<PAGE> 1
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 (Date of earliest event reported):
June 13, 1996
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Falcon Cable Systems Company, a California limited partnership
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(Exact name of registrant as specified in its charter)
California
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(State or other jurisdiction of incorporation)
1-9332 95-4108170
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(Commission File Number) (IRS Employer Identification No.)
10900 Wilshire Boulevard, 15th Floor, Los Angeles, CA 90024
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(Address of principal executive offices) (Zip Code)
(310) 824-9990
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(Registrant's Telephone Number)
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ITEM 5. OTHER EVENTS.
As previously disclosed, the Partnership Agreement of Falcon Cable
Systems Company, a California limited partnership (the "Partnership") provides
that Falcon Cable Investors Group, the Partnership's general partner (the
"General Partner") shall use its best efforts to cause the Partnership to sell
all of the Partnership's cable systems between December 31, 1991 and December
31, 1996, the "termination date" of the Partnership. In addition, the
Partnership Agreement provides the General Partner or its affiliates the right
to purchase for cash substantially all of the Partnership's cable systems at
any time after December 31, 1991 without soliciting unaffiliated purchasers
(the "Purchase Right").
Pursuant to the Partnership Agreement, the price at which the Purchase
Right may be exercised is determined by reference to an "appraised value"
determined pursuant to an appraisal process set forth in the Partnership
Agreement (the "Appraisal Process"). The Partnership Agreement provides that
the "appraised value" is determined by the average of three appraisal
evaluations of the Partnership's cable systems and provides that one appraiser
is selected by the General Partner; one appraiser is selected by a majority
vote of the independent members of the Partnership's advisory committee; and
one appraiser is selected by the two appraisers already so chosen.
As previously disclosed, the General Partner, in its exploration of
the possibility of exercising the Purchase Right, initiated the Appraisal
Process. Also as previously disclosed, in accordance with the Appraisal
Process, the appraiser to be selected by a majority vote of the independent
members of the Partnership's advisory committee, the appraiser to be selected
by the General Partner, and the appraiser selected by the two appraisers so
chosen, were each selected earlier this year. The three appraisers are,
respectively, Malarkey-Taylor Associates, Inc., Kane-Reece Associates, Inc.,
and Waller Capital Corporation (the "Appraisers").
On March 11, 1996, each of the Appraisers delivered summaries of the
results of their appraisals which were filed as Exhibits 1, 2 and 3,
respectively, to the Partnership's Current Report on Form 8-K/A dated March 11,
1996, and are incorporated herein by reference. The full report of each Ap-
<PAGE> 3
praiser (together with the previously filed summaries, the "Appraisals") was
subsequently delivered to the Partnership, and each is filed as an exhibit
hereto, and incorporated herein by reference. Based upon the Appraisals, as of
December 31, 1995, the "appraised value" (as defined in the Partnership
Agreement) of all of the cable systems owned by the Partnership (the "Total
Systems") is $247.40 million (the "Total Systems Appraised Value"). The Total
Systems Appraised Value is calculated as the average of $283.23 million,
$245.29 million, and $213.67 million, the appraised value as of December 31,
1995 of all of the cable systems owned by the Partnership, as set forth in the
Appraisals delivered by each of Malarkey-Taylor Associates, Inc., Kane-Reece
Associates, Inc., and Waller Capital Corporation, respectively.
Based upon the Total Systems Appraised Value of $247.57 million, and
assuming a hypothetical liquidation of the Partnership on March 31, 1996, the
estimated cash distribution to unitholders would have been $9.17 per unit (the
"Hypothetical Estimated Per Unit Distribution") (based upon 6,398,913 units
outstanding). The Hypothetical Estimated Per Unit Distribution was calculated
assuming (i) net liabilities on the balance sheet of the Partnership, excluding
property, plant and equipment and intangible assets ("Net Liabilities") of
approximately $181.51 million (as of March 31, 1996), (ii) a Sale Fee equal to
approximately $6.19 million (2 1/2% of the Total Systems Appraised Value) and
(iii) satisfaction of all other liabilities of the Partnership required to be
satisfied in connection with the liquidation of the Partnership, each of which
the Partnership Agreement would require be paid prior to the distribution of any
remaining cash to unitholders. The Hypothetical Estimated Per Unit Distribution
is presented for illustrative purposes only and does not necessarily represent
amounts the Partnership could have distributed to unitholders on March 31, 1996
or any date thereafter.
The Appraisals each set forth certain matters considered by the
respective Appraisers. In connection with rendering their Appraisals, the
Appraisers performed a variety of financial analyses which are summarized in
the respective Appraisals. No limitations were imposed by the Partnership with
respect to the investigations made or the procedures followed by the Appraisers
in rendering their Appraisals. As described in the Appraisals, the Appraisals
are based upon numerous sources of information including data supplied by
Falcon, which included certain projections. The Partnership does not as a
matter of course make public any forecasts as to its future financial
performance. THE PROJECTIONS WERE PREPARED SOLELY FOR INTERNAL USE AND NOT
WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH THE PUBLISHED GUIDELINES OF
THE COMMISSION OR THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
REGARDING PROJECTIONS AND WERE NOT PREPARED WITH THE ASSISTANCE OF, OR REVIEWED
BY, INDEPENDENT ACCOUNTANTS. SUCH PROJECTIONS WERE PROVIDED TO THE APPRAISERS
SOLELY FOR THE PURPOSES OF THEIR APPRAISALS. NONE OF THE PARTNERSHIP OR ANY
PARTY TO WHOM THE PROJECTIONS WERE PROVIDED ASSUMES ANY RESPONSIBILITY FOR THE
VALIDITY, REASONABLENESS, ACCURACY OR COMPLETENESS OF THE PROJECTIONS. WHILE
PRESENTED WITH NUMERICAL SPECIFICITY, THE PROJECTIONS ARE BASED ON A VARIETY OF
ASSUMPTIONS RELATING TO THE BUSINESSES OF THE PARTNERSHIP, INDUSTRY
PERFORMANCE, GENERAL BUSINESS AND ECONOMIC CONDITIONS AND OTHER MATTERS WHICH
ARE SUBJECT TO SIGNIFICANT UNCERTAIN-
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TIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE PARTNERSHIP'S CONTROL,
AND, THEREFORE, SUCH PROJECTIONS ARE INHERENTLY IMPRECISE AND THERE CAN BE NO
ASSURANCE THAT THEY WILL BE REALIZED. ALSO, ACTUAL FUTURE RESULTS MAY VARY
MATERIALLY FROM THOSE SHOWN IN THE PROJECTIONS. THE PARTNERSHIP IS NOT UNDER
ANY OBLIGATION TO UPDATE THE PROJECTIONS AT ANY FUTURE TIME.
Each of the Appraisers is a nationally recognized cable system
appraisal firm and is continually engaged in the valuation of cable systems.
Each of the appraisers from time to time provides valuation services to the
Partnership and its affiliates and receives customary compensation.
As previously disclosed, certain affiliates (the "Affiliates") of the
Partnership and its General Partner, including Marc B. Nathanson (the Chairman
of the Board, Chief Executive Officer, President and a director of Falcon
Holding Group, Inc., the General Partner's sole general partner) had made a
preliminary proposal (the "Proposal") to the independent members of the
Partnership's advisory committee with respect to an exchange transaction (the
"Exchange"). Under the Proposal, the Exchange would have taken place
immediately prior to the exercise by the General Partner or its affiliates of
their right to purchase for cash substantially all of the Partnership's cable
systems remaining after giving effect to the Exchange (the "Sale Systems"). In
the Exchange, substantially all of the Falcon Units owned by the Affiliates
would have been exchanged for a portion (by value) of the Partnership's cable
systems (the "Exchange Systems") equal to the proportion of total outstanding
Units exchanged by the Affiliates (the Affiliates would also have relieved
Falcon of an equal proportion of its total debt). On June 13, 1996 the
Affiliates informed the Partnership's advisory committee that they would not
pursue the Exchange.
In its Current Report on Form 8-K dated April 4, 1996, the Partnership
disclosed that on April 4, 1996, the Partnership, the General Partner and
certain of their affiliates (the "Falcon Defendants"), were served with a
complaint entitled Frank O'Shea, IRA v. Waller Capital Corp., et. al., case no.
BC147386 filed in the Superior Court of the State of California, County of Los
Angeles on April 1, 1996 (the "Com-
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plaint"), which Complaint was filed as Exhibit 99.1 thereto, and is hereby
incorporated herein by reference. On May 31, 1996, the Falcon Defendants filed
an answer denying the material allegations of the Complaint. The answer is
filed as Exhibit 5 hereto, and is hereby incorporated herein by reference.
On June 13, 1996, Falcon Holding Group, L.P. ("FHGLP"), the general
partner of the General Partner approved the exercise of the Purchase Right by
the General Partner. On that same date, the General Partner caused the
Partnership to enter into an Asset Purchase Agreement (the "Purchase
Agreement") with an affiliate of the General Partner, Falcon Cable Systems
Company II, L.P. ("New Falcon"), which is attached hereto as Exhibit 4 and is
hereby incorporated herein by reference. The description of the Purchase
Agreement in this Form 8-K is qualified in its entirety by the foregoing
reference thereto.
The Purchase Agreement provides that subject to the terms and
conditions set forth in the Purchase Agreement, the Partnership will sell to
New Falcon, and New Falcon will purchase all of the Partnership's right, title
and interest in the Total Systems (the "Purchase"). Pursuant to the Purchase
Agreement, New Falcon will pay the Partnership an amount equal
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to the Appraised Value of $247.40 million.
Unless waived by the parties, the Purchase will not be consummated
unless (i) any applicable waiting period (and any extension thereof) under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act") shall have expired or been terminated without the commencement or threat
of any litigation to restrain the consummation of the Purchase; (ii) no order,
stay, judgment or decree shall have been issued by any court and be in effect
restraining or prohibiting the consummation of the Purchase in any material
respect; (iii) all consents required to be obtained in connection with the
Purchase shall have been obtained and remain in full force and effect and (iv)
the parties' representations and warranties are true and correct on the date of
the Purchase Agreement and the date the Purchase is consummated.
In addition, the obligations of New Falcon to consummate the Purchase
are subject to the receipt by New Falcon of financing in an amount necessary to
satisfy New Falcon's obligations under the Purchase Agreement. New Falcon
currently intends to obtain such financing through (i) the receipt of a capital
contribution from partners in New Falcon, and (ii) borrowings under a financing
facility (the "Facility") covering New Falcon and certain of its affiliates
(together, the "Falcon Group"). The Falcon Group has received commitments from
the lenders' agents under the Facility that would, under an amendment to the
Facility (the "Amendment"), permit New Falcon to obtain the financing necessary
to consummate the purchase of the Total Systems under the Purchase Agreement,
and on June 13, 1996, FHGLP approved the entering into the Amendment by the
members of the Falcon Group. However, the Falcon Group and the lenders under
the Facility have not yet entered into the Amendment, and under the Facility,
borrowing by members of the Falcon Group is subject to certain specified
conditions. Therefore, while it is expected that the Amendment will be entered
into, and as a result of the Amendment, New Falcon is expected to be able to
obtain sufficient financing to consummate the Purchase, there can be no
assurance that the Amendment will be entered into or that New Falcon will be
able to obtain sufficient financing to consummate the Purchase.
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Pursuant to the Purchase Agreement, the Partnership and New Falcon
have begun the process of obtaining regulatory approvals, including those
required pursuant to certain cable television systems franchises, federal
communications law, and the HSR Act.
The Partnership Agreement provides that the Partnership shall be
dissolved upon the occurrence of the sale or distribution of all or
substantially all of the assets of the Company, which will occur upon
consummation of the Purchase. The Partnership Agreement also provides that
upon the dissolution of the Partnership, the General Partner shall take such
actions as are necessary for the winding up of the affairs of the Partnership
and the distribution of its assets to the Partners pursuant to the provisions
of the Partnership Agreement. Accordingly, following the consummation of the
Purchase, the General Partner will wind-up the affairs of the Partnership in
accordance with the terms of the Partnership Agreement, including the
liquidation of the assets of the Partnership, the discharge of all of the
liabilities of the Partnership, and the distribution of the remaining assets of
the Partnership to its partners as appropriate.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA
FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
Exhibit No. Description
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1 System Appraisal of Falcon Cable Systems Company, as
of December 31, 1995, by Malarkey-Taylor Associates,
Inc., dated April 29, 1996.
2 System Appraisal of Falcon Cable Systems Company, as
of December 31, 1995, by Kane-Reece Associates,
Inc., dated April 29, 1996.
3 System Appraisal of Falcon Cable Systems Com-
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pany, as of December 31, 1995, by Waller Capital
Corporation.
4 Asset Purchase Agreement by and between the
Partnership and New Falcon, dated as of June 13,
1996.
5 Answer in the case of Frank O'Shea, IRA v. Waller
Capital Corp., et. al., case no. BC147386 filed in
the Superior Court of the State of California, County
of Los Angeles on May 31, 1996.
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SIGNATURE
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 hereunto duly authorized.
Date: June 13, 1996
FALCON CABLE SYSTEMS COMPANY
By: Falcon Cable Investors Group,
Managing General Partner
By: Falcon Holding Group, L.P.
General Partner
By: Falcon Holding Group, Inc.
General Partner
By: /s/ Michael K. Menerey
------------------------------
Michael K. Menerey, Secretary
and Chief Financial Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
----------- ----------- --------
<S> <C> <C>
1 System Appraisal of Falcon Cable Systems
Company, as of December 31, 1995, by
Malarkey-Taylor Associates, Inc., dated
April 29, 1996.
2 System Appraisal of Falcon Cable Systems
Company, as of December 31, 1995, by Kane-
Reece Associates, Inc., dated April 29,
1996.
3 System Appraisal of Falcon Cable Systems
Company, as of December 31, 1995, by
Waller Capital Corporation.
4 Asset Purchase Agreement by and between
the Partnership and New Falcon, dated as
of June 13, 1996.
5 Answer in the case of Frank O'Shea, IRA v.
Waller Capital Corp., et. al., case no.
BC147386 filed in the Superior Court of
the State of California, County of Los
Angeles on May 31, 1996.
</TABLE>
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EXHIBIT 1
APPRAISAL REPORT:
FAIR MARKET VALUATION
OF
FALCON CABLE SYSTEMS COMPANY, L.P.
PASADENA, CALIFORNIA
As of December 31, 1995
Prepared for:
FALCON CABLE SYSTEMS COMPANY, L.P./ADVISORY COMMITTEE
Pasadena, CA
Prepared by:
MALARKEY-TAYLOR ASSOCIATES, INC.
1130 Connecticut Avenue, N.W.
Suite 325
Washington, D.C. 20036
(202) 835-7800
April 29, 1996
(C) Copyright 1996 Malarkey-Taylor Associates, Inc.
<PAGE> 2
APPRAISAL REPORT:
FAIR MARKET VALUATION
OF
FALCON CABLE SYSTEMS COMPANY, L.P.
PASADENA, CALIFORNIA
TABLE OF CONTENTS
<TABLE>
<S> <C>
I. EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
A. Introduction, Purpose, and Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
B. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
II. PURPOSE OF APPRAISAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
III. INDUSTRY OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
A. Historical Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
B. Industry Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1. General Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2. Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3. Financial/Economic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4. Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
IV. SYSTEM DESCRIPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
A. History and Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1. Gilroy, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2. Hesperia, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3. San Luis Obispo, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4. Tulare, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5. Central Region, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6. Coos Bay, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7. Dallas, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8. Florence, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
B. Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
1. Gilroy, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2. Hesperia, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3. San Luis Obispo, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4. Tulare, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5. Central Region, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6. Coos Bay, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7. Dallas, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
8. Florence, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
</TABLE>
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TABLE OF CONTENTS (continued)
<TABLE>
<S> <C>
C. Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
D. Subscribers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
E. System Mileage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
F. Physical Plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
1. Gilroy, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
2. Hesperia, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
3. San Luis Obispo, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
4. Tulare, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
5. Central Oregon, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
6. Coos Bay, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
7. Dallas, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
8. Florence, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
G. Franchises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
H. Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
1. Gilroy, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
2. Hesperia, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
3. San Luis Obispo, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
4. Tulare, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
5. Central Region, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
6. Coos Bay, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
7. Dallas, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
8. Florence, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
I. Financial History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
1. Gilroy, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
2. Hesperia, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
3. San Luis Obispo, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
4. Tulare, CA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
5. Central Region, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
6. Coos Bay, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
7. Dallas, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
8. Florence, OR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
V. TOTAL SYSTEM VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
A. Valuation Procedure and Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
B. Discounted Cash Flow Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
1. Net Cash Flow/Return on Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
2. Net Cash Flow/Return On Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
3. Cash Flow Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
4. Residual Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
5. Discount Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
C. Direct Income Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
D. Value Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
</TABLE>
<PAGE> 4
TABLE OF CONTENTS (continued)
<TABLE>
<S> <C> <C>
VI. ALLOCATION OF VALUE TO SALE AND EXCHANGE CLUSTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
A. Purpose of Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
B. Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
C. Headend Value Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
VII. CONTINGENCIES AND LIMITING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
VIII. STATEMENT OF VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
IX. QUALIFICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
A. Qualifications of Malarkey-Taylor Associates, Inc. (MTA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
B. Qualifications of Robert M. Jones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
C. Qualifications of Susan Donovan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
D. Qualifications of Keke Tan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
</TABLE>
<PAGE> 5
APPENDIX A - DCF Valuation Exhibits for Falcon Systems
(the following set of Exhibits has been prepared for each of
the eight Systems valued)
A. Valuation Methods
B-1. Profit and Loss/Sources and Uses-Return on Equity -
Low Value
B-2. Profit and Loss/Sources and Uses-Return on Equity -
High Value
C-1. Debt Amortization-Return on Equity - Low Value
C-2. Debt Amortization-Return on Equity - High Value
D. Return on Investment
E. Cable Television Subscribers
F. Cable Television Service Rates
G. Cash Flow Projections
H. Capital Expenditures
I. Depreciation Schedule
J. Valuation Assumptions
APPENDIX B - Allocation of System Fair Market Values to Sale and Exchange
Clusters for Coos Bay, Dallas, and Florence
APPENDIX C - Allocation of Sale and Exchange Cluster Values to Headends for
Coos Bay, Dallas, and Florence
<PAGE> 6
APPRAISAL REPORT:
FAIR MARKET VALUATION
OF
FALCON CABLE SYSTEMS COMPANY
PASADENA, CALIFORNIA
I. EXECUTIVE SUMMARY
A. INTRODUCTION, PURPOSE, AND METHODOLOGY
Malarkey-Taylor Associates, Inc. (MTA) was retained to conduct a fair
market valuation, as of December 31, 1995, of eight groups of cable systems
(the Systems) owned by the limited partnership of Falcon Cable Systems Company,
L.P. (Falcon). The Systems are located in California and Oregon, and are
identified as: Gilroy, Hesperia, San Luis Obispo, and Tulare in the state of
California, and Central Region, Coos Bay, Dallas, and Florence in the state of
Oregon. In addition to estimating the individual fair market values of the
Systems, MTA has allocated the System values for Coos Bay, Dallas, and
Florence, among the operating headends in the particular Systems. MTA was
chosen as one of three appraisers performing these tasks in preparation for a
potential buyout by Falcon's General Partner of the interest of the Limited
Partners or a sale of the company. MTA was retained specifically by the
Advisory Committee for the potential transaction.
The cable television Systems served approximately 135,000 subscribers
throughout eighteen counties in California and Oregon, as of December 31, 1995.
This independent appraisal will allow the Advisory Committee to confirm the
fair market value of the Systems as a business enterprise, in consideration of
alternatives attendant to the expiration of the limited partnership in December
1996.
Fair market value is the cash price a willing buyer would give a
willing seller in an arm's length transaction in order to complete the sale.
It is assumed that both buyer
1
<PAGE> 7
and seller have been informed of all relevant facts and neither is under any
compulsion to conclude the transaction. MTA also assumes that the tangible
assets will remain in their present locations and will continue to be employed
in their highest and best use, i.e., the delivery of cable television signals
to subscribers.
For each System, MTA used five generally accepted cable television
valuation methods using the income approach to valuation in establishing the
range of total fair market values of the System as a going concern. The first
method used a multiple of the past year's operating income derived from
comparable asset values of privately-held and publicly-traded cable companies.
The second method used a lower multiple of the annualized current month's
operating income. The third method applied a slightly lower multiple of next
year's projected operating income. The fourth method was a discounted net cash
flow analysis in which a purchase price (estimated fair market value) was
calculated to achieve a target after-tax return on equity, given particular
operating and financing assumptions specific to the System's assets. The fifth
method was a discounted cash flow analysis that measured the net present value
of the pre-tax operating cash flows (less capital expenditures, plus the
residual value of the System) that represent the return on total investment.
To allocate a System's fair market value among its operating headends,
MTA examined 1) the number of subscribers served by the headend, 2) the
projected operating cash flows to be generated by each headend, and 3) the
projected free cash flows to be generated by each headend after capital
expenditures were considered. Allocation percentages were developed for these
three criteria, which were then averaged to determine the final allocation
value for each of the selected headends.
B. CONCLUSIONS
MTA's conclusions as to the range of System fair market values are
based upon information and data supplied by Falcon and System management;
onsite inspections by representatives of MTA of a representative portion of the
Systems and service areas; and general cable industry information. In MTA's
opinion, the data which support the
2
<PAGE> 8
valuations are reliable and sound. Our estimates of each System's fair market
value as a business enterprise are as follows:
<TABLE>
<S> <C>
Gilroy, CA $76,000,000
Hesperia, CA 38,846,000
San Luis Obispo, CA 29,585,000
Tulare, CA 31,972,000
Central Region, OR 26,294,000
Coos Bay, OR 34,501,000
Dallas, OR 35,334,000
Florence, OR 10,696,000
COMBINED SYSTEMS $283,228,000
</TABLE>
The allocations of the above values to the headends within Coos Bay,
Dallas, and Florence are found in Appendix C to this report. A summary of the
Sale properties is as follows:
<TABLE>
<CAPTION>
Sale
<S> <C>
Coos Bay, OR $27,837,000
Dallas, OR 15,402,000
Florence, OR 271,000
Gilroy, CA 76,000,000
Tulare, CA 31,972,000
SLO, CA 29,585,000
Central, OR 26,294,000
-----------
TOTAL $207,361,000
</TABLE>
A summary of the Exchange properties is as follows:
<TABLE>
<CAPTION>
Exchange
<S> <C>
Coos Bay $ 6,664,000
Dallas 19,932,000
Hesperia 38,846,000
Florence 10,425,000
-----------
TOTAL $75,867,000
</TABLE>
3
<PAGE> 9
II. PURPOSE OF APPRAISAL
Malarkey-Taylor Associates, Inc. (MTA) was retained to conduct a fair
market valuation, as of December 31, 1995, of the eight groups of cable
television systems (the Systems) owned by the limited partnership of Falcon
Cable Systems Company, L.P. (Falcon). Additionally, for the Coos Bay, Dallas,
and Florence Systems, MTA has allocated the System fair market value among the
headends comprising the particular System. As of the appraisal date, the
Systems served approximately 135,000 subscribers in California and Oregon. The
partnership is slated to expire in December 1996, with a buyout by the General
Partner of the interest of the Limited Partners or a sale of the company. MTA
was retained by the Advisory Committee to this transaction, which will use this
appraisal to confirm the fair market value of the Systems as a business
enterprise, in consideration of alternatives attendant to the expiration of the
limited partnership.
Fair market value is the cash price a willing buyer would give a
willing seller in an arm's length transaction in order to complete the sale.
It is assumed that both buyer and seller have been informed of all relevant
facts and neither is under any compulsion to conclude the transaction and that
the tangible assets will remain in their present locations and will continue to
be employed in their highest and best use, i.e., the delivery of cable
television signals to subscribers.
4
<PAGE> 10
III. INDUSTRY OVERVIEW
A. HISTORICAL BACKGROUND
Cable television was born in the late 1940's. The first systems were
built during the period 1948 to 1964. Most of these early systems were located
in rural areas where off-air television reception was limited and picture
quality was poor. The cable system basically provided a reception service,
offering up to 12 channels with no unique programming. Systems generally
enjoyed high levels of penetration, ranging from approximately 70% to 90% of
homes passed.
During the period 1965 to 1972, cable systems were built in
medium-sized markets, importing distant television signals via terrestrial
microwave. Rulings by the Federal Communications Commission (FCC) in 1965 and
1966 initiated a regulatory period that lasted two decades. FCC constraints
were placed on importing distant signals which inhibited the construction of
systems in the largest 100 markets. The U.S. Supreme Court affirmed the FCC's
regulatory authority over the cable television industry. The typical cable
television system generally remained a 12- to 24- channel reception service
with some additional program selections via imported signals. Programming
unique to cable television did not exist. Basic penetrations of between 50%
and 60% of homes passed were typical for newly-cabled markets.
In 1972, the FCC eased its restrictions on signal importation, thus
making it feasible for cable television operators to enter the nation's top 100
markets with differentiated product. Satellite delivered premium television
services (HBO, Showtime) and Super Stations (WTBS) were introduced in 1975.
Cable exclusive networks, such as ESPN, CNN, USA, and others, soon followed.
During the mid- to late-1970's, new 24- to 36-channel cable television systems
emerged as a result of these communications satellite services. Significant
increases in programming options allowed cable systems to attract ample numbers
of subscribers to attain operational profitability even where off-air broadcast
reception and leisure-time options were above average. The smallest 50 of the
top 100 markets were built first, followed by the larger metropolitan areas.
Premium, or
5
<PAGE> 11
pay, services were the primary force behind basic penetration gains reaching
30% to 45% of homes passed in these new markets.
During the period 1979 to 1983, the remaining major markets were
franchised. Cable channel options increased dramatically, both in pay services
(Disney, Cinemax, Bravo, Movie Channel) and basic services (MTV, Lifetime,
Nickelodeon, regional sports, CNN, and others). Systems with 54 and more
channels were built, offering an abundance of program alternatives. Cable
system operators instituted price increases for pay services and established
elaborate tiering structures to compensate for local constraints on basic
service pricing. In newer cable markets, basic penetrations of homes passed
began to edge above the 40% level.
In 1984, the U.S. Congress approved and President Reagan signed the
Cable Communications Policy Act, the first comprehensive cable legislation to
be enacted. The most significant feature of the legislation was the ultimate
removal of price controls on basic cable service in all but the very smallest
cable systems. Discretionary price increases of up to 5% were allowed in 1985
and 1986, and all price controls were removed in January 1987. During the
period 1984 to 1992, the mix of cable offerings and pricing changed as growth
in pay subscriptions slowed down and local constraints on basic price increases
were removed. Basic penetrations continued to rise in major markets, and
nationwide penetration reached 60% of homes passed by cable. New revenue
sources emerged in the form of pay-per-view, advertising, and home shopping.
The industry emphasized programming quality and marketing in order to increase
overall penetration levels above the 60% level.
The Cable Television Consumer Protection and Competition Act of 1992
was passed on October 5, 1992, which imposed significant new regulations,
particularly on subscriber rates and programming packaging. Generally,
programming packages were specifically segregated between the "basic tier" and
the "satellite programming tier(s)" since the level of regulation was different
for each of them. After the new regulations were implemented, the overall
cable industry experienced a slight reduction in revenues in 1993, but learned
to cope with the new regulations in 1994 and continued its overall
6
<PAGE> 12
growth due to added services, increased subscriber penetrations and repackaging
of programming services.
B. INDUSTRY CHARACTERISTICS
1. General Background
Cable television is a capital intensive business. The right to
operate a cable system is authorized by the local government. Substantial
up-front capital is required in plant and equipment with second entrants facing
even greater capital construction costs due primarily to space limitations on
utility poles. A considerable percentage of total operating costs are fixed.
Similar to utilities, once cable television has exceeded its break-even
requirements, operating margins grow very rapidly and remain fairly predictable
from year to year.
Unlike most businesses, market analysis in cable is better pursued on
the basis of system type than generic geographic or demographic criteria. The
classification of a cable system in any individual market tends to reflect the
competitive characteristics and demand dynamics resident in that market. In
general, there are two primary categories of cable systems--classic and modern.
Classic cable systems are those built in locations where reception of
over-the-air television signals has historically been poor or limited. They
were the earliest systems built, usually serving communities with lower
densities (40 to 90 homes per mile), higher subscriber penetrations (60% to 90%
of homes passed), lower average revenues per subscriber, and higher cash flow
margins (45% to 65%) relative to modern systems. They usually were built with
fewer channels but may have been upgraded at a later time. Expectations for
additional growth in these markets tends to be lower than the industry average.
The downside risk of investing in these systems is relatively low.
Modern cable systems have been constructed since the introduction of
pay and other cable-specific programming in the mid-1970's. They tend to serve
urban and suburban communities which have higher densities (70 to 120 and more
homes per mile), better quality off-air programming, and more extensive
competition for consumers'
7
<PAGE> 13
leisure time. These systems were built with broader channel capacity (36 to 54
or more channels), individual subscriber addressability, local programming
capability, and the capacity for advertising sales. They tend to have lower
penetration (30% to 55%) than classic systems. More rapid growth has been
experienced in these systems than in classic systems because of higher
household growth rates, more potential for penetration gains, and greater
opportunities for ancillary revenues. They are also more risky because of
greater off-air competition and higher overall operating costs.
It is estimated that 32,255 communities are served throughout the
United States by approximately 13,000 operating cable systems. The industry is
structured into approximately 660 MSO's which manage these systems on a
wholly-owned, partially-owned, or management contract basis. Economic forces
within the industry are causing significant shifts in the ownership of these
companies, resulting in increasing consolidation of the industry into the hands
of fewer, larger operators.
Management characteristics in the industry vary considerably between
the MSO headquarters and system operating levels and between different
categories of systems. At the corporate level, nearly all of the mid-to-large
sized MSO's have a strong representation of professionally trained and
field-seasoned management among their ranks. Strong emphasis is placed on
strategic, financial planning and operating control functions at this level,
and the staffing reflects those requirements. Even the more entrepreneurial
MSO's are well-staffed with lawyers, accountants, and MBA's.
System-level management requirements vary significantly with the
category of system under consideration. Classic cable operations often require
custodial management to oversee customer service and maintenance functions.
Strategic, marketing, and financial management tends to be handled at the
corporate level. Billing functions are processed through service bureaus
specializing in cable systems. Very little management complexity is left at
the system level, and the positions tend to be filled accordingly.
Large-scale, urban cable operations are much more dynamic and demanding. They
require far more sophisticated and versatile management capabilities. The
physical plant, budgets, and operating staffs in these systems are considerably
larger.
8
<PAGE> 14
More of the strategic, marketing, and financial planning functions are handled
locally. The political liaison requirements with the cities are far more
complex. Not surprisingly, the caliber of management found in these systems is
substantially higher than that found in classic systems, and tends to be
professionally trained, financially aware, and politically astute.
2. Regulation
Historically, the extent to which the cable television industry has
been regulated at the local, state and federal levels, has varied. Following
the deregulation of service prices in the 1984 Cable Communications Policy Act,
the next several years saw regulatory constraints on cable reduced at both the
local and federal levels. Subsequent public perception of the industry as
abusing its newly-won pricing freedom and additional consolidation in the
industry led to enactment of the Cable Television Consumer Protection and
Competition Act of 1992 on October 5, 1992, ushering in a new period of
extensive regulation. Many aspects of such regulation are currently the
subject of judicial, administrative or legislative proceedings or proposals.
This law required the FCC to regulate the operation of cable television systems
in a number of areas, including rates that may be charged by systems.
On September 1, 1993, rate changes mandated by the FCC under the 1992
Act went into effect for most systems. The FCC implemented a benchmark rate
structure that was intended to reduce the federally regulated portion of the
average cable subscriber's monthly bill by 10%. Most of the resulting
reductions in subscriber bills were attributable to the decline in equipment
and additional outlet charges. However, with the mandated reconfiguration of
basic service and the expanded basic tier, some subscribers' bills increased.
For cable operators, the effects of the rate change were estimated to reduce
revenue by 3% to 5% on an industrywide basis.
In February 1994, the FCC announced further rate reductions of 7% in
order to fully implement the 1992 Cable Act. As an alternative, cable systems
were permitted to file Cost of Service showings if implementation of the
mandated rate reductions was not
9
<PAGE> 15
feasible. By yearend 1995, widescale telecommunications reform appeared
imminent; although, the extent to which or even whether this reform would
entail relief from rate regulation was unclear. The likelihood that providers
of cable and telephony services would be allowed engage in both businesses was
a near certainty, however, the timetable for these changes was uncertain.
3. Financial/Economic
Cable's rapid financial growth and expectations for future growth have
drawn the attention of the capital markets and helped fuel consolidation within
the industry. With most cable markets already franchised and constructed,
growth-oriented MSO's turned to acquisitions as their primary method of
expansion. A flurry of acquisitions occurred during the period of 1986 through
1989, with the peak being reached in 1988. Most of these acquisitions were
made by companies already in the cable business who were seeking national
consolidation or regional clustering of cable television systems to produce
greater economies of scale and operating efficiencies. The number of
transactions decreased in 1990 due to federal government restrictions on banks
pertaining to highly leveraged transactions (HLT), uncertainty about the
regulatory environment, and other factors.
HLT restrictions caused less money to be available for the expansion,
upgrading, and trading of cable systems in 1990 and 1991. These restrictions
were subsequently removed in June 1992, and while the number of acquisitions
increased, they did not reach the same levels seen in the latter half of the
1980's. Passage of the Cable Television Consumer Protection and Competition
Act of 1992 and the resultant rate regulation decreased the overall
attractiveness of the cable industry to potential investors.
By 1994, several of the largest MSO's had formed or were exploring
alliances with both long distance and local telephone companies, as both the
cable and telephone industries were planning to enter one another's primary
lines of business. Simultaneously, a number of mid-sized MSO's were developing
exit strategies based on
10
<PAGE> 16
the belief that success in the evolving cable industry would require a critical
mass of subscribers and access to substantial amounts of capital.
While the development of voice, video and data delivery technologies
holds the promise of substantial new services and revenues for the industry,
the near-term outlook based on established programming services continues to be
positive. Operators expect to continue to increase operating income by
continuing to attract more subscribers, exploit current and additional
opportunities for ancillary revenues, and improve operating efficiencies.
4. Competition
During the next several years, the cable industry may face additional
competition which could emerge in the form of system overbuilds, the
introduction of new technologies, and entry into the video distribution
business by telephone companies.
The long-term viability of overbuilds in most cable markets is
questionable at best. An overbuilder splits up the subscriber base, incurring
higher costs per subscriber and lower margins overall. Many attempted
overbuilders have been bought out by the incumbent or have simply gone out of
business. The likelihood of a successful overbuild in all but a few markets is
very small.
Cable television has begun to face increasing competition from new
distribution technologies including direct-broadcast satellite (DBS), satellite
master antenna television (SMATV), and multichannel multipoint distribution
service (MMDS). The ultimate success or failure of any of these television
delivery systems will depend largely on a combination of the three
interconnected factors of technology, regulation, and economics.
Malarkey-Taylor anticipates that the threat to cable television by these
technologies in the next few years will not be material, although various
technologies are proving adept at providing services in certain niche markets.
MMDS and SMATV typically have little or no effect on mature cable systems,
except in large urban areas where a high percentage of homes passed are in
multiple dwelling units (MDU's). DBS presents a greater competitive threat.
The DBS industry, which is still very young, has
11
<PAGE> 17
thus far focused on building its customer base in areas not wired for cable
television. As of 1994, leaders in the DBS industry predicted that between 10%
and 20% of television households nationwide would use their service within ten
years. However, DBS is hampered by the fact that it does not carry off-air
broadcast signals.
Telephone companies have long shown an interest in expanding into
video distribution. For the most part, this competition has not materialized
as a result of existing regulatory restraints and technical limitations. By
the end of 1993, there was widespread recognition that technological
developments would force dramatic changes in such regulation, as the
telecommunications industry entered a consolidation period characterized by
mergers, joint ventures, and acquisitions.
Fiber optics are increasingly being utilized as telephone and cable
companies begin experimenting with 'full service' networks with the capability
of delivering voice, video and data services to the home. Several of the
largest MSO's, in conjunction with telephone companies, have built these
experimental systems to determine their feasibility from both technological and
marketing perspectives.
As of the mid-1990's, the telephone industry still is in the
experimental stage with regard to using fiber optic cable to deliver video
services to the home. For technological and financial reasons, full use of
fiber is probably years away. Additionally, federal legislation permitting
telephone and cable companies to compete directly with one another will most
likely incorporate a time delay before competition begins.
12
<PAGE> 18
IV. SYSTEM DESCRIPTION
A. HISTORY AND MARKET
Tables I (A1) through (B4) present demographic data published in
Marketing Statistics' Demographics USA 1995 for the counties comprising the
regions served by the eight Systems in California and Oregon, respectively. In
California, the counties of Santa Clara, Monterey, San Benito, and San
Bernardino, or portions thereof, comprised the Gilroy System's service area.
The Hesperia System served portions of San Bernardino and Kern Counties.
Sections of San Luis Obispo and Santa Barbara Counties were located in the San
Luis Obispo System's service area, while the Tulare System's service area
included portions of Tulare and Fresno counties. Data for population,
households, and Effective Buying Income (EBI) were estimated for 1994 and
projected for 1999. Also presented, for comparison purposes, are statewide
data for California and nationwide data.
From 1994 through 1999, total U.S. population was projected to grow at
0.89% per year, and the annual growth rate of total households was forecasted
at 1.05%. Over the same period, the State of California was projected to
experience population growth of 0.70% per year and household growth of 0.45%
per year. Nationwide, average household EBI of $45,937 in 1994 was projected
to grow at 3.00% per year. The average household EBI in California in 1994 was
$50,713, with an annual growth rate of 2.30% through 1999.
1. Gilroy, CA
The counties (or portions thereof) of Santa Clara, Monterey, and San
Benito, California comprised the Gilroy System's service area. As of December
1995, about 42% of Gilroy's subscribers resided in Santa Clara, 37% in
Monterey, and 20% in San Benito. Subscribers ranged from low-income migrant
farm workers to well-educated professionals, although the preponderance of
subscribers were low income Hispanics. As of December 31, 1995, the Gilroy
System served 33,078 subscribers.
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<PAGE> 19
Santa Clara County is home to the community of Gilroy. Prominent
industries in this county include food processing, retail sales, tourism,
services, the manufacturing of paper products, and seed production. Major
employers include Gilroy Foods, Gilroy Canning (food processing), and Outlet
Shopping Centers (discount retail). Major medical facilities include South
Valley Hospital and Kaiser out-patient medical offices. There is a two-year
community college, Gavilan College, in Gilroy.
The economy of Santa Clara was adversely impacted by the 1993 closure
of the military facility Fort Ord. However, as of December 31, 1995, Gilroy
was beginning to grow in popularity as a bedroom community to Silicon Valley.
Additionally, Abbott Labs was slated to move into the area, bringing an
estimated 900 new jobs to the region.
The economy of Monterey County is based on agriculture, services,
retail trade, and manufacturing. Major employers include Basic Vegetable
Products, Casey Newspapers/Casey Printing (printing and publishing), and Cal
Compak Foods. Major medical facilities include Mee Memorial Hospital and
SoMoCo Medical Group. There is one community college extension facility in
King City. System subscribers in this county are frequently seasonal, signing
on in May and off in November to correspond with the immigrant labor work
schedule. However, the nature of the workplace is beginning to change as King
City attracts more residents commuting to Salinas for employment.
Industries present in San Benito County include agriculture, retail
trade, manufacturing, and services. The primary medical facilities in San
Benito County are Hazel Hawkins Memorial Hospital and San Benito Health
Foundation and Clinic.
Off-air reception of regional broadcast television signals was
generally poor for residents of the Gilroy System's service area. MMDS
providers had some presence in Greenfield (Monterey County), however, they did
not present a real threat to the cable operator as of the appraisal date.
Table I (A1) includes demographic data for the counties in the Gilroy
System. As shown, Santa Clara was much larger, with a 1994 population of
1,574,700, than Monterey (356,700) and San Benito (41,600). However, with an
annual projected
14
<PAGE> 20
population growth rate of 2.82% through 1999, San Benito was forecasted to
expand the most rapidly. Population in Santa Clara was projected to grow at
0.81% annually, while Monterey's population was forecasted to decline at a
yearly rate of 2.04%.
As with population, the number of households in Santa Clara in 1994,
531,600, was proportionately larger than either Monterey or San Benito.
Projected household growth in San Benito was the highest of the three counties,
at 2.69% per year. Household growth was projected to be 0.42% per year in
Santa Clara, while in Monterey the number of households was projected to
decline at an annual rate of 2.46% through 1999.
Average EBI per household in Santa Clara in 1994 was estimated to be
$63,372. The corresponding figures were $50,626 in Monterey and $45,062 in San
Benito. Santa Clara also had a higher projected annual EBI growth rate of
2.63% than both Monterey (2.51%) and San Benito (0.36%). Household EBI figures
were substantially higher in Santa Clara and moderately higher in Monterey than
the national average of $45,937. The corresponding figure in San Benito was
comparable to the national average, although the majority of the Gilroy System
subscribers were low income.
TABLE I (A1)
<TABLE>
<CAPTION>
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
<S> <C> <C> <C>
GILROY SYSTEM
Santa Clara County, CA
- ----------------------
Total Population 1,574,700 1,639,400 0.81%
Total Households 531,600 542,800 0.42%
Median Age 33.05 N/A
Effective Buying Income (EBI)
Total EBI (000's) $33,688,736 $39,158,109 3.05%
Average Household EBI $63,372 $72,141 2.63%
</TABLE>
15
<PAGE> 21
TABLE I (A1) (CONTINUED)
<TABLE>
<CAPTION>
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
<S> <C> <C> <C>
GILROY SYSTEM
Monterey County, CA
- -------------------
Total Population 356,700 321,800 -2.04%
Total Households 112,700 99,500 -2.46%
Median Age 31.0 N/A
Effective Buying Income (EBI)
Total EBI (000's) $5,705,518 $5,701,382 -0.01%
Average Household EBI $50,626 $57,300 2.51%
San Benito County, CA
- ---------------------
Total Population 41,600 47,800 2.82%
Total Households 12,700 14,500 2.69%
Median Age 31.4 N/A
Effective Buying Income (EBI)
Total EBI (000's) $572,283 $665,112 3.05%
Average Household EBI $45,062 $45,870 0.36%
State of California
- -------------------
Total Population 31,957,300 33,089,800 0.70%
Total Households 10,886,200 11,130,600 0.45%
Median Age 32.7 N/A
Effective Buying Income (EBI)
Total EBI (000's) $552,074,838 $632,548,630 2.76%
Average Household EBI $50,713 $56,830 2.30%
United States of America
- ------------------------
Total Population 262,213,300 274,074,500 0.89%
Total Households 96,571,000 101,749,100 1.05%
Median Age 34.15 N/A
Effective Buying Income (EBI)
Total EBI (000's) $4,436,178,724 $5,418,070,332 4.08%
Average Household EBI $45,937 $53,249 3.00%
</TABLE>
16
<PAGE> 22
2. Hesperia, CA
As of December 31, 1995, the Hesperia System served portions of San
Bernardino and Kern Counties. About 77% of System subscribers resided in San
Bernardino, while the other 23% were in Kern County. Hesperia is primarily a
residential town. The majority of local businesses are small, such as
restaurants, motels, and shops. A substantial portion of the local population,
approximately 30%, receives some form of state-sponsored financial aid. About
40% of residents in the neighboring community of Adelanto are welfare
recipients. The 1993 closure of George Air Force Base, a military facility
located in the region, was an important factor causing high unemployment in the
region. Despite the high level of welfare recipients, as of the valuation
date, Adelanto and Rosamond were growing more rapidly than other parts of the
System's service area. These communities provided a source of affordable
housing for families with modest income.
The economy of Kern County is supported by services, agriculture,
retail trade, and mineral extraction. Major employers include Sun
World/Superior Farms, Grimmway Farms, and Giumarra Vineyards. Major medical
facilities include Mercy Healthcare, San Joaquin, Kern Medical Memorial, Mercy
Southwest, and Good Samaritan. The county is home to a branch campus of
California State University, the Pacific School of Law, and one community
college.
San Bernardino County had a population of 1,605,900 in 1994, with a
projected yearly growth rate of 0.61% through 1999, as shown in Table I (A2).
Kern County had a smaller population of 617,900, but a higher growth rate of
1.56%. The number of households in San Bernardino was 516,000 in 1994 and was
forecasted to grow at 0.39% per year through 1999. As with population, Kern
County had fewer households, at 200,500, but a higher household growth rate of
1.47% per year, than San Bernadino.
Estimated average EBI per household in San Bernardino in 1994 was
$44,943, with an annual growth rate of 2.22%. Kern County had a lower EBI of
$40,409, but a slightly higher EBI growth rate of 2.32% per year. Household
EBI figures for Hesperia
17
<PAGE> 23
service area were lower than the corresponding figures for the State of
California and the U.S. as a whole.
TABLE I (A2)
<TABLE>
<CAPTION>
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
<S> <C> <C> <C>
HESPERIA SYSTEM
San Bernardino County, CA
-------------------------
Total Population 1,605,900 1,655,600 0.61%
Total Households 516,000 526,200 0.39%
Median Age 30.2 N/A
Effective Buying Income (EBI)
Total EBI (000's) $23,087,593 $26,279,762 2.62%
Average Household EBI $44,743 $49,943 2.22%
Kern County, CA
---------------
Total Population 617,900 667,600 1.56%
Total Households 200,500 215,700 1.47%
Median Age 30.75 N/A
Effective Buying Income (EBI)
Total EBI (000's) $8,101,940 $9,775,806 3.83%
Average Household EBI $40,409 $45,321 2.32%
</TABLE>
3. San Luis Obispo, CA
Sections of San Luis Obispo and Santa Barbara Counties comprised the
San Luis Obispo System's service area. Generally, the communities served by
the System are economically stable. Particularly large employers in the region
contributing to the stability include the Pacific Gas and Electricity Company
and California Polytech College. Other large private employers include
Mid-State Bank, Hind Inc. (sportswear), and American Eagle Airline. The coast
of San Luis Obispo is populated with tourists and supports numerous restaurants
and hotels. The community of Atascadero, populated primarily by
low-to-middle-income residents, is home to Atascadero State Hospital.
18
<PAGE> 24
Almost 93% of System subscribers resided in San Luis Obispo County,
which had a 1994 population of 229,900. The county was forecasted to grow at a
rate of 0.58% per year through 1999, as shown in Table I (A3). The households
in San Luis Obispo, totaling 84,500 in 1994, were projected to grow at a yearly
rate of 0.61%. Estimated average household EBI in San Luis Obispo of $45,148
was forecasted to grow by 2.18% annually. Although lower than the California
statewide household EBI figure, it was comparable to nationwide household EBI.
TABLE I (A3)
<TABLE>
<CAPTION>
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
<S> <C> <C> <C>
SAN LUIS OBISPO SYSTEM
San Luis Obispo County, CA
--------------------------
Total Population 229,900 236,700 0.58%
Total Households 84,500 87,100 0.61%
Median Age 34.6 N/A
Effective Buying Income (EBI)
Total EBI (000's) $3,815,008 $4,380,903 2.80%
Average Household EBI $45,148 $50,297 2.18%
Santa Barbara County, CA
------------------------
Total Population 338,400 398,100 3.30%
Total Households 133,400 134,800 0.21%
Median Age 33 N/A
Effective Buying Income (EBI)
Total EBI (000's) $7,021,150 $7,945,923 2.51%
Average Household EBI $52,632 $58,946 2.29%
</TABLE>
4. Tulare, CA
The Tulare System serves portions of both Tulare County and Fresno
County. However, subscribers in Fresno comprised only about 1% of total Tulare
System subscribers. The vast majority resided in Tulare County. The service
area's economy is agriculture-based, and, as of 1995 was still experiencing the
negative effects of a 1991
19
<PAGE> 25
crop-destroying freeze, which led to continuing high levels of unemployment.
The largest employer in the area was Wal Mart Distribution Center. About 50%
of the System's service area residents were Hispanic, many of whom were illegal
residents.
As of the appraisal date, Choice Wireless, an MMDS provider that
entered the market in 1993, had an estimated 3,000 subscribers, many in the
Tulare System's service area. As of December 1995, Choice Wireless offered
fewer channels, but at a lower price than the comparable System package.
Off-air reception of regional broadcast television stations from Fresno and
Bakersfield was good. The three factors of low- income residents, easy access
to off-air signals, and the presence of an aggressive competitor kept downward
pressure on the System's subscriber levels.
In 1994, Tulare County had a population of 351,000, with an annual
growth rate of 1.63%, shown in Table I (A4). The number of households in the
county was 107,800 in 1994, and was estimated to grow at 1.49% per year through
1999. In 1994, the average household EBI of $37,515 in Tulare was notably
lower than the corresponding figures for the State of California and the U.S.
as a whole.
TABLE I (A4)
<TABLE>
<CAPTION>
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
<S> <C> <C> <C>
TULARE SYSTEM
Tulare County, CA
-----------------
Total Population 351,000 380,500 1.63%
Total Households 107,800 116,100 1.49%
Median Age 30.2 N/A
Effective Buying Income (EBI)
Total EBI (000's) $4,044,102 $5,020,144 4.42%
Average Household EBI $37,515 $43,240 2.88%
</TABLE>
20
<PAGE> 26
TABLE I (A4) (CONTINUED)
<TABLE>
<CAPTION>
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
<S> <C> <C> <C>
TULARE SYSTEM
Fresno County, CA
-----------------
Total Population 755,800 812,500 1.46%
Total Households 246,000 263,900 1.41%
Median Age 30.25 N/A
Effective Buying Income (EBI)
Total EBI (000's) $9,658,848 $11,543,464 3.63%
Average Household EBI $39,264 $43,742 2.18%
</TABLE>
In Oregon, portions of the counties of Lane, Douglas, Linn and
Josephine were served by the Central Region System. Portions of Coos and
Douglas Counties were included in the Coos Bay System's service area. The
Dallas System's service area covered the counties of Tillamook, Polk, Marion,
and Clatsop, and the Florence System served portions of Lane County. Data for
population, households, and Effective Buying Income (EBI) were estimated for
1994 and projected for 1999. Also presented, for comparison purposes, are
statewide data for Oregon and nationwide data.
From 1994 through 1999, the State of Oregon was projected to
experience population growth of 1.66% per year and household growth of 1.79%
per year. The average household EBI in Oregon in 1994 was estimated at
$40,597, and it was projected to grow at 3.32% per year through 1999.
5. Central Region, OR
Portions of the counties of Lane, Douglas, Josephine, and Linn
comprised the Central Region System's service area. About 71% of the
subscribers resided in Lane, 23% in Douglas, 3% in Josephine, while the
remainder resided in Linn.
The economy in Lane County is based on retail, lumber and wood, and
tourism. Major medical facilities in Lane County are Sacred Heart General
Hospital and
21
<PAGE> 27
McKenzie Williamette Hospital. Higher education is available at the local
campus of the University of Oregon. Lane Community College provides an
additional education option. Douglas County is very similar to Lane County
economically, with retail trade, lumber and wood, and services as its dominant
industries.
As of the appraisal date, an MMDS competitor, American Telecasting,
had been in the Central Region System's service area for about two years.
There were no SMATV operators in the market, which was most likely due to the
limited numbers of MDU's in the area.
Table I (B1) indicates that Lane County had a 1994 population of
300,900, which was forecasted to grow at a rate of 1.23% through 1999. Douglas
County's smaller population of 98,800 was also forecasted to grow at a lower
yearly rate of 0.86%. The number of Households in Lane was estimated at
118,000 in 1994, and was forecasted to grow annually by 1.45%. As with
population, the number of households in Douglas was proportionately lower
(37,400) than the corresponding figure in Lane. Projected household growth for
Douglas was lower as well.
Average household EBI in 1994 was estimated to be $37,290 in Lane and
$32,121 in Douglas. Both EBI figures were notably lower than corresponding
figures for the State of Oregon ($40,597) and the U.S. as a whole ($45,957).
The annual EBI growth rates were projected at 3.28% in Lane and 2.55% in
Douglas.
TABLE I (B1)
<TABLE>
<CAPTION>
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
<S> <C> <C> <C>
CENTRAL REGION SYSTEM
Linn County, OR
---------------
Total Population 98,700 106,900 1.61%
Total Households 37,300 40,400 1.61%
Median Age 36.2 N/A
</TABLE>
22
<PAGE> 28
TABLE I (B1) (CONTINUED)
<TABLE>
<CAPTION>
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
<S> <C> <C> <C>
CENTRAL REGION SYSTEM
Effective Buying Income (EBI)
Total EBI (000's) $1,365,909 $1,754,617 5.14%
Average Household EBI $36,620 $43,431 3.47%
Josephine County, OR
--------------------
Total Population 69,700 79,500 2.67%
Total Households 28,100 32,600 3.02%
Median Age 40.8 N/A
Effective Buying Income (EBI)
Total EBI (000's) $864,228 $1,153,979 5.95%
Average Household EBI $30,755 $35,398 2.85%
Lane County, OR
---------------
Total Population 300,900 319,900 1.23%
Total Households 118,000 126,800 1.45%
Median Age 35.35 N/A
Effective Buying Income (EBI)
Total EBI (000's) $4,400,199 $5,557,458 4.78%
Average Household EBI $37,290 $43,829 3.28%
Douglas County, OR
------------------
Total Population 98,800 103,100 0.86%
Total Households 37,400 39,400 1.05%
Median Age 37.3 N/A
Effective Buying Income (EBI)
Total EBI (000's) $1,201,337 $1,435,185 3.62%
Average Household EBI $32,121 $36,426 2.55%
State of Oregon
---------------
Total Population 3,120,400 3,387,800 1.66%
Total Households 1,207,400 1,319,600 1.79%
Median Age 35.8 N/A
</TABLE>
23
<PAGE> 29
TABLE I (B1) (CONTINUED)
<TABLE>
<CAPTION>
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
<S> <C> <C> <C>
CENTRAL REGION SYSTEM
Effective Buying Income (EBI)
Total EBI (000's) $49,016,991 $63,085,455 5.18%
Average Household EBI $40,597 $47,806 3.32%
United States of America
------------------------
Total Population 262,213,300 274,074,500 0.89%
Total Households 96,571,000 101,749,100 1.05%
Median Age 34.15 N/A
Effective Buying Income (EBI)
Total EBI (000's) $4,436,178,724 $5,418,070,332 4.08%
Average Household EBI $45,937 $53,249 3.00%
</TABLE>
6. Coos Bay, OR
The Coos Bay System served portions of Coos County and Douglas County.
However, about 90% of the subscribers resided in Coos County. Industries that
are predominant in Coos County include agriculture, commercial fishing, and
forestry. Bay Area Hospital serves the county.
As of the appraisal date, DBS competitors in the market included
Direct TV and Primestar, although, the number of subscribers was limited and
had yet to impact the System. SMATV operators also had a limited presence in
the market. There were no MMDS competitors in the market.
As shown in Table I (B2), Coos County had a population of 62,800, with
a projected annual growth rate of 0.50% through 1999. The number of households
was estimated at 25,200 in 1994, and was projected to grow at 0.78% per year.
Average household EBI in 1994 was estimated to be $31,285 in Coos, and was
forecasted to grow at an annual rate of 2.63%. Average EBI figures for the
System's service area were significantly lower than both the Oregon statewide
and nationwide averages.
24
<PAGE> 30
TABLE I (B2)
<TABLE>
<CAPTION>
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
<S> <C> <C> <C>
COOS BAY SYSTEM
Coos County, OR
---------------
Total Population 62,800 64,400 0.50%
Total Households 25,200 26,200 0.78%
Median Age 38.75 N/A
Effective Buying Income (EBI)
Total EBI (000's) $788,394 $933,095 3.43%
Average Household EBI $31,285 $35,614 2.63%
Douglas County, OR
------------------
Total Population 98,800 103,100 0.86%
Total Households 37,400 39,400 1.05%
Median Age 37.3 N/A
Effective Buying Income (EBI)
Total EBI (000's) $1,201,337 $1,435,185 3.62%
Average Household EBI $32,121 $36,426 2.55%
</TABLE>
7. Dallas, OR
The counties of Polk, Tillamook, Marion, and Clatsop comprised the
Dallas System's service area. Approximately 38% of System subscribers resided
in Polk, 31% in Marion, 24% in Tillamook, while less than 7% were in Clatsop.
The economy of the service area is based on lumber and wood products,
agriculture, and manufacturing. Valley Community Hospital serves the area from
the City of Dallas in Polk County.
In terms of population, Marion was the largest county in the service
area, with a population of 253,300. Population figures for Polk and Tillamook
were 56,500 and 23,500, respectively. With an annual growth rate of 2.43%,
Polk was projected to expand more rapidly than both Tillamook (1.96%) and
Marion (1.84%). The number of households in Marion in 1994 was 91,700.
Households totaled 20,600 in Polk and 9,700
25
<PAGE> 31
in Tillamook. Projected household growth for Polk of 2.58%, was higher than
growth in Tillamook (1.98%) and Marion (1.89%).
Estimated average EBI per household of $40,200 in Marion was higher
than EBI figures for Polk and Tillamook of $36,245 and $32,432, respectively.
Marion also had a higher projected annual EBI growth rate at 3.45% than both
Tillamook (3.17%) and Polk (1.79%). Household EBI figures in the Dallas
System's service area were lower than EBI figures for both the State of Oregon
and the U.S. as a whole. This information is presented in Table I (B3).
TABLE I (B3)
<TABLE>
<CAPTION>
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
<S> <C> <C> <C>
DALLAS SYSTEM
Tillamook County, OR
--------------------
Total Population 23,500 25,900 1.96%
Total Households 9,700 10,700 1.98%
Median Age 41.3 N/A
Effective Buying Income (EBI)
Total EBI (000's) $314,595 $405,556 5.21%
Average Household EBI $32,432 $37,902 3.17%
Clatsop County, OR
------------------
Total Population 35,400 37,700 1.27%
Total Households 14,100 15,100 1.38%
Median Age 37.05 N/A
Effective Buying Income (EBI)
Total EBI (000's) $465,808 $529,530 2.60%
Average Household EBI $33,036 $35,068 1.20%
Polk County, OR
---------------
Total Population 56,500 63,700 2.43%
Total Households 20,600 23,400 2.58%
Median Age 35.5 N/A
</TABLE>
26
<PAGE> 32
TABLE I (B3) (CONTINUED)
<TABLE>
<CAPTION>
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
<S> <C> <C> <C>
DALLAS SYSTEM
Effective Buying Income (EBI)
Total EBI (000's) $746,649 $926,837 4.42%
Average Household EBI $36,245 $39,608 1.79%
Marion County, OR
-----------------
Total Population 253,300 277,500 1.84%
Total Households 91,700 100,700 1.89%
Median Age 35.05 N/A
Effective Buying Income (EBI)
Total EBI (000's) $3,686,300 $4,796,522 5.41%
Average Household EBI $40,200 $47,632 3.45%
</TABLE>
8. Florence, OR
As of the appraisal date, the Florence System's subscribers resided in
or near Lane County, Oregon. Lane County, served by the Central Region System,
was discussed earlier in this report. Data is presented in Table I (B4).
TABLE I (B4)
<TABLE>
<CAPTION>
Annual
1994 1999 Growth Rate
Estimate Projection 1994-1999
-------- ---------- ---------
FLORENCE SYSTEM
<S> <C> <C> <C>
Lane County, OR
---------------
Total Population 300,900 319,900 1.23%
Total Households 118,000 126,800 1.45%
Median Age 35.35 N/A
Effective Buying Income (EBI)
Total EBI (000's) $4,400,199 $5,557,458 4.78%
Average Household EBI $37,290 $43,829 3.28%
</TABLE>
27
<PAGE> 33
B. SERVICES
Tables II (A1) through (H2) present information on programming offered
to subscribers in the eight Systems, as of the appraisal date. Given the use
of multiple headends in each System and varying channel capacities, program
line-ups available to subscribers differed within the individual Systems. The
premium services are shown in boldface and tier services are indicated by =, +,
++ and +++ markings.
1. Gilroy, CA
As of December 31, 1995, Gilroy subscribers were served by four
headends. Table II (A1) presents the programming service offered by the Gilroy
headend, which is microwaved to the counties of Santa Clara and San Benito.
Subscribers receiving this programming service comprised about 60% of total
System subscribers. Programming included a 21-channel basic service, two tier
services, six premium channels, and one pay-per-view channel. Basic service
included fourteen local broadcast TV stations, six satellite-delivered
services, and one community access programming service. Premium services
included Encore, The Movie Channel, The Disney Channel, Showtime, Cinemax and
HBO. The single pay-per-view service offered was Request. Subscribers
residing in Monterey and San Benito, which comprised about 19% of System
subscribers, received the same service with one exception -- Encore was not
available. In its place, C-SPAN was offered.
Roughly 9% of subscribers received programming from the
Soledad/Gonzales headend. The 35-channel lineup presented in Table II (A2)
included a 16-channel basic service, a 7-channel tier service, a 6-channel tier
service, five premium channels, and one pay-per-view service.
About 8% of System subscribers received the programming shown in Table
II (A3) from the King City headend, while less than 5% received the same
programming from the Greenfield headend. These subscribers received a
24-channel basic service, a 3-channel tier, a 5-channel tier service, and three
premium channels.
28
<PAGE> 34
TABLE II (A1)
GILROY HEADEND
<TABLE>
<S> <C> <C>
* 1 REQUEST - PAY PER VIEW
2 KTVU 2-Fox Oakland, CA
3 KICU-TV 36-IND San Jose, CA
4 KRON-TV 4-NBC San Francisco, CA
5 KCCN-TV 46-CBS Monterey, CA
6 KSBW 8-NBC Salinas-Monterey, CA
7 KGO-TV 7-ABC San Francisco, CA
8 KCBA 35-Fox Salinas-Monterey, CA
9 KQED 9-PBS San Francisco, CA
10 KPIX 5-CBS San Francisco, CA
11 KBHK-TV 44-Ind San Francisco, CA
12 KNTV 11-ABC San Jose, CA
13 KSMS-TV 67-Univsn Monterey, CA
14 KTEH 54-PBS San Jose, CA
* 15 ENCORE
* 16 THE MOVIE CHANNEL
* 17 THE DISNEY CHANNEL
* 18 SHOWTIME
* 20 CINEMAX
* 21 HBO
+ 22 The Family Channel
+ 23 USA Network
+ 24 The Discovery Channel
+ 25 TNT
= 26 CNN
= 27 The Nashville Network
= 28 ESPN
29 Lifetime
30 QVC
31 Arts & Entertainment
32 Nickelodeon
33 WTBS 17-IND Atlanta, GA
34 Local - Community Access/PEG
35 KSTS 48-Telemundo San Jose, CA
36 MTV
</TABLE>
29
<PAGE> 35
TABLE II (A2)
SOLEDAD/GONZALES
<TABLE>
<S> <C> <C>
* 1 REQUEST - PAY PER VIEW
2 KTVU 2-Fox Oakland, CA
3 WTBS 17-IND Atlanta, GA
4 KCCN-TV 46-CBS Monterey, CA
5 KCBA 35-Fox Salinas-Monterey, CA
6 KSBW 8-NBC Salinas-Monterey, CA
7 Local - Community Access/PEG
8 Local - Community Access/PEG
+ 9 USA Network
10 KNTV 11-ABC San Jose, CA
11 KQED 9-PBS San Francisco, CA
12 KICU-TV 36-IND San Jose, CA
13 KSMS-TV 67-Univsn Monterey, CA
14 QVC
= 15 Lifetime
= 16 The Family Channel
= 17 ESPN
= 18 The Nashville Network
= 20 American Movie Classics
= 21 Country Music TV
= 22 Galavision
+ 23 CNN
+ 24 The Discovery Channel
* 25 HBO
* 26 CINEMAX
* 28 SHOWTIME
29 Sneak Prevue
* 30 THE MOVIE CHANNEL
* 31 THE DISNEY CHANNEL
+ 32 Nickelodeon
+ 33 CNN Headline News
34 Arts & Entertainment
+ 35 Cartoon Network
36 MTV
37 Home Shopping Network
</TABLE>
30
<PAGE> 36
TABLE II (A3)
KING CITY AND GREENFIELD HEADENDS
<TABLE>
<S> <C> <C>
* 2 THE MOVIE CHANNEL
3 KCBA 35-Fox Salinas-Monterey, CA
4 The Discovery Channel
* 5 SHOWTIME
6 The Family Channel
7 Galavision
8 KTVU 2-Fox Oakland, CA
9 KQED 9-PBS San Francisco, CA
10 KSBW 8-NBC Salinas-Monterey, CA
11 KNTV 11-ABC San Jose, CA
12 KCCN-TV 46-CBS Monterey, CA
13 KSMS-TV 67-Univsn Monterey, CA
* 14 THE DISNEY CHANNEL
15 Local - Monterey Co. Office Educational
16 Local - Community Access/PEG
+ 17 WTBS 17-IND Atlanta, GA
+ 18 WGN-TV
+ 20 TNT
+ 21 CNN
+ 22 CNN Headline News
23 QVC
24 The Nashville Network
25 USA Network
26 MTV
27 Nickelodeon
28 ESPN
= 29 The Learning Channel
= 30 The Weather Channel
= 31 Arts & Entertainment
32 Bravo
33 American Movie Classics
34 Country Music TV
35 Sci-Fi Channel
36 Lifetime
37 Home Shopping Network
</TABLE>
31
<PAGE> 37
2. Hesperia, CA
The Hesperia System operated with five headends as of the appraisal
date. Table II (B1) presents the programming available to subscribers served
by the Hesperia headend, who comprised 58% of total System subscribers.
Programming included a 21-channel basic service, an 8-channel tier service, a
7-channel tier service, six premium channels, and one pay-per-view service.
Basic service included nine local broadcast TV stations, 12 satellite-delivered
services, and one local community programming channel. Premium services
included HBO, Cinemax, Showtime, The Movie Channel, Encore, and The Disney
Channel. Request pay-per-view service was also offered.
About 19% of System subscribers received the programming shown in
Table II (B2) from the Adelanto headend. This line-up was similar to the
line-up available from the Hesperia headend. Minor differences included the
packaging of Comedy Central and VH-1, and the inclusion of BET in place of
Nostalgia.
About 18% of subscribers had access to a 40-channel programming
service from the Mojave/Rosamond headend shown in Table II (B3). Included were
a 26-channel basic service (channel 29 was shared by Comedy Central and VH-1),
a 5-channel tier service, a 4-channel tier, and five premium channels.
About 4% of System subscribers received a 28-channel programming
service from the Boron headend, while 1% received a 40-channel programming
service from the North Edwards headend. These services are presented in Tables
II (B4) and (B5), respectively.
TABLE II (B1)
HESPERIA HEADEND
<TABLE>
<S> <C> <C>
2 KCBS-TV 2-CBS Los Angeles, CA
= 3 ESPN
4 KNBC 4-NBC Los Angeles, CA
5 KTLA 5-Ind Los Angeles, CA
6 KCET 28-PBS Los Angeles, CA
</TABLE>
32
<PAGE> 38
TABLE II (B1) (CONTINUED)
HESPERIA HEADEND
<TABLE>
<S><C> <C>
7 KABC-TV 7-ABC Los Angeles, CA
8 KHIZ 64-Ind Barstow, CA
9 KCAL 9-Ind Los Angeles, CA
10 Univision
11 KTTV 11-Fox Los Angeles, CA
12 WGN-TV
13 KCOP 13-Ind Los Angeles, CA
14 QVC
15 Local - Character Generated
= 16 The Travel Channel
= 17 Arts & Entertainment
= 18 The Family Channel
= 19 Country Music TV
= 20 Lifetime
= 21 The Nashville Network
= 22 American Movie Classics
+ 23 CNN Headline News
+ 24 The Discovery Channel
25 The Learning Channel
26 C-SPAN
+ 27 Nickelodeon
+ 28 USA Network
+ 29 CNN
30 Comedy Central
30 VH-1
31 Nostalgia
32 MTV
33 TNT
+ 34 Prime Sports
* 35 HBO
36 WTBS 17-Ind Atlanta, GA
* 37 CINEMAX
* 38 SHOWTIME
* 39 THE MOVIE CHANNEL
* 40 ENCORE
* 41 THE DISNEY CHANNEL
* 42 REQUEST - PAY PER VIEW
43 Home Shopping Network
+ 44 TV Food Network
</TABLE>
33
<PAGE> 39
TABLE II (B2)
ADELANTO HEADEND
<TABLE>
<S><C> <C>
2 KCBS-TV 2-CBS Los Angeles, CA
= 3 ESPN
4 KNBC 4-NBC Los Angeles, CA
5 KTLA 5-Ind Los Angeles, CA
6 KCET 28-PBS Los Angeles, CA
7 KABC-TV 7-ABC Los Angeles, CA
8 KHIZ 64-Ind Barstow, CA
9 KCAL 9-Ind Los Angeles, CA
10 Univision
11 KTTV 11-Fox Los Angeles, CA
12 WGN-TV
13 KCOP 13-Ind Los Angeles, CA
14 QVC
15 Local - Character Generated
= 16 The Travel Channel
= 17 Arts & Entertainment
= 18 The Family Channel
= 19 Country Music TV
= 20 Lifetime
= 21 The Nashville Network
= 22 American Movie Classics
+ 23 CNN Headline News
+ 24 The Discovery Channel
25 The Learning Channel
26 C-SPAN
+ 27 Nickelodeon
+ 28 USA Network
+ 29 CNN
= 30 Comedy Central
= 30 VH-1
31 Black Entertainment TV
32 MTV
33 TNT
+ 34 Prime Sports
* 35 HBO
36 WTBS 17-Ind Atlanta, GA
* 37 CINEMAX
</TABLE>
34
<PAGE> 40
TABLE II (B2) (CONTINUED)
ADELANTO HEADEND
<TABLE>
<S><C> <C>
* 38 SHOWTIME
* 39 THE MOVIE CHANNEL
* 40 ENCORE
* 41 THE DISNEY CHANNEL
* 42 REQUEST - PAY PER VIEW
43 Home Shopping Network
+ 44 TV Food Network
</TABLE>
35
<PAGE> 41
TABLE II (B3)
MOJAVE/ROSAMOND HEADEND
<TABLE>
<S><C> <C>
2 KCBS-TV 2-CBS Los Angeles, CA
3 KHIZ 64-Ind Barstow, CA
4 KNBC 4-NBC Los Angeles, CA
5 KTLA 5-Ind Los Angeles, CA
6 ESPN
7 KABC-TV 7-ABC Los Angeles, CA
8 KTBN-TV 40 Ind Los Angeles, CA
9 KCAL 9-Ind Los Angeles, CA
10 Spanish International Network
11 KTTV 11-Fox Los Angeles, CA
12 KCET 28-PBS Los Angeles, CA
13 KCOP 13-Ind Los Angeles, CA
14 The Family Channel
+ 15 TV Food Network
+ 16 ESPN 2
+ 17 WTBS 17-Ind Atlanta, GA
+ 18 WGN-TV
= 19 Lifetime
= 20 CNN
= 21 CNN Headline News
= 22 The Discovery Channel
= 23 American Movie Classics
* 24 HBO
* 25 CINEMAX
* 26 SHOWTIME
* 27 THE MOVIE CHANNEL
28 MTV
29 Comedy Central
29 VH-1
* 30 THE DISNEY CHANNEL
31 Local - Community Access/PEG
32 ACTS
33 CNBC
34 QVC
35 USA Network
36 Sci-Fi Channel
37 Bravo
38 E! - Entertainment
39 Home Shopping Network
40 The Nashville Network
41 Nickelodeon
</TABLE>
36
<PAGE> 42
TABLE II (B4)
BORON HEADEND
<TABLE>
<S><C> <C>
2 KCBS-TV 2-CBS Los Angeles, CA
+ 3 WTBS 17-Ind Atlanta, GA
4 KNBC 4-NBC Los Angeles, CA
5 KTLA 5-Ind Los Angeles, CA
* 6 SHOWTIME
7 KABC-TV 7-ABC Los Angeles, CA
8 KHIZ 64-Ind Barstow, CA
9 KCAL 9-Ind Los Angeles, CA
+ 10 The Discovery Channel
11 KTTV 11-Fox Los Angeles, CA
12 KBAK-TV 29-ABC Bakersfield, CA
13 KCOP 13-Ind Los Angeles, CA
14 MTV
15 KERO-TV 23-CBS Bakersfield, CA
16 Home Shopping Network
* 17 THE MOVIE CHANNEL
+ 18 CNN
20 The Family Channel
* 21 HBO
* 22 THE DISNEY CHANNEL
23 ESPN
24 C-SPAN
+ 25 The Nashville Network
26 QVC
+ 27 TV Food Network
28 Nickelodeon
= 29 American Movie Classics
= 30 Lifetime
</TABLE>
37
<PAGE> 43
TABLE II (B5)
NORTH EDWARDS HEADEND
<TABLE>
<S><C> <C>
2 KCBS-TV 2-CBS Los Angeles, CA
3 Arts & Entertainment
4 KNBC 4-NBC Los Angeles, CA
5 KTLA 5-Ind Los Angeles, CA
6 KCET 28-PBS Los Angeles, CA
7 KABC-TV 7-ABC Los Angeles, CA
8 KHIZ 64-Ind Barstow, CA
9 KCAL 9-Ind Los Angeles, CA
10 The Learning Channel
11 Fox Network
12 WGN-TV
13 KCOP 13-Ind Los Angeles, CA
14 QVC
15 KTBN-TV 40 Ind Los Angeles, CA
16 WTBS 17-Ind Atlanta, GA
17 C-SPAN
+ 18 CNN
+ 20 Nickelodeon
+ 21 CNN Headline News
+ 22 The Discovery Channel
= 23 American Movie Classics
= 24 The Family Channel
= 25 Lifetime
= 26 ESPN
= 27 Sci-Fi Channel
= 28 The Nashville Network
= 29 Country Music TV
30 Comedy Central
30 VH-1
31 MTV
32 TNT
+ 33 Prime Sports
* 34 HBO
* 35 CINEMAX
36 The Travel Channel
* 37 SHOWTIME
* 38 THE MOVIE CHANNEL
* 39 THE DISNEY CHANNEL
+ 40 USA Network
41 Home Shopping Network
+ 42 TV Food Network
</TABLE>
38
<PAGE> 44
3. San Luis Obispo, CA
As of the appraisal date, the San Luis Obispo System had four
headends. Table II (C1) presents the programming available to subscribers
receiving service from the San Luis Obispo County headend. These subscribers
comprised about 56% of total System subscribers. Programming included a
22-channel basic service, a 13-channel expanded basic service, a 6-channel tier
service, two 4-channel tiers, six premium channels, and one pay-per-view
service. Basic service included eight local broadcast TV stations, ten
satellite-delivered services, and five local community access programming
services. Premium services included The Disney Channel, Showtime, Cinemax,
HBO, The Movie Channel, and Playboy. The pay-per-view service Request was also
available. Due to limited capacity, channel sharing was employed for several
channels, including two local community access programming services, VH-1, and
Comedy Central.
About 37% of subscribers were served by the Atascadero headend. These
subscribers had access to the 36 channels of programming shown in Table II
(C2). Basic service included one local community access programming channel,
and the same local broadcast TV stations and satellite-delivered services
available at the San Luis Obispo County headend. Premium and pay-per-view
services also duplicated those at the San Luis Obispo County headend.
About 5% of San Luis Obispo System subscribers were served by the
Guadalupe headend, and less than 2% were served by the Los Alamos headend.
Tables II (C3) and (C4) present the programming services received by those
subscribers, respectively.
39
<PAGE> 45
TABLE II (C1)
SAN LUIS OBISPO HEADEND
<TABLE>
<S> <C> <C>
2 KCOY-TV 12-CBS Santa Maria, CA
3 KEYT-TV 3-ABC Santa Barbara, CA
4 KSBY 6-NBC San Luis Obispo, CA
5 KTLA 5-Ind Los Angeles, CA
6 California Channel
7 The Family Channel
8 KCET 28-PBS Los Angeles, CA
9 KCAL 9-Ind Los Angeles, CA
10 C-SPAN
11 KTTV 11-Fox Los Angeles, CA
12 QVC
13 KADY-TV 63-Ind Oxnard, CA
14 WTBS 17-Ind Atlanta, GA
15 Arts & Entertainment
16 The Learning Channel
* 17 THE DISNEY CHANNEL
+ 18 Prime Sports
* 19 SHOWTIME
* 20 CINEMAX
* 21 HBO
* 22 THE MOVIE CHANNEL
+ 23 Bravo
* 24 REQUEST - PAY PER VIEW
= 25 CNN
= 26 The Nashville Network
= 27 American Movie Classics
= 28 Lifetime
= 29 Comedy Central
= 30 CNBC
= 31 ESPN
32 Nickelodeon
33 USA Network
+ 34 The Discovery Channel
35 TNT
36 MTV
= 37 Univision
= 38 Prevue Guide
= 39 Home Shopping Network
= 40 Sneak Prevue
= 41 TV Food Network
= 42 ESPN 2
+++ 43 The History Channel
+++ 45 Country Music TV
</TABLE>
40
<PAGE> 46
TABLE II (C1) (CONTINUED)
SAN LUIS OBISPO HEADEND
<TABLE>
<S> <C> <C>
+++ 46 FXM - Fox Movies
+++ 47 Eternal Word TV Network
++ 48 Cartoon Network
++ 50 E! - Entertainment TV
++ 51 Sci-Fi Channel
++ 52 Newstalk Television
+ 53 The Weather Channel
+ 54 CNN Headline News
+ 55 Home & Garden TV
59 Local - Government Access
60 Local - Educational Access
61 Local - Community Access/PEG
* 80 PLAYBOY
</TABLE>
41
<PAGE> 47
TABLE II (C2)
ATASCADERO HEADEND
<TABLE>
<S> <C> <C>
2 KCOY-TV 12-CBS Santa Maria, CA
3 KEYT-TV 3-ABC Santa Barbara, CA
4 KSBY 6-NBC San Luis Obispo, CA
5 KTLA 5-Ind Los Angeles, CA
6 Local - Community Access/PEG
7 The Family Channel
8 KCET 28-PBS Los Angeles, CA
9 KCAL 9-Ind Los Angeles, CA
10 C-SPAN
11 KTTV 11-Fox Los Angeles, CA
12 QVC
13 KADY-TV 63-Ind Oxnard, CA
14 WTBS 17-Ind Atlanta, GA
15 Arts & Entertainment
16 The Learning Channel
* 17 THE DISNEY CHANNEL
+ 18 Prime Sports
* 19 SHOWTIME
* 20 CINEMAX
* 21 HBO
* 22 THE MOVIE CHANNEL
+ 23 Bravo
* 24 REQUEST - PAY PER VIEW
= 25 CNN
= 26 The Nashville Network
= 27 American Movie Classics
= 28 Lifetime
= 29 Comedy Central
= 29 VH-1
= 30 CNBC
= 31 ESPN
32 Nickelodeon
33 USA Network
+ 34 The Discovery Channel
35 TNT
36 MTV
* 80 PLAYBOY
</TABLE>
42
<PAGE> 48
TABLE II (C3)
GUADALUPE HEADEND
<TABLE>
<S> <C> <C>
2 KCOY-TV 12-CBS Santa Maria, CA
3 KEYT-TV 3-ABC Santa Barbara, CA
4 KSBY 6-NBC San Luis Obispo, CA
5 KTLA 5-Ind Los Angeles, CA
6 Local - Community Access/PEG
7 K07TA 7-LPTV Santa Maria, CA
8 KCET 28-PBS Los Angeles, CA
9 KCAL 9-Ind Los Angeles, CA
10 C-SPAN
11 KTTV 11-Fox Los Angeles, CA
12 QVC
13 KADY-TV 63-Ind Oxnard, CA
14 WTBS 17-Ind Atlanta, GA
15 Arts & Entertainment
16 The Learning Channel
* 17 THE DISNEY CHANNEL
+ 18 Prime Sports
* 19 SHOWTIME
* 20 CINEMAX
* 21 HBO
* 22 THE MOVIE CHANNEL
+ 23 Bravo
* 24 REQUEST - PAY PER VIEW
= 25 CNN
= 26 The Nashville Network
= 27 American Movie Classics
= 28 Lifetime
= 29 Comedy Central
= 29 VH-1
= 30 CNBC
31 ESPN
32 Nickelodeon
33 USA Network
+ 34 The Discovery Channel
35 TNT
36 MTV
* 80 PLAYBOY
</TABLE>
43
<PAGE> 49
TABLE II (C4)
LOS ALAMOS HEADEND
<TABLE>
<S> <C> <C>
2 QVC
3 KEYT-TV 3-ABC Santa Barbara, CA
4 The Family Channel
5 Bravo
6 KSBY 6-NBC San Luis Obispo, CA
* 7 HBO
* 8 CINEMAX
9 The learning Channel
10 MTV
11 ESPN
12 KCOY-TV 12-CBS Santa Maria, CA
13 Local - Community Access
= 14 USA Network
= 15 Lifetime
= 16 Country Music TV
+ 17 CNN
+ 18 WTBS 17-Ind Atlanta, GA
+ 19 The Discovery Channel
+ 20 CNN Headline News
* 21 THE DISNEY CHANNEL
* 22 GALAVISION
</TABLE>
4. Tulare, CA
As of the appraisal date, the Tulare System was served by three
headends. About 98% of System subscribers received programming from the
Porterville/Tulare headend. As shown in Table II (D1), the service consisted
of a 21-channel basic service, two 6-channel tier services, five premium
channels, and one pay-per-view channel. Basic service included 14 local
broadcast TV stations, six satellite-delivered services, and one local
community access programming service. Premium services offered were The Disney
Channel, Cinemax, The Movie Channel, HBO, and Showtime. The pay-per-view
service Request was also offered.
44
<PAGE> 50
About 1% of the subscribers received a 12-channel program line-up from
the California Hot Springs headend, and less than 1% subscribers received a
13-channel line-up from Jack Ranch/Posey headend. Tables II (D2) and (D3)
present this information.
TABLE II (D1)
PORTERVILLE/TULARE HEADEND
<TABLE>
<S> <C> <C>
+ 1 Country Music TV
2 KSEE 24-NBC Fresno, CA
3 KFSN-TV 30-ABC Fresno, CA
4 KVPT 18-PBS Fresno, CA
5 KTLA 5-Ind Los Angeles, CA
6 KMPH 26-Fox Visalia-Fresno, CA
7 KJEO 47-CBS Fresno, CA
8 KBAK-TV 29-ABC Bakersfield, CA
9 KFTV 21-Univsn Hanford, CA
10 KERO-TV 23-CBS Bakersfield, CA
11 KNXT 49-ETV Visalia, CA
12 Local-Character Generated
13 USA Network
14 WTBS 17-Ind Atlanta, GA
+ 15 C-SPAN
+ 15 Prime Sports
+ 16 TNT
17 KGET 17-NBC Bakersfield, CA
= 18 The Discovery Channel
= 19 The Weather Channel
= 20 Lifetime
= 21 ESPN
= 22 CNBC
23 MTV
+ 24 CNN
= 25 Nickelodeon
+ 26 The Nashville Network
27 Trinity Broadcast Network
+ 28 CNN Headline News
29 Arts & Entertainment
* 30 THE DISNEY CHANNEL
* 31 CINEMAX
* 32 REQUEST - PAY PER VIEW
* 33 THE MOVIE CHANNEL
* 34 HBO
* 35 SHOWTIME
36 QVC
37 KAIL 53-Ind Fresno, CA
38 KMSG-TV 59-Telemundo Sanger, CA
39 KKAG 61-Ind Porterville, CA
</TABLE>
45
<PAGE> 51
TABLE II (D2)
CALIFORNIA HOT SPRINGS HEADEND
<TABLE>
<S> <C> <C>
2 KSEE 24-NBC Fresno, CA
3 ESPN
4 KMPH 26-Fox Visalia-Fresno, CA
* 5 SHOWTIME
6 KERO-TV 23-CBS Bakersfield, CA
7 KBAK-TV 29-ABC Bakersfield, CA
8 QVC
9 KVPT 18-PBS Fresno, CA
10 CNN
11 Arts & Entertainment
12 Sci-Fi Channel
13 The Discovery Channel
</TABLE>
TABLE II (D3)
JACK RANCH/POSEY HEADEND
<TABLE>
<S> <C> <C>
2 KFSN-TV 30-ABC Fresno, CA
3 ESPN
4 KSEE 24-NBC Fresno, CA
* 5 THE MOVIE CHANNEL
6 KMPH 26-Fox Visalia-Fresno, CA
7 KJEO 47-CBS Fresno, CA
8 KBAK-TV 29-ABC Bakersfield, CA
9 QVC
10 CNN
11 KVPT 18-PBS Fresno, CA
12 Sci-Fi Channel
13 The Discovery Channel
22 CNN Headline News
</TABLE>
5. Central Region, OR
As of the appraisal date, there were eight headends in the Central
Region System. Table II (E1) presents the programming available to subscribers
receiving service from the Bear Mountain headend. These subscribers,
comprising about 45% of total System subscribers, had access to a 15-channel
basic service, three tier services
46
<PAGE> 52
with between four to six channels each, and five premium channels. The basic
line-up included seven local broadcast TV stations, nine satellite-delivered
services, one microwave-delivered service, and one local community access
programming channel. Premium services included The Movie Channel, Showtime,
HBO, Cinemax, and The Disney Channel. The same programming services were
offered to subscribers served from the Drain/Yoncalla headend, which served
less than 6% of System subscribers; and the Bear Mountain/Cottage Grove
headend, which served only about 3% of subscribers.
About 14% of System subscribers, served by the Sutherlin/Oakland
headend, received programming services presented in Table II (E2). A
15-channel basic service was comprised of six local broadcast TV stations,
eight satellite-delivered services, and one local community access programming
service. Additionally, a 4-channel tier, a 5-channel tier, and four premium
services were available to these subscribers.
Table II (E3) presents the programming offered to the 13% of total
System subscribers receiving service from the Cottage Grove headend.
Programming available included a 29-channel basic service, a 4-channel tier
service, and six premium channels. Basic service consisted of seven local
broadcast TV stations, 18 satellite-delivered programming services, one
microwave-delivered service, and three local community access programming
channels.
Approximately 10% of subscribers received the programming service
shown in Table II (E4) from the Veneta headend. Basic service consisted of
seven local broadcast TV stations, four satellite-delivered services, one
microwave-delivered service, and one local community access programming
channel. The subscribers could also receive a 4-channel tier, a 5-channel
tier, and four premium services.
The Cave Junction headend served less than 6% of System subscribers,
while the Brownsville headend served less than 4% of System subscribers. The
programming services available from those headends were presented in Tables II
(E5) and (E6), respectively.
47
<PAGE> 53
TABLE II (E1)
BEAR MOUNTAIN AND BEAR MT./COTTAGE GROVE HEADENDS
<TABLE>
<S> <C> <C>
+ 2 Nickelodeon
+ 3 Country Music TV
4 KEZI 9-ABC Eugene, OR
5 WGN-TV
6 KMTR 16-NBC Eugene, OR
7 KOAC-TV 7-PBS Corvallis, OR
8 KVAL-TV 13-CBS Eugene, OR
9 Local - Community Access/PEG
9 C-SPAN
10 WTBS 17-Ind Atlanta, GA
11 K25AS 25-Fox Eugene, OR
12 KEVU 34-Ind Eugene, OR
13 QVC
* 14 THE MOVIE CHANNEL
+ 15 The Discovery Channel
++ 16 The Weather Channel
* 17 SHOWTIME
* 18 HBO
+ 19 The Family Channel
20 Prime Sports Northwest
* 21 BLAZERCABLE
++ 22 Cinemax
= 23 CNN Headline News
= 24 ESPN
= 25 CNN
= 26 Lifetime
= 27 Sci-Fi Channel
+ 28 The Nashville Network
29 MTV
30 VH-1
30 Comedy Central
31 Arts & Entertainment
++ 32 Cartoon Network
* 33 THE DISNEY CHANNEL
++ 34 The Learning Channel
35 American Movie Classics
+ 36 USA Network
</TABLE>
48
<PAGE> 54
TABLE II (E2)
SUTHERLIN/OAKLAND HEADEND
<TABLE>
<S> <C> <C>
* 2 HBO
3 KLSR-TV 29-Fox Winston, OR
4 KPIC 4-CBS Roseburg, OR
5 KOBI 5-NBC Medford, OR
6 ESPN
7 KOAC-TV 7-PBS Corvallis, OR
8 QVC
9 KEZI 9-ABC Eugene, OR
10 KMTR 16-NBC Eugene, OR
11 Local - Community Access/PEG
* 12 THE MOVIE CHANNEL
= 13 Country Music TV
+ 14 CNN Headline News
+ 15 CNN
+ 15 Blazercable
+ 16 TNT
17 The Family Channel
18 Nickelodeon
19 Arts & Entertainment
* 20 THE DISNEY CHANNEL
* 21 SHOWTIME
22 Lifetime
23 American Movie Classics
24 E! - Entertainment TV
= 95 Sci-Fi Channel
= 96 The Nashville Network
= 97 USA Network
+ 98 WGN-TV
+ 99 WTBS 17-Ind Atlanta, GA
</TABLE>
49
<PAGE> 55
TABLE II (E3)
COTTAGE GROVE HEADEND
<TABLE>
<S> <C> <C>
2 KMTR 16-NBC Eugene, OR
3 C-SPAN
4 Local-Character Generated
5 KOBI 5-NBC Medford, OR
6 Local - Community Access/PEG
7 KOAC-TV 7-PBS Corvallis, OR
8 ESPN
9 KEZI 9-ABC Eugene, OR
10 Local - Community Access/PEG
11 K25AS 25-Fox Eugene, OR
12 KEVU 34-Ind Eugene, OR
13 KVAL-TV 13-CBS Eugene, OR
14 Arts & Entertainment
15 WGN-TV
16 WTBS 17-Ind Atlanta, GA
+ 17 WWOR-TV
+ 18 Nickelodeon
20 The Family Channel
+ 21 The Nashville Network
+ 22 Country Music TV
* 23 THE DISNEY CHANNEL
* 24 HBO
* 25 CINEMAX
* 26 SHOWTIME
+ 27 USA Network
+ 28 The Discovery Channel
= 29 CNN
30 Blazercable
= 30 CNN Headline News
= 31 The Weather Channel
32 New Inspirational Network
33 Trinity Broadcast Network
34 MTV
35 Nostalgia
36 American Movie Classics
37 The Learning Channel
* 38 THE MOVIE CHANNEL
39 Lifetime
* 40 ENCORE
41 QVC
= 42 Sci-Fi Channel
43 The Travel Channel
44 Bravo
45 fX
46 Home Shopping Network
</TABLE>
50
<PAGE> 56
TABLE II (E4)
VENETA HEADEND
<TABLE>
<S> <C> <C>
2 KATU 2-ABC Portland, OR
= 3 ESPN
* 4 HBO
5 The Family Channel
6 KOIN 6-CBS Portland, OR
7 KOAC-TV 7-PBS Corvallis, OR
8 KMTR 16-NBC Eugene, OR
9 MTV
10 KVAL-TV 13-CBS Eugene, OR
11 KEZI 9-ABC Eugene, OR
12 K25AS 25-Fox Eugene, OR
13 Local - Community Access/PEG
+ 14 CNN Headline News
+ 15 CNN
= 16 Nickelodeon
= 17 USA Network
* 18 SHOWTIME
* 19 THE DISNEY CHANNEL
+ 20 WTBS 17-Ind Atlanta, GA
+ 21 The Nashville Network
+ 22 The Discovery Channel
* 23 THE MOVIE CHANNEL
24 Nostalgia
98 Blazercable
98 C-SPAN
= 99 Sci-Fi Channel
</TABLE>
51
<PAGE> 57
TABLE II (E5)
CAVE JUNCTION HEADEND
<TABLE>
<S> <C> <C>
2 WTBS 17-Ind Atlanta, GA
3 The Family Channel
* 4 HBO
5 KOBI 5-NBC Medford, OR
6 ESPN
7 KSYS 8-PBS Medford, OR
8 Blazercable
= 8 CNN
= 9 USA Network
10 KTVL-TV 10-CBS Medford, OR
11 Nickelodeon
= 12 The Discovery Channel
13 KDRV 12-ABC Medford, OR
+ 14 American Movie Classics
= 15 CNN Headline News
+ 16 TNT
+ 17 Country Music TV
+ 18 The Nashville Network
19 Arts & Entertainment
20 Lifetime
21 QVC
* 22 CINEMAX
* 23 THE DISNEY CHANNEL
* 24 SHOWTIME
97 Trinity Broadcast Network
= 98 Sci-Fi Channel
99 Fox Network
</TABLE>
52
<PAGE> 58
TABLE II (E6)
BROWNSVILLE HEADEND
<TABLE>
<S> <C> <C>
2 KATU 2-ABC Portland, OR
3 K25AS 25-Fox Eugene, OR
4 ESPN
5 WTBS 17-Ind Atlanta, GA
6 KOIN 6-CBS Portland, OR
7 KOAC-TV 7-PBS Corvallis, OR
8 KGW-TV 8-NBC Portland, OR
9 KEZI 9-ABC Eugene, OR
10 KMTR 16-NBC Eugene, OR
11 QVC
12 KPTV 12-Ind Portland, OR
13 KVAL-TV 13-CBS Eugene, OR
14 American Movie Classics
= 15 Sci-Fi Channel
16 Blazercable
16 Trinity Broadcast Network
* 17 SHOWTIME
* 18 HBO
* 19 THE DISNEY CHANNEL
* 20 THE MOVIE CHANNEL
+ 21 Country Music TV
+ 22 The Nashville Network
= 23 Arts & Entertainment
= 24 Lifetime
25 The Family Channel
26 Nickelodeon
+ 27 TNT
+ 28 The Discovery Channel
* 29 REQUEST - PAY PER VIEW
+ 30 CNN
= 31 USA Network
32 Home Shopping Network
33 Home & Garden TV
</TABLE>
6. Coos Bay, OR
As of the appraisal date, Coos Bay was also served by eight headends.
About 58% of total System subscribers were served by the Coos Bay headend.
Programming shown in Table II (F1) included a 29-channel basic service, two
7-channel tier services, a
53
<PAGE> 59
6-channel tier, six premium channels, and five pay-per-view services. Basic
service consisted of seven local broadcast TV stations, 20 satellite-delivered
services, and two local community access programming channels. Premium
services were HBO, Cinemax, Showtime, The Movie Channel, The Disney Channel,
and Encore. Pay-per-view services available included Action, Viewer's Choice,
Spice, and several Request services. Subscribers served by the Hauser headend,
comprising less than 3% of total System subscribers, received the same line-up
as Coos Bay with one additional satellite-delivered channel, WGN-TV.
Approximately 15% of System subscribers had available the 34-channel
programming service shown in Table II (F2). The Reedsport headend line-up
consisted of a 21-channel basic service, two 4-channel tiers, and five premium
channels. Basic service included seven local broadcast TV stations, 12
satellite-delivered services, two local community access programming services.
The Coquille headend served about 10% of System subscribers. As shown
in Table II (F3), this headend offered a total of 34 channels of programming,
including a 20-channel basic service, a 4-channel tier, a 6-channel tier, and
four premium channels.
Nearly 9% of System subscribers were served by the Bandon headend, and
received the 33-channel program line-up shown in Table II (F4). The Myrtle
Point headend served about 4% of subscribers, while the Powers and Gardiner
headends each served roughly 1%. The programming services received by these
subscribers are presented in Tables II (F5), (F6), and (F7), respectively.
54
<PAGE> 60
TABLE II (F1)
COOS BAY AND HAUSER HEADENDS
<TABLE>
<S> <C> <C>
2 KLSR-TV 63-Fox Eugene, OR
3 Local - Falcon Cable Marketplace
4 KCBY-TV 11-CBS Coos Bay, OR
5 KOBI 5-NBC Medford, OR
6 KMTZ 23-NBC Coos Bay, OR
7 KOAC-TV 7-PBS Corvallis, OR
8 American Movie Classics
9 KEZI 9-ABC Eugene, OR
10 Arts & Entertainment
11 QVC
12 KPTV 12-Ind Portland, OR
13 Prevue Guide
14 Local - Community Access/PEG
15 Mind Extension University
= 16 The Discovery Channel
= 17 CNN Headline News
= 18 ESPN
= 19 Blazercable
= 20 The Family Channel
= 21 Nickelodeon
= 22 CNN
23 Sneak Prevue
24 Lifetime
25 E! - Entertainment
26 fX
++ 27 WTBS 17-Ind Atlanta, GA
++ 28 The History Channel
* 29 HBO
* 30 CINEMAX
* 31 SHOWTIME
* 32 THE MOVIE CHANNEL
* 33 THE DISNEY CHANNEL
* 34 ENCORE
+ 35 The Nashville Network
+ 36 Comedy Central
+ 37 TNT
+ 38 USA Network
+ 39 Country Music TV
+ 40 Sci-Fi Channel
+ 41 Bravo
42 CNBC
43 Prime Sports Northwest
44 C-SPAN 2
</TABLE>
55
<PAGE> 61
TABLE II (F1) (CONTINUED)
COOS BAY AND HAUSER HEADENDS
<TABLE>
<S> <C> <C>
45 MTV
46 The Learning Channel
47 VH-1
48 The Weather Channel
49 Home Shopping Network
50 C-SPAN
51 The Travel Channel
++ 52 FXM-Fox Movies
++ 53 Newstalk Television
++ 54 Cartoon Network
55 Trinity Broadcast Network
* 57 REQUEST - PAY PER VIEW
* 58 ACTION - PAY PER VIEW
* 59 REQUEST - PAY PER VIEW
* 60 VIEW'S CHOICE - PPV
* 61 SPICE - PAY PER VIEW
++ 63 ESPN 2
</TABLE>
56
<PAGE> 62
TABLE II (F2)
REEDSPORT HEADEND
<TABLE>
<S> <C> <C>
2 ESPN
3 KLSR-TV 63-Fox Eugene, OR
4 QVC
5 KOBI 5-NBC Medford, OR
6 KMTZ 23-NBC Coos Bay, OR
7 KOAC-TV 7-PBS Corvallis, OR
8 The Family Channel
9 KEZI 9-ABC Eugene, OR
10 Blazercable
10 Local - Community Access/PEG
11 KCBY-TV 11-CBS Coos Bay, OR
12 KPTV 12-Ind Portland, OR
13 CNN
14 USA Network
= 15 Arts & Entertainment
= 16 The Nashville Network
= 17 Lifetime
= 18 American Movie Classics
+ 19 TNT
+ 20 The Discovery Channel
+ 21 WGN-TV
+ 22 WTBS 17-Ind Atlanta, GA
* 23 SHOWTIME
* 24 THE DISNEY CHANNEL
* 25 HBO
* 26 CINEMAX
* 27 THE MOVIE CHANNEL
28 CNN Headline News
29 C-SPAN
30 Bravo
31 E! - Entertainment
32 Sci-Fi Channel
33 Home Shopping Network
34 Home & Garden TV
35 Local - Community Access/PEG
</TABLE>
57
<PAGE> 63
TABLE II (F3)
COQUILLE HEADEND
<TABLE>
<S> <C> <C>
2 KLSR-TV 63-Fox Eugene, OR
3 QVC
4 ESPN
5 KOBI 5-NBC Medford, OR
6 KMTZ 23-NBC Coos Bay, OR
* 7 SHOWTIME
8 KOAC-TV 7-PBS Corvallis, OR
9 KEZI 9-ABC Eugene, OR
10 The Family Channel
11 KCBY-TV 11-CBS Coos Bay, OR
12 KPTV 12-Ind Portland, OR
13 WTBS 17-Ind Atlanta, GA
= 14 Lifetime
= 15 USA Network
= 16 Arts & Entertainment
+ 17 The learning Channel
+ 18 Country Music TV
+ 19 The Discovery Channel
= 20 ESPN 2
+ 21 The Nashville Network
+ 22 Sci-Fi Channel
23 CNN Headline News
* 24 THE DISNEY CHANNEL
* 25 THE MOVIE CHANNEL
26 CNN
* 27 HBO
28 fX
29 Blazercable
30 Bravo
+ 31 C-SPAN
32 Home Shopping Network
33 E! - Entertainment TV
34 WGN-TV
35 Comedy Central
</TABLE>
58
<PAGE> 64
TABLE II (F4)
BANDON HEADEND
<TABLE>
<S> <C> <C>
2 KLSR-TV 63-Fox Eugene, OR
3 QVC
4 ESPN
5 KOBI 5-NBC Medford, OR
6 KMTZ 23-NBC Coos Bay, OR
* 7 SHOWTIME
8 KOAC-TV 7-PBS Corvallis, OR
9 KEZI 9-ABC Eugene, OR
10 WGN-TV
11 KCBY-TV 11-CBS Coos Bay, OR
12 KPTV 12-Ind Portland, OR
13 The Family Channel
= 14 Arts & Entertainment
= 15 USA Network
= 16 Lifetime
+ 17 ESPN 2
+ 18 Country Music TV
+ 19 The Discovery Channel
+ 20 TNT
+ 21 The Nashville Network
+ 22 Sci-Fi Channel
* 23 HBO
24 CNN Headline News
* 25 THE MOVIE CHANNEL
26 CNN
27 Bravo
* 28 THE DISNEY CHANNEL
29 Comedy Central
30 fX
31 Home Shopping Network
32 C-SPAN
33 WTBS 17-Ind Atlanta, GA
34 E! - Entertainment TV
</TABLE>
59
<PAGE> 65
TABLE II (F5)
MYRTLE POINT HEADEND
<TABLE>
<S> <C> <C>
2 KLSR-TV 63-Fox Eugene, OR
3 QVC
4 ESPN
5 KOBI 5-NBC Medford, OR
6 KMTZ 23-NBC Coos Bay, OR
7 Nickelodeon
8 KOAC-TV 7-PBS Corvallis, OR
9 KEZI 9-ABC Eugene, OR
10 The Family Channel
11 KCBY-TV 11-CBS Coos Bay, OR
12 KPTV 12-Ind Portland, OR
13 CNN Headline News
14 USA Network
= 15 The Discovery Channel
= 16 Sci-Fi Channel
= 17 Lifetime
= 18 VH-1
18 Comedy Central
18 Blazercable
+ 19 TNT
+ 20 WTBS 17-Ind Atlanta, GA
+ 21 The Nashville Network
+ 22 The Weather Channel
* 23 CINEMAX
* 24 THE DISNEY CHANNEL
* 25 THE MOVIE CHANNEL
* 26 SHOWTIME
* 27 HBO
28 Arts & Entertainment
29 CNN
30 Bravo
31 C-SPAN
32 Home Shopping Network
33 E! - Entertainment TV
34 The Learning Channel
35 MTV
</TABLE>
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<PAGE> 66
TABLE II (F6)
POWERS HEADEND
<TABLE>
<S> <C> <C>
2 KLSR-TV 63-Fox Eugene, OR
3 KOBI 5-NBC Medford, OR
4 KCBY-TV 11-CBS Coos Bay, OR
5 QVC
6 KMTZ 23-NBC Coos Bay, OR
7 ESPN
8 The Family Channel
9 KEZI 9-ABC Eugene, OR
10 Nickelodeon
11 The Learning Channel
12 CNN
13 KOAC-TV 7-PBS Corvallis, OR
14 The Discovery Channel
= 15 The Nashville Network
= 16 USA Network
= 17 Arts & Entertainment
* 18 THE DISNEY CHANNEL
+ 19 TNT
+ 20 WTBS 17-Ind Atlanta, GA
+ 21 WGN-TV
* 22 HBO
23 C-SPAN
24 Bravo
</TABLE>
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<PAGE> 67
TABLE II (F7)
GARDINER HEADEND
<TABLE>
<S> <C> <C>
2 CNN Headline News
3 KLSR-TV 63-Fox Eugene, OR
4 QVC
5 ESPN
6 KMTZ 23-NBC Coos Bay, OR
7 KOAC-TV 7-PBS Corvallis, OR
8 The Family Channel
9 KEZI 9-ABC Eugene, OR
10 Local - Community Access/PEG
11 KCBY-TV 11-CBS Coos Bay, OR
12 KPTV 12-Ind Portland, OR
13 CNN
16 The Nashville Network
17 WGN-TV
18 WTBS 17-Ind Atlanta, GA
20 The Discovery Channel
21 Home & Garden TV
* 23 SHOWTIME
* 24 THE DISNEY CHANNEL
* 25 HBO
* 26 CINEMAX
* 27 THE MOVIE CHANNEL
</TABLE>
7. Dallas, OR
The Dallas System was served by seven headends. Tables II (G1)
through (G6) present the programming services available from those headends.
The Dallas headend, serving about 39% of total System subscribers, offered 39
channels of programming, including a 19-channel basic service, a 7-channel
tier, a 5-channel tier, seven premium channels, and one pay-per-view channel.
Basic service included ten local broadcast TV stations, seven
satellite-delivered services, two local community access programming services,
and one microwave-delivered service. Premium services available included The
Movie Channel, Showtime, HBO, The Disney Channel, Playboy, Cinemax, and Encore.
Request was the pay-per-view service offered by the Dallas headend.
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<PAGE> 68
The Nehalem headend served about 28% of System subscribers. Table II
(G2) presents the 34-channel programming service offered at this headend,
including a 33-channel basic service, a 7-channel tier service, a 5-channel
tier, seven premium channels, and one pay-per-view channel. Basic service
consisted of six local broadcast TV stations, six satellite-delivered services,
one microwave-delivered channel, and one local community access programming
channel.
Table II (G3) presents the programming service available to the 15% of
System subscribers served by the Tillamook headend. Those subscribers received
a 17-channel basic service, a 5-channel tier service, a 2-channel tier, and
five premium services. The Silverton headend served about 10% of System
subscribers and offered a 37-channel programming service as shown in Table II
(G4). Netarts/Oceanside served about 5% of subscribers, while Brickyard Road
served about 3%. Both headends offered the same 18-channel programming service
shown in Table II (G5). Less than 1% of the subscribers received the
five-channel programming service offered from Wilson River headend, presented
in Table II (G6).
TABLE II (G1)
DALLAS HEADEND
<TABLE>
<S> <C> <C>
2 KATU 2-ABC Portland, OR
3 Local-Character Generator
4 Home & Garden TV
5 QVC
6 KOIN 6-CBS Portland, OR
7 KOAC-TV 7-PBS Corvallis, OR
8 KGW-TV 8-NBC Portland, OR
9 KEZI 9-ABC Eugene, OR
10 KPDX 49-Fox Vancouver, WA
11 KBSP-TV 22-HSN Salem, OR
12 KPTV 12-Ind Portland, OR
13 KVAL-TV 13-CBS Eugene, OR
14 WTBS 17-Ind Atlanta, GA
15 WGN-TV
17 Local - Community Access/PEG
+ 18 The Family Channel
* 19 THE MOVIE CHANNEL
</TABLE>
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<PAGE> 69
TABLE II (G1) (CONTINUED)
DALLAS HEADEND
<TABLE>
<S> <C> <C>
* 20 SHOWTIME
* 21 HBO
* 22 THE DISNEY CHANNEL
* 23 PLAYBOY
* 24 CINEMAX
+ 25 CNN
+ 26 USA Network
+ 27 TNT
+ 28 The Discovery Channel
29 MTV
30 KEBN 32-Ind Salem, OR
31 Blazercable
31 C-SPAN
32 Arts & Entertainment
= 33 ESPN
= 34 Nickelodeon
= 35 The Learning Channel
= 36 CNN Headline News
= 37 The Nashville Network
= 38 Prime Sports Northwest
= 39 Univision
* 40 ENCORE
* 41 REQUEST - PAY PER VIEW
</TABLE>
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<PAGE> 70
TABLE II (G2)
NEHALEM HEADEND
<TABLE>
<S> <C> <C>
2 KATU 2-ABC Portland, OR
3 Local-Character Generator
4 Comedy Central
5 WTBS 17-Ind Atlanta, GA
6 KOIN 6-CBS Portland, OR
7 QVC
8 KGW-TV 8-NBC Portland, OR
9 WGN
10 KOPB-TV 10-PBS Portland, OR
11 C-SPAN
12 KPTV 12-Ind Portland, OR
13 KPDX 49-Fox Vancouver, OR
14 Blazercable
= 15 The Family Channel
* 17 THE MOVIE CHANNEL
* 18 SHOWTIME
* 19 HBO
* 20 CINEMAX
* 21 THE DISNEY CHANNEL
* 22 PLAYBOY
+ 23 Nickelodeon
+ 24 The Nashville Network
+ 25 USA Network
+ 26 The Discovery Channel
+ 27 Country Music TV
= 30 CNN
= 31 CNN Headline News
= 32 ESPN
= 33 American Movie Classics
= 34 Arts & Entertainment
= 35 Lifetime
* 40 ENCORE
* 41 REQUEST - PAY PER VIEW
</TABLE>
65
<PAGE> 71
TABLE II (G3)
TILLAMOOK HEADEND
<TABLE>
<S> <C> <C>
2 KATU 2-ABC Portland, OR
3 American Movie Classics
4 Local-Character Generator
5 QVC
6 KOIN 6-CBS Portland, OR
7 USA Network
8 KGW-TV 8-NBC Portland, OR
9 TNT
10 KOPB-TV 10-PBS Portland, OR
11 ESPN
12 KPTV 12-Ind Portland, OR
13 KPDX 49-Fox Vancouver, OR
14 The Family Channel
+ 17 WTBS 17-Ind Atlanta, GA
+ 18 WGN-TV
* 20 HBO
* 21 SHOWTIME
* 22 THE DISNEY CHANNEL
* 23 CINEMAX
24 Blazercable
25 Trinity Broadcast Network
26 Bravo
27 Lifetime
* 28 THE MOVIE CHANNEL
= 29 Arts & Entertainment
= 30 The Discovery Channel
= 31 The Nashville Network
= 32 CNN
= 33 CNN Headline News
</TABLE>
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<PAGE> 72
TABLE II (G4)
SILVERTON HEADEND
<TABLE>
<S> <C> <C>
2 KATU 2-ABC Portland, OR
3 Local-Character Generator
4 QVC
5 WTBS 17-Ind Atlanta, GA
6 KOIN 6-CBS Portland, OR
7 KOPB-TV 10-PBS Portland, OR
8 KGW-TV 8-NBC Portland, OR
9 C-SPAN
10 Local - Community Access/PEG
11 KBSP-TV 22-HSN Salem, OR
12 KPTV 12-Ind Portland, OR
13 KPDX 49-Fox Vancouver, OR
14 KEBN 32-Ind Salem, OR
15 ESPN
16 The Family Channel
+ 17 TNT
+ 18 USA Network
+ 19 The Discovery Channel
+ 20 The Nashville Network
+ 21 Country Music TV
* 22 HBO
* 23 CINEMAX
* 24 SHOWTIME
* 25 THE MOVIE CHANNEL
* 26 THE DISNEY CHANNEL
* 27 PPV- BLAZERCABLE
28 KNMT 24-TBN Portland, OR
29 Nickelodeon
30 Univision
31 Home & Garden TV
32 MTV
= 33 American Movie Classics
= 34 Lifetime
= 35 CNN
= 36 CNN Headline News
= 37 Arts & Entertainment
* 41 REQUEST - PAY PER VIEW
</TABLE>
67
<PAGE> 73
TABLE II (G5)
NETARTS/OCEANSIDE AND BRICKYARD ROAD HEADENDS
<TABLE>
<S> <C> <C>
2 KATU 2-ABC Portland, OR
* 3 THE DISNEY CHANNEL
* 4 HBO
5 The Nashville Network
6 KOIN 6-CBS Portland, OR
7 WTBS 17-Ind Atlanta, GA
8 KGW-TV 8-NBC Portland, OR
9 The Family Channel
10 KOPB-TV 10-PBS Portland, OR
11 ESPN
12 KPTV 12-Ind Portland, OR
13 KPDX 49-Fox Vancouver, OR
17 The Discovery Channel
18 CNN
19 Arts & Entertainment
20 TNT
21 USA Network
22 Blazercable
</TABLE>
TABLE II (G6)
WILSON RIVER HEADEND
<TABLE>
<S> <C>
2 KATU 2-ABC Portland, OR
6 KOIN 6-CBS Portland, OR
8 KGW-TV 8-NBC Portland, OR
10 KOPB-TV 10-PBS Portland, OR
12 KPTV 12-Ind Portland, OR
</TABLE>
8. Florence, OR
The Florence System was served by two headends in Florence and
Mapleton. Table II (H1) presents the 56-channel programming service available
to the 95% of System subscribers receiving service from the Florence headend.
Programming included a 30-channel basic service, three tier services with
between four and six channels each, six premium channels, and five pay-per-view
channels. Basic service included six local broadcast TV stations, 22
satellite-delivered services, one microwave-delivered service,
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<PAGE> 74
and one local community access programming channel. Premium services consisted
of HBO, Cinemax, Showtime, The Disney Channel, The Movie Channel, and Encore.
Pay-per-view services included Request, Adam & Eve, Viewer's Choice, Action,
and Spice.
The remaining 5% of subscribers, served from the Mapleton headend, had
access to the 17 channels of programming shown in Table II (H2). Basic service
included six local broadcast TV stations and four satellite-delivered services.
Two tiers offering a total of six channels were also available. Premium
services consisted of HBO and The Disney Channel.
TABLE II (H1)
FLORENCE/DUNES CITY HEADENDS
<TABLE>
<S> <C> <C>
2 WGN-TV
3 QVC
4 Prevue Guide
5 WTBS 17-Ind Atlanta, GA
6 KLSR-TV 6-Fox Eugene, OR
7 KOAC-TV 7-PBS Corvallis, OR
8 KMTR 16-NBC Eugene, OR
9 KEZI 9-ABC Eugene, OR
10 Local-Character Generated
11 Sneak Prevue
12 KPTV 12-Ind Portland, OR
13 KVAL-TV 13-CBS Eugene, OR
14 Nickelodeon
= 15 CNN
= 16 USA Network
= 17 The Discovery Channel
= 18 ESPN
19 The Family Channel
20 American Movie Classics
21 The Nashville Network
22 Lifetime
23 Arts & Entertainment
24 Blazercable
* 25 HBO
* 26 CINEMAX
* 27 SHOWTIME
* 28 THE DISNEY CHANNEL
++ 29 The Weather Channel
* 30 THE MOVIE CHANNEL
</TABLE>
69
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TABLE II (H1) (CONTINUED)
FLORENCE/DUNES CITY HEADENDS
<TABLE>
<S> <C> <C>
31 Sci-Fi Channel
32 CNN Headline News
33 The Travel Channel
+ 34 TNT
+ 35 CNBC
36 E! - Entertainment TV
37 fX
38 Trinity Broadcast Network
+ 39 The Learning Channel
+ 40 Country Music TV
+ 41 Prime Sports Northwest
42 VH-1
* 43 ENCORE
++ 44 FXM - Fox Movies
++ 45 The History Channel
++ 46 Cartoon Network
++ 47 Fit TV
48 Downhome TV
* 49 REQUEST - PAY PER VIEW
* 50 ADAM & EVE PAY PER VIEW
* 51 VIEWER'S CHOICE - PPV
* 52 ACTION - PAY PER VIEW
* 53 SPICE - PAY PER VIEW
54 Home Shopping Network
55 Home & Garden TV
56 C-SPAN
+ 57 Bravo
</TABLE>
70
<PAGE> 76
TABLE II (H2)
MAPLETON HEADEND
<TABLE>
<S> <C> <C>
2 KATU 2-ABC Portland, OR
3 QVC
4 ESPN
5 Sci-Fi Channel
6 KLSR-TV 6-Fox Eugene, OR
7 KOAC-TV 7-PBS Corvallis, OR
8 KMTR 16-NBC Eugene, OR
9 KEZI 9-ABC Eugene, OR
10 The Family Channel
+ 11 WGN-TV
+ 12 WTBS 17-Ind Atlanta, GA
13 KVAL-TV 13-CBS Eugene, OR
= 17 USA Network
= 18 Country Music TV
= 19 The Discovery Channel
* 20 HBO
* 21 The Disney Channel
</TABLE>
C. RATES
The average monthly programming and equipment rental rates, and
one-time installation charges to subscribers for the preceding services as of
the appraisal date, are outlined in Tables III (A) and (B). Comparison data
for the basic service, pay service, and monthly revenue per subscriber are
published in MTA-EMCI's 1995 edition of Cable Trends 1980-2000, which uses
yearend 1994 operating and financial data.
Table III (A) presents information for the Systems operating in
California. As shown, the basic monthly service rate for Gilroy of $20.07, was
higher than the average rate of $18.50 for the nation. The corresponding rates
for Hesperia, at $18.03; Tulare, at $16.23; and San Luis Obispo, at $15.79 were
all lower than the national average. A la carte pay service rates were similar
in Gilroy, Hesperia, and San Luis Obispo, where HBO cost $11.95, and Showtime,
Cinemax, The Movie Channel, and The Disney Channel each cost $10.95. The a la
carte pay rate was $10.45 for all services in the
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<PAGE> 77
Tulare System. The service rates charged by the System were somewhat higher
than the average rate charged nationally of $9.25 per pay unit. Actual revenue
generated by the California Systems per pay unit ranged from $6.15 in Tulare to
$7.49 in San Luis Obispo.
The non-addressable converter rental ranged from $0.51 in Gilroy to
$2.04 in Hesperia, while the addressable converter rental varied from a low of
$1.13 in Gilroy to a high of $4.49 in Hesperia. The installation charge was
$45.00 per home plus materials throughout the California Systems.
On a nationwide basis, average monthly revenue per subscriber was
$30.32 as of the end of 1994, according to MTA-EMCI's research. The revenue
figure includes basic cable revenue, premium revenue, PPV revenue, local
advertising revenue, equipment rental revenue, and miscellaneous revenues.
During 1995, average revenue per subscriber figures were $36.20 in Hesperia,
$35.12 in Tulare, $33.67 in Gilroy, and $30.50 in San Luis Obispo -- all higher
than the nationwide average for 1994.
TABLE III (A)
<TABLE>
<CAPTION>
GILROY HESPERIA SAN LUIS TULARE UNITED
OBISPO STATES
<S> <C> <C> <C> <C> <C>
Basic Service (Average) $20.07 $18.03 $15.79 $16.23 $18.50
Expanded Basic Tier (Average) $5.03 $7.15 $7.54 $5.00 N/A
Revenue Per Pay Unit $7.04 $6.60 $7.49 $6.15 N/A
Pay Services (a la carte) $9.25
HBO $11.95 $11.95 $11.95 $10.45
Showtime $10.95 $10.95 $10.95 $10.45
Cinemax $10.95 $10.95 $10.95 $10.45
The Movie Channel $10.95 $10.95 $10.95 $10.45
The Disney Channel $10.95 $10.95 $10.95 $10.45
Playboy N/A N/A $10.95 $10.45
Encore $5.95 $5.95 N/A N/A
Pay Per View (Movie) $3.95 $3.95 $3.95 $3.95 N/A
</TABLE>
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<PAGE> 78
TABLE III (A) (CONTINUED)
<TABLE>
<CAPTION>
GILROY HESPERIA SAN LUIS TULARE UNITED
OBISPO STATES
<S> <C> <C> <C> <C> <C>
Converters N/A
Addressable $1.13 $4.49 $2.38 $3.38
Non-addressable $0.51 $2.04 N/A N/A
Installation Charges: N/A
Hourly Rate * $45.00 $45.00 $45.00 $45.00
Revenue Per Subscriber Per Month $33.67 $36.20 $30.50 $35.12 $30.32
</TABLE>
* Material additional
Table III (B) presents service rate information for the Oregon
Systems. As shown, the basic rate for Florence of $23.40 was the highest among
the Oregon Systems, as well as being higher than the 1994 national average.
Corresponding basic rates were $17.24 for Coos Bay, $16.60 for Dallas, and
$15.98 for Central Region. The a la carte pay rates were $11.95 for HBO; $5.95
for Encore; and $10.95 for Showtime, Cinemax, The Movie Channel, and The Disney
Channel. These rates were uniform throughout the Systems in Oregon.
Addressable converter rentals ranged substantially from $0.49 in
Central Region to $4.05 in Florence. Non-addressable converter rentals ranged
from $0.25 in Dallas to $2.68 in Florence. The rentals on non-addressable
converters were generally lower than the addressable rentals except in Central
Region, where a higher non-addressable rental of $1.23 was charged.
During 1995 monthly revenue per subscriber was $39.98 in Florence,
$31.48 in Coos Bay, and $30.39 in Dallas. These figures were higher than the
1994 national average of $30.32, while the revenue figure of $29.33 in the
Central Region System was lower.
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<PAGE> 79
TABLE III (B)
<TABLE>
<CAPTION>
CENTRAL COOS DALLAS FLORENCE UNITED
REGION BAY STATES
<S> <C> <C> <C> <C> <C>
Basic Service (Average) $15.98 $17.24 $16.47 $23.40 $18.50
Expanded Basic Tier (Average) $4.99 $3.78 $5.94 $3.79 N/A
Revenue Per Pay Unit $7.93 $6.41 $6.96 $8.00 N/A
Pay Services (a la carte) $9.25
HBO $11.95 $11.95 $11.95 $11.95
Showtime $10.95 $10.95 $10.95 $10.95
Cinemax $10.95 $10.95 $10.95 $10.95
The Movie Channel $10.95 $10.95 $10.95 $10.95
The Disney Channel $10.95 $10.95 $10.95 $10.95
Playboy N/A N/A $10.95 N/A
Encore $5.95 $5.95 $5.95 $5.95
Pay Per View (Movie) $3.95 $3.95 $3.95 $3.95 N/A
Converters N/A
Addressable $0.49 $2.45 $0.72 $4.05
Non-addressable $1.23 $0.86 $0.25 $2.68
Installation Charges: N/A
Hourly Rate * $45.00 $45.00 $45.00 $45.00
Revenue Per Subscriber Per Month $29.33 $31.48 $30.39 $39.98 $30.32
</TABLE>
* Material additional
D. SUBSCRIBERS
Tables IV (A) and (B) present information on the number of homes
passed, basic subscribers, expanded/tier subscribers, pay units, converters,
and addressable homes for the Systems as of December 31, 1995. This
information is compared with similar figures, where available, for the United
States as a whole.
In California, as shown in Table IV (A), at the time of the appraisal
the Hesperia System had the highest basic penetration of 65.5%, which was
slightly higher than the national rate of 64.6%. Basic penetration rates for
San Luis Obispo, Gilroy, and Tulare
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<PAGE> 80
were 59.8%, 58.8%, and 37.1%, respectively. All were lower than the 64.6%
penetration rate for the nation.
Pay penetration for Tulare stood at 46.6%, higher than the
corresponding rates for Hesperia (46.0%), Gilroy (40.4%), and San Luis Obispo
(23.9%). However, pay penetration rates for the California Systems were all
much lower than the national pay penetration rate of 73.1%. Addressable home
penetration for Tulare of 51.3% was higher than the rates for Gilroy (39.1%),
Hesperia (33.2%), and San Luis Obispo (31.7%). The national average of
addressable home penetration was 40.3%.
TABLE IV (A)
<TABLE>
<CAPTION>
GILROY HESPERIA SAN LUIS TULARE UNITED
OBISPO STATES
<S> <C> <C> <C> <C> <C>
Homes Passed 56,219 28,280 26,138 41,053 91,500,000
Basic Subscribers 33,078 18,513 15,635 15,249 59,100,000
% of Homes Passed 58.8% 65.5% 59.8% 37.1% 64.6%
Expanded Basic Subscribers 30,391 17,593 13,605 14,787 N/A
% of Basic Subscribers 91.9% 95.0% 87.0% 97.0% N/A
Total Pay Units 13,465 8,507 3,733 7,110 43,200,000
% of Basic Subscribers 40.4% 46.0% 23.9% 46.6% 73.1%
Converters 17,120 7,218 6,009 8,791 N/A
% of Basic Subscribers 2.2% 3.7% 1.7% 57.6% N/A
Addressable Homes 12,924 6,140 4,964 7,830 23,800,000
% of Basic Subscribers 39.1% 33.2% 31.7% 51.3% 40.3%
</TABLE>
Among the Oregon Systems, as shown in Table IV (B), as of the
appraisal date Coos Bay had the highest basic penetration of 75.6%. The
corresponding rates for Dallas, Central Region, and Florence were 71.2%, 54.0%,
and 50.4%, respectively. Basic penetration rates for Coos Bay and Dallas were
higher than the national average, while rates for Central Region and Florence
were lower.
Pay penetration for Dallas of 43.6%, was higher than the rates for
Coos Bay (39.2%), Central Region (38.8%), and Florence (26.7%). As with the
California
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Systems, the Oregon pay penetration rates were much lower than the national
average of 73.1%. Addressable home penetration for Dallas of 40.2%, the
highest among the Oregon Systems, was comparable to the national average of
40.3%. The corresponding rates for Central Region, Florence, and Coos Bay were
35.3%, 34.6%, and 31.3%, respectively, which were lower than the corresponding
rate for the nation of 40.3%.
TABLE IV (B)
<TABLE>
<CAPTION>
CENTRAL COOS DALLAS FLORENCE UNITED
REGION BAY STATES
<S> <C> <C> <C> <C> <C>
Homes Passed 26,355 23,663 23,770 7,826 91,500,000
Basic Subscribers 14,225 17,900 16,928 3,947 59,100,000
% of Homes Passed 54.0% 75.6% 71.2% 50.4% 64.6%
Expanded Basic Subscribers 12,921 17,424 12,481 3,706 N/A
% of Basic Subscribers 90.8% 97.3% 73.7% 93.9% N/A
Total Pay Units 5,516 7,024 7,380 1,053 43,200,000
% of Basic Subscribers 38.8% 39.2% 43.6% 26.7% 73.1%
Converters 6,016 8,268 7,977 1,910 N/A
% of Basic Subscribers 42.3% 46.2% 47.1% 48.4% N/A
Addressable Homes 4,762 5,611 6,810 1,366 23,800,000
% of Basic Subscribers 33.5% 31.3% 40.2% 34.6% 40.3%
</TABLE>
E. SYSTEM MILEAGE
According to System management, the mileage figures presented in
Tables V (A) and (B) are based on System maps. Since a complete walk- out of
the current Systems would be prohibitively expensive, MTA used the following
approach to corroborate the plant mileage:
1. Interviewed knowledgeable System personnel to ascertain the
source and reliability of the mileage estimates.
2. Noted the configuration of the Systems on area maps and the
existence and condition of plant in a representative portion of
the area served by the Systems.
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3. Related the average density of the Systems to general
observations of densities while inspecting the Systems and
service areas.
Tables V (A) and (B) present management's best estimate of the number
of route miles of plant as represented by total strand and trench in each of
the Systems as of the appraisal date. Based upon the above procedures and cost
limitations, these estimates appear to be reasonable. Included in the mileage
figures are fiber optic miles.
TABLE V (A) - CALIFORNIA
Plant Miles
<TABLE>
<CAPTION>
Aerial Underground Total
------ ----------- -----
<S> <C> <C> <C>
Gilroy 323.8 340.9 664.7
Hesperia 478.3 199.7 678.0
San Luis Obispo 341.1 67.8 408.9
Tulare 532.8 143.0 675.9
</TABLE>
TABLE V (B) - OREGON
Plant Miles
<TABLE>
<CAPTION>
Aerial Underground Total
------ ----------- -----
<S> <C> <C> <C>
Central Region 605.5 54.8 660.3
Coos Bay 384.0 60.8 444.8
Dallas 379.6 87.0 466.6
Florence 102.5 33.8 136.3
</TABLE>
As of December 31, 1995, in California there were approximately 10
miles of fiber in Gilroy, 50 miles in Hesperia, 42 miles in San Luis Obispo,
and 24 miles in Tulare. In Oregon there were about 5 miles of fiber in Coos
Bay, 7 miles in Dallas, and .76 miles in Florence. As of the appraisal date,
there was no fiber in the Central Oregon System.
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F. PHYSICAL PLANT
1. Gilroy, CA
As of the valuation date, Gilroy's central office facilities were
located at 7640 Eigleberry Street in Gilroy. This office space was owned by
the System. Payment offices were maintained in Soledad, King City, and
Greenfield. In addition, four headends were maintained in Gilroy, Greenfield,
King City, and Soledad/Gonzales. All of the headends were located on leased
premises.
Early construction of the plant took place at the Gilroy headend in
1970 and at Greenfield and King City in 1974. Gilroy was subsequently upgraded
in 1983. The Soledad/Gonzales headend was upgraded to its December 1995
capacity in 1989. As of December 31, 1995, the System passed about 56,219
homes with an estimated 664.7 miles of plant, for an overall density of 84.6
homes per mile.
As of the appraisal date, the System's feeder and trunk cable
bandwidths were 300 MHz at Gilroy, Greenfield, and King City, and 400 MHz at
Soledad/Gonzales. For programming, 35 channels were available throughout the
System, all of which were in use. Trunk amplifiers and line extenders in the
System were manufactured by Scientific Atlanta (S/A), Jerrold, and Magnavox.
S/A addressable converter models 8500, 8550, and 8580 were installed in homes
served from the Gilroy and Soledad/Gonzales headends. Non-addressable
converter model S/A 6783 was installed in all portions of the System.
The System's satellite antennas were manufactured by S/A, Comtech,
Microdyne, and Saturn. Processor manufacturers included S/A and Jerrold.
Stereo encoders and scramblers were manufactured by S/A. Advertising insertion
equipment was manufactured by Channelmatic and Sony, and back-up power supplies
were manufactured by Onan and Kohler.
2. Hesperia, CA
As of the appraisal date, Hesperia's central office facilities were
located at 9536 "C" Avenue in Hesperia. Separate office facilities were
located in Mojave. The System
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maintained five headends in Adelanto, Boron, Hesperia, Mojave/Rosamond, and
North Edwards.
Initial construction took place at Boron in 1967, at Hesperia and
Adelanto in 1972, at Rosamond/Mojave in the early 1970's, and at North Edwards
in 1990. Rebuilds were completed at Hesperia and Adelanto in 1988, a 60%
rebuild took place at Boron in 1991. As of the appraisal date, the System
passed about 28,280 homes with an estimated 678 miles of plant, for an overall
density of 41.7 homes per mile.
As of the appraisal date, feeder and trunk cable bandwidths throughout
the System ranged from 270 MHz to 450 MHz. At Hesperia and Adelanto 43
channels were available and 100% of the capacity was utilized. At
Mojave/Rosamond and North Edwards 42 channels were available and 40 were in
use.
Trunk amplifiers and line extenders throughout the System were
manufactured by Magnavox and Thetacom. Addressable converters, installed in
homes served from the Adelanto, Hesperia, and North Edwards headends, were
manufactured by General Instrument (GI). Non-addressable converters were
manufactured by Hamlin.
The System's satellite antennas were manufactured by S/A, Prodelin,
A.F.C., and Channelmaster. Processors were manufactured by GI and S/A.
Advertising insertion equipment was manufactured by Ad-link and Channelmatic.
Backup power supplies were manufactured by Winco.
3. San Luis Obispo, CA
As of December 31, 1995, the San Luis Obispo System's central office
facilities were located at 7555 San Luis Avenue in Atascadero. These
facilities were shared by System personnel and the Western Division
headquarters. The System maintained four headends in Atascadero, Guadalupe,
SLO County, and Los Alamos.
Initial construction of the plant took place at Atascadero in 1976 and
at Los Alamos in 1985. A rebuild of Atascadero was accomplished in December
1995 just prior to the valuation date. As of December 31, 1995, the System
passed about 26,138
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homes with an estimated 408.9 miles of plant, for an overall density of 63.9
homes per mile.
As of the appraisal date, fiber and feeder bandwidths were 750 MHz at
Atascadero. The channel capacity of the System ranged from 37 to 95 at
different headends. Throughout the System, trunk amplifiers and line extenders
were manufactured by S/A. Addressable converters in use were S/A model 8580.
Non-addressable converters in use were generally Regal RR-92s. Satellite
antennas were manufactured by S/A and Comtech and processors were manufactured
by S/A. Onan standby backup power supplies were installed in the System.
4. Tulare, CA
As of the appraisal date, the Tulare System maintained central office
facilities at 1152 W. Henderson in Porterville. There were three headends in
the System at California Hot Springs, Jack Ranch/Posey, and Porterville. All
were located at leased sites.
Portions of the System in Hot Springs and Jack Ranch/Posey were
initially constructed in 1963 and later upgraded in 1986. At the Porterville
headend, initial construction took place in 1975, followed by a rebuild in
1981. A fiber trunk overlay upgrade took place in 1995. As of December 1995,
the System passed about 41,503 homes with an estimated 690.3 miles of plant,
for an overall density of 60.1 homes per mile.
As of the appraisal date, feeder and trunk cable bandwidths were 270
MHz at Hot Springs and Jack Ranch/Posey. At Porterville, 50% of the plant's
bandwidth was 400 MHz or more, 35% was 300 MHz, and 15% was less than 300 MHz.
The Porterville headend provided a 42-channel capacity, about 90% of which (38
channels) was utilized as of the appraisal date. Twelve channels were in use
at Hot Springs and 13 were in use at Jack Ranch/Posey.
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<PAGE> 86
Trunk amplifiers and line extenders throughout the System were
manufactured by S/A, Magnavox, Century III, Jerrold Starline, and Vikoa. The
System's addressable converters included S/A models 8580, 8550, and 8500.
The System's satellite antennas were manufactured by S/A, Comtech,
Anixter, Tru Focus, and Andrews. Processors were manufactured by S/A, General
Instrument, Blonder Tongue, and PhaseCom. Receivers and scramblers were
manufactured by S/A. Advertising insertion equipment included a series Sony VP
7000 unit. The backup power supply at Porterville was an Onan L634 generator.
5. Central Oregon, OR
As of the appraisal date, the System's central office facilities were
located at 4739 Main Street in Springfield. Additional office space was
maintained in Cottage Grove. The System maintained eight headends at the
following locations: Bear Mountain, Bear Mountain/Cottage Grove,
Drain/Yoncalla, Brownsville, Cave Junction, Cottage Grove, Sutherlin/Oakland,
and Veneta.
Initial construction of the System's plant took place at Sutherlin in
1971, at Veneta in 1980, and at Bear Mountain in 1988. Upgrades were completed
at Sutherlin in 1981, at Cottage Grove in 1988, at Bear Mountain in 1992 and
1995, and at Veneta in 1995. As of the appraisal date, the System passed about
26,355 homes with an estimated 660.3 miles of plant, for an overall density of
39.9 homes per mile.
As of December 31, 1995, feeder and trunk cable bandwidths were 450
MHz at the Cave Junction, Cottage Grove and Veneta headends; 330 MHz at
Brownsville; 216 MHz at Sutherlin; and 300 MHz to 450 MHz at Bear Mountain.
The headends at Bear Mountain, Bear Mountain/Cottage Grove, Drain/Yoncalla, and
Brownsville used 80% of the 40-channel capacity. Fifty-two channels were
available at the Cottage Grove headend and 44 were in use. The
Sutherlin/Oakland, Cave Junction, and Veneta headends provided 28, 26, and
25-channel capacities respectively, all of which were utilized fully.
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<PAGE> 87
Trunk amplifiers and line extenders throughout the System were
manufactured by Magnavox, Coral, and Gamco. The manufacturers of addressable
converters in use included S/A and Jerrold. Non-addressable converters were
manufactured by Texscan, Jerrold, Hamlin, Panasonic, Eagle, and Arcom.
The System's satellite antennas were manufactured by Comtech, S/A,
Antenna Technology Corp., Simulsat, Global Image, Andrews, Wineguard, and
Channelmaster. Processors were manufactured by S/A, Jerrold, and Cadco, while
backup power supplies were manufactured by Onan.
6. Coos Bay, OR
As of the appraisal date, the System maintained its central facilities
at 1400 Newmark Avenue in Coos Bay. Offices were also kept in Reedsport.
There were eight headends located in Bandon, Coos Bay, Hauser, Coquille, Myrtle
Point, Powers, Gardiner, and Reedsport. The Reedsport and Coos Bay headend
sites were owned by the System. The others were leased.
Initial construction took place at Myrtle Point in 1970, at Reedsport
in 1971, at Bandon and Powers in 1980, and at Coos Bay in 1993. Electronic
upgrades were completed at Reedsport in 1985 and at Bandon in 1992. As of
December 31, 1995, the System passed about 23,663 homes with an estimated
444.76 miles of plant, for an overall density of 53.2 homes per mile.
As of the appraisal date, feeder and trunk cable bandwidths were 450
MHz at the Coos Bay, Bandon, and Coquille headends; 300 MHz at Myrtle Point and
Powers; and 270 MHz at Reedsport. For programming, 61 channels were available
at Bandon, Coos Bay, Hauser, and Coquille; 37 were available at Myrtle Point
and Powers; and 32 were available at Gardiner and Reedsport. Addressable
converters in use throughout the System were manufactured by S/A.
Non-addressable converters were manufactured by Jerrold.
The System's satellite antennas were manufactured by Andrews, Comtech,
MA/Com, S/A, and Channel Master Wire Mesh. Processors were manufactured by
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Jerrold, S/A, and Cadco. Advertising insertion equipment was made by
Channelmatic Inc., and the System's backup power supply was manufactured by
Onan.
7. Dallas, OR
As of the appraisal date, the Dallas central office facilities were
located at 1862 Godsey Road in Dallas. Additional office facilities were
located in Garibaldi, Silverton, Nehalem, and Tillamook. Seven headends were
maintained in Brickyard, Dallas, Nehalem, Netarts/Oceanside, Silverton,
Tillamook, and Wilson River. The Tillamook and Nehalem headend sites were
owned and the others were leased.
Initial construction of the plant took place at Tillamook in 1958, at
Netarts in the early 1960's, and at Dallas in 1987. Upgrades took place at
Tillamook in 1983, at Nehalem in 1986, and at Dallas (including fiber) in 1995.
As of the appraisal date, the System passed about 23,770 homes with an
estimated 466.6 miles of plant, for an overall density of 50.9 homes per mile.
As of the appraisal date, feeder and trunk cable bandwidths were 330
MHz at the Tillamook, Dallas, Nehalem, and Silverton headends; and 270 MHz at
the Netarts and Brickyard. For programming, 39 channels were available at the
Dallas headend, 37 were available at Silverton, 33 at Nehalem, 29 at Tillamook,
and 5 at Wilson River. All of the channels available from these headends were
in use. Both the Brickyard Road and Netarts/Oceanside headends provided 22
channels, 18 of which were in use.
Trunk amplifiers and line extenders were manufactured by S/A,
Magnavox, Jerrold, C-Cor, Sylvania, Triple Crown, Anaconda, and Century III.
Addressable converters were installed in portions of the System served by the
Dallas, Nehalem, and Silverton headends, and they were manufactured by S/A.
Non-addressable converters were manufactured by Hamlin, Jerrold, and Oak.
The System's satellite antennas were manufactured by S/A, Vertex,
Comtech, and M/A-Com. Processors were manufactured by S/A, Jerrold, and
Blonder Tongue. Backup power supplies were manufactured by Onan and Alpha.
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8. Florence, OR
As of the appraisal date, the System's central office facilities were
located at 1234 Rhodadendron Drive in Florence. The System was served by
headends in Florence/Dunes City and Mapleton.
Initial construction of plant took place in 1956. Upgrades of headend
equipment were done in 1962 and 1984. A gradual rebuild of distribution plant
took place from 1991 to 1993. As of the appraisal date, the System passed
about 7,826 homes with an estimated 136.29 miles of plant, for an overall
density of 57.4 homes per mile.
Feeder and trunk cable bandwidth throughout most of the System was 450
MHz. Channel capacity was 62 at the Florence/Dunes City headend, of which 56
were in use; and 17 (220 MHz) at Mapleton, all of which were in use. Trunk
amplifiers and line extenders in the System were manufactured by S/A.
Addressable converter models S/A 8600 and non-addressable models S/A 8511 were
also in use.
The System's satellite antennas were manufactured by Comtech and
Prodelin, and processors were manufactured by S/A. Advertising insertion
equipment was manufactured by AdCart. Backup power supplies were manufactured
by Onan.
G. FRANCHISES
As of December 31, 1995, the eight Falcon Systems together held a
total of 69 franchises. In California, Gilroy held 13 franchise agreements,
Hesperia and San Luis Obispo held four agreements each, and Tulare held seven.
For each System, the weighted average remaining life of its franchise
agreements was calculated. As of December 31, 1995, the weighted average
remaining lives of the franchise agreements, prior to renewals and extensions,
were approximately 3.1 years for Gilroy, 9.5 years for Hesperia, 6.9 years for
San Luis Obispo, and 2.1 years for Tulare. The individual agreements and their
expiration dates are shown in Table VI (A) for the California Systems.
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<PAGE> 90
TABLE VI (A)
<TABLE>
<CAPTION>
REGION/FRANCHISE EXPIRATION DATE
<S> <C>
GILROY, CA -
City of Gilroy May 16, 1999
City of Gonzales July 1, 2002
City of Greenfield November 4, 2003
City of Hollister December 31, 1997
King City September 23, 2003
La Mesa Naval Post Graduate School March 3, 1994
Monterey County October 1, 1998
Monterey County August 1, 1997
City of Morgan Hill May 24, 1996
San Benito County December 31, 1994
City of San Juan Bautista August 16, 1995
Santa Clara County April 7, 2002
City of Soledad June 11, 2002
Weighted Average Remaining Life 3.1
(In Years)
HESPERIA, CA -
City of Adelanto N/A
City of Hesperia June 7, 2006
Kern County January 31, 2007
San Bernardino County April 19, 2008
Weighted Average Remaining Life 9.5
(In Years)
SAN LUIS OBISPO, CA -
City of Atascadero July 14, 2001
City of Guadalupe August 12, 2006
San Luis Obispo County June 6, 2003
Santa Barbara County February 5, 1999
Weighted Average Remaining Life 6.9
(In Years)
</TABLE>
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<PAGE> 91
TABLE VI (A) (CONTINUED)
<TABLE>
<CAPTION>
REGION/FRANCHISE EXPIRATION DATE
<S> <C>
TULARE, CA -
City of Exeter January 28, 1997
City of Farmersville January 24, 1997
City of Lindsay September 17, 1999
City of Orange Cove May 1, 2002
City of Porterville May 5, 1995
Tulare County February 1, 1998
City of Woodlake September 8, 2009
Weighted Average Remaining Life 2.1
(In Years)
</TABLE>
In Oregon, the Central Region System held 14 franchise agreements,
Coos Bay held eight, Dallas held 16, and Florence held three agreements. As of
December 31, 1995, the weighted average remaining lives of the franchise
agreements, prior to renewals and extensions, were approximately 8.1 years for
Central Region, 4.4 years for Coos Bay, 4.3 years for Dallas, and 9.2 years for
Florence. A summary of the Oregon Systems' agreements is presented in Table VI
(B) on the following pages.
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TABLE VI (B)
<TABLE>
<CAPTION>
REGION/FRANCHISE EXPIRATION DATE
<S> <C>
CENTRAL OREGON, OR -
City of Brownsville July 6, 2002
City of Cave Junction August 24, 2007
City of Coburg February 2, 2008
City of Cottage Grove November 7, 1998
City of Creswell November 7, 1995
City of Drain September 7, 2009
Lane County June 24, 2007
City of Lowell May 17, 1991
City of Oakland November 6, 1998
City of Oakridge June 30, 2005
City of Sutherlin November 1, 1997
City of Veneta November 24, 2006
City of West Fir June 30, 2005
City of Yoncalla November 10, 2007
No Franchise Required
Weighted Average Remaining Life 8.1
(In Years)
COOS BAY, OR -
City of Bandon June 5, 1994
City of Coos Bay June 30, 2004
City of Coquille June 30, 1996
City of Lakeside December 31, 2004
City of Myrtle Point June 2, 2001
City of North Bend June 30, 2004
City of Powers March 1, 1996
City of Reedsport October 3, 1998
No Franchise Required
Weighted Average Remaining Life 4.4
(In Years)
</TABLE>
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TABLE VI (B) (CONTINUED)
<TABLE>
<CAPTION>
REGION/FRANCHISE EXPIRATION DATE
<S> <C>
DALLAS, OR -
City of Bay City May 31, 2000
City of Cannon Beach July 7, 2002
City of Dallas October 8, 2002
City of Falls City March 7, 1999
City of Garibaldi September 14, 1997
City of Independence August 27, 2002
City of Jefferson January 14, 2003
City of Manzanita February , 1997
Marion County August 24, 1996
City of Monmouth August 4, 2002
City of Mt. Angel October 7, 1995
city of Nehalem October 8, 2001
City of Rockaway Beach December 8, 2002
City of Silverton January 1, 2000
City of Tillamook December 19, 1999
City of Wheeler November 16, 2013
No Franchise Required
Weighted Average Remaining Life 4.3
(In Years)
FLORENCE, OR -
Dunes City September 22, 2003
City of Florence September 13, 2003
Lane County June 24, 2007
Weighted Average Remaining Life 9.2
(In Years)
</TABLE>
H. MANAGEMENT
During the site visits to the eight Falcon Systems, MTA's
representatives met and spoke extensively with System General Managers. The
amount of time that the GMs had been with their respective Systems varied from
several months to several years, although all had years of experience in cable
system management.
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1. Gilroy, CA
At the time of the appraisal, there were 16 people in the technical
department, including a plant manager, seven technicians, a lead installer
(responsible for quality control), five installers, and two dispatchers. The
customer service group had 11 employees, including an operations manager and
ten customer service representatives (CSRs). The System also employed a
general manager, advertising sales people, and a direct sales staff.
2. Hesperia, CA
At the time of the appraisal, Hesperia's technical department operated
with a chief technician, a dispatcher, three installers, and three technicians.
There were six CSRs in the Hesperia offices. Additionally, there were two
technicians, two installers, and two CSRs operating out of the Mojave offices.
Finally, there were the general manager and an advertising sales person for the
System.
3. San Luis Obispo, CA
As of the appraisal date, San Luis Obispo's technical department
operated with a chief technician, two main technicians, one service technician,
one install technician, two installers, one dispatcher, and one warehouse
technician. The System periodically made use of contract installers.
Managerial and administrative duties were handled by the general manager, an
office manager, a lead customer service representative, and four customer
representatives. There was one sales person in the advertising sales
department.
4. Tulare, CA
As of December 31, 1995, the technical department for Tulare operated
with a chief engineer, four technicians, five installers, a converter manager,
two dispatchers, and one construction person. The System had a general manager
and an office manager/marketing manager. There were seven CSRs, two of whom
were part-time
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<PAGE> 95
employees. The advertising department was run with two sales people, and
direct sales were handled by contract sales people.
5. Central Region, OR
As of the appraisal date, the technical department at the Central
Region System was run with four technicians, three installers, and one
dispatcher. Managerial and administrative duties were handled by the General
Manager, an office manager, and three CSRs.
6. Coos Bay, OR
As of December 31, 1995, the technical department operated with a
chief technical manager, five technicians, four installers, and one dispatcher.
General office and administrative functions were dealt with by an office
manager and six CSRs. Additionally, there was a CSR at the Reedsport payment
office. Advertising sales were handled by two employees at Coos Bay. All
functions were overseen by the System's General Manager.
7. Dallas, OR
As of the appraisal date, the technical department at the Dallas
System operated with one dispatcher, four installers/technicians, and one
part-time technician. Managerial and administrative duties were handled by an
office manager and two customer service representatives. The System's General
Manager oversaw all functions.
8. Florence, OR
As of the appraisal date, Florence's technical department was run with
one installer and one technician. Customer service was handled by two
full-time CSRs and one part-time CSR. Advertising sales were handled by one
employee. All aspects of the System's operations were supervised by the
General Manager.
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I. FINANCIAL HISTORY
1. Gilroy, CA
Based on unaudited financial statements for the year ending December
31, 1994, revenues for Gilroy were $13,249,767. Operating expenses totaled
$5,536,679, resulting in operating income of $7,713,088 with an operating
profit margin of 58.2%. Unaudited financial statements for the full twelve
months of 1995 indicate that operating profits of $7,650,850 were generated on
revenues of $13,145,698, for an operating margin of 58.2%.
2. Hesperia, CA
Unaudited financial statements for the year ending December 31, 1994
show revenues for Hesperia of $7,320,512. Operating expenses totaled
$3,203,982, leaving operating income of $4,116,529 with an operating profit
margin of 56.2%. Unaudited financial statements for 1995 indicate that
operating profits of $4,216,820 were generated on revenues of $7,846,604, for
an operating margin of 53.7%.
3. San Luis Obispo, CA
Unaudited financial statements for the year ending December 31, 1994
outline revenues for San Luis Obispo of $6,134,452. Operating expenses over
the same period totaled $2,966,706, resulting in operating income of $3,167,746
with an operating profit margin of 51.6%. Unaudited financial statements for
1995 indicate that operating profits of $2,548,832 were generated on revenues
of $5,728,559, for an operating margin of 44.5%.
4. Tulare, CA
Based on unaudited financial statements for the year ending December
31, 1994, revenues for Tulare reached $6,802,316. Operating expenses totaled
$3,468,775, leaving operating income of $3,333,541 with an operating profit
margin of 49.0%. Unaudited
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<PAGE> 97
financial statements for 1995 indicate that operating profits of $3,177,814
were generated on revenues of $6,506,018, for an operating margin of 48.8%.
5. Central Region, OR
Unaudited financial statements for the year ending December 31, 1994
detail revenues for Central Region of $5,028,970. Operating expenses reached
$2,217,403, resulting in operating income of $2,811,567 with an operating
profit margin of 55.9%. Unaudited financial statements for 1995 indicate that
operating profits of $2,712,460 were generated on revenues of $5,001,040, for
an operating margin of 54.2%.
6. Coos Bay, OR
Unaudited financial statements for the year ending December 31, 1994,
show revenues for the System of $6,658,404. Operating expenses totaled
$2,895,699, resulting in operating income of $3,762,705 with an operating
profit margin of 56.5%. Unaudited financial statements for 1995 indicate that
operating profits of $3,687,386 were generated on revenues of $6,775,525, for
an operating margin of 54.4%.
7. Dallas, OR
Based on unaudited financial statements for the year ending December
31, 1994, revenues for Dallas were $6,005,589. Over the same period, operating
expenses totaled $2,394,019, resulting in operating income of $3,611,569 with
an operating profit margin of 60.1%. Unaudited financial statements for 1995
indicate that operating profits of $3,664,003 were generated on revenues of
$6,074,204, for an operating margin of 60.3%.
8. Florence, OR
Unaudited financial statements for the year ending December 31, 1994
show revenues for Florence reached $1,604,711. Operating expenses totaled
$638,989, resulting in operating income of $965,722 with an operating profit
margin of 60.2%. Unaudited financial statements for 1995 indicate that
operating profits of $888,628 were generated on revenues of $1,695,633, for an
operating margin of 52.41%.
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V. TOTAL SYSTEM VALUE
MTA has estimated the sum of the fair market values for the Systems as
a business enterprise to be $283,228,000 as of December 31, 1995. Fair market
value is the cash price a willing buyer would give a willing seller in an arm's
length transaction in order to complete the sale. It is assumed that both
buyer and seller have been informed of all relevant facts and neither is under
any compulsion to conclude the transaction and that the tangible assets will
remain in their present location and will continue to be employed in their
highest and best use, i.e., the delivery of cable television signals to
subscribers.
A. VALUATION PROCEDURE AND METHODS
MTA used the following basic methodology to determine the overall fair
market value of the System(s):
1. Performed onsite reviews to observe a representative portion
of the markets and homes passed, reviewed the number of
subscribers, and determined the quality and attractiveness of
the services provided.
2. Made inquiries of management to ascertain and/or verify items
relevant to the appraisal.
3. Estimated the availability of additional homes passed and the
probability of future growth.
4. Reviewed selected financial records and other documents to
verify certain financial data.
5. Estimated the expected changes in operations that a buyer most
likely would institute.
6. Applied generally accepted methods of estimating the fair
market value of the entity as a whole.
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A business valuation typically is performed using one or more of three
approaches: the cost approach, the market approach, and the income approach.
Since the System will be relying to a large degree on intangible assets to
generate income, the cost approach is not appropriate in this case. The
market, or comparable sales, approach has not been used because of the
difficulty in choosing sales that reflect the same profitability, size, and
growth as the System. Therefore, this valuation has been based on the income
approach to valuation. The income approach is the best approach to valuing the
System because it reflects the future earnings potential of the System.
There are various established methods of determining a business
entity's total fair market value using the income approach. The most commonly
accepted methods are as follows:
1. Capitalization of projected net cash flow.
2. Capitalization of single-year operating profit.
3. Dividend capitalization.
4. Market price-to-book equity.
5. Price-earnings multiple.
Of the methods listed above, MTA normally relies primarily upon the
capitalization of projected net cash flow, or "discounted cash flow" approach,
to estimate total value. MTA generally favors discounted cash flow methodology
because it considers the broadest range of factors that will affect both the
present and future income, and therefore value, of a cable television system.
Accordingly, MTA usually gives greater consideration to the discounted cash
flow methods in its final judgment concerning the fair market value of a cable
television system.
MTA has prepared two discounted cash flow valuations for the System,
one which analyzes the projected return on equity and one which analyzes the
projected return on investment. MTA also has considered the second general
methodology listed above, i.e., capitalization of operating profit, in
conducting its valuation of the System.
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The methodologies are described in Parts V-B and V-C of this report. The
values for the overall fair market value of the System are presented in
Exhibit A.
The remaining methods listed above, although widely used in other
industries, generally are inappropriate for valuing cable television systems.
Dividend capitalization, based upon actual dividends or capacity, usually is
irrelevant since few publicly-traded cable companies pay dividends and earnings
(which should be reflective of a dividend capacity) are not reflective of the
capacity to generate operating income. A comparison of market price-to-book
equity also is not valid usually since book equity varies widely from one
company to another as to how much intangible and tangible value is reflected on
the books. Finally, an analysis of price-earnings multiples generally is not
appropriate because they also vary widely within the industry and are not
representative of the financial position of most cable systems.
B. DISCOUNTED CASH FLOW METHODOLOGY
MTA has generated two discounted cash flow models to arrive at a total
System value. The return-on-equity model is based upon a hypothetical purchase
price that would achieve a target after-tax return on equity based on the
present value of the projected net cash flows. The return-on-investment model
measures the net present value of the projected pre-tax operating cash flows,
less capital expenditures, plus the residual value of the System, that
represent the return on total investment.
Both the return-on-equity and return-on-investment methods are
dependent upon projections of the System's future net cash flow and residual
value and on selection of an appropriate discount rate. MTA's calculations are
based on detailed projections of a variety of factors which will affect future
cash flow including housing growth, plant mileage, basic and pay subscriber
growth, subscriber rates, operating expenditures, and capital expenditures.
The projections and assumptions used in MTA's discounted cash flow models are
set forth in Exhibits E, F, G, and H. Exhibit E provides details of MTA's
projections for plant mileage, housing, and subscriber growth. Exhibit F shows
the rates subscribers were charged at the time of the appraisal for various
services and
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MTA's projections for future growth. Exhibit G lists revenues and operating
expenses for all years throughout the projection period, and Exhibit H details
capital expenditures anticipated for the System. In addition, Exhibit J
includes miscellaneous assumptions such as the average remaining life of the
franchises under which the System operates, tax rates, the net fair market
value of beginning tangible assets, the breakdown between debt and equity and
the interest rate anticipated on the debt, and the multiples and discount rates
used in the various appraisal methods. MTA's determination and use of these
factors is discussed further below.
1. Net Cash Flow/Return on Equity
This method involves the use of multiple year projected operations for
the System and a predetermined target after-tax return on equity for a
hypothetical outside buyer. The projection period is based on the average
remaining franchise life of the System. A complete discussion of the selection
of the projection period is provided in Part V-B-3 of this report.
Based on the use of typical debt-to-equity ratios and debt services,
MTA has made certain assumptions concerning the capital structure that a
"typical, prudent outside buyer" might experience as well as the probable
interest rates that would be applicable in connection with any debt financing
that might be incurred, as shown in Exhibit J. To calculate future cash flows,
MTA has projected future subscribers, revenues, operating expenses, and capital
expenditures. MTA has then tested various hypothetical purchase prices, i.e.,
potential fair market values, to determine a value that yields the desired
return on equity, as shown in Exhibits C-1 and C-2.
Using the return-on-equity model, MTA has generated low and high cash
flow projections for the System shown in Exhibits B-1 and B-2. The difference
between the two projections reflects the range of potential returns on equity
that a buyer could reasonably expect to realize depending upon the initial
purchase price paid for the System.
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2. Net Cash Flow/Return On Investment
This discounted cash flow method, similar to the preceding method, is
used to measure the net present value of the pre-tax operating cash flow, less
capital expenditures, plus the residual value of the System, that represent the
return on the total investment rather than that which could result from an
assumed purchase with a predetermined debt-to-equity ratio. To calculate
future cash flows, MTA has used the same projections for future subscribers,
revenues, operating expenses, and capital expenditures as in the
return-on-equity method. The projected cash flows for the System, plus the
last-year residual value of the System, less capital expenditures, are then
discounted to their present value using an acceptable discount factor based on
the weighted average cost of money, as shown in Exhibit D. MTA has used the
return on investment model, like the return on equity model, to generate low
and high values for the System. These values, shown in Exhibit D, represent
the present value of the future pre-tax operating cash flows and reflect more
conservative and more optimistic assumptions, respectively, as to the likely
return on investment that the System will generate over time.
3. Cash Flow Projections
There are many factors that affect the projections of a specific cable
system's cash flow. With respect to the System, MTA has analyzed the franchise
area, the costs incurred to meet franchise obligations, the length of the
franchise period, the degree of competition, and the historic results of the
System's operations. MTA also has examined factors that affect the industry,
such as possibility of regulation, competitive threats, rapid technical
changes, and the development of additional programming services. These factors
have been incorporated into MTA's projections of the System's future cash
flows.
The most critical factors in the expected cash flow of a specific
cable system are the opportunities for growth in the territory in which it
operates, i.e., its franchise area and the duration of the franchise. In
making its cash flow projections, MTA has
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carefully reviewed the demographics of counties represented in the service
area. Demographic information was gathered from direct observation during
MTA's onsite visit, discussion with System management, Marketing Statistic's
Demographics USA 1995, U.S. Census Bureau data, and information obtained from
the local Chamber of Commerce.
MTA also has reviewed information pertaining to the System's
franchises in order to calculate their remaining life and made inquiries of
System management personnel to ascertain any relevant terms that may affect the
value of the System. MTA has calculated a weighted average remaining life of
the franchises in each of the eight regions.
The projection period used for the cash flows normally is the weighted
average remaining life of the franchises, except when the weighted life of the
franchises falls below seven or exceeds ten years. When the franchise life
falls below seven years, MTA uses a seven-year projection period, amortizing
the franchises over fifteen years as mandated by the Internal Revenue Service
(IRS). When the franchise life exceeds ten years, a ten-year projection period
is used, with the franchises amortized over fifteen years. MTA believes that
the cash flows realized from a projection period less than seven years
generally are not reflective of the value of a system than an investor would
consider when utilizing discounted cash flow methodology. MTA also believes
that the operating income resulting from income and expense projections beyond
ten years is increasingly uncertain and might produce less accurate values for
the System.
MTA's cash flow projections are also based in part on historical
operating data such as subscriber rates, the ratio of subscribers to homes
passed, and the age and condition of the System's distribution plant. MTA also
has relied on information provided by System management personnel, discussions
with System personnel, and MTA's familiarity with typical industry expenses and
operating trends to project the future financial performance of the System. As
shown in Exhibits E through H, MTA has projected increases in the number of
basic and pay subscribers, projected changes in
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service rates, and estimated expenditures for future installation of cable
plant and other future capital requirements.
4. Residual Value
Under both the return-on-equity and the return-on-investment
approaches, MTA has calculated a residual value for the System following the
projection period. The residual represents the anticipated value of the System
at the end of the projection period. This value is added to the System's cash
flow stream in the final year of the projection period and then discounted back
to present value.
The residual is calculated as a multiple of the projected annual net
cash flow in the final year of the discounted cash flow analysis. The multiple
used reflects the degree of likelihood that the System will have significant
future income, and therefore value, at the end of the projection period. If
the franchise is likely to be renewed on the same terms as the current
franchise, and if there is a realistic expectation of continued growth in
income, a higher multiple will be applied. On the other hand, if the franchise
is not likely to be renewed, or is renewed on terms and conditions
significantly different from the current franchise, or if competitive or
technological factors jeopardize the operator's future income, a lower multiple
is appropriate.
Based on its experience and familiarity with the cable industry, and
its analysis of the System, MTA has calculated the System's residual value
using the last year's cash flow times a multiple of nine, as shown in Exhibit
D. This multiple reflects MTA's view that the System is likely to have
significant value in the last year of the projections, but that certain
unknowns and uncertainties must be factored into the multiple nonetheless.
Currently, the Cable Act of 1984 puts operators in a favorable position in that
cable franchises are generally likely to be renewed. However, the 1984 Act
provides no guarantee of renewal, and it is expected that the negotiation
process required to obtain a renewal will result in new franchises that will be
on terms significantly different and probably less favorable than current
franchises. In addition, concerns about how
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re-regulation of the cable industry will affect the Act's renewal provisions
could have the effect of reducing or eliminating the operator's expectation of
renewal.
5. Discount Rates
A critical component of both the return-on-equity and the
return-on-investment approaches is the selection of the rate at which future
cash flows are discounted to their present value. The discount rate represents
the investor's expected return on capital, i.e., the rate of return that
reasonably reflects the risk being undertaken by the investor.
Considering the relative risk associated with the cable industry in
comparison to other industries, and the risk associated with the System in
particular, MTA has adopted a range of discount rates for its discounted cash
flow methods. In the after-tax return-on-equity model, MTA has applied an
after-tax discount rate of 14.0% for its low valuation, and a rate of 12.0% for
its high valuation. In the pre-tax return- on-investment model, the pre-tax
weighted average low valuation discount rate is 16.6%, while the high valuation
rate is 15.1%. The discount rates used in the two discounted cash flow methods
are indicated on Exhibit D and summarized in Exhibit A.
MTA has calculated the discount rate for the return-on-equity model by
first establishing a risk-free rate of return (the current rate of return
available on Treasury bills or Treasury bonds as of the valuation date) and
then adding the historical premium for risk that the market has presented to
holders of representative cable television stocks. This assumes that using
such historical data will provide a reasonable guide to future return
expectations after recognition for risk.
The discount rate incorporates systematic risk, which is the
sensitivity of the return on the subject investment to changes in the return
for the market as a whole. MTA also has considered in our selection of the
discount rates unsystematic risk, which is any risk premium directly associated
with the industry, particular company, or the subject system. Thus, internal
risk factors, such as the possibility of competition, municipal and customer
relations, rate structure, franchise stability, etc., have been examined in our
selection of the discount rates.
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The discount rates used in the return-on-investment model is
determined by the "band of investment" method. The rates are based on an
average of the rate applicable to equity and the cost of debt weighted in the
proportions that are utilized for the particular system.
C. DIRECT INCOME METHODOLOGY
An alternative valuation method to the discounted cash flow method is
the direct income method, in which the estimate of the cable system's value is
based on current net operating income times a multiple selected by the
appraiser. MTA has applied several alternative versions of this method to the
System. In the first model, MTA used the System's actual annual net operating
income for the 12-month period preceding the valuation date, whenever the
appropriate data was available. When data was insufficient to ascertain the
actual net operating income for the past full year, MTA estimated the past
year's annual net operating income based on available financial information for
the past several months. In the second, the System's current cash flow as of
the appraisal date was annualized to create a "running rate" net operating
income projection. In the third model, MTA used the System's projected net
operating income for the twelve months following the appraisal date. The
results are shown in Exhibit A.
The multiples applied to each of these income figures are derived from
a variety of cable industry data. First, MTA has looked at the income and
stock value of several publicly traded cable companies near the appraisal date.
From this analysis, MTA has derived a range of multiples that it believes are
applicable to privately held cable systems, which includes adjustments for
control and marketability. Taking into account multiples derived from the sale
of other cable television systems, MTA has arrived at a composite figure for
each model. In the historical income model, MTA has applied a low multiple of
10.5 and a high multiple of 11.5. The running rate and projected income models
use slightly lower multiples to account for the additional risk and uncertainty
of using projections rather than historical data. The multiples used in each
of the three direct income approaches are indicated in Exhibit A.
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D. VALUE CONCLUSIONS
The valuations yielded by each of the methods described above are
shown in Exhibit A. In arriving at a final System valuation, MTA considered
both discounted cash flow methods, i.e., the return-on-equity and
return-on-investment methods, and the direct income methods. Based upon the
foregoing analysis and a consideration of the various methods, MTA concludes
that the fair market values of the Systems as a business enterprise as of
December 31, 1995, were as follows:
<TABLE>
<S> <C>
Gilroy, CA $76,000,000
Hesperia, CA 38,846,000
San Luis Obispo, CA 29,585,000
Tulare, CA 31,972,000
Central Region, OR 26,294,000
Coos Bay, OR 34,501,000
Dallas, OR 35,334,000
Florence, OR 10,696,000
COMBINED SYSTEMS $283,228,000
</TABLE>
Allocations of the above values to the headends within Coos Bay,
Dallas, and Florence are found in Appendix C to this report. Allocation
summaries for the identified Sale and Exchange properties are as follows:
<TABLE>
<CAPTION>
Sale
<S> <C>
Coos Bay, OR $27,837,000
Dallas, OR 15,402,000
Florence, OR 271,000
Gilroy, CA 76,000,000
Tulare, CA 31,972,000
SLO, CA 29,585,000
Central, OR 26,294,000
------------
TOTAL $207,361,000
</TABLE>
<TABLE>
<CAPTION>
Exchange
<S> <C>
Coos Bay $6,664,000
Dallas 19,932,000
Hesperia 38,846,000
Florence 10,425,000
-----------
TOTAL $75,867,000
</TABLE>
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VI. ALLOCATION OF VALUE TO SALE AND EXCHANGE CLUSTERS
A. PURPOSE OF ALLOCATION
Certain affiliates of Falcon Cable Systems Company, L.P. have made a
preliminary proposal to the Advisory Committee to exchange their ownership
interests for a portion of the cable systems that represent an equal value.
After the exchange, the General Partner would exercise its right to acquire the
ownership interests of the unaffiliated owners. The proposal was designed such
that the unaffiliated owners would receive the same amount whether or not the
systems are exchanged with the affiliated members or all the systems are sold
as part of a sale and liquidation. Accordingly, it was necessary to compute
the value of the systems that would be exchanged (Exchange Systems) and the
remaining systems that would be sold (Sale Systems) in order to determine any
adjustments in the list of systems that would ensure that the unaffiliated
owners would receive the same amount whether or not the exchange took place.
B. METHODOLOGY
The fair market values assigned to certain Systems in the previous
section have been allocated to the headend service areas (headends) within
those Systems. Headend allocations have been calculated for Coos Bay, Dallas,
and Florence. To allocate each System's fair market value among its operating
headends, MTA examined 1) the number of subscribers served by the headend, 2)
the projected operating cash flows to be generated by the headend, and 3) the
projected free cash flows to be generated by the headend after capital
expenditures have been considered. Allocation percentages were developed based
on these three criteria and then averaged to determine a single allocation
percentage.
The allocation scheme based on the number of subscribers simply
divides the subscribers served from the headend by the total number of
subscribers served by the
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System, resulting in the first allocation percentage. This allocation was
conducted in an identical manner for all three Systems.
The second and third allocation methods were preceded by a grouping of
each System's headends into two separate operating clusters identified as Sale
and Exchange clusters, based on Falcon's General Partner's identification of
headends that would potentially be exchanged for the General Partner's limited
partner equity interest. When the clusters within Coos Bay, Dallas, and
Florence were identified, an allocation of each original System's value between
the two groups was developed. Since each cluster's collective revenues,
operating expenses, and the level of capital expenditures to be supported were
not evenly dispersed among the headends, it was necessary to prepare DCF models
for the clusters based on the same methodology used to estimate the original
System value. Appropriate adjustments were made to mileage, homes passed,
subscribers, rates, operating expenses, and capital expenditures. The single
exception to this methodology involved the Mapleton headend in the Florence
System, which was identified as a Sale cluster. However, this headend's value
is best represented by the contribution it makes to the value of the Florence
System. Accordingly, Mapleton's value is the difference between the original
value for Florence and the Florence Exchange headend. After the allocation of
original System values to Sale and Exchange clusters was accomplished, MTA's
second allocation scheme using operating cash flow per headend was applied.
C. HEADEND VALUE ALLOCATIONS
To forecast operating cash flows per headend in the second allocation
method, MTA began with revenue projections based on the number of subscribers
to each service per headend and the weighted average rates for services in
those specific communities. Certain revenue streams such as installation
charges, advertising sales, and miscellaneous have been projected per headend
according to a simple subscriber-based allocation of the corresponding (either
Sale or Exchange) cluster's revenue projections. Accordingly, revenue streams
were projected per headend for 1996.
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An operating profit margin was applied to the revenue streams to
forecast 1996 operating cash flow. The profit margin applied to the revenues
for each headend was the cumulative profit margin, incorporating all revenues
and cash flows, forecast in the corresponding cluster valuation. Headend cash
flows were projected to grow at the same annual rate as cash flows for the
corresponding cluster. Use of the cumulative margin and the cluster-wide cash
flow growth captures the impact on cash flow from new services launched after
the valuation date. Cumulative cash flows over the projection period for each
headend were divided by cumulative cash flows for the corresponding cluster.
In this manner, the second allocation percentage per headend was derived.
The third allocation method based on the free cash flow per headend
required an allocation of original System capital expenditures to each headend.
At the System level, certain expenditures, including converters, installations,
miscellaneous, and incremental upgrade/rebuild costs have been projected
directly by MTA. Plant mileage projections were based on a combination of
historical information, Falcon-provided projections, and the appraiser's
judgment. These expenditures were allocated between the headends based on the
appropriate statistic, either subscribers or plant miles. The specific
rebuild/upgrade expenditures per headend were based on plans and financial
projections prepared by Falcon and supplied to the appraisers. Cumulative
capital expenditures have been subtracted from cumulative operating cash flows
at the headend level and compared with the corresponding figure for the cluster
to provide the third allocation percentage.
The three allocation percentages were averaged to calculate a single
percentage. The average percentage is applied to the original System value to
determine an allocated value per headend. Where the sum of the allocated
values did not precisely match the original System value, the allocated values
were adjusted by the percentage difference between the two. This step results
in the final allocated value per headend which yields the overall values for
the Sale and Exchange properties.
According to this methodology, the sum the identified Sale headends,
as of December 31, 1995, is $207,361,000. The sum of the identified Exchange
headends as of the same date is $75,867,000.
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VII. CONTINGENCIES AND LIMITING CONDITIONS
Our conclusions as to the value of the System's assets and asset
allocations are based upon the following, which to the best of our knowledge
and belief are reliable and sound:
1. Information and data obtained during an onsite inspection by
MTA representatives of a representative portion of the System
and communities served.
2. Selected documents including:
a. Various operating data and maps.
b. Miscellaneous internal data and documents.
The following limiting conditions apply to the subject appraisal:
1. MTA is under no obligation to update the appraisal to account
for events or additional data subsequent to the appraisal
date. The appraisal is based on laws and regulations in place
as of December 31, 1995, and does not reflect subsequent
changes, if any, in the relevant laws and regulations.
2. Neither this report nor any portions thereof may be used for
any purpose other than as stated herein nor may it be
reproduced or excerpted without the prior written consent of
MTA.
3. No copies of this report will be furnished to entities other
than the client without the client's specific permission or
direction unless ordered by a court of competent jurisdiction.
4. The comments and judgments of MTA as to the physical and
terminal state of the cable system were made by
representatives who are expert in valuing cable television
assets but not by qualified cable television engineers.
Consequently, readers should not rely on any statement made
herein for any purpose other than those set forth in this
appraisal.
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5. Separate appraisals of the System-owned land, buildings,
improvements, and construction in progress were not conducted.
Values for the System's land, buildings, and improvements were
taken from the balance sheet, statements of assessed value for
tax purposes, or System estimates based on tax assessments.
6. MTA did not consider, or factor into the appraisal, any impact
on value that might be caused by the presence of toxic waste
or hazardous material including electromagnetic radiation or
other forms of radiofrequency radiation.
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VIII. STATEMENT OF VALUE
MTA certifies that a personal inspection of a representative portion
of the communities and Systems was made by qualified representatives of this
firm and that, to the best of our knowledge, the statements contained in this
appraisal are correct and that the opinions stated are based on consideration
of the relevant factors. Neither MTA nor any of its representatives have any
current interest or contemplated future interest in the entities appraised.
The fee paid for this report was in no way dependent on the values determined
herein.
Based on the various analyses, computations, and considerations
discussed in this report, it is our professional judgment, subject to the
assumptions and limitations stated in this report, that the values as stated in
this report are true and correct. Therefore, it is the professional opinion of
MTA that the fair market values of the Systems as a business enterprise as of
December 31, 1995, are as stated below:
<TABLE>
<S> <C>
Gilroy, CA $76,000,000
Hesperia, CA 38,846,000
San Luis Obispo, CA 29,585,000
Tulare, CA 31,972,000
Central Region, OR 26,294,000
Coos Bay, OR 34,501,000
Dallas, OR 35,334,000
Florence, OR 10,696,000
-----------
COMBINED SYSTEMS $283,228,000
</TABLE>
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<PAGE> 114
Value allocation summaries for the identified Sale and Exchange
properties, as of December 31, 1995, are as follows:
<TABLE>
<CAPTION>
Sale
<S> <C>
Coos Bay, OR $27,837,000
Dallas, OR 15,402,000
Florence, OR 271,000
Gilroy, CA 76,000,000
Tulare, CA 31,972,000
SLO, CA 29,585,000
Central, OR 26,294,000
-----------
TOTAL $207,361,000
</TABLE>
<TABLE>
<CAPTION>
Exchange
<S> <C>
Coos Bay $6,664,000
Dallas 19,932,000
Hesperia 38,846,000
Florence 10,425,000
-----------
TOTAL $75,867,000
</TABLE>
MALARKEY-TAYLOR ASSOCIATES, INC.
/s/ ROBERT M. JONES
---------------------------------
By: Robert M. Jones
President, MTA
/s/ SUSAN DONOVAN
---------------------------------
By: Susan Donovan
Senior Financial Analyst
April 29, 1996
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<PAGE> 115
IX. QUALIFICATIONS
A. QUALIFICATIONS OF MALARKEY-TAYLOR ASSOCIATES, INC. (MTA)
MTA has served the communications industry for nearly 30 years
specializing in the field of cable, cellular, paging, mobile radio, and
broadcasting technologies. We have completed thousands of projects for clients
in the communications industry and in the financial and investment communities.
Our organization is composed of a multi-disciplinary team of professionals who
combine academic training in accounting, finance, engineering, marketing,
management, economics, and law with many years of experience solving problems
for hundreds of clients in both the public and private sectors.
A large portion of our financial, engineering, and managerial
professionals' time is devoted to the appraisal of cable television systems,
cellular telephone systems, paging systems, and broadcast stations. Since
1964, we have appraised hundreds of communications properties for purposes of
financing, ownership transfers, property tax assessments, and estate planning
and probating. Our appraisal experience has included independent fair market
valuations and purchase price allocations, including valuation of both tangible
assets and intangible assets such as franchises, licenses, subscriber lists,
leases, and contracts. MTA has supplied expert testimony on cable, cellular,
paging, and broadcast property values in court and other legal hearings.
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B. QUALIFICATIONS OF ROBERT M. JONES
Robert M. Jones is MTA-EMCI's President. He is responsible for the management
of the financial aspects of all projects. During Mr. Jones years of experience
in the cable industry, he has been involved in the analysis of hundreds of
systems and is thoroughly familiar with the fiscal management features of all
types of systems, from the smallest to the largest. He has the training,
experience, and industry knowledge to analyze and interpret financial and
operating statements, pro forma financial projections and related financial and
management information systems involved in appraisals , rate regulation,
valuations, management audits, feasibility studies, due diligence reviews, and
franchise applications and renewals. He has testified before court and
arbitration hearings concerning cable system values.
EXPERIENCE
Malarkey-Taylor Associates, Inc., Washington, D.C.; telecommunications
consultants and appraisers, specializing in cable television; 1972-1975 and
1978-present; President and Chief Operating Officer; responsible for the
financial aspects of all projects.
U.S. Army Communications Command, Ft. Ritchie, MD; U.S. Government organization
responsible for all non-tactical communications (e.g. telephone, microwave,
cable TV, etc.) in the United States; 1977-1978. Chief of Internal Review;
responsible for review and analysis of all financial and operational aspects of
approximately 100 communications facilities throughout the United States.
U.S. Renegotiation Board, Washington, D.C.; Review and oversight of defense
contracts with the U.S. Government; 1975-1977; responsible for review, analysis
and renegotiation of defense contracts.
U.S. General Accounting Office, Washington, D.C.; Research and review of
various aspects, especially financial, of projects and operating groups in the
Department of Defense; 1968-1969 and 1971-1972.
EDUCATION
M.A. Degree, Accounting University of Missouri, Columbia, MO.
B.B.A. Degree, Accounting, Texas Tech University, Lubbock, TX.
CERTIFICATION AND ORGANIZATIONS
Certified Public Accountant, Texas and Maryland
Senior Member, American Society of Appraisers
Member, American Institute of Certified Public Accountants
Member, Texas Society of Certified Public Accountants
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C. QUALIFICATIONS OF SUSAN DONOVAN
Susan Donovan is a Senior Financial Analyst, in the Financial Services
department at Malarkey-Taylor. She provides valuation, financial and
consulting services to cable television and broadcasting companies. Ms.
Donovan is involved in the fair market valuation and asset appraisal of
publicly and privately held cable television systems and broadcast stations.
She has acquired an in-depth knowledge of the values of cable television
systems and broadcast stations, including their market characteristics, growth
prospects, construction costs, operating cost structures, and other industry
issues.
Ms. Donovan was previously with the communications consulting firms of
Broadcast Investment Analysts, Inc. and Frazier, Gross & Kadlec, both of
Washington, D.C., where she participated in asset appraisal and fair market
valuations for numerous broadcast properties.
EXPERIENCE
Senior Financial Analyst, Financial Services, Malarkey-Taylor Associates, Inc.,
Washington, D.C., 1993-present.
Financial Analyst, Broadcast Investment Analysts, Inc., Washington, D.C.,
1988-1992.
Research Analyst, Frazier, Gross & Kadlec, Washington, D.C., 1986-1988.
Assistant Editor and Editorial Coordinator, TV Digest (presently Warren
Publishing), Washington, D.C., 1985-1986.
EDUCATION
M.B.A., George Mason University, Fairfax, Virginia.
B.A., Political Science, Trinity College, Washington, D.C.
112
<PAGE> 118
D. QUALIFICATIONS OF KEKE TAN
Keke Tan is a Financial Analyst in the Financial Services department
at Malarkey-Taylor. She is involved in the fair market valuation and asset
allocation of cable television systems.
Ms. Tan has gained in-depth knowledge of the telecommunications
industry from her previous work on various Management Information Systems (MIS)
projects, as a graduate research assistant at George Mason University (GMU).
While a student at GMU, Ms. Tan was responsible for the preparation of a
comprehensive financial management case study addressing both domestic and
international perspectives pertaining to the telecommunications industry.
Additionally, she has worked as a financial analyst at LCI International, Inc.,
a business and residential long distance telephone service provider.
EXPERIENCE
Financial Analyst, Financial Services, Malarkey-Taylor Associates, Inc.,
Washington, D.C., October 1995-present.
Graduate Research Assistant, George Mason University, Fairfax, VA, 1994-1995.
Financial Analyst, LCI International, Inc., McLean, VA, 1995.
Financial Associate, Commonwealth Capital, Inc., Alexandria, VA, 1994.
EDUCATION
M.B.A. (studies concentrating in Finance and MIS), George Mason University,
Fairfax, Virginia.
B.S., International Business Administration, Hunan University, Hunan, China.
113
<PAGE> 119
APPENDIX A
DCF Valuation Exhibits for Falcon Systems
<PAGE> 120
Gilroy, CA
<PAGE> 121
FALCON CABLE SYSTEMS CO. EXHIBIT A
GILROY REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
VALUATION METHODS
- ----------------- LOW HIGH
----------- -----------
<S> <C> <C>
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
OPERATING INCOME, PER BOOKS (12/31/95) $7,650,850 $7,650,850
VALUATION MULTIPLE 10.5 11.5
ESTIMATED FAIR MARKET VALUE $80,333,925 $87,984,775
----------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $13,674,275 $13,674,275
OPERATING MARGIN, PER BOOKS (12/31/95) 58.2% 58.2%
----------- -----------
"RUNNING RATE" OPERATING INCOME 7,959,112 7,959,112
VALUATION MULTIPLE 10.0 11.0
ESTIMATED FAIR MARKET VALUE $79,591,116 $87,550,227
----------- -----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $8,321,175 $8,321,175
VALUATION MULTIPLE 9.5 10.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $79,051,165 $87,372,340
----------- -----------
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $68,767,468 $74,696,602
----------- -----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVSTMT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $67,554,967 $73,075,065
----------- -----------
SUMMARY OF VALUES
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $80,333,925 $87,984,775
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 79,591,116 87,550,227
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 79,051,165 87,372,340
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 68,767,468 74,696,602
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 67,554,967 73,075,065
----------- -----------
RANGE OF ESTIMATED FAIR MARKET VALUES $72,662,000 $79,338,000
</TABLE>
ESTIMATED FAIR MARKET VALUE $76,000,000
-----------
<PAGE> 122
FALCON CABLE SYSTEMS CO. EXHIBIT B
GILROY REGION - CALIFORNIA LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
<TABLE>
<CAPTION>
PROFIT AND LOSS - LOW VALUE
- ---------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $14,041,526 $15,361,691 $16,991,254 $18,911,275
OPERATING EXPENSES 5,720,351 6,323,315 6,998,292 7,728,029
----------- ----------- ----------- ------------
OPERATING INCOME $8,321,175 $9,038,377 $9,992,962 $11,183,246
OPERATING MARGIN 0.59 0.59 0.59 0.59
PARENT SERVICES/MGT FEE(5%) 702,076 768,085 849,563 945,564
FRANCHISE AMORTIZATION(15) 3,179,667 3,179,667 3,179,667 3,179,667
SUBSCRIBER LIST(8) 905,467 905,467 905,467 905,467
NON-COMPETE COVENANTS(0) 0 0 0 0
DEPRECIATION 1,640,173 3,820,456 4,786,445 5,555,825
INTEREST 3,306,134 3,539,424 3,962,766 4,135,473
----------- ----------- ----------- ------------
PRE-TAX INCOME ($1,412,341) ($3,174,720) ($3,690,945) ($3,538,750)
INCOME TAX (EXPENSE)/BENEFIT 480,196 1,079,405 1,254,921 1,203,175
----------- ----------- ----------- ------------
NET INCOME ($932,145) ($2,095,315) ($2,436,024) ($2,335,575)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($1,412,341) ($3,174,720) ($3,690,945) ($3,538,750)
FRANCHISE AMORTIZATION(15) 3,179,667 3,179,667 3,179,667 3,179,667
SUBSCRIBER LIST(8) 905,467 905,467 905,467 905,467
NON-COMPETE COVENANTS(0) 0 0 0 0
DEPRECIATION 1,640,173 3,820,456 4,786,445 5,555,825
EQUITY 33,061,336
DEBT 33,061,336 2,332,901 4,233,426 3,801,512
RESIDUAL VALUE IN YEAR 7 ----------- ----------- ----------- ------------
TOTAL SOURCES OF CASH $70,435,637 $7,063,769 $9,414,060 $9,903,722
USES OF CASH -
PURCHASE PRICE - CURRENT $68,767,468
CAPITAL EXPENDITURES 1,567,208 7,064,729 7,339,613 7,621,830
DEBT RETIREMENT 0 0 2,074,447 2,281,891
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) ----------- ----------- ----------- ------------
TOTAL USES OF CASH $70,334,677 $7,064,729 $9,414,060 $9,903,722
ANNUAL CASH INCREASE/(DECREASE) $100,960 ($960) ($0) $0
CUMULATIVE CASH 100,960 100,000 100,000 100,000
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $20,810,824 $22,442,561 $23,934,099 $132,493,230
OPERATING EXPENSES 8,573,875 9,242,147 9,878,234 54,464,242
----------- ----------- ----------- -------------
OPERATING INCOME $12,236,949 $13,200,414 $14,055,865 $78,028,988
OPERATING MARGIN 0.59 0.59 0.59
PARENT SERVICES/MGT FEE(5%) 1,040,541 1,122,128 1,196,705 6,624,661
FRANCHISE AMORTIZATION(15) 3,179,667 3,179,667 3,179,667 22,257,667
SUBSCRIBER LIST(8) 905,467 905,467 905,467 6,338,267
NON-COMPETE COVENANTS(0) 0 0 0 0
DEPRECIATION 5,307,702 4,590,197 4,277,742 29,978,539
INTEREST 3,907,284 3,353,366 2,660,833 24,865,280
----------- ----------- ----------- -------------
PRE-TAX INCOME ($2,103,711) $49,589 $1,835,452 ($12,035,426)
INCOME TAX (EXPENSE)/BENEFIT 715,262 (16,860) (624,054) 4,092,045
----------- ----------- ----------- -------------
NET INCOME ($1,388,449) $32,729 $1,211,398 ($7,943,381)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH-
PRE TAX INCOME ($2,103,711) $49,589 $1,835,452 ($12,035,426)
FRANCHISE AMORTIZATION(5) 3,179,667 3,179,667 3,179,667 22,257,667
SUBSCRIBER LIST(8) 905,467 905,467 905,467 6,338,267
NON-COMPETE COVENANTS(0) 0 0 0 0
DEPRECIATION 5,307,702 4,590,197 4,277,742 29,978,539
EQUITY 33,061,336
DEBT 0 0 0 43,429,175
RESIDUAL VALUE IN YEAR 7 126,502,789 126,502,789
----------- ----------- ------------ ------------
TOTAL SOURCES OF CASH $7,289,124 $8,724,919 $136,701,115 $249,532,346
USES OF CASH-
PURCHASE PRICE - CURRENT $68,767,468
CAPITAL EXPENDITURES 1,749,949 1,799,592 1,878,395 29,021,317
DEBT RETIREMENT 5,539,175 6,925,327 26,608,335 43,429,175
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 25,586,037 25,586,037
----------- ----------- ----------- ------------
TOTAL USES OF CASH $7,289,124 $8,724,919 $54,072,767 $166,803,997
ANNUAL CASH INCREASE/(DECREASE) $0 ($0) $82,628,349 $82,728,349
CUMULATIVE CASH 100,000 100,000 82,728,349
</TABLE>
<PAGE> 123
FALCON CABLE SYSTEMS CO. EXHIBIT B
GILROY REGION - CALIFORNIA HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
<TABLE>
<CAPTION>
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $14,041,526 $15,361,691 $16,991,254 $18,911,275
OPERATING EXPENSES 5,720,351 6,323,315 6,998,292 7,728,029
----------- ----------- ----------- ------------
OPERATING INCOME $8,321,175 $9,038,377 $9,992,962 $11,183,246
OPERATING MARGIN 0.59 0.59 0.59 0.59
PARENT SERVICES/MGT FEE(5%) 702,076 768,085 849,563 945,564
FRANCHISE AMORTIZATION(15) 3,179,667 3,179,667 3,179,667 3,179,667
SUBSCRIBER LIST(8) 905,467 905,467 905,467 905,467
NON-COMPETE COVENANTS(0) 0 0 0 0
DEPRECIATION 1,640,173 3,820,456 4,786,445 5,555,825
INTEREST 3,618,191 3,886,158 4,369,783 4,589,889
----------- ----------- ----------- ------------
PRE-TAX INCOME ($1,724,399) ($3,521,455) ($4,097,962) ($3,993,166)
INCOME TAX (EXPENSE)/BENEFIT 586,296 1,197,295 1,393,307 1,357,676
----------- ----------- ----------- ------------
NET INCOME ($1,138,103) ($2,324,160) ($2,704,655) ($1,674,149)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($1,724,399) ($3,521,455) ($4,097,962) ($3,993,166)
FRANCHISE AMORTIZATION(15) 3,179,667 3,179,667 3,179,667 3,179,667
SUBSCRIBER LIST(8) 905,467 905,467 905,467 905,467
NON-COMPETE COVENANTS(0) 0 0 0 0
DEPRECIATION 1,640,173 3,820,456 4,786,445 5,555,825
EQUITY 36,181,914
DEBT 36,181,914 2,679,671 4,836,245 4,471,311
RESIDUAL VALUE IN YEAR 7 ----------- ----------- ----------- ------------
TOTAL SOURCES OF CASH $76,364,735 $7,063,805 $9,609,861 $10,119,104
USES OF CASH -
PURCHASE PRICE - CURRENT $74,696,602
CAPITAL EXPENDITURES 1,567,208 7,064,729 7,339,613 7,621,830
DEBT RETIREMENT 0 0 2,270,248 2,497,273
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) ----------- ----------- ----------- ------------
TOTAL USES OF CASH $76,263,810 $7,064,729 $9,609,861 $10,119,104
ANNUAL CASH INCREASE/(DECREASE) $100,924 ($924) $0 $(0)
CUMULATIVE CASH 100,924 100,000 100,000 100,000
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $20,810,824 $22,442,561 $23,934,099 $132,493,230
OPERATING EXPENSES 8,573,875 9,242,147 9,878,234 54,464,242
----------- ----------- ----------- -------------
OPERATING INCOME $12,236,949 $13,200,414 $14,055,865 $78,028,988
OPERATING MARGIN 0.59 0.59 0.59
PARENT SERVICES/MGT FEE(5%) 1,040,541 1,122,128 1,196,705 6,624,661
FRANCHISE AMORTIZATION(15) 3,179,667 3,179,667 3,179,667 22,257,667
SUBSCRIBER LIST(8) 905,467 905,467 905,467 6,338,267
NON-COMPETE COVENANTS(0) 0 0 0 0
DEPRECIATION 5,307,702 4,590,197 4,277,742 29,978,539
INTEREST 4,340,162 3,829,532 3,184,616 27,818,332
----------- ----------- ----------- -------------
PRE-TAX INCOME ($2,536,589) ($426,577) $1,311,670 ($14,988,479)
INCOME TAX (EXPENSE)/BENEFIT 862,440 145,036 (445,968) 5,096,083
----------- ----------- ----------- -------------
NET INCOME ($1,674,149) ($281,541) $865,702 ($9,892,396)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH-
PRE TAX INCOME ($2,536,589) $(426,577) $1,311,670 ($14,988,479)
FRANCHISE AMORTIZATION(5) 3,179,667 3,179,667 3,179,667 22,257,667
SUBSCRIBER LIST(8) 905,467 905,467 905,467 6,338,267
NON-COMPETE COVENANTS(0) 0 0 0 0
DEPRECIATION 5,307,702 4,590,197 4,277,742 29,978,539
EQUITY 36,181,914
DEBT 0 0 0 48,169,141
RESIDUAL VALUE IN YEAR 7 126,502,789 126,502,789
----------- ----------- ------------ -------------
TOTAL SOURCES OF CASH $6,856,246 $8,248,753 $136,177,333 $254,439,837
USES OF CASH-
PURCHASE PRICE - CURRENT $74,696,602
CAPITAL EXPENDITURES 1,749,949 1,799,592 1,878,395 29,021,317
DEBT RETIREMENT 5,106,297 6,449,162 31,846,160 48,169,141
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 22,566,094 22,566,094
----------- ----------- ----------- ------------
TOTAL USES OF CASH $6,856,246 $8,248,753 $56,290,649 $174,453,153
ANNUAL CASH INCREASE/(DECREASE) $0 $0 $79,886,684 $79,986,684
CUMULATIVE CASH 100,000 100,000 79,986,684
</TABLE>
<PAGE> 124
FALCON CABLE SYSTEMS CO. EXHIBIT C
GILROY REGION - CALIFORNIA LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
<TABLE>
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
<S> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $66,122,671
YEAR 1 DEBT REQUIREMENTS 33,061,336
YEAR 1 EQUITY REQUIREMENTS 33,061,336
FINANCING AVAILABLE $49,730,525 $54,087,639 $58,749,450 $64,954,254
UNUSED LEVERAGE 16,669,189 18,693,403 21,196,234 25,881,417
SENIOR DEBT: 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING DEBT $0 33,061,336 $33,061,336 $30,986,889
DEBT ADDED 33,061,336 0 0 0
TOTAL ANNUAL PAYMENTS 3,306,134 3,306,134 5,380,580 5,380,580
INTEREST 3,306,134 3,306,134 3,306,134 3,098,689
PRINCIPAL REPAYMENT 0 0 2,074,447 2,281,891
ENDING BALANCE 33,061,336 33,061,336 30,986,889 28,704,998
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $2,332,901 $6,566,327
BORROWINGS 0 2,332,901 4,233,426 3,801,512
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 233,290 656,633 1,036,784
SENIOR DEBT COVERAGE 4.0 3.7 3.1 2.6
LOC DEBT COVERAGE 0.0 0.3 0.7 0.9
TOTAL DEBT COVERAGE 4.0 3.9 3.8 3.5
FINANCING AVAILABLE $72,691,097 $79,540,169 $85,802,688
UNUSED LEVERAGE 39,157,435 52,931,834 65,406,056
SENIOR DEBT: 2000 2001 2002 TOTAL
---- ---- ---- -----
BEGINNING DEBT $28,704,998 $26,194,918 $23,433,829
DEBT ADDED 0 0 0 33,061,336
TOTAL ANNUAL PAYMENTS 5,380,580 5,380,580 5,380,580 33,515,168
INTEREST 2,870,500 2,619,492 2,343,383 20,850,464
PRINCIPAL REPAYMENT 2,510,080 2,761,088 3,037,197 12,664,704
ENDING BALANCE 26,194,918 23,433,829 20,396,632
LINE OF CREDIT:
BEGINNING DEBT $10,367,839 $7,338,744 $3,174,505 $0
BORROWINGS 0 0 0 10,367,839
PRINCIPAL PAYMENTS 3,029,095 4,164,239 3,174,505 10,367,839
INTEREST 1,036,784 733,874 317,451 4,014,816
SENIOR DEBT COVERAGE 2.1 1.8 1.5
LOC DEBT COVERAGE 0.6 0.2 0.0
TOTAL DEBT COVERAGE 2.7 2.0 1.5
</TABLE>
<PAGE> 125
FALCON CABLE SYSTEMS CO. EXHIBIT C
GILROY REGION - CALIFORNIA HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
<TABLE>
<CAPTION>
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
<S> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $72,363,827
YEAR 1 DEBT REQUIREMENTS 36,181,914
YEAR 1 EQUITY REQUIREMENTS 36,181,914
FINANCING AVAILABLE $57,381,375 $62,408,814 $67,787,827 $74,947,216
UNUSED LEVERAGE 21,199,461 23,547,230 26,360,245 31,545,598
SENIOR: 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING DEBT $0 $36,181,914 $36,181,914 $33,911,685
DEBT ADDED 36,181,914 0 0 0
TOTAL ANNUAL PAYMENTS 3,618,191 3,618,191 5,888,440 5,888,440
INTEREST 3,618,191 3,618,191 3,618,191 3,391,167
PRINCIPAL REPAYMENT 0 0 2,270,248 2,497,273
ENDING BALANCE 36,181,914 36,181,914 33,911,665 31,414,392
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $2,679,671 $7,515,916
BORROWINGS 0 2,679,671 4,836,245 4,471,311
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 267,967 751,592 1,198,723
SENIOR DEBT COVERAGE 4.3 4.0 3.4 2.8
LOC DEBT COVERAGE 0.0 0.3 0.8 1.1
TOTAL DEBT COVERAGE 4.3 4.3 4.1 3.9
FINANCING AVAILABLE $83,874,342 $91,777,118 $99,003,101
UNUSED LEVERAGE 45,579,020 66,131,427 76,681,282
SENIOR: 2000 2001 2002 TOTAL
---- ---- ---- -----
BEGINNING DEBT $31,414,392 $28,667,391 $25,645,690
DEBT ADDED 0 0 0 $36,181,914
TOTAL ANNUAL PAYMENTS 5,888,440 5,888,440 5,888,440 33,678,582
INTEREST 3,141,439 2,866,739 2,564,569 22,818,488
PRINCIPAL REPAYMENT 2,747,001 3,021,701 3,323,871 13,860,094
ENDING BALANCE 28,667,391 25,645,690 22,321,820
LINE OF CREDIT:
BEGINNING DEBT $11,987,227 $9,627,931 $6,200,470 $0
BORROWINGS 0 0 0 11,987,227
PRINCIPAL PAYMENTS 2,359,296 3,427,461 6,200,470 11,987,227
INTEREST 1,198,723 962,793 620,047 4,999,844
SENIOR DEBT COVERAGE 2.3 1.9 1.6
LOC DEBT COVERAGE 0.8 0.5 0.0
TOTAL DEBT COVERAGE 3.1 2.4 1.6
</TABLE>
<PAGE> 126
FALCON CABLE SYSTEMS CO. EXHIBIT D
GILROY REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
<TABLE>
<CAPTION>
PROFIT AND LOSS
- ---------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $14,041,526 $15,361,691 $16,991,254 $18,911,275
OPERATING EXPENSES 5,720,351 6,323,315 6,998,292 7,728,029
----------- ----------- ----------- -----------
OPERATING INCOME 8,321,175 9,038,377 9,992,962 11,183,246
PLUS: RESIDUAL VALUE
LESS: CAPITAL EXPENDITURES 1,567,208 7,064,729 7,339,613 7,621,830
----------- ----------- ----------- -----------
TOTAL CASH FLOW $6,753,967 $1,973,647 $2,653,349 $3,561,415
NET PRESENT VALUE @ 16.6% $67,554,967
-----------
NET PRESENT VALUE @ 15.1% $73,075,065
-----------
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
<S> <C> <C> <C> <C>
REVENUES $20,810,824 $22,442,561 $23,934,099 $132,493,230
OPERATING EXPENSES 8,573,875 9,242,147 9,878,234 54,464,242
----------- ----------- ----------- ------------
OPERATING INCOME 12,236,949 13,200,414 14,055,865 78,028,988
PLUS: RESIDUAL VALUE 126,502,789 126,502,789
LESS: CAPITAL EXPENDITURES 1,749,949 1,799,592 1,878,395 29,021,317
----------- ----------- ------------ ------------
TOTAL CASH FLOW $10,487,000 $11,400,822 $138,680,258 $175,510,459
</TABLE>
<PAGE> 127
FALCON CABLE SYSTEMS CO. EXHIBIT E
GILROY REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
CABLE TELEVISION SUBSCRIBERS
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
BEGINNING MILES 664.7
MILES ADDED 20.5 18.1 17.1 15.9 14.6 13.6 13.6
CUMULATIVE MILES 685.2 703.3 720.4 736.3 751.0 764.5 778.1
DENSITY OF ADDITIONAL PLANT 89 88 87 86 85 85 84
HOMES PASSED - BEGINNING 56,219
NEW HOMES & EXTENSIONS 1,827 1,596 1,491 1,376 1,250 1,148 1,136
HOMES PASSED - ENDING 58,046 59,642 61,133 62,509 63,759 64,907 66,043
GROWTH IN HOMES 3.3% 2.8% 2.5% 2.3% 2.0% 1.8% 1.8%
BASIC - BEGINNING SUBSCRIBERS 33,078 34,443 35,689 36,887 38,029 39,108 40,137
AVERAGE SUBSCRIBERS 33,761 35,066 36,288 37,458 38,569 39,623 40,653
ENDING SUBSCRIBERS 34,443 35,689 36,887 38,029 39,108 40,137 41,170
PENETRATION 59.3% 59.8% 60.3% 60.8% 61.3% 61.8% 62.3%
EXPANDED BASIC - BEGINNING 30,391 31,645 32,790 33,890 34,940 35,932 36,876
AVERAGE SUBSCRIBERS 31,018 32,217 33,340 34,415 35,436 36,404 37,351
ENDING SUBSCRIBERS 31,645 32,790 33,890 34,940 35,932 36,876 37,825
PENETRATION 91.9% 91.9% 91.9% 91.9% 91.9% 91.9% 91.9%
NEW PRODUCT TIER #1 - BEGINNING 13,992 15,086 17,951 18,554 19,129 19,672 20,189
AVERAGE SUBSCRIBERS 14,539 16,519 18,253 18,841 19,400 19,930 20,449
ENDING SUBSCRIBERS 15,086 17,951 18,554 19,129 19,672 20,189 20,708
PENETRATION 43.8% 50.3% 50.3% 50.3% 50.3% 50.3% 50.3%
NEW PRODUCT TIER #2 - BEGINNING 0 0 928 3,836 8,785 12,045 12,362
AVERAGE SUBSCRIBERS 0 464 2,382 6,310 10,415 12,204 12,521
ENDING SUBSCRIBERS 0 928 3,836 8,785 12,045 12,362 12,680
PENETRATION 0.0% 2.6% 10.4% 23.1% 30.8% 30.8% 30.8%
NEW PRODUCT TIER #3 - BEGINNING 0 0 928 3,836 8,785 12,045 12,362
AVERAGE SUBSCRIBERS 0 464 2,382 6,310 10,415 12,204 12,521
ENDING SUBSCRIBERS 0 928 3,836 8,785 12,045 12,362 12,680
PENETRATION 0.0% 2.6% 10.4% 23.1% 30.8% 30.8% 30.8%
PAY TV - BEGINNING UNITS 13,465 13,332 14,171 15,200 16,241 17,093 17,543
AVERAGE UNITS 13,398 13,751 14,685 15,720 16,667 17,318 17,768
ENDING UNITS 13,332 14,171 15,200 16,241 17,093 17,543 17,994
PENETRATION 38.7% 39.7% 41.2% 42.7% 43.7% 43.7% 43.7%
PAY PER VIEW - BEGINNING UNITS/MO 728 926 1,497 2,513 3,701 5,064 6,163
AVERAGE UNITS 827 1,212 2,005 3,107 4,382 5,613 6,774
ENDING UNITS 926 1,497 2,513 3,701 5,064 6,163 7,386
AVERAGE BUY RATE/MO 6.6% 9.6% 14.6% 19.6% 24.6% 27.6% 30.6%
CONVERTER RENTALS - BEG. 17,120 18,343 20,077 21,858 23,676 24,934 26,192
AVERAGE SUBSCRIBERS 17,732 19,210 20,967 22,767 24,305 25,563 26,838
ENDING SUBSCRIBERS 18,343 20,077 21,858 23,676 24,934 26,192 27,483
PENETRATION 53.3% 56.3% 59.3% 62.3% 63.8% 65.3% 66.8%
ADDRESSABLE HOMES 12,924 13,974 15,550 17,179 18,851 20,560 22,305
AVERAGE HOMES 13,449 14,762 16,364 18,015 19,706 21,432 23,209
ENDING HOMES 13,974 15,550 17,179 18,851 20,560 22,305 24,114
PENETRATION 40.6% 43.6% 46.6% 49.6% 52.6% 55.6% 58.6%
BASIC CHURN RATE 36% 36% 36% 36% 36% 36% 36%
</TABLE>
<PAGE> 128
FALCON CABLE SYSTEMS CO. EXHIBIT F
GILROY REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
SERVICE RATES
- -------------
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- ------------- ------------- --------------
<S> <C> <C>
BASIC $20.07 $20.20
EXPANDED BASIC $5.03 $5.19
NEW PRODUCT TIER #1 $4.20 $4.54
NEW PRODUCT TIER #2 $4.00 $4.00
NEW PRODUCT TIER #3 $4.00 $4.00
PAY $7.04 $7.04
PAY PER VIEW $15.31 $12.25
CONVERTER RENTALS $1.02 $0.92
INSTALLATIONS-NEW $50.00 $50.00
INSTALLATIONS-CHURN $25.00 $25.00
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
------ ------- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 1% 3% 3% 3% 3% 3% 3%
EXPANDED BASIC 3% 10% 10% 9% 4% 3% 3%
NEW PRODUCT TIER #1 8% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #3 0% 3% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1% 1%
PAY PER VIEW -20% -10% -5% 3% 3% 3% 3%
CONVERTER/REMOTE RENTALS -10% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $20.20 $20.80 $21.43 $22.07 $22.73 $23.42 $24.12
EXPANDED BASIC 5.19 5.71 6.26 6.84 7.12 7.33 7.55
NEW PRODUCT TIER #1 4.54 4.67 4.81 4.96 5.11 5.26 5.42
NEW PRODUCT TIER #2 4.00 4.12 4.24 4.37 4.50 4.64 4.78
NEW PRODUCT TIER #3 4.00 4.12 4.24 4.37 4.50 4.64 4.78
PAY 7.04 7.11 7.18 7.25 7.32 7.40 7.47
PAY PER VIEW 12.25 11.02 10.47 10.78 11.11 11.44 11.78
CONVERTERS RENTALS 0.92 0.95 0.97 1.00 1.03 1.06 1.10
INSTALLATIONS-NEW 50.00 51.50 53.05 54.64 56.28 57.96 59.70
INSTALLATIONS-CHURN 25.00 25.75 26.52 27.32 28.14 28.98 29.85
</TABLE>
<PAGE> 129
FALCON CABLE SYSTEMS CO. EXHIBIT G
GILROY REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 TOTAL
----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
BASIC $8,183,005 $8,754,378 $9,331,147 $9,921,016 $10,521,714 $11,133,508 $11,765,772 $69,610,540
EXPANDED BASIC 1,931,897 2,207,654 2,505,254 2,822,923 3,027,418 3,203,449 3,385,371 19,083,966
NEW PRODUCT TIER #1 791,690 926,475 1,054,434 1,121,090 1,188,970 1,258,103 1,329,550 7,670,311
NEW PRODUCT TIER #2 0 22,938 121,302 330,989 562,667 679,081 717,646 2,434,623
NEW PRODUCT TIER #3 0 22,938 121,302 330,989 562,667 679,081 717,646 2,434,623
PAY TV 1,131,456 1,172,871 1,265,053 1,367,762 1,464,625 1,537,032 1,592,778 9,531,577
PAY PER VIEW 121,534 160,288 251,954 402,064 584,118 770,662 957,966 3,248,587
CONVERTER/REMOTE
RENTALS 195,383 218,026 245,108 274,125 301,425 326,540 353,106 1,913,714
INSTALLATIONS 295,256 308,759 325,244 341,694 358,016 375,106 395,327 2,399,404
COMMERCIAL 132,885 136,872 140,978 145,207 149,563 154,050 158,672 1,018,226
ADVERTISING 385,810 491,908 614,885 753,234 903,881 1,062,060 1,221,369 5,433,146
MISCELLANEOUS 872,609 938,586 1,014,594 1,100,182 1,185,759 1,263,887 1,338,896 7,714,513
----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------
TOTAL REVENUES $14,041,526 $15,361,691 $16,991,254 $18,911,275 $20,810,824 $22,442,561 $23,934,099 $132,493,230
OPERATING EXPENSES:
OPERATIONS $ 2,064,345 $ 2,249,848 $ 2,412,998 $ 2,591,481 $ 2,769,969 $ 2,936,676 $ 3,099,788 $ 18,125,105
GENERAL &
ADMINISTRATIVE 1,158,941 1,238,634 1,322,695 1,411,711 1,501,747 1,589,892 1,678,653 9,902,273
SALES & MARKETING 561,994 732,575 899,476 1,018,709 1,146,308 1,265,334 1,386,374 7,010,770
PROGRAMMING 1,935,071 2,102,257 2,363,122 2,706,128 3,155,850 3,450,245 3,713,419 19,426,094
----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------
TOTAL OPERATING
EXPENSES $ 5,720,351 $ 6,323,315 $ 6,998,292 $ 7,728,029 $ 8,573,875 $ 9,242,147 $ 9,878,234 $ 54,464,242
----------- ----------- ----------- ----------- ----------- ----------- ----------- ------------
OPERATING INCOME $ 8,321,175 $ 9,038,377 $ 9,992,962 $11,183,246 $12,236,949 $13,200,414 $14,055,865 $ 78,028,988
OPERATING MARGIN 59.3% 58.8% 58.8% 59.1% 58.8% 58.8% 58.7%
TOTAL REVENUE/
BASIC SUB/MONTH $34.66 $36.51 $39.02 $42.07 $44.96 $47.20 $49.06
CASH FLOW/BASIC
SUB/MONTH $20.54 $21.48 $22.95 $24.88 $26.44 $27.76 $28.81
OPERATIONS
% OF REVENUE 15% 15% 14% 14% 13% 13% 13%
G & A PERCENTAGE
OF REVENUE 8% 8% 8% 7% 7% 7% 7%
SALES & MARKETING
% OF REVENUE 4% 5% 5% 5% 6% 6% 6%
PROGRAMMING
% OF REVENUE 14% 14% 14% 14% 15% 15% 16%
</TABLE>
<PAGE> 130
FALCON CABLE SYSTEMS CO. EXHIBIT H
GILROY REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES
- --------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 TOTAL
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSUMPTIONS AND INPUTS:
- ----------------------
BV OF EXISTING PLANT $9,910,561
ADDITIONAL MILES
OF PLANT 20.5 18.1 17.1 15.9 14.6 13.6 13.6
AERIAL PLANT
PER MILE $11,000 $11,220 $11,444 $11,673 $11,907 $12,145 $12,388
UNDERGROUND PLANT
PER MILE $18,000 $18,360 $18,727 $19,102 $19,484 $19,873 $20,271
PERCENTAGE OF
PLANT AERIAL 5% 5% 5% 5% 5% 5% 5%
PERCENTAGE OF
PLANT UNDERGROUND 95% 95% 95% 95% 95% 95% 95%
AVERAGE COST
PER CONVERTER $110 $112 $114 $117 $119 $121 $124
PERCENTAGE
CONVERTER USE 53% 56% 59% 62% 64% 65% 67%
PERCENTAGE
REPLACEMENT 5% 5% 5% 5% 5% 5% 5%
INSTALLATION
COST PER SUBSCRIBER $63 $64 $65 $67 $68 $69 $71
MISC. CAPITAL
PER SUBSCRIBER $5 $5 $5 $5 $5 $6 $6
INFLATION FACTOR
FOR CAPITALS 2% 2% 2% 2% 2% 2% 2% 115%
1.02 1.04 1.06 1.08 1.10 1.13 1.15
ANNUAL COSTS:
- ------------
23,775
PLANT ADDITIONS - AERIAL $11,287 $10,164 $9,785 $9,302 $8,712 $8,240 $8,401 $65,890
- UNDERGROUND 350,921 316,007 304,219 289,206 270,849 256,174 261,198 2,048,573
PLANT REBUILD/
UPGRADE/INCL. HE 33,898 5,507,000 5,726,000 5,956,000 41,457 43,050 44,690 17,352,096
AVERAGE COST
OF NEW CONVERTERS 79,980 78,609 81,235 83,029 81,939 81,511 85,393 571,697
CONVERTER
REPLACEMENT 96,889 108,703 121,012 134,034 144,345 154,973 165,959 925,916
INSTALLATION COSTS 825,430 865,410 908,594 951,507 993,907 1,036,911 1,083,843 6,665,602
MISC. CAPITAL
EXPENDITURES 168,803 178,836 188,768 198,753 208,740 218,733 228,911 1,391,544
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
TOTAL CAPITAL
EXPENDITURES $1,567,208 $7,064,729 $7,339,613 $7,621,830 $1,749,949 $1,799,592 $1,878,395 $29,021,317
AS A % OF
OPERATING INCOME 18.8% 78.2% 73.4% 68.2% 14.3% 13.6% 13.4%
</TABLE>
<PAGE> 131
FALCON CABLE SYSTEMS CO. EXHIBIT I
GILROY REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ESTIMATED
DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5% 8.9% 8.9% 8.9%
</TABLE>
<TABLE>
<CAPTION>
DEPRECIATION - BEG.
& ADTNS. 1996 1997 1998 1999 2000 2001 2002 TOTAL
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR 1 $1,640,173 $2,810,906 $2,007,462 $1,433,573 $1,024,965 $1,023,817 $1,024,965 $10,965,861
YEAR 2 1,009,550 1,730,152 1,235,621 882,385 630,880 630,174 6,118,762
YEAR 3 1,048,831 1,797,471 1,283,698 916,718 655,427 5,702,145
YEAR 4 1,089,160 1,866,586 1,333,058 951,967 5,240,771
YEAR 5 250,068 428,562 306,066 984,696
YEAR 6 257,162 440,720 697,882
YEAR 7 268,423 268,423
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
TOTAL DEPRECIATION $1,640,173 $3,820,456 $4,786,445 $5,555,825 $5,307,702 $4,590,197 $4,277,742 $29,978,539
</TABLE>
<PAGE> 132
FALCON CABLE SYSTEMS CO. EXHIBIT J
GILROY REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
ASSUMPTIONS AND INPUTS
- ----------------------
<TABLE>
<S> <C>
REMAINING LIFE OF FRANCHISES (YEARS) 7
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $9,910,561
SUBSCRIBERS IN FRANCHISES 100%
</TABLE>
<TABLE>
<CAPTION>
LOW HIGH
ANALYSIS ANALYSIS
--------- ---------
<S> <C> <C>
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
</TABLE>
<PAGE> 133
HESPERIA, CA
<PAGE> 134
FALCON CABLE SYSTEMS CO. EXHIBIT A
HESPERIA REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
VALUATION METHODS
- -----------------
<TABLE>
<CAPTION>
LOW HIGH
--- ----
<S> <C> <C> <C>
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
OPERATING INCOME, PER BOOKS (12/31/95) $ 4,216,820 $ 4,216,820
VALUATION MULTIPLE 10.5 11.5
ESTIMATED FAIR MARKET VALUE $44,276,610 $48,493,430
----------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED. OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $ 8,028,258 $ 8,028,258
OPERATING MARGIN, PER BOOKS (12/31/95) 55.0% 55.0%
"RUNNING RATE" OPERATING INCOME $4,414,338 $4,414,338
VALUATION MULTIPLE 10.0 11.0
ESTIMATED FAIR MARKET VALUE $44,143,375 $48,557,713
----------- -----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $ 4,580,803 $ 4,580,803
VALUATION MULTIPLE 9.5 10.5
ESTIMATED FAIR MARKET VALUE $43,517,628 $48,098,431
----------- -----------
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $32,599,933 $36,560,368
----------- -----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVESTMENT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $31,670,116 $35,251,299
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF VALUES
- -----------------
<S> <C> <C>
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $44,276,610 $48,493,430
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 44,143,375 48,557,713
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 43,517,628 48,098,431
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 32,599,933 36,560,368
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 31,670,116 35,251,299
RANGE OF ESTIMATED FAIR MARKET VALUES $36,820,000 $40,872,000
ESTIMATED FAIR MARKET VALUE $38,846,000
</TABLE>
<PAGE> 135
FALCON CABLE SYSTEMS CO. EXHIBIT B
HESPERIA REGION - CALIFORNIA LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES $8,248,820 $8,847,099 $9,614,941 $10,465,621 $11,314,770 $12,082,783
OPERATING EXPENSES 3,668,017 3,948,555 4,313,107 4,630,815 4,964,157 5,275,992
----------- ----------- ----------- ----------- ----------- -----------
OPERATING INCOME $4,580,803 $4,898,544 $5,301,835 $5,834,806 $6,350,614 $6,806,792
OPERATING MARGIN 0.56 0.55 0.55 0.56 0.56 0.56
PARENT SERVICES/MGT FEE (5%) 412,441 442,355 480,747 523,281 565,739 604,139
FRANCHISE AMORTIZATION (15) 1,028,800 1,028,800 1,028,800 1,028,800 1,028,800 1,028,800
SUBSCRIBER LIST (8) 497,133 497,133 497,133 497,133 497,133 497,133
NON-COMPETE COVENANTS (0) 0 0 0 0 0 0
DEPRECIATION 1,997,324 4,405,394 5,149,922 4,831,032 3,722,372 3,297,420
INTEREST 1,544,438 1,984,723 2,571,658 2,474,751 2,283,396 2,030,501
----------- ----------- ----------- ----------- ----------- -----------
PRE-TAX INCOME ($899,333) ($3,459,860) ($4,426,425) ($3,520,192) ($1,746,826) ($651,203)
INCOME TAX (EXPENSE)/BENEFIT 305,773 1,176,353 1,504,985 1,196,865 593,921 221,409
----------- ----------- ----------- ----------- ----------- -----------
NET INCOME ($593,560) ($2,283,508) ($2,921,441) ($2,323,327) ($1,152,905) ($429,794)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($899,333) ($3,459,860) ($4,426,425) ($3,520,192) ($1,746,826) ($651,203)
FRANCHISE AMORTIZATION (15) 1,028,800 1,028,800 1,028,800 1,028,800 1,028,800 1,028,800
SUBSCRIBER LIST (8) 497,133 497,133 497,133 497,133 497,133 497,133
NON-COMPETE COVENANTS (0) 0 0 0 0 0 0
DEPRECIATION 1,997,324 4,405,394 5,149,922 4,831,032 3,722,372 3,297,420
EQUITY 15,444,381
DEBT 15,444,381 4,402,846 5,869,347 0 0 0
RESIDUAL VALUE IN YEAR 10
----------- ----------- ----------- ----------- ----------- -----------
TOTAL SOURCES OF CASH $33,512,687 $6,874,313 $8,118,778 $2,836,773 $3,501,479 $4,172,151
USES OF CASH -
PURCHASE PRICE - CURRENT $32,599,933
CAPITAL EXPENDITURES 812,270 6,874,797 7,149,714 923,226 972,527 1,008,417
DEBT RETIREMENT 0 0 969,064 1,913,548 2,528,952 3,163,734
TAXES PAID ON NET INCOME 0 0 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
----------- ----------- ----------- ----------- ----------- -----------
TOTAL USES OF CASH $33,412,203 $6,874,797 $8,118,778 $2,836,773 $3,501,479 $4,172,151
ANNUAL CASH INCREASE/(DECREASE $100,484 ($484) ($0) $0 ($0) $0
CUMULATIVE CASH 100,484 100,000 100,000 100,000 100,000 100,000
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2002 2003 2004 2005 TOTAL
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES $12,765,783 $13,466,484 $14,181,782 $14,925,345 $115,913,429
OPERATING EXPENSES 5,569,010 5,866,492 6,172,597 6,495,056 50,903,797
----------- ----------- ----------- ----------- ------------
OPERATING INCOME $7,196,773 $7,599,992 $8,009,185 $8,430,289 $65,009,632
OPERATING MARGIN 0.56 0.56 0.56 0.56
PARENT SERVICES/MGT FEE (5%) 638,289 673,324 709,089 746,267 5,795,671
FRANCHISE AMORTIZATION (15) 1,028,800 1,028,800 1,028,800 1,028,800 10,288,000
SUBSCRIBER LIST (8) 497,133 497,133 497,133 497,133 4,971,333
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 3,183,294 2,672,563 1,860,526 1,355,114 32,474,961
INTEREST 1,714,128 1,335,411 887,077 625,071 17,451,154
----------- ----------- ----------- ----------- ------------
PRE-TAX INCOME $135,129 $1,392,760 $3,026,560 $4,177,904 ($5,971,487)
INCOME TAX (EXPENSE)/BENEFIT (45,944) (473,538) (1,029,030) (1,420,487) 2,030,306
----------- ----------- ----------- ----------- ------------
NET INCOME $89,185 $919,222 $1,997,529 $2,757,416 ($3,941,182)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME $135,129 $1,392,760 $3,026,560 $4,177,904 ($5,971,487)
FRANCHISE AMORTIZATION (15) 1,028,800 1,028,800 1,028,800 1,028,800 10,288,000
SUBSCRIBER LIST (8) 497,133 497,133 497,133 497,133 4,971,333
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 3,183,294 2,672,563 1,860,526 1,355,114 32,474,961
EQUITY 15,444,381
DEBT 0 0 0 0 25,716,575
RESIDUAL VALUE IN YEAR 10 75,872,604 75,872,604
----------- ----------- ----------- ----------- ------------
TOTAL SOURCES OF CASH $4,844,356 $5,591,256 $6,413,019 $82,931,555 $158,796,367
USES OF CASH -
PURCHASE PRICE - CURRENT $32,599,933
CAPITAL EXPENDITURES 1,057,191 1,107,912 1,148,080 1,189,715 22,243,848
DEBT RETIREMENT 3,787,165 4,483,345 2,620,061 6,250,707 25,716,575
TAXES PAID ON NET INCOME 0 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 21,349,154 21,349,154
----------- ----------- ----------- ----------- ------------
TOTAL USES OF CASH $4,844,356 $5,591,256 $3,768,141 $28,789,576 $101,909,510
ANNUAL CASH INCREASE/(DECREASE ($0) $0 $2,644,878 $54,141,979 $56,886,857
CUMULATIVE CASH 100,000 100,000 2,744,878 56,886,857
</TABLE>
<PAGE> 136
FALCON CABLE SYSTEMS CO. EXHIBIT B
HESPERIA REGION - CALIFORNIA HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001
----------- ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES $8,248,820 $8,847,099 $9,614,941 $10,465,621 $11,314,770 $12,082,783
OPERATING EXPENSES 3,668,017 3,948,555 4,313,107 4,630,815 4,964,157 5,275,992
----------- ----------- ----------- ----------- ------------ -----------
OPERATING INCOME $4,580,803 $4,898,544 $5,301,835 $5,834,806 $6,350,614 $6,806,792
OPERATING MARGIN 0.56 0.55 0.55 0.56 0.56 0.56
PARENT SERVICES/MGT FEE (5%) 412,441 442,355 480,747 523,281 565,739 604,139
FRANCHISE AMORTIZATION (15) 1,028,800 1,028,800 1,028,800 1,028,800 1,028,800 1,028,800
SUBSCRIBER LIST (8) 497,133 497,133 497,133 497,133 497,133 497,133
NON-COMPETE COVENANTS (0) 0 0 0 0 0 0
DEPRECIATION 1,997,324 4,405,394 5,149,922 4,831,032 3,722,372 3,297,420
INTEREST 1,752,869 2,216,341 2,843,542 2,733,557 2,568,083 2,343,657
----------- ----------- ----------- ----------- ------------ -----------
PRE-TAX INCOME ($1,107,764) ($3,691,478) ($4,698,309) ($3,778,999) ($2,031,513) ($964,358)
INCOME TAX (EXPENSE)/BENEFIT 376,640 1,255,103 1,597,425 1,284,859 690,714 327,882
----------- ----------- ----------- ----------- ------------ -----------
NET INCOME ($731,124) ($2,436,376) ($3,100,884) ($2,494,139) ($1,340,799) ($636,476)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($1,107,764) ($3,691,478) ($4,698,309) ($3,778,999) ($2,031,513) ($964,358)
FRANCHISE AMORTIZATION (10) 1,028,800 1,028,800 1,028,800 1,028,800 1,028,800 1,028,800
SUBSCRIBER LIST (8) 497,133 497,133 497,133 497,133 497,133 497,133
NON-COMPETE COVENANTS (0) 0 0 0 0 0 0
DEPRECIATION 1,997,324 4,405,394 5,149,922 4,831,032 3,722,372 3,297,420
EQUITY 17,528,686
DEBT 17,528,686 4,634,721 6,272,012 0 0 0
RESIDUAL VALUE IN YEAR 10
----------- ----------- ----------- ----------- ------------ -----------
TOTAL SOURCES OF CASH $37,472,864 $6,874,570 $8,249,558 $2,577,967 $3,216,792 $3,858,996
USES OF CASH -
PURCHASE PRICE - CURRENT $36,560,368
CAPITAL EXPENDITURES 812,270 6,874,797 7,149,714 923,226 972,527 1,008,417
DEBT RETIREMENT 0 0 1,099,844 1,654,742 2,244,265 2,850,579
TAXES PAID ON NET INCOME 0 0 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
----------- ----------- ----------- ----------- ------------ -----------
TOTAL USES OF CASH $37,372,637 $6,874,797 $8,249,558 $2,577,967 $3,216,792 $3,858,996
ANNUAL CASH INCREASE/(DECREASE) $100,227 ($227) ($0) $0 ($0) $0
CUMULATIVE CASH 100,227 100,000 100,000 100,000 100,000 100,000
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2002 2003 2004 2005 TOTAL
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES $12,765,783 $13,466,484 $14,181,782 $14,925,345 $115,913,429
OPERATING EXPENSES 5,569,010 5,866,492 6,172,597 6,495,056 50,903,797
----------- ----------- ----------- ----------- ------------
OPERATING INCOME $7,196,773 $7,599,992 $8,009,185 $8,430,289 $65,009,632
OPERATING MARGIN 0.56 0.56 0.56 0.56
PARENT SERVICES/MGT FEE (5%) 638,289 673,324 709,089 746,267 5,795,671
FRANCHISE AMORTIZATION (15) 1,028,800 1,028,800 1,028,800 1,028,800 10,288,000
SUBSCRIBER LIST (8) 497,133 497,133 497,133 497,133 4,971,333
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 3,183,294 2,672,563 1,860,526 1,355,114 32,474,961
INTEREST 2,058,599 1,714,330 1,303,887 819,074 20,353,938
----------- ----------- ----------- ----------- ------------
PRE-TAX INCOME ($209,342) $1,013,842 $2,609,749 $3,983,900 ($8,874,272)
INCOME TAX (EXPENSE)/BENEFIT 71,176 (344,706) (887,315) (1,354,526) 3,017,252
----------- ----------- ----------- ----------- ------------
NET INCOME ($138,166) $669,136 $1,722,435 $2,629,374 ($5,857,019)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($209,342) $1,013,842 $2,609,749 $3,983,900 ($8,874,272)
FRANCHISE AMORTIZATION (10) 1,028,800 1,028,800 1,028,800 1,028,800 10,288,000
SUBSCRIBER LIST (8) 497,133 497,133 497,133 497,133 4,971,333
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 3,183,294 2,672,563 1,860,526 1,355,114 32,474,961
EQUITY 17,528,686
DEBT 0 0 0 0 28,435,419
RESIDUAL VALUE IN YEAR 10 75,872,604 75,872,604
----------- ----------- ----------- ----------- ------------
TOTAL SOURCES OF CASH $4,499,885 $5,212,338 $5,996,209 $82,737,552 $160,696,731
USES OF CASH -
PURCHASE PRICE - CURRENT $36,560,368
CAPITAL EXPENDITURES 1,057,191 1,107,912 1,148,080 1,189,715 22,243,848
DEBT RETIREMENT 3,442,694 4,104,426 4,848,129 8,190,741 28,435,419
TAXES PAID ON NET INCOME 0 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 19,015,660 19,015,660
----------- ----------- ----------- ----------- ------------
TOTAL USES OF CASH $4,499,885 $5,212,338 $5,996,209 $28,396,115 $106,255,294
ANNUAL CASH INCREASE/(DECREASE) ($0) $0 $0 $54,341,437 $54,441,437
CUMULATIVE CASH 100,000 100,000 100,000 54,441,437
</TABLE>
<PAGE> 137
FALCON CABLE SYSTEMS CO. EXHIBIT C
HESPERIA REGION - CALIFORNIA LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - LOW VALUE
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $30,888,763
YEAR 1 DEBT REQUIREMENTS 15,444,381
YEAR 1 EQUITY REQUIREMENTS 15,444,381
FINANCING AVAILABLE $27,409,330 $29,775,219 $31,840,539 $34,461,927 $37,926,237 $41,278,990
UNUSED LEVERAGE 11,964,949 9,927,991 7,093,028 11,627,964 17,621,225 24,137,712
</TABLE>
<TABLE>
<CAPTION>
SENIOR DEBT: 1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
BEGINNING DEBT $0 $15,444,381 $15,444,381 $14,475,318 $13,409,347 $12,236,780
DEBT ADDED 15,444,381 0 0 0 0 0
TOTAL ANNUAL PAYMENTS 1,544,438 1,544,438 2,513,502 2,513,502 2,513,502 2,513,502
INTEREST 1,544,438 1,544,438 1,544,438 1,447,532 1,340,935 1,223,678
PRINCIPAL REPAYMENT 0 0 969,064 1,065,970 1,172,567 1,289,824
ENDING BALANCE 15,444,381 15,444,381 14,475,318 13,409,347 12,236,780 10,946,956
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $4,402,846 $10,272,194 $9,424,616 $8,068,232
BORROWINGS 0 4,402,846 5,869,347 0 0 0
PRINCIPAL PAYMENTS 0 0 0 847,578 1,356,385 1,873,910
INTEREST 0 440,285 1,027,219 1,027,219 942,462 806,823
SENIOR DEBT COVERAGE 3.4 3.2 2.7 2.3 1.9 1.6
LOC DEBT COVERAGE 0.0 0.9 1.9 1.6 1.3 0.9
TOTAL DEBT COVERAGE 3.4 4.1 4.7 3.9 3.2 2.5
DEBT AMORTIZATION - LOW VALUE
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $44,244,145 $46,779,024 $49,399,947 $52,059,701
UNUSED LEVERAGE 30,890,032 37,908,256 43,149,240 47,697,425
SENIOR DEBT: 2002 2003 2004 2005 TOTAL
---- ---- ---- ---- -----
BEGINNING DEBT $10,946,956 $9,528,150 $7,967,463 $6,250,707
DEBT ADDED 0 0 0 0 15,444,381
TOTAL ANNUAL PAYMENTS 2,513,502 2,513,502 2,513,502 2,513,502 23,196,892
INTEREST 1,094,696 952,815 796,746 625,071 12,114,787
PRINCIPAL REPAYMENT 1,418,806 1,560,687 1,716,756 1,888,431 11,082,105
ENDING BALANCE 9,528,150 7,967,463 6,250,707 4,362,276
LINE OF CREDIT:
BEGINNING DEBT $6,194,321 $3,825,963 $903,305 $0 $0
BORROWINGS 0 0 0 0 10,272,194
PRINCIPAL PAYMENTS 2,368,358 2,922,658 903,305 0 10,272,194
INTEREST 619,432 382,596 90,330 0 5,336,367
SENIOR DEBT COVERAGE 1.3 1.0 0.8 0.5
LOC DEBT COVERAGE 0.5 0.1 0.0 0.0
TOTAL DEBT COVERAGE 1.9 1.2 0.8 0.5
</TABLE>
<PAGE> 138
FALCON CABLE SYSTEMS CO. EXHIBIT C
HESPERIA REGION - CALIFORNIA HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - HIGH VALUE
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $35,057,371
YEAR 1 DEBT REQUIREMENTS 17,528,686
YEAR 1 EQUITY REQUIREMENTS 17,528,686
FINANCING AVAILABLE $31,626,150 $34,356,022 $36,739,084 $39,763,762 $43,761,042 $47,629,604
UNUSED LEVERAGE 14,097,464 12,192,616 9,403,509 14,082,929 20,324,475 27,043,614
</TABLE>
<TABLE>
<CAPTION>
SENIOR: 1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
BEGINNING DEBT $0 $17,528,686 $17,528,686 $16,428,841 $15,219,013 $13,888,201
DEBT ADDED 17,528,686 0 0 0 0 0
TOTAL ANNUAL PAYMENTS 1,752,869 1,752,869 2,852,713 2,852,713 2,852,713 2,852,713
INTEREST 1,752,869 1,752,869 1,752,869 1,642,884 1,521,901 1,388,820
PRINCIPAL REPAYMENT 0 0 1,099,844 1,209,829 1,330,812 1,463,893
ENDING BALANCE 17,528,686 17,528,686 16,428,841 15,219,013 13,888,201 12,424,308
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $4,634,721 $10,906,733 $10,461,820 $9,548,367
BORROWINGS 0 4,634,721 6,272,012 0 0 0
PRINCIPAL PAYMENTS 0 0 0 444,913 913,453 1,386,686
INTEREST 0 463,472 1,090,673 1,090,673 1,046,182 954,837
SENIOR DEBT COVERAGE 3.8 3.6 3.1 2.6 2.2 1.8
LOC DEBT COVERAGE 0.0 0.9 2.1 1.8 1.5 1.2
TOTAL DEBT COVERAGE 3.8 4.5 5.2 4.4 3.7 3.0
FINANCING AVAILABLE $51,050,937 $53,975,797 $56,999,939 $60,068,886
UNUSED LEVERAGE 33,907,641 40,936,927 48,809,198 55,117,897
SENIOR: 2002 2003 2004 2005 TOTAL
---- ---- ---- ---- -----
BEGINNING DEBT $12,424,308 $10,814,026 $9,042,716 $7,094,275
DEBT ADDED 0 0 0 0 $17,528,686
TOTAL ANNUAL PAYMENTS 2,852,713 2,852,713 2,852,713 2,852,713 26,327,440
INTEREST 1,242,431 1,081,403 904,272 709,427 13,749,744
PRINCIPAL REPAYMENT 1,610,282 1,771,310 1,948,441 2,143,285 12,577,696
ENDING BALANCE 10,814,026 9,042,716 7,094,275 4,950,989
LINE OF CREDIT:
BEGINNING DEBT $8,161,681 $6,329,270 $3,996,153 $1,096,466 $0
BORROWINGS 0 0 0 0 10,906,733
PRINCIPAL PAYMENTS 1,832,412 2,333,116 2,899,688 1,096,466 10,906,733
INTEREST 816,168 632,927 399,615 109,647 6,604,194
SENIOR DEBT COVERAGE 1.5 1.2 0.9 0.6
LOC DEBT COVERAGE 0.9 0.5 0.1 0.0
TOTAL DEBT COVERAGE 2.4 1.7 1.0 0.6
</TABLE>
<PAGE> 139
FALCON CABLE SYSTEMS CO. EXHIBIT D
HESPERIA REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES $ 8,248,820 $ 8,847,099 $ 9,614,941 $10,465,621 $11,314,770 $12,082,783
OPERATING EXPENSES 3,668,017 3,948,555 4,313,107 4,630,815 4,964,157 5,275,992
----------- ----------- ----------- ----------- ----------- -----------
OPERATING INCOME $ 4,580,803 $ 4,898,544 $ 5,301,835 $ 5,834,806 $ 6,350,614 $ 6,806,792
PLUS: RESIDUAL VALUE
LESS: CAPITAL EXPENDITURES 812,270 6,874,797 7,149,714 923,226 972,527 1,008,417
----------- ----------- ----------- ----------- ----------- -----------
TOTAL CASH FLOW $ 3,768,533 ($1,976,252) ($1,847,879) $ 4,911,580 $ 5,378,087 $ 5,798,375
NET PRESENT VALUE @ 16.6% $31,670,116
-----------
NET PRESENT VALUE @ 15.1% $35,251,299
-----------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2002 2003 2004 2005 TOTAL
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES $12,765,783 $13,466,484 $14,181,782 $14,925,345 $115,913,429
OPERATING EXPENSES 5,569,010 5,866,492 6,172,597 6,495,056 50,903,797
----------- ----------- ----------- ----------- ------------
OPERATING INCOME $ 7,196,773 $ 7,599,992 $ 8,009,185 $ 8,430,289 $ 65,009,632
PLUS: RESIDUAL VALUE 75,872,604 75,872,604
LESS: CAPITAL EXPENDITURES 1,057,191 1,107,912 1,148,080 1,189,715 22,243,848
----------- ----------- ----------- ----------- ------------
TOTAL CASH FLOW $ 6,139,582 $ 6,492,080 $ 6,861,105 $83,113,178 $118,638,388
NET PRESENT VALUE @ 16.6%
NET PRESENT VALUE @ 15.1%
</TABLE>
<PAGE> 140
FALCON CABLE SYSTEMS CO. EXHIBIT E
HESPERIA REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
BEGINNING MILES 678.0
MILES ADDED 10.0 10.0 10.5 10.5 11.0 11.0
CUMULATIVE MILES 688.0 698.0 708.5 719.0 730.0 741.0
DENSITY OF ADDITIONAL PLANT 31 31 30 31 30 27
HOMES PASSED - BEGINNING 28,280
NEW HOMES & EXTENSIONS 311 315 318 321 325 299
HOMES PASSED - ENDING 28,591 28,906 29,224 29,545 29,870 30,169
GROWTH IN HOMES 1.1% 1.1% 1.1% 1.1% 1.1% 1.0%
BASIC - BEGINNING SUBSCRIBERS 18,513 19,003 19,501 19,861 20,227 20,599
AVERAGE SUBSCRIBERS 18,758 19,252 19,681 20,044 20,413 20,778
ENDING SUBSCRIBERS 19,003 19,501 19,861 20,227 20,599 20,956
PENETRATION 66.5% 67.5% 68.0% 68.5% 69.0% 69.5%
EXPANDED BASIC - BEGINNING 17,593 18,058 18,532 18,874 19,222 19,576
AVERAGE SUBSCRIBERS 17,826 18,295 18,703 19,048 19,399 19,745
ENDING SUBSCRIBERS 18,058 18,532 18,874 19,222 19,576 19,915
PENETRATION 95.0% 95.0% 95.0% 95.0% 95.0% 95.0%
NEW PRODUCT TIER #1 - BEGINNING 8,712 9,227 9,762 9,942 10,126 10,312
AVERAGE SUBSCRIBERS 8,970 9,495 9,852 10,034 10,219 10,401
ENDING SUBSCRIBERS 9,227 9,762 9,942 10,126 10,312 10,490
PENETRATION 48.6% 50.1% 50.1% 50.1% 50.1% 50.1%
NEW PRODUCT TIER #2 - BEGINNING 0 0 741 3,059 4,673 6,345
AVERAGE SUBSCRIBERS 0 371 1,900 3,866 5,509 6,400
ENDING SUBSCRIBERS 0 741 3,059 4,673 6,345 6,454
PENETRATION 0.0% 3.8% 15.4% 23.1% 30.8% 30.8%
NEW PRODUCT TIER #3 - BEGINNING 0 0 741 3,059 4,673 6,345
AVERAGE SUBSCRIBERS 0 371 1,900 3,866 5,509 6,400
ENDING SUBSCRIBERS 0 741 3,059 4,673 6,345 6,454
PENETRATION 0.0% 3.8% 15.4% 23.1% 30.8% 30.8%
PAY TV - BEGINNING UNITS 8,507 8,542 8,961 9,375 9,801 9,981
AVERAGE UNITS 8,524 8,751 9,168 9,588 9,891 10,067
ENDING UNITS 8,542 8,961 9,375 9,801 9,981 10,154
PENETRATION 45.0% 46.0% 47.2% 48.5% 48.5% 48.5%
PAY PER VIEW - BEGINNING UNITS/ 678 805 1,120 1,639 2,238 2,725
AVERAGE UNITS 742 963 1,380 1,939 2,482 2,946
ENDING UNITS 805 1,120 1,639 2,238 2,725 3,167
AVERAGE BUY RATE/MO 12.1% 15.1% 20.1% 25.1% 28.1% 31.1%
CONVERTER RENTALS - BEG. 7,218 7,789 8,578 9,730 10,921 12,151
AVERAGE SUBSCRIBERS 7,503 8,184 9,154 10,325 11,536 12,571
ENDING SUBSCRIBERS 7,789 8,578 9,730 10,921 12,151 12,990
PENETRATION 41.0% 44.0% 49.0% 54.0% 59.0% 62.0%
ADDRESSABLE HOMES - BEGINNING 6,140 6,682 7,443 8,176 8,934 9,716
AVERAGE HOMES 6,411 7,063 7,809 8,555 9,325 9,957
ENDING HOMES 6,682 7,443 8,176 8,934 9,716 10,198
PENETRATION 35.2% 38.2% 41.2% 44.2% 47.2% 48.7%
BASIC CHURN RATE 40% 40% 40% 40% 40% 40%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2002 2003 2004 2005
---- ---- ---- ----
<S> <C> <C> <C> <C>
BEGINNING MILES
MILES ADDED 11.5 12.0 12.0 12.0
CUMULATIVE MILES 752.5 764.5 776.5 788.5
DENSITY OF ADDITIONAL PLANT 26 25 26 26
HOMES PASSED - BEGINNING
NEW HOMES & EXTENSIONS 302 305 308 311
HOMES PASSED - ENDING 30,470 30,775 31,083 31,394
GROWTH IN HOMES 1.0% 1.0% 1.0% 1.0%
BASIC - BEGINNING SUBSCRIBERS 20,956 21,318 21,685 22,057
AVERAGE SUBSCRIBERS 21,137 21,502 21,871 22,246
ENDING SUBSCRIBERS 21,318 21,685 22,057 22,435
PENETRATION 70.0% 70.5% 71.0% 71.5%
EXPANDED BASIC - BEGINNING 19,915 20,259 20,607 20,961
AVERAGE SUBSCRIBERS 20,087 20,433 20,784 21,141
ENDING SUBSCRIBERS 20,259 20,607 20,961 21,320
PENETRATION 95.0% 95.0% 95.0% 95.0%
NEW PRODUCT TIER #1 - BEGINNING 10,490 10,672 10,855 11,042
AVERAGE SUBSCRIBERS 10,581 10,763 10,948 11,136
ENDING SUBSCRIBERS 10,672 10,855 11,042 11,231
PENETRATION 50.1% 50.1% 50.1% 50.1%
NEW PRODUCT TIER #2 - BEGINNING 6,454 6,566 6,679 6,794
AVERAGE SUBSCRIBERS 6,510 6,622 6,736 6,852
ENDING SUBSCRIBERS 6,566 6,679 6,794 6,910
PENETRATION 30.8% 30.8% 30.8% 30.8%
NEW PRODUCT TIER #3 - BEGINNING 6,454 6,566 6,679 6,794
AVERAGE SUBSCRIBERS 6,510 6,622 6,736 6,852
ENDING SUBSCRIBERS 6,566 6,679 6,794 6,910
PENETRATION 30.8% 30.8% 30.8% 30.8%
PAY TV - BEGINNING UNITS 10,154 10,329 10,507 10,687
AVERAGE UNITS 10,241 10,418 10,597 10,779
ENDING UNITS 10,329 10,507 10,687 10,870
PENETRATION 48.5% 48.5% 48.5% 48.5%
PAY PER VIEW - BEGINNING UNITS/ 3,167 3,481 3,815 4,169
AVERAGE UNITS 3,324 3,648 3,992 4,356
ENDING UNITS 3,481 3,815 4,169 4,544
AVERAGE BUY RATE/MO 32.6% 34.1% 35.6% 37.1%
CONVERTER RENTALS - BEG. 12,990 13,854 14,743 15,327
AVERAGE SUBSCRIBERS 13,422 14,299 15,035 15,627
ENDING SUBSCRIBERS 13,854 14,743 15,327 15,926
PENETRATION 65.0% 68.0% 69.5% 71.0%
ADDRESSABLE HOMES - BEGINNING 10,198 10,694 11,204 11,727
AVERAGE HOMES 10,446 10,949 11,465 11,996
ENDING HOMES 10,694 11,204 11,727 12,264
PENETRATION 50.2% 51.7% 53.2% 54.7%
BASIC CHURN RATE 40% 40% 40% 40%
</TABLE>
<PAGE> 141
FALCON CABLE SYSTEMS CO. EXHIBIT F
HESPERIA REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
SERVICE RATES
- -------------
<TABLE>
<CAPTION>
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- ------------- ------------- --------
<S> <C> <C>
BASIC $18.03 $18.11
EXPANDED BASIC $7.15 $7.34
NEW PRODUCT TIER #1 $3.50 $3.96
NEW PRODUCT TIER #2 $4.00 $4.00
NEW PRODUCT TIER #3 $4.00 $4.00
PAY $6.60 $6.60
PAY PER VIEW $12.65 $12.65
CONVERTER RENTALS $3.87 $4.11
INSTALLATIONS-NEW $50.00 $50.00
INSTALLATIONS-CHURN $25.00 $25.00
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
PERCENTAGE RATE INCREASES
- -------------------------
<S> <C> <C> <C> <C> <C> <C>
BASIC 0% 3% 3% 3% 3% 3%
EXPANDED BASIC 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #1 13% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #3 0% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1%
PAY PER VIEW -15% -10% 3% 3% 3% 3%
CONVERTER RENTALS 6% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $18.11 $18.65 $19.21 $19.79 $20.38 $20.99
EXPANDED BASIC 7.34 7.56 7.79 8.02 8.26 8.51
NEW PRODUCT TIER #1 3.96 4.08 4.20 4.33 4.46 4.59
NEW PRODUCT TIER #2 4.00 4.12 4.24 4.37 4.50 4.64
NEW PRODUCT TIER #3 4.00 4.12 4.24 4.37 4.50 4.64
PAY 6.60 6.67 6.74 6.80 6.87 6.94
PAY PER VIEW 10.75 9.67 9.96 10.26 10.57 10.89
CONVERTER RENTALS 4.11 4.24 4.36 4.49 4.63 4.77
INSTALLATIONS-NEW 50.00 51.50 53.05 54.64 56.28 57.96
INSTALLATIONS-CHURN 25.00 25.75 26.52 27.32 28.14 28.98
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2002 2003 2004 2005
---- ---- ---- ----
<S> <C> <C> <C> <C>
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 3% 3% 3% 3%
EXPANDED BASIC 3% 3% 3% 3%
NEW PRODUCT TIER #1 3% 3% 3% 3%
NEW PRODUCT TIER #2 3% 3% 3% 3%
NEW PRODUCT TIER #3 3% 3% 3% 3%
PAY 1% 1% 1% 1%
PAY PER VIEW 3% 3% 3% 3%
CONVERTER RENTALS 3% 3% 3% 3%
INSTALLATIONS-NEW 3% 3% 3% 3%
INSTALLATIONS-CHURN 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $21.62 $22.27 $22.94 $23.62
EXPANDED BASIC 8.77 9.03 9.30 9.58
NEW PRODUCT TIER #1 4.73 4.87 5.02 5.17
NEW PRODUCT TIER #2 4.78 4.92 5.07 5.22
NEW PRODUCT TIER #3 4.78 4.92 5.07 5.22
PAY 7.01 7.08 7.15 7.22
PAY PER VIEW 11.21 11.55 11.90 12.25
CONVERTER RENTALS 4.91 5.06 5.21 5.37
INSTALLATIONS-NEW 59.70 61.49 63.34 65.24
INSTALLATIONS-CHURN 29.85 30.75 31.67 32.62
</TABLE>
<PAGE> 142
FALCON CABLE SYSTEMS CO. EXHIBIT G
HESPERIA REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001
---------- ---------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
BASIC $4,075,580 $4,308,360 $4,536,580 $ 4,758,959 $ 4,991,971 $ 5,233,501
EXPANDED BASIC 1,569,177 1,660,412 1,748,366 1,834,070 1,923,871 2,016,955
NEW PRODUCT TIER #1 426,219 464,695 496,656 521,001 546,511 572,953
NEW PRODUCT TIER #2 0 18,318 96,745 202,754 297,597 356,103
NEW PRODUCT TIER #3 0 18,318 96,745 202,754 297,597 356,103
PAY TV 675,596 700,515 741,188 782,882 815,694 838,556
PAY PER VIEW 95,684 111,749 164,964 238,740 314,780 384,895
CONVERTER 370,390 416,078 479,380 556,938 640,913 719,365
INSTALLATIONS 170,395 179,947 183,175 192,106 201,464 210,207
COMMERCIAL 270,174 278,279 286,628 295,227 304,083 313,206
ADVERTISING*** 247,920 322,295 393,200 463,976 538,213 613,562
MISCELLANEOUS 347,686 368,131 391,312 416,214 442,077 467,376
---------- ---------- ---------- ----------- ------------ ------------
TOTAL REVENUES $8,248,820 $8,847,099 $9,614,941 $10,465,621 $11,314,770 $12,082,783
OPERATING EXPENSES:
OPERATIONS $1,195,823 $1,263,736 $1,342,113 $ 1,425,647 $ 1,510,946 $ 1,593,362
GENERAL & ADMINISTRATIVE 715,703 756,194 799,433 843,657 889,148 934,183
SALES & MARKETING 362,065 458,712 583,462 636,164 691,421 747,915
PROGRAMMING 1,394,425 1,469,914 1,588,099 1,725,348 1,872,641 2,000,531
---------- ---------- ---------- ----------- ------------ ------------
TOTAL OPERATING EXPENSES $3,668,017 $3,948,555 $4,313,107 $ 4,630,815 $ 4,964,157 $ 5,275,992
OPERATING INCOME $4,580,803 $4,898,544 $5,301,835 $ 5,834,806 $ 6,350,614 $ 6,806,792
OPERATING MARGIN 55.5% 55.4% 55.1% 55.8% 56.1% 56.3%
TOTAL REVENUE/BASIC SUB/MONTH $36.65 $38.30 $40.71 $43.51 $46.19 $48.46
CASH FLOW/BASIC SUB/MONTH $20.35 $21.20 $22.45 $24.26 $25.93 $27.30
OPERATIONS % OF REVENUE 14% 14% 14% 14% 13% 13%
G & A PERCENTAGE OF REVENUE 9% 9% 8% 8% 8% 8%
SALES & MARKETING % OF REVENUE 4% 5% 6% 6% 6% 6%
PROGRAMMING % OF REVENUE 17% 17% 17% 16% 17% 17%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2002 2003 2004 2005 TOTAL
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
BASIC $ 5,483,741 $ 5,745,651 $ 6,019,765 $ 6,306,641 $ 51,460,750
EXPANDED BASIC 2,113,396 2,214,334 2,319,975 2,430,535 19,831,090
NEW PRODUCT TIER #1 600,349 629,023 659,032 690,439 5,606,879
NEW PRODUCT TIER #2 373,131 390,952 409,603 429,123 2,574,326
NEW PRODUCT TIER #3 373,131 390,952 409,603 429,123 2,574,326
PAY TV 861,590 885,212 909,435 934,274 8,144,942
PAY PER VIEW 447,291 505,637 569,913 640,610 3,474,263
CONVERTER 791,136 868,082 940,181 1,006,477 6,788,940
INSTALLATIONS 220,206 230,669 241,618 253,075 2,082,862
COMMERCIAL 322,602 332,280 342,249 352,516 3,097,244
ADVERTISING*** 687,190 755,909 816,382 881,692 5,720,340
MISCELLANEOUS 492,020 517,784 544,027 570,840 4,557,467
----------- ----------- ----------- ----------- ------------
TOTAL REVENUES $12,765,783 $13,466,484 $14,181,782 $14,925,345 $115,913,429
OPERATING EXPENSES:
OPERATIONS $ 1,673,505 $ 1,756,936 $ 1,843,131 $ 1,932,884 $ 15,538,082
GENERAL & ADMINISTRATIVE 978,714 1,024,997 1,073,039 1,123,161 9,138,231
SALES & MARKETING 804,403 859,620 912,053 967,873 7,023,688
PROGRAMMING 2,112,388 2,224,938 2,344,374 2,471,138 19,203,795
----------- ----------- ----------- ----------- ------------
TOTAL OPERATING EXPENSES $ 5,569,010 $ 5,866,492 $ 6,172,597 $ 6,495,056 $ 50,903,797
OPERATING INCOME $ 7,196,773 $ 7,599,992 $ 8,009,185 $ 8,430,289 $ 65,009,632
OPERATING MARGIN 56.4% 56.4% 56.5% 56.5%
TOTAL REVENUE/BASIC SUB/MONTH $50.33 $52.19 $54.04 $55.91
CASH FLOW/BASIC SUB/MONTH $28.37 $29.46 $30.52 $31.58
OPERATIONS % OF REVENUE 13% 13% 13% 13%
G & A PERCENTAGE OF REVENUE 8% 8% 8% 8%
SALES & MARKETING % OF REVENUE 6% 6% 6% 6%
PROGRAMMING % OF REVENUE 17% 17% 17% 17%
</TABLE>
<PAGE> 143
FALCON CABLE SYSTEMS CO. EXHIBIT H
HESPERIA REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001
----------- ---------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
ASSUMPTIONS AND INPUTS:
BV OF EXISTING PLANT $13,164,804
ADDITIONAL MILES OF PLANT 10.0 10.0 10.5 10.5 11.0 11.0
AERIAL PLANT PER MILE $11,000 $11,220 $11,444 $11,673 $11,907 $12,145
UNDERGROUND PLANT PER MILE $18,000 $18,360 $18,727 $19,102 $19,484 $19,873
PERCENTAGE OF PLANT AERIAL 20% 20% 20% 20% 20% 20%
PERCENTAGE OF PLANT UNDERGROUND 80% 80% 80% 80% 80% 80%
AVERAGE COST PER CONVERTER $110 $112 $114 $117 $119 $121
PERCENTAGE CONVERTER USE 41% 44% 49% 54% 59% 62%
PERCENTAGE REPLACEMENT 5% 5% 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $57 $58 $60 $61 $62 $63
MISC. CAPITAL PER SUBSCRIBER $5 $5 $5 $5 $5 $6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2% 2% 2%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $22,000 $22,440 $24,033 $24,514 $26,195 $26,719
- UNDERGROUND 144,000 146,880 157,308 160,455 171,457 174,886
PLANT REBUILD/UPGRADE 34,578 6,060,650 6,302,700 38,913 40,299 41,724
AVERAGE COST OF NEW CONVERTERS 22,073 24,583 20,218 23,079 26,118 26,864
CONVERTER REPLACEMENT 41,735 46,894 54,665 62,586 71,035 77,541
INSTALLATION COSTS 454,094 475,167 488,409 507,323 526,943 545,981
MISC. CAPITAL EXPENDITURES 93,789 98,183 102,380 106,356 110,481 114,701
-------- ---------- ---------- -------- -------- ----------
TOTAL CAPITAL EXPENDITURES $812,270 $6,874,797 $7,149,714 $923,226 $972,527 $1,008,417
AS A % OF OPERATING INCOME 17.7% 140.3% 134.9% 15.8% 15.3% 14.8%
</TABLE>
CAPITAL EXPENDITURES
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2002 2003 2004 2005 TOTAL
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
ASSUMPTIONS AND INPUTS:
BV OF EXISTING PLANT
ADDITIONAL MILES OF PLANT 11.5 12.0 12.0 12.0
AERIAL PLANT PER MILE $ 12,388 $ 12,636 $ 12,888 $ 13,146
UNDERGROUND PLANT PER MILE $ 20,271 $ 20,676 $ 21,090 $ 21,512
PERCENTAGE OF PLANT AERIAL 20% 20% 20% 20%
PERCENTAGE OF PLANT UNDERGROUND 80% 80% 80% 80%
AVERAGE COST PER CONVERTER $ 124 $ 126 $ 129 $ 131
PERCENTAGE CONVERTER USE 65% 68% 69% 71%
PERCENTAGE REPLACEMENT 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $ 64 $ 66 $ 67 $ 68
MISC. CAPITAL PER SUBSCRIBER $ 6 $ 6 $ 6 $ 6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2% 122%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $ 28,492 $ 30,325 $ 30,932 $ 31,550 $ 267,200
- UNDERGROUND 186,492 198,493 202,463 206,512 1,748,947
PLANT REBUILD/UPGRADE 43,219 44,787 46,399 48,059 12,701,329
AVERAGE COST OF NEW CONVERTERS 29,136 31,533 33,340 35,233 272,177
CONVERTER REPLACEMENT 84,356 91,569 97,105 102,922 730,407
INSTALLATION COSTS 566,476 587,712 609,713 632,507 5,394,325
MISC. CAPITAL EXPENDITURES 119,019 123,493 128,128 132,931 1,129,462
---------- ---------- ---------- ---------- -----------
TOTAL CAPITAL EXPENDITURES $1,057,191 $1,107,912 $1,148,080 $1,189,715 $22,243,848
AS A % OF OPERATING INCOME 14.7% 14.6% 14.3% 14.1%
</TABLE>
<PAGE> 144
FALCON CABLE SYSTEMS CO. EXHIBIT I
HESPERIA REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6
---------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
ESTIMATED DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5% 8.9% 8.9%
DEPRECIATION - BEG. & ADTNS. 1996 1997 1998 1999 2000 2001
---------- ---------- ---------- ---------- ---------- ----------
YEAR 1 $1,997,324 $3,422,985 $2,444,590 $1,745,736 $1,248,153 $1,246,755
YEAR 2 982,408 1,683,638 1,202,402 858,662 613,919
YEAR 3 1,021,694 1,750,965 1,250,485 892,999
YEAR 4 131,929 226,098 161,472
YEAR 5 138,974 238,172
YEAR 6 144,103
YEAR 7
YEAR 8
YEAR 9
YEAR 10
---------- ---------- ---------- ---------- ---------- ----------
TOTAL DEPRECIATION $1,997,324 $4,405,394 $5,149,922 $4,831,032 $3,722,372 $3,297,420
</TABLE>
<TABLE>
<CAPTION>
YEAR 7 YEAR 8
------ ------
<S> <C> <C> <C> <C> <C>
ESTIMATED DEPRECIATION RATES 8.9% 4.5%
DEPRECIATION - BEG. & ADTNS. 2002 2003 2004 2005 TOTAL
---------- ---------- ---------- ---------- -----------
YEAR 1 $1,248,153 $ 623,377 $13,977,074
YEAR 2 613,232 613,919 306,616 6,874,797
YEAR 3 638,469 637,754 638,469 318,877 7,149,714
YEAR 4 115,311 82,444 82,352 82,444 882,050
YEAR 5 170,095 121,469 86,847 86,749 842,306
YEAR 6 246,961 176,372 125,951 90,052 2,133,786
YEAR 7 151,073 258,906 184,903 132,043 1,795,572
YEAR 8 158,321 271,328 193,774 623,422
YEAR 9 164,061 281,165 445,225
YEAR 10 170,010 170,010
---------- ---------- ---------- ---------- -----------
TOTAL DEPRECIATION $3,183,294 $2,672,563 $1,860,526 $1,355,114 $32,474,961
</TABLE>
<PAGE> 145
FALCON CABLE SYSTEMS CO. EXHIBIT J
HESPERIA REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
ASSUMPTIONS AND INPUTS
- ----------------------
<S> <C> <C>
REMAINING LIFE OF FRANCHISES (YEARS) 9.85
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $13,164,804
SUBSCRIBERS IN FRANCHISES 100%
LOW HIGH
ANALYSIS ANALYSIS
-------- --------
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
</TABLE>
<PAGE> 146
SAN LUIS OBISPO, CA
<PAGE> 147
FALCON CABLE SYSTEMS CO. EXHIBIT A
SAN LUIS OBISPO REGION - CALIF.
AS OF DECEMBER 31, 1995
VALUATION METHODS
<TABLE>
<CAPTION>
LOW HIGH
--- ----
<S> <C> <C> <C>
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
OPERATING INCOME, PER BOOKS (12/31/95) $2,548,832 $2,548,832
VALUATION MULTIPLE 10.5 11.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $26,762,736 $29,311,568
----------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $5,970,827 $5,970,827
OPERATING MARGIN, PER BOOKS (12/31/95) 48.1% 48.1%
----------- -----------
"RUNNING RATE" OPERATING INCOME 2,869,878 2,869,878
VALUATION MULTIPLE 10.0 11.0
----------- -----------
ESTIMATED FAIR MARKET VALUE $28,698,781 $31,568,659
----------- -----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $3,116,863 $3,116,863
VALUATION MULTIPLE 9.5 10.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $29,610,202 $32,727,066
----------- -----------
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $27,919,331 $30,339,543
----------- -----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVSTMT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $27,868,221 $30,068,209
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF VALUES
<S> <C> <C>
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $26,762,736 $29,311,568
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 28,698,781 31,568,659
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 29,610,202 32,727,066
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 27,919,331 30,339,543
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 27,868,221 30,068,209
----------- -----------
RANGE OF ESTIMATED FAIR MARKET VALUES $28,301,000 $30,869,000
ESTIMATED FAIR MARKET VALUE $29,585,000
</TABLE>
<PAGE> 148
FALCON CABLE SYSTEMS CO. EXHIBIT B
SAN LUIS OBISPO REGION - CALIF. LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
- -----------------------
PROFIT AND LOSS - LOW VALUE
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $6,314,102 $6,909,478 $7,657,824 $8,513,121
OPERATING EXPENSES 3,197,239 3,425,857 3,730,534 4,080,071
---------- ---------- ---------- ----------
OPERATING INCOME $3,116,863 $3,483,621 $3,927,290 $4,433,050
OPERATING MARGIN 0.49 0.50 0.51 0.52
PARENT SERVICES/MGT FEE (5%) 315,705 345,474 382,891 425,656
FRANCHISE AMORTIZATION (15) 903,133 903,133 903,133 903,133
SUBSCRIBER LIST (8) 290,933 290,933 290,933 290,933
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,579,712 2,814,984 2,441,324 2,403,242
INTEREST 1,365,130 1,365,130 1,365,130 1,333,920
---------- ---------- ---------- ----------
PRE-TAX INCOME ($1,337,750) ($2,236,033) ($1,456,122) ($923,834)
INCOME TAX (EXPENSE)/BENEFIT 454,835 760,251 495,081 314,104
---------- ---------- ---------- ----------
NET INCOME ($882,915) ($1,475,782) ($961,041) ($609,730)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($1,337,750) ($2,236,033) ($1,456,122) ($923,834)
FRANCHISE AMORTIZATION (15) 903,133 903,133 903,133 903,133
SUBSCRIBER LIST (8) 290,933 290,933 290,933 290,933
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,579,712 2,814,984 2,441,324 2,403,242
EQUITY 13,651,296
DEBT 13,651,296 0 0 544,461
RESIDUAL VALUE IN YEAR 7
TOTAL SOURCES OF CASH $28,738,621 $1,773,018 $2,179,269 $3,217,935
----------- ---------- ---------- ----------
USES OF CASH -
PURCHASE PRICE - CURRENT $27,919,331
CAPITAL EXPENDITURES 718,921 753,647 2,262,385 2,355,791
DEBT RETIREMENT 0 0 856,556 942,212
TAXES PAID ON NET INCOME 0 0 0 0
----------- ---------- ---------- ----------
TAXES PAID ON SALE (RESIDUAL)
TOTAL USES OF CASH $28,638,252 $753,647 $3,118,941 $3,298,003
ANNUAL CASH INCREASE/(DECREASE) $100,369 $1,019,371 ($939,673) ($80,068)
CUMULATIVE CASH 100,369 1,119,740 180,068 100,000
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
<S> <C> <C> <C>
REVENUES $9,342,916 $10,061,251 $10,726,262 $59,524,954
OPERATING EXPENSES 4,453,572 4,791,909 5,124,737 28,803,918
----------- ---------- ---------- ----------
OPERATING INCOME $4,889,344 $5,269,342 $5,601,525 $30,721,035
OPERATING MARGIN 0.52 0.52 0.52
PARENT SERVICES/MGT FEE (5%) 467,146 503,063 536,313 2,976,248
FRANCHISE AMORTIZATION (15) 903,133 903,133 903,133 6,321,933
SUBSCRIBER LIST (8) 290,933 290,933 290,933 2,036,533
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 2,405,944 2,483,293 2,347,518 16,476,017
INTEREST 1,274,948 1,171,305 967,602 8,843,164
----------- ---------- ---------- ----------
PRE-TAX INCOME ($452,761) ($82,385) $556,025 ($5,932,860)
INCOME TAX (EXPENSE)/BENEFIT 153,939 28,011 (189,048) 2,017,173
----------- ---------- ---------- ----------
NET INCOME ($298,822) ($54,374) $366,976 ($3,915,688)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($452,761) ($82,385) $556,025 ($5,932,860)
FRANCHISE AMORTIZATION (15) 903,133 903,133 903,133 6,321,933
SUBSCRIBER LIST (8) 290,933 290,933 290,933 2,036,533
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 2,405,944 2,483,293 2,347,518 16,476,017
EQUITY 13,651,296
DEBT 352,493 0 0 14,548,250
RESIDUAL VALUE IN YEAR 7 50,413,722 50,413,722
----------- ---------- ---------- ----------
TOTAL SOURCES OF CASH $3,499,743 $3,594,975 $54,511,331 $97,514,891
USES OF CASH -
PURCHASE PRICE - CURRENT $27,919,331
CAPITAL EXPENDITURES 2,463,310 924,086 977,606 10,455,747
DEBT RETIREMENT 1,036,433 2,037,030 9,676,020 14,548,250
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 10,519,691 10,519,691
----------- ---------- ---------- ----------
TOTAL USES OF CASH $3,499,743 $2,961,116 $21,173,317 $63,443,019
ANNUAL CASH INCREASE/(DECREASE) ($0) $633,859 $33,338,014 $34,071,873
CUMULATIVE CASH 100,000 733,859 34,071,873
</TABLE>
<PAGE> 149
FALCON CABLE SYSTEMS CO. EXHIBIT B
SAN LUIS OBISPO REGION - CALIF. HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
- -----------------------
PROFIT AND LOSS - HIGH VALUE
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $6,314,102 $6,909,478 $7,657,824 $8,513,121
OPERATING EXPENSES 3,197,239 3,425,857 3,730,534 4,080,071
---------- ---------- ---------- ----------
OPERATING INCOME $3,116,863 $3,483,621 $3,927,290 $4,433,050
OPERATING MARGIN 0.49 0.50 0.51 0.52
PARENT SERVICES/MGT FEE (5%) 315,705 345,474 382,891 425,656
FRANCHISE AMORTIZATION (15) 903,133 903,133 903,133 903,133
SUBSCRIBER LIST (8) 290,933 290,933 290,933 290,933
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,579,712 2,814,984 2,441,324 2,403,242
INTEREST 1,492,508 1,492,508 1,520,801 1,516,672
---------- ---------- ---------- ----------
PRE-TAX INCOME ($1,465,129) ($2,363,412) ($1,611,793) ($1,106,586)
INCOME TAX (EXPENSE)/BENEFIT 498,144 803,560 548,010 376,239
NET INCOME ($966,985) ($1,559,852) ($1,063,783) ($730,347)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($1,465,129) ($2,363,412) ($1,611,793) ($1,106,586)
FRANCHISE AMORTIZATION (15) 903,133 903,133 903,133 903,133
SUBSCRIBER LIST (8) 290,933 290,933 290,933 290,933
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,579,712 2,814,984 2,441,324 2,403,242
EQUITY 14,925,083
DEBT 14,925,083 0 282,924 895,197
---------- ---------- ---------- ----------
RESIDUAL VALUE IN YEAR 7
TOTAL SOURCES OF CASH $31,158,816 $1,645,639 $2,306,522 $3,385,919
USES OF CASH -
PURCHASE PRICE - CURRENT $30,339,543
CAPITAL EXPENDITURES 718,921 753,647 2,262,385 2,355,791
DEBT RETIREMENT 0 0 936,480 1,030,128
TAXES PAID ON NET INCOME 0 0 0 0
---------- ---------- ---------- ----------
TAXES PAID ON SALE (RESIDUAL)
TOTAL USES OF CASH $31,058,464 $753,647 $3,198,866 $3,385,919
ANNUAL CASH INCREASE/(DECREASE) $100,352 $891,992 ($892,344) $0
CUMULATIVE CASH 100,352 992,344 100,000 100,000
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
<S> <C> <C> <C> <C>
REVENUES $9,342,916 $10,061,251 $10,726,262 $59,524,954
OPERATING EXPENSES 4,453,572 4,791,909 5,124,737 28,803,918
---------- ---------- ---------- ----------
OPERATING INCOME $4,889,344 $5,269,342 $5,601,525 $30,721,035
OPERATING MARGIN 0.52 0.52 0.52
PARENT SERVICES/MGT FEE (5%) 467,146 503,063 536,313 2,976,248
FRANCHISE AMORTIZATION (15) 903,133 903,133 903,133 6,321,933
SUBSCRIBER LIST (8) 290,933 290,933 290,933 2,036,533
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 2,405,944 2,483,293 2,347,518 16,476,017
INTEREST 1,478,983 1,365,669 1,118,017 9,985,158
---------- ---------- ---------- ----------
PRE-TAX INCOME ($656,796) ($276,749) $405,610 ($7,074,855)
INCOME TAX (EXPENSE)/BENEFIT 223,311 94,095 (137,908) 2,405,451
---------- ---------- ---------- ----------
NET INCOME ($433,485) ($182,655) $267,703 ($4,669,404)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($656,796) ($276,749) $405,610 ($7,074,855)
FRANCHISE AMORTIZATION (15) 903,133 903,133 903,133 6,321,933
SUBSCRIBER LIST (8) 290,933 290,933 290,933 2,036,533
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 2,405,944 2,483,293 2,347,518 16,476,017
EQUITY 14,925,083
DEBT 653,236 0 0 16,756,440
RESIDUAL VALUE IN YEAR 7 50,413,722 50,413,722
---------- ---------- ---------- ----------
TOTAL SOURCES OF CASH $3,596,451 $3,400,610 $54,360,916 $99,854,874
USES OF CASH -
PURCHASE PRICE - CURRENT $30,339,543
CAPITAL EXPENDITURES 2,463,310 924,086 977,606 10,455,747
DEBT RETIREMENT 1,133,141 2,476,525 11,180,166 16,756,440
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 9,308,541 9,308,541
---------- ---------- ---------- ----------
TOTAL USES OF CASH $3,596,451 $3,400,610 $21,466,313 $66,860,270
ANNUAL CASH INCREASE/(DECREASE) ($0) $0 $32,894,603 $32,994,603
CUMULATIVE CASH 100,000 100,000 32,994,603
</TABLE>
<PAGE> 150
FALCON CABLE SYSTEMS CO. EXHIBIT C
SAN LUIS OBISPO REGION - CALIF. LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
<TABLE>
<CAPTION>
DEBT AMORTIZATION - LOW VALUE
<S> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $27,302,593
YEAR 1 DEBT REQUIREMENTS 13,651,296
YEAR 1 EQUITY REQUIREMENTS 13,651,296
FINANCING AVAILABLE $16,567,408 $20,259,612 $22,643,538 $25,527,383
UNUSED LEVERAGE 2,916,112 6,608,316 9,848,797 13,130,394
</TABLE>
<TABLE>
<CAPTION>
SENIOR DEBT: 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
BEGINNING DEBT $0 $13,651,296 $13,651,296 $12,794,740
DEBT ADDED 13,651,296 0 0 0
TOTAL ANNUAL PAYMENTS 1,365,130 1,365,130 2,221,686 2,221,686
INTEREST 1,365,130 1,365,130 1,365,130 1,279,474
PRINCIPAL REPAYMENT 0 0 856,556 942,212
ENDING BALANCE 13,651,296 13,651,296 12,794,740 11,852,529
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 544,461
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 54,446
SENIOR DEBT COVERAGE 4.4 3.9 3.3 2.7
LOC DEBT COVERAGE 0.0 0.0 0.0 0.1
TOTAL DEBT COVERAGE 4.4 3.9 3.3 2.8
</TABLE>
<TABLE>
<CAPTION>
DEBT AMORTIZATION - LOW VALUE
<S> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $28,814,828 $31,780,733 $34,250,723
UNUSED LEVERAGE 17,101,778 22,104,713 25,828,787
</TABLE>
<TABLE>
<CAPTION>
SENIOR DEBT: 2000 2001 2002 TOTAL
---- ---- ---- -----
<S> <C> <C> <C>
BEGINNING DEBT $11,852,529 $10,816,096 $9,676,020
DEBT ADDED 0 0 0 13,651,296
TOTAL ANNUAL PAYMENTS 2,221,686 2,221,686 2,221,686 13,838,687
INTEREST 1,185,253 1,081,610 967,602 8,609,327
PRINCIPAL REPAYMENT 1,036,433 1,140,076 1,254,084 5,229,360
ENDING BALANCE 10,816,096 9,676,020 8,421,936
LINE OF CREDIT:
BEGINNING DEBT $544,461 $896,954 $0 $0
BORROWINGS 352,493 0 0 896,954
PRINCIPAL PAYMENTS 0 896,954 0 896,954
INTEREST 89,695 89,695 0 233,837
SENIOR DEBT COVERAGE 2.2 1.8 1.5
LOC DEBT COVERAGE 0.2 0.0 0.0
TOTAL DEBT COVERAGE 2.4 1.8 1.5
</TABLE>
<PAGE> 151
FALCON CABLE SYSTEMS CO. EXHIBIT C
SAN LUIS OBISPO REGION - CALIF. HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
<TABLE>
<CAPTION>
DEBT AMORTIZATION - HIGH VALUE
<S> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $29,850,166
YEAR 1 DEBT REQUIREMENTS 14,925,083
YEAR 1 EQUITY REQUIREMENTS 14,925,083
FINANCING AVAILABLE $19,116,240 $23,376,475 $26,127,159 $29,454,673
UNUSED LEVERAGE 4,191,157 8,451,393 11,855,632 15,318,078
</TABLE>
<TABLE>
<CAPTION>
SENIOR: 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
BEGINNING DEBT $0 $14,925,083 $14,925,083 $13,988,603
DEBT ADDED 14,925,083 0 0 0
TOTAL ANNUAL PAYMENTS 1,492,508 1,492,508 2,428,989 2,428,989
INTEREST 1,492,508 1,492,508 1,492,508 1,398,860
PRINCIPAL REPAYMENT 0 0 936,480 1,030,128
ENDING BALANCE 14,925,083 14,925,083 13,988,603 12,958,474
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $282,924
BORROWINGS 0 0 282,924 895,197
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 28,292 117,812
SENIOR DEBT COVERAGE 4.8 4.3 3.6 2.9
LOC DEBT COVERAGE 0.0 0.0 0.1 0.3
TOTAL DEBT COVERAGE 4.8 4.3 3.6 3.2
</TABLE>
<TABLE>
<CAPTION>
DEBT AMORTIZATION - HIGH VALUE
<S> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $33,247,879 $36,670,077 $39,520,066
UNUSED LEVERAGE 19,591,188 26,091,199 30,312,288
</TABLE>
<TABLE>
<CAPTION>
SENIOR: 2000 2001 2002 TOTAL
---- ---- ---- -----
<S> <C> <C> <C> <C>
BEGINNING DEBT $12,958,474 $11,825,333 $10,578,878
DEBT ADDED 0 0 0 $14,925,083
TOTAL ANNUAL PAYMENTS 2,428,989 2,428,989 2,428,989 15,129,959
INTEREST 1,295,847 1,182,533 1,057,888 9,412,654
PRINCIPAL REPAYMENT 1,133,141 1,246,455 1,371,101 5,717,305
ENDING BALANCE 11,825,333 10,578,878 9,207,777
LINE OF CREDIT:
BEGINNING DEBT $1,178,121 $1,831,357 $601,288 $0
BORROWINGS 653,236 0 0 1,831,357
PRINCIPAL PAYMENTS 0 1,230,069 601,288 1,831,357
INTEREST 183,136 183,136 60,129 572,505
SENIOR DEBT COVERAGE 2.4 2.0 1.6
LOC DEBT COVERAGE 0.4 0.1 0.0
TOTAL DEBT COVERAGE 2.8 2.1 1.6
</TABLE>
<PAGE> 152
FALCON CABLE SYSTEMS CO. EXHIBIT D
SAN LUIS OBISPO REGION - CALIF.
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES $6,314,102 $6,909,478 $7,657,824 $8,513,121
OPERATING EXPENSES 3,197,239 3,425,857 3,730,534 4,080,071
----------- ---------- ---------- ----------
OPERATING INCOME 3,116,863 3,483,621 3,927,290 4,433,050
PLUS: RESIDUAL VALUE
LESS: CAPITAL EXPENDITURES 718,921 753,647 2,262,385 2,355,791
----------- ---------- ---------- ----------
TOTAL CASH FLOW $2,397,942 $2,729,975 $1,664,904 $2,077,259
NET PRESENT VALUE @ 16.6% $27,868,221
-----------
NET PRESENT VALUE @ 15.1% $30,068,209
-----------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES $9,342,916 $10,061,251 $10,726,262 $59,524,954
OPERATING EXPENSES 4,453,572 4,791,909 5,124,737 28,803,918
---------- ----------- ----------- -----------
OPERATING INCOME 4,889,344 5,269,342 5,601,525 30,721,035
PLUS: RESIDUAL VALUE 50,413,722 50,413,722
LESS: CAPITAL EXPENDITURES 2,463,310 924,086 977,606 10,455,747
---------- ----------- ----------- -----------
TOTAL CASH FLOW $2,426,034 $4,345,256 $55,037,640 $70,679,010
NET PRESENT VALUE @ 16.6%
NET PRESENT VALUE @ 15.1%
</TABLE>
<PAGE> 153
FALCON CABLE SYSTEMS CO. EXHIBIT E
SAN LUIS OBISPO REGION - CALIF.
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
BEGINNING MILES 408.9
MILES ADDED 20.0 20.0 21.0 21.0 22.0 22.0 23.0
CUMULATIVE MILES 428.9 448.9 469.9 490.9 512.9 534.9 557.9
DENSITY OF ADDITIONAL PLANT 24 24 23 24 22 22 21
HOMES PASSED - BEGINNING 26,138
NEW HOMES & EXTENSIONS 470 479 488 496 477 485 494
HOMES PASSED - ENDING 26,608 27,087 27,575 28,071 28,549 29,034 29,527
GROWTH IN HOMES 1.8% 1.8% 1.8% 1.8% 1.7% 1.7% 1.7%
BASIC - BEGINNING SUBSCRIBERS 15,635 16,049 16,474 16,908 17,353 17,791 18,238
AVERAGE SUBSCRIBERS 15,842 16,262 16,691 17,131 17,572 18,014 18,467
ENDING SUBSCRIBERS 16,049 16,474 16,908 17,353 17,791 18,238 18,696
PENETRATION 60.3% 60.8% 61.3% 61.8% 62.3% 62.8% 63.3%
EXPANDED BASIC - BEGINNING 13,605 13,966 14,335 14,713 15,100 15,481 15,870
AVERAGE SUBSCRIBERS 13,785 14,150 14,524 14,906 15,290 15,676 16,069
ENDING SUBSCRIBERS 13,966 14,335 14,713 15,100 15,481 15,870 16,269
PENETRATION 87.0% 87.0% 87.0% 87.0% 87.0% 87.0% 87.0%
NEW PRODUCT TIER #1 - BEGINNING 4,466 4,825 6,600 8,465 8,688 8,907 9,131
AVERAGE SUBSCRIBERS 4,646 5,713 7,533 8,576 8,797 9,019 9,245
ENDING SUBSCRIBERS 4,825 6,600 8,465 8,688 8,907 9,131 9,360
PENETRATION 30.1% 40.1% 50.1% 50.1% 50.1% 50.1% 50.1%
NEW PRODUCT TIER #2 - BEGINNING 0 899 1,845 3,449 5,553 6,618 6,785
AVERAGE SUBSCRIBERS 449 1,372 2,647 4,501 6,086 6,701 6,870
ENDING SUBSCRIBERS 899 1,845 3,449 5,553 6,618 6,785 6,955
PENETRATION 5.6% 11.2% 20.4% 32.0% 37.2% 37.2% 37.2%
NEW PRODUCT TIER #3 - BEGINNING 0 899 1,845 3,449 5,553 6,618 6,785
AVERAGE SUBSCRIBERS 449 1,372 2,647 4,501 6,086 6,701 6,870
ENDING SUBSCRIBERS 899 1,845 3,449 5,553 6,618 6,785 6,955
PENETRATION 5.6% 11.2% 20.4% 32.0% 37.2% 37.2% 37.2%
PAY TV - BEGINNING UNITS 3,733 3,511 3,686 4,037 4,447 4,870 4,993
AVERAGE UNITS 3,622 3,599 3,862 4,242 4,659 4,932 5,056
ENDING UNITS 3,511 3,686 4,037 4,447 4,870 4,993 5,118
PENETRATION 21.9% 22.4% 23.9% 25.6% 27.4% 27.4% 27.4%
PAY PER VIEW - BEGINNING UNITS/MO 273 363 655 1,135 1,727 2,435 3,051
AVERAGE UNITS 318 509 895 1,431 2,081 2,743 3,344
ENDING UNITS 363 655 1,135 1,727 2,435 3,051 3,637
AVERAGE BUY RATE/MO 6.5% 10.0% 15.0% 20.0% 25.0% 28.0% 31.0%
CONVERTER RENTALS - BEGINNING UNITS 6,009 6,971 7,979 9,035 9,793 10,574 11,387
AVERAGE SUBSCRIBERS 6,490 7,475 8,507 9,414 10,183 10,980 11,810
ENDING SUBSCRIBERS 6,971 7,979 9,035 9,793 10,574 11,387 12,233
PENETRATION 43.4% 48.4% 53.4% 56.4% 59.4% 62.4% 65.4%
ADDRESSABLE HOMES 4,964 5,577 6,548 7,566 8,633 9,740 10,897
AVERAGE HOMES 5,271 6,063 7,057 8,100 9,187 10,319 11,314
ENDING HOMES 5,577 6,548 7,566 8,633 9,740 10,897 11,732
PENETRATION 34.7% 39.7% 44.7% 49.7% 54.7% 59.7% 62.7%
BASIC CHURN RATE 34% 34% 34% 34% 34% 34% 34%
</TABLE>
<PAGE> 154
FALCON CABLE SYSTEMS CO. EXHIBIT F
SAN LUIS OBISPO REGION - CALIF.
AS OF DECEMBER 31, 1995
SERVICE RATES
- ------------
<TABLE>
<CAPTION>
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- ------------- ------------- --------
<S> <C> <C>
BASIC $15.79 $16.20
EXPANDED BASIC $7.54 $8.09
NEW PRODUCT TIER #1 $3.38 $3.65
NEW PRODUCT TIER #2 $5.00 $5.00
NEW PRODUCT TIER #3 $5.00 $5.00
PAY $7.49 $7.49
PAY PER VIEW $9.10 $9.10
CONVERTER RENTALS $2.38 $2.82
INSTALLATIONS-NEW $50.00 $50.00
INSTALLATIONS-CHURN $25.00 25.00
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 3% 3% 3% 3% 3% 3% 3%
EXPANDED BASIC 7% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #1 8% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #3 0% 3% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1% 1%
PAY PER VIEW 0% 3% 3% 3% 3% 3% 3%
CONVERTER RENTALS 19% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $16.20 $16.76 $17.26 $17.78 $18.31 $18.86 $19.42
EXPANDED BASIC 8.09 8.33 8.58 8.84 9.10 9.38 9.66
NEW PRODUCT TIER #1 3.65 3.76 3.87 3.99 4.11 4.23 4.36
NEW PRODUCT TIER #2 5.00 5.15 5.30 5.46 5.63 5.80 5.97
NEW PRODUCT TIER #3 5.00 5.15 5.30 5.46 5.63 5.80 5.97
PAY 7.49 7.57 7.64 7.72 7.79 7.87 7.95
PAY PER VIEW 9.10 9.38 9.66 9.95 10.25 10.55 10.87
CONVERTERS RENTALS 2.82 2.91 2.99 3.08 3.18 3.27 3.37
INSTALLATIONS-NEW 50.00 51.50 53.05 54.64 56.28 57.96 59.70
INSTALLATIONS-CHURN 25.00 25.75 26.52 27.32 28.14 28.98 29.85
</TABLE>
<PAGE> 155
FALCON CABLE SYSTEMS CO. EXHIBIT G
SAN LUIS OBISPO REGION - CALIF.
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
BASIC $3,079,127 $3,269,684 $3,456,696 $3,654,159
EXPANDED BASIC 1,337,964 1,414,586 1,495,495 1,580,925
NEW PRODUCT TIER #1 203,457 257,694 349,983 410,433
NEW PRODUCT TIER #2 26,963 84,785 168,503 295,109
NEW PRODUCT TIER #3 26,963 84,785 168,503 295,109
PAY TV 325,570 326,700 354,083 392,848
PAY PER VIEW 34,716 57,240 103,722 170,809
CONVERTER RENTAL 219,696 260,627 305,505 348,222
INSTALLATIONS 124,179 131,245 138,704 146,577
COMMERCIAL 107,754 110,987 114,317 117,746
ADVERTISING 275,977 320,134 364,952 412,396
MISCELLANEOUS 551,735 591,011 637,361 688,789
---------- ---------- ---------- ----------
TOTAL REVENUES $6,314,102 $6,909,478 $7,657,824 $8,513,121
OPERATING EXPENSES:
OPERATIONS $1,089,676 $1,174,505 $1,272,220 $1,378,892
GENERAL & ADMINISTRATIVE 605,114 641,163 681,346 724,888
SALES & MARKETING 378,166 414,790 464,546 517,849
PROGRAMMING 1,124,283 1,195,400 1,312,422 1,458,441
---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES $3,197,239 $3,425,857 $3,730,534 $4,080,071
OPERATING INCOME $3,116,863 $3,483,621 $3,927,290 $4,433,050
OPERATING MARGIN 49.4% 50.4% 51.3% 52.1%
TOTAL REVENUE/BASIC SUB/MONTH $33.21 $35.41 $38.23 $41.41
CASH FLOW/BASIC SUB/MONTH $16.40 $17.85 $19.61 $21.57
OPERATIONS % OF REVENUE 17% 17% 17% 16%
G & A PERCENTAGE OF REVENUE 10% 9% 9% 9%
SALES & MARKETING % OF REVENUE 6% 6% 6% 6%
PROGRAMMING % OF REVENUE 18% 17% 17% 17%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
<S> <C> <C> <C> <C>
REVENUES:
BASIC $3,860,726 $4,076,727 $4,304,538 $25,701,656
EXPANDED BASIC 1,670,293 1,763,743 1,862,302 11,125,308
NEW PRODUCT TIER #1 433,635 457,896 483,484 2,596,582
NEW PRODUCT TIER #2 410,959 466,124 492,171 1,944,613
NEW PRODUCT TIER #3 410,959 466,124 492,171 1,944,613
PAY TV 435,751 465,902 482,385 2,783,240
PAY PER VIEW 255,867 347,428 436,235 1,406,016
CONVERTER RENTAL 387,986 430,901 477,374 2,430,311
INSTALLATIONS 154,034 162,598 171,628 1,028,966
COMMERCIAL 121,279 124,917 128,664 825,665
ADVERTISING 461,884 512,691 563,960 2,911,993
MISCELLANEOUS 739,544 786,200 831,349 4,825,988
---------- ---------- ---------- -----------
TOTAL REVENUES $9,342,916 $10,061,251 $10,726,262 $59,524,954
OPERATING EXPENSES:
OPERATIONS $1,488,428 $1,594,512 $1,702,000 $9,700,232
GENERAL & ADMINISTRATIVE 769,189 812,710 856,817 5,091,227
SALES & MARKETING 574,353 619,666 666,234 3,635,604
PROGRAMMING 1,621,603 1,765,021 1,899,686 10,376,855
---------- ---------- ---------- -----------
TOTAL OPERATING EXPENSES $4,453,572 $4,791,909 $5,124,737 $28,803,918
OPERATING INCOME $4,889,344 $5,269,342 $5,601,525 $30,721,035
OPERATING MARGIN 52.3% 52.4% 52.2%
TOTAL REVENUE/BASIC SUB/MONTH $44.31 $46.54 $48.40
CASH FLOW/BASIC SUB/MONTH $23.19 $24.38 $25.28
OPERATIONS % OF REVENUE 16% 16% 16%
G & A PERCENTAGE OF REVENUE 8% 8% 8%
SALES & MARKETING % OF REVENUE 6% 6% 6%
PROGRAMMING % OF REVENUE 17% 18% 18%
</TABLE>
<PAGE> 156
FALCON CABLE SYSTEMS CO. EXHIBIT H
SAN LUIS OBISPO REGION - CALIF.
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
- --------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
ASSUMPTIONS AND INPUTS:
- ----------------------
BV OF EXISTING PLANT $10,335,746
ADDITIONAL MILES OF PLANT 20.0 20.0 21.0 21.0
AERIAL PLANT PER MILE $11,000 $11,220 $11,444 $11,673
UNDERGROUND PLANT PER MILE $18,000 $18,360 $18,727 $19,102
PERCENTAGE OF PLANT AERIAL 90% 90% 90% 90%
PERCENTAGE OF PLANT UNDERGROUND 10% 10% 10% 10%
AVERAGE COST PER CONVERTER $110 $112 $114 $117
PERCENTAGE CONVERTER USE 43% 48% 53% 56%
PERCENTAGE REPLACEMENT 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $57 $58 $60 $61
MISC. CAPITAL PER SUBSCRIBER $5 $5 $5 $5
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2%
ANNUAL COSTS:
- ------------- 22,596
PLANT ADDITIONS - AERIAL $198,000 $201,960 $216,299 $220,625
36,000 36,720 39,327 40,114
PLANT REBUILD/UPGRADE/INCL. HDND. 20,853 22,311 1,483,900 1,543,300
AVERAGE COST OF NEW CONVERTERS 19,802 23,059 26,564 29,295
CONVERTER REPLACEMENT 37,349 43,608 50,369 55,692
INSTALLATION COSTS 327,706 343,055 359,099 375,870
MISC. CAPITAL EXPENDITURES 79,211 82,934 86,827 90,895
-------- -------- ---------- ----------
TOTAL CAPITAL EXPENDITURES $718,921 $753,647 $2,262,385 $2,355,791
AS A % OF OPERATING INCOME 23.1% 21.6% 57.6% 53.1%
CAPITAL EXPENDITURES
- --------------------
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT
ADDITIONAL MILES OF PLANT 22.0 22.0 23.0
AERIAL PLANT PER MILE $11,907 $12,145 $12,388
UNDERGROUND PLANT PER MILE $19,484 $19,873 $20,271
PERCENTAGE OF PLANT AERIAL 90% 90% 90%
PERCENTAGE OF PLANT UNDERGROUND 10% 10% 10%
AVERAGE COST PER CONVERTER $119 $121 $124
PERCENTAGE CONVERTER USE 59% 62% 65%
PERCENTAGE REPLACEMENT 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $62 $63 $64
MISC. CAPITAL PER SUBSCRIBER $5 $6 $6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 115%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $235,754 $240,469 $256,427 $1,569,534
- UNDERGROUND 42,864 43,722 46,623 285,370
PLANT REBUILD/UPGRADE/INCL. HDND. 1,604,900 28,880 30,721 4,734,865
AVERAGE COST OF NEW CONVERTERS 30,977 33,940 37,099 200,736
CONVERTER REPLACEMENT 61,399 67,448 73,917 389,783
INSTALLATION COSTS 392,314 410,181 428,834 2,637,059
MISC. CAPITAL EXPENDITURES 95,101 99,447 103,985 638,401
---------- -------- --------- -----------
TOTAL CAPITAL EXPENDITURES $2,463,310 $924,086 $977,606 $10,455,747
AS A % OF OPERATING INCOME 50.4% 17.5% 17.5%
</TABLE>
<PAGE> 157
FALCON CABLE SYSTEMS CO. EXHIBIT I
SAN LUIS OBISPO REGION - CALIF.
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4
------ ------ ------ ------
<S> <C> <C> <C> <C>
ESTIMATED DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5%
DEPRECIATION - BEG. & ADTNS. 1996 1997 1998 1999
---- ---- ---- ----
YEAR 1 $1,579,712 $2,707,288 $1,933,461 $1,380,728
YEAR 2 107,696 184,568 131,813
YEAR 3 323,295 554,058
YEAR 4 336,643
YEAR 5
YEAR 6
YEAR 7
---------- ---------- ---------- ----------
TOTAL DEPRECIATION $1,579,712 $2,814,984 $2,441,324 $2,403,242
</TABLE>
<TABLE>
<CAPTION>
YEAR 5 YEAR 6 YEAR 7
------ ------ ------
<S> <C> <C> <C> <C>
ESTIMATED DEPRECIATION RATES 8.9% 8.9% 8.9%
DEPRECIATION - BEG. & ADTNS. 2000 2001 2002 TOTAL
---- ---- ---- -----
YEAR 1 $987,182 $986,076 $987,182 $10,561,629
YEAR 2 94,130 67,301 67,225 652,733
YEAR 3 395,691 282,572 202,031 1,757,647
YEAR 4 576,933 412,028 294,238 1,619,842
YEAR 5 352,007 603,265 430,833 1,386,104
YEAR 6 132,052 226,309 358,360
YEAR 7 139,700 139,700
---------- ---------- ---------- -----------
TOTAL DEPRECIATION $2,405,944 $2,483,293 $2,347,518 $16,476,017
</TABLE>
<PAGE> 158
FALCON CABLE SYSTEMS CO. EXHIBIT J
SAN LUIS OBISPO REGION - CALIF.
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
ASSUMPTIONS AND INPUTS
<S> <C>
REMAINING LIFE OF FRANCHISES (YEARS) 7
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $10,335,746
SUBSCRIBERS IN FRANCHISES 100%
</TABLE>
<TABLE>
<CAPTION>
LOW HIGH
ANALYSIS ANALYSIS
-------- --------
<S> <C> <C>
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
</TABLE>
<PAGE> 159
TULARE, CA
<PAGE> 160
FALCON CABLE SYSTEMS CO. EXHIBIT A
TULARE REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
VALUATION METHODS
- -----------------
<TABLE>
<CAPTION>
LOW HIGH
--- ----
<S> <C> <C> <C>
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
OPERATING INCOME, PER BOOKS (12/31/95) $3,177,814 $3,177,814
VALUATION MULTIPLE 10.5 11.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $33,367,047 $36,544,861
----------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $6,512,501 $6,512,501
OPERATING MARGIN, PER BOOKS (12/31/95) 48.9% 48.9%
---------- ----------
"RUNNING RATE" OPERATING INCOME 3,186,241 3,186,241
VALUATION MULTIPLE 10.0 11.0
----------- -----------
ESTIMATED FAIR MARKET VALUE $31,862,412 $35,048,654
----------- -----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $3,329,175 $3,329,175
VALUATION MULTIPLE 9.5 10.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $31,627,158 $34,956,333
----------- -----------
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $29,943,941 $32,317,838
----------- -----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVSTMT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $29,567,487 $31,820,292
----------- -----------
SUMMARY OF VALUES
- -----------------
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $33,367,047 $36,544,861
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 31,862,412 35,048,654
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 31,627,158 34,956,333
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 29,943,941 32,317,838
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 29,567,487 31,820,292
----------- -----------
RANGE OF ESTIMATED FAIR MARKET VALUES $30,627,000 $33,317,000
ESTIMATED FAIR MARKET VALUE $31,972,000
-----------
</TABLE>
<PAGE> 161
FALCON CABLE SYSTEMS CO. EXHIBIT B
TULARE REGION - CALIFORNIA LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $7,024,036 $7,507,378 $8,090,912 $8,763,382
OPERATING EXPENSES 3,694,862 3,916,217 4,184,220 4,497,296
---------- ---------- ---------- ----------
OPERATING INCOME $3,329,175 $3,591,161 $3,906,692 $4,266,086
OPERATING MARGIN 0.47 0.48 0.48 0.49
PARENT SERVICES/MGT FEE (5%) 351,202 375,369 404,546 438,169
FRANCHISE AMORTIZATION (15) 999,467 999,467 999,467 999,467
SUBSCRIBER LIST (8) 345,200 345,200 345,200 345,200
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,593,755 2,846,354 2,265,099 1,856,452
INTEREST 1,465,442 1,465,442 1,465,442 1,373,492
---------- ---------- ---------- ----------
PRE-TAX INCOME ($1,425,891) ($2,440,670) ($1,573,061) ($746,693)
INCOME TAX (EXPENSE)/BENEFIT 484,803 829,828 534,841 253,078
---------- ---------- ---------- ----------
NET INCOME ($941,088) ($1,610,842) ($1,038,221) ($492,818)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($1,425,891) ($2,440,670) ($1,573,061) ($746,693)
FRANCHISE AMORTIZATION (15) 999,467 999,467 999,467 999,467
SUBSCRIBER LIST (8) 345,200 345,200 345,200 345,200
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,593,755 2,846,354 2,265,099 1,856,452
EQUITY 14,654,415
DEBT 14,654,415 0 0 0
---------- ---------- ---------- ----------
RESIDUAL VALUE IN YEAR 7
TOTAL SOURCES OF CASH $30,821,381 $1,750,351 $2,036,705 $2,454,425
USES OF CASH -
PURCHASE PRICE - CURRENT $29,943,941
CAPITAL EXPENDITURES 777,146 804,754 821,315 850,650
DEBT RETIREMENT 0 0 919,497 1,011,447
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
---------- ---------- ---------- ----------
TOTAL USES OF CASH $30,721,087 $804,754 $1,740,812 $1,862,097
ANNUAL CASH INCREASE/(DECREASE) $100,274 $945,597 $295,893 $592,328
CUMULATIVE CASH 100,274 1,045,871 1,341,764 1,934,091
</TABLE>
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
<S> <C> <C> <C>
REVENUES $9,492,062 $10,237,240 $11,002,417 $62,117,428
OPERATING EXPENSES 4,865,030 5,221,361 5,578,828 31,957,815
---------- ---------- ---------- -----------
OPERATING INCOME $4,627,032 $5,015,879 $5,423,588 $30,159,613
OPERATING MARGIN 0.49 0.49 0.49
PARENT SERVICES/MGT FEE (5%) 474,603 511,862 550,121 3,105,871
FRANCHISE AMORTIZATION (15) 999,467 999,467 999,467 6,996,267
SUBSCRIBER LIST (8) 345,200 345,200 345,200 2,416,400
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,576,694 1,668,575 1,765,768 13,572,698
INTEREST 1,272,347 1,161,088 1,038,703 9,241,954
---------- ---------- ---------- -----------
PRE-TAX INCOME ($41,279) $329,687 $724,330 ($5,173,578)
INCOME TAX (EXPENSE)/BENEFIT 14,035 (112,094) (246,272) 1,759,016
---------- ---------- ---------- -----------
NET INCOME ($27,244) $217,594 $478,058 ($3,414,561)
SOURCES AND USES OF CASH
SOURCES OF CASH -
PRE TAX INCOME ($41,279) $329,687 $724,390 ($5,173,578)
FRANCHISE AMORTIZATION (15) 999,467 999,467 999,467 6,996,267
SUBSCRIBER LIST (8) 345,200 345,200 345,200 2,416,400
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,576,694 1,668,575 1,765,768 13,572,698
EQUITY 14,654,415
DEBT 0 0 0 14,654,415
RESIDUAL VALUE IN YEAR 7 48,812,296 48,812,296
---------- ---------- ---------- -----------
TOTAL SOURCES OF CASH $2,880,082 $3,342,929 $52,647,061 $95,932,914
USES OF CASH -
PURCHASE PRICE - CURRENT $29,943,941
CAPITAL EXPENDITURES 897,487 914,713 961,883 6,027,949
DEBT RETIREMENT 1,112,591 1,223,851 10,387,029 14,654,415
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 10,421,746 10,421,746
---------- ---------- ---------- -----------
TOTAL USES OF CASH $2,010,078 $2,138,564 $21,770,658 $81,048,051
ANNUAL CASH INCREASE/(DECREASE) $870,003 $1,204,365 $30,876,403 $34,884,883
CUMULATIVE CASH 2,804,095 4,008,460 34,884,863
</TABLE>
<PAGE> 162
FALCON CABLE SYSTEMS CO. EXHIBIT B
TULARE REGION - CALIFORNIA HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $7,024,036 $7,507,378 $8,090,912 $8,763,382
OPERATING EXPENSES 3,694,862 3,916,217 4,184,220 4,497,296
---------- ---------- ---------- ----------
OPERATING INCOME $3,329,175 $3,591,161 $3,906,692 $4,266,086
OPERATING MARGIN 0.47 0.48 0.48 0.49
PARENT SERVICES/MGT FEE (5%) 351,202 375,369 404,546 438,169
FRANCHISE AMORTIZATION (15) 999,467 999,467 999,467 999,467
SUBSCRIBER LIST (8) 345,200 345,200 345,200 345,200
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,593,755 2,846,354 2,265,099 1,856,452
INTEREST 1,590,393 1,590,393 1,590,393 1,490,603
---------- ---------- ---------- ----------
PRE-TAX INCOME ($1,550,842) ($2,565,622) ($1,698,013) ($863,805)
INCOME TAX (EXPENSE)/BENEFIT 527,286 872,311 577,324 293,694
---------- ---------- ---------- ----------
NET INCOME ($1,023,556) ($1,693,310) ($1,120,689) ($570,111)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($1,550,842) ($2,565,622) ($1,698,013) ($863,805)
FRANCHISE AMORTIZATION (15) 999,467 999,467 999,467 999,467
SUBSCRIBER LIST (8) 345,200 345,200 345,200 345,200
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,593,755 2,846,354 2,265,099 1,856,452
EQUITY 15,903,931
DEBT 15,903,931 0 0 0
---------- ---------- ---------- ----------
RESIDUAL VALUE IN YEAR 7
TOTAL SOURCES OF CASH $33,195,442 $1,625,399 $1,911,753 $2,337,313
USES OF CASH -
PURCHASE PRICE - CURRENT $32,317,838
CAPITAL EXPENDITURES 777,146 804,754 821,315 850,650
DEBT RETIREMENT 0 0 997,898 1,097,688
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
---------- ---------- ---------- ----------
TOTAL USES OF CASH $33,094,984 $804,754 $1,819,213 $1,948,339
ANNUAL CASH INCREASE/(DECREASE) $100,458 $820,645 $92,540 $388,975
CUMULATIVE CASH 100,458 921,103 1,013,643 1,402,618
</TABLE>
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
<S> <C> <C> <C> <C>
REVENUES $9,492,062 $10,237,240 $11,002,417 $62,117,428
OPERATING EXPENSES 4,865,030 5,221,361 5,578,828 31,957,815
---------- ---------- ---------- ----------
OPERATING INCOME $4,627,032 $5,015,879 $5,423,588 $30,159,613
OPERATING MARGIN 0.49 0.49 0.49
PARENT SERVICES/MGT FEE (5%) 474,603 511,862 550,121 3,105,871
FRANCHISE AMORTIZATION (15) 999,467 999,467 999,467 6,996,267
SUBSCRIBER LIST (8) 345,200 345,200 345,200 2,416,400
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,576,694 1,668,575 1,765,768 13,572,698
INTEREST 1,380,834 1,260,089 1,127,268 10,029,974
---------- ---------- ---------- ----------
PRE-TAX INCOME ($149,767) $230,687 $635,764 ($5,961,598)
INCOME TAX (EXPENSE)/BENEFIT 50,921 (78,433) (216,160) 2,026,943
---------- ---------- ---------- ----------
NET INCOME ($98,846) $152,253 $419,604 ($3,934,654)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($149,767) $230,687 $635,764 ($5,961,598)
FRANCHISE AMORTIZATION (15) 999,467 999,467 999,467 6,996,267
SUBSCRIBER LIST (8) 345,200 345,200 345,200 2,416,400
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,576,694 1,668,575 1,765,768 13,572,698
EQUITY 15,903,931
DEBT 0 0 0 15,903,931
RESIDUAL VALUE IN YEAR 7 48,812,296 48,812,296
---------- ---------- ---------- ----------
TOTAL SOURCES OF CASH $2,771,595 $3,243,928 $52,558,496 $97,643,926
USES OF CASH -
PURCHASE PRICE - CURRENT $32,317,838
CAPITAL EXPENDITURES 897,487 914,713 961,883 6,027,949
DEBT RETIREMENT 1,207,457 1,328,203 11,272,685 15,903,931
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 9,346,694 9,346,694
---------- ---------- ---------- ----------
TOTAL USES OF CASH $2,104,944 $2,242,916 $21,581,262 $63,596,413
ANNUAL CASH INCREASE/(DECREASE) $666,650 $1,001,012 $30,977,233 $34,047,514
CUMULATIVE CASH 2,069,268 3,070,280 34,047,514
</TABLE>
<PAGE> 163
FALCON CABLE SYSTEMS CO.
TULARE REGION - CALIFORNIA EXHIBIT C
AS OF DECEMBER 31, 1995 LOW ANALYSIS
RETURN ON EQUITY METHOD
<TABLE>
<CAPTION>
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $29,308,830
YEAR 1 DEBT REQUIREMENTS 14,654,415
YEAR 1 EQUITY REQUIREMENTS 14,654,415
FINANCING AVAILABLE $20,655,791 $21,639,635 $23,342,549 $25,393,496 $27,729,557 $30,075,709 $32,603,213
UNUSED LEVERAGE 6,001,376 6,985,219 9,607,631 12,670,025 16,118,677 19,688,680 23,562,420
</TABLE>
<TABLE>
<CAPTION>
SENIOR DEBT: 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BEGINNING DEBT $0 $14,654,415 $14,654,415 $13,734,918 $12,723,471 $11,610,880 $10,387,029
DEBT ADDED 14,654,415 0 0 0 0 0 0 14,654,415
TOTAL ANNUAL PAYMENTS 1,465,442 1,465,442 2,384,939 2,384,939 2,384,939 2,384,939 2,384,939 14,855,576
INTEREST 1,465,442 1,465,442 1,465,442 1,373,492 1,272,347 1,161,088 1,038,703 9,241,954
PRINCIPAL REPAYMENT 0 0 919,497 1,011,447 1,112,591 1,223,851 1,346,236 5,613,622
ENDING BALANCE 14,654,415 14,654,415 13,734,918 12,723,471 11,610,880 10,387,029 9,040,794
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0 $0 $0 $0 $0
BORROWINGS 0 0 0 0 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0 0 0 0 0
INTEREST 0 0 0 0 0 0 0 0
SENIOR DEBT COVERAGE 4.4 4.1 3.5 3.0 2.5 2.1 1.7
LOC DEBT COVERAGE 0.0 0.0 0.0 0.0 0.0 0.0 0.0
TOTAL DEBT COVERAGE 4.4 4.1 3.5 3.0 2.5 2.1 1.7
</TABLE>
<PAGE> 164
FALCON CABLE SYSTEMS CO. EXHIBIT C
TULARE REGION - CALIFORNIA HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
<TABLE>
<CAPTION>
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
<S> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $31,807,863
YEAR 1 DEBT REQUIREMENTS 15,903,931
YEAR 1 EQUITY REQUIREMENTS 15,903,931
FINANCING AVAILABLE $23,833,605 $24,968,809 $26,933,710 $29,300,188
UNUSED LEVERAGE 7,929,674 9,064,878 12,027,677 15,491,843
</TABLE>
<TABLE>
<CAPTION>
SENIOR: 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
BEGINNING DEBT $0 $15,903,931 $15,903,931 $14,906,033
DEBT ADDED 15,903,931 0 0 0
TOTAL ANNUAL PAYMENTS 1,590,393 1,590,393 2,588,292 2,588,292
INTEREST 1,590,393 1,590,393 1,590,393 1,490,603
PRINCIPAL REPAYMENT 0 0 997,898 1,097,688
ENDING BALANCE 15,903,931 15,903,931 14,906,033 13,808,345
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 0
SENIOR DEBT COVERAGE 4.8 4.4 3.8 3.2
LOC DEBT COVERAGE 0.0 0.0 0.0 0.0
TOTAL DEBT COVERAGE 4.8 4.4 3.8 3.2
</TABLE>
<TABLE>
<CAPTION>
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
<S> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $31,995,643 $34,702,741 $37,619,092
UNUSED LEVERAGE 19,394,755 23,430,056 27,807,431
</TABLE>
<TABLE>
<CAPTION>
SENIOR: 2000 2001 2002 TOTAL
---- ---- ---- -----
<S> <C> <C> <C> <C>
BEGINNING DEBT $13,808,345 $12,600,888 $11,272,685
DEBT ADDED 0 0 0 $15,903,931
TOTAL ANNUAL PAYMENTS 2,588,292 2,588,292 2,588,292 16,122,244
INTEREST 1,380,834 1,260,089 1,127,268 10,029,974
PRINCIPAL REPAYMENT 1,207,457 1,328,203 1,461,023 6,092,270
ENDING BALANCE 12,600,888 11,272,685 9,811,662
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 0
SENIOR DEBT COVERAGE 2.7 2.2 1.8
LOC DEBT COVERAGE 0.0 0.0 0.0
TOTAL DEBT COVERAGE 2.7 2.2 1.8
</TABLE>
<PAGE> 165
FALCON CABLE SYSTEMS CO. EXHIBIT D
TULARE REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES $7,024,036 $7,507,378 $8,090,912 $8,763,382 $9,492,062 $10,237,240 $11,002,417 $62,117,428
OPERATING EXPENSES 3,694,862 3,916,217 4,184,220 4,497,296 4,865,030 5,221,361 5,578,828 31,957,815
---------- --------- --------- ---------- --------- ---------- ----------- -----------
OPERATING INCOME 3,329,175 3,591,161 3,906,692 4,266,086 4,627,032 5,015,879 5,423,588 30,159,613
PLUS: RESIDUAL VALUE 48,812,296 48,812,296
LESS: CAPITAL EXPENDITURES 777,146 804,754 821,315 850,650 897,487 914,713 961,883 6,027,949
---------- --------- --------- ---------- --------- ---------- ----------- -----------
TOTAL CASH FLOW $2,552,029 $2,786,407 $3,085,377 $3,415,435 $3,729,545 $4,101,166 $53,274,001 $72,943,960
NET PRESENT VALUE @ 16.6% $29,587,487
-----------
NET PRESENT VALUE @ 15.1% $31,820,292
-----------
</TABLE>
<PAGE> 166
FALCON CABLE SYSTEMS CO. EXHIBIT E
TULARE REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
- ----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
BEGINNING MILES 675.9
MILES ADDED 14.2 13.4 12.5 11.5 11.8 10.7 10.9
CUMULATIVE MILES 690.0 703.4 716.0 727.5 739.3 750.0 761.0
DENSITY OF ADDITIONAL PLANT 87 87 87 87 87 87 87
HOMES PASSED - BEGINNING 41,053
NEW HOMES & EXTENSIONS 1,232 1,163 1,086 1,002 1,025 931 950
HOMES PASSED - ENDING 42,285 43,447 44,534 45,536 46,560 47,491 48,441
GROWTH IN HOMES 3.0% 2.8% 2.5% 2.3% 2.3% 2.0% 2.0%
BASIC - BEGINNING SUBSCRIBERS 15,249 15,706 16,247 16,765 17,369 17,993 18,590
AVERAGE SUBSCRIBERS 15,478 15,977 16,506 17,067 17,681 18,292 18,897
ENDING SUBSCRIBERS 15,706 16,247 16,765 17,369 17,993 18,590 19,204
PENETRATION 37.1% 37.4% 37.6% 38.1% 38.6% 39.1% 39.6%
EXPANDED BASIC - BEGINNING 14,787 15,231 15,755 16,257 16,843 17,448 18,027
AVERAGE SUBSCRIBERS 15,009 15,493 16,006 16,550 17,146 17,737 18,325
ENDING SUBSCRIBERS 15,231 15,755 16,257 16,843 17,448 18,027 18,623
PENETRATION 97.0% 97.0% 97.0% 97.0% 97.0% 97.0% 97.0%
NEW PRODUCT TIER #1 - BEGINNING 7,001 7,368 7,865 8,451 8,756 9,070 9,372
AVERAGE SUBSCRIBERS 7,185 7,617 8,158 8,604 8,913 9,221 9,526
ENDING SUBSCRIBERS 7,368 7,865 8,451 8,756 9,070 9,372 9,681
PENETRATION 46.9% 48.4% 50.4% 50.4% 50.4% 50.4% 50.4%
NEW PRODUCT TIER #2 - BEGINNING 0 0 0 0 0 0 0
AVERAGE SUBSCRIBERS 0 0 0 0 0 0 0
ENDING SUBSCRIBERS 0 0 0 0 0 0 0
PENETRATION 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
PAY TV - BEGINNING UNITS 7,110 7,009 7,332 7,817 8,403 9,019 9,319
AVERAGE UNITS 7,060 7,170 7,574 8,110 8,711 9,169 9,472
ENDING UNITS 7,009 7,332 7,817 8,403 9,019 9,319 9,626
PENETRATION 44.6% 45.1% 46.6% 48.4% 50.1% 50.1% 50.1%
PAY PER VIEW - BEGINNING UNITS/MO 451 550 846 1,394 2,037 2,711 3,218
AVERAGE UNITS 501 698 1,120 1,716 2,374 2,964 3,495
ENDING UNITS 550 846 1,394 2,037 2,711 3,218 3,772
AVERAGE BUY RATE/MO 6.8% 9.8% 14.8% 19.8% 24.8% 27.8% 30.8%
CONVERTER RENTALS - BEG. 8,791 9,133 9,610 10,168 10,795 11,452 12,112
AVERAGE SUBSCRIBERS 8,962 9,372 9,889 10,481 11,124 11,782 12,408
ENDING SUBSCRIBERS 9,133 9,610 10,168 10,795 11,452 12,112 12,704
PENETRATION 58.1% 59.1% 60.6% 62.1% 63.6% 65.1% 66.1%
ADDRESSABLE HOMES 7,830 8,143 8,667 9,446 10,308 10,948 11,591
AVERAGE HOMES 7,987 8,405 9,057 9,877 10,628 11,269 11,926
ENDING HOMES 8,143 8,667 9,446 10,308 10,948 11,591 12,262
PENETRATION 51.8% 53.3% 56.3% 59.3% 60.8% 62.3% 63.8%
BASIC CHURN RATE 38% 38% 38% 38% 38% 38% 38%
</TABLE>
<PAGE> 167
FALCON CABLE SYSTEMS CO. EXHIBIT F
TULARE REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
SERVICE RATES
- -------------
<TABLE>
<CAPTION>
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- ------------- -------------- --------
<S> <C> <C>
BASIC $16.23 $17.56
EXPANDED BASIC $5.00 $5.84
NEW PRODUCT TIER #1 $5.95 $6.43
NEW PRODUCT TIER #2 N/A N/A
PAY $6.15 $6.15
PAY PER VIEW $16.20 $12.96
CONVERTER RENTALS $3.38 $3.45
INSTALLATIONS-NEW $50.00 $50.00
INSTALLATIONS-CHURN $25.00 $25.00
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 8% 3% 3% 3% 3% 3% 3%
EXPANDED BASIC 17% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #1 8% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1% 1%
PAY PER VIEW -20% -15% -10% 3% 3% 3% 3%
CONVERTER RENTALS 2% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $17.56 $18.05 $18.59 $19.15 $19.72 $20.31 $20.92
EXPANDED BASIC 5.84 6.02 6.20 6.38 6.58 6.77 6.98
NEW PRODUCT TIER #1 6.43 6.62 6.82 7.02 7.23 7.45 7.67
NEW PRODUCT TIER #2 0.00 0.00 0.00 0.00 0.00 0.00 0.00
PAY 6.15 6.21 6.27 6.34 6.40 6.46 6.53
PAY PER VIEW 12.96 11.02 9.91 10.21 10.52 10.83 11.16
CONVERTERS RENTALS 3.45 3.55 3.66 3.77 3.88 4.00 4.12
INSTALLATIONS-NEW 50.00 51.50 53.05 54.64 56.28 57.96 59.70
INSTALLATIONS-CHURN 25.00 25.75 26.52 27.32 28.14 28.98 29.85
</TABLE>
<PAGE> 168
FALCON CABLE SYSTEMS CO. EXHIBIT G
TULARE REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
BASIC $3,260,966 $3,460,351 $3,682,180 $3,921,595
EXPANDED BASIC 1,052,315 1,118,829 1,190,553 1,267,962
NEW PRODUCT TIER #1 554,015 604,962 667,414 724,965
NEW PRODUCT TIER #2 0 0 0 0
PAY TV 521,082 534,554 570,299 616,726
PAY PER VIEW 77,878 92,300 133,265 210,237
CONVERTER RENTALS 370,856 399,436 434,124 473,939
INSTALLATIONS 134,568 145,888 153,503 166,534
COMMERCIAL 85,197 90,386 98,767 111,163
ADVERTISING 300,695 353,316 406,314 463,198
MISCELLANEOUS 666,465 707,355 754,493 807,064
---------- ---------- ---------- ----------
TOTAL REVENUES $7,024,036 $7,507,378 $8,090,912 $8,763,382
OPERATING EXPENSES:
OPERATIONS $1,475,220 $1,557,894 $1,648,920 $1,747,264
GENERAL & ADMINISTRATIVE 620,727 657,442 698,255 743,088
SALES & MARKETING 404,874 450,171 496,661 546,832
PROGRAMMING 1,194,041 1,250,710 1,340,385 1,460,112
---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES $3,694,862 $3,916,217 $4,184,220 $4,497,296
---------- ---------- ---------- ----------
OPERATING INCOME $3,329,175 $3,591,161 $3,906,692 $4,266,086
OPERATING MARGIN 47.4% 47.8% 48.3% 48.7%
TOTAL REVENUE/BASIC SUB/MONTH $37.82 $39.16 $40.85 $42.79
CASH FLOW/BASIC SUB/MONTH $17.92 $18.73 $19.72 $20.83
OPERATIONS % OF REVENUE 21% 21% 20% 20%
G & A PERCENTAGE OF REVENUE 9% 9% 9% 8%
SALES & MARKETING % OF REVENUE 6% 6% 6% 6%
PROGRAMMING % OF REVENUE 17% 17% 17% 17%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
<S> <C> <C>
BASIC $4,184,616 $ 4,458,968 $ 4,744,809 $27,713,484
EXPANDED BASIC 1,353,005 1,441,710 1,534,131 8,958,505
NEW PRODUCT TIER #1 773,588 824,306 877,149 5,026,400
NEW PRODUCT TIER #2 0 0 0 0
PAY TV 669,076 711,296 742,197 4,365,230
PAY PER VIEW 299,629 385,363 467,950 1,666,620
CONVERTER RENTALS 518,077 565,197 613,062 3,374,691
INSTALLATIONS 177,567 186,991 198,830 1,163,881
COMMERCIAL 128,869 153,876 189,248 857,507
ADVERTISING 523,413 586,223 650,708 3,283,867
MISCELLANEOUS 864,221 923,310 984,333 5,707,243
---------- ----------- ----------- -----------
TOTAL REVENUES $9,492,062 $10,237,240 $11,002,417 $62,117,428
OPERATING EXPENSES:
OPERATIONS $1,852,664 $1,959,850 $2,070,631 $12,312,443
GENERAL & ADMINISTRATIVE 791,897 842,437 894,806 5,248,652
SALES & MARKETING 612,695 669,397 727,991 3,908,620
PROGRAMMING 1,607,773 1,749,678 1,885,400 10,488,100
---------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES $4,865,030 $ 5,221,361 $ 5,578,828 $31,957,815
---------- ----------- ----------- -----------
OPERATING INCOME $4,627,032 $ 5,015,879 $ 5,423,588 $30,159,613
OPERATING MARGIN 48.7% 49.0% 49.3%
TOTAL REVENUE/BASIC SUB/MONTH $44.74 $46.64 $48.52
CASH FLOW/BASIC SUB/MONTH $21.81 $22.85 $23.92
OPERATIONS % OF REVENUE 20% 19% 19%
G & A PERCENTAGE OF REVENUE 8% 8% 8%
SALES & MARKETING % OF REVENUE 6% 7% 7%
PROGRAMMING % OF REVENUE 17% 17% 17%
</TABLE>
<PAGE> 169
FALCON CABLE SYSTEMS CO. EXHIBIT H
TULARE REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
- --------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT $10,375,794
ADDITIONAL MILES OF PLANT 14.2 13.4 12.5 11.5
AERIAL PLANT PER MILE $11,000 $11,220 $11,444 $11,673
UNDERGROUND PLANT PER MILE $16,000 $18,360 $18,727 $19,102
PERCENTAGE OF PLANT AERIAL 10% 10% 10% 10%
PERCENTAGE OF PLANT UNDERGROUND 90% 90% 90% 90%
AVERAGE COST PER CONVERTER $110 $112 $114 $117
PERCENTAGE CONVERTER USE 58% 59% 61% 62%
PERCENTAGE REPLACEMENT 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $55 $56 $57 $59
MISC. CAPITAL PER SUBSCRIBER $5 $5 $5 $5
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $15,612 $15,035 $14,325 $13,479
- UNDERGROUND 229,924 221,428 210,971 198,513
PLANT REBUILD/UPGRADE/INCL. HE 34,468 35,696 37,325 38,749
AVERAGE COST OF NEW CONVERTERS 29,262 35,874 35,920 43,863
CONVERTER REPLACEMENT 48,770 52,119 56,385 60,813
INSTALLATION COSTS 341,721 362,920 360,525 404,655
MISC. CAPITAL EXPENDITURES 77,389 81,481 85,883 90,558
-------- -------- -------- --------
TOTAL CAPITAL EXPENDITURES $777,146 $604,754 $621,315 $850,550
AS A % OF OPERATING INCOME 23.3% 22.4% 21.0% 19.9%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
<S> <C> <C> <C> <C>
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT
ADDITIONAL MILES OF PLANT 11.8 10.7 10.9
AERIAL PLANT PER MILE $11,907 $12,145 $12,388
UNDERGROUND PLANT PER MILE $19,484 $19,873 $20,271
PERCENTAGE OF PLANT AERIAL 10% 10% 10%
PERCENTAGE OF PLANT UNDERGROUND 90% 90% 90%
AVERAGE COST PER CONVERTER $119 $121 $124
PERCENTAGE CONVERTER USE 64% 65% 66%
PERCENTAGE REPLACEMENT 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $60 $61 $62
MISC. CAPITAL PER SUBSCRIBER $5 $6 $6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 115%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $14,058 $13,033 $13,559 $99,102
- UNDERGROUND 207,039 191,939 199,694 1,459,509
PLANT REBUILD/UPGRADE/INCL. HE 40,161 41,629 43,078 271,307
AVERAGE COST OF NEW CONVERTERS 47,261 47,262 50,315 289,778
CONVERTER REPLACEMENT 65,818 71,184 76,169 431,257
INSTALLATION COSTS 427,455 448,689 472,660 2,838,626
MISC. CAPITAL EXPENDITURES 95,694 100,977 106,407 638,369
-------- -------- -------- ----------
TOTAL CAPITAL EXPENDITURES $897,487 $914,713 $961,883 $6,027,949
AS A % OF OPERATING INCOME 19.4% 18.2% 17.7%
</TABLE>
<PAGE> 170
FALCON CABLE SYSTEMS CO. EXHIBIT I
TULARE REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ESTIMATED DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5% 8.9% 8.9% 8.9%
DEPRECIATION - BEG. & ADTNS. 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
YEAR 1 $1,593,755 $2,731,355 $1,950,649 $1,393,002 $995,958 $994,842 $995,956 $10,655,519
YEAR 2 114,999 197,084 140,751 100,514 71,665 71,784 696,998
YEAR 3 117,366 201,140 143,646 102,582 73,343 638,079
YEAR 4 121,558 208,324 148,779 106,246 684,907
YEAR 5 128,251 210,795 156,970 605,016
YEAR 6 130,712 224,013 354,726
YEAR 7 137,453 137,453
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
TOTAL DEPRECIATION $1,593,755 $2,846,354 $2,265,099 $1,856,452 $1,576,694 $1,688,575 $1,765,768 $13,572,698
</TABLE>
<PAGE> 171
FALCON CABLE SYSTEMS CO. EXHIBIT J
TULARE REGION - CALIFORNIA
AS OF DECEMBER 31, 1995
ASSUMPTIONS AND INPUTS
- ----------------------
<TABLE>
<S> <C>
REMAINING LIFE OF FRANCHISES (YEARS) 7
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $10,375,794
SUBSCRIBERS IN FRANCHISES 100%
</TABLE>
<TABLE>
<CAPTION>
LOW HIGH
ANALYSIS ANALYSIS
-------- --------
<S> <C> <C>
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
</TABLE>
<PAGE> 172
CENTRAL REGION, OR
<PAGE> 173
FALCON CABLE SYSTEMS CO. EXHIBIT A
CENTRAL REGION - OREGON
AS OF DECEMBER 31, 1995
VALUATION METHODS
- -----------------
<TABLE>
<CAPTION>
LOW HIGH
----------- -----------
<S> <C> <C>
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
OPERATING INCOME, PER BOOKS (DECEMBER 31, 1995) $ 2,712,460 $ 2,712,460
VALUATION MULTIPLE 10.5 11.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $28,480,830 $31,193,290
----------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $ 4,980,876 $ 4,980,876
OPERATING MARGIN, PER BOOKS (DECEMBER 31, 1995) 55.1% 55.1%
----------- -----------
"RUNNING RATE" OPERATING INCOME 2,743,218 2,743,218
VALUATION MULTIPLE 10.0 11.0
----------- -----------
ESTIMATED FAIR MARKET VALUE $27,432,177 $30,175,395
----------- -----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $ 2,740,648 $ 2,740,648
VALUATION MULTIPLE 9.5 10.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $26,036,156 $28,776,804
----------- -----------
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $24,125,971 $26,253,741
----------- -----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVESTMENT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $23,806,704 $25,813,664
----------- -----------
SUMMARY OF VALUES
- -----------------
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $28,480,830 $31,193,290
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 27,432,177 30,175,395
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 26,036,156 28,776,804
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 24,125,971 26,253,741
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 23,806,704 25,813,664
RANGE OF ESTIMATED FAIR MARKET VALUES $25,126,000 $27,462,000
----------- -----------
ESTIMATED FAIR MARKET VALUE $26,294,000
-----------
</TABLE>
<PAGE> 174
FALCON CABLE SYSTEMS CO. EXHIBIT B
CENTRAL REGION - OREGON LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
REVENUES $ 5,505,473 $ 5,911,255 $ 6,465,718 $7,109,814 $7,658,421
OPERATING EXPENSES 2,764,825 2,975,093 3,260,530 3,559,699 3,794,401
----------- ----------- ----------- ---------- ----------
OPERATING INCOME $ 2,740,648 $ 2,936,162 $ 3,205,188 $3,550,115 $3,864,020
OPERATING MARGIN 0.50 0.50 0.50 0.50 0.50
PARENT SERVICES/MGT FEE (5%) 275,274 295,563 323,286 355,491 382,921
FRANCHISE AMORTIZATION (15) 808,333 808,333 808,333 808,333 808,333
SUBSCRIBER LIST (8) 287,000 287,000 287,000 287,000 287,000
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 1,290,879 2,286,181 1,934,104 1,693,492 1,388,241
INTEREST 1,171,388 1,171,388 1,171,388 1,097,889 1,017,040
----------- ----------- ----------- ---------- ----------
PRE-TAX INCOME ($1,092,227) ($1,912,304) ($1,318,923) ($692,090) ($19,515)
INCOME TAX (EXPENSE)/BENEFIT 371,357 650,183 448,434 235,311 6,635
----------- ----------- ----------- ---------- ----------
NET INCOME ($720,870) ($1,262,120) ($870,489) ($456,779) ($12,880)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($1,092,227) ($1,912,304) ($1,318,923) ($692,090) ($19,515)
FRANCHISE AMORTIZATION (15) 808,333 808,333 808,333 808,333 808,333
SUBSCRIBER LIST (8) 287,000 287,000 287,000 287,000 287,000
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 1,290,879 2,286,181 1,934,104 1,693,492 1,388,241
EQUITY 11,713,882
DEBT 11,713,882 0 0 0 0
RESIDUAL VALUE IN YEAR 8
------------ ----------- ----------- ---------- ----------
TOTAL SOURCES OF CASH $24,721,751 $ 1,469,211 $ 1,710,514 $2,096,735 $2,464,059
USES OF CASH -
PURCHASE PRICE - CURRENT $24,125,971
CAPITAL EXPENDITURES 495,521 517,076 1,592,176 593,800 651,350
DEBT RETIREMENT 0 0 734,992 808,491 889,341
TAXES PAID ON NET INCOME 0 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) ------------ ----------- ----------- ---------- ----------
TOTAL USES OF CASH $24,621,492 $ 517,076 $ 2,327,168 $1,402,291 $1,540,690
ANNUAL CASH INCREASE/(DECREASE) $100,259 $ 952,134 ($616,654) $694,444 $923,369
CUMULATIVE CASH 100,259 1,052,393 435,739 1,130,183 2,053,552
YEAR ENDING DECEMBER 31, 2001 2002 2003 TOTAL
---- ---- ---- -----
<C> <C> <C> <C>
REVENUES $8,161,506 $8,680,035 $ 9,218,457 $58,710,679
OPERATING EXPENSES 4,047,030 4,304,682 4,570,306 29,276,566
---------- ---------- ----------- -----------
OPERATING INCOME $4,114,476 $4,375,353 $ 4,648,151 $29,434,112
OPERATING MARGIN 0.50 0.50 0.50
PARENT SERVICES/MGT FEE (5%) 408,075 434,002 460,923 2,935,534
FRANCHISE AMORTIZATION (15) 808,333 808,333 808,333 6,466,667
SUBSCRIBER LIST (8) 287,000 287,000 287,000 2,296,000
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,411,612 1,451,994 1,126,147 12,582,650
INTEREST 928,106 830,278 722,668 8,110,146
---------- ---------- ----------- -----------
PRE-TAX INCOME $271,350 $563,745 $ 1,243,079 ($2,956,884)
INCOME TAX (EXPENSE)/BENEFIT (92,259) (191,673) (422,647) 1,005,341
---------- ---------- ----------- -----------
NET INCOME $179,091 $ 372,072 $ 820,432 ($1,951,543)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME $271,350 $ 563,745 $ 1,243,079 ($2,956,884)
FRANCHISE AMORTIZATION (15) 808,333 808,333 808,333 6,466,667
SUBSCRIBER LIST (8) 287,000 287,000 287,000 2,296,000
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,411,612 1,451,994 1,126,147 12,582,650
EQUITY 11,713,882
DEBT 0 0 0 11,713,882
RESIDUAL VALUE IN YEAR 8 41,833,356 41,833,356
---------- ----------- ------------ -----------
TOTAL SOURCES OF CASH $2,778,295 $ 3,111,073 $ 45,297,915 $83,649,553
USES OF CASH -
PURCHASE PRICE - CURRENT $24,125,971
CAPITAL EXPENDITURES 681,735 713,504 746,718 5,991,879
DEBT RETIREMENT 978,275 1,076,102 7,226,682 11,713,882
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 10,235,339 10,235,339
---------- ----------- ------------ -----------
TOTAL USES OF CASH $1,660,010 $ 1,789,606 $ 18,208,738 $52,067,071
ANNUAL CASH INCREASE/(DECREASE) $1,118,285 $ 1,321,467 $ 27,089,177 $31,582,482
CUMULATIVE CASH 3,171,838 4,493,305 31,582,482
</TABLE>
<PAGE> 175
FALCON CABLE SYSTEMS CO. EXHIBIT B
CENTRAL REGION - OREGON HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
<TABLE>
<CAPTION>
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
REVENUES $5,505,473 $5,911,255 $6,465,718 $7,109,814 $7,658,421
OPERATING EXPENSES 2,764,825 2,975,093 3,260,530 3,559,699 3,794,401
---------- ---------- ---------- ---------- ----------
OPERATING INCOME $2,740,648 $2,936,162 $3,205,188 $3,550,115 $3,864,020
OPERATING MARGIN 0.50 0.50 0.50 0.50 0.50
PARENT SERVICES/MGT FEE(5%) 275,274 295,563 323,286 355,491 382,921
FRANCHISE AMORTIZATION(15) 808,333 808,333 808,333 808,333 808,333
SUBSCRIBER LIST (8) 287,000 287,000 287,000 287,000 287,000
NON-COMPETE COVENANTS(0) 0 0 0 0 0
DEPRECIATION 1,290,879 2,286,181 1,934,104 1,693,492 1,388,241
INTEREST 1,283,375 1,283,375 1,283,375 1,202,849 1,114,270
---------- ---------- ---------- ---------- ----------
PRE-TAX INCOME ($1,204,213) ($2,024,290) ($1,430,909) ($797,050) ($116,745)
INCOME TAX (EXPENSE)/BENEFIT 409,432 688,259 486,509 270,997 39,693
----------- ----------- ----------- --------- ---------
NET INCOME ($794,781) ($1,336,032) ($944,400) ($526,053) ($77,052)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($1,204,213) ($2,024,290) ($1,430,909) ($797,050) ($116,745)
FRANCHISE AMORTIZATION(15) 808,333 808,333 808,333 808,333 808,333
SUBSCRIBER LIST (8) 287,000 287,000 287,000 287,000 287,000
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 1,290,879 2,286,181 1,934,104 1,693,492 1,388,241
EQUITY 12,833,747
DEBT 12,833,747 0 0 0 0
RESIDUAL VALUE IN YEAR 8
----------- ---------- ---------- ---------- ----------
TOTAL SOURCES OF CASH $26,849,494 $1,357,224 $1,598,527 $1,991,775 $2,366,829
USES OF CASH -
PURCHASE PRICE - CURRENT $26,253,741
CAPITAL EXPENDITURES 495,521 517,076 1,592,176 593,800 651,350
DEBT RETIREMENT 0 0 805,259 885,784 974,363
TAXES PAID ON NET INCOME 0 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
----------- -------- ---------- ------- ---------
TOTAL USES OF CASH $26,749,262 $517,076 $2,397,434 $1,479,584 $1,625,713
ANNUAL CASH INCREASE/(DECREASE) $100,232 $840,148 ($798,907) $512,191 $741,116
CUMULATIVE CASH 100,232 940,380 141,473 653,664 1,394,780
</TABLE>
<PAGE> 176
FALCON CABLE SYSTEMS CO. EXHIBIT B
CENTRAL REGION - OREGON HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2001 2002 2003 TOTAL
---- ---- ---- -----
<S> <C> <C> <C> <C>
REVENUES $8,161,506 $8,680,035 $9,218,457 $58,710,679
OPERATING EXPENSES 4,047,030 4,304,682 4,570,306 29,276,566
---------- ---------- ---------- -----------
OPERATING INCOME $4,114,476 $4,375,353 $4,648,151 $29,434,112
OPERATING MARGIN 0.50 0.50 0.50
PARENT SERVICES/MGT FEE(5%) 408,075 434,002 460,923 2,935,534
FRANCHISE AMORTIZATION(15) 808,333 808,333 808,333 6,466,667
SUBSCRIBER LIST(8) 287,000 287,000 287,000 2,296,000
NON-COMPETE COVENANTS(0) 0 0 0 0
DEPRECIATION 1,411,612 1,451,994 1,126,147 12,582,650
INTEREST 1,016,834 909,654 791,756 8,885,488
---------- ---------- ---------- -----------
PRE-TAX INCOME $182,621 $484,369 $1,173,991 ($3,732,226)
INCOME TAX (EXPENSE)/BENEFIT (62,091) (164,685) (399,157) 1,268,957
---------- ---------- ---------- -----------
NET INCOME $120,530 $319,684 $774,834 ($2,463,269)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME $182,621 $484,369 $1,173,991 ($3,732,226)
FRANCHISE AMORTIZATION(15) 808,333 808,333 808,333 6,466,667
SUBSCRIBER LIST(8) 287,000 287,000 287,000 2,296,000
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,411,612 1,451,994 1,126,147 12,582,650
EQUITY 12,833,747
DEBT 0 0 0 12,833,747
RESIDUAL VALUE IN YEAR 8 41,833,356 41,833,356
---------- ---------- ----------- -----------
TOTAL SOURCES OF CASH $2,689,567 $3,031,697 $45,228,827 $85,113,941
USES OF CASH -
PURCHASE PRICE - CURRENT $26,253,741
CAPITAL EXPENDITURES 681,735 713,504 746,718 5,991,879
DEBT RETIREMENT 1,071,799 1,178,979 7,917,563 12,833,747
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 9,248,281 9,248,281
---------- ---------- ----------- -----------
TOTAL USES OF CASH $1,753,534 $1,892,483 $17,912,562 $54,327,648
ANNUAL CASH INCREASE/(DECREASE) $936,033 $1,139,214 $27,316,266 $30,786,292
CUMULATIVE CASH 2,330,813 3,470,027 30,786,292
</TABLE>
<PAGE> 177
FALCON CABLE SYSTEMS CO.
CENTRAL REGION - OREGON EXHIBIT C
AS OF DECEMBER 31, 1995 LOW ANALYSIS
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
<TABLE>
<S> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $23,427,765
YEAR 1 DEBT REQUIREMENTS 11,713,882
YEAR 1 EQUITY REQUIREMENTS 11,713,882
FINANCING AVAILABLE $17,630,990 $17,814,212 $19,085,050 $20,833,723 $23,075,747
UNUSED LEVERAGE 5,917,108 6,100,329 8,106,160 10,663,324 13,794,689
SENIOR DEBT: 1996 1997 1998 1999 2000
---- ---- ---- ---- ----
BEGINNING DEBT $0 $11,713,882 $11,713,882 $10,978,890 $10,170,399
DEBT ADDED 11,713,882 0 0 0 0
TOTAL ANNUAL PAYMENTS 1,171,388 1,171,388 1,906,380 1,906,380 1,906,380
INTEREST 1,171,388 1,171,388 1,171,388 1,097,889 1,017,040
PRINCIPAL REPAYMENT 0 0 734,992 808,491 889,341
ENDING BALANCE 11,713,882 11,713,882 10,978,890 10,170,399 9,281,058
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0 $0
BORROWINGS 0 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0 0
INTEREST 0 0 0 0 0
SENIOR DEBT COVERAGE 4.3 4.0 3.4 2.9 2.4
LOC DEBT COVERAGE 0.0 0.0 0.0 0.0 0.0
TOTAL DEBT COVERAGE 4.3 4.0 3.4 2.9 2.4
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $25,116,131 $26,744,095 $28,439,793
UNUSED LEVERAGE 16,813,348 19,517,413 22,396,824
SENIOR DEBT: 2001 2002 2003 TOTAL
---- ---- ---- -----
BEGINNING DEBT $9,281,058 $8,302,784 $7,226,682
DEBT ADDED 0 0 0 $11,713,882
TOTAL ANNUAL PAYMENTS 1,906,380 1,906,380 1,906,380 13,781,059
INTEREST 928,106 830,278 722,668 8,110,146
PRINCIPAL REPAYMENT 978,275 1,076,102 1,183,712 5,670,913
ENDING BALANCE 8,302,784 7,226,682 6,042,969
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 0
SENIOR DEBT COVERAGE 2.0 1.7 1.3
LOC DEBT COVERAGE 0.0 0.0 0.0
TOTAL DEBT COVERAGE 2.0 1.7 1.3
</TABLE>
<PAGE> 178
FALCON CABLE SYSTEMS CO. EXHIBIT C
CENTRAL REGION - OREGON HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - HIGH VALUE
<TABLE>
<S> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $25,667,495
YEAR 1 DEBT REQUIREMENTS 12,833,747
YEAR 1 EQUITY REQUIREMENTS 12,833,747
FINANCING AVAILABLE $20,343,450 $20,554,860 $22,021,211 $24,038,911 $26,625,862
UNUSED LEVERAGE 7,509,703 7,721,113 9,992,723 12,896,206 16,457,521
SENIOR: 1996 1997 1998 1999 2000
---- ---- ---- ---- ----
BEGINNING DEBT $0 $12,833,747 $12,833,747 $12,028,489 $11,142,704
DEBT ADDED 12,833,747 0 0 0 0
TOTAL ANNUAL PAYMENTS 1,283,375 1,283,375 2,088,633 2,088,633 2,088,633
INTEREST 1,283,375 1,283,375 1,283,375 1,202,849 1,114,270
PRINCIPAL REPAYMENT 0 0 805,259 885,784 974,363
ENDING BALANCE 12,833,747 12,833,747 12,028,489 11,142,704 10,168,342
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0 $0
BORROWINGS 0 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0 0
INTEREST 0 0 0 0 0
SENIOR DEBT COVERAGE 4.7 4.4 3.8 3.1 2.6
LOC DEBT COVERAGE 0.0 0.0 0.0 0.0 0.0
TOTAL DEBT COVERAGE 4.7 4.4 3.8 3.1 2.6
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $28,980,152 $30,858,571 $32,815,146
UNUSED LEVERAGE 19,883,609 22,941,007 26,194,459
SENIOR: 2001 2002 2003 TOTAL
---- ---- ---- -----
BEGINNING DEBT $10,168,342 $9,096,542 $7,917,563
DEBT ADDED 0 0 0 $12,833,747
TOTAL ANNUAL PAYMENTS 2,088,633 2,088,633 2,088,633 15,098,549
INTEREST 1,016,834 909,654 791,756 8,885,488
PRINCIPAL REPAYMENT 1,071,799 1,178,979 1,296,877 6,213,061
ENDING BALANCE 9,096,542 7,917,563 6,620,686
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 0
SENIOR DEBT COVERAGE 2.2 1.8 1.4
LOC DEBT COVERAGE 0.0 0.0 0.0
TOTAL DEBT COVERAGE 2.2 1.8 1.4
</TABLE>
<PAGE> 179
FALCON CABLE SYSTEMS CO.
CENTRAL REGION - OREGON EXHIBIT D
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
REVENUES $5,505,473 $5,911,255 $6,465,718 $7,109,814 $7,658,421
OPERATING EXPENSES 2,764,825 2,975,093 3,260,530 3,559,699 3,794,401
OPERATING INCOME $2,740,648 $2,936,162 $3,205,188 $3,550,115 $3,864,020
PLUS: RESIDUAL VALUE
LESS: CAPITAL EXPENDITURES 495,521 517,076 1,592,176 593,800 651,350
TOTAL CASH FLOW $2,245,127 $2,419,085 $1,613,012 $2,956,315 $3,212,670
NET PRESENT VALUE @ 16.6% $23,806,704
NET PRESENT VALUE @ 15.1% $25,813,664
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2001 2002 2003 TOTAL
---- ---- ---- -----
<S> <C> <C> <C> <C>
REVENUES $8,161,506 $8,680,035 $9,218,457 $58,710,679
OPERATING EXPENSES 4,047,030 4,304,682 4,570,306 29,276,566
OPERATING INCOME $4,114,476 $4,375,353 $4,648,151 $29,434,112
PLUS: RESIDUAL VALUE 41,833,356 41,833,356
LESS: CAPITAL EXPENDITURES 681,735 713,504 746,718 5,991,879
TOTAL CASH FLOW $3,432,741 $3,661,849 $45,734,789 $65,275,589
</TABLE>
<PAGE> 180
FALCON CABLE SYSTEMS CO. EXHIBIT E
CENTRAL REGION - OREGON
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BEGINNING MILES 660.3
MILES ADDED 7.9 8.0 9.7 9.8 11.6 11.8 11.9 12.1
CUMULATIVE MILES 668.2 676.2 685.9 695.7 707.3 719.1 731.0 743.1
DENSITY OF ADDITIONAL PLANT 33 33 33 33 33 33 33 33
HOMES PASSED - BEGINNING 26,355
NEW HOMES & EXTENSIONS 264 266 323 326 385 391 396 402
HOMES PASSED - ENDING 26,619 26,885 27,207 27,534 27,919 28,310 28,707 29,108
GROWTH IN HOMES 1.0% 1.0% 1.2% 1.2% 1.4% 1.4% 1.4% 1.4%
BASIC - BEGINNING SUBSCRIBERS 14,225 14,500 14,780 15,093 15,412 15,767 16,130 16,499
AVERAGE SUBSCRIBERS 14,363 14,640 14,936 15,253 15,590 15,948 16,314 16,687
ENDING SUBSCRIBERS 14,500 14,780 15,093 15,412 15,767 16,130 16,499 16,875
PENETRATION 54.5% 55.0% 55.5% 56.0% 56.5% 57.0% 57.5% 58.0%
EXPANDED BASIC - BEGINNING 12,921 13,171 13,425 13,710 13,999 14,322 14,651 14,987
AVERAGE SUBSCRIBERS 13,046 13,298 13,567 13,854 14,161 14,486 14,819 15,158
ENDING SUBSCRIBERS 13,171 13,425 13,710 13,999 14,322 14,651 14,987 15,329
PENETRATION 90.8% 90.8% 90.8% 90.8% 90.8% 90.8% 90.8% 90.8%
NEW PRODUCT TIER #1 - BEGINNING 9,266 9,445 9,627 9,832 10,039 10,271 10,507 10,747
AVERAGE SUBSCRIBERS 9,356 9,536 9,729 10,155 10,389 10,627 10,870
ENDING SUBSCRIBERS 9,445 9,627 9,832 10,039 10,271 10,507 10,747 10,992
PENETRATION 65.1% 65.1% 65.1% 65.1% 65.1% 65.1% 65.1% 65.1%
NEW PRODUCT TIER #2 - BEGINNING 0 1,015 2,069 3,849 5,240 5,361 5,484 5,610
AVERAGE SUBSCRIBERS 508 1,542 2,959 4,544 5,300 5,422 5,547 5,674
ENDING SUBSCRIBERS 1,015 2,069 3,849 5,240 5,361 5,484 5,610 5,738
PENETRATION 7.0% 14.0% 25.5% 34.0% 34.0% 34.0% 34.0% 34.0%
NEW PRODUCT TIER #3 - BEGINNING 0 1,015 2,069 3,849 5,240 5,361 5,484 5,610
AVERAGE SUBSCRIBERS 508 1,542 2,959 4,544 5,300 5,422 5,547 5,674
ENDING SUBSCRIBERS 1,015 2,069 3,849 5,240 5,361 5,484 5,610 5,738
PENETRATION 7.0% 14.0% 25.5% 34.0% 34.0% 34.0% 34.0% 34.0%
40%
PAY TV - BEGINNING UNITS 5,516 5,695 5,879 6,079 6,285 6,508 6,738 6,975
AVERAGE UNITS 5,606 5,787 5,979 6,182 6,396 6,623 6,857 7,097
ENDING UNITS 5,695 5,879 6,079 6,285 6,508 6,738 6,975 7,219
PENETRATION 39.3% 39.8% 40.3% 40.8% 41.3% 41.8% 42.3% 42.8%
PAY PER VIEW - BEGINNING UNITS/MO 0 0 292 839 1,463 1,990 2,415 2,651
AVERAGE UNITS 0 146 565 1,151 1,727 2,202 2,533 2,777
ENDING UNITS 0 292 839 1,463 1,990 2,415 2,651 2,902
AVERAGE BUY RATE/MO 0.0% 5.0% 12.5% 20.0% 25.0% 28.0% 29.5% 31.0%
CONVERTER RENTALS - BEGINNING 6,016 6,567 7,137 7,742 8,367 9,033 9,725 10,442
AVERAGE SUBSCRIBERS 6,292 6,852 7,439 8,054 8,700 9,379 10,084 10,815
ENDING SUBSCRIBERS 6,567 7,137 7,742 8,367 9,033 9,725 10,442 11,187
PENETRATION 45.3% 48.3% 51.3% 54.3% 57.3% 60.3% 63.3% 66.3%
ADDRESSABLE HOMES 4,762 5,289 5,835 6,713 7,317 7,959 8,626 8,988
AVERAGE HOMES 5,026 5,562 6,274 7,015 7,638 8,292 8,807 9,175
ENDING HOMES 5,289 5,835 6,713 7,317 7,959 8,626 8,988 9,362
PENETRATION 36.5% 39.5% 44.5% 47.5% 50.5% 53.5% 54.5% 55.5%
BASIC CHURN RATE 28% 28% 28% 28% 28% 28% 28% 28%
</TABLE>
<PAGE> 181
FALCON CABLE SYSTEMS CO.
CENTRAL REGION - OREGON EXHIBIT F
AS OF DECEMBER 31, 1995
SERVICE RATES
- -------------
<TABLE>
<CAPTION>
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- ------------- ------------- --------
<S> <C> <C>
BASIC $15.98 $17.60
EXPANDED BASIC $4.99 $5.43
NEW PRODUCT TIER #1 $4.41 $5.13
NEW PRODUCT TIER #2 $4.00 $4.00
NEW PRODUCT TIER #3 $4.00 $4.00
PAY $7.93 $7.93
PAY PER VIEW N/A N/A
CONVERTER RENTALS $0.55 $0.54
INSTALLATIONS-NEW $50.00 $50.00
INSTALLATIONS-CHURN $25.00 $25.00
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 10% 3% 3% 3% 3% 3% 3% 3%
EXPANDED BASIC 9% 3% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #1 16% 3% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #3 0% 3% 3% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1% 1% 1%
PAY PER VIEW 0% 3% 3% 3% 3% 3% 3% 3%
CONVERTER RENTALS -2% 3% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $17.60 $18.13 $18.67 $19.23 $19.81 $20.40 $21.01 $21.64
EXPANDED BASIC 5.43 5.59 5.76 5.93 6.11 6.29 6.48 6.67
NEW PRODUCT TIER #1 5.13 5.28 5.44 5.60 5.77 5.94 6.12 6.30
NEW PRODUCT TIER #2 4.00 4.12 4.24 4.37 4.50 4.64 4.78 4.92
NEW PRODUCT TIER #3 4.00 4.12 4.24 4.37 4.50 4.64 4.78 4.92
PAY 7.93 8.01 8.09 8.17 8.25 8.33 8.42 8.50
PAY PER VIEW 7.50 7.73 7.96 8.20 8.44 8.69 8.96 9.22
CONVERTER RENTALS 0.54 0.56 0.57 0.59 0.61 0.63 0.65 0.67
INSTALLATIONS-NEW 50.00 51.50 53.05 54.64 56.28 57.96 59.70 61.49
INSTALLATIONS-CHURN 25.00 25.75 26.52 27.32 28.14 28.98 29.85 30.75
</TABLE>
<PAGE> 182
FALCON CABLE SYSTEMS CO.
CENTRAL REGION - OREGON EXHIBIT G
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
REVENUES:
BASIC $3,033,046 $3,184,371 $3,346,309 $3,519,639 $3,705,344
EXPANDED BASIC 849,445 891,826 937,178 985,722 1,037,731
NEW PRODUCT TIER #1 575,473 604,184 634,909 667,796 703,031
NEW PRODUCT TIER #2 24,361 76,241 150,680 238,358 286,355
NEW PRODUCT TIER #3 24,361 76,241 150,680 238,358 286,355
PAY TV 533,313 556,082 580,266 605,946 633,252
PAY-PER-VIEW 0 13,521 53,987 113,221 174,892
CONVERTER RENTALS 40,833 45,806 51,222 57,120 63,551
INSTALLATIONS 91,674 96,198 102,291 107,535 114,538
COMMERCIAL 104,155 107,279 110,498 113,813 117,227
ADVERTISING 5,125 25,623 102,492 204,984 266,479
MISCELLANEOUS 223,690 233,882 245,207 257,323 269,666
---------- ---------- ---------- ---------- ----------
TOTAL REVENUES $5,505,473 $5,911,255 $6,465,718 $7,109,814 $7,658,421
OPERATING EXPENSES:
OPERATIONS $1,119,791 $1,178,723 $1,249,858 $1,328,393 $1,404,541
GENERAL & ADMINISTRATIVE 542,197 569,390 600,434 634,404 668,217
SALES & MARKETING 188,772 245,183 334,379 408,360 428,358
PROGRAMMING 914,064 981,798 1,075,859 1,188,543 1,293,285
---------- ---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES $2,764,825 $2,975,093 $3,260,530 $3,559,699 $3,794,401
---------- ---------- ---------- ---------- ----------
OPERATING INCOME $2,740,648 $2,936,162 $3,205,188 $3,550,115 $3,864,020
OPERATING MARGIN 49.8% 49.7% 49.6% 49.9 50.5%
TOTAL REVENUE/BASIC SUB/MONTH $31.94 $33.65 $36.07 $38.84 $40.94
CASH FLOW/BASIC SUB/MONTH $15.90 $16.71 $17.88 $19.40 $20.65
OPERATIONS % OF REVENUE 20% 20% 19% 19% 18%
G & A PERCENTAGE OF REVENUE 10% 10% 9% 9% 9%
SALES & MARKETING % OF REVENUE 3% 4% 5% 6% 6%
PROGRAMMING % OF REVENUE 17% 17% 17% 17% 17%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2001 2002 2003 TOTAL
---- ---- ---- -----
<S> <C> <C> <C> <C>
REVENUES:
BASIC $3,904,349 $4,113,723 $4,333,994 $29,140,774
EXPANDED BASIC 1,093,465 1,152,103 1,213,793 8,161,261
NEW PRODUCT TIER #1 740,789 780,514 822,307 5,529,003
NEW PRODUCT TIER #2 301,735 317,915 334,938 1,730,583
NEW PRODUCT TIER #3 301,735 317,915 334,938 1,730,583
PAY TV 662,279 692,483 723,906 4,987,527
PAY-PER-VIEW 229,788 272,241 307,363 1,165,013
CONVERTER RENTALS 70,564 78,141 86,321 493,557
INSTALLATIONS 120,632 127,041 133,781 893,691
COMMERCIAL 120,744 124,366 128,097 926,178
ADVERTISING 333,099 408,046 489,656 1,835,504
MISCELLANEOUS 282,328 295,546 309,364 2,117,005
---------- ---------- ---------- -----------
TOTAL REVENUES $8,161,506 $8,680,035 $9,218,457 $58,710,679
OPERATING EXPENSES:
OPERATIONS $1,480,125 $1,558,774 $1,640,861 $10,961,065
GENERAL & ADMINISTRATIVE 702,844 739,010 776,853 5,233,349
SALES & MARKETING 476,992 530,540 588,228 3,200,812
PROGRAMMING 1,387,069 1,476,358 1,564,364 9,881,340
---------- ---------- ---------- -----------
TOTAL OPERATING EXPENSES $4,047,030 $4,304,682 $4,570,306 $29,276,566
---------- ---------- ---------- -----------
OPERATING INCOME $4,114,476 $4,375,353 $4,648,151 $29,434,112
OPERATING MARGIN 50.4% 50.4% 50.4%
TOTAL REVENUE/BASIC SUB/MONTH $42.65 $44.34 $46.04
CASH FLOW/BASIC SUB/MONTH $21.50 $22.35 $23.21
OPERATIONS % OF REVENUE 18% 18% 18%
G & A PERCENTAGE OF REVENUE 9% 9% 8%
SALES & MARKETING % OF REVENUE 6% 6% 6%
PROGRAMMING % OF REVENUE 17% 17% 17%
</TABLE>
<PAGE> 183
FALCON CABLE SYSTEMS CO. EXHIBIT H
CENTRAL REGION - OREGON
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
- --------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT $8,537,924
ADDITIONAL MILES OF PLANT 7.9 8.0 9.7 9.8 11.6
AERIAL PLANT PER MILE $12,000 $12,240 $12,485 $12,734 $12,989
UNDERGROUND PLANT PER MILE $18,000 $18,360 $18,727 $19,102 $19,484
PERCENTAGE OF PLANT AERIAL 50% 50% 50% 50% 50%
PERCENTAGE OF PLANT UNDERGROUND 50% 50% 50% 50% 50%
AVERAGE COST PER CONVERTER $110 $112 $114 $117 $119
PERCENTAGE CONVERTER USE 45% 48% 51% 54% 57%
PERCENTAGE REPLACEMENT 5% 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $52 $53 $54 $55 $56
MISC. CAPITAL PER SUBSCRIBER $5 $5 $5 $5 $5
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2% 2%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $47,542 $48,977 $60,548 $62,500 $75,267
71,312 73,466 90,822 93,750 112,901
PLANT REBUILD/UPGRADE/INCL. HDND. 33,675 34,761 1,059,850 37,123 38,408
AVERAGE COST OF NEW CONVERTERS 13,718 15,140 18,396 20,204 24,241
CONVERTER REPLACEMENT 35,435 39,284 43,379 47,827 52,567
INSTALLATION COSTS 222,026 230,784 241,482 251,465 263,592
MISC. CAPITAL EXPENDITURES 71,813 74,664 77,700 80,931 84,374
-------- -------- ---------- -------- --------
TOTAL CAPITAL EXPENDITURES $495,521 $517,076 $1,592,176 $593,800 $651,350
AS A % OF OPERATING INCOME 18.1% 17.6% 49.7% 16.7 16.9%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2001 2002 2003 TOTAL
---- ---- ---- -----
<S> <C> <C> <C> <C>
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT
ADDITIONAL MILES OF PLANT 11.8 11.9 12.1
AERIAL PLANT PER MILE $13,249 $13,514 $13,784
UNDERGROUND PLANT PER MILE $19,873 $20,271 $20,676
PERCENTAGE OF PLANT AERIAL 50% 50% 50%
PERCENTAGE OF PLANT UNDERGROUND 50% 50% 50%
AVERAGE COST PER CONVERTER $121 $124 $126
PERCENTAGE CONVERTER USE 60% 63% 66%
PERCENTAGE REPLACEMENT 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $57 $59 $60
MISC. CAPITAL PER SUBSCRIBER $6 $6 $6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 117%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $77,847 $80,516 $83,276 $536,474
116,771 120,774 124,914 804,710
PLANT REBUILD/UPGRADE/INCL. HDND. 39,828 41,300 42,824 1,327,770
AVERAGE COST OF NEW CONVERTERS 26,528 28,958 31,539 178,726
CONVERTER REPLACEMENT 57,727 63,232 69,100 408,551
INSTALLATION COSTS 274,990 286,861 299,222 2,070,421
MISC. CAPITAL EXPENDITURES 88,042 91,863 95,842 665,228
-------- -------- -------- ----------
TOTAL CAPITAL EXPENDITURES $681,735 $713,504 $746,718 $5,991,879
AS A % OF OPERATING INCOME 16.6% 16.3% 16.1%
</TABLE>
<PAGE> 184
FALCON CABLE SYSTEMS CO. EXHIBIT I
CENTRAL REGION - OREGON
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
ESTIMATED DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5% 8.9%
DEPRECIATION - BEG. & ADTNS. 1996 1997 1998 1999 2000
---- ---- ---- ---- ----
YEAR 1 $1,290,879 $2,212,291 $1,579,950 $1,128,277 $806,687
YEAR 2 73,890 126,632 90,437 64,583
YEAR 3 227,522 389,924 278,472
YEAR 4 84,854 145,422
YEAR 5 93,078
YEAR 6
YEAR 7
YEAR 8
---------- ---------- ---------- ---------- ----------
TOTAL DEPRECIATION $1,290,879 $2,286,181 $1,934,104 $1,693,492 $1,388,241
</TABLE>
<TABLE>
<CAPTION>
YEAR 6 YEAR 7 YEAR 8
------ ------ ------
<S> <C> <C> <C> <C>
ESTIMATED DEPRECIATION RATES 8.9% 8.9% 4.5%
DEPRECIATION - BEG. & ADTNS. 2001 2002 2003 TOTAL
YEAR 1 $805,783 $806,687 $402,892 $9,033,445
YEAR 2 46,175 46,123 46,175 494,015
YEAR 3 198,863 142,181 142,022 1,378,984
YEAR 4 103,856 74,166 53,026 461,323
YEAR 5 159,516 113,921 81,354 447,868
YEAR 6 97,420 166,957 119,235 383,612
YEAR 7 101,960 174,737 276,697
YEAR 8 106,706 106,706
---------- ---------- ---------- -----------
TOTAL DEPRECIATION $1,411,612 $1,451,994 $1,126,147 $12,582,650
</TABLE>
<PAGE> 185
FALCON CABLE SYSTEMS CO. EXHIBIT J
CENTRAL REGION - OREGON
AS OF DECEMBER 31, 1995
ASSUMPTIONS AND INPUTS
- ----------------------
<TABLE>
<S> <C>
REMAINING LIFE OF FRANCHISES (YEARS) 8
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $8,537,924
SUBSCRIBERS IN FRANCHISES 100%
</TABLE>
<TABLE>
<CAPTION>
LOW HIGH
ANALYSIS ANALYSIS
-------- --------
<S> <C> <C>
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
</TABLE>
<PAGE> 186
COOS BAY, OR
<PAGE> 187
FALCON CABLE SYSTEMS CO. EXHIBIT A
COOS BAY REGION - OREGON
AS OF DECEMBER 31, 1995
VALUATION METHODS
- -----------------
<TABLE>
<CAPTION>
LOW HIGH
--- ----
<S> <C> <C>
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
ADJUSTED OPERATING INCOME, PER BOOKS (DECEMBER 31, 1995) $3,687,386 $3,687,386
VALUATION MULTIPLE 10.5 11.5
---- ----
ESTIMATED FAIR MARKET VALUE $38,717,553 $42,404,939
----------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $7,110,616 $7,110,616
OPERATING MARGIN, PER BOOKS (DECEMBER 31, 1995) 55.5% 55.5%
"RUNNING RATE" OPERATING INCOME 3,943,903 3,943,903
VALUATION MULTIPLE 10.0 11.0
---- ----
ESTIMATED FAIR MARKET VALUE $39,439,031 $43,382,934
----------- -----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $3,922,856 $3,922,856
VALUATION MULTIPLE 9.5 10.5
---- ----
ESTIMATED FAIR MARKET VALUE $37,267,128 $41,189,983
----------- -----------
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $29,654,142 $32,072,794
----------- -----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVSTMT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $29,386,825 $31,656,216
----------- -----------
SUMMARY OF VALUES
- -----------------
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $38,717,553 $42,404,939
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 39,439,031 43,382,934
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 37,267,128 41,189,983
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 29,654,142 32,072,794
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 29,386,825 31,656,216
----------- -----------
RANGE OF ESTIMATED FAIR MARKET VALUES $33,017,000 $35,984,000
ESTIMATED FAIR MARKET VALUE $34,501,000
-----------
</TABLE>
<PAGE> 188
FALCON CABLE SYSTEMS CO. EXHIBIT B
COOS BAY REGION - OREGON LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES $7,499,836 $7,923,595 $8,444,768 $9,025,877 $9,574,462 $10,033,185 $10,483,111 $62,984,835
OPERATING EXPENSES 3,576,981 3,840,354 4,081,846 4,325,562 4,559,679 4,772,376 4,983,987 30,140,786
----------- ----------- ---------- ---------- ---------- ---------- ----------- -----------
OPERATING INCOME $3,922,856 $4,083,241 $4,362,922 $4,700,314 $5,014,784 $5,260,808 $5,499,125 $32,844,049
OPERATING MARGIN 0.52 0.52 0.52 0.52 0.52 0.52 0.52
PARENT SERVICES/MGT FEE (5%) 374,992 396,180 422,238 451,294 478,723 501,659 524,156 3,149,242
FRANCHISE AMORTIZATION (15) 1,336,867 1,336,867 1,336,867 1,336,867 1,336,867 1,336,867 1,336,867 9,358,067
SUBSCRIBER LIST (8) 380,133 380,133 380,133 380,133 380,133 380,133 380,133 2,660,933
NON-COMPETE COVENANTS (0) 0 0 0 0 0 0 0 0
DEPRECIATION 1,053,762 2,151,172 2,191,238 2,155,919 1,911,328 1,735,088 1,678,150 12,876,657
INTEREST 1,407,934 1,423,098 1,482,422 1,403,611 1,306,436 1,115,524 997,942 9,136,967
----------- ----------- ---------- ---------- ---------- ---------- ----------- -----------
PRE-TAX INCOME ($630,832) ($1,604,209) ($1,449,977) ($1,027,510) ($398,703) $191,537 $581,877 ($4,337,816)
INCOME TAX (EXPENSE)/
BENEFIT 214,483 545,431 492,992 349,353 135,559 (65,123) (197,838) 1,474,858
----------- ----------- ---------- ---------- ---------- ---------- ----------- -----------
NET INCOME ($416,349) ($1,058,778) ($956,985) ($678,156) ($263,144) $126,414 $384,039 ($2,862,959)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($630,832) ($1,604,209) ($1,449,977) ($1,027,510) ($398,703) $191,537 $581,877 ($4,337,816)
FRANCHISE AMORTIZATION (15) 1,336,867 1,336,867 1,336,867 1,336,867 1,336,867 1,336,867 1,336,867 9,358,067
SUBSCRIBER LIST (8) 380,133 380,133 380,133 380,133 380,133 380,133 380,133 2,660,933
NON-COMPETE COVENANTS (0) 0 0 0 0 0 0 0 0
DEPRECIATION 1,053,762 2,151,172 2,191,238 2,155,919 1,911,328 1,735,088 1,678,150 12,876,657
EQUITY 14,079,342 14,079,342
DEBT 14,079,342 151,639 593,242 95,302 0 0 0 14,919,525
RESIDUAL VALUE IN YEAR 7 49,492,121 49,492,121
----------- ----------- ---------- ---------- ---------- ---------- ----------- -----------
TOTAL SOURCES OF CASH $30,298,613 $2,415,602 $3,051,503 $2,940,711 $3,229,625 $3,643,625 $53,469,148 $99,048,828
USES OF CASH -
PURCHASE PRICE - CURRENT $29,654,142 $29,654,142
CAPITAL EXPENDITURES 544,049 2,416,024 2,168,089 1,968,956 627,440 648,989 671,250 9,044,798
DEBT RETIREMENT 0 0 883,414 971,755 1,909,114 1,175,824 9,979,418 14,919,525
TAXES PAID ON NET INCOME 0 0 0 0 0 0 0 0
TAXES PAID ON SALE
(RESIDUAL) 10,659,347 10,659,347
----------- ----------- ---------- ---------- ---------- ---------- ----------- -----------
TOTAL USES OF CASH $30,198,191 $2,416,024 $3,051,503 $2,940,711 $2,536,553 $1,824,813 $21,310,015 $64,277,812
ANNUAL CASH INCREASE/
(DECREASE) $100,422 ($422) $0 ($0) $693,072 $1,818,811 $32,159,133 $34,771,016
CUMULATIVE CASH 100,422 100,000 100,000 100,000 793,072 2,611,883 34,771,016
</TABLE>
<PAGE> 189
FALCON CABLE SYSTEMS CO. EXHIBIT B
COOS BAY REGION - OREGON HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES $7,499,836 $7,923,595 $8,444,768 $9,025,877 $9,574,462 $10,033,185 $10,483,111 $62,984,835
OPERATING EXPENSES 3,576,981 3,840,354 4,081,846 4,325,562 4,559,679 4,772,376 4,983,987 30,140,786
----------- ----------- ----------- ----------- ---------- ----------- ----------- ------------
OPERATING INCOME $3,922,856 $4,083,241 $4,362,922 $4,700,314 $5,014,784 $5,260,808 $5,499,125 $32,844,049
OPERATING MARGIN 0.52 0.52 0.52 0.52 0.52 0.52 0.52
PARENT SERVICES/MGT FEE (5%) 374,992 396,180 422,238 451,294 478,723 501,659 524,156 3,149,242
FRANCHISE AMORTIZATION (15) 1,336,867 1,336,867 1,336,867 1,336,867 1,336,867 1,336,867 1,336,867 9,358,067
SUBSCRIBER LIST (8) 380,133 380,133 380,133 380,133 380,133 380,133 380,133 2,660,933
NON-COMPETE COVENANTS (0) 0 0 0 0 0 0 0 0
DEPRECIATION 1,053,762 2,151,172 2,191,238 2,155,919 1,911,328 1,735,088 1,678,150 12,876,657
INTEREST 1,535,228 1,564,543 1,648,458 1,588,982 1,483,021 1,240,461 1,088,168 10,148,862
----------- ----------- ----------- ----------- ---------- ----------- ----------- ------------
PRE-TAX INCOME ($758,127) ($1,745,654) ($1,616,013) ($1,212,881) ($575,288) $66,600 $491,652 ($5,349,711)
INCOME TAX (EXPENSE)/
BENEFIT 257,763 593,522 549,444 412,380 195,598 (22,644) (167,162) 1,818,902
----------- ----------- ----------- ----------- ---------- ----------- ----------- ------------
NET INCOME ($500,364) ($1,152,132) ($1,066,568) ($800,502) ($379,690) $43,956 $324,490 ($3,530,809)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($758,127) ($1,745,654) ($1,616,013) ($1,212,881) ($575,288) $66,600 $491,652 ($5,349,711)
FRANCHISE AMORTIZATION (15) 1,336,867 1,336,867 1,336,867 1,336,867 1,336,867 1,336,867 1,336,867 9,358,067
SUBSCRIBER LIST (8) 380,133 380,133 380,133 380,133 380,133 380,133 380,133 2,660,933
NON-COMPETE COVENANTS (0) 0 0 0 0 0 0 0 0
DEPRECIATION 1,053,762 2,151,172 2,191,238 2,155,919 1,911,328 1,735,088 1,678,150 12,876,657
EQUITY 15,352,284 15,352,284
DEBT 15,352,284 293,145 839,149 368,532 0 0 0 16,853,110
RESIDUAL VALUE IN YEAR 7 49,492,121 49,492,121
----------- ----------- ----------- ----------- ---------- ----------- ----------- ------------
TOTAL SOURCES OF CASH $32,717,204 $2,415,663 $3,131,375 $3,028,570 $3,053,039 $3,518,688 $53,378,922 $101,243,461
USES OF CASH -
PURCHASE PRICE - CURRENT $32,072,794 $32,072,794
CAPITAL EXPENDITURES 544,049 2,416,024 2,168,089 1,968,956 627,440 648,989 671,250 9,044,798
DEBT RETIREMENT 0 0 963,285 1,059,614 2,425,600 1,522,933 10,881,678 16,853,110
TAXES PAID ON NET INCOME 0 0 0 0 0 0 0 0
TAXES PAID ON SALE
(RESIDUAL) 9,492,961 9,492,961
----------- ----------- ----------- ----------- ---------- ----------- ----------- ------------
TOTAL USES OF CASH $32,616,843 $2,416,024 $3,131,375 $3,028,570 $3,053,039 $2,171,923 $21,045,889 $67,463,663
ANNUAL CASH INCREASE/
(DECREASE) $100,361 ($361) $0 ($0) $0 $1,346,765 $32,333,033 $33,779,798
CUMULATIVE CASH 100,361 100,000 100,000 100,000 100,000 1,446,765 33,779,798
</TABLE>
<PAGE> 190
FALCON CABLE SYSTEMS CO. EXHIBIT C
COOS BAY REGION - OREGON LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
<TABLE>
<CAPTION>
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $28,158,684
YEAR 1 DEBT REQUIREMENTS 14,079,342
YEAR 1 EQUITY REQUIREMENTS 14,079,342
FINANCING AVAILABLE $23,968,009 $25,498,561 $26,541,066 $28,358,992 $30,552,044 $32,596,093 $34,195,253
UNUSED LEVERAGE 9,888,667 11,267,580 12,600,257 15,294,636 19,396,802 22,616,675 25,509,241
</TABLE>
<TABLE>
<CAPTION>
SENIOR DEBT: 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BEGINNING DEBT $0 $14,079,342 $14,079,342 $13,195,928 $12,224,173 $11,155,242 $9,979,418
DEBT ADDED 14,079,342 0 0 0 0 0 0 14,079,342
TOTAL ANNUAL PAYMENTS 1,407,934 1,407,934 2,291,348 2,291,348 2,291,348 2,291,348 2,291,348 14,272,609
INTEREST 1,407,934 1,407,934 1,407,934 1,319,593 1,222,417 1,115,524 997,942 8,879,279
PRINCIPAL REPAYMENT 0 0 883,414 971,755 1,068,931 1,175,824 1,293,406 5,393,330
ENDING BALANCE 14,079,342 14,079,342 13,195,928 12,224,173 11,155,242 9,979,418 8,686,012
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $151,639 $744,881 $840,183 $0 $0 $0
BORROWINGS 0 151,639 593,242 95,302 0 0 0 840,183
PRINCIPAL PAYMENTS 0 0 0 0 840,183 0 0 840,183
INTEREST 0 15,164 74,488 84,018 84,018 0 0 257,689
SENIOR DEBT COVERAGE 3.6 3.4 3.0 2.6 2.2 1.9 1.6
LOC DEBT COVERAGE 0.0 0.0 0.2 0.2 0.0 0.0 0.0
TOTAL DEBT COVERAGE 3.6 3.5 3.2 2.8 2.2 1.9 1.6
</TABLE>
<PAGE> 191
FALCON CABLE SYSTEMS CO. EXHIBIT C
COOS BAY REGION - OREGON HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
<TABLE>
<CAPTION>
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $30,704,569
YEAR 1 DEBT REQUIREMENTS 15,352,284
YEAR 1 EQUITY REQUIREMENTS 15,352,284
FINANCING AVAILABLE $27,655,395 $29,421,417 $30,624,307 $32,721,914 $35,252,359 $37,610,877 $39,456,061
UNUSED LEVERAGE 12,303,111 13,775,987 15,103,014 17,891,703 22,847,747 26,729,199 29,984,729
</TABLE>
<TABLE>
<CAPTION>
SENIOR: 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BEGINNING DEBT $0 $15,352,284 $15,352,284 $14,388,999 $13,329,386 $12,163,811 $10,881,678
DEBT ADDED 15,352,284 0 0 0 0 0 0 $15,352,284
TOTAL ANNUAL PAYMENTS 1,535,228 1,535,228 2,498,514 2,498,514 2,498,514 2,498,514 2,498,514 15,563,025
INTEREST 1,535,228 1,535,228 1,535,228 1,438,900 1,332,939 1,216,381 1,088,168 9,682,073
PRINCIPAL REPAYMENT 0 0 963,285 1,059,614 1,165,575 1,282,133 1,410,346 5,880,952
ENDING BALANCE 15,352,284 15,352,284 14,388,999 13,329,386 12,163,811 10,881,678 9,471,332
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $293,145 $1,132,294 $1,500,826 $240,801 $0 $0
BORROWINGS 0 293,145 839,149 368,532 0 0 0 1,500,826
PRINCIPAL PAYMENTS 0 0 0 0 1,260,025 240,801 0 1,500,826
INTEREST 0 29,314 113,229 150,083 150,083 24,080 0 466,789
SENIOR DEBT COVERAGE 3.9 3.8 3.3 2.8 2.4 2.1 1.7
LOC DEBT COVERAGE 0.0 0.1 0.3 0.3 0.0 0.0 0.0
TOTAL DEBT COVERAGE 3.9 3.8 3.6 3.2 2.5 2.1 1.7
</TABLE>
<PAGE> 192
FALCON CABLE SYSTEMS CO. EXHIBIT D
COOS BAY REGION - OREGON
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES $7,499,836 $7,923,595 $8,444,768 $9,025,877 $9,574,462 $10,033,185 $10,483,111 $62,984,835
OPERATING EXPENSES 3,576,981 3,840,354 4,081,846 4,325,562 4,559,679 4,772,376 4,983,987 30,140,786
---------- ---------- ---------- ---------- ---------- ----------- ----------- -----------
OPERATING INCOME 3,922,856 4,083,241 4,362,922 4,700,314 5,014,784 5,260,808 5,499,125 32,844,049
PLUS: RESIDUAL VALUE 49,492,121 49,492,121
LESS: CAPITAL EXPENDITURES 544,049 2,416,024 2,168,089 1,968,956 627,440 648,989 671,250 9,044,798
---------- ---------- ---------- ---------- ---------- ----------- ----------- -----------
TOTAL CASH FLOW $3,378,807 $1,667,217 $2,194,832 $2,731,358 $4,387,344 $4,611,819 $54,319,996 $73,291,372
NET PRESENT VALUE @ 16.6% $29,386,825
-----------
NET PRESENT VALUE @ 15.1% $31,656,216
-----------
</TABLE>
<PAGE> 193
FALCON CABLE SYSTEMS CO. EXHIBIT E
COOS BAY REGION - OREGON
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
- ----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
BEGINNING MILES 444.8
MILES ADDED 3.3 3.4 3.4 3.4 3.6 3.6 3.7
CUMULATIVE MILES 448.1 451.4 454.8 458.2 461.8 465.5 469.1
DENSITY OF ADDITIONAL PLANT 35 35 35 35 33 33 33
HOMES PASSED - BEGINNING 23,663
NEW HOMES & EXTENSIONS 118 119 120 120 121 121 122
HOMES PASSED - ENDING 23,781 23,900 24,020 24,140 24,261 24,382 24,504
GROWTH IN HOMES 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5%
BASIC - BEGINNING SUBSCRIBERS 17,900 18,049 18,199 18,350 18,502 18,655 18,809
AVERAGE SUBSCRIBERS 17,974 18,124 18,274 18,426 18,579 18,732 18,887
ENDING SUBSCRIBERS 18,049 18,199 18,350 18,502 18,655 18,809 18,965
PENETRATION 75.9% 76.1% 76.4% 76.6% 76.9% 77.1% 77.4%
EXPANDED BASIC - BEGINNING 17,424 17,569 17,715 17,862 18,010 18,159 18,309
AVERAGE SUBSCRIBERS 17,496 17,642 17,789 17,936 18,085 18,234 18,385
ENDING SUBSCRIBERS 17,569 17,715 17,862 18,010 18,159 18,309 18,460
PENETRATION 97.3% 97.3% 97.3% 97.3% 97.3% 97.3% 97.3%
NEW PRODUCT TIER #1 - BEGINNING 12,143 12,244 12,346 12,448 12,551 12,655 12,760
AVERAGE SUBSCRIBERS 12,194 12,295 12,397 12,500 12,603 12,708 12,813
ENDING SUBSCRIBERS 12,244 12,346 12,448 12,551 12,655 12,760 12,865
PENETRATION 67.8% 67.8% 67.8% 67.8% 67.8% 67.8% 67.8%
NEW PRODUCT TIER #2 - BEGINNING 1,779 2,335 3,629 5,127 7,019 7,078 7,136
AVERAGE SUBSCRIBERS 2,057 2,982 4,378 6,073 7,048 7,107 7,166
ENDING SUBSCRIBERS 2,335 3,629 5,127 7,019 7,078 7,136 7,195
PENETRATION 12.9% 19.9% 27.9% 37.9% 37.9% 37.9% 37.9%
NEW PRODUCT TIER #3 - BEGINNING 0 0 364 734 1,943 2,612 2,633
AVERAGE SUBSCRIBERS 0 182 549 1,338 2,277 2,623 2,644
ENDING SUBSCRIBERS 0 364 734 1,943 2,612 2,633 2,655
PENETRATION 0.0% 2.0% 4.0% 10.5% 14.0% 14.0% 14.0%
PAY TV - BEGINNING UNITS 7,024 6,902 7,141 7,384 7,445 7,507 7,569
AVERAGE UNITS 6,963 7,022 7,263 7,415 7,476 7,538 7,600
ENDING UNITS 6,902 7,141 7,384 7,445 7,507 7,569 7,631
PENETRATION 38.2% 39.2% 40.2% 40.2% 40.2% 40.2% 40.2%
PAY PER VIEW - BEGINNING UNITS/MO 1,745 1,903 2,535 3,170 3,816 4,219 4,647
AVERAGE UNITS 1,824 2,219 2,852 3,493 4,017 4,433 4,812
ENDING UNITS 1,903 2,535 3,170 3,816 4,219 4,647 4,978
AVERAGE BUY RATE/MO 32.1% 34.1% 36.1% 37.6% 39.1% 40.6% 42.1%
CONVERTER RENTALS - BEGINNING UNIT 8,268 8,517 9,134 9,760 10,396 11,042 11,698
AVERAGE SUBSCRIBERS 8,393 8,826 9,447 10,078 10,719 11,370 12,030
ENDING SUBSCRIBERS 8,517 9,134 9,760 10,396 11,042 11,698 12,363
PENETRATION 47.2% 50.2% 53.2% 56.2% 59.2% 62.2% 65.2%
ADDRESSABLE HOMES 5,611 5,928 7,434 8,780 10,148 10,791 11,445
AVERAGE HOMES 5,770 6,681 8,107 9,464 10,470 11,118 11,634
ENDING HOMES 5,928 7,434 8,780 10,148 10,791 11,445 11,824
PENETRATION 32.8% 40.8% 47.8% 54.8% 57.8% 60.8% 62.3%
BASIC CHURN RATE 32% 32% 32% 32% 32% 32% 32%
</TABLE>
<PAGE> 194
FALCON CABLE SYSTEMS CO. EXHIBIT F
COOS BAY REGION - OREGON
AS OF DECEMBER 31, 1995
SERVICE RATES
<TABLE>
<CAPTION>
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- ------------- ------------- -------------
<S> <C> <C>
BASIC $17.24 $18.15
EXPANDED BASIC $3.78 $4.33
NEW PRODUCT TIER #1 $4.37 $4.71
NEW PRODUCT TIER #2 $5.00 $5.00
NEW PRODUCT TIER #3 $4.00 $4.00
PAY $6.41 $6.41
PAY PER VIEW $5.35 $5.35
CONVERTER RENTALS $2.08 $1.94
INSTALLATIONS-NEW $50.00 $50.00
INSTALLATIONS-CHURN $25.00 $25.00
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 5% 3% 3% 3% 3% 3% 3%
EXPANDED BASIC 15% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #1 8% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #3 0% 3% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1% 1%
PAY PER VIEW 0% 3% 3% 3% 3% 3% 3%
CONVERTER/REMOTE RENTALS -7% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $18.15 $18.69 $19.25 $19.83 $20.42 $21.04 $21.67
EXPANDED BASIC 4.33 4.46 4.59 4.73 4.87 5.02 5.17
NEW PRODUCT TIER #1 4.71 4.85 5.00 5.15 5.30 5.46 5.63
NEW PRODUCT TIER #2 5.00 5.15 5.30 5.46 5.63 5.80 5.97
NEW PRODUCT TIER #3 4.00 4.12 4.24 4.37 4.50 4.64 4.78
PAY 6.41 6.47 6.54 6.60 6.67 6.74 6.80
PAY PER VIEW 5.35 5.51 5.67 5.84 6.02 6.20 6.39
CONVERTERS RENTALS 1.94 2.00 2.06 2.12 2.18 2.25 2.32
INSTALLATIONS-NEW 50.00 51.50 53.05 54.64 56.28 57.96 59.70
INSTALLATIONS-CHURN 25.00 25.75 26.52 27.32 28.14 28.98 29.85
</TABLE>
<PAGE> 195
FALCON CABLE SYSTEMS CO. EXHIBIT G
COOS BAY REGION - OREGON
AS OF DECEMBER 31, 1995
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10.47
13.04 15.84 18.85 21.97 25.06 27.83 30.37
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
REVENUES:
BASIC $3,914,100 $4,065,049 $4,221,774 $4,384,494 $4,553,437 $4,728,839 $4,910,947 $30,778,640
EXPANDED BASIC 908,426 943,459 979,834 1,017,599 1,056,809 1,097,519 1,139,784 7,143,430
NEW PRODUCT TIER #1 689,424 716,012 743,617 772,278 802,036 832,931 865,007 5,421,304
NEW PRODUCT TIER #2 123,428 184,284 278,656 398,173 475,987 494,323 513,359 2,468,210
NEW PRODUCT TIER #3 0 8,998 27,956 70,198 123,026 145,931 151,551 527,660
PAY TV 535,549 545,460 569,828 587,571 598,362 609,346 620,524 4,066,640
PAY PER VIEW 117,054 146,669 194,181 244,910 290,174 329,793 368,744 1,691,527
CONVERTER RENTALS 195,298 211,536 233,225 256,271 280,743 306,717 334,273 1,818,063
INSTALLATIONS 120,276 124,906 129,713 134,704 139,886 145,265 150,850 945,601
COMMERCIAL 180,101 185,504 191,069 196,801 202,705 208,786 215,050 1,380,014
ADVERTISING 234,370 287,103 344,524 404,816 465,538 521,402 573,543 2,831,296
MISCELLANEOUS 481,812 504,615 530,390 558,062 585,759 612,332 639,480 3,912,450
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
TOTAL REVENUES $7,499,836 $7,923,595 $8,444,768 $9,025,877 $9,574,462 $10,033,185 $10,483,111 $62,984,835
OPERATING EXPENSES:
OPERATIONS $1,196,962 $1,249,151 $1,307,749 $1,370,303 $1,432,593 $1,491,797 $1,551,946 $9,600,500
GENERAL & ADMINISTRATIVE 698,451 726,694 757,355 789,832 822,602 854,733 887,618 5,537,283
SALES & MARKETING 326,286 438,458 493,157 537,082 581,692 624,202 665,232 3,666,110
PROGRAMMING 1,355,282 1,426,052 1,523,585 1,628,347 1,722,792 1,801,645 1,879,190 11,336,892
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
TOTAL OPERATING EXPENSES $3,576,981 $3,840,354 $4,081,846 $4,325,562 $4,559,679 $4,772,376 $4,983,987 $30,140,786
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
OPERATING INCOME $3,922,856 $4,083,241 $4,362,922 $4,700,314 $5,014,784 $5,260,808 $5,499,125 $32,844,049
OPERATING MARGIN 52.3% 51.5% 51.7% 52.1% 52.4% 52.4% 52.5%
TOTAL REVENUE/BASIC SUB/MONTH $34.77 $36.43 $38.51 $40.82 $42.95 $44.63 $46.25
CASH FLOW/BASIC SUB/MONTH $18.19 $18.77 $19.90 $21.26 $22.49 $23.40 $24.26
16% 16% 15% 15% 15% 15% 15%
G & A PERCENTAGE OF REVENUE 9% 9% 9% 9% 9% 9% 8%
SALES & MARKETING % OF REVENUE 4.4% 5.5% 5.8% 6.0% 6.1% 6.2% 6.3%
PROGRAMMING % OF REVENUE 18% 18% 18% 18% 18% 18% 18%
</TABLE>
<PAGE> 196
FALCON CABLE SYSTEMS CO. EXHIBIT H
COOS BAY REGION - OREGON
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
- --------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT $6,830,072
ADDITIONAL MILES OF PLANT 3.3 3.4 3.4 3.4 3.6 3.6 3.7
AERIAL PLANT PER MILE $12,000 $12,240 $12,485 $12,734 $12,989 $13,249 $13,514
UNDERGROUND PLANT PER MILE $18,000 $18,360 $18,727 $19,102 $19,484 $19,873 $20,271
PERCENTAGE OF PLANT AERIAL 20% 20% 20% 20% 20% 20% 20%
PERCENTAGE OF PLANT UNDERGROUND 80% 80% 80% 80% 80% 80% 80%
AVERAGE COST PER CONVERTER $110 $112 $114 $117 $119 $121 $124
PERCENTAGE CONVERTER USE 47.2% 50% 53% 56% 59% 62% 65%
PERCENTAGE REPLACEMENT 5% 5% 5% 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $55 $56 $57 $58 $60 $61 $62
MISC. CAPITAL PER SUBSCRIBER $5 $5 $5 $5 $5 $6 $6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2% 2% 2% 2% 115%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $8,006 $8,207 $8,413 $8,624 $9,430 $9,666 $9,909 $62,253
- UNDERGROUND 48,034 49,240 50,476 51,743 56,577 57,998 59,453 373,520
PLANT REBUILD/UPGRADE/INCL. HDND. 22,683 1,876,475 1,609,750 1,391,200 25,495 26,210 26,945 4,978,758
AVERAGE COST OF NEW CONVERTERS 7,732 8,447 9,194 9,977 10,794 11,649 12,542 70,335
CONVERTER REPLACEMENT 46,459 50,820 55,391 60,181 65,198 70,451 75,949 424,447
INSTALLATION COSTS 321,263 330,404 339,802 349,463 359,395 369,605 380,102 2,450,036
MISC. CAPITAL EXPENDITURES 89,872 92,432 95,064 97,769 100,551 103,410 106,350 685,449
TOTAL CAPITAL EXPENDITURES $544,049 $2,416,024 $2,168,089 $1,968,956 $627,440 $648,989 $671,250 $9,044,798
AS A % OF OPERATING INCOME 13.9% 59.2% 49.7% 41.9% 12.5% 12.3% 12.2%
</TABLE>
<PAGE> 197
FALCON CABLE SYSTEMS CO. EXHIBIT I
COOS BAY REGION - OREGON
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
ESTIMATED DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5% 8.9% 8.9% 8.9%
</TABLE>
<TABLE>
<CAPTION>
DEPRECIATION - BEG. & ADTNS. 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR 1 $1,053,762 $1,805,922 $1,289,734 $921,028 $658,509 $657,772 $658,509 $7,045,235
YEAR 2 345,250 591,684 422,563 301,761 215,751 215,509 2,092,519
YEAR 3 309,820 530,965 379,199 270,794 193,610 1,684,389
YEAR 4 281,364 482,197 344,370 245,923 1,353,854
YEAR 5 89,661 153,660 109,739 353,060
YEAR 6 92,741 158,938 251,678
YEAR 7 95,922 95,922
TOTAL DEPRECIATION $1,053,762 $2,151,172 $2,191,238 $2,155,919 $1,911,328 $1,735,088 $1,678,150 $12,876,657
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
</TABLE>
<PAGE> 198
FALCON CABLE SYSTEMS CO. EXHIBIT J
COOS BAY REGION - OREGON
AS OF DECEMBER 31, 1995
ASSUMPTIONS AND INPUTS
- ----------------------
<TABLE>
<S> <C>
REMAINING LIFE OF FRANCHISES (YEARS) 7
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $6,830,072
SUBSCRIBERS IN FRANCHISES 100%
</TABLE>
<TABLE>
<CAPTION>
LOW HIGH
ANALYSIS ANALYSIS
-------- --------
<S> <C> <C>
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
</TABLE>
<PAGE> 199
DALLAS, OR
<PAGE> 200
FALCON CABLE SYSTEMS CO. EXHIBIT A
DALLAS REGION - OREGON
AS OF DECEMBER 31, 1995
VALUATION METHODS
- -----------------
<TABLE>
<CAPTION>
LOW HIGH
---------- ----------
<S> <C> <C>
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
ADJUSTED OPERATING INCOME, PER BOOKS (DECEMBER 31, 1995) $ 3,664,003 $ 3,664,003
VALUATION MULTIPLE 10.5 11.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $38,472,032 $42,136,035
----------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $ 6,190,695 $ 6,190,695
OPERATING MARGIN, PER BOOKS (DECEMBER 31, 1995) 60.2% 60.2%
----------- -----------
"RUNNING RATE" OPERATING INCOME 3,728,656 3,728,656
VALUATION MULTIPLE 10.0 11.0
----------- -----------
ESTIMATED FAIR MARKET VALUE $37,286,555 $41,015,211
----------- -----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $ 3,962,160 $ 3,962,160
VALUATION MULTIPLE 9.5 10.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $37,640,524 $41,602,684
----------- -----------
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $31,469,600 $34,160,482
----------- -----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVSTMT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $31,009,915 $33,500,707
----------- -----------
SUMMARY OF VALUES
- -----------------
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $38,472,032 $42,136,035
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 37,286,555 41,015,211
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 37,640,524 41,602,684
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 31,469,600 34,160,482
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 31,009,915 33,500,707
----------- -----------
RANGE OF ESTIMATED FAIR MARKET VALUES $33,789,000 $36,878,000
ESTIMATED FAIR MARKET VALUE $35,334,000
-----------
</TABLE>
<PAGE> 201
FALCON CABLE SYSTEMS CO. EXHIBIT B
DALLAS REGION - OREGON LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES $6,671,920 $7,164,985 $7,802,502 $8,481,542
OPERATING EXPENSES 2,709,760 2,923,366 3,170,665 3,439,033
---------- ---------- ---------- ----------
OPERATING INCOME $3,962,160 $4,241,619 $4,631,838 $5,042,508
OPERATING MARGIN 0.59 0.59 0.59 0.59
PARENT SERVICES/MGT FEE (5%) 333,596 358,249 390,125 424,077
FRANCHISE AMORTIZATION (15) 1,298,800 1,298,800 1,298,800 1,298,800
SUBSCRIBER LIST (8) 402,267 402,267 402,267 402,267
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,254,936 2,634,296 2,869,764 2,667,109
INTEREST 1,519,872 1,633,247 1,842,049 1,746,684
---------- ---------- ---------- ----------
PRE-TAX INCOME ($847,310) ($2,085,239) ($2,171,167) ($1,496,429)
INCOME TAX (EXPENSE)/BENEFIT 288,085 708,981 738,197 508,786
---------- ---------- ---------- ----------
NET INCOME ($559,225) ($1,376,258) ($1,432,970) ($987,643)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($847,310) ($2,085,239) ($2,171,167) ($1,496,429)
FRANCHISE AMORTIZATION (15) 1,298,800 1,298,800 1,298,800 1,298,800
SUBSCRIBER LIST (8) 402,267 402,267 402,267 402,267
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,254,936 2,634,296 2,869,764 2,667,109
EQUITY 15,198,715
DEBT 15,198,715 1,133,754 2,088,021 0
RESIDUAL VALUE IN YEAR 7
---------- ---------- ---------- ----------
TOTAL SOURCES OF CASH $32,506,124 $3,383,877 $4,487,685 $2,871,747
USES OF CASH -
PURCHASE PRICE - CURRENT $31,469,600
CAPITAL EXPENDITURES 936,193 3,384,208 3,534,035 789,812
DEBT RETIREMENT 0 0 953,649 2,081,935
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
---------- ---------- ---------- ----------
TOTAL USES OF CASH $32,405,792 $3,384,208 $4,487,685 $2,871,747
ANNUAL CASH INCREASE/(DECREASE) $100,331 ($331) $0 ($0)
CUMULATIVE CASH 100,331 100,000 100,000 100,000
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES $9,145,030 $9,786,141 $10,403,766 $59,455,887
OPERATING EXPENSES 3,706,819 3,973,497 4,242,635 24,165,775
---------- ---------- ---------- ----------
OPERATING INCOME $5,438,211 $5,812,644 $6,161,131 $35,290,111
OPERATING MARGIN 0.59 0.59 0.59
PARENT SERVICES/MGT FEE (5%) 457,251 489,307 520,188 2,972,794
FRANCHISE AMORTIZATION (15) 1,298,800 1,298,800 1,298,800 9,091,600
SUBSCRIBER LIST (8) 402,267 402,267 402,267 2,815,867
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 2,138,850 1,998,349 1,998,476 15,561,781
INTEREST 1,538,491 1,278,505 1,077,283 10,636,130
---------- ---------- ---------- ----------
PRE-TAX INCOME ($397,448) $345,416 $864,117 ($5,788,060)
INCOME TAX (EXPENSE)/BENEFIT 135,132 (117,441) (293,800) 1,967,941
---------- ---------- ---------- ----------
NET INCOME ($262,316) $227,975 $570,317 ($3,820,120)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($397,448) $345,416 $864,117 ($5,788,060)
FRANCHISE AMORTIZATION (15) 1,298,800 1,298,800 1,298,800 9,091,600
SUBSCRIBER LIST (8) 402,267 402,267 402,267 2,815,867
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 2,138,850 1,998,349 1,998,476 15,561,781
EQUITY 15,198,715
DEBT 0 0 0 18,420,490
RESIDUAL VALUE IN YEAR 7 55,450,179 55,450,179
---------- ---------- ---------- ----------
TOTAL SOURCES OF CASH $3,442,469 $4,044,832 $60,013,839 $110,750,571
USES OF CASH -
PURCHASE PRICE - CURRENT $31,469,600
CAPITAL EXPENDITURES 842,613 888,014 932,782 11,307,657
DEBT RETIREMENT 2,599,856 2,012,221 10,772,828 18,420,490
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 11,680,397 11,680,397
---------- ---------- ---------- ----------
TOTAL USES OF CASH $3,442,469 $2,900,235 $23,386,008 $72,878,144
ANNUAL CASH INCREASE/(DECREASE) $0 $1,144,597 $36,627,831 $37,872,428
CUMULATIVE CASH 100,000 1,244,597 37,872,428
</TABLE>
<PAGE> 202
FALCON CABLE SYSTEMS CO. EXHIBIT B
DALLAS REGION - OREGON HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES $6,671,920 $7,164,985 $7,802,502 $8,481,542
OPERATING EXPENSES 2,709,760 2,923,366 3,170,665 3,439,033
---------- ---------- ---------- ----------
OPERATING INCOME $3,962,160 $4,241,619 $4,631,838 $5,042,508
OPERATING MARGIN 0.59 0.59 0.59 0.59
PARENT SERVICES/MGT FEE (5%) 333,596 358,249 390,125 424,077
FRANCHISE AMORTIZATION (15) 1,298,800 1,298,800 1,298,800 1,298,800
SUBSCRIBER LIST (8) 402,267 402,267 402,267 402,267
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,254,936 2,634,296 2,869,764 2,667,109
INTEREST 1,661,498 1,790,608 2,026,768 1,922,517
---------- ---------- ---------- ----------
PRE-TAX INCOME ($988,936) ($2,242,600) ($2,355,886) ($1,672,261)
INCOME TAX (EXPENSE)/BENEFIT 336,238 762,484 801,001 568,569
---------- ---------- ---------- ----------
NET INCOME ($652,698) ($1,480,116) ($1,554,885) ($1,103,693)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($988,936) ($2,242,600) ($2,355,886) ($1,672,261)
FRANCHISE AMORTIZATION (15) 1,298,800 1,298,800 1,298,800 1,298,800
SUBSCRIBER LIST (8) 402,267 402,267 402,267 402,267
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,254,936 2,634,296 2,869,764 2,667,109
EQUITY 16,614,975
DEBT 16,614,975 1,291,103 2,361,604 0
RESIDUAL VALUE IN YEAR 7
---------- ---------- ---------- ----------
TOTAL SOURCES OF CASH $35,197,017 $3,383,865 $4,576,548 $2,695,914
USES OF CASH -
PURCHASE PRICE - CURRENT $34,160,482
CAPITAL EXPENDITURES 936,193 3,384,208 3,534,035 789,812
DEBT RETIREMENT 0 0 1,042,513 1,906,102
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
---------- ---------- ---------- ----------
TOTAL USES OF CASH $35,096,674 $3,384,208 $4,576,548 $2,695,914
ANNUAL CASH INCREASE/(DECREASE) $100,343 ($343) $0 ($0)
CUMULATIVE CASH 100,343 100,000 100,000 100,000
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES $9,145,030 $9,786,141 $10,403,766 $59,455,887
OPERATING EXPENSES 3,706,819 3,973,497 4,242,635 24,165,775
---------- ---------- ---------- ----------
OPERATING INCOME $5,438,211 $5,812,644 $6,161,131 $35,290,111
OPERATING MARGIN 0.59 0.59 0.59
PARENT SERVICES/MGT FEE (5%) 457,251 489,307 520,188 2,972,794
FRANCHISE AMORTIZATION (15) 1,298,800 1,298,800 1,298,800 9,091,600
SUBSCRIBER LIST (8) 402,267 402,267 402,267 2,815,867
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 2,138,850 1,998,349 1,998,476 15,561,781
INTEREST 1,731,907 1,491,263 1,196,857 11,821,416
---------- ---------- ---------- ----------
PRE-TAX INCOME ($590,864) $132,658 $744,544 ($6,973,347)
INCOME TAX (EXPENSE)/BENEFIT 200,894 (45,104) (253,145) 2,370,938
---------- ---------- ---------- ----------
NET INCOME ($389,970) $87,554 $491,399 ($4,602,409)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($590,864) $132,658 $744,544 ($6,973,347)
FRANCHISE AMORTIZATION (15) 1,298,800 1,298,800 1,298,800 9,091,600
SUBSCRIBER LIST (8) 402,267 402,267 402,267 2,815,867
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 2,138,850 1,998,349 1,998,476 15,561,781
EQUITY 16,614,975
DEBT 0 0 0 20,267,682
RESIDUAL VALUE IN YEAR 7 55,450,179 55,450,179
---------- ---------- ---------- ----------
TOTAL SOURCES OF CASH $3,249,053 $3,832,074 $59,894,265 $112,828,737
USES OF CASH -
PURCHASE PRICE - CURRENT $34,160,482
CAPITAL EXPENDITURES 842,613 888,014 932,782 11,307,657
DEBT RETIREMENT 2,406,440 2,944,060 11,968,566 20,267,682
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 10,362,500 10,362,500
---------- ---------- ---------- ----------
TOTAL USES OF CASH $3,249,053 $3,832,074 $23,263,849 $76,098,320
ANNUAL CASH INCREASE/(DECREASE) $0 $0 $36,630,416 $36,730,416
CUMULATIVE CASH 100,000 100,000 36,730,416
</TABLE>
<PAGE> 203
FALCON CABLE SYSTEMS CO. EXHIBIT C
DALLAS REGION - OREGON LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
<TABLE>
<S> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $30,397,431
YEAR 1 DEBT REQUIREMENTS 15,198,715
YEAR 1 EQUITY REQUIREMENTS 15,198,715
FINANCING AVAILABLE $23,816,020 $25,754,042 $27,570,525 $30,106,944
UNUSED LEVERAGE 8,617,304 9,421,573 10,103,684 14,722,038
SENIOR DEBT: 1996 1997 1998 1999
---------- ----------- ----------- -----------
BEGINNING DEBT $0 $15,198,715 $15,198,715 $14,245,066
DEBT ADDED 15,198,715 0 0 0
TOTAL ANNUAL PAYMENTS 1,519,872 1,519,872 2,473,521 2,473,521
INTEREST 1,519,872 1,519,872 1,519,872 1,424,507
PRINCIPAL REPAYMENT 0 0 953,649 1,049,014
ENDING BALANCE 15,198,715 15,198,715 14,245,066 13,196,052
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $1,133,754 $3,221,775
BORROWINGS 0 1,133,754 2,088,021 0
PRINCIPAL PAYMENTS 0 0 0 1,032,921
INTEREST 0 113,375 322,177 322,177
SENIOR DEBT COVERAGE 3.8 3.6 3.1 2.6
LOC DEBT COVERAGE 0.0 0.3 0.7 0.4
TOTAL DEBT COVERAGE 3.8 3.9 3.8 3.1
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $32,776,305 $35,348,370 $37,782,186
UNUSED LEVERAGE 19,991,255 24,575,541 28,405,596
SENIOR DEBT: 2000 2001 2002 TOTAL
----------- ----------- ----------- ----------
BEGINNING DEBT $13,196,052 $12,042,136 $10,772,828
DEBT ADDED 0 0 0 15,198,715
TOTAL ANNUAL PAYMENTS 2,473,521 2,473,521 2,473,521 15,407,348
INTEREST 1,319,605 1,204,214 1,077,283 9,585,223
PRINCIPAL REPAYMENT 1,153,916 1,269,307 1,396,238 5,822,125
ENDING BALANCE 12,042,136 10,772,828 9,376,590
LINE OF CREDIT:
BEGINNING DEBT $2,188,854 $742,914 $0 $0
BORROWINGS 0 0 0 3,221,775
PRINCIPAL PAYMENTS 1,445,940 742,914 0 3,221,775
INTEREST 218,885 74,291 0 1,050,907
SENIOR DEBT COVERAGE 2.2 1.9 1.5
LOC DEBT COVERAGE 0.1 0.0 0.0
TOTAL DEBT COVERAGE 2.4 1.9 1.5
</TABLE>
<PAGE> 204
FALCON CABLE SYSTEMS CO. EXHIBIT C
DALLAS REGION - OREGON HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
<TABLE>
<S> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $33,229,950
YEAR 1 DEBT REQUIREMENTS 16,614,975
YEAR 1 EQUITY REQUIREMENTS 16,614,975
FINANCING AVAILABLE $27,480,023 $29,716,203 $31,812,144 $34,738,782
UNUSED LEVERAGE 10,865,047 11,810,125 12,586,976 17,419,715
SENIOR: 1996 1997 1998 1999
---------- ----------- ----------- -----------
BEGINNING DEBT $0 $16,614,975 $16,614,975 $15,572,462
DEBT ADDED 16,614,975 0 0 0
TOTAL ANNUAL PAYMENTS 1,661,498 1,661,498 2,704,011 2,704,011
INTEREST 1,661,498 1,661,498 1,661,498 1,557,246
PRINCIPAL REPAYMENT 0 0 1,042,513 1,146,764
ENDING BALANCE 16,614,975 16,614,975 15,572,462 14,425,697
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $1,291,103 $3,652,707
BORROWINGS 0 1,291,103 2,361,604 0
PRINCIPAL PAYMENTS 0 0 0 759,338
INTEREST 0 129,110 365,271 365,271
SENIOR DEBT COVERAGE 4.2 3.9 3.4 2.9
LOC DEBT COVERAGE 0.0 0.3 0.8 0.6
TOTAL DEBT COVERAGE 4.2 4.2 4.2 3.4
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $37,818,813 $40,786,580 $43,594,830
UNUSED LEVERAGE 22,906,186 29,009,909 33,344,502
SENIOR: 2000 2001 2002 TOTAL
----------- ----------- ----------- -----------
BEGINNING DEBT $14,425,697 $13,164,256 $11,776,671
DEBT ADDED 0 0 0 $16,614,975
TOTAL ANNUAL PAYMENTS 2,704,011 2,704,011 2,704,011 16,843,048
INTEREST 1,442,570 1,316,426 1,177,667 10,478,401
PRINCIPAL REPAYMENT 1,261,441 1,387,585 1,526,344 6,364,647
ENDING BALANCE 13,164,256 11,776,671 10,250,328
LINE OF CREDIT:
BEGINNING DEBT $2,893,369 $1,748,370 $191,895 $0
BORROWINGS 0 0 0 3,652,707
PRINCIPAL PAYMENTS 1,144,999 1,556,475 191,895 3,652,707
INTEREST 289,337 174,837 19,189 1,343,015
SENIOR DEBT COVERAGE 2.4 2.0 1.7
LOC DEBT COVERAGE 0.3 0.0 0.0
TOTAL DEBT COVERAGE 2.7 2.1 1.7
</TABLE>
<PAGE> 205
FALCON CABLE SYSTEMS CO. EXHIBIT D
DALLAS REGION - OREGON
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES $6,671,920 $7,164,985 $7,802,502 $8,481,542
OPERATING EXPENSES 2,709,760 2,923,366 3,170,665 3,439,033
---------- ---------- ---------- ----------
OPERATING INCOME 3,962,160 4,241,619 4,631,838 5,042,508
PLUS: RESIDUAL VALUE
LESS: CAPITAL EXPENDITURES 936,193 3,384,208 3,534,035 789,812
---------- ---------- ---------- ----------
TOTAL CASH FLOW $3,025,968 $857,411 $1,097,802 $4,252,696
NET PRESENT VALUE @ 16.6% $31,009,915
----------
NET PRESENT VALUE @ 15.1% $33,500,707
----------
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---------- ---------- ----------- -----------
REVENUES $9,145,030 $9,786,141 $10,403,766 $59,455,887
OPERATING EXPENSES 3,706,819 3,973,497 4,242,635 24,165,775
OPERATING INCOME 5,438,211 5,812,644 6,161,131 35,290,111
PLUS: RESIDUAL VALUE 55,450,179 55,450,179
LESS: CAPITAL EXPENDITURES 842,613 888,014 932,782 11,307,657
TOTAL CASH FLOW $4,595,598 $4,924,630 $60,678,528 $79,432,634
NET PRESENT VALUE @ 16.6%
NET PRESENT VALUE @ 15.1%
</TABLE>
<PAGE> 206
FALCON CABLE SYSTEMS CO. EXHIBIT E
DALLAS REGION - OREGON
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
- ----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
------ ----- ----- -----
<S> <C> <C> <C> <C>
BEGINNING MILES 466.6
MILES ADDED 13.0 13.0 13.5 13.5
CUMULATIVE MILES 479.6 492.6 506.1 519.6
DENSITY OF ADDITIONAL PLANT 37 37 37 37
HOMES PASSED - BEGINNING 23,770
NEW HOMES & EXTENSIONS 475 485 495 504
HOMES PASSED - ENDING 24,245 24,730 25,225 25,729
GROWTH IN HOMES 2.0% 2.0% 2.0% 2.0%
BASIC - BEGINNING SUBSCRIBERS 16,928 17,388 17,859 18,343
AVERAGE SUBSCRIBERS 17,158 17,623 18,101 18,558
ENDING SUBSCRIBERS 17,388 17,859 18,343 18,774
PENETRATION 71.7% 72.2% 72.7% 73.0%
EXPANDED BASIC - BEGINNING 12,481 12,820 13,168 13,524
AVERAGE SUBSCRIBERS 12,651 12,994 13,346 13,683
ENDING SUBSCRIBERS 12,820 13,168 13,524 13,842
PENETRATION 73.7% 73.7% 73.7% 73.7%
NEW PRODUCT TIER #1 - BEGINNING 7,458 7,834 8,493 9,182
AVERAGE SUBSCRIBERS 7,646 8,164 8,838 9,290
ENDING SUBSCRIBERS 7,834 8,493 9,182 9,398
PENETRATION 45.1% 47.6% 50.1% 50.1%
NEW PRODUCT TIER #2 - BEGINNING 0 0 536 1,834
AVERAGE SUBSCRIBERS 0 268 1,185 2,325
ENDING SUBSCRIBERS 0 536 1,834 2,816
PENETRATION 0.0% 3.0% 10.0% 15.0%
NEW PRODUCT TIER #3 - BEGINNING 0 0 536 1,834
AVERAGE SUBSCRIBERS 0 268 1,185 2,325
ENDING SUBSCRIBERS 0 536 1,834 2,816
PENETRATION 0.0% 3.0% 10.0% 15.0%
PAY TV - BEGINNING UNITS 7,380 7,407 7,786 8,180
AVERAGE UNITS 7,393 7,596 7,983 8,276
ENDING UNITS 7,407 7,786 8,180 8,372
PENETRATION 42.6% 43.6% 44.6% 44.6%
PAY PER VIEW - BEGINNING UNITS/MO 359 515 833 1,401
AVERAGE UNITS 437 674 1,117 1,716
ENDING UNITS 515 833 1,401 2,031
AVERAGE BUY RATE/MO 6.8% 9.8% 14.8% 19.8%
CONVERTER RENTALS - BEG. 7,977 8,368 9,130 9,928
AVERAGE SUBSCRIBERS 8,172 8,749 9,529 10,326
ENDING SUBSCRIBERS 8,368 9,130 9,928 10,724
PENETRATION 48.1% 51.1% 54.1% 57.1%
ADDRESSABLE HOMES 6,810 7,604 8,524 9,488
AVERAGE HOMES 7,207 8,064 9,006 9,882
ENDING HOMES 7,604 8,524 9,488 10,275
PENETRATION 43.7% 47.7% 51.7% 54.7%
BASIC CHURN RATE 28% 28% 28% 28%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2000 2001 2002
------ ----- -----
<S> <C> <C> <C>
BEGINNING MILES
MILES ADDED 14.5 15.0 15.5
CUMULATIVE MILES 534.1 549.1 564.6
DENSITY OF ADDITIONAL PLANT 35 35 35
HOMES PASSED - BEGINNING
NEW HOMES & EXTENSIONS 515 525 535
HOMES PASSED - ENDING 26,244 26,769 27,304
GROWTH IN HOMES 2.0% 2.0% 2.0%
BASIC - BEGINNING SUBSCRIBERS 18,774 19,215 19,666
AVERAGE SUBSCRIBERS 18,994 19,440 19,897
ENDING SUBSCRIBERS 19,215 19,666 20,128
PENETRATION 73.2% 73.5% 73.7%
EXPANDED BASIC - BEGINNING 13,842 14,167 14,500
AVERAGE SUBSCRIBERS 14,004 14,333 14,670
ENDING SUBSCRIBERS 14,167 14,500 14,840
PENETRATION 73.7% 73.7% 73.7%
NEW PRODUCT TIER #1 - BEGINNING 9,398 9,618 9,844
AVERAGE SUBSCRIBERS 9,508 9,731 9,960
ENDING SUBSCRIBERS 9,618 9,844 10,075
PENETRATION 50.1% 50.1% 50.1%
NEW PRODUCT TIER #2 - BEGINNING 2,816 3,843 3,933
AVERAGE SUBSCRIBERS 3,330 3,888 3,979
ENDING SUBSCRIBERS 3,843 3,933 4,026
PENETRATION 20.0% 20.0% 20.0%
NEW PRODUCT TIER #3 - BEGINNING 2,816 3,843 3,933
AVERAGE SUBSCRIBERS 3,330 3,888 3,979
ENDING SUBSCRIBERS 3,843 3,933 4,026
PENETRATION 20.0% 20.0% 20.0%
PAY TV - BEGINNING UNITS 8,372 8,569 8,770
AVERAGE UNITS 8,471 8,670 8,873
ENDING UNITS 8,569 8,770 8,976
PENETRATION 44.6% 44.6% 44.6%
PAY PER VIEW - BEGINNING UNITS/MO 2,031 2,581 3,171
AVERAGE UNITS 2,306 2,876 3,496
ENDING UNITS 2,581 3,171 3,822
AVERAGE BUY RATE/MO 23.3% 26.8% 30.3%
CONVERTER RENTALS - BEG. 10,724 11,553 12,414
AVERAGE SUBSCRIBERS 11,138 11,983 12,710
ENDING SUBSCRIBERS 11,553 12,414 13,007
PENETRATION 60.1% 63.1% 64.6%
ADDRESSABLE HOMES 10,275 11,093 11,845
AVERAGE HOMES 10,684 11,469 12,235
ENDING HOMES 11,093 11,845 12,626
PENETRATION 57.7% 60.2% 62.7%
BASIC CHURN RATE 28% 28% 28%
</TABLE>
<PAGE> 207
FALCON CABLE SYSTEMS CO. EXHIBIT F
DALLAS REGION - OREGON
AS OF DECEMBER 31, 1995
SERVICE RATES
- -------------
<TABLE>
<CAPTION>
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- ------------- ------------- -------------
<S> <C> <C>
BASIC $16.47 $17.15
EXPANDED BASIC $5.94 $6.82
NEW PRODUCT TIER #1 $4.35 $5.47
NEW PRODUCT TIER #2 $4.00 $4.00
NEW PRODUCT TIER #3 $4.00 $4.00
PAY $6.96 $6.96
PAY PER VIEW $9.99 $6.96
CONVERTER RENTALS $0.70 $0.96
INSTALLATIONS-NEW $50.00 $50.00
INSTALLATIONS-CHURN $25.00 $25.00
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 4% 3% 3% 3% 3% 3% 3%
EXPANDED BASIC 15% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #1 26% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #3 0% 3% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1% 1%
PAY PER VIEW 0% 3% 3% 3% 3% 3% 3%
CONVERTER/REMOTE RENTALS 37% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $17.15 $17.67 $18.20 $18.74 $19.31 $19.89 $20.48
EXPANDED BASIC 6.82 7.03 7.24 7.45 7.68 7.91 8.15
NEW PRODUCT TIER #1 5.47 5.63 5.80 5.97 6.15 6.34 6.53
NEW PRODUCT TIER #2 4.00 4.12 4.24 4.37 4.50 4.64 4.78
NEW PRODUCT TIER #3 4.00 4.12 4.24 4.37 4.50 4.64 4.78
PAY 6.96 7.03 7.10 7.17 7.24 7.31 7.39
PAY PER VIEW 9.99 10.29 10.59 10.91 11.24 11.58 11.92
CONVERTERS RENTALS 0.96 0.99 1.02 1.05 1.09 1.12 1.15
INSTALLATIONS-NEW 50.00 51.50 53.05 54.64 56.28 57.96 59.70
INSTALLATIONS-CHURN 25.00 25.75 26.52 27.32 28.14 28.98 29.85
</TABLE>
<PAGE> 208
FALCON CABLE SYSTEMS CO. EXHIBIT G
DALLAS REGION - OREGON
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES:
BASIC $3,531,731 $3,736,395 $3,952,729 $4,174,155
EXPANDED BASIC 1,035,600 1,095,613 1,159,048 1,223,977
NEW PRODUCT TIER #1 501,690 551,725 615,168 666,039
NEW PRODUCT TIER #2 0 13,244 60,345 121,956
NEW PRODUCT TIER #3 0 13,244 60,345 121,956
PAY TV 617,483 640,781 680,140 712,172
PAY PER VIEW 52,349 83,168 142,029 224,763
CONVERTER RENTALS 94,583 104,294 116,999 130,588
INSTALLATIONS 113,515 120,058 126,972 131,273
COMMERCIAL 236,291 243,380 250,681 258,202
ADVERTISING 247,294 309,117 370,941 435,855
MISCELLANEOUS 241,384 253,965 267,105 280,605
---------- ---------- ---------- ----------
TOTAL REVENUES $6,671,920 $7,164,985 $7,802,502 $8,481,542
OPERATING EXPENSES:
OPERATIONS $811,276 $861,632 $919,592 $980,196
GENERAL & ADMINISTRATIVE 505,962 534,237 565,599 598,071
SALES & MARKETING 274,794 333,108 373,741 416,013
PROGRAMMING 1,117,728 1,194,390 1,311,733 1,444,754
---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES $2,709,760 $2,923,366 $3,170,665 $3,439,033
---------- ---------- ---------- ----------
OPERATING INCOME $3,962,160 $4,241,619 $4,631,838 $5,042,508
OPERATING MARGIN 59.4% 59.2% 59.4% 59.5%
TOTAL REVENUE/BASIC SUB/MONTH $32.40 $33.88 $35.92 $38.09
CASH FLOW/BASIC SUB/MONTH $19.24 $20.06 $21.32 $22.64
OPERATIONS % OF REVENUE 12% 12% 12% 12%
G & A PERCENTAGE OF REVENUE 8% 7% 7% 7%
SALES & MARKETING % OF REVENUE 4.1% 4.6% 4.8% 4.9%
PROGRAMMING % OF REVENUE 17% 17% 17% 17%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
REVENUES:
BASIC $4,400,419 $4,638,892 $4,890,233 $29,324,555
EXPANDED BASIC 1,290,323 1,360,250 1,433,950 8,598,762
NEW PRODUCT TIER #1 702,142 740,194 780,298 4,557,257
NEW PRODUCT TIER #2 179,874 216,352 228,075 819,847
NEW PRODUCT TIER #3 179,874 216,352 228,075 819,847
PAY TV 736,198 761,025 786,680 4,934,480
PAY PER VIEW 311,072 399,558 500,308 1,713,247
CONVERTER RENTALS 145,090 160,778 175,651 927,983
INSTALLATIONS 138,378 145,867 153,759 929,822
COMMERCIAL 265,948 273,926 282,144 1,810,573
ADVERTISING 501,234 563,888 620,277 3,048,605
MISCELLANEOUS 294,478 309,058 324,315 1,970,910
---------- ---------- ---------- -----------
TOTAL REVENUES $9,145,030 $9,786,141 $10,403,766 $59,455,887
OPERATING EXPENSES:
OPERATIONS $1,042,134 $1,105,440 $1,170,189 $6,890,459
GENERAL & ADMINISTRATIVE 630,870 664,596 699,298 4,198,633
SALES & MARKETING 458,855 500,970 540,669 2,898,148
PROGRAMMING 1,574,960 1,702,492 1,832,479 10,178,535
---------- ---------- ---------- -----------
TOTAL OPERATING EXPENSES $3,706,819 $3,973,497 $4,242,635 $24,165,775
---------- ---------- ---------- -----------
OPERATING INCOME $5,438,211 $5,812,644 $6,161,131 $35,290,111
OPERATING MARGIN 59.5% 59.4% 59.2%
TOTAL REVENUE/BASIC SUB/MONTH $40.12 $41.95 $43.57
CASH FLOW/BASIC SUB/MONTH $23.86 $24.92 $25.80
OPERATIONS % OF REVENUE 11% 11% 11%
G & A PERCENTAGE OF REVENUE 7% 7% 7%
SALES & MARKETING % OF REVENUE 5.0% 5.1% 5.2%
PROGRAMMING % OF REVENUE 17% 17% 18%
</TABLE>
<PAGE> 209
FALCON CABLE SYSTEMS CO. EXHIBIT H
DALLAS REGION - OREGON
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---------- ------- ------- -------
<S> <C> <C> <C> <C>
ASSUMPTIONS AND INPUTS:
BV OF EXISTING PLANT $7,845,728
ADDITIONAL MILES OF PLANT 13.0 13.0 13.5 13.5
AERIAL PLANT PER MILE $12,000 $12,240 $12,485 $12,734
UNDERGROUND PLANT PER MILE $18,000 $18,360 $18,727 $19,102
PERCENTAGE OF PLANT AERIAL 5% 5% 5% 5%
PERCENTAGE OF PLANT UNDERGROUND 95% 95% 95% 95%
AVERAGE COST PER CONVERTER $110 $112 $114 $117
PERCENTAGE CONVERTER USE 48% 51% 54% 57%
PERCENTAGE REPLACEMENT 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $55 $56 $57 $58
MISC. CAPITAL PER SUBSCRIBER $5 $5 $5 $5
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2%
1.02 1.04 1.06 1.08
ANNUAL COSTS:
PLANT ADDITIONS - AERIAL $7,800 $7,956 $8,427 $8,596
- 222,300 226,746 240,176 244,980
PLANT REBUILD/UPGRADE/INCL. HDND. 269,075 2,687,225 2,796,500 27,391
AVERAGE COST OF NEW CONVERTERS 24,339 27,040 29,936 28,751
CONVERTER REPLACEMENT 44,805 49,868 55,311 61,155
INSTALLATION COSTS 282,085 295,493 309,524 320,469
MISC. CAPITAL EXPENDITURES 85,789 89,880 94,161 98,470
---------- ------- ------- -------
TOTAL CAPITAL EXPENDITURES $936,193 $3,384,208 $3,534,035 $789,812
AS A % OF OPERATING INCOME 23.6% 79.8% 76.3% 15.7%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
-------- ------- ------- -------
<S> <C> <C> <C> <C>
ASSUMPTIONS AND INPUTS:
BV OF EXISTING PLANT
ADDITIONAL MILES OF PLANT 14.5 15.0 15.5
AERIAL PLANT PER MILE $12,989 $13,249 $13,514
UNDERGROUND PLANT PER MILE $19,484 $19,873 $20,271
PERCENTAGE OF PLANT AERIAL 5% 5% 5%
PERCENTAGE OF PLANT UNDERGROUND 95% 95% 95%
AVERAGE COST PER CONVERTER $119 $121 $124
PERCENTAGE CONVERTER USE 60% 63% 65%
PERCENTAGE REPLACEMENT 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $59 $60 $62
MISC. CAPITAL PER SUBSCRIBER $5 $6 $6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 115%
ANNUAL COSTS:
PLANT ADDITIONS - AERIAL $9,417 $9,937 $10,473 $62,606
- 268,389 283,197 298,489 1,784,277
PLANT REBUILD/UPGRADE/INCL. HDND. 28,684 30,074 31,537 5,870,486
AVERAGE COST OF NEW CONVERTERS 31,576 34,591 36,951 213,185
CONVERTER REPLACEMENT 67,198 73,652 78,717 430,705
INSTALLATION COSTS 334,549 349,244 364,579 2,255,943
MISC. CAPITAL EXPENDITURES 102,800 107,319 112,035 690,453
-------- -------- -------- -----------
TOTAL CAPITAL EXPENDITURES $842,613 $888,014 $932,782 $11,307,657
AS A % OF OPERATING INCOME 15.5% 15.3% 15.1%
</TABLE>
<PAGE> 210
FALCON CABLE SYSTEMS CO. EXHIBIT I
DALLAS REGION - OREGON
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4
------ ------ ------ ------
<S> <C> <C> <C> <C>
ESTIMATED DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5%
DEPRECIATION - BEG. & ADTNS. 1996 1997 1998 1999
YEAR 1 $1,254,936 $2,150,692 $1,535,958 $1,096,862
YEAR 2 483,603 828,792 591,898
YEAR 3 505,014 865,485
YEAR 4 112,864
YEAR 5
YEAR 6
YEAR 7
---------- ---------- ---------- ----------
TOTAL DEPRECIATION $1,254,936 $2,634,296 $2,869,764 $2,667,109
</TABLE>
<TABLE>
<CAPTION>
YEAR 5 YEAR 6 YEAR 7
------ ------ ------
<S> <C> <C> <C> <C>
ESTIMATED DEPRECIATION RATES 8.9% 8.9% 8.9%
DEPRECIATION - BEG. & ADTNS. 2000 2001 2002 TOTAL
---------- ---------- ---------- -----------
YEAR 1 $784,226 $783,347 $784,226 $8,390,247
YEAR 2 422,688 302,210 301,871 2,931,062
YEAR 3 618,103 441,401 315,589 2,745,592
YEAR 4 193,425 138,138 98,648 543,075
YEAR 5 120,409 206,356 147,373 474,138
YEAR 6 126,897 217,475 344,372
YEAR 7 133,295 133,295
---------- ---------- ---------- -----------
TOTAL DEPRECIATION $2,138,850 $1,998,349 $1,998,476 $15,561,781
</TABLE>
<PAGE> 211
FALCON CABLE SYSTEMS CO. EXHIBIT J
DALLAS REGION - OREGON
AS OF DECEMBER 31, 1995
ASSUMPTIONS AND INPUTS
- ----------------------
<TABLE>
<S> <C>
REMAINING LIFE OF FRANCHISES (YEARS) 7
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $7,845,728
SUBSCRIBERS IN FRANCHISES 100%
</TABLE>
<TABLE>
<CAPTION>
LOW HIGH
ANALYSIS ANALYSIS
-------- --------
<S> <C> <C>
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
</TABLE>
<PAGE> 212
FLORENCE, OR
<PAGE> 213
FALCON CABLE SYSTEMS CO. EXHIBIT A
FLORENCE REGION - OREGON
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
VALUATION METHODS LOW HIGH
- ----------------- --- ----
<S> <C> <C> <C>
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
OPERATING INCOME, PER BOOKS (DECEMBER 31, 1995) $1,059,119 $1,059,119
VALUATION MULTIPLE 10.5 11.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $11,120,750 $12,179,869
----------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $1,953,529 $1,953,529
OPERATING MARGIN, PER BOOKS (DECEMBER 31, 1995) 54.7% 54.7%
----------- -----------
"RUNNING RATE" OPERATING INCOME 1,068,873 1,068,873
VALUATION MULTIPLE 10.0 11.0
----------- -----------
ESTIMATED FAIR MARKET VALUE $10,688,733 $11,757,606
----------- -----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $1,140,159 $1,140,159
VALUATION MULTIPLE 9.5 10.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $10,831,514 $11,971,673
----------- -----------
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $9,842,046 $10,835,349
----------- -----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVSTMT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $9,707,817 $10,612,381
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF VALUES
- -----------------
<S> <C> <C>
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $11,120,750 $12,179,869
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 10,688,733 11,757,606
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 10,831,514 11,971,673
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 9,842,046 10,835,349
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 9,707,817 10,612,381
----------- -----------
RANGE OF ESTIMATED FAIR MARKET VALUES $10,191,000 $11,201,000
ESTIMATED FAIR MARKET VALUE $10,696,000
-----------
</TABLE>
<PAGE> 214
FALCON CABLE SYSTEMS CO. EXHIBIT B
FLORENCE REGION - OREGON LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
REVENUES $2,090,507 $2,274,330 $2,478,712 $2,685,374 $2,885,397
OPERATING EXPENSES 950,348 1,029,443 1,109,804 1,196,081 1,283,845
----------- ---------- ---------- ---------- ----------
OPERATING INCOME $1,140,159 $1,244,886 $1,368,907 $1,489,294 $1,601,552
OPERATING MARGIN 0.55 0.55 0.55 0.55 0.56
PARENT SERVICES/MGT FEE (5%) 104,525 113,716 123,936 134,269 144,270
FRANCHISE AMORTIZATION (15) 389,667 389,667 389,667 389,667 389,667
SUBSCRIBER LIST (8) 100,000 100,000 100,000 100,000 100,000
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 413,604 740,096 720,664 708,408 574,033
INTEREST 480,228 480,228 505,782 475,649 416,950
----------- ---------- ---------- ---------- ----------
PRE-TAX INCOME ($347,865) ($578,821) ($471,140) ($318,700) ($23,367)
INCOME TAX (EXPENSE)/BENEFIT 118,274 196,799 160,188 108,358 7,945
----------- ---------- ---------- ---------- ----------
NET INCOME ($229,591) ($382,022) ($310,953) ($210,342) ($15,423)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($347,865) ($578,821) ($471,140) ($318,700) ($23,367)
FRANCHISE AMORTIZATION (15) 389,667 389,667 389,667 389,667 389,667
SUBSCRIBER LIST (8) 100,000 100,000 100,000 100,000 100,000
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 413,604 740,096 720,664 708,408 574,033
EQUITY 4,802,279
DEBT 4,802,279 0 255,537 0 0
----------- ---------- ---------- ---------- ----------
RESIDUAL VALUE IN YEAR 9
TOTAL SOURCES OF CASH $10,159,963 $650,942 $994,727 $879,376 $1,040,332
USES OF CASH -
PURCHASE PRICE - CURRENT $9,842,046
CAPITAL EXPENDITURES 217,813 218,806 1,125,647 230,670 244,024
DEBT RETIREMENT 0 0 301,321 586,990 364,598
TAXES PAID ON NET INCOME 0 0 0 0 0
----------- ---------- ---------- ---------- ----------
TAXES PAID ON SALE (RESIDUAL)
TOTAL USES OF CASH $10,059,858 $218,806 $1,426,968 $817,660 $608,622
ANNUAL CASH INCREASE/(DECREASE) $100,105 $432,136 ($432,241) $61,716 $431,710
CUMULATIVE CASH 100,105 532,241 100,000 161,716 593,426
</TABLE>
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2001 2002 2003 2004 TOTAL
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
REVENUES $3,079,488 $3,274,528 $3,477,801 $3,693,943 $25,940,081
OPERATING EXPENSES 1,369,253 1,453,545 1,541,214 1,636,280 11,569,814
---------- ---------- ---------- ---------- -----------
OPERATING INCOME $1,710,235 $1,820,983 $1,936,587 $2,057,663 $14,370,267
OPERATING MARGIN 0.56 0.56 0.56 0.56
PARENT SERVICES/MGT FEE (5%) 153,974 163,726 173,890 184,697 1,297,004
FRANCHISE AMORTIZATION (15) 389,667 389,667 389,667 389,667 3,507,000
SUBSCRIBER LIST (8) 100,000 100,000 100,000 100,000 900,000
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 554,072 547,168 314,342 322,851 4,895,239
INTEREST 380,491 340,385 296,268 247,740 3,623,722
---------- ---------- ---------- ---------- -----------
PRE-TAX INCOME $132,031 $280,037 $662,420 $812,708 $147,302
INCOME TAX (EXPENSE)/BENEFIT (44,890) (95,212) (225,223) (276,321) (50,083)
---------- ---------- ---------- ---------- -----------
NET INCOME $87,140 $184,824 $437,197 $536,387 $97,220
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME $132,031 $280,037 $662,420 $812,708 $147,302
FRANCHISE AMORTIZATION (15) 389,667 389,667 389,667 389,667 3,507,000
SUBSCRIBER LIST (8) 100,000 100,000 100,000 100,000 900,000
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 554,072 547,168 314,342 322,851 4,895,239
EQUITY 4,802,279
DEBT 0 0 0 0 5,057,815
RESIDUAL VALUE IN YEAR 9 18,518,963 18,518,963
---------- ---------- ---------- ---------- -----------
TOTAL SOURCES OF CASH $1,175,770 $1,316,872 $1,466,429 $20,144,188 $37,828,599
USES OF CASH -
PURCHASE PRICE - CURRENT $9,842,046
CAPITAL EXPENDITURES 249,526 252,380 264,995 278,230 3,082,090
DEBT RETIREMENT 401,058 441,164 485,280 2,477,404 5,057,815
TAXES PAID ON NET INCOME 0 0 0 50,083 50,083
TAXES PAID ON SALE (RESIDUAL) 5,065,003 5,065,003
---------- ---------- ---------- ---------- -----------
TOTAL USES OF CASH $650,584 $693,544 $750,275 $7,870,720 $23,097,037
ANNUAL CASH INCREASE/(DECREASE) $525,186 $623,328 $716,153 $12,273,468 $14,731,562
CUMULATIVE CASH 1,118,612 1,741,940 2,458,094 14,731,562
</TABLE>
<PAGE> 215
FALCON CABLE SYSTEMS CO. EXHIBIT B
FLORENCE REGION - OREGON HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
REVENUES $2,090,507 $2,274,330 $2,478,712 $2,685,374 $2,885,397
OPERATING EXPENSES 950,348 1,029,443 1,109,804 1,196,081 1,283,845
----------- ----------- ----------- ----------- -----------
OPERATING INCOME $1,140,159 $1,244,886 $1,368,907 $1,489,294 $1,601,552
OPERATING MARGIN 0.55 0.55 0.55 0.55 0.56
PARENT SERVICES/MGT FEE (5%) 104,525 113,716 123,936 134,269 144,270
FRANCHISE AMORTIZATION (15) 389,667 389,667 389,667 389,667 389,667
SUBSCRIBER LIST (8) 100,000 100,000 100,000 100,000 100,000
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 413,604 740,096 720,664 708,408 574,033
INTEREST 532,509 532,509 573,322 539,909 481,465
----------- ----------- ----------- ----------- -----------
PRE-TAX INCOME ($400,145) ($631,102) ($538,681) ($382,959) ($87,882)
INCOME TAX (EXPENSE)/BENEFIT 136,049 214,575 183,151 130,206 29,880
----------- ----------- ----------- ----------- -----------
NET INCOME ($264,096) ($416,527) ($355,529) ($252,753) ($58,002)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($400,145) ($631,102) ($538,681) ($382,959) ($87,882)
FRANCHISE AMORTIZATION (15) 389,667 389,667 389,667 389,667 389,667
SUBSCRIBER LIST (8) 100,000 100,000 100,000 100,000 100,000
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 413,604 740,096 720,664 708,408 574,033
EQUITY 5,325,087
DEBT 5,325,087 0 408,130 0 0
----------- ----------- ----------- ----------- -----------
RESIDUAL VALUE IN YEAR 9
TOTAL SOURCES OF CASH $11,153,298 $598,661 $1,079,780 $815,116 $975,818
USES OF CASH -
PURCHASE PRICE - CURRENT $10,835,349
CAPITAL EXPENDITURES 217,813 218,806 1,125,647 230,670 244,024
DEBT RETIREMENT 0 0 334,125 584,446 595,512
TAXES PAID ON NET INCOME 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
TAXES PAID ON SALE (RESIDUAL)
TOTAL USES OF CASH $11,053,162 $218,806 $1,459,772 $815,116 $839,536
ANNUAL CASH INCREASE/(DECREASE) $100,137 $379,855 ($379,992) ($0) $136,282
CUMULATIVE CASH 100,137 479,992 100,000 100,000 236,282
</TABLE>
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2001 2002 2003 2004 TOTAL
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
REVENUES $3,079,488 $3,274,528 $3,477,801 $3,693,943 $25,940,081
OPERATING EXPENSES 1,369,253 1,453,545 1,541,214 1,636,280 11,569,814
----------- ----------- ----------- ----------- -----------
OPERATING INCOME $1,710,235 $1,820,983 $1,936,587 $2,057,663 $14,370,267
OPERATING MARGIN 0.56 0.56 0.56 0.56
PARENT SERVICES/MGT FEE (5%) 153,974 163,726 173,890 184,697 1,297,004
FRANCHISE AMORTIZATION (15) 389,667 389,667 389,667 389,667 3,507,000
SUBSCRIBER LIST (8) 100,000 100,000 100,000 100,000 900,000
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 554,072 547,168 314,342 322,851 4,895,239
INTEREST 421,913 377,441 328,522 274,711 4,062,301
----------- ----------- ----------- ----------- -----------
PRE-TAX INCOME $90,608 $242,980 $630,166 $785,737 ($291,277)
INCOME TAX (EXPENSE)/BENEFIT (30,807) (82,613) (214,256) (267,151) 99,034
----------- ----------- ----------- ----------- -----------
NET INCOME $59,801 $160,367 $415,910 $518,586 ($192,243)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME $90,608 $242,980 $630,166 $785,737 ($291,277)
FRANCHISE AMORTIZATION (15) 389,667 389,667 389,667 389,667 3,507,000
SUBSCRIBER LIST (8) 100,000 100,000 100,000 100,000 900,000
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 554,072 547,168 314,342 322,851 4,895,239
EQUITY 5,325,087
DEBT 0 0 0 0 5,733,217
RESIDUAL VALUE IN YEAR 9 18,518,963 18,518,963
----------- ----------- ----------- ----------- -----------
TOTAL SOURCES OF CASH $1,134,347 $1,279,815 $1,434,175 $20,117,218 $38,588,228
USES OF CASH -
PURCHASE PRICE - CURRENT $10,835,349
CAPITAL EXPENDITURES 249,526 252,380 264,995 278,230 3,082,090
DEBT RETIREMENT 444,720 489,192 538,111 2,747,111 5,733,217
TAXES PAID ON NET INCOME 0 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 4,628,245 4,628,245
----------- ----------- ----------- ----------- -----------
TOTAL USES OF CASH $694,246 $741,572 $803,106 $7,653,586 $24,278,901
ANNUAL CASH INCREASE/(DECREASE) $440,101 $538,243 $631,069 $12,463,631 $14,309,327
CUMULATIVE CASH 676,384 1,214,627 1,845,696 14,309,327
</TABLE>
<PAGE> 216
FALCON CABLE SYSTEMS CO. EXHIBIT C
FLORENCE REGION - OREGON LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
<TABLE>
<CAPTION>
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
<S> <C> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $9,604,557
YEAR 1 DEBT REQUIREMENTS 4,802,279
YEAR 1 EQUITY REQUIREMENTS 4,802,279
FINANCING AVAILABLE $6,884,274 $7,411,036 $8,091,760 $8,897,899 $9,680,409
UNUSED LEVERAGE 2,081,995 2,608,757 3,335,266 4,728,394 5,875,503
SENIOR DEBT: 1996 1997 1998 1999 2000
----------- ----------- ----------- ----------- -----------
BEGINNING DEBT $0 $4,802,279 $4,802,279 $4,500,958 $4,169,505
DEBT ADDED 4,802,279 0 0 0 0
TOTAL ANNUAL PAYMENTS 480,228 480,228 781,549 781,549 781,549
INTEREST 480,228 480,228 480,228 450,096 416,950
PRINCIPAL REPAYMENT 0 0 301,321 331,453 364,598
ENDING BALANCE 4,802,279 4,802,279 4,500,958 4,169,505 3,804,906
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $255,537 $0
BORROWINGS 0 0 255,537 0 0
PRINCIPAL PAYMENTS 0 0 0 255,537 0
INTEREST 0 0 25,554 25,554 0
SENIOR DEBT COVERAGE 4.2 3.9 3.3 2.8 2.4
LOC DEBT COVERAGE 0.0 0.0 0.2 0.0 0.0
TOTAL DEBT COVERAGE 4.2 3.9 3.5 2.8 2.4
</TABLE>
RETURN ON EQUITY METHOD
<TABLE>
<CAPTION>
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
<S> <C> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $10,410,091 $11,116,527 $11,836,390 $12,587,817
UNUSED LEVERAGE 7,006,242 8,153,843 9,358,986 10,644,221
SENIOR DEBT: 2001 2002 2003 2004 TOTAL
----------- ----------- ----------- ----------- -----------
BEGINNING DEBT $3,804,906 $3,403,848 $2,962,685 $2,477,404
DEBT ADDED 0 0 0 0 $4,802,279
TOTAL ANNUAL PAYMENTS 781,549 781,549 781,549 781,549 6,431,297
INTEREST 380,491 340,385 296,268 247,740 3,572,614
PRINCIPAL REPAYMENT 401,058 441,164 485,280 533,808 2,858,683
ENDING BALANCE 3,403,848 2,962,685 2,477,404 1,943,596
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0 $0
BORROWINGS 0 0 0 0 255,537
PRINCIPAL PAYMENTS 0 0 0 0 255,537
INTEREST 0 0 0 0 51,107
SENIOR DEBT COVERAGE 2.0 1.6 1.3 0.9
LOC DEBT COVERAGE 0.0 0.0 0.0 0.0
TOTAL DEBT COVERAGE 2.0 1.6 1.3 0.9
</TABLE>
<PAGE> 217
FALCON CABLE SYSTEMS CO. EXHIBIT C
FLORENCE REGION - OREGON HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
<TABLE>
<CAPTION>
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
<S> <C> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $10,650,173
YEAR 1 DEBT REQUIREMENTS 5,325,087
YEAR 1 EQUITY REQUIREMENTS 5,325,087
FINANCING AVAILABLE $7,943,393 $8,551,195 $9,336,646 $10,266,806 $11,169,703
UNUSED LEVERAGE 2,618,306 3,226,109 3,937,554 5,452,160 6,950,569
SENIOR: 1996 1997 1998 1999 2000
----------- ----------- ---------- ----------- -----------
BEGINNING DEBT $0 $5,325,087 $5,325,087 $4,990,962 $4,623,425
DEBT ADDED 5,325,087 0 0 0 0
TOTAL ANNUAL PAYMENTS 532,509 532,509 866,633 866,633 866,633
INTEREST 532,509 532,509 532,509 499,096 462,342
PRINCIPAL REPAYMENT 0 0 334,125 367,537 404,291
ENDING BALANCE 5,325,087 5,325,087 4,990,962 4,623,425 4,219,134
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $408,130 $191,221
BORROWINGS 0 0 408,130 0 0
PRINCIPAL PAYMENTS 0 0 0 216,909 191,221
INTEREST 0 0 40,813 40,813 19,122
SENIOR DEBT COVERAGE 4.7 4.3 3.6 3.1 2.6
LOC DEBT COVERAGE 0.0 0.0 0.3 0.1 0.0
TOTAL DEBT COVERAGE 4.7 4.3 3.9 3.2 2.6
</TABLE>
RETURN ON EQUITY METHOD
<TABLE>
<CAPTION>
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
<S> <C> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $12,011,643 $12,826,762 $13,657,373 $14,524,404
UNUSED LEVERAGE 8,237,229 9,541,540 10,910,262 12,369,215
SENIOR: 2001 2002 2003 2004 TOTAL
----------- ----------- ----------- ----------- -----------
BEGINNING DEBT $4,219,134 $3,774,414 $3,285,222 $2,747,111
DEBT ADDED 0 0 0 0 $5,325,087
TOTAL ANNUAL PAYMENTS 866,633 866,633 866,633 866,633 7,131,450
INTEREST 421,913 377,441 328,522 274,711 3,961,553
PRINCIPAL REPAYMENT 444,720 489,192 538,111 591,922 3,169,898
ENDING BALANCE 3,774,414 3,285,222 2,747,111 2,155,189
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0 $0
BORROWINGS 0 0 0 0 408,130
PRINCIPAL PAYMENTS 0 0 0 0 408,130
INTEREST 0 0 0 0 100,748
SENIOR DEBT COVERAGE 2.2 1.8 1.4 1.0
LOC DEBT COVERAGE 0.0 0.0 0.0 0.0
TOTAL DEBT COVERAGE 2.2 1.8 1.4 1.0
</TABLE>
<PAGE> 218
FALCON CABLE SYSTEMS CO. EXHIBIT D
FLORENCE REGION - OREGON
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
REVENUES $2,090,507 $2,274,330 $2,478,712 $2,685,374 $2,885,397
OPERATING EXPENSES 950,348 1,029,443 1,109,804 1,196,081 1,283,845
----------- ----------- ----------- ----------- -----------
OPERATING INCOME $1,140,159 $1,244,886 $1,368,907 $1,489,294 $1,601,552
PLUS: RESIDUAL VALUE
LESS: CAPITAL EXPENDITURES 217,813 218,806 1,125,647 230,670 244,024
----------- ----------- ----------- ----------- -----------
TOTAL CASH FLOW $922,347 $1,026,080 $243,260 $1,258,624 $1,357,529
NET PRESENT VALUE @ 16.6% $9,707,817
-----------
NET PRESENT VALUE @ 15.1% $10,612,381
-----------
</TABLE>
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2001 2002 2003 2004 TOTAL
<S> <C> <C> <C> <C> <C>
REVENUES $3,079,488 $3,274,528 $3,477,801 $3,693,943 $25,940,081
OPERATING EXPENSES 1,369,253 1,453,545 1,541,214 1,636,280 11,569,814
----------- ----------- ----------- ----------- -----------
OPERATING INCOME $1,710,235 $1,820,983 $1,936,587 $2,057,663 $14,370,267
PLUS: RESIDUAL VALUE 18,518,963 18,518,963
LESS: CAPITAL EXPENDITURES 249,526 252,380 264,995 278,230 3,082,090
----------- ----------- ----------- ----------- -----------
TOTAL CASH FLOW $1,460,709 $1,568,603 $1,671,592 $20,298,396 $29,807,140
NET PRESENT VALUE @ 16.6%
NET PRESENT VALUE @ 15.1%
</TABLE>
<PAGE> 219
FALCON CABLE SYSTEMS CO. EXHIBIT E
FLORENCE REGION - OREGON
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
- -----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
BEGINNING MILES 136.3
MILES ADDED 4.8 4.3 3.8 3.9 4.0
CUMULATIVE MILES 141.1 145.4 149.2 153.1 157.1
DENSITY OF ADDITIONAL PLANT 57 56 55 55 55
HOMES PASSED - BEGINNING 7,826
NEW HOMES & EXTENSIONS 274 243 209 214 219
HOMES PASSED - ENDING 8,100 8,343 8,551 8,765 8,984
GROWTH IN HOMES 3.5% 3.0% 2.5% 2.5% 2.5%
BASIC - BEGINNING SUBSCRIBERS 3,947 4,126 4,291 4,441 4,596
AVERAGE SUBSCRIBERS 4,036 4,208 4,366 4,519 4,676
ENDING SUBSCRIBERS 4,126 4,291 4,441 4,596 4,756
PENETRATION 50.9% 51.4% 51.9% 52.4% 52.9%
EXPANDED BASIC - BEGINNING 3,706 3,874 4,029 4,170 4,315
AVERAGE SUBSCRIBERS 3,790 3,951 4,100 4,243 4,390
ENDING SUBSCRIBERS 3,874 4,029 4,170 4,315 4,465
PENETRATION 93.9% 93.9% 93.9% 93.9% 93.9%
NEW PRODUCT TIER #1 - BEGINNING 1,344 1,435 1,775 2,087 2,160
AVERAGE SUBSCRIBERS 1,390 1,605 1,931 2,124 2,197
ENDING SUBSCRIBERS 1,435 1,775 2,087 2,160 2,235
PENETRATION 37.1% 44.1% 50.1% 50.1% 50.1%
NEW PRODUCT TIER #2 - BEGINNING 308 611 1,064 1,546 1,760
AVERAGE SUBSCRIBERS 459 838 1,305 1,653 1,791
ENDING SUBSCRIBERS 611 1,064 1,546 1,760 1,822
PENETRATION 14.8% 24.8% 34.8% 38.3% 38.3%
PAY TV - BEGINNING UNITS 1,053 1,059 1,145 1,229 1,318
AVERAGE UNITS 1,056 1,102 1,187 1,274 1,341
ENDING UNITS 1,059 1,145 1,229 1,318 1,364
PENETRATION 25.7% 26.7% 27.7% 28.7% 28.7%
PAY PER VIEW - BEGINNING UNITS/MO 300 342 411 538 688
AVERAGE UNITS 321 376 474 613 755
ENDING UNITS 342 411 538 688 823
AVERAGE BUY RATE/MO 23.0% 24.5% 27.5% 30.5% 32.0%
CONVERTER RENTALS - BEGINNING 1,910 2,058 2,205 2,416 2,638
AVERAGE SUBSCRIBERS 1,984 2,132 2,310 2,527 2,755
ENDING SUBSCRIBERS 2,058 2,205 2,416 2,638 2,872
PENETRATION 49.9% 51.4% 54.4% 57.4% 60.4%
ADDRESSABLE HOMES - BEGINNING 1,366 1,490 1,678 1,959 2,257
AVERAGE HOMES 1,428 1,584 1,819 2,108 2,415
ENDING HOMES 1,490 1,678 1,959 2,257 2,573
PENETRATION 36.1% 39.1% 44.1% 49.1% 54.1%
BASIC CHURN RATE 35% 35% 35% 35% 35%
YEAR ENDING DECEMBER 31, 2001 2002 2003 2004
----- ----- ----- -----
BEGINNING MILES
MILES ADDED 3.8 3.4 3.5 3.6
CUMULATIVE MILES 160.9 164.4 167.9 171.4
DENSITY OF ADDITIONAL PLANT 53 53 53 53
HOMES PASSED - BEGINNING
NEW HOMES & EXTENSIONS 202 184 187 191
HOMES PASSED - ENDING 9,187 9,370 9,558 9,749
GROWTH IN HOMES 2.3% 2.0% 2.0% 2.0%
BASIC - BEGINNING SUBSCRIBERS 4,756 4,909 5,054 5,203
AVERAGE SUBSCRIBERS 4,832 4,981 5,128 5,279
ENDING SUBSCRIBERS 4,909 5,054 5,203 5,355
PENETRATION 53.4% 53.9% 54.4% 54.9%
EXPANDED BASIC - BEGINNING 4,465 4,609 4,745 4,885
AVERAGE SUBSCRIBERS 4,537 4,677 4,815 4,957
ENDING SUBSCRIBERS 4,609 4,745 4,885 5,028
PENETRATION 93.9% 93.9% 93.9% 93.9%
NEW PRODUCT TIER #1 - BEGINNING 2,235 2,307 2,375 2,445
AVERAGE SUBSCRIBERS 2,271 2,341 2,410 2,481
ENDING SUBSCRIBERS 2,307 2,375 2,445 2,517
PENETRATION 50.1% 50.1% 50.1% 50.1%
NEW PRODUCT TIER #2 - BEGINNING 1,822 1,880 1,936 1,993
AVERAGE SUBSCRIBERS 1,851 1,908 1,964 2,022
ENDING SUBSCRIBERS 1,880 1,936 1,993 2,051
PENETRATION 38.3% 38.3% 38.3% 38.3%
PAY TV - BEGINNING UNITS 1,364 1,408 1,449 1,492
AVERAGE UNITS 1,386 1,429 1,471 1,514
ENDING UNITS 1,408 1,449 1,492 1,536
PENETRATION 28.7% 28.7% 28.7% 28.7%
PAY PER VIEW - BEGINNING UNITS/MO 823 924 1,006 1,094
AVERAGE UNITS 873 965 1,050 1,140
ENDING UNITS 924 1,006 1,094 1,187
AVERAGE BUY RATE/MO 33.0% 34.0% 35.0% 36.0%
CONVERTER RENTALS - BEGINNING 2,872 3,038 3,204 3,376
AVERAGE SUBSCRIBERS 2,955 3,121 3,290 3,466
ENDING SUBSCRIBERS 3,038 3,204 3,376 3,556
PENETRATION 61.9% 63.4% 64.9% 66.4%
ADDRESSABLE HOMES - BEGINNING 2,573 2,803 2,962 3,127
AVERAGE HOMES 2,688 2,883 3,045 3,213
ENDING HOMES 2,803 2,962 3,127 3,299
PENETRATION 57.1% 58.6% 60.1% 61.6%
BASIC CHURN RATE 35% 35% 35% 35%
</TABLE>
<PAGE> 220
FALCON CABLE SYSTEMS CO. EXHIBIT F
FLORENCE REGION - OREGON
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
SERVICE RATES
- -------------
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- -------------- ------------- ---------------
<S> <C> <C>
BASIC $23.40 $24.91
EXPANDED BASIC $3.79 $4.24
NEW PRODUCT TIER #1 $3.20 $3.50
NEW PRODUCT TIER #2 $4.50 $4.50
PAY $8.00 $8.00
PAY PER VIEW $7.77 $7.77
CONVERTER RENTALS $3.92 $3.66
INSTALLATIONS-NEW $50.00 $50.00
INSTALLATIONS-CHURN $25.00 $25.00
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 2003 2004
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 6% 3% 3% 3% 3% 3% 3% 3% 3%
EXPANDED BASIC 12% 3% 3% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #1 9% 3% 3% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1% 1% 1% 1%
PAY PER VIEW 0% 3% 3% 3% 3% 3% 3% 3% 3%
CONVERTER/REMOTE RENTALS -7% 3% 3% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $24.91 $25.65 $26.42 $27.22 $28.03 $28.87 $29.74 $30.63 $31.55
EXPANDED BASIC 4.24 4.36 4.49 4.63 4.77 4.91 5.06 5.21 5.37
NEW PRODUCT TIER #1 3.50 3.61 3.71 3.83 3.94 4.06 4.18 4.31 4.43
NEW PRODUCT TIER #2 4.50 4.64 4.77 4.92 5.06 5.22 5.37 5.53 5.70
PAY 8.00 8.08 8.16 8.25 8.33 8.41 8.50 8.58 8.67
PAY PER VIEW 7.77 8.01 8.25 8.49 8.75 9.01 9.28 9.56 9.85
CONVERTER RENTALS 3.66 3.77 3.88 4.00 4.12 4.24 4.37 4.50 4.63
INSTALLATIONS-NEW 50.00 51.50 53.05 54.64 56.28 57.96 59.70 61.49 63.34
INSTALLATIONS-CHURN 25.00 25.75 26.52 27.32 28.14 28.98 29.85 30.75 31.67
</TABLE>
<PAGE> 221
FALCON CABLE SYSTEMS CO. EXHIBIT G
FLORENCE REGION - OREGON
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
REVENUES:
BASIC $1,206,428 $1,295,592 $1,384,485 $1,475,809 $1,573,014
EXPANDED BASIC 192,675 206,915 221,112 235,697 251,222
NEW PRODUCT TIER #1 58,381 69,454 86,065 97,485 103,905
NEW PRODUCT TIER #2 24,806 46,584 74,762 97,542 108,855
PAY TV 101,436 106,903 116,292 126,027 134,016
PAY PER VIEW 29,951 36,159 46,937 62,463 79,272
CONVERTER RENTALS 87,080 96,365 107,574 121,170 136,080
INSTALLATIONS 35,142 36,883 38,495 41,016 43,698
COMMERCIAL 130,053 133,955 137,973 142,112 146,376
ADVERTISING 131,002 147,378 162,115 178,327 196,159
MISCELLANEOUS 93,554 98,141 102,902 107,726 112,801
----------- ----------- ----------- ----------- -----------
TOTAL REVENUES $2,090,507 $2,274,330 $2,478,712 $2,685,374 $2,885,397
OPERATING EXPENSES:
OPERATIONS $360,049 $385,710 $412,326 $439,808 $467,879
GENERAL & ADMINISTRATIVE 183,167 194,126 205,312 216,778 228,727
SALES & MARKETING 106,693 123,141 134,102 147,380 161,926
PROGRAMMING 300,438 326,466 358,065 392,114 425,313
----------- ----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES $950,348 $1,029,443 $1,109,804 $1,196,081 $1,283,845
OPERATING INCOME $1,140,159 $1,244,886 $1,368,907 $1,489,294 $1,601,552
OPERATING MARGIN 54.5% 54.7% 55.2% 55.5% 55.5%
TOTAL REVENUE/BASIC SUB/MONTH $43.16 $45.04 $47.31 $49.52 $51.42
CASH FLOW/BASIC SUB/MONTH $23.54 $24.65 $26.13 $27.47 $28.54
OPERATIONS % OF REVENUE 17% 17% 17% 16% 16%
G & A PERCENTAGE OF REVENUE 9% 9% 8% 8% 8%
SALES & MARKETING % OF REVENUE 5% 5% 5% 5% 6%
PROGRAMMING % OF REVENUE 14% 14% 14% 15% 15%
YEAR ENDING DECEMBER 31, 2001 2002 2003 2004 TOTAL
----------- ----------- ----------- ----------- -----------
REVENUES:
BASIC $1,674,390 $1,777,793 $1,885,144 $1,998,807 $14,271,461
EXPANDED BASIC 267,412 283,926 301,071 319,224 2,279,256
NEW PRODUCT TIER #1 110,602 117,432 124,523 132,031 899,878
NEW PRODUCT TIER #2 115,870 123,026 130,455 138,320 860,221
PAY TV 139,883 145,637 151,433 157,446 1,179,072
PAY PER VIEW 94,437 107,487 120,423 134,706 711,835
CONVERTER RENTALS 150,348 163,546 177,573 192,682 1,232,419
INSTALLATIONS 45,947 48,182 51,069 54,126 394,557
COMMERCIAL 150,767 155,290 159,949 164,747 1,321,222
ADVERTISING 211,852 228,800 247,104 266,873 1,769,611
MISCELLANEOUS 117,980 123,409 129,056 134,980 1,020,549
----------- ----------- ----------- ----------- -----------
TOTAL REVENUES $3,079,488 $3,274,528 $3,477,801 $3,693,943 $25,940,081
OPERATING EXPENSES:
OPERATIONS $496,050 $524,412 $554,051 $585,380 $4,225,666
GENERAL & ADMINISTRATIVE 241,027 253,568 266,576 280,291 2,069,571
SALES & MARKETING 175,606 188,555 202,409 219,185 1,458,997
PROGRAMMING 456,571 487,010 518,177 551,424 3,815,579
----------- ----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES $1,369,253 $1,453,545 $1,541,214 $1,636,280 $11,569,814
OPERATING INCOME $1,710,235 $1,820,983 $1,936,587 $2,057,663 $14,370,267
OPERATING MARGIN 55.5% 55.6% 55.7% 55.7%
TOTAL REVENUE/BASIC SUB/MONTH $53.11 $54.78 $56.51 $58.31
CASH FLOW/BASIC SUB/MONTH $29.49 $30.46 $31.47 $32.48
OPERATIONS % OF REVENUE 16% 16% 16% 16%
G & A PERCENTAGE OF REVENUE 8% 8% 8% 8%
SALES & MARKETING % OF REVENUE 6% 6% 6% 6%
PROGRAMMING % OF REVENUE 15% 15% 15% 15%
</TABLE>
<PAGE> 222
FALCON CABLE SYSTEMS CO. EXHIBIT H
FLORENCE REGION - OREGON
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
- --------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT $2,676,547
ADDITIONAL MILES OF PLANT 4.8 4.3 3.8 3.9 4.0
AERIAL PLANT PER MILE $12,000 $12,240 $12,485 $12,734 $12,989
UNDERGROUND PLANT PER MILE $18,000 $18,360 $18,727 $19,102 $19,484
PERCENTAGE OF PLANT AERIAL 10% 10% 10% 10% 10%
PERCENTAGE OF PLANT UNDERGROUND 90% 90% 90% 90% 90%
AVERAGE COST PER CONVERTER $110 $112 $114 $117 $119
PERCENTAGE CONVERTER USE 50% 51% 54% 57% 60%
PERCENTAGE REPLACEMENT 5% 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $56 $57 $59 $60 $61
MISC. CAPITAL PER SUBSCRIBER $5 $5 $5 $5 $5
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2% 2%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $5,724 $5,309 $4,762 $4,978 $5,205
- UNDERGROUND 77,276 71,674 64,282 67,206 70,264
PLANT REBUILD/UPGRADE/INCL. HDND. 6,951 7,338 915,325 8,076 8,453
AVERAGE COST OF NEW CONVERTERS 9,804 9,542 9,339 10,374 11,492
CONVERTER REPLACEMENT 10,831 11,894 13,356 14,877 16,524
INSTALLATION COSTS 87,045 91,585 95,871 101,183 106,779
MISC. CAPITAL EXPENDITURES 20,182 21,463 22,713 23,976 25,307
----------- ----------- ----------- ----------- -----------
TOTAL CAPITAL EXPENDITURES $217,813 $218,806 $1,125,647 $230,670 $244,024
AS A % OF OPERATING INCOME 19.1% 17.6% 82.2% 15.5% 15.2%
YEAR ENDING DECEMBER 31, 2001 2002 2003 2004 TOTAL
----------- ----------- ----------- ----------- -----------
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT
ADDITIONAL MILES OF PLANT 3.8 3.4 3.5 3.6
AERIAL PLANT PER MILE $13,249 $13,514 $13,784 $14,060
UNDERGROUND PLANT PER MILE $19,873 $20,271 $20,676 $21,090
PERCENTAGE OF PLANT AERIAL 10% 10% 10% 10%
PERCENTAGE OF PLANT UNDERGROUND 90% 90% 90% 90%
AVERAGE COST PER CONVERTER $121 $124 $126 $129
PERCENTAGE CONVERTER USE 62% 63% 65% 66%
PERCENTAGE REPLACEMENT 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $62 $63 $65 $66
MISC. CAPITAL PER SUBSCRIBER $6 $6 $6 $6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2% 120%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $5,014 $4,648 $4,836 $5,032 $45,508
- UNDERGROUND 67,689 62,752 65,288 67,925 614,358
PLANT REBUILD/UPGRADE/INCL. HDND. 8,848 9,242 9,628 10,030 983,890
AVERAGE COST OF NEW CONVERTERS 11,496 11,389 12,206 13,074 98,717
CONVERTER REPLACEMENT 17,874 19,274 20,719 22,259 147,607
INSTALLATION COSTS 111,929 117,026 122,864 128,983 963,265
MISC. CAPITAL EXPENDITURES 26,676 28,049 29,454 30,926 228,745
----------- ----------- ----------- ----------- -----------
TOTAL CAPITAL EXPENDITURES $249,526 $252,380 $264,995 $278,230 $3,082,090
AS A % OF OPERATING INCOME 14.6% 13.9% 13.7% 13.5%
</TABLE>
<PAGE> 223
FALCON CABLE SYSTEMS CO. EXHIBIT I
FLORENCE REGION - OREGON
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ESTIMATED DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5% 8.9%
DEPRECIATION - BEG. & ADTNS. 1996 1997 1998 1999 2000
----------- ----------- ----------- ----------- -----------
YEAR 1 $413,604 $708,829 $506,223 $361,506 $258,466
YEAR 2 31,267 53,586 38,269 27,329
YEAR 3 160,855 275,671 196,876
YEAR 4 32,963 56,491
YEAR 5 34,871
YEAR 6
YEAR 7
YEAR 8
YEAR 9
-------- -------- -------- -------- --------
TOTAL DEPRECIATION $413,604 $740,096 $720,664 $708,408 $574,033
YEAR 6 YEAR 7 YEAR 8
----------- ----------- -----------
ESTIMATED DEPRECIATION RATES 8.9% 8.9% 4.5%
DEPRECIATION - BEG. & ADTNS. 2001 2002 2003 2004 TOTAL
----------- ----------- ----------- ----------- -----------
YEAR 1 $258,177 $258,466 $2,765,271
YEAR 2 19,539 19,518 19,539 209,047
YEAR 3 140,593 100,520 100,408 100,520 1,075,443
YEAR 4 40,344 28,811 20,599 20,576 199,783
YEAR 5 59,761 42,680 30,479 21,791 189,582
YEAR 6 35,657 61,109 43,642 31,166 171,574
YEAR 7 36,065 61,808 44,141 142,014
YEAR 8 37,868 64,897 102,765
YEAR 9 39,759 39,759
----------- ----------- ----------- ----------- -----------
TOTAL DEPRECIATION $554,072 $547,168 $314,342 $322,851 $4,895,239
</TABLE>
<PAGE> 224
FALCON CABLE SYSTEMS CO. EXHIBIT J
FLORENCE REGION - OREGON
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
ASSUMPTIONS AND INPUTS
- ----------------------
<S> <C>
REMAINING LIFE OF FRANCHISES (YEARS) 9
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $2,676,547
SUBSCRIBERS IN FRANCHISES 100%
</TABLE>
<TABLE>
<CAPTION>
LOW HIGH
ANALYSIS ANALYSIS
----------- -----------
<S> <C> <C>
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
</TABLE>
<PAGE> 225
APPENDIX B
ALLOCATION OF SYSTEM FAIR MARKET VALUE TO EXCHANGE AND SALES CLUSTERS
FOR COOS BAY, DALLAS, AND FLORENCE
<PAGE> 226
COOS BAY - SALE
<PAGE> 227
FALCON CABLE SYSTEMS CO. EXHIBIT A
COOS BAY REGION - SALE
AS OF DECEMBER 31, 1995
VALUATION METHODS
- -----------------
<TABLE>
<CAPTION>
LOW HIGH
--- ----
<S> <C> <C>
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
ADJUSTED OPERATING INCOME, PER BOOKS (DECEMBER 31, 1995) $2,825,070 $2,825,070
VALUATION MULTIPLE 10.5 11.5
---- ----
ESTIMATED FAIR MARKET VALUE $29,663,239 $32,488,309
----------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $5,624,448 $5,624,448
OPERATING MARGIN, PER BOOKS (DECEMBER 31, 1995) 54.4% 54.4%
----- -----
"RUNNING RATE" OPERATING INCOME 3,057,310 3,057,310
VALUATION MULTIPLE 10.0 11.0
---- ----
ESTIMATED FAIR MARKET VALUE $30,573,102 $33,630,412
----------- -----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $3,198,621 $3,198,621
VALUATION MULTIPLE 9.5 10.5
---- ----
ESTIMATED FAIR MARKET VALUE $30,386,896 $33,585,517
----------- -----------
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $24,325,213 $26,176,650
----------- -----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVSTMT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $24,087,871 $25,882,068
----------- -----------
SUMMARY OF VALUES
- -----------------
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $29,663,239 $32,488,309
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 30,573,102 33,630,412
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 30,386,896 33,585,517
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 24,325,213 26,176,650
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 24,087,871 25,882,068
---------- ----------
RANGE OF ESTIMATED FAIR MARKET VALUES $26,670,000 $29,004,000
ESTIMATED FAIR MARKET VALUE $27,837,000
-----------
</TABLE>
<PAGE> 228
FALCON CABLE SYSTEMS CO. EXHIBIT B
COOS BAY REGION - SALE LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $5,884,413 $6,177,231 $6,523,907 $6,899,841
OPERATING EXPENSES 2,685,792 2,861,645 3,018,664 3,173,709
--------- --------- --------- ---------
OPERATING INCOME $3,198,621 $3,315,586 $3,505,243 $3,726,132
OPERATING MARGIN 0.54 0.54 0.54 0.54
PARENT SERVICES/MGT FEE (5%) 294,221 308,862 326,195 344,992
FRANCHISE AMORTIZATION (15) 1,155,600 1,155,600 1,155,600 1,155,600
SUBSCRIBER LIST (8) 297,333 297,333 297,333 297,333
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 693,989 1,243,896 1,226,319 1,413,092
INTEREST 1,152,115 1,152,115 1,152,115 1,079,825
--------- --------- --------- ---------
PRE-TAX INCOME ($394,637) ($842,219) ($652,320) ($564,710)
INCOME TAX (EXPENSE)/BENEFIT 134,177 286,355 221,789 192,001
--------- --------- --------- ---------
NET INCOME ($260,461) ($555,865) ($430,531) ($372,709)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($394,637) ($842,219) ($652,320) ($564,710)
FRANCHISE AMORTIZATION (15) 1,155,600 1,155,600 1,155,600 1,155,600
SUBSCRIBER LIST (8) 297,333 297,333 297,333 297,333
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 693,989 1,243,896 1,226,319 1,413,092
EQUITY 11,521,150
DEBT 11,521,150 0 0 0
RESIDUAL VALUE IN YEAR 7
--------- --------- --------- ---------
TOTAL SOURCES OF CASH $24,794,586 $1,854,609 $2,026,933 $2,301,315
USES OF CASH -
PURCHASE PRICE - CURRENT $24,325,213
CAPITAL EXPENDITURES 369,108 381,716 1,983,494 1,777,461
DEBT RETIREMENT 0 0 722,899 795,189
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
--------- --------- --------- ---------
TOTAL USES OF CASH $24,694,321 $381,716 $2,706,394 $2,572,650
ANNUAL CASH INCREASE/(DECREASE) $100,265 $1,472,894 ($679,461) ($271,335)
CUMULATIVE CASH 100,265 1,573,159 893,698 622,363
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $7,257,273 $7,565,069 $7,864,354 $48,172,089
OPERATING EXPENSES 3,322,942 3,460,424 3,596,527 22,119,703
--------- --------- --------- ----------
OPERATING INCOME $3,934,331 $4,104,646 $4,267,827 $26,052,386
OPERATING MARGIN 0.54 0.54 0.54
PARENT SERVICES/MGT FEE (5%) 362,864 378,253 393,218 2,408,604
FRANCHISE AMORTIZATION (15) 1,155,600 1,155,600 1,155,600 8,089,200
SUBSCRIBER LIST (8) 297,333 297,333 297,333 2,081,333
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,324,827 1,193,767 1,114,174 8,210,064
INTEREST 1,000,306 912,835 816,618 7,265,929
--------- --------- --------- ---------
PRE-TAX INCOME ($206,599) $166,856 $490,885 ($2,002,745)
INCOME TAX (EXPENSE)/BENEFIT 70,244 (56,731) (166,901) 680,933
------ ------- -------- -------
NET INCOME ($136,355) $110,125 $323,984 ($1,321,812)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($206,599) $166,856 $490,885 ($2,002,745)
FRANCHISE AMORTIZATION (15) 1,155,600 1,155,600 1,155,600 8,089,200
SUBSCRIBER LIST (8) 297,333 297,333 297,333 2,081,333
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,324,827 1,193,767 1,114,174 8,210,064
EQUITY 11,521,150
DEBT 0 0 0 11,521,150
RESIDUAL VALUE IN YEAR 7 38,410,446 38,410,446
--------- --------- ---------- ----------
TOTAL SOURCES OF CASH $2,571,162 $2,813,557 $41,468,438 $77,830,599
USES OF CASH -
PURCHASE PRICE - CURRENT $24,325,213
CAPITAL EXPENDITURES 428,657 440,091 451,794 5,832,321
DEBT RETIREMENT 874,708 962,179 8,166,176 11,521,150
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 8,374,460 8,374,460
--------- --------- --------- ---------
TOTAL USES OF CASH $1,303,365 $1,402,270 $16,992,429 $50,053,144
ANNUAL CASH INCREASE/(DECREASE) $1,267,797 $1,411,287 $24,476,009 $27,777,455
CUMULATIVE CASH 1,890,159 3,301,446 27,777,455
</TABLE>
<PAGE> 229
FALCON CABLE SYSTEMS CO. EXHIBIT B
COOS BAY REGION - SALE HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $5,884,413 $6,177,231 $6,523,907 $6,899,841
OPERATING EXPENSES 2,685,792 2,861,645 3,018,664 3,173,709
--------- --------- --------- ---------
OPERATING INCOME $3,198,621 $3,315,586 $3,505,243 $3,726,132
OPERATING MARGIN 0.54 0.54 0.54 0.54
PARENT SERVICES/MGT FEE (5%) 294,221 308,862 326,195 344,992
FRANCHISE AMORTIZATION (15) 1,155,600 1,155,600 1,155,600 1,155,600
SUBSCRIBER LIST (8) 297,333 297,333 297,333 297,333
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 693,989 1,243,896 1,226,319 1,413,092
INTEREST 1,249,555 1,249,555 1,249,555 1,171,152
--------- --------- --------- ---------
PRE-TAX INCOME ($492,078) ($939,660) ($749,760) ($656,037)
INCOME TAX (EXPENSE)/BENEFIT 167,306 319,484 254,919 223,052
------- ------- ------- -------
NET INCOME ($324,771) ($620,176) ($494,842) ($432,984)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($492,078) ($939,660) ($749,760) ($656,037)
FRANCHISE AMORTIZATION (15) 1,155,600 1,155,600 1,155,600 1,155,600
SUBSCRIBER LIST (8) 297,333 297,333 297,333 297,333
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 693,989 1,243,896 1,226,319 1,413,092
EQUITY 12,495,555
DEBT 12,495,555 0 0 0
RESIDUAL VALUE IN YEAR 7
--------- --------- --------- ---------
TOTAL SOURCES OF CASH $26,645,954 $1,757,169 $1,929,492 $2,209,988
USES OF CASH -
PURCHASE PRICE - CURRENT $26,176,650
CAPITAL EXPENDITURES 369,108 381,716 1,983,494 1,777,461
DEBT RETIREMENT 0 0 784,039 862,442
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
--------- --------- --------- ---------
TOTAL USES OF CASH $26,545,759 $381,716 $2,767,533 $2,639,903
ANNUAL CASH INCREASE/(DECREASE) $100,196 $1,375,453 ($838,041) ($429,915)
CUMULATIVE CASH 100,196 1,475,649 637,608 207,693
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $7,257,273 $7,565,069 $7,864,354 $48,172,089
OPERATING EXPENSES 3,322,942 3,460,424 3,596,527 22,119,703
--------- --------- --------- ----------
OPERATING INCOME $3,934,331 $4,104,646 $4,267,827 $26,052,386
OPERATING MARGIN 0.54 0.54 0.54
PARENT SERVICES/MGT FEE (5%) 362,864 378,253 393,218 2,408,604
FRANCHISE AMORTIZATION (15) 1,155,600 1,155,600 1,155,600 8,089,200
SUBSCRIBER LIST (8) 297,333 297,333 297,333 2,081,333
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,324,827 1,193,767 1,114,174 8,210,064
INTEREST 1,084,907 990,039 885,683 7,880,447
--------- ------- ------- ---------
PRE-TAX INCOME ($291,200) $89,653 $421,819 ($2,617,263)
INCOME TAX (EXPENSE)/BENEFIT 99,008 (30,482) (143,418) 889,869
------ ------- -------- -------
NET INCOME ($192,192) $59,171 $278,401 ($1,727,394)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($291,200) $89,653 $421,819 ($2,617,263)
FRANCHISE AMORTIZATION (15) 1,155,600 1,155,600 1,155,600 8,089,200
SUBSCRIBER LIST (8) 297,333 297,333 297,333 2,081,333
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,324,827 1,193,767 1,114,174 8,210,064
EQUITY 12,495,555
DEBT 0 0 0 12,495,555
RESIDUAL VALUE IN YEAR 7 38,410,446 38,410,446
--------- --------- ---------- ----------
TOTAL SOURCES OF CASH $2,486,560 $2,736,353 $41,399,373 $79,164,890
USES OF CASH -
PURCHASE PRICE - CURRENT $26,176,650
CAPITAL EXPENDITURES 428,657 440,091 451,794 5,832,321
DEBT RETIREMENT 948,687 1,043,555 8,856,832 12,495,555
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 7,536,035 7,536,035
--------- --------- --------- ---------
TOTAL USES OF CASH $1,377,344 $1,483,646 $16,844,661 $52,040,562
ANNUAL CASH INCREASE/(DECREASE) $1,109,217 $1,252,707 $24,554,712 $27,124,329
CUMULATIVE CASH 1,316,910 2,569,617 27,124,329
</TABLE>
<PAGE> 230
FALCON CABLE SYSTEMS CO. EXHIBIT C
COOS BAY REGION - SALE LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
<TABLE>
<S> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $23,042,301
YEAR 1 DEBT REQUIREMENTS 11,521,150
YEAR 1 EQUITY REQUIREMENTS 11,521,150
FINANCING AVAILABLE $18,362,957 $20,791,034 $21,551,309 $22,784,080
UNUSED LEVERAGE 6,841,807 9,269,884 10,753,058 12,781,018
SENIOR DEBT: 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING DEBT $0 $11,521,150 $11,521,150 $10,798,251
DEBT ADDED 11,521,150 0 0 0
TOTAL ANNUAL PAYMENTS 1,152,115 1,152,115 1,875,014 1,875,014
INTEREST 1,152,115 1,152,115 1,152,115 1,079,825
PRINCIPAL REPAYMENT 0 0 722,899 795,189
ENDING BALANCE 11,521,150 11,521,150 10,798,251 10,003,062
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 0
SENIOR DEBT COVERAGE 3.6 3.5 3.1 2.7
LOC DEBT COVERAGE 0.0 0.0 0.0 0.0
TOTAL DEBT COVERAGE 3.6 3.5 3.1 2.7
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $24,219,859 $25,573,155 $26,680,196
UNUSED LEVERAGE 15,091,504 17,406,979 19,572,417
SENIOR DEBT: 2000 2001 2002 TOTAL
---- ---- ---- -----
BEGINNING DEBT $10,003,062 $9,128,354 $8,166,176
DEBT ADDED 0 0 0 11,521,150
TOTAL ANNUAL PAYMENTS 1,875,014 1,875,014 1,875,014 11,679,301
INTEREST 1,000,306 912,835 816,618 7,265,929
PRINCIPAL REPAYMENT 874,708 962,179 1,058,397 4,413,371
ENDING BALANCE 9,128,354 8,166,176 7,107,779
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 0
SENIOR DEBT COVERAGE 2.3 2.0 1.7
LOC DEBT COVERAGE 0.0 0.0 0.0
TOTAL DEBT COVERAGE 2.3 2.0 1.7
</TABLE>
<PAGE> 231
FALCON CABLE SYSTEMS CO. EXHIBIT C
COOS BAY REGION - SALE HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
<TABLE>
<S> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $24,991,110
YEAR 1 DEBT REQUIREMENTS 12,495,555
YEAR 1 EQUITY REQUIREMENTS 12,495,555
FINANCING AVAILABLE $21,188,028 $23,989,655 $24,866,895 $26,289,324
UNUSED LEVERAGE 8,692,473 11,494,100 13,155,379 15,440,250
SENIOR: 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING DEBT $0 $12,495,555 $12,495,555 $11,711,516
DEBT ADDED 12,495,555 0 0 0
TOTAL ANNUAL PAYMENTS 1,249,555 1,249,555 2,033,594 2,033,594
INTEREST 1,249,555 1,249,555 1,249,555 1,171,152
PRINCIPAL REPAYMENT 0 0 784,039 862,442
ENDING BALANCE 12,495,555 12,495,555 11,711,516 10,849,074
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 0
SENIOR DEBT COVERAGE 3.9 3.8 3.3 2.9
LOC DEBT COVERAGE 0.0 0.0 0.0 0.0
TOTAL DEBT COVERAGE 3.9 3.8 3.3 2.9
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $27,945,991 $29,507,486 $30,784,842
UNUSED LEVERAGE 18,045,603 20,650,654 23,075,920
SENIOR: 2000 2001 2002 TOTAL
---- ---- ---- -----
BEGINNING DEBT $10,849,074 $9,900,387 $8,856,832
DEBT ADDED 0 0 0 $12,495,555
TOTAL ANNUAL PAYMENTS 2,033,594 2,033,594 2,033,594 12,667,081
INTEREST 1,084,907 990,039 885,683 7,880,447
PRINCIPAL REPAYMENT 948,687 1,043,555 1,147,911 4,786,634
ENDING BALANCE 9,900,387 8,856,832 7,708,921
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 0
SENIOR DEBT COVERAGE 2.5 2.2 1.8
LOC DEBT COVERAGE 0.0 0.0 0.0
TOTAL DEBT COVERAGE 2.5 2.2 1.8
</TABLE>
<PAGE> 232
FALCON CABLE SYSTEMS CO. EXHIBIT D
COOS BAY REGION - SALE
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $5,884,413 $6,177,231 $6,523,907 $6,899,841
OPERATING EXPENSES 2,685,792 2,861,645 3,018,664 3,173,709
--------- --------- --------- ---------
OPERATING INCOME 3,198,621 3,315,586 3,505,243 3,726,132
PLUS: RESIDUAL VALUE
LESS: CAPITAL EXPENDITURES 369,108 381,716 1,983,494 1,777,461
TOTAL CASH FLOW $2,829,512 $2,933,870 $1,521,749 $1,948,671
NET PRESENT VALUE @ 16.6% $24,087,871
-----------
NET PRESENT VALUE @ 15.1% $25,882,068
-----------
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $7,257,273 $7,565,069 $7,864,354 $48,172,089
OPERATING EXPENSES 3,322,942 3,460,424 3,596,527 22,119,703
--------- --------- --------- ----------
OPERATING INCOME 3,934,331 4,104,646 4,267,827 26,052,386
PLUS: RESIDUAL VALUE 38,410,446 38,410,446
LESS: CAPITAL EXPENDITURES 428,657 440,091 451,794 5,832,321
TOTAL CASH FLOW $3,505,674 $3,664,554 $42,226,480 $58,630,511
NET PRESENT VALUE @ 16.6%
NET PRESENT VALUE @ 15.1%
</TABLE>
<PAGE> 233
FALCON CABLE SYSTEMS CO. EXHIBIT E
COOS BAY REGION - SALE
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
- ----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
BEGINNING MILES 325.6
MILES ADDED 0.5 0.6 0.5 0.7 1.3 1.3 1.3
CUMULATIVE MILES 326.0 326.6 327.2 327.8 329.1 330.4 331.7
DENSITY OF ADDITIONAL PLANT 0 8 5 11 19 19 18
HOMES PASSED - BEGINNING 17,754
NEW HOMES & EXTENSIONS 0 4 3 7 25 24 23
HOMES PASSED - ENDING 17,754 17,759 17,761 17,769 17,794 17,818 17,842
GROWTH IN HOMES 0.0% 0.0% 0.0% 0.0% 0.1% 0.1% 0.1%
BASIC - BEGINNING SUBSCRIBERS 13,578 13,622 13,670 13,717 13,767 13,831 13,894
AVERAGE SUBSCRIBERS 13,600 13,646 13,694 13,742 13,799 13,863 13,926
ENDING SUBSCRIBERS 13,622 13,670 13,717 13,767 13,831 13,894 13,957
PENETRATION 76.7% 77.0% 77.2% 77.5% 77.7% 78.0% 78.2%
EXPANDED BASIC - BEGINNING 13,249 13,292 13,339 13,384 13,433 13,496 13,558
AVERAGE SUBSCRIBERS 13,271 13,316 13,362 13,409 13,465 13,527 13,588
ENDING SUBSCRIBERS 13,292 13,339 13,384 13,433 13,496 13,558 13,619
PENETRATION 97.6% 97.6% 97.6% 97.6% 97.6% 97.6% 97.6%
NEW PRODUCT TIER #1 - BEGINNING 8,207 8,234 8,263 8,291 8,321 8,360 8,398
AVERAGE SUBSCRIBERS 8,220 8,248 8,277 8,306 8,341 8,379 8,417
ENDING SUBSCRIBERS 8,234 8,263 8,291 8,321 8,360 8,398 8,436
PENETRATION 60.4% 60.4% 60.4% 60.4% 60.4% 60.4% 60.4%
NEW PRODUCT TIER #2 - BEGINNING 1,779 2,330 3,261 4,369 5,486 5,512 5,537
AVERAGE SUBSCRIBERS 2,054 2,795 3,815 4,928 5,499 5,525 5,550
ENDING SUBSCRIBERS 2,330 3,261 4,369 5,486 5,512 5,537 5,562
PENETRATION 17.1% 23.9% 31.9% 39.9% 39.9% 39.9% 39.9%
NEW PRODUCT TIER #3 - BEGINNING 0 0 0 0 585 1,072 1,077
AVERAGE SUBSCRIBERS 0 0 0 293 828 1,074 1,079
ENDING SUBSCRIBERS 0 0 0 585 1,072 1,077 1,082
PENETRATION 0.0% 0.0% 0.0% 4.3% 7.8% 7.8% 7.8%
PAY TV - BEGINNING UNITS 6,041 5,925 6,082 6,240 6,263 6,292 6,321
AVERAGE UNITS 5,983 6,003 6,161 6,251 6,277 6,306 6,335
ENDING UNITS 5,925 6,082 6,240 6,263 6,292 6,321 6,349
PENETRATION 43.5% 44.5% 45.5% 45.5% 45.5% 45.5% 45.5%
PAY PER VIEW - BEGINING UNITS/MO 1,745 1,894 2,299 2,740 3,123 3,357 3,586
AVERAGE UNITS 1,820 2,097 2,519 2,931 3,240 3,472 3,690
ENDING UNITS 1,894 2,299 2,740 3,123 3,357 3,586 3,794
AVERAGE BUY RATE/MO 32.1% 34.1% 36.1% 37.6% 39.1% 40.6% 42.1%
CONVERTER RENTALS - BEGINNING UNITS 7,412 7,573 7,907 8,139 8,376 8,622 8,870
AVERAGE SUBSCRIBERS 7,492 7,740 8,023 8,257 8,499 8,746 8,995
ENDING SUBSCRIBERS 7,573 7,907 8,139 8,376 8,622 8,870 9,119
PENETRATION 55.6% 57.8% 59.3% 60.8% 62.3% 63.8% 65.3%
ADDRESSABLE HOMES 5,611 5,902 6,743 7,589 8,305 8,585 8,833
AVERAGE HOMES 5,756 6,322 7,166 7,947 8,445 8,709 8,923
ENDING HOMES 5,902 6,743 7,589 8,305 8,585 8,833 9,013
PENETRATION 43.3% 49.3% 55.3% 60.3% 62.1% 63.6% 64.6%
BASIC CHURN RATE 32% 32% 32% 32% 32% 32% 32%
</TABLE>
<PAGE> 234
FALCON CABLE SYSTEMS CO. EXHIBIT F
COOS BAY REGION - SALE
AS OF DECEMBER 31, 1995
SERVICE RATES
- -------------
<TABLE>
<CAPTION>
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- ------------- ------------- --------
<S> <C> <C>
BASIC $17.22 $18.18
EXPANDED BASIC $4.31 $4.78
NEW PRODUCT TIER #1 $5.14 $5.17
NEW PRODUCT TIER #2 $5.00 $5.00
NEW PRODUCT TIER #3 $4.00 $4.00
PAY $6.41 $6.41
PAY PER VIEW $5.35 $5.35
CONVERTER RENTALS $2.06 $2.06
INSTALLATIONS-NEW $50.00 $50.00
INSTALLATIONS-CHURN $25.00 $25.00
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 6% 3% 3% 3% 3% 3% 3%
EXPANDED BASIC 11% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #1 1% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #3 0% 3% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1% 1%
PAY PER VIEW 0% 3% 3% 3% 3% 3% 3%
CONVERTER/REMOTE RENTALS 0% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $18.18 $18.73 $19.29 $19.87 $20.46 $21.08 $21.71
EXPANDED BASIC 4.78 4.92 5.07 5.22 5.38 5.54 5.71
NEW PRODUCT TIER #1 5.17 5.33 5.48 5.65 5.82 5.99 6.17
NEW PRODUCT TIER #2 5.00 5.15 5.30 5.46 5.63 5.80 5.97
NEW PRODUCT TIER #3 4.00 4.12 4.24 4.37 4.50 4.64 4.78
PAY 6.41 6.47 6.54 6.60 6.67 6.74 6.80
PAY PER VIEW 5.35 5.51 5.67 5.84 6.02 6.20 6.39
CONVERTERS RENTALS 2.06 2.12 2.19 2.25 2.32 2.39 2.46
INSTALLATIONS-NEW 50.00 51.50 53.05 54.64 56.28 57.96 59.70
INSTALLATIONS-CHURN 25.00 25.75 26.52 27.32 28.14 28.98 29.85
</TABLE>
<PAGE> 235
FALCON CABLE SYSTEMS CO. EXHIBIT G
COOS BAY REGION - SALE
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
BASIC $2,967,172 $3,066,553 $3,169,466 $3,276,081
EXPANDED BASIC 761,174 786,668 813,069 840,419
NEW PRODUCT TIER #1 509,998 527,080 544,768 563,094
NEW PRODUCT TIER #2 123,262 172,742 242,831 323,082
NEW PRODUCT TIER #3 0 0 0 15,344
PAY TV 460,158 466,354 483,389 495,383
PAY PER VIEW 116,781 138,603 171,527 205,541
CONVERTER RENTALS 185,209 197,062 210,406 223,052
INSTALLATIONS 88,277 91,363 94,371 97,696
COMMERCIAL 122,288 125,957 129,736 133,628
ADVERTISING 177,334 216,173 258,161 301,906
MISCELLANEOUS 372,759 388,676 406,182 424,614
------- ------- ------- -------
TOTAL REVENUES $5,884,413 $6,177,231 $6,523,907 $6,899,841
OPERATING EXPENSES:
OPERATIONS $853,768 $886,134 $921,905 $959,674
GENERAL & ADMINISTRATIVE 529,381 548,303 568,580 589,839
SALES & MARKETING 226,278 302,622 338,746 367,186
PROGRAMMING 1,076,365 1,124,587 1,189,433 1,257,010
--------- --------- --------- ---------
TOTAL OPERATING EXPENSES $2,685,792 $2,861,645 $3,018,664 $3,173,709
---------- ---------- ---------- ----------
OPERATING INCOME $3,198,621 $3,315,586 $3,505,243 $3,726,132
OPERATING MARGIN 54.4% 53.7% 53.7% 54.0%
TOTAL REVENUE/BASIC SUB/MONTH $36.06 $37.72 $39.70 $41.84
CASH FLOW/BASIC SUB/MONTH $19.60 $20.25 $21.33 $22.60
OPERATIONS % OF REVENUE 15% 14% 14% 14%
G & A PERCENTAGE OF REVENUE 9% 9% 9% 9%
SALES & MARKETING % OF REVENUE 4% 5% 5% 5%
PROGRAMMING % OF REVENUE 18% 18% 18% 18%
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES:
BASIC $3,388,377 $3,506,138 $3,627,777 $23,001,565
EXPANDED BASIC 869,227 899,436 930,640 5,900,634
NEW PRODUCT TIER #1 582,395 602,636 623,543 3,953,513
NEW PRODUCT TIER #2 371,362 384,269 397,600 2,015,149
NEW PRODUCT TIER #3 44,759 59,783 61,857 181,743
PAY TV 502,415 509,781 517,225 3,434,704
PAY PER VIEW 234,004 258,272 282,781 1,407,509
CONVERTER RENTALS 236,458 250,635 265,496 1,568,319
INSTALLATIONS 101,656 105,151 108,759 687,272
COMMERCIAL 137,637 141,766 146,019 937,030
ADVERTISING 345,770 385,858 422,884 2,108,086
MISCELLANEOUS 443,215 461,345 479,772 2,976,565
------- ------- -------
TOTAL REVENUES $7,257,273 $7,565,069 $7,864,354 $48,172,089
OPERATING EXPENSES:
OPERATIONS $998,051 $1,034,948 $1,072,176 $6,726,656
GENERAL & ADMINISTRATIVE 611,535 633,147 655,161 4,135,946
SALES & MARKETING 396,085 423,492 449,671 2,504,080
PROGRAMMING 1,317,270 1,368,836 1,419,519 8,753,021
--------- --------- --------- ---------
TOTAL OPERATING EXPENSES $3,322,942 $3,460,424 $3,596,527 $22,119,703
---------- ---------- ---------- -----------
OPERATING INCOME $3,934,331 $4,104,646 $4,267,827 $26,052,386
OPERATING MARGIN 54.2% 54.3% 54.3% 54.1%
TOTAL REVENUE/BASIC SUB/MONTH $43.83 $45.48 $47.06
CASH FLOW/BASIC SUB/MONTH $23.76 $24.67 $25.54
OPERATIONS % OF REVENUE 14% 14% 14%
G & A PERCENTAGE OF REVENUE 8% 8% 8%
SALES & MARKETING % OF REVENUE 5% 6% 6%
PROGRAMMING % OF REVENUE 18% 18% 18%
</TABLE>
<PAGE> 236
FALCON CABLE SYSTEMS CO. EXHIBIT H
COOS BAY REGION - SALE
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
- --------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT $4,487,357
ADDITIONAL MILES OF PLANT 0.5 0.6 0.5 0.7 1.3 1.3 1.3
AERIAL PLANT PER MILE $12,000 $12,240 $12,485 $12,734 $12,989 $13,249 $13,514
UNDERGROUND PLANT PER MILE $18,000 $18,360 $18,727 $19,102 $19,484 $19,873 $20,271
PERCENTAGE OF PLANT AERIAL 20% 20% 20% 20% 20% 20% 20%
PERCENTAGE OF PLANT UNDERGROUND 80% 80% 80% 80% 80% 80% 80%
AVERAGE COST PER CONVERTER $110 $112 $114 $117 $119 $121 $124
PERCENTAGE CONVERTER USE 56% 58% 59% 61% 62% 64% 65%
PERCENTAGE REPLACEMENT 5% 5% 5% 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $53 $54 $55 $57 $58 $59 $60
MISC. CAPITAL PER SUBSCRIBER $5 $5 $5 $5 $5 $6 $6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2% 2% 2% 2% 115%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $1,140 $1,420 $1,359 $1,678 $3,420 $3,444 $3,467 $15,929
- UNDERGROUND 6,839 8,523 8,155 10,071 20,519 20,666 20,804 95,577
PLANT REBUILD/UPGRADE/INCL. HDND. 16,604 16,991 1,609,750 1,391,200 18,170 18,606 19,052 3,090,372
AVERAGE COST OF NEW CONVERTERS 2,720 3,100 3,162 3,563 4,747 4,918 5,091 27,302
CONVERTER REPLACEMENT 41,513 44,201 46,417 48,707 51,093 53,616 56,230 341,777
INSTALLATION COSTS 232,292 237,884 243,417 249,326 256,027 262,312 268,736 1,749,994
MISC. CAPITAL EXPENDITURES 68,001 69,596 71,234 72,915 74,682 76,528 78,414 511,370
------- ------ ------ ------ ------ ------ ------ -------
TOTAL CAPITAL EXPENDITURES $369,108 $381,716 $1,983,494 $1,777,461 $428,657 $440,091 $451,794 $5,832,321
AS A % OF OPERATING INCOME 11.5% 11.5% 56.6% 47.7% 10.9% 10.7% 10.6%
</TABLE>
<PAGE> 237
FALCON CABLE SYSTEMS CO. EXHIBIT I
COOS BAY REGION - SALE
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ESTIMATED DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5% 8.9% 8.9% 8.9%
DEPRECIATION - BEG. & ADTNS. 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
YEAR 1 $693,989 $1,189,348 $849,396 $606,573 $433,682 $433,197 $433,682 $4,639,867
YEAR 2 54,547 93,482 66,762 47,676 34,087 34,049 330,604
YEAR 3 283,441 485,758 346,913 247,738 177,126 1,540,977
YEAR 4 253,999 435,300 310,878 222,005 1,222,182
YEAR 5 61,255 104,978 74,972 241,205
YEAR 6 62,889 107,778 170,667
YEAR 7 64,561 64,561
------- ------- ------- ------- ------- ------- ------ ------
TOTAL DEPRECIATION $693,989 $1,243,896 $1,226,319 $1,413,092 $1,324,827 $1,193,767 $1,114,174 $8,210,064
</TABLE>
<PAGE> 238
FALCON CABLE SYSTEMS CO. EXHIBIT J
COOS BAY REGION - SALE
AS OF DECEMBER 31, 1995
ASSUMPTIONS AND INPUTS
- ----------------------
<TABLE>
<S> <C>
REMAINING LIFE OF FRANCHISES (YEARS) 7
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $4,487,357
SUBSCRIBERS IN FRANCHISES 100%
</TABLE>
<TABLE>
<Caption
LOW HIGH
ANALYSIS ANALYSIS
-------- --------
<S> <C> <C>
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
</TABLE>
<PAGE> 239
COOS BAY - EXCHANGE
<PAGE> 240
FALCON CABLE SYSTEMS CO. EXHIBIT A
COOS BAY REGION - EXCHANGE
AS OF DECEMBER 31, 1995
VALUATION METHODS
- -----------------
<TABLE>
<CAPTION>
LOW HIGH
--- ----
<S> <C> <C>
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
ADJUSTED OPERATING INCOME, PER BOOKS (DECEMBER 31, 1995) $897,025 $897,025
VALUATION MULTIPLE 10.5 11.5
---- ----
ESTIMATED FAIR MARKET VALUE $9,418,762 $10,315,787
---------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $1,529,017 $1,529,017
OPERATING MARGIN, PER BOOKS (DECEMBER 31, 1995) 47.2% 47.2%
---- ----
"RUNNING RATE" OPERATING INCOME 721,003 721,003
VALUATION MULTIPLE 10.0 11.0
---- ----
ESTIMATED FAIR MARKET VALUE $7,210,033 $7,931,037
---------- ----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $761,161 $761,161
VALUATION MULTIPLE 9.5 10.5
--- ----
ESTIMATED FAIR MARKET VALUE $7,231,027 $7,992,188
---------- ----------
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $5,628,480 $6,123,716
---------- ----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVSTMT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $5,586,058 $6,079,621
---------- ----------
SUMMARY OF VALUES
- -----------------
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $9,418,762 $10,315,787
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 7,210,033 7,931,037
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 7,231,027 7,992,188
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 5,628,480 6,123,716
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 5,586,058 6,079,621
--------- ---------
RANGE OF ESTIMATED FAIR MARKET VALUES $6,363,000 $6,965,000
ESTIMATED FAIR MARKET VALUE $6,664,000
----------
</TABLE>
<PAGE> 241
FALCON CABLE SYSTEMS CO. EXHIBIT B
COOS BAY REGION - EXCHANGE LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $1,614,178 $1,738,939 $1,904,487 $2,093,424
OPERATING EXPENSES 853,018 928,286 1,001,620 1,080,657
------- ------- --------- ---------
OPERATING INCOME $761,161 $810,653 $902,867 $1,012,766
OPERATING MARGIN 0.47 0.47 0.47 0.48
PARENT SERVICES/MGT FEE (5%) 80,709 86,947 95,224 104,671
FRANCHISE AMORTIZATION (15) 199,733 199,733 199,733 199,733
SUBSCRIBER LIST (8) 64,600 64,600 64,600 64,600
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 358,010 904,939 963,108 739,931
INTEREST 274,248 450,865 450,865 433,070
------- ------- ------- -------
PRE-TAX INCOME ($216,139) ($896,432) ($870,664) ($529,239)
INCOME TAX (EXPENSE)/BENEFIT 73,487 304,787 296,026 179,941
------ ------- ------- -------
NET INCOME ($142,652) ($591,645) ($574,638) ($349,298)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($216,139) ($896,432) ($870,664) ($529,239)
FRANCHISE AMORTIZATION (15) 199,733 199,733 199,733 199,733
SUBSCRIBER LIST (8) 64,600 64,600 64,600 64,600
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 358,010 904,939 963,108 739,931
EQUITY 2,742,477
DEBT 2,742,477 1,766,178 0 0
RESIDUAL VALUE IN YEAR 7
--------- --------- -------- --------
TOTAL SOURCES OF CASH $5,891,158 $2,039,019 $356,777 $475,025
USES OF CASH -
PURCHASE PRICE - CURRENT $5,628,480
CAPITAL EXPENDITURES 162,603 2,039,094 178,824 186,040
DEBT RETIREMENT 0 0 177,953 288,985
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
--------- --------- -------- --------
TOTAL USES OF CASH $5,791,083 $2,039,094 $356,777 $475,025
ANNUAL CASH INCREASE/(DECREASE) $100,075 ($75) $0 $0
CUMULATIVE CASH 100,075 100,000 100,000 100,000
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $2,274,318 $2,420,635 $2,561,842 $14,607,822
OPERATING EXPENSES 1,157,790 1,227,581 1,296,948 7,545,899
--------- --------- --------- ---------
OPERATING INCOME $1,116,528 $1,193,054 $1,264,894 $7,061,923
OPERATING MARGIN 0.49 0.49 0.49
PARENT SERVICES/MGT FEE (5%) 113,716 121,032 128,092 730,391
FRANCHISE AMORTIZATION (15) 199,733 199,733 199,733 1,398,133
SUBSCRIBER LIST (8) 64,600 64,600 64,600 452,200
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 581,900 534,215 555,196 4,637,299
INTEREST 404,172 362,961 311,715 2,687,896
------- ------- ------- ---------
PRE-TAX INCOME ($247,594) ($89,487) $5,558 ($2,843,997)
INCOME TAX (EXPENSE)/BENEFIT 84,182 30,426 (1,890) 966,959
------ ------ ------ -------
NET INCOME ($163,412) ($59,061) $3,668 ($1,877,038)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($247,594) ($89,487) $5,558 ($2,843,997)
FRANCHISE AMORTIZATION (15) 199,733 199,733 199,733 1,398,133
SUBSCRIBER LIST (8) 64,600 64,600 64,600 452,200
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 581,900 534,215 555,196 4,637,299
EQUITY 2,742,477
DEBT 0 0 0 4,508,655
RESIDUAL VALUE IN YEAR 7 11,384,046 11,384,046
--------- --------- ---------- ----------
TOTAL SOURCES OF CASH $598,640 $709,062 $12,209,133 $22,278,813
USES OF CASH -
PURCHASE PRICE - CURRENT $5,628,480
CAPITAL EXPENDITURES 186,530 196,605 207,177 3,156,873
DEBT RETIREMENT 412,110 512,457 3,117,150 4,508,655
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 2,122,392 2,122,392
--------- --------- --------- ---------
TOTAL USES OF CASH $598,640 $709,062 $5,446,719 $15,416,399
ANNUAL CASH INCREASE/(DECREASE) ($0) $0 $6,762,414 $6,862,414
CUMULATIVE CASH 100,000 100,000 6,862,414
</TABLE>
<PAGE> 242
FALCON CABLE SYSTEMS CO. EXHIBIT B
COOS BAY REGION - EXCHANGE HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $1,614,178 $1,738,939 $1,904,487 $2,093,424
OPERATING EXPENSES 853,018 928,286 1,001,620 1,080,657
------- ------- --------- ---------
OPERATING INCOME $761,161 $810,653 $902,867 $1,012,766
OPERATING MARGIN 0.47 0.47 0.47 0.48
PARENT SERVICES/MGT FEE (5%) 80,709 86,947 95,224 104,671
FRANCHISE AMORTIZATION (15) 199,733 199,733 199,733 199,733
SUBSCRIBER LIST (8) 64,600 64,600 64,600 64,600
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 358,010 904,939 963,108 739,931
INTEREST 300,313 479,826 484,209 465,365
------- ------- ------- -------
PRE-TAX INCOME ($242,205) ($925,392) ($904,007) ($561,534)
INCOME TAX (EXPENSE)/BENEFIT 82,350 314,633 307,362 190,922
------- ------- ------- -------
NET INCOME ($159,855) ($610,759) ($596,645) ($370,613)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($242,205) ($925,392) ($904,007) ($561,534)
FRANCHISE AMORTIZATION (15) 199,733 199,733 199,733 199,733
SUBSCRIBER LIST (8) 64,600 64,600 64,600 64,600
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 358,010 904,939 963,108 739,931
EQUITY 3,003,132
DEBT 3,003,132 1,795,131 43,823 0
RESIDUAL VALUE IN YEAR 7
--------- --------- -------- --------
TOTAL SOURCES OF CASH $6,386,402 $2,039,011 $367,257 $442,730
USES OF CASH -
PURCHASE PRICE - CURRENT $6,123,716
CAPITAL EXPENDITURES 162,603 2,039,094 178,824 186,040
DEBT RETIREMENT 0 0 188,433 256,690
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
--------- --------- -------- --------
TOTAL USES OF CASH $6,286,319 $2,039,094 $367,257 $442,730
ANNUAL CASH INCREASE/(DECREASE) $100,083 ($83) $0 $0
CUMULATIVE CASH 100,083 100,000 100,000 100,000
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $2,274,318 $2,420,635 $2,561,842 $14,607,822
OPERATING EXPENSES 1,157,790 1,227,581 1,296,948 7,545,899
--------- --------- --------- ---------
OPERATING INCOME $1,116,528 $1,193,054 $1,264,894 $7,061,923
OPERATING MARGIN 0.49 0.49 0.49
PARENT SERVICES/MGT FEE (5%) 113,716 121,032 128,092 730,391
FRANCHISE AMORTIZATION (15) 199,733 199,733 199,733 1,398,133
SUBSCRIBER LIST (8) 64,600 64,600 64,600 452,200
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 581,900 534,215 555,196 4,637,299
INTEREST 439,696 402,038 354,700 2,926,147
------- ------- ------- ---------
PRE-TAX INCOME ($283,118) ($128,564) ($37,427) ($3,082,247)
INCOME TAX (EXPENSE)/BENEFIT 96,260 43,712 12,725 1,047,964
------ ------ ------ ---------
NET INCOME ($186,858) ($84,852) ($24,702) ($2,034,283)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($283,118) ($128,564) ($37,427) ($3,082,247)
FRANCHISE AMORTIZATION (15) 199,733 199,733 199,733 1,398,133
SUBSCRIBER LIST (8) 64,600 64,600 64,600 452,200
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 581,900 534,215 555,196 4,637,299
EQUITY 3,003,132
DEBT 0 0 0 4,842,085
RESIDUAL VALUE IN YEAR 7 11,384,046 11,384,046
-------- -------- ---------- ----------
TOTAL SOURCES OF CASH $563,115 $669,985 $12,166,148 $22,634,648
USES OF CASH -
PURCHASE PRICE - CURRENT $6,123,716
CAPITAL EXPENDITURES 186,530 196,605 207,177 3,156,873
DEBT RETIREMENT 376,585 473,380 3,546,998 4,842,085
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 1,873,006 1,873,006
-------- -------- --------- ----------
TOTAL USES OF CASH $563,115 $669,985 $5,627,181 $15,995,681
ANNUAL CASH INCREASE/(DECREASE) ($0) $0 $6,538,967 $6,638,967
CUMULATIVE CASH 100,000 100,000 6,638,967
</TABLE>
<PAGE> 243
FALCON CABLE SYSTEMS CO. EXHIBIT C
COOS BAY REGION - EXCHANGE LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
<TABLE>
<S> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $5,484,953
YEAR 1 DEBT REQUIREMENTS 2,742,477
YEAR 1 EQUITY REQUIREMENTS 2,742,477
FINANCING AVAILABLE $5,830,662 $4,947,545 $5,269,245 $5,868,636
UNUSED LEVERAGE 3,088,186 438,890 938,543 1,826,919
SENIOR DEBT: 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING DEBT $0 $2,742,477 $2,742,477 $2,570,399
DEBT ADDED 2,742,477 0 0 0
TOTAL ANNUAL PAYMENTS 274,248 274,248 446,325 446,325
INTEREST 274,248 274,248 274,248 257,040
PRINCIPAL REPAYMENT 0 0 172,078 189,286
ENDING BALANCE 2,742,477 2,742,477 2,570,399 2,381,113
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $1,766,178 $1,760,303
BORROWINGS 0 1,766,178 0 0
PRINCIPAL PAYMENTS 0 0 5,875 99,699
INTEREST 0 176,618 176,618 176,030
SENIOR DEBT COVERAGE 3.6 3.4 2.8 2.4
LOC DEBT COVERAGE 0.0 2.2 1.9 1.6
TOTAL DEBT COVERAGE 3.6 5.6 4.8 4.0
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $6,582,981 $7,257,430 $7,754,852
UNUSED LEVERAGE 2,953,374 4,140,279 6,062,927
SENIOR DEBT: 2000 2001 2002 TOTAL
---- ---- ---- -----
BEGINNING DEBT $2,381,113 $2,172,899 $1,943,864
DEBT ADDED 0 0 0 2,742,477
TOTAL ANNUAL PAYMENTS 446,325 446,325 446,325 2,780,123
INTEREST 238,111 217,290 194,386 1,729,571
PRINCIPAL REPAYMENT 208,214 229,036 251,939 1,050,552
ENDING BALANCE 2,172,899 1,943,864 1,691,925
LINE OF CREDIT:
BEGINNING DEBT $1,660,604 $1,456,708 $1,173,287 $0
BORROWINGS 0 0 0 1,766,178
PRINCIPAL PAYMENTS 203,896 283,422 1,173,287 1,766,178
INTEREST 166,060 145,671 117,329 958,326
SENIOR DEBT COVERAGE 1.9 1.6 1.3
LOC DEBT COVERAGE 1.3 1.0 0.0
TOTAL DEBT COVERAGE 3.3 2.6 1.3
</TABLE>
<PAGE> 244
FALCON CABLE SYSTEMS CO. EXHIBIT C
COOS BAY REGION - EXCHANGE HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
<TABLE>
<S> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $6,006,263
YEAR 1 DEBT REQUIREMENTS 3,003,132
YEAR 1 EQUITY REQUIREMENTS 3,003,132
FINANCING AVAILABLE $6,727,687 $5,708,705 $6,079,898 $6,771,503
UNUSED LEVERAGE 3,724,556 910,443 1,426,245 2,374,540
SENIOR: 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING DEBT $0 $3,003,132 $3,003,132 $2,814,699
DEBT ADDED 3,003,132 0 0 0
TOTAL ANNUAL PAYMENTS 300,313 300,313 488,746 488,746
INTEREST 300,313 300,313 300,313 281,470
PRINCIPAL REPAYMENT 0 0 188,433 207,276
ENDING BALANCE 3,003,132 3,003,132 2,814,699 2,607,423
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $1,795,131 $1,838,954
BORROWINGS 0 1,795,131 43,823 0
PRINCIPAL PAYMENTS 0 0 0 49,414
INTEREST 0 179,513 183,895 183,895
SENIOR DEBT COVERAGE 3.9 3.7 3.1 2.6
LOC DEBT COVERAGE 0.0 2.2 2.0 1.8
TOTAL DEBT COVERAGE 3.9 5.9 5.2 4.3
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $7,595,747 $8,373,957 $8,947,906
UNUSED LEVERAGE 3,575,369 6,245,342 7,095,174
SENIOR: 2000 2001 2002 TOTAL
---- ---- ---- -----
BEGINNING DEBT $2,607,423 $2,379,419 $2,128,616
DEBT ADDED 0 0 0 $3,003,132
TOTAL ANNUAL PAYMENTS 488,746 488,746 488,746 3,044,355
INTEREST 260,742 237,942 212,862 1,893,955
PRINCIPAL REPAYMENT 228,004 250,804 275,884 1,150,400
ENDING BALANCE 2,379,419 2,128,616 1,852,731
LINE OF CREDIT:
BEGINNING DEBT $1,789,540 $1,640,958 $1,418,382 $0
BORROWINGS 0 0 0 1,838,954
PRINCIPAL PAYMENTS 148,582 222,576 1,418,382 1,838,954
INTEREST 178,954 164,096 141,838 1,032,192
SENIOR DEBT COVERAGE 2.1 1.8 1.5
LOC DEBT COVERAGE 1.5 1.2 0.0
TOTAL DEBT COVERAGE 3.6 3.0 1.5
</TABLE>
<PAGE> 245
FALCON CABLE SYSTEMS CO. EXHIBIT D
COOS BAY REGION - EXCHANGE
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $1,614,178 $1,738,939 $1,904,487 $2,093,424
OPERATING EXPENSES 853,018 928,286 1,001,620 1,080,657
------- ------- --------- ---------
OPERATING INCOME 761,161 810,653 902,867 1,012,766
PLUS: RESIDUAL VALUE
LESS: CAPITAL EXPENDITURES 162,603 2,039,094 178,824 186,040
------- --------- ------- -------
TOTAL CASH FLOW $598,558 ($1,228,441) $724,043 $826,726
NET PRESENT VALUE @ 16.6% $5,586,058
----------
NET PRESENT VALUE @ 15.1% $6,079,621
----------
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $2,274,318 $2,420,635 $2,561,842 $14,607,822
OPERATING EXPENSES 1,157,790 1,227,581 1,296,948 7,545,899
--------- --------- --------- ---------
OPERATING INCOME 1,116,528 1,193,054 1,264,894 7,061,923
PLUS: RESIDUAL VALUE 11,384,046 11,384,046
LESS: CAPITAL EXPENDITURES 186,530 196,605 207,177 3,156,873
------- ------- ------- ---------
TOTAL CASH FLOW $929,997 $996,450 $12,441,763 $15,289,096
NET PRESENT VALUE @ 16.6%
NET PRESENT VALUE @ 15.1%
</TABLE>
<PAGE> 246
FALCON CABLE SYSTEMS CO. EXHIBIT E
COOS BAY REGION - EXCHANGE
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
- ----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
BEGINNING MILES 119.2
MILES ADDED 2.9 2.8 2.8 2.7
CUMULATIVE MILES 122.1 124.8 127.7 130.4
DENSITY OF ADDITIONAL PLANT 41 41 41 41
HOMES PASSED - BEGINNING 5,909.0
NEW HOMES & EXTENSIONS 118 115 117 113
HOMES PASSED - ENDING 6,027 6,142 6,258 6,371
GROWTH IN HOMES 2.0% 1.9% 1.9% 1.8%
BASIC - BEGINNING SUBSCRIBERS 4,322 4,424 4,523 4,624
AVERAGE SUBSCRIBERS 4,373 4,473 4,574 4,674
ENDING SUBSCRIBERS 4,424 4,523 4,624 4,724
PENETRATION 73.4% 73.6% 73.9% 74.1%
EXPANDED BASIC - BEGINNING 4,175 4,273 4,369 4,467
AVERAGE SUBSCRIBERS 4,224 4,321 4,418 4,515
ENDING SUBSCRIBERS 4,273 4,369 4,467 4,563
PENETRATION 96.6% 96.6% 96.6% 96.6%
NEW PRODUCT TIER #1 - BEGINNING 3,936 4,028 4,119 4,211
AVERAGE SUBSCRIBERS 3,982 4,074 4,165 4,257
ENDING SUBSCRIBERS 4,028 4,119 4,211 4,302
PENETRATION 91.1% 91.1% 91.1% 91.1%
NEW PRODUCT TIER #2 - BEGINNING 0 0 362 740
AVERAGE SUBSCRIBERS 0 181 551 1,061
ENDING SUBSCRIBERS 0 362 740 1,382
PENETRATION 0.0% 8.0% 16.0% 29.3%
NEW PRODUCT TIER #3 - BEGINNING 0 0 362 740
AVERAGE SUBSCRIBERS 0 181 551 1,061
ENDING SUBSCRIBERS 0 362 740 1,382
PENETRATION 0.0% 8.0% 16.0% 29.3%
PAY TV - BEGINNING UNITS 983 962 1,029 1,098
AVERAGE UNITS 972 995 1,063 1,110
ENDING UNITS 962 1,029 1,098 1,122
PENETRATION 21.7% 22.7% 23.7% 23.7%
PAY PER VIEW - BEGINNING UNITS/MO 0 0 237 421
AVERAGE UNITS 0 119 329 534
ENDING UNITS 0 237 421 646
AVERAGE BUY RATE/MO 0.0% 37.5% 35.0% 36.0%
CONVERTER RENTALS - BEGINNING UNITS 856 920 1,224 1,575
AVERAGE SUBSCRIBERS 888 1,072 1,399 1,769
ENDING SUBSCRIBERS 920 1,224 1,575 1,963
PENETRATION 20.8% 27.1% 34.1% 41.6%
ADDRESSABLE HOMES 0 0 633 1,202
AVERAGE HOMES 0 317 918 1,499
ENDING HOMES 0 633 1,202 1,795
PENETRATION 0.0% 14.0% 26.0% 38.0%
BASIC CHURN RATE 32% 32% 32% 32%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2000 2001 2002
---- ---- ----
<S> <C> <C> <C>
BEGINNING MILES
MILES ADDED 2.3 2.3 2.4
CUMULATIVE MILES 132.7 135.0 137.4
DENSITY OF ADDITIONAL PLANT 41 41 41
HOMES PASSED - BEGINNING
NEW HOMES & EXTENSIONS 96 97 98
HOMES PASSED - ENDING 6,467 6,564 6,662
GROWTH IN HOMES 1.5% 1.5% 1.5%
BASIC - BEGINNING SUBSCRIBERS 4,724 4,811 4,899
AVERAGE SUBSCRIBERS 4,767 4,855 4,944
ENDING SUBSCRIBERS 4,811 4,899 4,989
PENETRATION 74.4% 74.6% 74.9%
EXPANDED BASIC - BEGINNING 4,563 4,647 4,733
AVERAGE SUBSCRIBERS 4,605 4,690 4,776
ENDING SUBSCRIBERS 4,647 4,733 4,820
PENETRATION 96.6% 96.6% 96.6%
NEW PRODUCT TIER #1 - BEGINNING 4,302 4,381 4,462
AVERAGE SUBSCRIBERS 4,341 4,421 4,503
ENDING SUBSCRIBERS 4,381 4,462 4,544
PENETRATION 91.1% 91.1% 91.1%
NEW PRODUCT TIER #2 - BEGINNING 1,382 1,556 1,585
AVERAGE SUBSCRIBERS 1,469 1,571 1,599
ENDING SUBSCRIBERS 1,556 1,585 1,614
PENETRATION 32.4% 32.4% 32.4%
NEW PRODUCT TIER #3 - BEGINNING 1,382 1,556 1,585
AVERAGE SUBSCRIBERS 1,469 1,571 1,599
ENDING SUBSCRIBERS 1,556 1,585 1,614
PENETRATION 32.4% 32.4% 32.4%
PAY TV - BEGINNING UNITS 1,122 1,142 1,163
AVERAGE UNITS 1,132 1,153 1,174
ENDING UNITS 1,142 1,163 1,185
PENETRATION 23.7% 23.7% 23.7%
PAY PER VIEW - BEGINNING UNITS/MO 646 841 1,039
AVERAGE UNITS 744 940 1,117
ENDING UNITS 841 1,039 1,194
AVERAGE BUY RATE/MO 38.0% 40.0% 42.0%
CONVERTER RENTALS - BEGINNING UNITS 1,963 2,360 2,771
AVERAGE SUBSCRIBERS 2,161 2,565 2,983
ENDING SUBSCRIBERS 2,360 2,771 3,196
PENETRATION 49.1% 56.6% 64.1%
ADDRESSABLE HOMES 1,795 2,213 2,597
AVERAGE HOMES 2,004 2,405 2,720
ENDING HOMES 2,213 2,597 2,844
PENETRATION 46.0% 53.0% 57.0%
BASIC CHURN RATE 32% 32% 32%
</TABLE>
<PAGE> 247
FALCON CABLE SYSTEMS CO. EXHIBIT F
COOS BAY REGION - EXCHANGE
AS OF DECEMBER 31, 1995
SERVICE RATES
- -------------
<TABLE>
<CAPTION>
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- ------------- ------------- --------
<S> <C> <C>
BASIC $17.60 $18.05
EXPANDED BASIC $2.20 $2.91
NEW PRODUCT TIER #1 $3.51 $3.76
NEW PRODUCT TIER #2 $5.00 $5.00
NEW PRODUCT TIER #3 $4.00 $4.00
PAY $6.41 $6.41
PAY PER VIEW $5.35 $5.35
CONVERTER RENTALS $0.86 $0.86
INSTALLATIONS-NEW $50.00 $50.00
INSTALLATIONS-CHURN $25.00 $25.00
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 3% 3% 3% 3% 3% 3% 3%
EXPANDED BASIC 32% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #1 7% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #3 0% 3% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1% 1%
PAY PER VIEW 0% 3% 3% 3% 3% 3% 3%
CONVERTER/REMOTE RENTALS 0% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $18.05 $18.59 $19.15 $19.72 $20.32 $20.93 $21.55
EXPANDED BASIC 2.91 3.00 3.09 3.18 3.28 3.38 3.48
NEW PRODUCT TIER #1 3.76 3.87 3.99 4.11 4.23 4.36 4.49
NEW PRODUCT TIER #2 5.00 5.15 5.30 5.46 5.63 5.80 5.97
NEW PRODUCT TIER #3 4.00 4.12 4.24 4.37 4.50 4.64 4.78
PAY 6.41 6.47 6.54 6.60 6.67 6.74 6.80
PAY PER VIEW 5.35 5.51 5.67 5.84 6.02 6.20 6.39
CONVERTERS RENTALS 0.86 0.89 0.91 0.94 0.97 1.00 1.03
INSTALLATIONS-NEW 50.00 51.50 53.05 54.64 56.28 57.96 59.70
INSTALLATIONS-CHURN 25.00 25.75 26.52 27.32 28.14 28.98 29.85
</TABLE>
<PAGE> 248
FALCON CABLE SYSTEMS CO. EXHIBIT G
COOS BAY REGION - EXCHANGE
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
BASIC $947,168 $997,995 $1,051,027 $1,106,316
EXPANDED BASIC 147,612 155,533 163,798 172,414
NEW PRODUCT TIER #1 179,674 189,315 199,375 209,863
NEW PRODUCT TIER #2 0 11,181 35,065 69,550
NEW PRODUCT TIER #3 0 8,945 28,052 55,640
PAY TV 74,793 77,316 83,432 87,947
PAY PER VIEW 0 7,848 22,409 37,413
CONVERTER RENTALS 9,166 11,395 15,320 19,948
INSTALLATIONS 31,871 33,398 35,171 36,818
COMMERCIAL 57,812 59,547 61,333 63,173
ADVERTISING 57,017 70,861 86,227 102,688
MISCELLANEOUS 109,067 115,607 123,277 131,655
------- ------- ------- -------
TOTAL REVENUES $1,614,178 $1,738,939 $1,904,487 $2,093,424
OPERATING EXPENSES:
OPERATIONS $278,747 $295,400 $314,585 $335,177
GENERAL & ADMINISTRATIVE 223,063 233,529 244,982 257,150
SALES & MARKETING 72,891 99,334 110,250 121,838
PROGRAMMING 278,316 300,024 331,803 366,492
------- ------- ------- -------
TOTAL OPERATING EXPENSES $853,018 $928,286 $1,001,620 $1,080,657
-------- -------- ---------- ----------
OPERATING INCOME $761,161 $810,653 $902,867 $1,012,766
OPERATING MARGIN 47.2% 46.6% 47.4% 48.4%
TOTAL REVENUE/BASIC SUB/MONTH $30.76 $32.40 $34.70 $37.32
CASH FLOW/BASIC SUB/MONTH $14.51 $15.10 $16.45 $18.06
OPERATIONS % OF REVENUE 17% 17% 17% 16%
G & A PERCENTAGE OF REVENUE 14% 13% 13% 12%
SALES & MARKETING % OF REVENUE 5% 6% 6% 6%
PROGRAMMING % OF REVENUE 17% 17% 17% 18%
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES:
BASIC $1,162,201 $1,219,113 $1,278,798 $7,762,619
EXPANDED BASIC 181,123 189,993 199,294 1,209,766
NEW PRODUCT TIER #1 220,465 231,260 242,582 1,472,535
NEW PRODUCT TIER #2 99,200 109,244 114,592 438,832
NEW PRODUCT TIER #3 79,360 87,395 91,674 351,065
PAY TV 90,595 93,186 95,850 603,119
PAY PER VIEW 53,706 69,915 85,558 276,848
CONVERTER RENTALS 25,106 30,691 36,763 148,389
INSTALLATIONS 38,042 39,903 41,853 257,057
COMMERCIAL 65,068 67,020 69,031 442,985
ADVERTISING 119,454 135,135 150,143 721,524
MISCELLANEOUS 139,998 147,779 155,701 923,083
------- ------- -------
TOTAL REVENUES $2,274,318 $2,420,635 $2,561,842 $14,607,822
OPERATING EXPENSES:
OPERATIONS $355,196 $374,041 $393,220 $2,346,366
GENERAL & ADMINISTRATIVE 269,342 281,183 293,346 1,802,595
SALES & MARKETING 133,595 144,914 156,088 838,910
PROGRAMMING 399,657 427,443 454,293 2,558,028
------- ------- ------- ---------
TOTAL OPERATING EXPENSES $1,157,790 $1,227,581 $1,296,948 $7,545,899
---------- ---------- ---------- ----------
OPERATING INCOME $1,116,528 $1,193,054 $1,264,894 $7,061,923
OPERATING MARGIN 49.1% 49.3% 49.4% 48.3%
TOTAL REVENUE/BASIC SUB/MONTH $39.76 $41.55 $43.18
CASH FLOW/BASIC SUB/MONTH $19.52 $20.48 $21.32
OPERATIONS % OF REVENUE 16% 15% 15%
G & A PERCENTAGE OF REVENUE 12% 12% 11%
SALES & MARKETING % OF REVENUE 6% 6% 6%
PROGRAMMING % OF REVENUE 18% 18% 18%
</TABLE>
<PAGE> 249
FALCON CABLE SYSTEMS CO. EXHIBIT H
COOS BAY REGION - EXCHANGE
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
- --------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT $2,342,715
ADDITIONAL MILES OF PLANT 2.9 2.8 2.8 2.7 2.3 2.3 2.4
AERIAL PLANT PER MILE $12,000 $12,240 $12,485 $12,734 $12,989 $13,249 $13,514
UNDERGROUND PLANT PER MILE $18,000 $18,360 $18,727 $19,102 $19,484 $19,873 $20,271
PERCENTAGE OF PLANT AERIAL 20% 20% 20% 20% 20% 20% 20%
PERCENTAGE OF PLANT UNDERGROUND 80% 80% 80% 80% 80% 80% 80%
AVERAGE COST PER CONVERTER $110 $112 $114 $117 $119 $121 $124
PERCENTAGE CONVERTER USE 21% 27% 34% 42% 49% 57% 64%
PERCENTAGE REPLACEMENT 5% 5% 5% 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $54 $55 $56 $57 $58 $59 $61
MISC. CAPITAL PER SUBSCRIBER $5 $5 $5 $5 $5 $6 $6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2% 2% 2% 2% 115%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $6,866 $6,786 $7,053 $6,945 $6,010 $6,222 $6,442 $46,324
- UNDERGROUND 41,196 40,717 42,320 41,672 36,059 37,331 38,649 277,944
PLANT REBUILD/UPGRADE/INCL. HDND. 6,079 1,876,475 6,774 7,057 7,325 7,604 7,893 1,919,207
AVERAGE COST OF NEW CONVERTERS 2,323 3,017 3,959 4,811 5,083 6,083 7,153 32,430
CONVERTER REPLACEMENT 4,946 6,714 8,814 11,216 13,795 16,521 19,438 81,445
INSTALLATION COSTS 79,330 82,571 86,112 89,539 92,458 96,041 99,762 625,811
MISC. CAPITAL EXPENDITURES 21,864 22,813 23,792 24,801 25,801 26,801 27,841 173,713
------ ------ ------ ------ ------ ------ ------ -------
TOTAL CAPITAL EXPENDITURES $162,603 $2,039,094 $178,824 $186,040 $186,530 $196,605 $207,177 $3,156,873
AS A % OF OPERATING INCOME 21.4% 251.5% 19.8% 18.4% 16.7% 16.5% 16.4%
</TABLE>
<PAGE> 250
FALCON CABLE SYSTEMS CO. EXHIBIT I
COOS BAY REGION - EXCHANGE
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ESTIMATED DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5% 8.9% 8.9% 8.9%
DEPRECIATION - BEG. & ADTNS. 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
YEAR 1 $358,010 $613,552 $438,180 $312,914 $223,725 $223,474 $223,725 $2,393,581
YEAR 2 291,386 499,374 356,637 254,683 182,091 181,887 1,766,059
YEAR 3 25,554 43,794 31,276 22,335 15,969 138,929
YEAR 4 26,585 45,561 32,538 23,236 127,921
YEAR 5 26,655 45,681 32,624 104,961
YEAR 6 28,095 48,148 76,243
YEAR 7 29,606 29,606
-------- -------- -------- -------- -------- -------- -------- ----------
TOTAL DEPRECIATION $358,010 $904,939 $963,108 $739,931 $581,900 $534,215 $555,196 $4,637,299
</TABLE>
<PAGE> 251
FALCON CABLE SYSTEMS CO. EXHIBIT J
COOS BAY REGION - EXCHANGE
AS OF DECEMBER 31, 1995
ASSUMPTIONS AND INPUTS
- ----------------------
<TABLE>
<S> <C>
REMAINING LIFE OF FRANCHISES (YEARS) 7
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $2,342,715
SUBSCRIBERS IN FRANCHISES 100%
</TABLE>
<TABLE>
<CAPTION>
LOW HIGH
ANALYSIS ANALYSIS
-------- --------
<S> <C> <C>
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
</TABLE>
<PAGE> 252
DALLAS - SALE
<PAGE> 253
FALCON CABLE SYSTEMS CO. EXHIBIT A
DALLAS REGION - SALE
AS OF DECEMBER 31, 1995
VALUATION METHODS
- -----------------
<TABLE>
<CAPTION>
LOW HIGH
--- ----
<S> <C> <C>
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
ADJUSTED OPERATING INCOME, PER BOOKS (DECEMBER 31, 1995) $1,424,832 $1,424,832
VALUATION MULTIPLE 10.5 11.5
---- ----
ESTIMATED FAIR MARKET VALUE $14,960,738 $16,385,570
----------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $2,605,152 $2,605,152
OPERATING MARGIN, PER BOOKS (DECEMBER 31, 1995) 60.4% 60.4%
----- -----
"RUNNING RATE" OPERATING INCOME 1,574,523 1,574,523
VALUATION MULTIPLE 10.0 11.0
---- ----
ESTIMATED FAIR MARKET VALUE $15,745,227 $17,319,750
----------- -----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $1,660,673 $1,660,673
VALUATION MULTIPLE 9.5 10.5
--- ----
ESTIMATED FAIR MARKET VALUE $15,776,391 $17,437,064
----------- -----------
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $14,334,131 $15,426,595
----------- -----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVSTMT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $13,989,432 $15,032,075
----------- -----------
SUMMARY OF VALUES
- -----------------
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $14,960,738 $16,385,570
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 15,745,227 17,319,750
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 15,776,391 17,437,064
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 14,334,131 15,426,595
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 13,989,432 15,032,075
---------- ----------
RANGE OF ESTIMATED FAIR MARKET VALUES $14,762,000 $16,042,000
ESTIMATED FAIR MARKET VALUE $15,402,000
-----------
</TABLE>
<PAGE> 254
FALCON CABLE SYSTEMS CO. EXHIBIT B
DALLAS REGION - SALE LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $2,747,693 $2,942,374 $3,165,196 $3,400,467
OPERATING EXPENSES 1,087,020 1,165,761 1,260,445 1,362,210
--------- --------- --------- ---------
OPERATING INCOME $1,660,673 $1,776,612 $1,904,751 $2,038,257
OPERATING MARGIN 0.60 0.60 0.60 0.60
PARENT SERVICES/MGT FEE (5%) 137,385 147,119 158,260 170,023
FRANCHISE AMORTIZATION (15) 687,200 687,200 687,200 687,200
SUBSCRIBER LIST (8) 153,533 153,533 153,533 153,533
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 315,120 585,519 511,976 463,484
INTEREST 695,714 695,714 695,714 652,061
------- ------- ------- -------
PRE-TAX INCOME ($328,279) ($492,473) ($301,932) ($88,045)
INCOME TAX (EXPENSE)/BENEFIT 111,615 167,441 102,657 29,935
------- ------- ------- ------
NET INCOME ($216,664) ($325,032) ($199,275) ($58,110)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($328,279) ($492,473) ($301,932) ($88,045)
FRANCHISE AMORTIZATION (15) 687,200 687,200 687,200 687,200
SUBSCRIBER LIST (8) 153,533 153,533 153,533 153,533
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 315,120 585,519 511,976 463,484
EQUITY 6,957,142
DEBT 6,957,142 0 0 0
RESIDUAL VALUE IN YEAR 7
--------- -------- --------- ---------
TOTAL SOURCES OF CASH $14,741,858 $933,780 $1,050,777 $1,216,173
USES OF CASH -
PURCHASE PRICE - CURRENT $14,334,131
CAPITAL EXPENDITURES 307,630 318,205 338,434 346,544
DEBT RETIREMENT 0 0 436,529 480,181
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
---------- -------- -------- --------
TOTAL USES OF CASH $14,641,761 $318,205 $774,963 $826,726
ANNUAL CASH INCREASE/(DECREASE) $100,097 $615,574 $275,814 $389,447
CUMULATIVE CASH 100,097 715,671 991,486 1,380,933
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
<S> <C> <C> <C> <C>
REVENUES $3,638,199 $3,883,772 $4,141,720 $23,919,421
OPERATING EXPENSES 1,464,268 1,568,874 1,679,019 9,587,597
--------- --------- --------- ---------
OPERATING INCOME $2,173,932 $2,314,898 $2,462,701 $14,331,825
OPERATING MARGIN 0.60 0.60 0.59
PARENT SERVICES/MGT FEE (5%) 181,910 194,189 207,086 1,195,971
FRANCHISE AMORTIZATION (15) 687,200 687,200 687,200 4,810,400
SUBSCRIBER LIST (8) 153,533 153,533 153,533 1,074,733
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 434,596 477,319 522,691 3,310,705
INTEREST 604,043 551,223 493,121 4,387,592
------- ------- ------- ---------
PRE-TAX INCOME $112,650 $251,434 $399,069 ($447,576)
INCOME TAX (EXPENSE)/BENEFIT (38,301) (85,488) (135,684) 152,176
------- ------- -------- -------
NET INCOME $74,349 $165,946 $263,386 ($295,400)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME $112,650 $251,434 $399,069 ($447,576)
FRANCHISE AMORTIZATION (15) 687,200 687,200 687,200 4,810,400
SUBSCRIBER LIST (8) 153,533 153,533 153,533 1,074,733
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 434,596 477,319 522,691 3,310,705
EQUITY 6,957,142
DEBT 0 0 0 6,957,142
RESIDUAL VALUE IN YEAR 7 22,164,309 22,164,309
--------- --------- ---------- ----------
TOTAL SOURCES OF CASH $1,387,979 $1,569,486 $23,926,802 $44,826,855
USES OF CASH -
PURCHASE PRICE - CURRENT $14,334,131
CAPITAL EXPENDITURES 376,970 398,887 421,694 2,508,365
DEBT RETIREMENT 528,200 581,020 4,931,213 6,957,142
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 4,783,826 4,783,826
--------- --------- --------- ---------
TOTAL USES OF CASH $905,169 $979,907 $10,136,733 $28,583,463
ANNUAL CASH INCREASE/(DECREASE) $482,809 $589,580 $13,790,070 $16,243,392
CUMULATIVE CASH 1,863,742 2,453,322 16,243,392
</TABLE>
<PAGE> 255
FALCON CABLE SYSTEMS CO. EXHIBIT B
DALLAS REGION - SALE HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $2,747,693 $2,942,374 $3,165,196 $3,400,467
OPERATING EXPENSES 1,087,020 1,165,761 1,260,445 1,362,210
--------- --------- --------- ---------
OPERATING INCOME $1,660,673 $1,776,612 $1,904,751 $2,038,257
OPERATING MARGIN 0.60 0.60 0.60 0.60
PARENT SERVICES/MGT FEE (5%) 137,385 147,119 158,260 170,023
FRANCHISE AMORTIZATION (15) 687,200 687,200 687,200 687,200
SUBSCRIBER LIST (8) 153,533 153,533 153,533 153,533
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 315,120 585,519 511,976 463,484
INTEREST 753,219 753,219 753,219 705,958
------- ------- ------- -------
PRE-TAX INCOME ($385,784) ($549,978) ($359,437) ($141,942)
INCOME TAX (EXPENSE)/BENEFIT 131,166 186,992 122,208 48,260
------- ------- ------- ------
NET INCOME ($254,617) ($362,985) ($237,228) ($93,681)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($385,784) ($549,978) ($359,437) ($141,942)
FRANCHISE AMORTIZATION (15) 687,200 687,200 687,200 687,200
SUBSCRIBER LIST (8) 153,533 153,533 153,533 153,533
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 315,120 585,519 511,976 463,484
EQUITY 7,532,189
DEBT 7,532,189 0 0 0
RESIDUAL VALUE IN YEAR 7
--------- --------- --------- ---------
TOTAL SOURCES OF CASH $15,834,448 $876,275 $993,272 $1,162,276
USES OF CASH -
PURCHASE PRICE - CURRENT $15,426,595
CAPITAL EXPENDITURES 307,630 318,205 338,434 346,544
DEBT RETIREMENT 0 0 472,610 519,871
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
--------- -------- -------- --------
TOTAL USES OF CASH $15,734,225 $318,205 $811,044 $866,415
ANNUAL CASH INCREASE/(DECREASE) $100,223 $558,070 $182,228 $295,861
CUMULATIVE CASH 100,223 658,292 840,520 1,136,381
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
<S> <C> <C> <C> <C>
REVENUES $3,638,199 $3,883,772 $4,141,720 $23,919,421
OPERATING EXPENSES 1,464,268 1,568,874 1,679,019 9,587,597
--------- --------- --------- ---------
OPERATING INCOME $2,173,932 $2,314,898 $2,462,701 $14,331,825
OPERATING MARGIN 0.60 0.60 0.59
PARENT SERVICES/MGT FEE (5%) 181,910 194,189 207,086 1,195,971
FRANCHISE AMORTIZATION (15) 687,200 687,200 687,200 4,810,400
SUBSCRIBER LIST (8) 153,533 153,533 153,533 1,074,733
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 434,596 477,319 522,691 3,310,705
INTEREST 653,971 596,785 533,881 4,750,251
------- ------- ------- ---------
PRE-TAX INCOME $62,722 $205,872 $358,310 ($810,236)
INCOME TAX (EXPENSE)/BENEFIT (21,325) (69,997) (121,825) 275,480
------- ------- -------- -------
NET INCOME $41,396 $135,876 $236,485 ($534,755)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME $62,722 $205,872 $358,310 ($810,236)
FRANCHISE AMORTIZATION (15) 687,200 687,200 687,200 4,810,400
SUBSCRIBER LIST (8) 153,533 153,533 153,533 1,074,733
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 434,596 477,319 522,691 3,310,705
EQUITY 7,532,189
DEBT 0 0 0 7,532,189
RESIDUAL VALUE IN YEAR 7 22,164,309 22,164,309
--------- --------- ---------- ----------
TOTAL SOURCES OF CASH $1,338,051 $1,523,925 $23,886,043 $45,614,290
USES OF CASH -
PURCHASE PRICE - CURRENT $15,426,595
CAPITAL EXPENDITURES 376,970 398,887 421,694 2,508,365
DEBT RETIREMENT 571,858 629,044 5,338,805 7,532,189
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 4,289,083 4,289,083
-------- --------- --------- ---------
TOTAL USES OF CASH $948,828 $1,027,931 $10,049,583 $29,756,233
ANNUAL CASH INCREASE/(DECREASE) $389,223 $495,993 $13,836,460 $15,858,057
CUMULATIVE CASH 1,525,604 2,021,597 15,858,057
</TABLE>
<PAGE> 256
FALCON CABLE SYSTEMS CO. EXHIBIT C
DALLAS REGION - SALE LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
<TABLE>
<S> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $13,914,284
YEAR 1 DEBT REQUIREMENTS 6,957,142
YEAR 1 EQUITY REQUIREMENTS 6,957,142
FINANCING AVAILABLE $9,261,409 $10,794,373 $11,547,981 $12,380,883
UNUSED LEVERAGE 2,304,267 3,837,231 5,027,367 6,340,451
SENIOR DEBT: 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING DEBT $0 $6,957,142 $6,957,142 $6,520,613
DEBT ADDED 6,957,142 0 0 0
TOTAL ANNUAL PAYMENTS 695,714 695,714 1,132,243 1,132,243
INTEREST 695,714 695,714 695,714 652,061
PRINCIPAL REPAYMENT 0 0 436,529 480,181
ENDING BALANCE 6,957,142 6,957,142 6,520,613 6,040,432
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 0
SENIOR DEBT COVERAGE 4.2 3.9 3.4 3.0
LOC DEBT COVERAGE 0.0 0.0 0.0 0.0
TOTAL DEBT COVERAGE 4.2 3.9 3.4 3.0
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $13,248,672 $14,130,557 $15,046,838
UNUSED LEVERAGE 7,736,440 9,199,344 10,754,747
SENIOR DEBT: 2000 2001 2002 TOTAL
---- ---- ---- -----
BEGINNING DEBT $6,040,432 $5,512,232 $4,931,213
DEBT ADDED 0 0 0 6,957,142
TOTAL ANNUAL PAYMENTS 1,132,243 1,132,243 1,132,243 7,052,643
INTEREST 604,043 551,223 493,121 4,387,592
PRINCIPAL REPAYMENT 528,200 581,020 639,122 2,665,051
ENDING BALANCE 5,512,232 4,931,213 4,292,091
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 0
SENIOR DEBT COVERAGE 2.5 2.1 1.7
LOC DEBT COVERAGE 0.0 0.0 0.0
TOTAL DEBT COVERAGE 2.5 2.1 1.7
</TABLE>
<PAGE> 257
FALCON CABLE SYSTEMS CO. EXHIBIT C
DALLAS REGION - SALE HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
<TABLE>
<S> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $15,064,379
YEAR 1 DEBT REQUIREMENTS 7,532,189
YEAR 1 EQUITY REQUIREMENTS 7,532,189
FINANCING AVAILABLE $10,686,241 $12,455,046 $13,324,593 $14,285,634
UNUSED LEVERAGE 3,154,052 4,922,856 6,265,014 7,745,926
SENIOR: 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING DEBT $0 $7,532,189 $7,532,189 $7,059,579
DEBT ADDED 7,532,189 0 0 0
TOTAL ANNUAL PAYMENTS 753,219 753,219 1,225,829 1,225,829
INTEREST 753,219 753,219 753,219 705,958
PRINCIPAL REPAYMENT 0 0 472,610 519,871
ENDING BALANCE 7,532,189 7,532,189 7,059,579 6,539,708
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 0
SENIOR DEBT COVERAGE 4.5 4.2 3.7 3.2
LOC DEBT COVERAGE 0.0 0.0 0.0 0.0
TOTAL DEBT COVERAGE 4.5 4.2 3.7 3.2
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $15,286,930 $16,304,489 $17,361,737
UNUSED LEVERAGE 9,319,080 10,965,683 12,714,880
SENIOR: 2000 2001 2002 TOTAL
---- ---- ---- -----
BEGINNING DEBT $6,539,708 $5,967,850 $5,338,805
DEBT ADDED 0 0 0 $7,532,189
TOTAL ANNUAL PAYMENTS 1,225,829 1,225,829 1,225,829 7,635,584
INTEREST 653,971 596,785 533,881 4,750,251
PRINCIPAL REPAYMENT 571,858 629,044 691,949 2,885,332
ENDING BALANCE 5,967,850 5,338,805 4,646,857
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0
BORROWINGS 0 0 0 0
PRINCIPAL PAYMENTS 0 0 0 0
INTEREST 0 0 0 0
SENIOR DEBT COVERAGE 2.7 2.3 1.9
LOC DEBT COVERAGE 0.0 0.0 0.0
TOTAL DEBT COVERAGE 2.7 2.3 1.9
</TABLE>
<PAGE> 258
FALCON CABLE SYSTEMS CO. EXHIBIT D
DALLAS REGION - SALE
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $2,747,693 $2,942,374 $3,165,196 $3,400,467
OPERATING EXPENSES 1,087,020 1,165,761 1,260,445 1,362,210
--------- --------- --------- ---------
OPERATING INCOME 1,660,673 1,776,612 1,904,751 2,038,257
PLUS: RESIDUAL VALUE
LESS: CAPITAL EXPENDITURES 307,630 318,205 338,434 346,544
TOTAL CASH FLOW $1,353,043 $1,458,407 $1,566,317 $1,691,713
NET PRESENT VALUE @ 16.6% $13,989,432
-----------
NET PRESENT VALUE @ 15.1% $15,032,075
-----------
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $3,638,199 $3,883,772 $4,141,720 $23,919,421
OPERATING EXPENSES 1,464,268 1,568,874 1,679,019 9,587,597
--------- --------- --------- ---------
OPERATING INCOME 2,173,932 2,314,898 2,462,701 14,331,825
PLUS: RESIDUAL VALUE 22,164,309 22,164,309
LESS: CAPITAL EXPENDITURES 376,970 398,887 421,694 2,508,365
TOTAL CASH FLOW $1,796,962 $1,916,011 $24,205,315 $33,987,768
NET PRESENT VALUE @ 16.6%
NET PRESENT VALUE @ 15.1%
</TABLE>
<PAGE> 259
FALCON CABLE SYSTEMS CO. EXHIBIT E
DALLAS REGION - SALE
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
- ----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
BEGINNING MILES 162.7
MILES ADDED 6.1 6.0 6.3 6.2 7.1 7.5 7.8
CUMULATIVE MILES 168.8 174.8 181.1 187.3 194.4 201.9 209.7
DENSITY OF ADDITIONAL PLANT 36 38 36 38 34 33 32
HOMES PASSED - BEGINNING 9,209
NEW HOMES & EXTENSIONS 221 226 231 236 241 247 253
HOMES PASSED - ENDING 9,430 9,655 9,886 10,122 10,364 10,611 10,863
GROWTH IN HOMES 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4%
BASIC - BEGINNING SUBSCRIBERS 6,775 6,984 7,200 7,421 7,624 7,832 8,045
AVERAGE SUBSCRIBERS 6,880 7,092 7,311 7,523 7,728 7,938 8,154
ENDING SUBSCRIBERS 6,984 7,200 7,421 7,624 7,832 8,045 8,263
PENETRATION 74.1% 74.6% 75.1% 75.3% 75.6% 75.8% 76.1%
EXPANDED BASIC - BEGINNING 5,403 5,570 5,742 5,918 6,080 6,246 6,416
AVERAGE SUBSCRIBERS 5,487 5,656 5,830 5,999 6,163 6,331 6,503
ENDING SUBSCRIBERS 5,570 5,742 5,918 6,080 6,246 6,416 6,590
PENETRATION 79.7% 79.7% 79.7% 79.7% 79.7% 79.7% 79.7%
NEW PRODUCT TIER #1 - BEGINNING 3,834 3,953 4,074 4,200 4,314 4,432 4,553
AVERAGE SUBSCRIBERS 3,893 4,013 4,137 4,257 4,373 4,492 4,614
ENDING SUBSCRIBERS 3,953 4,074 4,200 4,314 4,432 4,553 4,676
PENETRATION 56.6% 56.6% 56.6% 56.6% 56.6% 56.6% 56.6%
NEW PRODUCT TIER #2 - BEGINNING 0 0 0 0 0 0 0
AVERAGE SUBSCRIBERS 0 0 0 0 0 0 0
ENDING SUBSCRIBERS 0 0 0 0 0 0 0
PENETRATION 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
NEW PRODUCT TIER #3 - BEGINNING 0 0 0 0 0 0 0
AVERAGE SUBSCRIBERS 0 0 0 0 0 0 0
ENDING SUBSCRIBERS 0 0 0 0 0 0 0
PENETRATION 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
PAY TV - BEGINNING UNITS 3,427 3,463 3,642 3,828 3,933 4,040 4,150
AVERAGE UNITS 3,445 3,552 3,735 3,880 3,986 4,095 4,206
ENDING UNITS 3,463 3,642 3,828 3,933 4,040 4,150 4,263
PENETRATION 49.6% 50.6% 51.6% 51.6% 51.6% 51.6% 51.6%
PAY PER VIEW - BEGINNING UNITS/MO 212 288 438 700 985 1,209 1,450
AVERAGE UNITS 250 363 569 842 1,097 1,330 1,580
ENDING UNITS 288 438 700 985 1,209 1,450 1,709
AVERAGE BUY RATE/MO 6.8% 9.8% 14.8% 19.8% 23.3% 26.8% 30.3%
CONVERTER RENTALS - BEGINNING UNITS 4,512 4,669 4,849 5,035 5,211 5,392 5,579
AVERAGE SUBSCRIBERS 4,590 4,759 4,942 5,123 5,301 5,485 5,675
ENDING SUBSCRIBERS 4,669 4,849 5,035 5,211 5,392 5,579 5,772
PENETRATION 66.8% 67.3% 67.8% 68.3% 68.8% 69.3% 69.8%
ADDRESSABLE HOMES 4,020 4,249 4,488 4,737 4,981 5,195 5,417
AVERAGE HOMES 4,135 4,369 4,613 4,859 5,088 5,306 5,532
ENDING HOMES 4,249 4,488 4,737 4,981 5,195 5,417 5,647
PENETRATION 60.8% 62.3% 63.8% 65.3% 66.3% 67.3% 68.3%
BASIC CHURN RATE 28% 28% 28% 28% 28% 28% 28%
</TABLE>
<PAGE> 260
FALCON CABLE SYSTEMS CO. EXHIBIT F
DALLAS REGION - SALE
AS OF DECEMBER 31, 1995
SERVICE RATES
- -------------
<TABLE>
<CAPTION>
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- ------------- ------------- --------
<S> <C> <C>
BASIC $16.94 $17.19
EXPANDED BASIC $5.08 $5.85
NEW PRODUCT TIER #1 $5.87 $6.22
NEW PRODUCT TIER #2 $0.00 $4.00
NEW PRODUCT TIER #3 $0.00 $4.00
PAY $6.96 $6.96
PAY PER VIEW $9.98 $9.98
CONVERTER RENTALS $0.67 $0.99
INSTALLATIONS-NEW $50.00 $50.00
INSTALLATIONS-CHURN $25.00 $25.00
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 1% 3% 3% 3% 3% 3% 3%
EXPANDED BASIC 15% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #1 6% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #3 0% 3% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1% 1%
PAY PER VIEW 0% 3% 3% 3% 3% 3% 3%
CONVERTER/REMOTE RENTALS 48% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $17.19 $17.71 $18.24 $18.78 $19.35 $19.93 $20.53
EXPANDED BASIC $5.85 6.03 6.21 6.39 6.58 6.78 6.99
NEW PRODUCT TIER #1 $6.22 6.41 6.60 6.80 7.00 7.21 7.43
NEW PRODUCT TIER #2 $4.00 4.12 4.24 4.37 4.50 4.64 4.78
NEW PRODUCT TIER #3 $4.00 4.12 4.24 4.37 4.50 4.64 4.78
PAY $6.96 7.03 7.10 7.17 7.24 7.31 7.39
PAY PER VIEW $9.98 10.28 10.59 10.91 11.23 11.57 11.92
CONVERTERS RENTALS $0.99 1.02 1.05 1.08 1.11 1.15 1.18
INSTALLATIONS-NEW $50.00 51.50 53.05 54.64 56.28 57.96 59.70
INSTALLATIONS-CHURN $25.00 25.75 26.52 27.32 28.14 28.98 29.85
</TABLE>
<PAGE> 261
FALCON CABLE SYSTEMS CO. EXHIBIT G
DALLAS REGION - SALE
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
BASIC $1,419,150 $1,506,856 $1,599,871 $1,695,660
EXPANDED BASIC 385,151 408,954 434,198 460,195
NEW PRODUCT TIER #1 290,594 308,553 327,600 347,214
NEW PRODUCT TIER #2 0 0 0 0
NEW PRODUCT TIER #3 0 0 0 0
PAY TV 287,728 299,669 318,218 333,909
PAY PER VIEW 29,911 44,786 72,307 110,221
CONVERTER RENTALS 54,535 58,232 62,287 66,504
INSTALLATIONS 46,518 49,373 52,399 54,425
COMMERCIAL 41,115 42,348 43,619 44,927
ADVERTISING 99,156 124,396 149,816 176,676
MISCELLANEOUS 93,834 99,205 104,881 110,737
------ ------ ------- -------
TOTAL REVENUES $2,747,693 $2,942,374 $3,165,196 $3,400,467
OPERATING EXPENSES:
OPERATIONS $280,520 $298,960 $319,349 $340,533
GENERAL & ADMINISTRATIVE 251,307 264,537 278,709 293,381
SALES & MARKETING 81,561 95,770 109,842 124,605
PROGRAMMING 473,632 506,494 552,545 603,691
TOTAL OPERATING EXPENSES $1,087,020 $1,165,761 $1,260,445 $1,362,210
---------- ---------- ---------- ----------
OPERATING INCOME $1,660,673 $1,776,612 $1,904,751 $2,038,257
OPERATING MARGIN 60.4% 60.4% 60.2% 59.9%
TOTAL REVENUE/BASIC SUB/MONTH $33.28 $34.57 $36.08 $37.67
CASH FLOW/BASIC SUB/MONTH $20.12 $20.88 $21.71 $22.58
OPERATIONS % OF REVENUE 10% 10% 10% 10%
G & A PERCENTAGE OF REVENUE 9% 9% 9% 9%
SALES & MARKETING % OF REVENUE 3% 3% 3% 4%
PROGRAMMING % OF REVENUE 17% 17% 17% 18%
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES:
BASIC $1,794,159 $1,898,314 $2,008,447 $11,922,457
EXPANDED BASIC 486,927 515,194 545,084 3,235,704
NEW PRODUCT TIER #1 367,383 388,711 411,262 2,441,317
NEW PRODUCT TIER #2 0 0 0 0
NEW PRODUCT TIER #3 0 0 0 0
PAY TV 346,445 359,439 372,908 2,318,316
PAY PER VIEW 147,845 184,585 225,901 815,555
CONVERTER RENTALS 70,884 75,546 80,507 468,496
INSTALLATIONS 57,574 60,904 64,424 385,616
COMMERCIAL 46,275 47,663 49,093 315,040
ADVERTISING 203,926 230,257 254,204 1,238,431
MISCELLANEOUS 116,782 123,160 129,891 778,490
------- ------- ------- -------
TOTAL REVENUES $3,638,199 $3,883,772 $4,141,720 $23,919,421
OPERATING EXPENSES:
OPERATIONS $362,862 $386,440 $411,480 $2,400,144
GENERAL & ADMINISTRATIVE 308,417 324,165 340,717 2,061,231
SALES & MARKETING 139,657 154,431 168,260 874,126
PROGRAMMING 653,332 703,839 758,562 4,252,095
TOTAL OPERATING EXPENSES $1,464,268 $1,568,874 $1,679,019 $9,587,597
---------- ---------- ---------- ----------
OPERATING INCOME $2,173,932 $2,314,898 $2,462,701 $14,331,825
OPERATING MARGIN 59.8% 59.6% 59.5% 59.9%
TOTAL REVENUE/BASIC SUB/MONTH $39.23 $40.77 $42.33
CASH FLOW/BASIC SUB/MONTH $23.44 $24.30 $25.17
OPERATIONS % OF REVENUE 10% 10% 10%
G & A PERCENTAGE OF REVENUE 8% 8% 8%
SALES & MARKETING % OF REVENUE 4% 4% 4%
PROGRAMMING % OF REVENUE 18% 18% 18%
</TABLE>
<PAGE> 262
FALCON CABLE SYSTEMS CO. EXHIBIT H
DALLAS REGION - SALE
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
- --------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT $1,897,545
ADDITIONAL MILES OF PLANT 6.1 6.0 6.3 6.2
AERIAL PLANT PER MILE $12,000 $12,240 $12,485 $12,734
UNDERGROUND PLANT PER MILE $18,000 $18,360 $18,727 $19,102
PERCENTAGE OF PLANT AERIAL 5% 5% 5% 5%
PERCENTAGE OF PLANT UNDERGROUND 95% 95% 95% 95%
AVERAGE COST PER CONVERTER $110 $112 $114 $117
PERCENTAGE CONVERTER USE 67% 67% 68% 68%
PERCENTAGE REPLACEMENT 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $56 $57 $58 $59
MISC. CAPITAL PER SUBSCRIBER $5 $5 $5 $5
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $3,652 $3,651 $3,959 $3,958
104,075 104,046 112,833 112,816
PLANT REBUILD/UPGRADE/INCL. HE 8,298 8,780 9,272 9,801
AVERAGE COST OF NEW CONVERTERS 15,400 16,277 17,201 16,158
CONVERTER REPLACEMENT 24,909 26,389 27,953 29,605
INSTALLATION COSTS 116,898 122,893 129,187 134,290
MISC. CAPITAL EXPENDITURES 34,399 36,170 38,030 39,915
------ ------ ------ ------
TOTAL CAPITAL EXPENDITURES $307,630 $318,205 $338,434 $346,544
AS A % OF OPERATING INCOME 18.5% 17.9% 17.8% 17.0%
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT
ADDITIONAL MILES OF PLANT 7.1 7.5 7.8
AERIAL PLANT PER MILE $12,989 $13,249 $13,514
UNDERGROUND PLANT PER MILE $19,484 $19,873 $20,271
PERCENTAGE OF PLANT AERIAL 5% 5% 5%
PERCENTAGE OF PLANT UNDERGROUND 95% 95% 95%
AVERAGE COST PER CONVERTER $119 $121 $124
PERCENTAGE CONVERTER USE 69% 69% 70%
PERCENTAGE REPLACEMENT 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $61 $62 $63
MISC. CAPITAL PER SUBSCRIBER $5 $6 $6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 115%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $4,604 $4,942 $5,289 $30,055
131,223 140,839 150,743 856,576
PLANT REBUILD/UPGRADE/INCL. HE 10,340 10,946 11,594 69,032
AVERAGE COST OF NEW CONVERTERS 17,032 17,953 18,922 118,943
CONVERTER REPLACEMENT 31,249 32,980 34,804 207,888
INSTALLATION COSTS 140,697 147,405 154,428 945,797
MISC. CAPITAL EXPENDITURES 41,824 43,822 45,915 280,074
------ ------ ------ -------
TOTAL CAPITAL EXPENDITURES $376,970 $398,887 $421,694 $2,508,365
AS A % OF OPERATING INCOME 17.3% 17.2% 17.1%
</TABLE>
<PAGE> 263
FALCON CABLE SYSTEMS CO. EXHIBIT I
DALLAS REGION - SALE
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ESTIMATED DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5% 8.9% 8.9% 8.9%
DEPRECIATION - BEG. & ADTNS. 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
YEAR 1 $315,120 $540,047 $385,685 $275,426 $196,922 $196,702 $196,922 $2,106,825
YEAR 2 45,472 77,928 55,654 39,744 28,416 28,384 275,598
YEAR 3 48,362 82,883 59,192 42,270 30,222 262,929
YEAR 4 49,521 84,869 60,611 43,283 238,284
YEAR 5 53,869 92,320 65,932 212,121
YEAR 6 57,001 97,687 154,688
YEAR 7 60,260 60,260
------- ------- ------- ------- ------- ------- ------ ------
TOTAL DEPRECIATION $315,120 $585,519 $511,976 $463,484 $434,596 $477,319 $522,691 $3,310,705
</TABLE>
<PAGE> 264
FALCON CABLE SYSTEMS CO. EXHIBIT J
DALLAS REGION - SALE
AS OF DECEMBER 31, 1995
ASSUMPTIONS AND INPUTS
- ----------------------
<TABLE>
<S> <C>
REMAINING LIFE OF FRANCHISES (YEARS) 7
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $1,897,545
SUBSCRIBERS IN FRANCHISES 100%
</TABLE>
<TABLE>
<CAPTION>
LOW HIGH
ANALYSIS ANALYSIS
-------- --------
<S> <C> <C>
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
</TABLE>
<PAGE> 265
DALLAS - EXCHANGE
<PAGE> 266
FALCON CABLE SYSTEMS CO. EXHIBIT A
DALLAS REGION - EXCHANGE
AS OF DECEMBER 31, 1995
VALUATION METHODS
- -----------------
<TABLE>
<CAPTION>
LOW HIGH
--- ----
<S> <C> <C>
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
ADJUSTED OPERATING INCOME, PER BOOKS (DECEMBER 31, 1995) $2,228,584 $2,228,584
VALUATION MULTIPLE 10.5 11.5
---- ----
ESTIMATED FAIR MARKET VALUE $23,400,128 $25,628,712
----------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $3,736,193 $3,736,193
OPERATING MARGIN, PER BOOKS (DECEMBER 31, 1995) 58.4% 58.4%
----- -----
"RUNNING RATE" OPERATING INCOME 2,181,383 2,181,383
VALUATION MULTIPLE 10.0 11.0
---- ----
ESTIMATED FAIR MARKET VALUE $21,813,835 $23,995,218
----------- -----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $2,290,039 $2,290,039
VALUATION MULTIPLE 9.5 10.5
--- ----
ESTIMATED FAIR MARKET VALUE $21,755,370 $24,045,409
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $17,231,814 $18,739,501
----------- -----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVSTMT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $16,926,793 $18,370,153
----------- -----------
SUMMARY OF VALUES
- -----------------
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $23,400,128 $25,628,712
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 21,813,835 23,995,218
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 21,755,370 24,045,409
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 17,231,814 18,739,501
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 16,926,793 18,370,153
---------- ----------
RANGE OF ESTIMATED FAIR MARKET VALUES $19,041,000 $20,823,000
ESTIMATED FAIR MARKET VALUE $19,932,000
-----------
</TABLE>
<PAGE> 267
FALCON CABLE SYSTEMS CO. EXHIBIT B
DALLAS REGION - EXCHANGE LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $3,922,294 $4,216,945 $4,627,442 $5,070,879
OPERATING EXPENSES 1,632,255 1,766,004 1,915,993 2,080,389
--------- --------- --------- ---------
OPERATING INCOME $2,290,039 $2,450,941 $2,711,448 $2,990,490
OPERATING MARGIN 0.58 0.58 0.59 0.59
PARENT SERVICES/MGT FEE (5%) 196,115 210,847 231,372 253,544
FRANCHISE AMORTIZATION (15) 641,133 641,133 641,133 641,133
SUBSCRIBER LIST (8) 218,467 218,467 218,467 218,467
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 941,191 2,052,561 2,363,435 2,209,358
INTEREST 835,588 1,021,299 1,273,712 1,221,283
--------- --------- --------- ---------
PRE-TAX INCOME ($542,454) ($1,693,366) ($2,016,671) ($1,553,295)
INCOME TAX (EXPENSE)/BENEFIT 184,435 575,744 685,668 528,120
------- ------- ------- -------
NET INCOME ($358,020) ($1,117,621) ($1,331,003) ($1,025,175)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($542,454) ($1,693,366) ($2,016,671) ($1,553,295)
FRANCHISE AMORTIZATION (15) 641,133 641,133 641,133 641,133
SUBSCRIBER LIST (8) 218,467 218,467 218,467 218,467
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 941,191 2,052,561 2,363,435 2,209,358
EQUITY 8,355,879
DEBT 8,355,879 1,857,109 2,524,133 0
RESIDUAL VALUE IN YEAR 7
--------- --------- --------- ---------
TOTAL SOURCES OF CASH $17,970,094 $3,075,904 $3,730,497 $1,515,663
USES OF CASH -
PURCHASE PRICE - CURRENT $17,231,814
CAPITAL EXPENDITURES 638,177 3,076,008 3,206,204 444,565
DEBT RETIREMENT 0 0 524,293 1,071,098
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
--------- --------- --------- ---------
TOTAL USES OF CASH $17,869,991 $3,076,008 $3,730,497 $1,515,663
ANNUAL CASH INCREASE/(DECREASE) $100,103 ($103) $0 $0
CUMULATIVE CASH 100,103 100,000 100,000 100,000
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $5,497,440 $5,891,841 $6,249,084 $35,475,924
OPERATING EXPENSES 2,243,598 2,402,486 2,557,707 14,598,433
--------- --------- --------- ----------
OPERATING INCOME $3,253,842 $3,489,355 $3,691,376 $20,877,491
OPERATING MARGIN 0.59 0.59 0.59
PARENT SERVICES/MGT FEE (5%) 274,872 294,592 312,454 1,773,796
FRANCHISE AMORTIZATION (15) 641,133 641,133 641,133 4,487,933
SUBSCRIBER LIST (8) 218,467 218,467 218,467 1,529,267
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,708,709 1,524,712 1,479,078 12,279,044
INTEREST 1,114,173 974,379 801,311 7,241,745
--------- ------- ------- ---------
PRE-TAX INCOME ($703,512) ($163,929) $238,933 ($6,434,294)
INCOME TAX (EXPENSE)/BENEFIT 239,194 55,736 (81,237) 2,187,660
------- ------ ------- ---------
NET INCOME ($464,318) ($108,193) $157,696 ($4,246,634)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($703,512) ($163,929) $238,933 ($6,434,294)
FRANCHISE AMORTIZATION (15) 641,133 641,133 641,133 4,487,933
SUBSCRIBER LIST (8) 218,467 218,467 218,467 1,529,267
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,708,709 1,524,712 1,479,078 12,279,044
EQUITY 8,355,879
DEBT 0 0 0 12,737,122
RESIDUAL VALUE IN YEAR 7 33,222,386 33,222,386
--------- --------- ---------- ----------
TOTAL SOURCES OF CASH $1,864,797 $2,220,383 $35,799,998 $66,177,336
USES OF CASH -
PURCHASE PRICE - CURRENT $17,231,814
CAPITAL EXPENDITURES 466,861 489,698 511,651 8,833,164
DEBT RETIREMENT 1,397,936 1,730,685 8,013,109 12,737,122
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 6,466,582 6,466,582
--------- --------- --------- ---------
TOTAL USES OF CASH $1,864,797 $2,220,383 $14,991,343 $45,268,681
ANNUAL CASH INCREASE/(DECREASE) ($0) ($0) $20,808,655 $20,908,655
CUMULATIVE CASH 100,000 100,000 20,908,655
</TABLE>
<PAGE> 268
FALCON CABLE SYSTEMS CO. EXHIBIT B
DALLAS REGION - EXCHANGE HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $3,922,294 $4,216,945 $4,627,442 $5,070,879
OPERATING EXPENSES 1,632,255 1,766,004 1,915,993 2,080,389
--------- --------- --------- ---------
OPERATING INCOME $2,290,039 $2,450,941 $2,711,448 $2,990,490
OPERATING MARGIN 0.58 0.58 0.59 0.59
PARENT SERVICES/MGT FEE (5%) 196,115 210,847 231,372 253,544
FRANCHISE AMORTIZATION (15) 641,133 641,133 641,133 641,133
SUBSCRIBER LIST (8) 218,467 218,467 218,467 218,467
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 941,191 2,052,561 2,363,435 2,209,358
INTEREST 914,947 1,109,461 1,377,202 1,319,794
--------- --------- --------- ---------
PRE-TAX INCOME ($621,813) ($1,781,528) ($2,120,162) ($1,651,806)
INCOME TAX (EXPENSE)/BENEFIT 211,417 605,719 720,855 561,614
------- ------- ------- -------
NET INCOME ($410,397) ($1,175,808) ($1,399,307) ($1,090,192)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($621,813) ($1,781,528) ($2,120,162) ($1,651,806)
FRANCHISE AMORTIZATION (15) 641,133 641,133 641,133 641,133
SUBSCRIBER LIST (8) 218,467 218,467 218,467 218,467
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 941,191 2,052,561 2,363,435 2,209,358
EQUITY 9,149,468
DEBT 9,149,468 1,945,140 2,677,418 0
RESIDUAL VALUE IN YEAR 7
--------- --------- --------- ---------
TOTAL SOURCES OF CASH $19,477,913 $3,075,773 $3,780,291 $1,417,152
USES OF CASH -
PURCHASE PRICE - CURRENT $18,739,501
CAPITAL EXPENDITURES 638,177 3,076,008 3,206,204 444,565
DEBT RETIREMENT 0 0 574,087 972,587
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL)
--------- --------- --------- ---------
TOTAL USES OF CASH $19,377,678 $3,076,008 $3,780,291 $1,417,152
ANNUAL CASH INCREASE/(DECREASE) $100,235 ($235) $0 ($0)
CUMULATIVE CASH 100,235 100,000 100,000 100,000
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- ----
REVENUES $5,497,440 $5,891,841 $6,249,084 $35,475,924
OPERATING EXPENSES 2,243,598 2,402,486 2,557,707 14,598,433
--------- --------- --------- ----------
OPERATING INCOME $3,253,842 $3,489,355 $3,691,376 $20,877,491
OPERATING MARGIN 0.59 0.59 0.59
PARENT SERVICES/MGT FEE (5%) 274,872 294,592 312,454 1,773,796
FRANCHISE AMORTIZATION (15) 641,133 641,133 641,133 4,487,933
SUBSCRIBER LIST (8) 218,467 218,467 218,467 1,529,267
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,708,709 1,524,712 1,479,078 12,279,044
INTEREST 1,222,535 1,093,578 932,429 7,969,946
--------- --------- ------- ---------
PRE-TAX INCOME ($811,874) ($283,127) $107,815 ($7,162,495)
INCOME TAX (EXPENSE)/BENEFIT 276,037 96,263 (36,657) 2,435,248
------- ------ ------- ---------
NET INCOME ($535,837) ($186,864) $71,158 ($4,727,246)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($811,874) ($283,127) $107,815 ($7,162,495)
FRANCHISE AMORTIZATION (15) 641,133 641,133 641,133 4,487,933
SUBSCRIBER LIST (8) 218,467 218,467 218,467 1,529,267
NON-COMPETE COVENANTS (0) 0 0 0 0
DEPRECIATION 1,708,709 1,524,712 1,479,078 12,279,044
EQUITY 9,149,468
DEBT 0 0 0 13,772,025
RESIDUAL VALUE IN YEAR 7 33,222,386 33,222,386
--------- --------- ---------- ----------
TOTAL SOURCES OF CASH $1,756,435 $2,101,185 $35,668,880 $67,277,628
USES OF CASH -
PURCHASE PRICE - CURRENT $18,739,501
CAPITAL EXPENDITURES 466,861 489,698 511,651 8,833,164
DEBT RETIREMENT 1,289,574 1,611,487 9,324,290 13,772,025
TAXES PAID ON NET INCOME 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 5,706,380 5,706,380
--------- --------- --------- ---------
TOTAL USES OF CASH $1,756,435 $2,101,185 $15,542,321 $47,051,070
ANNUAL CASH INCREASE/(DECREASE) $0 ($0) $20,126,558 $20,226,558
CUMULATIVE CASH 100,000 100,000 20,226,558
</TABLE>
<PAGE> 269
FALCON CABLE SYSTEMS CO. EXHIBIT C
DALLAS REGION - EXCHANGE LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
<TABLE>
<S> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $16,711,758
YEAR 1 DEBT REQUIREMENTS 8,355,879
YEAR 1 EQUITY REQUIREMENTS 8,355,879
FINANCING AVAILABLE $14,485,794 $14,885,253 $15,931,118 $17,624,413
UNUSED LEVERAGE 6,129,915 4,672,265 3,718,290 6,482,683
SENIOR DEBT: 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING DEBT $0 $8,355,879 $8,355,879 $7,831,586
DEBT ADDED 8,355,879 0 0 0
TOTAL ANNUAL PAYMENTS 835,588 835,588 1,359,881 1,359,881
INTEREST 835,588 835,588 835,588 783,159
PRINCIPAL REPAYMENT 0 0 524,293 576,722
ENDING BALANCE 8,355,879 8,355,879 7,831,586 7,254,864
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $1,857,109 $4,381,243
BORROWINGS 0 1,857,109 2,524,133 0
PRINCIPAL PAYMENTS 0 0 0 494,376
INTEREST 0 185,711 438,124 438,124
SENIOR DEBT COVERAGE 3.6 3.4 2.9 2.4
LOC DEBT COVERAGE 0.0 0.8 1.6 1.3
TOTAL DEBT COVERAGE 3.6 4.2 4.5 3.7
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $19,438,183 $21,149,973 $22,680,804
UNUSED LEVERAGE 9,694,389 13,136,863 17,525,786
SENIOR DEBT: 2000 2001 2002 TOTAL
---- ---- ---- -----
BEGINNING DEBT $7,254,864 $6,620,469 $5,922,635
DEBT ADDED 0 0 0 8,355,879
TOTAL ANNUAL PAYMENTS 1,359,881 1,359,881 1,359,881 8,470,580
INTEREST 725,486 662,047 592,264 5,269,719
PRINCIPAL REPAYMENT 634,394 697,834 767,617 3,200,861
ENDING BALANCE 6,620,469 5,922,635 5,155,018
LINE OF CREDIT:
BEGINNING DEBT $3,886,866 $3,123,325 $2,090,474 $0
BORROWINGS 0 0 0 4,381,243
PRINCIPAL PAYMENTS 763,541 1,032,851 2,090,474 4,381,243
INTEREST 388,687 312,333 209,047 1,972,026
SENIOR DEBT COVERAGE 2.0 1.7 1.4
LOC DEBT COVERAGE 1.0 0.6 0.0
TOTAL DEBT COVERAGE 3.0 2.3 1.4
</TABLE>
<PAGE> 270
FALCON CABLE SYSTEMS CO. EXHIBIT C
DALLAS REGION - EXCHANGE HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
<TABLE>
<S> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $18,298,935
YEAR 1 DEBT REQUIREMENTS 9,149,468
YEAR 1 EQUITY REQUIREMENTS 9,149,468
FINANCING AVAILABLE $16,714,377 $17,175,292 $18,382,060 $20,335,861
UNUSED LEVERAGE 7,564,910 6,080,685 5,184,122 8,110,511
SENIOR: 1996 1997 1998 1999
---- ---- ---- ----
BEGINNING DEBT $0 $9,149,468 $9,149,468 $8,575,381
DEBT ADDED 9,149,468 0 0 0
TOTAL ANNUAL PAYMENTS 914,947 914,947 1,489,034 1,489,034
INTEREST 914,947 914,947 914,947 857,538
PRINCIPAL REPAYMENT 0 0 574,087 631,496
ENDING BALANCE 9,149,468 9,149,468 8,575,381 7,943,885
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $1,945,140 $4,622,557
BORROWINGS 0 1,945,140 2,677,418 0
PRINCIPAL PAYMENTS 0 0 0 341,092
INTEREST 0 194,514 462,256 462,256
SENIOR DEBT COVERAGE 4.0 3.7 3.2 2.7
LOC DEBT COVERAGE 0.0 0.8 1.7 1.4
TOTAL DEBT COVERAGE 4.0 4.5 4.9 4.1
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
FINANCING AVAILABLE $22,428,673 $24,403,815 $26,170,159
UNUSED LEVERAGE 11,492,896 17,918,685 20,525,550
SENIOR: 2000 2001 2002 TOTAL
---- ---- ---- -----
BEGINNING DEBT $7,943,885 $7,249,240 $6,485,130
DEBT ADDED 0 0 0 $9,149,468
TOTAL ANNUAL PAYMENTS 1,489,034 1,489,034 1,489,034 9,275,062
INTEREST 794,389 724,924 648,513 5,770,204
PRINCIPAL REPAYMENT 694,645 764,110 840,521 3,504,858
ENDING BALANCE 7,249,240 6,485,130 5,644,609
LINE OF CREDIT:
BEGINNING DEBT $4,281,465 $3,686,537 $2,839,160 $0
BORROWINGS 0 0 0 4,622,557
PRINCIPAL PAYMENTS 594,928 847,377 2,839,160 4,622,557
INTEREST 428,147 368,654 283,916 2,199,742
SENIOR DEBT COVERAGE 2.2 1.9 1.5
LOC DEBT COVERAGE 1.1 0.8 0.0
TOTAL DEBT COVERAGE 3.4 2.7 1.5
</TABLE>
<PAGE> 271
FALCON CABLE SYSTEMS CO. EXHIBIT D
DALLAS REGION - EXCHANGE
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $3,922,294 $4,216,945 $4,627,442 $5,070,879
OPERATING EXPENSES 1,632,255 1,766,004 1,915,993 2,080,389
--------- --------- --------- ---------
OPERATING INCOME 2,290,039 2,450,941 2,711,448 2,990,490
PLUS: RESIDUAL VALUE
LESS: CAPITAL EXPENDITURES 638,177 3,076,008 3,206,204 444,565
------- --------- --------- -------
TOTAL CASH FLOW $1,651,862 ($625,066) ($494,756) $2,545,925
NET PRESENT VALUE @ 16.6% $16,926,793
-----------
NET PRESENT VALUE @ 15.1% $18,370,153
-----------
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
REVENUES $5,497,440 $5,891,841 $6,249,084 $35,475,924
OPERATING EXPENSES 2,243,598 2,402,486 2,557,707 14,598,433
--------- --------- --------- ----------
OPERATING INCOME 3,253,842 3,489,355 3,691,376 20,877,491
PLUS: RESIDUAL VALUE 33,222,386 33,222,386
LESS: CAPITAL EXPENDITURES 466,861 489,698 511,651 8,833,164
------- ------- ------- ---------
TOTAL CASH FLOW $2,786,981 $2,999,657 $36,402,111 $45,266,713
NET PRESENT VALUE @ 16.6%
NET PRESENT VALUE @ 15.1%
</TABLE>
<PAGE> 272
FALCON CABLE SYSTEMS CO. EXHIBIT E
DALLAS REGION - EXCHANGE
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
- ----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
BEGINNING MILES 303.9
MILES ADDED 6.9 7.0 7.2 7.3
CUMULATIVE MILES 310.8 317.8 325.0 332.3
DENSITY OF ADDITIONAL PLANT 37 37 37 37
HOMES PASSED - BEGINNING 14,561.0
NEW HOMES & EXTENSIONS 255 259 264 268
HOMES PASSED - ENDING 14,816 15,075 15,339 15,607
GROWTH IN HOMES 1.8% 1.8% 1.8% 1.8%
BASIC - BEGINNING SUBSCRIBERS 10,153.0 10,405 10,662 10,925
AVERAGE SUBSCRIBERS 10,279 10,533 10,794 11,041
ENDING SUBSCRIBERS 10,405 10,662 10,925 11,156
PENETRATION 70.2% 70.7% 71.2% 71.5%
EXPANDED BASIC - BEGINNING 7,078.0 7,254 7,433 7,617
AVERAGE SUBSCRIBERS 7,166 7,343 7,525 7,697
ENDING SUBSCRIBERS 7,254 7,433 7,617 7,777
PENETRATION 69.7% 69.7% 69.7% 69.7%
NEW PRODUCT TIER #1 - BEGINNING 3,624.0 3,880 4,414 4,970
AVERAGE SUBSCRIBERS 3,752 4,147 4,692 5,023
ENDING SUBSCRIBERS 3,880 4,414 4,970 5,075
PENETRATION 37.3% 41.4% 45.5% 45.5%
NEW PRODUCT TIER #2 - BEGINNING 0 0 512 1,835
AVERAGE SUBSCRIBERS 0 256 1,174 2,329
ENDING SUBSCRIBERS 0 512 1,835 2,822
PENETRATION 0.0% 4.8% 16.8% 25.3%
NEW PRODUCT TIER #3 - BEGINNING 0 0 512 1,835
AVERAGE SUBSCRIBERS 0 256 1,174 2,329
ENDING SUBSCRIBERS 0 512 1,835 2,822
PENETRATION 0.0% 4.8% 16.8% 25.3%
PAY TV - BEGINNING UNITS 3,953.0 3,947 4,151 4,363
AVERAGE UNITS 3,950 4,049 4,257 4,409
ENDING UNITS 3,947 4,151 4,363 4,455
PENETRATION 37.9% 38.9% 39.9% 39.9%
PAY PER VIEW - BEGINNING UNITS/MO 147 227 393 702
AVERAGE UNITS 187 310 547 874
ENDING UNITS 227 393 702 1,047
AVERAGE BUY RATE/MO 6.8% 9.8% 14.8% 19.8%
CONVERTER RENTALS - BEGINNING UNITS 3,465 3,707 4,279 4,903
AVERAGE SUBSCRIBERS 3,586 3,993 4,591 5,211
ENDING SUBSCRIBERS 3,707 4,279 4,903 5,520
PENETRATION 35.6% 40.1% 44.9% 49.5%
ADDRESSABLE HOMES 2,790.0 3,353 4,023 4,750
AVERAGE HOMES 3,072 3,688 4,387 5,024
ENDING HOMES 3,353 4,023 4,750 5,297
PENETRATION 32.2% 37.7% 43.5% 47.5%
BASIC CHURN RATE 28% 28% 28% 28%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2000 2001 2002
------ ------ ------
<S> <C> <C> <C>
BEGINNING MILES
MILES ADDED 7.4 7.5 7.7
CUMULATIVE MILES 339.7 347.2 354.9
DENSITY OF ADDITIONAL PLANT 37 37 37
HOMES PASSED - BEGINNING
NEW HOMES & EXTENSIONS 273 278 283
HOMES PASSED - ENDING 15,880 16,158 16,441
GROWTH IN HOMES 1.8% 1.8% 1.8%
BASIC - BEGINNING SUBSCRIBERS 11,156 11,391 11,626
AVERAGE SUBSCRIBERS 11,273 11,508 11,747
ENDING SUBSCRIBERS 11,391 11,626 11,867
PENETRATION 71.7% 72.0% 72.2%
EXPANDED BASIC - BEGINNING 7,777 7,941 8,105
AVERAGE SUBSCRIBERS 7,859 8,023 8,189
ENDING SUBSCRIBERS 7,941 8,105 8,273
PENETRATION 69.7% 69.7% 69.7%
NEW PRODUCT TIER #1 - BEGINNING 5,075 5,182 5,289
AVERAGE SUBSCRIBERS 5,129 5,236 5,344
ENDING SUBSCRIBERS 5,182 5,289 5,399
PENETRATION 45.5% 45.5% 45.5%
NEW PRODUCT TIER #2 - BEGINNING 2,822 3,850 3,930
AVERAGE SUBSCRIBERS 3,336 3,890 3,970
ENDING SUBSCRIBERS 3,850 3,930 4,011
PENETRATION 33.8% 33.8% 33.8%
NEW PRODUCT TIER #3 - BEGINNING 2,822 3,850 3,930
AVERAGE SUBSCRIBERS 3,336 3,890 3,970
ENDING SUBSCRIBERS 3,850 3,930 4,011
PENETRATION 33.8% 33.8% 33.8%
PAY TV - BEGINNING UNITS 4,455 4,549 4,643
AVERAGE UNITS 4,502 4,596 4,691
ENDING UNITS 4,549 4,643 4,739
PENETRATION 39.9% 39.9% 39.9%
PAY PER VIEW - BEGINNING UNITS/MO 1,047 1,372 1,721
AVERAGE UNITS 1,210 1,546 1,916
ENDING UNITS 1,372 1,721 2,111
AVERAGE BUY RATE/MO 23.3% 26.8% 30.3%
CONVERTER RENTALS - BEGINNING UNITS 5,520 6,160 6,822
AVERAGE SUBSCRIBERS 5,840 6,491 7,026
ENDING SUBSCRIBERS 6,160 6,822 7,230
PENETRATION 54.1% 58.7% 60.9%
ADDRESSABLE HOMES 5,297 5,898 6,427
AVERAGE HOMES 5,597 6,163 6,701
ENDING HOMES 5,898 6,427 6,975
PENETRATION 51.8% 55.3% 58.8%
BASIC CHURN RATE 28% 28% 28%
</TABLE>
<PAGE> 273
FALCON CABLE SYSTEMS CO. EXHIBIT F
DALLAS REGION - EXCHANGE
AS OF DECEMBER 31, 1995
SERVICE RATES
- -------------
<TABLE>
<CAPTION>
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- ------------- ------------- -------------
<S> <C> <C>
BASIC $16.81 $17.12
EXPANDED BASIC $6.60 $7.54
NEW PRODUCT TIER #1 $4.49 $4.69
NEW PRODUCT TIER #2 $0.00 $4.00
NEW PRODUCT TIER #3 $0.00 $4.00
PAY 6.96 $6.96
PAY PER VIEW 9.99 $9.99
CONVERTER RENTALS 0.63 $0.94
INSTALLATIONS-NEW 50.00 $50.00
INSTALLATIONS-CHURN 25.00 $25.00
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 2% 3% 3% 3% 3% 3% 3%
EXPANDED BASIC 14% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #1 4% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #3 0% 3% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1% 1%
PAY PER VIEW 0% 3% 3% 3% 3% 3% 3%
CONVERTER/REMOTE RENTALS 49% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3% 3%
AVERAGE RATES
- -------------
BASIC $17.12 $17.63 $18.16 $18.71 $19.27 $19.85 $20.44
EXPANDED BASIC $7.54 7.77 8.00 8.24 8.49 8.74 9.00
NEW PRODUCT TIER #1 $4.69 4.83 4.98 5.12 5.28 5.44 5.60
NEW PRODUCT TIER #2 $4.00 4.12 4.24 4.37 4.50 4.64 4.78
NEW PRODUCT TIER #3 $4.00 4.12 4.24 4.37 4.50 4.64 4.78
PAY $6.96 7.03 7.10 7.17 7.24 7.31 7.39
PAY PER VIEW $9.99 10.29 10.60 10.92 11.25 11.59 11.93
CONVERTERS RENTALS $0.94 0.97 1.00 1.03 1.06 1.09 1.12
INSTALLATIONS-NEW $50.00 51.50 53.05 54.64 56.28 57.96 59.70
INSTALLATIONS-CHURN $25.00 25.75 26.52 27.32 28.14 28.98 29.85
</TABLE>
<PAGE> 274
FALCON CABLE SYSTEMS CO. EXHIBIT G
DALLAS REGION - EXCHANGE
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
BASIC $2,111,690 $2,228,916 $2,352,532 $2,478,500
EXPANDED BASIC 648,344 684,335 722,288 760,964
NEW PRODUCT TIER #1 211,171 240,390 280,145 308,895
NEW PRODUCT TIER #2 0 12,651 59,765 122,155
NEW PRODUCT TIER #3 0 12,651 59,765 122,155
PAY TV 329,901 341,562 362,701 379,394
PAY PER VIEW 22,430 38,297 69,639 114,590
CONVERTER RENTALS 40,448 46,387 54,936 64,232
INSTALLATIONS 67,056 70,757 74,658 76,947
COMMERCIAL 195,177 201,032 207,063 213,275
ADVERTISING 148,148 184,758 221,199 259,300
MISCELLANEOUS 147,928 155,209 162,751 170,472
---------- ---------- ---------- ----------
TOTAL REVENUES $3,922,294 $4,216,945 $4,627,442 $5,070,879
OPERATING EXPENSES:
OPERATIONS $492,002 $521,302 $555,951 $592,481
GENERAL & ADMINISTRATIVE 332,140 349,489 369,050 389,345
SALES & MARKETING 163,907 207,203 231,424 256,507
PROGRAMMING 644,206 688,010 759,569 842,056
---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES $1,632,255 $1,766,004 $1,915,993 $2,080,389
---------- ---------- ---------- ----------
OPERATING INCOME $2,290,039 $2,450,941 $2,711,448 $2,990,490
OPERATING MARGIN 58.4% 58.1% 58.6% 59.0%
TOTAL REVENUE/BASIC SUB/MONTH $31.80 $33.36 $35.73 $38.27
CASH FLOW/BASIC SUB/MONTH $18.57 $19.39 $20.93 $22.57
OPERATIONS % OF REVENUE 13% 12% 12% 12%
G & A PERCENTAGE OF REVENUE 8% 8% 8% 8%
SALES & MARKETING % OF REVENUE 4.2% 4.9% 5.0% 5.1%
PROGRAMMING % OF REVENUE 16% 16% 16% 17%
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
REVENUES:
BASIC $2,606,631 $2,740,872 $2,881,499 $17,400,640
EXPANDED BASIC 800,304 841,519 884,695 5,342,449
NEW PRODUCT TIER #1 324,863 341,594 359,120 2,066,177
NEW PRODUCT TIER #2 180,237 216,452 227,558 818,819
NEW PRODUCT TIER #3 180,237 216,452 227,558 818,819
PAY TV 391,260 403,421 415,885 2,624,124
PAY PER VIEW 163,303 215,011 274,370 897,641
CONVERTER RENTALS 74,136 84,876 94,630 459,646
INSTALLATIONS 80,919 84,895 89,245 544,477
COMMERCIAL 219,673 226,263 233,051 1,495,533
ADVERTISING 297,485 333,815 366,196 1,810,900
MISCELLANEOUS 178,390 186,670 195,277 1,196,698
---------- ---------- ---------- -----------
TOTAL REVENUES $5,497,440 $5,891,841 $6,249,084 $35,475,924
OPERATING EXPENSES:
OPERATIONS $629,095 $665,589 $701,831 $4,158,251
GENERAL & ADMINISTRATIVE 409,697 430,273 451,036 2,731,029
SALES & MARKETING 281,811 306,527 329,667 1,777,047
PROGRAMMING 922,994 1,000,097 1,075,174 5,932,106
---------- ---------- ---------- -----------
TOTAL OPERATING EXPENSES $2,243,598 $2,402,486 $2,557,707 $14,598,433
---------- ---------- ---------- ----------
OPERATING INCOME $3,253,842 $3,489,355 $3,691,376 $20,877,491
OPERATING MARGIN 59.2% 59.2% 59.1% 58.8%
TOTAL REVENUE/BASIC SUB/MONTH $40.64 $42.66 $44.33
CASH FLOW/BASIC SUB/MONTH $24.05 $25.27 $26.19
OPERATIONS % OF REVENUE 11% 11% 11%
G & A PERCENTAGE OF REVENUE 7% 7% 7%
SALES & MARKETING % OF REVENUE 5.1% 5.2% 5.3%
PROGRAMMING % OF REVENUE 17% 17% 17%
</TABLE>
<PAGE> 275
FALCON CABLE SYSTEMS CO. EXHIBIT H
DALLAS REGION - EXCHANGE
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
- --------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT $5,948,183
ADDITIONAL MILES OF PLANT 6.9 7.0 7.2 7.3
AERIAL PLANT PER MILE $12,000 $12,240 $12,485 $12,734
UNDERGROUND PLANT PER MILE $18,000 $18,360 $18,727 $19,102
PERCENTAGE OF PLANT AERIAL 5% 5% 5% 5%
PERCENTAGE OF PLANT UNDERGROUND 95% 95% 95% 95%
AVERAGE COST PER CONVERTER $110 $112 $114 $117
PERCENTAGE CONVERTER USE 36% 40% 45% 49%
PERCENTAGE REPLACEMENT 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $54 $55 $56 $57
MISC. CAPITAL PER SUBSCRIBER $5 $5 $5 $5
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $4,148 $4,305 $4,468 $4,637
118,225 122,700 127,344 132,164
PLANT REBUILD/UPGRADE/INCL. HE 269,075 2,687,225 2,796,500 17,590
AVERAGE COST OF NEW CONVERTERS 9,866 11,592 13,522 13,296
CONVERTER REPLACEMENT 19,895 23,423 27,381 31,551
INSTALLATION COSTS 165,573 173,042 180,840 186,744
MISC. CAPITAL EXPENDITURES 51,394 53,721 56,150 58,582
---------- ---------- ---------- ----------
TOTAL CAPITAL EXPENDITURES $638,177 $3,076,008 $3,206,204 $444,565
AS A % OF OPERATING INCOME 27.9% 125.5% 118.2% 14.9%
YEAR ENDING DECEMBER 31, 2000 2001 2002 TOTAL
---- ---- ---- -----
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT
ADDITIONAL MILES OF PLANT 7.4 7.5 7.7
AERIAL PLANT PER MILE $12,989 $13,249 $13,514
UNDERGROUND PLANT PER MILE $19,484 $19,873 $20,271
PERCENTAGE OF PLANT AERIAL 5% 5% 5%
PERCENTAGE OF PLANT UNDERGROUND 95% 95% 95%
AVERAGE COST PER CONVERTER $119 $121 $124
PERCENTAGE CONVERTER USE 54% 59% 61%
PERCENTAGE REPLACEMENT 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $58 $60 $61
MISC. CAPITAL PER SUBSCRIBER $5 $6 $6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 115%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $4,813 $4,995 $5,184 $32,551
137,166 142,358 147,746 927,701
PLANT REBUILD/UPGRADE/INCL. HE 18,344 19,128 19,943 5,827,805
AVERAGE COST OF NEW CONVERTERS 15,127 16,796 18,148 98,348
CONVERTER REPLACEMENT 35,915 40,587 43,876 222,627
INSTALLATION COSTS 194,485 202,302 210,611 1,313,598
MISC. CAPITAL EXPENDITURES 61,012 63,531 66,143 410,533
---------- ---------- ---------- ----------
TOTAL CAPITAL EXPENDITURES $466,861 $489,698 $511,651 $8,833,164
AS A % OF OPERATING INCOME 14.3% 14.0% 13.9%
</TABLE>
<PAGE> 276
FALCON CABLE SYSTEMS CO. EXHIBIT I
DALLAS REGION - EXCHANGE
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 6 YEAR 7
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ESTIMATED DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5% 8.9% 8.9% 8.9%
DEPRECIATION - BEG. & ADTNS. 1996 1997 1998 1999 2000 2001 2002 TOTAL
---- ---- ---- ---- ---- ---- ---- -----
YEAR 1 $941,191 $1,612,999 $1,151,954 $822,636 $588,162 $587,503 $588,162 $6,292,608
YEAR 2 439,561 753,314 537,994 384,193 274,687 274,380 2,664,130
YEAR 3 458,167 785,199 560,765 400,455 286,314 2,490,900
YEAR 4 63,528 108,874 77,754 55,526 305,683
YEAR 5 66,714 114,334 81,654 262,703
YEAR 6 69,978 119,927 189,905
YEAR 7 73,115 73,115
-------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
TOTAL DEPRECIATION $941,191 $2,052,561 $2,363,435 $2,209,358 $1,708,709 $1,524,712 $1,479,078 $12,279,044
</TABLE>
<PAGE> 277
FALCON CABLE SYSTEMS CO. EXHIBIT J
DALLAS REGION - EXCHANGE
AS OF DECEMBER 31, 1995
ASSUMPTIONS AND INPUTS
- ----------------------
<TABLE>
<S> <C>
REMAINING LIFE OF FRANCHISES (YEARS) 7
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $5,948,183
SUBSCRIBERS IN FRANCHISES 100%
</TABLE>
<TABLE>
<CAPTION>
LOW HIGH
ANALYSIS ANALYSIS
-------- --------
<S> <C> <C>
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
</TABLE>
<PAGE> 278
FLORENCE-EXCHANGE
<PAGE> 279
FALCON CABLE SYSTEMS CO. EXHIBIT A
FLORENCE REGION - EXCHANGE
AS OF DECEMBER 31, 1995
VALUATION METHODS
- -----------------
<TABLE>
<CAPTION>
LOW HIGH
<S> <C> <C> <C>
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME
OPERATING INCOME, PER BOOKS (DECEMBER 31, 1995) $1,006,163 $1,006,163
----------- -----------
VALUATION MULTIPLE 10.5 11.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $10,564,712 $11,570,875
----------- -----------
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME
ESTIMATED OPERATING INCOME
TOTAL CURRENT YEAR'S REVENUE $1,906,777 $1,906,777
OPERATING MARGIN, PER BOOKS (DECEMBER 31, 1995) 54.9% 54.9%
----------- -----------
"RUNNING RATE" OPERATING INCOME 1,047,246 1,047,246
VALUATION MULTIPLE 10.0 11.0
----------- -----------
ESTIMATED FAIR MARKET VALUE $10,472,457 $11,519,703
----------- -----------
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME
OPERATING INCOME $1,110,876 $1,110,876
VALUATION MULTIPLE 9.5 10.5
----------- -----------
ESTIMATED FAIR MARKET VALUE $10,553,325 $11,664,201
----------- -----------
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY
TARGET RETURN ON EQUITY 14.0% 12.0%
ESTIMATED FAIR MARKET VALUE $9,603,311 $10,572,968
----------- -----------
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT
TARGET RETURN ON INVSTMT 16.6% 15.1%
ESTIMATED FAIR MARKET VALUE $9,470,275 $10,352,769
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF VALUES
- -----------------
<S> <C> <C>
I. MULTIPLE OF PAST YEAR'S OPERATING INCOME $10,564,712 $11,570,875
II. MULTIPLE OF "RUNNING RATE" OPERATING INCOME 10,472,457 11,519,703
III. MULTIPLE OF NEXT YEAR'S OPERATING INCOME 10,553,325 11,664,201
IV. DISCOUNTED CASH FLOW RETURN ON EQUITY 9,603,311 10,572,968
V. DISCOUNTED CASH FLOW RETURN ON INVESTMENT 9,470,275 10,352,769
----------- -----------
RANGE OF ESTIMATED FAIR MARKET VALUES $9,932,000 $10,917,000
ESTIMATED FAIR MARKET VALUE $10,425,000
-----------
</TABLE>
<PAGE> 280
FALCON CABLE SYSTEMS CO. EXHIBIT B
FLORENCE REGION - EXCHANGE LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
REVENUES $2,022,632 $2,201,449 $2,400,299 $2,601,239 $2,795,196
OPERATING EXPENSES 911,756 987,811 1,065,251 1,148,434 1,232,960
---------- ---------- ---------- ---------- ----------
OPERATING INCOME $1,110,876 $1,213,638 $1,335,048 $1,452,804 $1,562,236
OPERATING MARGIN 0.55 0.55 0.56 0.56 0.56
PARENT SERVICES/MGT FEE (5%) 101,132 110,072 120,015 130,062 139,760
FRANCHISE AMORTIZATION (15) 377,467 377,467 377,467 377,467 377,467
SUBSCRIBER LIST (8) 97,800 97,800 97,800 97,800 97,800
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 407,282 727,908 709,299 697,547 563,297
INTEREST 468,526 468,526 494,993 465,595 406,791
---------- ---------- ---------- ---------- ----------
PRE-TAX INCOME ($341,330) ($568,136) ($464,526) ($315,666) ($22,878)
INCOME TAX (EXPENSE)/BENEFIT 116,052 193,166 157,939 107,327 7,779
---------- ---------- ---------- ---------- ----------
NET INCOME ($225,278) ($374,970) ($306,587) ($208,340) ($15,100)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($341,330) ($568,136) ($464,526) ($315,666) ($22,878)
FRANCHISE AMORTIZATION (15) 377,467 377,467 377,467 377,467 377,467
SUBSCRIBER LIST (8) 97,800 97,800 97,800 97,800 97,800
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 407,282 727,908 709,299 697,547 563,297
EQUITY 4,685,263
DEBT 4,685,263 0 264,665 0 0
---------- ---------- ---------- ---------- ----------
RESIDUAL VALUE IN YEAR 9
TOTAL SOURCES OF CASH $9,911,745 $635,039 $984,705 $857,147 $1,015,685
USES OF CASH -
PURCHASE PRICE - CURRENT $9,603,311
CAPITAL EXPENDITURES 208,367 209,335 1,116,497 220,604 233,268
DEBT RETIREMENT 0 0 293,979 588,042 355,714
TAXES PAID ON NET INCOME 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
TAXES PAID ON SALE (RESIDUAL)
TOTAL USES OF CASH $9,811,678 $209,335 $1,410,476 $808,645 $588,982
ANNUAL CASH INCREASE/(DECREASE) $100,067 $425,704 ($425,771) $48,502 $426,703
CUMULATIVE CASH 100,067 525,771 100,000 148,502 575,205
</TABLE>
RETURN ON EQUITY METHOD
PROFIT AND LOSS - LOW VALUE
- ---------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2001 2002 2003 2004 TOTAL
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
REVENUES $2,983,410 $3,172,462 $3,368,978 $3,577,807 $25,123,472
OPERATING EXPENSES 1,315,210 1,396,366 1,480,650 1,571,979 11,110,419
---------- ---------- ---------- ---------- ----------
OPERATING INCOME $1,668,200 $1,776,095 $1,888,329 $2,005,828 $14,013,053
OPERATING MARGIN 0.56 0.56 0.56 0.56
PARENT SERVICES/MGT FEE (5%) 149,170 158,623 168,449 178,890 1,256,174
FRANCHISE AMORTIZATION (15) 377,467 377,467 377,467 377,467 3,397,200
SUBSCRIBER LIST (8) 97,800 97,800 97,800 97,800 880,200
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 542,173 534,127 304,076 312,137 4,797,846
INTEREST 371,219 332,091 289,049 241,704 3,538,495
---------- ---------- ---------- ---------- ----------
PRE-TAX INCOME $130,370 $275,988 $651,488 $797,830 $143,139
INCOME TAX (EXPENSE)/BENEFIT (44,326) (93,836) (221,506) (271,262) (48,667)
---------- ---------- ---------- ---------- ----------
NET INCOME $86,044 $182,152 $429,982 $526,568 $94,472
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME $130,370 $275,988 $651,488 $797,830 $143,139
FRANCHISE AMORTIZATION (15) 377,467 377,467 377,467 377,467 3,397,200
SUBSCRIBER LIST (8) 97,800 97,800 97,800 97,800 880,200
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 542,173 534,127 304,076 312,137 4,797,846
EQUITY 4,685,263
DEBT 0 0 0 0 4,949,928
RESIDUAL VALUE IN YEAR 9 18,052,449 18,052,449
---------- ---------- ---------- ---------- ----------
TOTAL SOURCES OF CASH $1,147,810 $1,285,381 $1,430,830 $19,637,682 $36,906,025
USES OF CASH -
PURCHASE PRICE - CURRENT $9,603,311
CAPITAL EXPENDITURES 238,542 241,177 253,119 265,642 2,986,551
DEBT RETIREMENT 391,286 430,414 473,456 2,417,038 4,949,928
TAXES PAID ON NET INCOME 0 0 0 48,667 48,667
TAXES PAID ON SALE (RESIDUAL) 4,942,863 4,942,863
---------- ---------- ---------- ---------- ----------
TOTAL USES OF CASH $629,827 $671,591 $726,575 $7,674,211 $22,531,321
ANNUAL CASH INCREASE/(DECREASE) $517,982 $613,790 $704,256 $11,963,471 $14,374,705
CUMULATIVE CASH 1,093,188 1,706,978 2,411,233 14,374,705
</TABLE>
<PAGE> 281
FALCON CABLE SYSTEMS CO. EXHIBIT B
FLORENCE REGION - EXCHANGE HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES $2,022,632 $2,201,449 $2,400,299 $2,601,239 $2,795,196
OPERATING EXPENSES 911,756 987,811 1,065,251 1,148,434 1,232,960
---------- ---------- ---------- ---------- ----------
OPERATING INCOME $1,110,876 $1,213,638 $1,335,048 $1,452,804 $1,562,236
OPERATING MARGIN 0.55 0.55 0.56 0.56 0.56
PARENT SERVICES/MGT FEE (5%) 101,132 110,072 120,015 130,062 139,760
FRANCHISE AMORTIZATION (15) 377,467 377,467 377,467 377,467 377,467
SUBSCRIBER LIST (8) 97,800 97,800 97,800 97,800 97,800
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 407,282 727,908 709,299 697,547 563,297
INTEREST 519,561 519,561 560,926 528,326 470,945
---------- ---------- ---------- ---------- ----------
PRE-TAX INCOME ($392,365) ($619,170) ($530,460) ($378,398) ($87,032)
INCOME TAX (EXPENSE)/BENEFIT 133,404 210,518 180,356 128,655 29,591
---------- ---------- ---------- ---------- ----------
NET INCOME ($258,961) ($408,652) ($350,103) ($249,742) ($57,441)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME ($392,365) ($619,170) ($530,460) ($378,398) ($87,032)
FRANCHISE AMORTIZATION (15) 377,467 377,467 377,467 377,467 377,467
SUBSCRIBER LIST (8) 97,800 97,800 97,800 97,800 97,800
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 407,282 727,908 709,299 697,547 563,297
EQUITY 5,195,609
DEBT 5,195,609 0 413,655 0 0
---------- ---------- ---------- ---------- ----------
RESIDUAL VALUE IN YEAR 9
TOTAL SOURCES OF CASH $10,881,403 $584,004 $1,067,761 $794,416 $951,531
USES OF CASH -
PURCHASE PRICE - CURRENT $10,572,968
CAPITAL EXPENDITURES 208,367 209,335 1,116,497 220,604 233,268
DEBT RETIREMENT 0 0 326,001 573,813 592,904
TAXES PAID ON NET INCOME 0 0 0 0 0
---------- ---------- ---------- ---------- ----------
TAXES PAID ON SALE (RESIDUAL)
TOTAL USES OF CASH $10,781,335 $209,335 $1,442,498 $794,416 $826,171
ANNUAL CASH INCREASE/(DECREASE) $100,067 $374,669 ($374,736) $0 $125,360
CUMULATIVE CASH 100,067 474,736 100,000 100,000 225,360
</TABLE>
RETURN ON EQUITY METHOD
PROFIT AND LOSS - HIGH VALUE
- ----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2001 2002 2003 2004 TOTAL
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
REVENUES $2,983,410 $3,172,462 $3,368,978 $3,577,807 $25,123,472
OPERATING EXPENSES 1,315,210 1,396,366 1,480,650 1,571,979 11,110,419
---------- ---------- ---------- ---------- ----------
OPERATING INCOME $1,668,200 $1,776,095 $1,888,329 $2,005,828 $14,013,053
OPERATING MARGIN 0.56 0.56 0.56 0.56
PARENT SERVICES/MGT FEE (5%) 149,170 158,623 168,449 178,890 1,256,174
FRANCHISE AMORTIZATION (15) 377,467 377,467 377,467 377,467 3,397,200
SUBSCRIBER LIST (8) 97,800 97,800 97,800 97,800 880,200
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 542,173 534,127 304,076 312,137 4,797,846
INTEREST 411,655 368,264 320,534 268,032 3,967,805
---------- ---------- ---------- ---------- ----------
PRE-TAX INCOME $89,934 $239,815 $620,003 $771,502 ($286,171)
INCOME TAX (EXPENSE)/BENEFIT (30,578) (81,537) (210,801) (262,311) 97,298
---------- ---------- ---------- ---------- ----------
NET INCOME $59,357 $158,278 $409,202 $509,192 ($188,873)
SOURCES AND USES OF CASH
- ------------------------
SOURCES OF CASH -
PRE TAX INCOME $89,934 $239,815 $620,003 $771,502 ($286,171)
FRANCHISE AMORTIZATION (15) 377,467 377,467 377,467 377,467 3,397,200
SUBSCRIBER LIST (8) 97,800 97,800 97,800 97,800 880,200
NON-COMPETE COVENANTS (0) 0 0 0 0 0
DEPRECIATION 542,173 534,127 304,076 312,137 4,797,846
EQUITY 5,195,609
DEBT 0 0 0 0 5,609,264
RESIDUAL VALUE IN YEAR 9 18,052,449 18,052,449
---------- ---------- ---------- ---------- ----------
TOTAL SOURCES OF CASH $1,107,374 $1,249,208 $1,399,345 $19,611,354 $37,646,398
USES OF CASH -
PURCHASE PRICE - CURRENT $10,572,968
CAPITAL EXPENDITURES 238,542 241,177 253,119 265,642 2,986,551
DEBT RETIREMENT 433,907 477,297 525,027 2,680,316 5,609,264
TAXES PAID ON NET INCOME 0 0 0 0 0
TAXES PAID ON SALE (RESIDUAL) 4,515,882 4,515,882
---------- ---------- ---------- ---------- ----------
TOTAL USES OF CASH $672,448 $718,475 $778,146 $7,461,840 $23,684,665
ANNUAL CASH INCREASE/(DECREASE) $434,926 $530,733 $621,199 $12,149,514 $13,961,732
CUMULATIVE CASH 660,285 1,191,019 1,812,218 13,961,732
</TABLE>
<PAGE> 282
FALCON CABLE SYSTEMS CO. EXHIBIT C
FLORENCE REGION - EXCHANGE LOW ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
<TABLE>
<CAPTION>
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
<S> <C> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $9,370,527
YEAR 1 DEBT REQUIREMENTS 4,685,263
YEAR 1 EQUITY REQUIREMENTS 4,685,263
FINANCING AVAILABLE $6,540,060 $7,220,696 $7,888,646 $8,677,812 $9,443,228
UNUSED LEVERAGE 1,854,796 2,535,432 3,232,697 4,609,904 5,731,034
</TABLE>
<TABLE>
<CAPTION>
SENIOR DEBT: 1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
<S> <C> <C>
BEGINNING DEBT $0 $4,685,263 $4,685,263 $4,391,285 $4,067,908
DEBT ADDED 4,685,263 0 0 0 0
TOTAL ANNUAL PAYMENTS 468,526 468,526 762,505 762,505 762,505
INTEREST 468,526 468,526 468,526 439,128 406,791
PRINCIPAL REPAYMENT 0 0 293,979 323,377 355,714
ENDING BALANCE 4,685,263 4,685,263 4,391,285 4,067,908 3,712,194
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $264,665 $0
BORROWINGS 0 0 264,665 0 0
PRINCIPAL PAYMENTS 0 0 0 264,665 0
INTEREST 0 0 26,466 26,466 0
SENIOR DEBT COVERAGE 4.2 3.9 3.3 2.8 2.4
LOC DEBT COVERAGE 0.0 0.0 0.2 0.0 0.0
TOTAL DEBT COVERAGE 4.2 3.9 3.5 2.8 2.4
</TABLE>
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - LOW VALUE
- -----------------------------
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
<TABLE>
<S> <C> <C> <C> <C> <C>
FINANCING AVAILABLE $10,154,533 $10,843,297 $11,544,619 $12,274,136
UNUSED LEVERAGE 6,833,625 7,952,803 9,127,580 10,377,899
</TABLE>
<TABLE>
<CAPTION>
SENIOR DEBT: 2001 2002 2003 2004 TOTAL
---------- ---------- ---------- ---------- ----------
<S> <C>
BEGINNING DEBT $3,712,194 $3,320,908 $2,890,494 $2,417,038
DEBT ADDED 0 0 0 0 $4,685,263
TOTAL ANNUAL PAYMENTS 762,505 762,505 762,505 762,505 6,274,588
INTEREST 371,219 332,091 289,049 241,704 3,485,562
PRINCIPAL REPAYMENT 391,286 430,414 473,456 520,801 2,789,026
ENDING BALANCE 3,320,908 2,890,494 2,417,038 1,896,237
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0 $0
BORROWINGS 0 0 0 0 264,665
PRINCIPAL PAYMENTS 0 0 0 0 264,665
INTEREST 0 0 0 0 52,933
SENIOR DEBT COVERAGE 2.0 1.6 1.3 0.9
LOC DEBT COVERAGE 0.0 0.0 0.0 0.0
TOTAL DEBT COVERAGE 2.0 1.6 1.3 0.9
</TABLE>
<PAGE> 283
FALCON CABLE SYSTEMS CO. EXHIBIT C
FLORENCE REGION - EXCHANGE HIGH ANALYSIS
AS OF DECEMBER 31, 1995
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
TOTAL YEAR 1 CASH REQUIREMENTS $10,391,219
YEAR 1 DEBT REQUIREMENTS 5,195,609
YEAR 1 EQUITY REQUIREMENTS 5,195,609
FINANCING AVAILABLE $7,546,223 $8,331,572 $9,102,284 $10,012,860 $10,896,033
UNUSED LEVERAGE 2,350,613 3,135,963 3,819,021 5,303,408 6,779,485
</TABLE>
<TABLE>
<CAPTION>
SENIOR: 1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BEGINNING DEBT $0 $5,195,609 $5,195,609 $4,869,609 $4,511,008
DEBT ADDED 5,195,609 0 0 0 0
TOTAL ANNUAL PAYMENTS 519,561 519,561 845,562 845,562 845,562
INTEREST 519,561 519,561 519,561 486,961 451,101
PRINCIPAL REPAYMENT 0 0 326,001 358,601 394,461
ENDING BALANCE 5,195,609 5,195,609 4,869,609 4,511,008 4,116,548
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $413,655 $198,443
BORROWINGS 0 0 413,655 0 0
PRINCIPAL PAYMENTS 0 0 0 215,212 198,443
INTEREST 0 0 41,365 41,365 19,844
SENIOR DEBT COVERAGE 4.7 4.3 3.6 3.1 2.6
LOC DEBT COVERAGE 0.0 0.0 0.3 0.1 0.0
TOTAL DEBT COVERAGE 4.7 4.3 4.0 3.2 2.6
</TABLE>
RETURN ON EQUITY METHOD
DEBT AMORTIZATION - HIGH VALUE
- ------------------------------
TOTAL YEAR 1 CASH REQUIREMENTS
YEAR 1 DEBT REQUIREMENTS
YEAR 1 EQUITY REQUIREMENTS
<TABLE>
<S> <C> <C> <C> <C> <C>
FINANCING AVAILABLE $11,716,769 $12,511,496 $13,320,714 $14,162,465
UNUSED LEVERAGE 8,034,128 9,306,153 10,640,398 12,059,679
</TABLE>
<TABLE>
<CAPTION>
SENIOR: 2001 2002 2003 2004 TOTAL
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BEGINNING DEBT $4,116,548 $3,682,641 $3,205,343 $2,680,316
DEBT ADDED 0 0 0 0 $5,195,609
TOTAL ANNUAL PAYMENTS 845,562 845,562 845,562 845,562 6,958,053
INTEREST 411,655 368,264 320,534 268,032 3,865,229
PRINCIPAL REPAYMENT 433,907 477,297 525,027 577,530 3,092,823
ENDING BALANCE 3,682,641 3,205,343 2,680,316 2,102,786
LINE OF CREDIT:
BEGINNING DEBT $0 $0 $0 $0 $0
BORROWINGS 0 0 0 0 413,655
PRINCIPAL PAYMENTS 0 0 0 0 413,655
INTEREST 0 0 0 0 102,575
SENIOR DEBT COVERAGE 2.2 1.8 1.4 1.0
LOC DEBT COVERAGE 0.0 0.0 0.0 0.0
TOTAL DEBT COVERAGE 2.2 1.8 1.4 1.0
</TABLE>
<PAGE> 284
FALCON CABLE SYSTEMS CO. EXHIBIT D
FLORENCE REGION - EXCHANGE
AS OF DECEMBER 31, 1995
RETURN ON INVESTMENT METHOD
PROFIT AND LOSS
- ---------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
REVENUES $2,022,632 $2,201,449 $2,400,299 $2,601,239 $2,795,196
OPERATING EXPENSES 911,756 987,811 1,065,251 1,148,434 1,232,960
---------- ---------- ---------- ---------- ----------
OPERATING INCOME $1,110,876 $1,213,638 $1,335,048 $1,452,804 $1,562,236
PLUS: RESIDUAL VALUE
LESS: CAPITAL EXPENDITURES 208,367 209,335 1,116,497 220,604 233,268
---------- ---------- ---------- ---------- ----------
TOTAL CASH FLOW $902,509 $1,004,303 $218,551 $1,232,201 $1,328,968
NET PRESENT VALUE @ 16.6% $9,470,275
NET PRESENT VALUE @ 15.1% $10,352,769
YEAR ENDING DECEMBER 31, 2001 2002 2003 2004 TOTAL
---------- ---------- ---------- ---------- ----------
REVENUES $2,983,410 $3,172,462 $3,368,978 $3,577,807 $25,123,472
OPERATING EXPENSES 1,315,210 1,396,366 1,480,650 1,571,979 11,110,419
---------- ---------- ---------- ---------- ----------
OPERATING INCOME $1,668,200 $1,776,095 $1,888,329 $2,005,828 $14,013,053
PLUS: RESIDUAL VALUE 18,052,449 18,052,449
LESS: CAPITAL EXPENDITURES 238,542 241,177 253,119 265,642 2,986,551
---------- ---------- ---------- ---------- ----------
TOTAL CASH FLOW $1,429,658 $1,534,918 $1,635,210 $19,792,634 $29,078,951
NET PRESENT VALUE @ 16.6%
NET PRESENT VALUE @ 15.1%
</TABLE>
<PAGE> 285
FALCON CABLE SYSTEMS CO. EXHIBIT E
FLORENCE REGION - EXCHANGE
AS OF DECEMBER 31, 1995
CABLE TELEVISION SUBSCRIBERS
- ----------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BEGINNING MILES 129.8
MILES ADDED 4.5 4.1 3.6 3.7 3.8
CUMULATIVE MILES 134.3 138.5 142.1 145.8 149.6
DENSITY OF ADDITIONAL PLANT 58 56 55 55 55
HOMES PASSED - BEGINNING 7,483
NEW HOMES & EXTENSIONS 262 232 199 204 210
HOMES PASSED - ENDING 7,745 7,977 8,177 8,381 8,591
GROWTH IN HOMES 3.5% 3.0% 2.5% 2.5% 2.5%
BASIC - BEGINNING SUBSCRIBERS 3,751 3,921 4,079 4,221 4,369
AVERAGE SUBSCRIBERS 3,836 4,000 4,150 4,295 4,445
ENDING SUBSCRIBERS 3,921 4,079 4,221 4,369 4,521
PENETRATION 50.6% 51.1% 51.6% 52.1% 52.6%
EXPANDED BASIC - BEGINNING 3,517 3,676 3,824 3,958 4,096
AVERAGE SUBSCRIBERS 3,597 3,750 3,891 4,027 4,168
ENDING SUBSCRIBERS 3,676 3,824 3,958 4,096 4,239
PENETRATION 93.8% 93.8% 93.8% 93.8% 93.8%
NEW PRODUCT TIER #1 - BEGINNING 1,170 1,263 1,592 1,900 1,966
AVERAGE SUBSCRIBERS 1,216 1,427 1,746 1,933 2,000
ENDING SUBSCRIBERS 1,263 1,592 1,900 1,966 2,034
PENETRATION 34.3% 41.6% 48.0% 48.0% 48.0%
NEW PRODUCT TIER #2 - BEGINNING 308 610 1,063 1,543 1,759
AVERAGE SUBSCRIBERS 459 837 1,303 1,651 1,790
ENDING SUBSCRIBERS 610 1,063 1,543 1,759 1,820
PENETRATION 15.6% 26.1% 36.6% 40.3% 40.3%
PAY TV - BEGINNING UNITS 992 998 1,079 1,159 1,243
AVERAGE UNITS 995 1,038 1,119 1,201 1,264
ENDING UNITS 998 1,079 1,159 1,243 1,286
PENETRATION 25.4% 26.4% 27.4% 28.4% 28.4%
PAY PER VIEW - BEGINNING UNITS/MO 300 342 410 538 687
AVERAGE UNITS 321 376 474 612 755
ENDING UNITS 342 410 538 687 822
AVERAGE BUY RATE/MO 23.0% 24.5% 27.5% 30.5% 32.0%
CONVERTER RENTALS - BEGINNING 1,897 2,036 2,179 2,371 2,585
AVERAGE SUBSCRIBERS 1,966 2,107 2,275 2,478 2,692
ENDING SUBSCRIBERS 2,036 2,179 2,371 2,585 2,800
PENETRATION 51.9% 53.4% 56.2% 59.2% 61.9%
ADDRESSABLE HOMES - BEGINNING 1,366 1,491 1,677 1,957 2,255
AVERAGE HOMES 1,428 1,584 1,817 2,106 2,413
ENDING HOMES 1,491 1,677 1,957 2,255 2,571
PENETRATION 38.0% 41.1% 46.4% 51.6% 56.9%
BASIC CHURN RATE 35% 35% 35% 35% 35%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 2001 2002 2003 2004
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
BEGINNING MILES
MILES ADDED 3.6 3.3 3.3 3.4
CUMULATIVE MILES 153.2 156.5 159.9 163.3
DENSITY OF ADDITIONAL PLANT 54 54 54 54
HOMES PASSED - BEGINNING
NEW HOMES & EXTENSIONS 193 176 179 183
HOMES PASSED - ENDING 8,784 8,960 9,139 9,322
GROWTH IN HOMES 2.3% 2.0% 2.0% 2.0%
BASIC - BEGINNING SUBSCRIBERS 4,521 4,667 4,805 4,947
AVERAGE SUBSCRIBERS 4,594 4,736 4,876 5,019
ENDING SUBSCRIBERS 4,667 4,805 4,947 5,092
PENETRATION 53.1% 53.6% 54.1% 54.6%
EXPANDED BASIC - BEGINNING 4,239 4,376 4,505 4,638
AVERAGE SUBSCRIBERS 4,307 4,440 4,571 4,706
ENDING SUBSCRIBERS 4,376 4,505 4,638 4,774
PENETRATION 93.8% 93.8% 93.8% 93.8%
NEW PRODUCT TIER #1 - BEGINNING 2,034 2,100 2,162 2,226
AVERAGE SUBSCRIBERS 2,067 2,131 2,194 2,259
ENDING SUBSCRIBERS 2,100 2,162 2,226 2,291
PENETRATION 48.0% 48.0% 48.0% 48.0%
NEW PRODUCT TIER #2 - BEGINNING 1,820 1,879 1,934 1,992
AVERAGE SUBSCRIBERS 1,850 1,907 1,963 2,021
ENDING SUBSCRIBERS 1,879 1,934 1,992 2,050
PENETRATION 40.3% 40.3% 40.3% 40.3%
PAY TV - BEGINNING UNITS 1,286 1,327 1,367 1,407
AVERAGE UNITS 1,307 1,347 1,387 1,428
ENDING UNITS 1,327 1,367 1,407 1,449
PENETRATION 28.4% 28.4% 28.4% 28.4%
PAY PER VIEW - BEGINNING UNITS/MO 822 925 1,007 1,093
AVERAGE UNITS 873 966 1,050 1,139
ENDING UNITS 925 1,007 1,093 1,185
AVERAGE BUY RATE/MO 33.0% 34.0% 35.0% 36.0%
CONVERTER RENTALS - BEGINNING 2,800 2,960 3,107 3,261
AVERAGE SUBSCRIBERS 2,880 3,034 3,184 3,341
ENDING SUBSCRIBERS 2,960 3,107 3,261 3,421
PENETRATION 63.4% 64.7% 65.9% 67.2%
ADDRESSABLE HOMES - BEGINNING 2,571 2,803 2,963 3,125
AVERAGE HOMES 2,687 2,883 3,044 3,209
ENDING HOMES 2,803 2,963 3,125 3,293
PENETRATION 60.1% 61.7% 63.2% 64.7%
BASIC CHURN RATE 35% 35% 35% 35%
</TABLE>
<PAGE> 286
FALCON CABLE SYSTEMS CO. EXHIBIT F
FLORENCE REGION - EXCHANGE
AS OF DECEMBER 31, 1995
SERVICE RATES
- -------------
<TABLE>
<CAPTION>
RUNNING RATES
AS OF AVERAGE RATES
CURRENT RATES DECEMBER 1995 FOR 1996
- ------------- ------------------ -----------------
<S> <C> <C>
BASIC $24.32 $25.48
EXPANDED BASIC $3.93 $4.36
NEW PRODUCT TIER #1 $3.50 $3.50
NEW PRODUCT TIER #2 $4.50 $4.50
PAY $8.00 $8.00
PAY PER VIEW $7.77 $7.77
CONVERTER RENTALS $3.66 $3.66
INSTALLATIONS-NEW $50.00 $50.00
INSTALLATIONS-CHURN $25.00 25.00
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000 2001 2002 2003 2004
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PERCENTAGE RATE INCREASES
- -------------------------
BASIC 5% 3% 3% 3% 3% 3% 3% 3% 3%
EXPANDED BASIC 11% 3% 3% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #1 0% 3% 3% 3% 3% 3% 3% 3% 3%
NEW PRODUCT TIER #2 0% 3% 3% 3% 3% 3% 3% 3% 3%
PAY 0% 1% 1% 1% 1% 1% 1% 1% 1%
PAY PER VIEW 0% 3% 3% 3% 3% 3% 3% 3% 3%
CONVERTER/REMOTE RENTALS 0% 3% 3% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-NEW 0% 3% 3% 3% 3% 3% 3% 3% 3%
INSTALLATIONS-CHURN 0% 3% 3% 3% 3% 3% 3% 3% 3%
AVERAGE RATES
- --------------
BASIC $25.48 $26.24 $27.03 $27.84 $28.68 $29.54 $30.42 $31.34 $32.28
EXPANDED BASIC 4.36 4.49 4.62 4.76 4.91 5.05 5.20 5.36 5.52
NEW PRODUCT TIER #1 3.50 3.61 3.71 3.82 3.94 4.06 4.18 4.30 4.43
NEW PRODUCT TIER #2 4.50 4.64 4.77 4.92 5.06 5.22 5.37 5.53 5.70
PAY 8.00 8.08 8.16 8.25 8.33 8.41 8.50 8.58 8.67
PAY PER VIEW 7.77 8.01 8.25 8.49 8.75 9.01 9.28 9.56 9.85
CONVERTER RENTALS 3.66 3.77 3.88 4.00 4.12 4.24 4.37 4.50 4.64
INSTALLATIONS-NEW 50.00 51.50 53.05 54.64 56.28 57.96 59.70 61.49 63.34
INSTALLATIONS-CHURN 25.00 25.75 26.52 27.32 28.14 28.98 29.85 30.75 31.67
</TABLE>
<PAGE> 287
FALCON CABLE SYSTEMS CO. EXHIBIT G
FLORENCE REGION - EXCHANGE
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
REVENUES:
BASIC $1,172,900 $1,259,661 $1,346,167 $1,435,046 $1,529,652
EXPANDED BASIC 188,109 202,024 215,898 230,152 245,325
NEW PRODUCT TIER #1 51,083 61,753 77,797 88,700 94,548
NEW PRODUCT TIER #2 24,790 46,528 74,655 97,430 108,765
PAY TV 95,546 100,703 109,589 118,806 126,363
PAY PER VIEW 29,961 36,155 46,900 62,409 79,200
CONVERTER RENTALS 86,367 95,334 106,007 118,936 133,089
INSTALLATIONS 33,407 35,064 36,599 38,998 41,550
COMMERCIAL*** 126,672 130,472 134,386 138,417 142,570
ADVERTISING*** 124,501 140,072 154,088 169,506 186,468
MISCELLANEOUS *** 89,297 93,685 98,213 102,836 107,666
---------- ---------- ---------- ---------- ----------
TOTAL REVENUES $2,022,632 $2,201,449 $2,400,299 $2,601,239 $2,795,196
OPERATING EXPENSES:
OPERATIONS $346,213 $370,966 $396,663 $423,183 $450,229
GENERAL & ADMINISTRATIVE 177,629 188,185 198,964 210,013 221,518
SALES & MARKETING 101,859 117,569 128,041 140,728 154,625
PROGRAMMING 286,055 311,091 341,583 374,511 406,588
---------- ---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES $911,756 $987,811 $1,065,251 $1,148,434 $1,232,960
OPERATING INCOME $1,110,876 $1,213,638 $1,335,048 $1,452,804 $1,562,236
OPERATING MARGIN 54.9% 55.1% 55.6% 55.9% 55.9%
TOTAL REVENUE/BASIC SUB/MONTH $43.94 $45.87 $48.20 $50.47 $52.40
CASH FLOW/BASIC SUB/MONTH $24.13 $25.29 $26.81 $28.19 $29.29
OPERATIONS % OF REVENUE 17% 17% 17% 16% 16%
G & A PERCENTAGE OF REVENUE 9% 9% 8% 8% 8%
SALES & MARKETING % OF REVENUE 5% 5% 5% 5% 6%
PROGRAMMING % OF REVENUE 14% 14% 14% 14% 15%
YEAR ENDING DECEMBER 31, 2001 2002 2003 2004 TOTAL
---------- ---------- ---------- ---------- ----------
BASIC $1,628,323 $1,728,975 $1,833,475 $1,944,125 $13,878,325
EXPANDED BASIC 261,150 277,292 294,052 311,798 2,225,799
NEW PRODUCT TIER #1 100,647 106,868 113,327 120,166 814,889
NEW PRODUCT TIER #2 115,781 122,938 130,369 138,236 859,494
PAY TV 131,902 137,336 142,808 148,486 1,111,540
PAY PER VIEW 94,430 107,582 120,476 134,607 711,720
CONVERTER RENTALS 146,617 159,088 171,996 185,866 1,203,300
INSTALLATIONS 43,691 45,818 48,567 51,476 375,170
COMMERCIAL*** 146,847 151,252 155,790 160,464 1,286,870
ADVERTISING*** 201,396 217,519 234,934 253,741 1,682,225
MISCELLANEOUS *** 112,625 117,793 123,185 128,841 974,141
---------- ---------- ---------- ---------- ----------
TOTAL REVENUES $2,983,410 $3,172,462 $3,368,978 $3,577,807 $25,123,472
OPERATING EXPENSES:
OPERATIONS $477,364 $504,681 $533,199 $563,338 $4,065,834
GENERAL & ADMINISTRATIVE 233,360 245,434 257,954 271,150 2,004,207
SALES & MARKETING 167,698 180,074 193,315 209,347 1,393,257
PROGRAMMING 436,788 466,177 496,182 528,144 3,647,120
---------- ---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES $1,315,210 $1,396,366 $1,480,650 $1,571,979 $11,110,419
OPERATING INCOME $1,668,200 $1,776,095 $1,888,329 $2,005,828 $14,013,053
OPERATING MARGIN 55.9% 56.0% 56.1% 56.1%
TOTAL REVENUE/BASIC SUB/MONTH $54.12 $55.83 $57.58 $59.40
CASH FLOW/BASIC SUB/MONTH $30.26 $31.25 $32.27 $33.30
OPERATIONS % OF REVENUE 16% 16% 16% 16%
G & A PERCENTAGE OF REVENUE 8% 8% 8% 8%
SALES & MARKETING % OF REVENUE 6% 6% 6% 6%
PROGRAMMING % OF REVENUE 15% 15% 15% 15%
</TABLE>
<PAGE> 288
FALCON CABLE SYSTEMS CO. EXHIBIT H
FLORENCE REGION - EXCHANGE
AS OF DECEMBER 31, 1995
CAPITAL EXPENDITURES
- --------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ASSUMPTIONS AND INPUTS:
- ----------------------- 129.79
BV OF EXISTING PLANT $2,641,752
ADDITIONAL MILES OF PLANT 4.5 4.1 3.6 3.7 3.8
AERIAL PLANT PER MILE $12,000 $12,240 $12,485 $12,734 $12,989
UNDERGROUND PLANT PER MILE $18,000 $18,360 $18,727 $19,102 $19,484
PERCENTAGE OF PLANT AERIAL 10% 10% 10% 10% 10%
PERCENTAGE OF PLANT UNDERGROUND 90% 90% 90% 90% 90%
AVERAGE COST PER CONVERTER $110 $112 $114 $117 $119
PERCENTAGE CONVERTER USE 52% 53% 56% 59% 62%
PERCENTAGE REPLACEMENT 5% 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $57 $58 $59 $60 $61
MISC. CAPITAL PER SUBSCRIBER $5 $5 $5 $5 $5
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2% 2%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $5,451 $5,056 $4,535 $4,741 $4,957
- UNDERGRO 73,591 68,256 61,216 64,001 66,913
PLANT REBUILD/UPGRADE/INCL. HDND. 6,619 6,988 915,325 7,690 8,050
AVERAGE COST OF NEW CONVERTERS 9,710 9,442 9,183 10,184 11,220
CONVERTER REPLACEMENT 10,712 11,751 13,110 14,579 16,106
INSTALLATION COSTS 83,103 87,443 91,541 96,617 101,966
MISC. CAPITAL EXPENDITURES 19,180 20,399 21,588 22,790 24,057
---------- ---------- ---------- ---------- ----------
TOTAL CAPITAL EXPENDITURES $208,367 $209,335 $1,116,497 $220,604 $233,268
AS A % OF OPERATING INCOME 18.8% 17.2% 83.6% 15.2% 14.9%
YEAR ENDING DECEMBER 31, 2001 2002 2003 2004 TOTAL
---------- ---------- ---------- ---------- ----------
ASSUMPTIONS AND INPUTS:
- -----------------------
BV OF EXISTING PLANT
ADDITIONAL MILES OF PLANT 3.6 3.3 3.3 3.4
AERIAL PLANT PER MILE $13,249 $13,514 $13,784 $14,060
UNDERGROUND PLANT PER MILE $19,873 $20,271 $20,676 $21,090
PERCENTAGE OF PLANT AERIAL 10% 10% 10% 10%
PERCENTAGE OF PLANT UNDERGROUND 90% 90% 90% 90%
AVERAGE COST PER CONVERTER $121 $124 $126 $129
PERCENTAGE CONVERTER USE 63% 65% 66% 67%
PERCENTAGE REPLACEMENT 5% 5% 5% 5%
INSTALLATION COST PER SUBSCRIBER $62 $64 $65 $66
MISC. CAPITAL PER SUBSCRIBER $6 $6 $6 $6
INFLATION FACTOR FOR CAPITALS 2% 2% 2% 2% 120%
ANNUAL COSTS:
- -------------
PLANT ADDITIONS - AERIAL $4,775 $4,427 $4,605 $4,792 $43,338
- UNDERGRO 64,461 59,760 62,174 64,686 585,058
PLANT REBUILD/UPGRADE/INCL. HDND. 8,426 8,801 9,169 9,552 980,620
AVERAGE COST OF NEW CONVERTERS 11,218 11,066 11,811 12,600 96,435
CONVERTER REPLACEMENT 17,412 18,694 20,011 21,412 143,787
INSTALLATION COSTS 106,890 111,764 117,346 123,196 919,867
MISC. CAPITAL EXPENDITURES 25,360 26,666 28,003 29,405 217,446
---------- ---------- ---------- ---------- ----------
TOTAL CAPITAL EXPENDITURES $238,542 $241,177 $253,119 $265,642 $2,986,551
AS A % OF OPERATING INCOME 14.3% 13.6% 13.4% 13.2%
</TABLE>
<PAGE> 289
FALCON CABLE SYSTEMS CO. EXHIBIT I
FLORENCE REGION - EXCHANGE
AS OF DECEMBER 31, 1995
DEPRECIATION
- ------------
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ESTIMATED DEPRECIATION RATES 14.3% 24.5% 17.5% 12.5% 8.9%
DEPRECIATION - BEG. & ADTNS. 1996 1997 1998 1999 2000
---------- ---------- ---------- ---------- ----------
YEAR 1 $407,282 $697,994 $498,486 $355,980 $254,516
YEAR 2 29,914 51,266 36,613 26,146
YEAR 3 159,547 273,430 195,275
YEAR 4 31,524 54,026
YEAR 5 33,334
YEAR 6
YEAR 7
YEAR 8
YEAR 9
---------- ---------- ---------- ---------- ----------
TOTAL DEPRECIATION $407,282 $727,908 $709,299 $697,547 $563,297
YEAR 6 YEAR 7 YEAR 8
---------- ---------- ----------
ESTIMATED DEPRECIATION RATES 8.9% 8.9% 4.5%
DEPRECIATION - BEG. & ADTNS. 2001 2002 2003 2004 TOTAL
---------- ---------- ---------- ---------- ----------
YEAR 1 $254,231 $254,516 $2,723,004
YEAR 2 18,694 18,673 18,694 199,999
YEAR 3 139,450 99,703 99,592 99,703 1,066,701
YEAR 4 38,584 27,553 19,700 19,678 191,065
YEAR 5 57,127 40,799 29,135 20,831 181,226
YEAR 6 34,088 58,419 41,721 29,794 164,021
YEAR 7 34,464 59,064 42,182 135,710
YEAR 8 36,171 61,989 98,160
YEAR 9 37,960 37,960
---------- ---------- ---------- ---------- ----------
TOTAL DEPRECIATION $542,173 $534,127 $304,076 $312,137 $4,797,846
</TABLE>
<PAGE> 290
FALCON CABLE SYSTEMS CO. EXHIBIT J
FLORENCE REGION - EXCHANGE
AS OF DECEMBER 31, 1995
ASSUMPTIONS AND INPUTS
- ----------------------
<TABLE>
<S> <C>
REMAINING LIFE OF FRANCHISES (YEARS) 9
AVERAGE SUBSCRIBER LIFE (YEARS) 8
INCOME TAX RATE 34%
CAPITAL GAIN RATE 34%
NET FMV OF EXISTING ASSETS $2,641,752
SUBSCRIBERS IN FRANCHISES 100%
</TABLE>
<TABLE>
<CAPTION>
LOW HIGH
ANALYSIS ANALYSIS
---------- ----------
<S> <C> <C>
DEBT PERCENTAGE 50% 50%
EQUITY PERCENTAGE 50% 50%
RESIDUAL MULTIPLE (ROE & ROI) 9 9
MULT OF PAST YEAR'S OPERATING INCOME 10.5 11.5
MULT OF CURRENT YEAR'S OPERATING INCOME 10.0 11.0
MULT OF NEXT YEAR'S OPERATING INCOME 9.5 10.5
TARGET RETURN ON EQUITY 14.0% 12.0%
TARGET RETURN ON INVESTMENT 16.6% 15.1%
</TABLE>
<PAGE> 291
APPENDIX C
ALLOCATION OF SALE AND EXCHANGE VALUES TO HEADENDS
<PAGE> 292
ALLOCATION OF SALE AND EXCHANGE VALUES TO HEADENDS
<TABLE>
<CAPTION>
Alloc. by Alloc. by
Region/ Alloc. Cumulative Cumulative Average Allocated
Headend by Subs. Cash Flow Free Cash Flow Alloc. Value
- ------- -------- ---------- -------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Coos Bay - Sale
Coos Bay 76.5% 76.3% 79.7% 77.5% $21,736,981
Reedsport 19.1% 18.5% 14.3% 17.3% 4,850,816
Gardiner 0.8% 0.6% 0.6% 0.7% 183,751
Hauser 3.6% 3.6% 4.2% 3.8% 1,065,451
----------
Total $27,837,000
Coos Bays - Exchange
Myrtle Point 17.9% 18.5% 27.5% 21.3% $ 1,397,883
Powers 4.7% 4.3% 2.9% 4.0% 259,618
Coquille 41.6% 40.9% 38.3% 40.3% 2,644,535
Bandon 35.8% 37.9% 34.2% 36.0% 2,361,965
----------
Total $ 6,664,000
Sum $34,501,000
Dallas - Sale
Dallas 98.7% 97.2% 96.9% 97.6% $15,270,285
Wilson River 1.3% 0.5% 0.6% 0.8% 131,715
----------
Total $15,402,000
Dallas - Exchange
Silverton 17.3% 18.5% 27.6% 21.1% $4,221,179
Nehalem 45.4% 47.2% 47.6% 46.7% 9,350,470
Tillamook 24.4% 24.2% 12.7% 20.5% 4,093,022
Netarts 8.2% 6.2% 7.6% 7.3% 1,467,322
Brickyard Road 4.8% 3.5% 3.7% 4.0% 800,008
----------
Total $19,932,000
Sum $35,334,000
Florence - Sale
Mapleton -- -- -- -- $271,000
Florence - Exchange
Florence -- -- -- -- $10,425,000
----------
Sum $10,696,000
</TABLE>
<PAGE> 293
SUMMARY OF SALE AND EXCHANGE VALUES
<TABLE>
<CAPTION>
Sale
--------
<S> <C>
Coos Bay $ 27,837,000
Dallas 15,402,000
Florence 271,000
Gilroy 76,000,000
Tulare 31,972,000
SLO 29,585,000
Central 26,294,000
------------
Total $207,361,000
Exchange
--------
Coos Bay $ 6,664,000
Dallas 19,932,000
Hesperia 38,846,000
Florence 10,425,000
------------
Total $ 75,867,000
Sum of Sale and
Exchange Properties $283,228,000
</TABLE>
<PAGE> 1
EXHIBIT 2
FAIR MARKET VALUATION
OF FALCON CABLE SYSTEMS COMPANY,
A CALIFORNIA LIMITED PARTNERSHIP
AS OF DECEMBER 31, 1995
Prepared for:
Falcon Cable Investors Group
Los Angeles, California
<PAGE> 2
[LOGO] - KANE RE]
April 29, 1996
Falcon Cable Investors Group
10900 Wilshire Boulevard
Los Angeles, CA 90024
ATTN: Mr. Michael K. Menerey
In accordance with your authorization, Kane Reece Associates, Inc. ("Kane
Reece" or the "appraisers") has made an investigation and valuation of the
cable television system assets of Falcon Cable Systems Company ("FCSC" or the
"Partnership"), the Exchange Systems, as designated by the General Partner
pursuant to a preliminary proposal to the independent members of the
Partnership's advisory committee (the "Preliminary Proposal"); and the Systems,
referred to as the Sale Systems, are those Partnership Systems not designated
by the General Partner as Exchange Systems.
This valuation study was conducted to determine the fair market value of 100%
of the assets described above as of December 31, 1995. The appraisal was
conducted pursuant to Section 3.14 of the FCSC Partnership Agreement as Amended
and Restated and pursuant to the Preliminary Proposal. This is the sole
purpose of this appraisal.
Fair market value, as used herein, is defined as the price, in cash or
equivalent, that a buyer could reasonably be expected to pay and a seller could
reasonably be expected to accept, if the property were exposed for sale on the
open market for a reasonable period of time, both buyer and seller being in
possession of the pertinent facts, and neither being under compulsion to act,
as of a certain date.
Our methodology for determining the fair market value of any CATV property
incorporates an assessment of the potential revenues and cash flows the
property will generate over an appropriate investment term and the likely
appreciation in value of the property over that term. We confirm this
calculated economic valuation with an analysis of recent sales of comparable
properties to the extent available and relevant.
As part of the research required for our study, we were furnished materials on
historical and prospective operations. We have also consulted recognized
sources of financial and industry information; visited each Region to
physically inspect facilities and the service area, and interview management.
Kane Reece and this report comply with the appraisal standards set forth in the
Uniform Standards of Professional Appraisal Practice and those promulgated by
the American Society of Appraisers.
Valuation, Management & Technical Consultants
- -------------------------------------------------------------------------------
399 Thornall Street o Metro Park, New Jersey 08837-2236 o (908) 494-3700
o Fax (908) 8798 o email: [email protected]
<PAGE> 3
Falcon Cable Investors Group
April 29, 1996
Page Two
Based upon our investigation and valuation as described in the accompanying
report and subject to the Limiting and General Service Conditions and the
Appraisal Certificate contained in the report that follows, it is Kane Reece's
opinion that the fair market values of 100% of FCSC's, the Exchange Systems,
and the Sale Systems assets as of December 31, 1995 were:
<TABLE>
<S> <C>
FCSC $ 245,290,000
=================
Exchange Systems $ 66,070,000
=================
Sale Systems $ 179,220,000
=================
</TABLE>
Respectfully submitted,
KANE REECE ASSOCIATES, INC.
<PAGE> 4
LIMITING AND GENERAL SERVICE CONDITIONS
1) We were provided certain financial and operating data by management
and we have relied on this information without independent analysis or
verification by Kane Reece Associates, Inc.
2) Kane Reece Associates, Inc. is not responsible for the impact of
economic events occurring after the date of this report and we have no
obligation to update this report unless subsequently engaged to do so.
3) We have made no investigation of, and assume no responsibility for,
the title to the assets appraised nor for any undisclosed liabilities
of the subject company.
4) All statements in this appraisal are based on the best knowledge and
belief of Kane Reece Associates, Inc.
5) Neither Kane Reece Associates, Inc. nor any of its employees has any
present or contemplated financial interest in the appraised entity,
and we certify the compensation received for this study is in no way
contingent upon the valuation conclusions.
6) Kane Reece Associates, Inc. is not required to give testimony in
court, or be in attendance during any hearings or depositions, with
reference to the company being appraised, unless previous arrangements
have been made.
7) This appraisal is valid only for the purpose(s) stated herein, and no
one may rely on the report for any other purpose(s) and is valid only
for the appraisal date or dates specified herein. You may show our
report in its entirety to those third parties who need to review the
information contained therein. You agree to hold Kane Reece
Associates, Inc., harmless from any liability, including attorneys'
fees, damages or cost which may result from any improper use or
reliance by you or third parties. No reference to our name or our
report, in whole or in part, in any document you prepare and/or
distribute to third parties may be made without our prior written
consent. We will maintain the confidentiality of all conversations,
documents provided to us, and the contents of our reports, subject to
legal or administrative process or proceedings. These conditions can
be modified only by written documents executed by both parties.
KANE REECE ASSOCIATES, INC.
399 Thornall Street
Metro Park, NJ 08837-2236
(908)494-3700
<PAGE> 5
FAIR MARKET VALUATION
OF FALCON CABLE SYSTEMS COMPANY,
A CALIFORNIA LIMITED PARTNERSHIP
AS OF DECEMBER 31, 1995
<PAGE> 6
FAIR MARKET VALUATION
OF FALCON CABLE SYSTEMS COMPANY,
A CALIFORNIA LIMITED PARTNERSHIP
AS OF DECEMBER 31, 1995
TABLE OF CONTENTS
<TABLE>
<S> <C>
TRANSMITTAL LETTER
LIMITING AND GENERAL SERVICE CONDITIONS
I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II. INDUSTRY REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
III. DESCRIPTION OF THE REGIONS'
SERVICE AREAS AND SYSTEMS . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
IV. BUSINESS ENTERPRISE VALUATION . . . . . . . . . . . . . . . . . . . . . . . . . . 67
V. VALUATION OF EXCHANGE AND SALE SYSTEMS . . . . . . . . . . . . . . . . . . . . . . 78
APPRAISAL CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
EXHIBIT A: Photographs
EXHIBIT B: Region Operating Statistics
EXHIBIT C: Region Cash Flow Statements
EXHIBIT D Region Cash Flow Projection Assumptions
EXHIBIT E Region Cash Flow Projections
EXHIBIT F Exchange and Sale System Valuation
QUALIFICATIONS OF THE APPRAISERS
APPENDIX: Glossary of Cable TV Terms
</TABLE>
<PAGE> 7
FAIR MARKET VALUATION
OF FALCON CABLE SYSTEMS COMPANY,
A CALIFORNIA LIMITED PARTNERSHIP
AS OF DECEMBER 31, 1995
PART I - INTRODUCTION
Falcon Cable Investors Group, the General Partner (the "General Partner") of
Falcon Cable Systems Company, a California Limited Partnership ("FCSC" or the
"Partnership") manages cable television systems located in seven (7) regional
clusters in Oregon and California (the "Regions").
Kane Reece Associates, Inc. ("Kane Reece" or the "appraisers") of Metro Park,
New Jersey was selected and retained by the General Partner to determine fair
market value of 100% of the assets of FCSC and each Region as of December 31,
1995. Kane Reece was retained pursuant to Section 3.14 of the Partnership
Agreement as Amended and Restated. The appraisers were also engaged to
appraise the Exchange Systems, as designated by the General Partner pursuant to
the preliminary proposal to the independent members of the Partnership's
advisory committee (the "Preliminary Proposal"); and the Systems referred to as
the Sale Systems, i.e., those FCSC Systems not designated by the General
Partner as Exchange Systems. System(s) as used herein refers to cable
television operating units, as defined by FCSC, which comprise a Region. These
are the sole purposes of this report.
Fair market value, as used herein, is defined as the price, in cash or
equivalent, that a buyer could reasonably be expected to pay and a seller could
reasonably be expected to accept, if the property were exposed for sale in the
open market for a reasonable period of time, both buyer and seller being in
possession of the pertinent facts, and neither being under compulsion to act,
as of a certain date.
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<PAGE> 8
The appraisers visited each Region and several System offices and service areas
to interview management, inspect facilities, and to determine the growth
potential of the service area. Pursuant to information requests, the
appraisers was provided various documents. The appraisers were not denied any
material information and all requests were handled in a timely manner.
Documents provided included but were not limited to the following:
. Management prepared financial statements at various time periods
including the year ending December 31, 1995.
. Management prepared operating statistics reports -- homes passed,
basic subscribers, pay units, etc. for various dates including
December 31, 1995.
. 1996 operating budgets by Region.
. Ten year FCSC financial projections.
. Various SEC filings, i.e., 10K and 8K filings.
. System channel charts and rate cards for various dates.
The appraiser also relied on demographic data and other service area
information provided by CACI and various Chambers of Commerce as well as cable
industry trade publications and industry analysts' reports in forming the value
conclusions contained herein.
GENERAL APPRAISAL CONSIDERATIONS
The following paragraphs discuss some of the pertinent variables which
contribute to or detract from the value of a cable system, and provide
commentary on how they are considered in this study.
Remaining Life of the Franchise
The terms under which franchises are issued can vary considerably. The term of
the acquired franchise represents franchise life because the continued
operation of the
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<PAGE> 9
existing system will terminate at that point. In order to secure a franchise
renewal the operator will be required to negotiate a new franchise. Typical
system changes agreed to by the incumbent operator in this negotiation process
include, but are not limited to, rebuilding the system, adding local
origination facilities, adding more channels, and making rate concessions.
There are numerous examples of onerous franchise provisions demanded by cities
to grant a new franchise. These types of changes materially alter the economic
environment for the cable system. Additionally, there are many examples of
cities either denying a new franchise or allowing a second franchise when the
incumbent operator resists new franchise provisions.
Homes in the Franchise Area
The number of homes and the future growth of households in the franchise area
limit the maximum potential for expansion of revenues for a system. The
demographics of the franchise area are also important factors. Other important
demographics include household income, median age, and projected growth of the
employment base.
Net Plant Age and Channel Capacity
A typical cable television system plant is generally believed to have a 10 to
12 year life. A new system plant is obviously more attractive for investment
than one which is facing a very near-term major rebuild. The 10 to 12 year
life can be longer or shorter depending on preventive maintenance, several
environmental factors, e.g., proximity to salt water, and type and quality of
initial construction.
Old-fashioned 12-channel systems, or for that matter 36-channel systems, are
obsolete when compared to the new or high capacity systems. The greater the
channel capacity, the greater the possibility for offering additional pay
services and other revenue enhancing services.
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<PAGE> 10
Local Political Considerations
Certain areas have been identified as politically difficult for the cable TV
operators. In such cases, the anticipated market value or selling price for a
cable system will be less than in areas with a cooperative political
environment.
Regulatory Environment
In addition to franchises issued by local governmental units, the industry is
regulated under the Cable Acts of 1984 and 1992, the Telecommunication Act of
1934 and the Telecommunication Act of 1996. The 1996 Act, the regulations have
yet to codified, will have far reaching affects on the cable TV,
communications, and broadcast industries. One of the major elements of the
1996 Act is the removal or lessening of barriers of entry for the provision of
telephone and multichannel video services by would be competitors. The
Industry Review section includes a discussion of the current regulatory
environment.
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<PAGE> 11
FAIR MARKET VALUATION
OF FALCON CABLE SYSTEMS COMPANY,
A CALIFORNIA LIMITED PARTNERSHIP
AS OF DECEMBER 31, 1995
PART II - INDUSTRY REVIEW
The cable television ("CATV") industry is currently facing sweeping regulatory
and technological changes which offer, on one hand, the potential for new
services and growth opportunities and on the other, significant challenges. It
is the purpose of this section to provide the reader with a brief historical
backdrop and a discussion of various factors and issues that will impact the
CATV industry.
Early History
The first cable television system was developed in Mahanoy, Pennsylvania in
1948 as a re-distributor of off-air television broadcast signals. Technical
constraints and limited product confined industry growth to areas of limited or
no off-air television reception through the mid- 1970s. By that time, 29% of
television homes in the United States had cable television service available to
them, and approximately 12% to 15% of television households subscribed. Home
Box Office, and other satellite delivered cable exclusive programming,
developed in the mid-1970s represented a major breakthrough in technology. The
number of cable exclusive programming services grew exponentially through the
mid-1980s giving consumers a reason to subscribe to cable other than just
better television reception.
Historic Growth and Forecasts
During the late 1970s and the 1980s, the cable television industry was
characterized by a period of rapid growth as a number of communities granted
franchises, systems were built and wired, and subscribers were added. This
growth was spawned by an easing of government regulations, the increased
availability of capital, more cable-exclusive
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<PAGE> 12
programming, and improved technology. Following this period of intensive
construction, the industry's attention in the latter half of the 1980s turned
to new programming, geographic consolidation ("clustering"), new sources of
revenues, such as "pay-per-view", increased competition with broadcasters, the
development of more dynamic consumer marketing, and improved customer service.
From 1980 to 1994 the number of cable subscribers more than tripled from 18.1
million in 1980 to 59.7 million in 1994, representing a compound annual growth
rate ("CAGR") of 8.9%. During the same time period, pay TV units grew from 9
million to 45 million representing a 12.1% CAGR. Basic cable TV is now in 65%
of United States television households and is projected by Kagan1 to rise to
nearly 70% by 2000. However, in our opinion, these projections of cable
subscriber counts do not fully incorporate the impact of competitive delivery
systems, e.g., DBS.
As the industry further matures, basic subscribers will continue to grow both
in absolute numbers and in percentage of total television households, but at a
rate of growth slower than in the past. While basic cable units grew at a CAGR
of 8.9% between 1980 - 1994, they are expected to grow only at a 1.2% rate
between 1994 and 2004. Pay unit growth patterns exhibit an even more
pronounced slowing. Between 1980 and 1994 pay units grew at a CAGR of 12.1%;
however, between 1994 and 2004 the growth rate is expected to decline to 1.9%.
The growth in pay services appears to have been dampened due to:
. Home video - there are more VCR's than cable subscribers;
. Increased competition from additional basic cable networks;
. Pay-per-view; and
. Technological advancements such as video-on-demand and direct
broadcast satellite delivery systems.
__________________________________
1The Cable TV Financial Databook 1995, published by Paul Kagan Associates, Inc.
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<PAGE> 13
Historical and projected subscriber growth rates and industry revenues are
shown in Table 1A.
Regulation
The Cable Communications Policy Act of 1984 (the "1984 Act") had a major impact
on the CATV industry, the most significant of which was the deregulation of
basic cable rates. Effective December 29, 1986 cable operators were able to
raise monthly subscription rates on basic service at their own discretion,
rather than being limited to rate approval by local and state authorities. The
1984 Act also eased the franchise renewal process by establishing a specific
and consistent process for renewal. This "deregulated" cable world came to an
end with the passage of the "Cable Television Consumer Protection Act of 1992"
(the "1992 Act").
The Congress authorized the FCC to promulgate and enforce the major elements of
the 1992 Act.
Some of the key elements and issues addressed by the 1992 Act were:
. "Retransmission consent" whereby local TV stations were
allowed to negotiate with cable operators for consent, for a
fee, to retransmit their signals on cable, or local TV
stations could opt for "must carry" which requires cable
systems to carry the station for no fee.
. The "anti-buythrough" provision requires cable operators to
install expensive new addressable technology over the next ten
years so subscribers would no longer be required to buy "full
basic", or the "second tier", before being eligible to buy
premium and pay-per-view services.
. Rates of the lowest tier of local broadcast signals are
subject to local regulation of most cable systems (97%) under
guidelines developed by the FCC; expanded tiers of service may
be subject to rate regulation if subscribers complain to the
FCC and cable rates are found to be "unreasonable" on a
case-by-case basis by the FCC.
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<PAGE> 14
TABLE 1A
CABLE TELEVISION INDUSTRY STATISTICS
CABLE INDUSTRY GROWTH STATISTICS
<TABLE>
<CAPTION>
Basic Cable Pay Cable Units
--------------------------- ------------------------------------
TV Homes % of % of
TV Homes Passed Subscribers* Homes Units Homes % of
Yr End (Millions) (Millions) (Millions) Passed (Millions) Passed Basic
- ------ ---------- ---------- ----------- ------ ---------- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
1980 79.9 32.8 18.1 55.0% 9.1 27.9% 50.6%
1981 81.3 41.2 22.5 54.7% 15.5 37.5% 68.6%
1982 82.4** 49.1 27.2 55.5% 20.8 42.4% 76.4%
1983 83.3 55.9 31.4 56.1% 26.4 47.3% 84.2%
1984 84.9 60.5 34.2 56.6% 30.0 49.5% 87.5%
1985 86.5 64.7 36.7 56.6% 30.6 47.3% 83.5%
1986 87.7 69.4 39.7 57.2% 32.1 46.2% 80.8%
1987 89.2 73.1 42.6 58.3% 34.8 47.6% 81.6%
1988 90.9 77.2 45.7 59.2% 38.8 50.3% 85.0%
1989 91.6 82.8 49.3 59.5% 41.1 49.6% 83.3%
1990 91.1 86.0 51.7 60.2% 41.5 48.3% 80.2%
1991 92.1 88.4 53.4 60.4% 39.9 45.1% 74.7%
1992 93.1 89.7 55.2 61.5% 40.7 45.4% 73.7%
1993 94.0 90.6 57.2 63.1% 41.5 45.8% 72.6%
1994 94.9 91.6 59.7 65.2% 45.0 49.1% 75.4%
1995 (Est.) 95.9 92.7 61.7 66.6% 47.2 50.9% 76.5%
1999 (Est.) 100.0 97.0 66.1 68.2% 52.9 54.5% 80.0%
2004 (Est.) 105.4 102.8 67.1 65.3% 54.5 53.0% 81.2%
</TABLE>
COMPOUND AVERAGE ANNUAL GROWTH RATES (CAGR)
<TABLE>
<S> <C> <C> <C> <C>
1980-1994 1.2% 7.6% 8.9% 12.1%
1994-1999 1.1% 1.2% 2.1% 3.3%
1994-2004 1.1% 1.2% 1.2% 1.9%
</TABLE>
*Prior to 1982, basic subscribers and homes passed reflect quantities in those
systems offering pay TV.
**Estimate (conflicting data in published reports).
Sources: Paul Kagan Associates, Inc., The Cable TV Financial Databook, June
1995.
Kane Reece Associates, Inc., Compound Average Annual Growth Rates.
-8-
<PAGE> 15
TABLE 1B
CABLE TELEVISION INDUSTRY STATISTICS (CONTINUED)
CABLE INDUSTRY REVENUES
($ Millions)
<TABLE>
<CAPTION>
Act F/C F/C 1994-1999
Year 1994 1995 1999 CAGR
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic/Exp. Basic Cable Revenue $ 15,164 $ 16,803 $ 21,822 7.6%
Pay/Mini-Pay Pay Cable Revenue 4,522 4,800 5,357 3.4%
PPV Revenue:
PPV Movie Revenue 269 323 642
PPV Event Revenue 215 260 519
---------- ---------- ----------
Subtotal PPV Revenue 484 583 1,161 19.1%
Other Video Revenue*:
Advertising (Net) 1,077 1,281 2,169
Home Shopping 127 144 201
Misc. 1,412 585 1,071
---------- ---------- ----------
Subtotal Other Video Rev 2,616 2,010 3,441 5.6%
Digital Revenue**: 262 422 5,104 81.1%
---------- ---------- ----------
Total Video Revenues $ 23,048 $ 24,618 $ 36,885 9.9%
========== ========== ==========
Video Revenue/Average Sub $ 32.86 $ 33.80 $ 46.71 7.3%
========== ========== ==========
Competitive Access Provider Revenue $ n/a $ n/a $ 517 n/a
Cable Telephony Revenue*** $ n/a $ n/a $ 2,453 n/a
---------- ---------- ----------
Total Video & Telephony Rev. $ 23,048 $ 24,619 $ 39,855 11.6%
========== ========== ==========
Per Sub $ 32,86 $ 33.80 $ 50.47 9.0%
========== ========== ==========
</TABLE>
Sources: Paul Kagan Associates, Inc., The Cable TV Financial Databook, June
1995.
Kane Reece Associates, Inc. Growth Rate Calculations.
*1994 from The Cable TV Financial Databook, June 1995.
**Digital Revenue includes: Near video-on-demand/video-on-demand movie and
non-movie, digital video tier, cable to business video, cable delivered video
games, and on line high speed access revenues.
***Includes cablephone upgrade payments, cable operator share of cablephone
revenues and cable to business telephony revenue.
-9-
<PAGE> 16
. New competition is "encouraged" by the bill from new cable
operators, municipalities and alternate video distributors,
and cable programmers are required to sell their creative
products to competitors at justifiable prices.
. An anti-trafficing provision prohibits cable operators from
selling or transferring ownership in a cable system for at
least three years after buying or building the system.
. Other provisions affect channel positioning, customer service
standards, and the number of channels that can be occupied by
a programmer owned or backed by a cable operator, and the
number of cable subscribers any one cable operator may serve.
Some of the provisions of the 1992 Act are still being reviewed in the courts,
legislature or at the FCC. It is clear that the ground rules have changed and
industry cash flow has been impacted.
Rate regulation became effective with the FCC initial benchmark on September 1,
1993, followed by revised benchmarks effective as of May 15, 1994. In general,
the new regulations call for up to a maximum 17% reduction in basic cable
service rates and a cost based approach to the pricing of installation and
customer premise equipment such as remote control devices, converters and
additional outlets. Estimates of the impact of rate regulation on individual
companies have ranged from near-term negative impacts of 5% to 15% on revenue
and 1% to 8% on margins.
The first major overhaul of the Telecommunications Act of 1934 was passed by
Congress in January 1996. The Telecommunications Act of 1996 (the "1996 Act")
passed for several reasons including the following:
. Congress was desperate to enact any bill.
. Election year friendly/voter indifference.
. Regain policy authority from the court.
. Something for each industry.
. Public Relations Spin: information highway jobs.
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<PAGE> 17
The 1996 Act is made up of seven titles:
Title I Telecommunications Services
Title II Broadcast Services
Title III Cable Services
Title IV Regulation Reform
Title V Broadcast Obscenity and Violence
Title VI Effect on Other Laws
Title VII Miscellaneous Provisions
The 1996 Act is voluminous and complex, and as such, we will only deal with a
sample of the more significant aspects of the bill as they relate to cable TV.
The 1996 Act leaves in place, with certain modifications, most of the 1992 Act
provisions.
Rate Regulation
. Upper tier regulations
- Only a local franchising authority can file a
complaint with the FCC -- the 1992 Act had provisions
for individuals.
- All tier rate regulation ends on March 31, 1999.
- Small company relief broadened and better defined v.
1992 Act.
Effective Competition
- Local exchange carriers ("LEC's") added to test
criteria.
- Satisfaction of test criteria deregulates all rates.
- Subscriber notice of rate changes are relaxed.
- Customer premise equipment rules essentially same as
1992 Act - sunset when FCC determines true
competition exists.
. Must carry stays in place -- Nielsen DMA's ("designated market
area") define broadcast market.
. Telco's can enter cable TV business in their service area in
three (3) ways:
1. As a cable system -- regulated under Title III.
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<PAGE> 18
2. As a common carrier -- regulated under Title II only.
3. As an "open video system" -- cannot discriminate
among programmers, do not require a local franchise
but must comply with network non-duplication,
syndicated exclusivity.
. Telephone and Cable Buyouts
- No LEC or affiliate can acquire more than 10% of a
cable operator providing cable service within the
carriers service area.
- No cable operator or an affiliate can acquire more
than 10% of a LEC providing telephone service within
the cable system's service area.
- Developing LEC's and cable operators cannot form
joint ventures to offer cable or telephone service.
- There are several exceptions to the above
prohibitions which generally deal with small systems
and markets.
. Infrastructure Sharing
- Requires telcos to provide information about their
switched network to any "qualifying carrier".
Potential competitors, including cable, need the
information in order to connect their network with
the telcos' network.
. Direct Broadcast Satellite
- Gives the FCC exclusive authority over direct-to-home
satellite services ("DTH"), including direct
broadcast satellite ("DBS"). The bill also bars
local jurisdictions from taxing DTH satellite
services but does not affect state taxes.
- Bars local communities, including homeowner
associations, from writing zoning laws that prohibit
DBS dishes.
The 1996 Act impact on the cable industry is mixed. The industry will benefit
from telco competitive opportunities and eventual rate deregulations. However,
the deregulatory windfall is discounted. Competitors are encouraged, telco
takeover or investments restricted, and several 1992 Act regulations remain.
According to Research Weekly (Prudential Securities, December 11, 1995) the
cable industry has essentially learned to live with the new regulations.
Further, it notes that strategically the most important issues are local
telephone entry and revenue growth driven by new technologies and services.
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<PAGE> 19
Consolidation
The uncertainty of the impact of regulation, the timing and financing of the
"information superhighway" and its associated potential new revenue sources,
and the advent of a competitive environment have created a market for cable
systems driven by a need for consolidation. This is evident in the
unprecedented number of large cable operators who have put their cable systems
up for sale in 1995, systems serving over 13 million subscribers, almost 20% of
the industry. Once all these proposed deals close, the top 20 U.S. cable
multiple system operators ("MSOs") will serve about 87% of an estimated 62.5
million cable customers and the top five MSOs will control 65% of the
universe.2
The industry consensus is that consolidation is necessary in order to survive
the impacts of convergence, regulation, and competition, and to provide
operators with greater access to investment capital and greater leverage with
suppliers of equipment and programming.
Cable TV companies are also creating joint ventures with companies outside the
cable industry. A good example of industry convergence is the Sprint/Cable
Alliance. The major players include Sprint with a 40% equity interest in the
venture, TCI with a 30% equity interest and Cox Communications and Comcast
Corporation each with a 15% equity interest. The total costs have been
estimated at around $8 billion. Each of the players in the alliance will bring
something different to the table in an attempt to accomplish what is best
described as a national digital wireless communications network based on
broadband communications services. Sprint brings long-distance and local
exchange authority, as well as a marketable and recognizable name. TCI offers
a vast broadband wireline network. Comcast brings a wireline network and
cellular service expertise to the venture and will look to develop a Sprint
branded wireline service in
__________________________________
2Cable TV Investor, December 18, 1995.
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<PAGE> 20
Baltimore and Detroit. Cox Communications will provide their wireline network
and a wireless service in the large southern California/Las Vegas market.3
Cable Financing
Regardless of the size of current transactions, the ability to complete a
transaction requires the use of creative financing. The traditional financing
vehicles, i.e., senior debt and mezzanine financing, have become limited as the
investment community tries to analyze the potential impact of new
telecommunications legislation, as well as the regulatory environment. New
areas of financing include strategic alliances, recently increased junk bond
activity; seller paper; major pension fund investors, e.g., CalPERs, and
increased liquidity from non-traditional investors, e.g., US West's acquisition
of the Bass Atlanta systems.
Industry Trends
Cable TV historically has provided competitively priced entertainment compared
with movie theaters and other away-from-home leisure activities. Cable
revenues continue to exhibit stability over the business cycle relative to many
other discretionary consumer expenditures.
The latter half of the nineties is expected to bring continued growth in both
cable television subscriptions and revenues, albeit at a somewhat slower growth
rate, reflecting a maturing of the traditional basic cable industry. The
industry will focus on new programming and alternative viewing selections, such
as staggered starting times on alternative channels for entertainment events,
increased pay-per-view options, video on demand, etc. Technology will play a
major role in the continued growth and profitability of the industry. The use
of fiber optic technology for 750 MHz systems with 500-2,000 households per
node is now standard for industry rebuilds in high density areas. This,
__________________________________
3Cablevision Magazine, November 13, 1995, "Sprinting Into Telecommunications".
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<PAGE> 21
along with developments in digital television signal compression technologies,
will allow cable systems to offer more channels by orders of magnitude at cost
effective rates. Additionally, this distribution network architecture should
position the cable operator to offer new interactive services in competition
with other service providers as the new services approach viability. High
speed cable modem services offering extremely rapid access to the internet and
other data services, telecommunications, and information services, such as
Personal Communications Networks, are expected to offer additional revenue
sources.
Programming and Services: The next five to ten years will see additional
growth of CATV revenues from other revenue categories (other than basic and pay
cable subscription revenue) such as advertising, pay-per-view ("PPV"), home
shopping, digital audio, telephony, and potential new technology oriented
services such as interactive games and computer related services. In 1994
other revenues (see Table 1B) were approximately $3.4 billion, or 14.6%, of the
industry's $23.0 billion in revenues. As depicted in Table 1B, between 1994
and 1999 other revenues are projected to grow to $12.7 billion, representing
31.8% of total industry revenue and a CAGR of approximately 30%. Basic cable
subscription revenue is expected to grow at a 7.6% CAGR and pay services
revenue increasing by 3.4% CAGR.
As of December 31, 1994, over 65% of United States TV households had basic
cable television. In addition to providing broadcast stations, basic cable
offers the availability of program alternatives in the form of basic cable
networks. Each of the ten largest basic service networks (the top five being:
Cable News Network, ESPN, TBS Superstation, USA Network, and The Discovery
Channel) have over 60 million subscribers.4 Other widely distributed basic
cable networks include The Learning Channel, Headline News, Lifetime, The
Travel Channel, The Family Channel, C-Span, MTV, TNT, Arts &
__________________________________
4Cablevision Magazine, September 18, 1995.
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<PAGE> 22
Entertainment, The Weather Channel, WWOR-TV, QVC, The Nashville Network, CNBC,
and Comedy Channel.
Pay television services include channels for which an optional additional fee
is paid to the CATV operator. According to CableVision Magazine, September 18,
1995, the top five movie oriented pay channels served over 53 million
subscribers. The top five movie entertainment services are Home Box Office
(19.2 million subscribers), Disney Channel, Showtime, Cinemax, and Encore.5 In
addition to these services, regional and local sport networks are sometimes
offered as pay services.
New programming services are anticipated as cable industry capacity constraints
and regulatory "disincentives" are eased. New sources of competition are
expected from the Regional Bell Operating Companies ("RBOCs") and Hollywood.
Examples include the formation of Tele-TV in 1994 by Bell Atlantic, Nynex, and
Pacific Telesis to develop programming content and distribution networks.
Another video programming and interactive services venture will be known as
Americast and includes Ameritech, BellSouth, SBC Communications and Disney,
which has acquired Capital Cities/ABC.6
According to Veronis, Suhler & Associates Communications Industry Forecast,
1995 the three networks' audience levels, which were declining, have now
stabilized, although their share of advertising dollars have continued to
decline. In 1995, the three networks' portion of total TV advertising dollars
are projected to be about 32.4%, compared with an estimated 44.7% in 1980.
Much of this market share loss has come to cable television, which has offered
advertisers both growing overall audiences and opportunities to reach niche
audiences attracted by specialized programming.
__________________________________
5Cablevision Magazine, September 18, 1995.
6Standard & Poor's Telecommunications Industry Survey, December 7, 1995.
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<PAGE> 23
This increase in cable viewership is summarized in the following report in the
November 1995 Cable Avails:
For the first three weeks of the 1995-1996 broadcast season that
officially began on September 18, ad-supported cable posted
significant gains in primetime viewership, while the four broadcast
networks continued to lose audience despite heavy promotion of their
fall program lineups. The average number of aggregate households
watching primetime basic cable during the launch of the new season
increased by more than 3 million -- up 26 percent from the same period
last year. Cable's average collective primetime share jumped 26
percent (to 29 from 23) and average rating rose 21 percent (to 17.4
from 14).
A growing number of viewers, on the other hand, continued to tune out
ABC, CBS, NBC and Fox. The debut of their 1995-1996 primetime program
schedules was met by an average collective loss of more than 2.7
million households, 6 share points and more than 3 rating points.
These shifts in TV viewership seem to confirm that basic cable's
audience is growing at the expense of broadcasters.
Cable advertising revenues have begun to play a significant role in the
industry's profitability. According to Veronis, Suhler & Associates
Communications Industry Forecast, 1995, the audience share for all cable
increased from 13.7% in 1984 to 30.1% in 1994. This has attracted the
attention of both local and national advertisers. 1994 net national and local
spot spending totalled $2.9 billion, a 14% increase over 1993, with 1995
advertising spending projected to be $3.3 billion, an increase of 13% over
1994. 1994 cable advertising represented 8.7% of total TV advertising. Cable
advertising is forecasted to grow to $4.9 billion in 1999 which represents
11.0% of total forecasted TV advertising.
Due to the niche nature of cable television programming, cable advertising
offers an attractive, cost effective advertising medium to target specific
consumer demographics. Additionally, cable advertising interconnects, serving
broad metropolitan areas, have developed to facilitate the booking of
advertising time at multiple cable systems time by national and regional
advertisers.
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<PAGE> 24
PPV, and in fact all pay services, have not achieved the levels of penetration
and profitability that were anticipated in the mid-1980s. The flourishing home
video business is a major factor in the lack of performance in this segment of
the cable industry. Additionally, in recent years there were fewer big events,
e.g., boxing, to draw viewers. Veronis, Suhler & Associates Communications
Industry Forecast, 1995 summarizes the recent performances of and projection
for PPV as follows,
. A total of $269 million was spent on PPV movies in 1994.
. Buy rates have been disappointing with only 2.9 movies per
household bought by 21.7 million PPV households in 1994. By
contrast the average VCR household rented nearly 1 movie per
week.
. Total spending on PPV movies will rise to $1.0 billion in 1999
representing a CAGR of 28.7% from 1994, based on the following
assumptions:
- Increased channel capacity will increase selection
and allow multiplexing.
- PPV cable buy rates will increase to 4.3 movies per
year and PPV capable homes will increase to 29.0
million homes, 34% over 1994 levels.
- PPV price will drop from an average of $4.25 in 1994
to $3.75 in 1999, narrowing the gap with video
rentals.
- PPV spending from DBS, backyard satellite dish and
Telco video dial tone services will increase from
virtually nothing presently to $581 million in 1999.
In the future, PPV may become a significant source of revenues as the
technology improves and the acquisition of movies and event programming becomes
more aggressive, thereby improving their availability on cable relative to
theatrical and videocassette releases. A number of the large MSOs as well as
both cable and broadcast networks have recently shown significant interest in
both acquiring and developing new programming. Examples include cable
programmers purchase of the rights to numerous professional sporting events
including football, baseball, basketball, hockey, and boxing. In addition,
MSO's have purchased sports teams and venues, such as Comcast's purchase
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<PAGE> 25
of the Philadelphia Flyers and 76ers, and the Spectrum Sports Arena. These
purchases will lock-in cable television broadcast rights.
PPV services can be looked at as event oriented and movie oriented. According
to Kagan, 1994 PPV gross revenues were $484 million and are estimated to total
$583 million in 1995, an increase of 20% from 1994. It is anticipated that
events will continue to increase in number and create an increased audience for
PPV, i.e., more homes with fully addressable converters, and improved
subscriber awareness of events and available movies will greatly accelerate the
growth of PPV revenue. Kagan estimates cable PPV gross revenues to be $1.2
billion in 1999, representing a CAGR of 19%.
Another source of incremental revenues has been the growth of home shopping
services on cable TV. Paul Kagan Associates reported these services to
generate 1994 revenue for CATV operators of $127 million and projects these
revenues to grow to $201 million by 1999 (a 9% CAGR). These services can be
very profitable for cable system operators who generally receive 5%-10% of
gross sales.
Technology Developments
New revenue sources will be dependent upon new delivery systems. Emerging
technologies which will influence the new delivery systems are briefly
described below.
Interactive Digital Technology
A major factor in the growth in cable video revenues and related service
revenues such as telephony will be dependent upon the cable industry's
implementation of interactive digital technology into their delivery system.
These technical architectural changes include both digital and switched
technologies.
-19-
<PAGE> 26
Fiber Optics: Optical fiber technology is rapidly being deployed in cable
television systems and is projected to grow at an annual rate of 25% in the
1990s. It's use provides several advantages over traditional coaxial copper
cable:
. Cost effective upgrades of channel capacity by replacing
"trunk" without the high cost of replacing all cable to each
individual home, resulting in the "hybrid" fiber-coaxial
system commonly in use today;
. Improved reliability, by reducing the number of electronics
required between the headend and the consumer;
. The addition of two-way services for consumers or business at
cost effective rates.
. Reduced operating costs due to fewer electronics which need
periodic "balancing" or fine-tuning;
. Improved signal quality, due to fewer electronics and less
possibility of static or electrical interference.
HDTV: High Definition Television has been in development for over fifteen
years, but has yet to prove itself as a cost-effective consumer option, though
the technology has been successfully demonstrated on existing cable systems in
the United States and Canada. Basically, the term HDTV represents a variety of
technological approaches to improved clarity and quality. Recommendations
regarding the technology have been made to the FCC, but the future of HDTV is
yet to be determined.
The current broadcast television transmission format was developed based upon
engineering and technology available in the late 1940s and early 1950s. The
FCC is in the process of "adopting a series of standards for HDTV transmission,
designed by the Grand Alliance, a consortium of seven TV and cable equipment
vendors."7 The original objective of HDTV was to achieve TV pictures that are
more like movie screens than current TV sets. However, the capabilities that
digital TV technology offers are beyond that originally contemplated and
provide some issues to the television industry as outlined in the above
referenced article.
__________________________________
7Cablevision Magazine, November 13, 1995, "The Digital TV Showdown".
-20-
<PAGE> 27
. Broadcasters would like to use the 6 MHz additional channel
any way they want. For example, does HDTV programming have to
be aired exclusively or could broadcasts, using digital
compression, offer multiple programs and if so, do CATV
systems have to carry all of them under the "must carry"
rules?
. The computer industry is making a case before the FCC to use
progressive scanning versus current interlace scanning.
Progressive scanning is more legible for computer
applications.
. Digital channel capacity could be used by broadcasters for new
telecommunications services such as paging and personal
communications services ("PCS"). The issue before the FCC,
and possibly Congress, is whether the award of the additional
bandwidth to broadcasters should be paid for, now or in the
future in a manner analogous to auctions used for recent PCS
licenses.
Video Compression: The purpose of video compression is to achieve more
efficient use of expensive bandwidth and power. Currently, each television
channel on a cable system occupies 6 MHz of spectrum space which is the same
amount of bandwidth as a broadcast television channel. Hence the number of
channels that a cable system can deliver to subscribers at any one time is
limited by the bandwidth of the system. For example, an operator may currently
carry 60-channels in a 450 MHz system, and 76-channels in a 550 MHz system.
The use of video compression permits a greater number of channels to be
transmitted in a given bandwidth then an analog signal. Most satellite signals
that are delivered to cable headends occupy one satellite transponder or
channel each. This transmission is in the analog mode. By digitizing and
compressing a television signal it is possible to carry several programs on one
satellite transponder. This is exactly the method that direct broadcast
satellites use to make more than one hundred channels available to their
customers. Similar technologies can be applied to a cable system. For
example, a cable operator might dedicate four standard TV channels (24 MHz of
bandwidth) to services to be delivered in a compressed mode. The compression
technology might accommodate 8 to 12 video signals in this bandwidth. Hence,
viewers would have four to eight additional program choices available to them.
The application of compression technology should
-21-
<PAGE> 28
make additional services available to some subscribers without being a burden
to those not ordering such services.
Digital Storage and Switching: One of the major elements of an interactive
services delivery system will be the amount of digital storage and switching
technology installed at or accessible to either a cable headend or a telephone
switching office. Interactive services will require capabilities that are new
to cable headends and telephone switching centers. Historically, cable
headends do not have any significant switching requirements and telephone
central offices do not handle television services. Digital technology is
beginning to place increased demands on each of these facilities as the role of
cable operators and telephone companies change. A major new element that is
common to most interactive experiments is a file server, which can store
gigabits of information. This information could include movies in a compressed
video format, games that could be downloaded simultaneously by several
customers of a service, or data bases for use by local subscribers.
The emergence of digital technology threatens to revolutionize home
entertainment, education, and business into the next century. Interactive or
two-way cable television is likely to become increasingly commonplace as it
proves to be increasingly cost efficient in linking schools for special courses
like it does in Enfield, Connecticut, connecting hospitals for training and
videoconferences as it does at Portland, Oregon, providing municipal fire,
police, prison, and utilities with discreet video connections as it does in
many communities or providing data transmission for businesses as it does in
New York City; Dearborn, Michigan; Kansas City; and elsewhere.
Competition
These technological developments will, dramatically alter the way households,
businesses, and schools "connect" with informational, educational,
entertainment,
-22-
<PAGE> 29
telecommunications and transactional services. The cable television industry
is well positioned to take advantage of the new competitive marketplace brought
about by the 1996 Act. Future competition to cable operators is expected to
come from three industries; direct broadcast satellite services, telephone
companies, and wireless cable. It appears that all three competitors are
adequately financed to compete with cable operators. Briefly, here are some of
the strengths and weaknesses of the most frequently mentioned competitive
threats to cable television in the years ahead.
DBS: Direct Broadcast Satellite, is a satellite-to-home service by utilizing a
"backyard dish" or receiver. Historically, most DBS customers have been in
lightly populated rural areas which are not served by cable companies due to
cable's self-imposed guidelines for "cost-effective" densities of 20-30
households per mile.
In late June 1994, G. M. Hughes Electronics (DirecTV) and U.S. Satellite
Broadcasting ("USSB") began offering a DBS system utilizing high-tech, high
cost Ku-Band satellites for multichannel reception. The Hughes and USSB
systems is currently available nationally, and had 1.4 million subscribers at
the end of the first quarter 1996.
PrimeStar, a direct satellite broadcast system owned by Time Warner, Comcast,
TCI, Cox, and GE also began service in June 1994 with 70-channels in the first
all digital television signal delivery system. At the end of the first quarter
1996, Primestar served approximately 1.0 million customers. Echo Star has
successfully launched its DBS satellite in December 1995 and plans to begin
service in early 1996.
Advantages of DBS to consumers are the prospect of satellite signals at
competitive monthly prices and additional program services. Disadvantages are
requirements for an unimpeded line of sight for the antenna, a high initial
cost to subscribers for DirecTV (approximately $500 for a single TV set, $700
for two, plus installation fees of up to
-23-
<PAGE> 30
$150), no carriage of local broadcast signals or locally originated
programming, and currently the inability to provide practical interactive
services. Cable systems in rural, low density areas with limited channel
capacity (35 or less) and poor service, or areas without wired cable service
are the most vulnerable to DBS competition. Telephone companies and cable
operators themselves may also market DBS services as a entree to cable
services. In fact, AT&T has made an investment in DirecTV and will begin
marketing the service to its 95 million customers.
According to Morgan Stanley's US Investment Research8 "direct-to-home
satellites will become the largest competitors to the CATV industry with 12 -
12.5 million subscribers by the end of the decade." The forecast assumes that
DBS reception equipment for a single TV set will decline to just under $500
within five years and that PPV movie buy rates will improve due to the growth
in video store rental rates.
Wireless: Wireless cable (officially referred to as multichannel multipoint
distribution system, "MMDS") provides multichannel television service via a
local microwave distribution system and microwave receive equipment at the
consumer location. Wireless requires less capital than cable, is easier to
construct, and provides service to an area faster than it takes to build a
cable system. Disadvantages include line of sight requirements, a lack of
interactivity and local content limitations, similar to those stated above for
DBS. In addition there are current limitations to a maximum of 33-channels of
capacity for an MMDS system. However, digital compression techniques will
increase the number of programs delivered.
Support for this technology is offered by recent acquisitions of MMDS providers
by Pacific Telesis and Nynex. Bell Atlantic has also formed an alliance with
Cellular Vision of New York which provides a similar wireless service but at an
even higher frequency.
__________________________________
8Cable Television Metamorphism - The Arrival of DBS and RBOC Competition,
September 15, 1995.
-24-
<PAGE> 31
Though a true competitive service to cable, the growth of wireless seems
limited to an average of 2-3% of the marketplace. This is supported by
Veronis, Suhler & Associates Communications Industry Forecast, 1995 which
projects wireless cable subscribers increasing from 0.5 million in 1994 to 2.0
million in 1999 representing a 28% CAGR and 2.7% of the total subscription
video subscribers.
Telephone Companies: When talking about cable competition, "telephone" usually
means RBOCs, GTE, Sprint, MCI, because their lobbying and public campaign for
rights to provide video in their service areas has been highly visible.
Telephone companies view cable as a great new source of revenue and a way to
finance fiber optic cable throughout their areas. The RBOC's have the
financial resources, technical expertise and consumer experience to be real
competitive threats. However, serious barriers to their entry remain. They
have been prohibited from offering video services by the court and the Cable
Act of 1984; their drops to households would all need to be replaced and new
coax/fiber plant built at a huge cost in order to provide a broadband video
service comparable to what cable already has in place; Public Utility
Commissions would be unlikely to tolerate any cross-ownership of subsidiaries
by a regulated utility for an entry into a new, competitive field dominated by
an experienced incumbent; telephone companies have little experience in
providing video, much less in a complicated, multi-tiered, menu-driven post
1992 Act era. The 1996 Act creates a competitive marketplace for telephone and
cable serves by allowing phone and cable companies to compete in each others
businesses while prohibiting combinations of companies serving overlapping
areas. This is the so-called "two (2) wire" model. This is a situation that
cable is far better situated to take advantage of from both a technological and
regulatory standpoint with its broadband network in place. The telephone
companies would face heavier costs, and time delays.
-25-
<PAGE> 32
Many analysts give the competitive advantage to cable due to:
. Cable's national broadband fiber/coaxial networks can be
expanded for telephone services with an estimated cost of $20
billion while telephone's limited fiber/twisted pair network
would require an investment of an estimated $400 billion to
enable it to provide high capacity video services;
. Cable companies are likely to react to market opportunities
more quickly, having an opportunistic entrepreneurial history,
rather than that of a large, bureaucratic, utility monopoly
which has only recently ventured into competitive business;
. Cable is expected to "out-market" telephone companies, having
experienced some competition and several large cable companies
having managed cable-telco combined systems in the U.K. for
several years; and
. Cable will probably have an initial window of opportunity in
the "open marketplace" of 2-3 years due to the RBOC's focus on
first entering the long distance market, as well as normal
lapsed time required for telephone companies to work their way
through Public Utility Commission ("PUC") and regulatory
procedures.
Standard & Poor's Telecommunications Industry Survey, December 7, 1995 provides
a synopsis of the issues facing the CATV industry as it prepares to enter the
telecommunications market:
. Cable networks are generally one way and operators must
upgrade their networks with appropriate switching
capabilities.
. The cable industry must overcome the reliability of its
service.
. The United Kingdom market provides some insight into the
ability of U.K. cable companies to capture as much as 25% of
the U.K. Telephony market. However, the telephony market in
the U.K. does not provide the same level of reliability as in
the U.S.; thus the analogy may not correlate.
Summary
In summary, the cable TV industry is well positioned to participate in the
growth of the information highway. It has a broadband cable plant in place, is
entrepreneurial in nature, has outstanding companies and management talent to
compete with the entrenched telephone and broadcast players in the marketplace.
Additional services and corresponding sources of revenue will continue to
develop and the consolidation of
-26-
<PAGE> 33
players in the CATV industry and telecommunications industry, e.g., SBC's
proposed purchase of Pacific Telesis and Bell Atlantic's proposed merger with
NYNEX, will continue so that economies of scale and sufficient resources, both
capital and management, are available.
-27-
<PAGE> 34
FAIR MARKET VALUATION
OF FALCON CABLE SYSTEMS COMPANY,
A CALIFORNIA LIMITED PARTNERSHIP
AS OF DECEMBER 31, 1995
PART III - DESCRIPTION OF THE REGIONS'
SERVICE AREAS AND SYSTEMS
Description of Service Areas
FCSC is made up of seven (7) operating Regions as follows:
1. Gilroy, California
2. Hesperia, California
3. San Luis Obispo, California
4. Tulare, California
5. Central, Oregon
6. Dallas, Oregon
7. Coos Bay/Florence, Oregon
Figures 1 - 7 are maps showing the location of each Region and certain systems,
i.e., systems serving communities that are in the "Maplinx" database, within
each Region. Exhibits A and B contain photographs and detailed operating
statistics as of the valuation date respectively. Tables 2A through 2G depict
various relevant demographic factors, available at the valuation date, for each
Region's service areas. The reader should note that the demographic data in
the Tables were compiled by postal zip codes. The zip codes served were
provided by Falcon management. Also, the place names are associated with zip
codes and will not necessarily be the same as the Region's franchise areas.
However, Kane Reece's research indicates that the Tables' footprints reasonably
match each Region's service area. The Tables contain population and household
statistics, beginning with 1990 census data, show CACI projections for 1995 and
2000. Kane Reece computed the various compound annual growth rates ("CAGR").
Median ages are shown for 1990 and 1995. Median household income for 1995 and
the
-28-
<PAGE> 35
FIGURE 1
GILROY REGION
FALCON CABLE SYSTEMS COMPANY
Map of Gilroy region showing the location of certain systems in the region.
Gilroy
Gonzales
Soledad
Greenfield
King City
<PAGE> 36
FIGURE 2
HESPERIA REGION
FALCON CABLE SYSTEMS COMPANY
Map of Hesperia region showing the location of certain systems in the region.
Hesperia
Adelanto
Boron
North Edwards
Mojave
Rosamond
<PAGE> 37
FIGURE 3
SAN LUIS OBISPO REGION
FALCON CABLE SYSTEMS COMPANY
Map of San Luis Obispo region showing the location of certain systems in
the region.
Atascadero
San Luis Obispo
Guadalupe
Los Alamos
<PAGE> 38
FIGURE 4
TULARE REGION
FALCON CABLE SYSTEMS COMPANY
Map of Tulare region showing the location of certain systems in the region.
Tulare
Porterville
California Hot Springs
Posey
<PAGE> 39
FIGURE 5
CENTRAL OREGON REGION
FALCON CABLE SYSTEMS COMPANY
Map of Central Oregon region showing the location of certain systems in the
region.
Brownsville
Veneta
Drain
Cottage Grove
Oakland
Sutherlin
Cave Junction
<PAGE> 40
FIGURE 6
DALLAS REGION
FALCON CABLE SYSTEMS COMPANY
Map of Dallas region showing the location of certain systems in the region.
Nehalem
Tillamook
Dallas
Silverton
<PAGE> 41
FIGURE 7
COOS BAY & FLORENCE REGIONS
FALCON CABLE SYSTEMS COMPANY
Map of Coos Bay and Florence region showing the location of certain systems in
the region.
Florence
Mapleton
Gardiner
Reedsport
Coos Bay
Coquille
Bandon
Myrtle Point
Powers
<PAGE> 42
TABLE 2A
GILROY, CA REGION
DEMOGRAPHICS
<TABLE>
<CAPTION>
Population
------------------------------------------------------
CAGR
Zip Code Location 1990 1995 2000 90-95 95-00
- -------- -------- ------- ------- ------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
93908 Salinas 12,030 12,389 12,369 0.6% -0.0%
93925 Chualar 12 12 12 0.0% 0.0%
93926 Gonzales 12,842 11,941 11,858 -1.4% -0.1%
93927 Greenfield 8,728 8,555 8,457 -0.4% -0.2%
93930 King City 11,299 12,372 12,513 1.8% 0.2%
93940 Monterey 35,335 33,013 32,390 -1.4% -0.4%
93960 Soledad 9,046 9,464 9,478 0.9% 0.0%
95004 Aromas 2,713 2,930 3,086 1.6% 1.0%
95012 Castroville 7,168 7,088 7,015 -0.2% -0.2%
95020 Gilroy 39,878 42,638 44,921 1.3% 1.0%
95023 Hollister 31,212 36,096 40,678 3.0% 2.4%
95037 Morgan Hill 31,482 34,550 36,846 1.9% 1.3%
95039 N/A
95045 San Juan Bautista 3,688 4,093 4,516 2.1% 2.0%
95046 San Martin 5,477 5,750 6,005 1.0% 0.9%
95075 N/A
99396 N/A
------- ------- -------
Total/Avg 210,910 220,891 230,144 0.9% 0.8%
Wtd. Avg.
California 29,760,021 31,754,305 33,660,583 1.3% 1.2%
United States 248,709,873 263,006,245 277,083,635 1.1% 1.0%
<CAPTION>
Households
-----------------------------------------------------
CAGR Median Age Median HH National State
Zip Code Location 1990 1995 2000 90-95 90-00 1990 1995 Income Centile Centile
- -------- -------- ------- ------- ------- ----- ----- ----- ----- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
93908 Salinas 3,920 4,025 4,011 0.5% -0.1% 35.2 36 60,294 97% 93%
93925 Chualar 3 3 3 0.0% 0.0% 0 0 0 0% 0%
93926 Gonzales 1,578 1,529 1,505 -0.6% -0.3% 28.7 32.1 28,121 50% 29%
93927 Greenfield 2,105 2,053 2,023 -0.5% -0.3% 24.9 24.3 30,911 60% 39%
93930 King City 3,144 3,429 3,459 1.8% 0.2% 26.7 26.7 32,509 65% 44%
93940 Monterey 14,071 13,122 12,811 -1.4% -0.5% 32.3 34 38,025 79% 59%
93960 Soledad 2,186 2,269 2,265 0.7% -0.0% 25 25.6 30,483 59% 38%
95004 Aromas 872 938 987 1.5% 1.0% 30 30.3 38,863 81% 62%
95012 Castroville 1,919 1,888 1,864 -0.3% -0.3% 26.8 26.9 32,729 66% 45%
95020 Gilroy 11,926 12,708 13,373 1.3% 1.0% 29.3 30.4 45,687 89% 77%
95023 Hollister 9,636 11,058 12,425 2.8% 2.4% 29.8 30.2 38,900 81% 62%
95037 Morgan Hill 10,153 11,103 11,827 1.8% 1.3% 32.2 33.2 57,278 96% 91%
95039 N/A
95045 San Juan Bautista 1,152 1,273 1,404 2.0% 2.0% 33 33.3 39,234 81% 62%
95046 San Martin 1,587 1,658 1,729 0.9% 0.8% 32.7 33.5 56,046 96% 90%
95075 N/A
99396 N/A
------- ------- -------
Total/Avg 64,252 67,056 69,686 0.9% 0.8% 27.6 28.3 37,791 71% 57%
Wtd. Avg. 30.2 31.1 43,494
California 10,381,206 10,995,431 11,624,997 1.2% 1.1% 31.5 32.6 38,099 15 *
United States 91,947,410 97,069,804 102,201,641 1.1% 1.0% 32.9 34.0 33,610
</TABLE>
*National Rank
Source: The Sourcebook of Zip Code Demographics, 1995
-36-
<PAGE> 43
TABLE 2B
HESPERIA, CA REGION
DEMOGRAPHICS
<TABLE>
<CAPTION>
Population
------------------------------------------------------
CAGR
Zip Code Location 1990 1995 2000 90-95 95-00
- -------- -------- ----------- ----------- ----------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
92301 Adelanto 7,479 12,436 16,197 10.7% 5.4%
92342 Helendale 3,612 4,032 4,417 2.2% 1.8%
92345 Hesperia 52,078 62,401 70,640 3.7% 2.5%
----------- ----------- -----------
Total/Avg 63,169 78,869 91,254 4.5% 3.0%
=========== =========== =========== ===== ====
California 29,760,021 31,754,305 33,660,583 1.3% 1.2%
United States 248,709,873 263,006,245 277,083,635 1.1% 1.0%
<CAPTION>
Households
------------------------------------------------------
CAGR Median Age Median HH National State
Zip Code Location 1990 1995 2000 90-95 95-00 1990 1995 Income Centile Centile
- -------- -------- ----------- ----------- ----------- ----- ----- ---- ---- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
92301 Adelanto 2,671 4,406 5,720 10.5% 5.4% 26.7 23.7 $20,708 18% 7%
92342 Helendale 1,356 1,529 1,683 2.4% 1.9% 36.3 38.6 31,331 62% 41%
92345 Hesperia 17,046 20,270 22,876 3.5% 2.4% 30.7 31.3 33,205 67% 45%
----------- ----------- -----------
Total/Avg 21,073 26,205 30,279 4.5% 2.9% 31.2 31.2 28,415 49% 31%
=========== =========== =========== ===== ==== ==== ==== ======= === ===
California 10,381,206 10,995,431 11,624,997 1.2% 1.1% 31.5 32.6 38,099 15 *
United States 91,947,410 97,069,804 102,201,641 1.1% 1.0% 32.9 34.0 33,610
</TABLE>
*National Rank
Source: The Sourcebook of Zip Code Demographics, 1995
-37-
<PAGE> 44
TABLE 2C
SAN LUIS OBISPO, CA REGION
DEMOGRAPHICS
<TABLE>
<CAPTION>
Population
-------------------------------------------------------
CAGR
Zip Code Location 1990 1995 2000 90-95 95-00
- -------- -------- ------------ ----------- ----------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
93401 San Luis Obispo 24,451 24,181 24,434 -0.2% 0.2%
93402 Los Osos 14,648 14,448 14,587 -0.3% 0.2%
93422 Atascadero 27,722 28,730 29,692 0.7% 0.7%
93428 Cambria 5,607 5,915 6,167 1.1% 0.8%
93434 Guadalupe 6,064 6,598 6,978 1.7% 1.1%
93440 N/A
93446 Paso Robles 29,114 31,437 33,140 1.5% 1.1%
93453 Santa Margarita 1,187 1,242 1,289 0.9% 0.7%
93465 Templeton 5,793 6,084 6,330 1.0% 0.8%
------------ ----------- -----------
Total/Avg 114,586 118,635 122,617 0.7% 0.7%
============ =========== =========== ==== ====
California 29,760,021 31,754,305 33,660,583 1.3% 1.2%
United States 248,709,873 263,006,245 277,083,635 1.1% 1.0%
<CAPTION>
Households
------------------------------------------------------
CAGR Median Age Median HH National State
Zip Code Location 1990 1995 2000 90-95 95-00 1990 1995 Income Centile Centile
- -------- -------- ----------- ----------- ----------- ----- ----- ------------ --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
93401 San Luis Obispo 10,380 10,221 10,319 -0.3% 0.2% 29.9 31.9 $28,708 53% 32%
93402 Los Osos 5,857 5,741 5,781 -0.4% 0.1% 36.5 38.1 37,980 79% 59%
93422 Atascadero 9,863 10,175 10,504 0.6% 0.6% 33 34.1 36,945 76% 55%
93428 Cambria 2,465 2,584 2,688 0.9% 0.8% 44.4 46.8 37,937 79% 58%
93434 Guadalupe 1,517 1,639 1,729 1.6% 1.1% 25.4 24.8 24,140 31% 16%
93440 N/A
93446 Paso Robles 10,359 11,113 11,689 1.4% 1.0% 31.9 32.3 33,952 69% 47%
93453 Santa Margarita 451 469 486 0.8% 0.7% 34.9 36 39,617 82% 64%
93465 Templeton 2,193 2,290 2,377 0.9% 0.7% 36.2 38.1 42,500 86% 70%
---------- ---------- -----------
Total/Avg 43,085 44,232 45,573 0.5% 0.6% 34.025 35.263 35,222 69% 50%
========== ========== =========== ==== ==== ====== ====== ====== === ===
California 10,381,206 10,995,431 11,624,997 1.2% 1.1% 31.5 32.6 38,099 15 *
United States 91,947,410 97,069,804 102,201,641 1.1% 1.0% 32.9 34.0 33,610
</TABLE>
*National Rank
Source: The Sourcebook of Zip Code Demographics, 1995
-38-
<PAGE> 45
TABLE 2D
TULARE, CA TULARE
DEMOGRAPHICS
<TABLE>
<CAPTION>
Population
-----------------------------------------------------
CAGR
Zip Code Location 1990 1995 2000 90-95 95-00
- -------- -------- ----------- ----------- ----------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
93207 California Hot Sprin 149 163 178 1.8% 1.8%
93208 N/A
93209 N/A
93218 N/A
93219 Earlimart 11,963 13,426 14,824 2.3% 2.0%
93221 Exeter 10,919 12,397 13,744 2.6% 2.1%
93223 Farmersville 6,432 7,234 7,984 2.4% 2.0%
93235 Ivanhoe 3,326 3,592 3,889 1.6% 1.6%
93244 Lemon Cove 64 72 80 2.4% 2.1%
93247 Lindsay 12,983 13,965 15,085 1.5% 1.6%
93256 Pixley 4,768 5,137 5,554 1.5% 1.6%
93257 Porterville 53,982 60,020 65,936 2.1% 1.9%
93258 N/A
93260 Posey 243 266 290 1.8% 1.7%
93265 Springville 3,058 3,351 3,652 1.8% 1.7%
93267 Strathmore 4,774 5,228 5,697 1.8% 1.7%
93270 Terra Bella 5,066 5,728 6,339 2.5% 2.0%
93271 Three Rivers 2,166 2,446 2,705 2.5% 2.0%
93272 Tipton 2,365 2,725 3,043 2.9% 2.2%
93286 Woodlake 8,857 10,320 11,582 3.1% 2.3%
93291 Visalia 32,369 36,821 40,922 2.6% 2.1%
93292 Visalia 25,275 29,161 32,591 2.9% 2.2%
93615 Cutler 4,901 5,448 5,979 2.1% 1.9%
93646 Orange Cove 6,374 6,764 7,242 1.2% 1.4%
93647 Orosi 7,545 8,138 8,802 1.5% 1.6%
93666 N/A
----------- ----------- -----------
Total/Avg 207,579 232,402 256,118 2.3% 2.0%
=========== =========== =========== ===== =====
California 29,760,021 31,754,305 33,660,583 1.3% 1.2%
United States 248,709,873 263,006,245 277,083,635 1.1% 1.0%
<CAPTION>
Households
-----------------------------------------------------
CAGR Median Age Median HH National State
Zip Code Location 1990 1995 2000 90-95 95-00 1990 1995 Income Centile Centile
- -------- -------- ----------- ----------- ----------- ----- ----- ---- ---- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
93207 California Hot Sprin 61 67 72 1.9% 1.4% 38.5 39.5 $28,737 53% 32%
93208 N/A
93209 N/A
93218 N/A
93219 Earlimart 2,914 3,246 3,573 2.2% 1.9% 23.6 23 18,077 9% 3%
93221 Exeter 3,767 4,255 4,707 2.5% 2.0% 32.4 33.2 25,334 36% 19%
93223 Farmersville 1,745 1,948 2,144 2.2% 1.9% 25.5 24.2 20,376 17% 7%
93235 Ivanhoe 955 1,024 1,105 1.4% 1.5% 28.5 27.3 23,356 28% 14%
93244 Lemon Cove 22 25 28 2.6% 2.3% 40.4 40.4 29,167 54% 33%
93247 Lindsay 3,981 4,257 4,589 1.3% 1.5% 28 27.5 25,353 36% 20%
93256 Pixley 1,451 1,553 1,674 1.4% 1.5% 27.6 26 18,969 12% 4%
93257 Porterville 17,099 18,889 20,696 2.0% 1.8% 29.7 28.7 25,124 34% 19%
93258 N/A
93260 Posey 92 100 109 1.7% 1.7% 38.8 40.4 28,882 53% 32%
93265 Springville 1,291 1,408 1,533 1.8% 1.7% 38.7 40.1 28,816 53% 32%
93267 Strathmore 1,391 1,512 1,643 1.7% 1.7% 30.1 27.8 23,987 30% 16%
93270 Terra Bella 1,378 1,551 1,714 2.4% 2.0% 28.3 27.7 25,562 37% 20%
93271 Three Rivers 918 1,039 1,151 2.5% 2.1% 37.9 40.5 30,822 60% 39%
93272 Tipton 684 784 873 2.8% 2.2% 24.5 23.4 19,749 14% 6%
93286 Woodlake 2,534 2,935 3,285 3.0% 2.3% 28.6 28.3 22,232 24% 11%
93291 Visalia 9,435 10,803 12,042 2.7% 2.2% 27.5 27.7 26,028 40% 22%
93292 Visalia 8,286 9,538 10,652 2.9% 2.2% 29.7 30.5 30,357 59% 38%
93615 Cutler 1,033 1,145 1,256 2.1% 1.9% 22.8 23.4 20,207 16% 6%
93646 Orange Cove 1,547 1,631 1,741 1.1% 1.3% 24.4 24.3 17,675 8% 2%
93647 Orosi 1,930 2,069 2,233 1.4% 1.5% 26.4 26.4 21,484 21% 9%
93666 N/A
---------- ---------- -----------
Total/Avg 62,514 69,779 76,820 2.2% 1.9% 30.1 30.0 24,078 32% 18%
========== ========== =========== ===== ===== ==== ==== ======= === ===
California 10,381,206 10,995,431 11,624,997 1.2% 1.1% 31.5 32.6 38,099 15 *
United States 91,947,410 97,069,804 102,201,641 1.1% 1.0% 32.9 34.0 33,610
</TABLE>
*National Rank
Source: The Sourcebook of Zip Code Demographics, 1995
-39-
<PAGE> 46
TABLE 2E
CENTRAL, OR REGION
DEMOGRAPHICS
<TABLE>
<CAPTION>
Population Households
--------------------------------------------------- -------------------------------------------------
CAGR CAGR
Zip Code Location 1990 1995 2000 90-95 95-00 1990 1995 2000 90-95 95-00
- -------- -------- ---- ---- ---- ----- ----- ---- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
97327 Brownsville 3,249 3,620 3,946 2.2% 1.7% 1,176 1,303 1,419 2.1% 1.7%
97336 N/A
97377 Shedd 1,067 1,184 1,288 2.1% 1.7% 378 417 453 2.0% 1.7%
97386 Sweet Home 11,182 12,163 13,113 1.7% 1.5% 4,284 4,642 4,998 1.6% 1.5%
97401 Eugene 29,217 31,255 33,181 1.4% 1.2% 13227 14,115 14,995 1.3% 1.2%
97408 Eugene 6,997 7,630 8,181 1.7% 1.4% 2,717 2,952 3,161 1.7% 1.4%
97413 Blue River 1,090 1,138 1,195 0.9% 1.0% 451 469 491 0.8% 0.9%
97424 Cottage Grove 15,067 16,080 17,067 1.3% 1.2% 5,670 6,027 6,387 1.2% 1.2%
97426 Creswell 6,332 6,762 7,177 1.3% 1.2% 2,295 2,440 2,586 1.2% 1.2%
97431 Dexter 2,980 3,183 3,379 1.3% 1.2% 1,038 1,104 1,169 1.2% 1.2%
97435 Drain 2,337 2,411 2,498 0.6% 0.7% 857 881 911 0.6% 0.7%
97437 Elmira 2,424 2,576 2,729 1.2% 1.2% 869 919 971 1.1% 1.1%
97438 Fall Creek 1,570 1,684 1,792 1.4% 1.3% 563 601 638 1.3% 1.2%
97452 Lowell 793 851 905 1.4% 1.2% 274 293 311 1.3% 1.2%
97454 Marcola 1,442 1,551 1,652 1.5% 1.3% 527 564 600 1.4% 1.2%
97455 Pleasant Hill 2,218 2,347 2,480 1.1% 1.1% 752 792 836 1.0% 1.1%
97461 Noti 1,189 1,268 1,346 1.3% 1.2% 427 453 480 1.2% 1.2%
97462 Oakland 3,315 3,499 3,666 1.1% 0.9% 1,217 1,281 1,341 1.0% 0.9%
97463 Oakridge 3,992 4,155 4,356 0.8% 0.9% 1,596 1,654 1,730 0.7% 0.9%
97477 Springfield 32,447 34,410 36,433 1.2% 1.1% 13,208 13,980 14,797 1.1% 1.1%
97478 Springfield 27,521 30,088 32,320 1.8% 1.4% 9,905 10,775 11,550 1.7% 1.4%
97479 Sutherlin 7,304 8,002 8,529 1.8% 1.3% 2,753 3,005 3,198 1.8% 1.3%
97487 Veneta 6,004 6,376 6,750 1.2% 1.1% 2,115 2,237 2,365 1.1% 1.1%
97488 Vida 909 949 997 0.9% 1.0% 363 377 396 0.8% 1.0%
97489 Walterville 432 451 474 0.9% 1.0% 174 181 190 0.8% 1.0%
97492 West Fir 514 535 561 0.8% 1.0% 195 202 211 0.7% 0.9%
97499 Yoncalla 2,255 2,407 2,535 1.3% 1.0% 856 910 956 1.2% 1.0%
97523 Cave Junction 5,500 6,197 6,877 2.4% 2.1% 2,305 2,588 2,867 2.3% 2.1%
97531 Kerby 78 88 98 2.4% 2.2% 31 35 39 2.5% 2.2%
97534 O'Brien 247 278 309 2.4% 2.1% 93 104 116 2.3% 2.2%
--- --- --- -- --- ---
Total/Avg 179,672 193,138 205,834 1.5% 1.3% 70,316 75,301 80,162 1.4% 1.3%
Wtd. Avg. 18,381 19,716 20,984 1.4% 1.3% 7,661 8,181 8,695 1.3% 1.2%
Oregon 2,842,321 3,141,979 3,427,386 2.0% 1.8% 1,103,313 1,214,202 1,322,298 1.9% 1.7%
United States 248,709,873 263,006,245 277,083,635 1.1% 1.0% 91,947,410 97,069,804 102,201,641 1.1% 1.0%
</TABLE>
<TABLE>
<CAPTION>
Median Age Median HH National State
Zip Code Location 1990 1995 Income Centile Centile
- -------- -------- ---- ---- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
97327 Brownsville 35.9 37.4 $36,154 74% 76%
97336 N/A
97377 Shedd 33.8 35.1 34,121 69% 68%
97386 Sweet Home 35.7 36.2 26,041 40% 16%
97401 Eugene 30.9 32.5 28,157 50% 30%
97408 Eugene 37.9 39.8 41,570 85% 89%
97413 Blue River 39.7 42.1 37,959 79% 82%
97424 Cottage Grove 35.6 36.5 29,765 57% 44%
97426 Creswell 35 35.3 29,186 54% 38%
97431 Dexter 35.3 37.2 33,621 68% 66%
97435 Drain 36.7 37.8 25,892 39% 16%
97437 Elmira 36.6 39 35,209 71% 72%
97438 Fall Creek 33.9 36.1 32,616 65% 59%
97452 Lowell 34 36.1 32,630 65% 59%
97454 Marcola 37.8 40.4 38,379 80% 83%
97455 Pleasant Hill 38 40 35,359 72% 73%
97461 Noti 36.4 38.8 36,155 74% 77%
97462 Oakland 36.9 38 27,400 47% 23%
97463 Oakridge 36.3 37.2 25,027 34% 10%
97477 Springfield 32 32.1 27,250 46% 21%
97478 Springfield 32.3 33.7 33,116 66% 61%
97479 Sutherlin 35.5 36.2 25,646 38% 13%
97487 Veneta 34.1 35.8 29,973 57% 45%
97488 Vida 39.7 42.1 37,944 79% 82%
97489 Walterville 39.7 42.3 37,849 78% 81%
97492 West Fir 36.0 37.2 24,835 33% 9%
97499 Yoncalla 36.9 38 26,185 41% 18%
97523 Cave Junction 39.9 41.2 17,977 9% 1%
97531 Kerby 40.8 41.3 18,215 9% 2%
97534 O'Brien 39.3 41.0 18,022 9% 2%
Total/Avg 36.3 37.8 30,423 55% 45%
Wtd. Avg. 34.0 35.1 29,424
Oregon 34.5 35.6 35,077 21 *
United States 32.9 34.0 33,610
</TABLE>
*National Rank
Source: The Sourcebook of Zip Code Demographics, 1995
-40-
<PAGE> 47
TABLE 2F
DALLAS, OR REGION
DEMOGRAPHICS
<TABLE>
<CAPTION>
Population Households
--------------------------------------------------- -------------------------------------------------
CAGR CAGR
Zip Code Location 1990 1995 2000 90-95 95-00 1990 1995 2000 90-95 95-00
- -------- -------- ---- ---- ---- ----- ----- ---- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
97102 N/A
97107 Bay City 1,483 1,684 1,858 2.6% 2.0% 639 724 799 2.5% 2.0%
97110 N/A
97118 N/A
97130 N/A
97131 Nehalem 2,118 2,352 2,568 2.1% 1.8% 981 1,087 1,186 2.1% 1.8%
97134 N/A
97136 Rockaway 3,164 3,435 3,712 1.7% 1.6% 1,426 1,537 1,657 1.5% 1.5%
97141 Tillamook 11,010 12,043 13,052 1.8% 1.6% 4,245 4,638 5,027 1.8% 1.6%
97143 N/A
97145 Tolovana Park 1,114 1,168 1,227 1.0% 1.0% 495 516 542 0.8% 1.0%
97147 N/A
97338 Dallas 14,525 16,618 18,640 2.7% 2.3% 5,313 6,066 6,803 2.7% 2.3%
97344 Falls City 879 997 1,114 2.6% 2.2% 326 368 410 2.5% 2.2%
97351 Independence 5,944 6,680 7,429 2.4% 2.1% 2,007 2,251 2,503 2.3% 2.1%
97352 Jefferson 5,829 6,456 7,063 2.1% 1.8% 1,994 2,197 2,397 2.0% 1.8%
97361 Monmouth 8,082 9,061 10,050 2.3% 2.1% 2,794 3,167 3,538 2.5% 2.2%
97362 Mount Angel 4,747 5,084 5,477 1.4% 1.5% 1,329 1,447 1,570 1.7% 1.6%
97371 Rickreall 266 309 349 3.0% 2.5% 99 114 129 2.9% 2.5%
97381 Silverton 10,399 11,657 12,828 2.3% 1.9% 3,749 4,186 4,599 2.2% 1.9%
------ ------ ------ ----- ----- -----
Total/Avg 69,560 77,544 85,367 2.2% 1.9% 25,397 28,298 31,160 2.2% 1.9%
Wtd. Avg. 8,860 9,981 11,071 2.4% 2.1% 3,215 3,616 4,010 2.4% 2.1%
Oregon 2,842,321 3,141,979 3,427,386 2.0% 1.8% 1,103,313 1,214,202 1,322,298 1.9% 1.7%
United States 248,709,873 263,006,245 277,083,635 1.1% 1.0% 91,947,410 97,069,804 102,201,641 1.1% 1.0%
</TABLE>
<TABLE>
<CAPTION>
Median Age Median HH National State
Zip Code Location 1990 1995 Income Centile Centile
- -------- -------- ---- ---- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
97102 N/A
97107 Bay City 42.4 43.1 27,097 46% 21%
97110 N/A
97118 N/A
97130 N/A
97131 Nehalem 50.9 51.6 27,363 47% 23%
97134 N/A
97136 Rockaway 49.8 49.6 26,792 44% 20%
97141 Tillamook 36.7 38.1 29,018 54% 36%
97143 N/A
97145 Tolovana Park 40.2 42.2 30,422 59% 46%
97147 N/A
97338 Dallas 36.5 36.3 32,269 64% 57%
97344 Falls City 36.1 37.5 30,350 59% 46%
97351 Independence 31.1 31.7 29,692 56% 43%
97352 Jefferson 32.6 34.3 36,152 74% 76%
97361 Monmouth 24.6 25.2 25,717 38% 15%
97362 Mount Angel 31.5 31.8 33,479 67% 64%
97371 Rickreall 36.6 37.6 35,601 72% 74%
97381 Silverton 34.5 35.7 35,452 72% 74%
Total/Avg 37.2 38.1 30,723 58% 46%
Wtd. Avg. 34.9 35.6 30,969
Oregon 34.5 35.6 35,077 21 *
United States 32.9 34.0 33,610
</TABLE>
*National Rank
Source: The Sourcebook of Zip Code Demographics, 1995
-41-
<PAGE> 48
TABLE 2G
COOS BAY/FLORENCE, OR REGION
DEMOGRAPHICS
<TABLE>
<CAPTION>
Population Households
---------------------------------------------------- -------------------------------------------------
CAGR CAGR
Zip Code Location 1990 1995 2000 90-95 95-00 1990 1995 2000 90-95 95-00
- -------- -------- ---- ---- ---- ----- ----- ---- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
97411 Bandon 4,852 5,051 5,255 0.8% 0.8% 2,098 2,175 2,261 0.7% 0.8%
97420 Coos Bay 24,330 25,146 26,077 0.7% 0.7% 9,929 10,211 10,577 0.6% 0.7%
97423 Coquille 8,374 8,959 9,436 1.4% 1.0% 3,267 3,483 3,668 1.3% 1.0%
97439 Florence 9,986 11,007 11,861 2.0% 1.5% 4,321 4,750 5,115 1.9% 1.5%
97441 Gardiner 14 14 15 0.0% 1.4% 5 5 5 0.0% 0.0%
97449 Lakeside 994 1,097 1,174 2.0% 1.4% 420 462 494 1.9% 1.3%
97453 Mapleton 1,052 1,088 1,137 0.7% 0.9% 415 427 446 0.6% 0.9%
97458 Myrtle Point 5,246 5,566 5,844 1.2% 1.0% 1,985 2,098 2,201 1.1% 1.0%
97459 North Bend 15,269 16,072 16,802 1.0% 0.9% 5,933 6,217 6,494 0.9% 0.9%
97466 Powers 953 1,012 1,062 1.2% 1.0% 412 436 457 1.1% 0.9%
97467 Reedsport 6,723 6,941 7,192 0.6% 0.7% 2,742 2,820 2,918 0.6% 0.7%
97493 Westlake 272 283 297 0.8% 1.0% 100 104 109 0.8% 0.9%
--- --- --- --- --- ---
Total/Avg 78,065 82,236 86,152 1.0% 0.9% 31,627 33,188 34,745 1.0% 0.9%
Wtd. Avg. 14,017 14,595 15,199 0.8% 0.8% 5,676 5,884 6,125 0.7% 0.8%
Oregon 2,842,321 3,141,979 3,427,386 2.0% 1.8% 1,103,313 1,214,202 1,322,298 1.9% 1.7%
United States 248,709,873 263,006,245 277,083,635 1.1% 1.0% 91,947,410 97,069,804 102,201,641 1.1% 1.0%
</TABLE>
<TABLE>
<CAPTION>
Median Age Median HH National State
Zip Code Location 1990 1995 Income Centile Centile
- -------- -------- ---- ---- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
97411 Bandon 44.0 44.7 $21,899 23% 4%
97420 Coos Bay 37.1 38.1 25,674 38% 14%
97423 Coquille 38 38.9 25,480 37% 12%
97439 Florence 44.9 45.7 25,218 35% 11%
97441 Gardiner n/a n/a n/a n/a n/a
97449 Lakeside 40 42 29,234 55% 39%
97453 Mapleton 35.5 37.7 28,075 50% 29%
97458 Myrtle Point 36.7 37.7 23,997 30% 7%
97459 North Bend 36.8 38.7 28,907 53% 36%
97466 Powers 36.6 37.6 24,075 30% 7%
97467 Reedsport 39.1 40.3 28,423 52% 33%
97493 Westlake 44.4 47.2 28,168 50% 31%
Total/Avg 39.4 40.8 26,286 41% 20%
Wtd. Avg. 38.7 40.0 26,138
Oregon 34.5 35.6 35,077 21 *
United States 32.9 34.0 33,610
</TABLE>
*National Rank
Source: The Sourcebook of Zip Code Demographics, 1995
-42-
<PAGE> 49
corresponding national income centiles are also included. Statistics for
California or Oregon and the U.S. are included for comparative purposes.
Area Description
GILROY, CALIFORNIA - Table 2A depicts various relevant demographic statistics
for the service area which encompasses several communities lying along Route
101 beginning to the south of San Jose (see Figure 1). Household growth
between 1990 and 1995 of 0.9% was below that of the state and the nation.
However, the northern portion of the service area which includes Morgan Hill,
Hollister, and San Martin has experienced higher household growth rates and is
expected to continue to experience growth rates higher than the State and the
U.S. The northern portion benefits from being within commuting distance of
Silicon Valley while the south depends upon agriculture which is becoming more
mechanized, offering fewer jobs. Actual declines in households have occurred
in the southern portion. The service area's median household income on a
weighted average basis (weighted on households) exceeds California and the U.S.
by 14% and 29% respectively. As with household growth, communities in the
northern portion of the service area have higher income. The demographics of
the northern portion (Salinas northward) are favorable for continued growth of
the cable TV business, the southern portion is much less so.
HESPERIA, CALIFORNIA - Table 2B depicts various relevant demographic statistics
for the service area which consists of several communities lying 50 to 100
miles north of San Bernardino (see Figure 2). Annual household growth between
1990 and 1995 (4.5%) was almost four times that of the State and slightly more
than four times higher than the U.S. The high growth rate is projected to
decline somewhat through 2000 (2.8%) but is still almost triple the State and
U.S. average. The service area's 1995 median household income is below the
State and U.S. averages. According to Regional management, a significant
portion (over 20%) of the subscriber base is unemployed.
-43-
<PAGE> 50
SAN LUIS OBISPO, CALIFORNIA - Table 2C depicts various relevant demographic
statistics for the service area which consists of several communities along the
California coast, north of Santa Barbara (see Figure 3). Annual household
growth between 1990 and 1995 was slightly less than half (0.5%) that of the
State and the U.S. This annual growth rate pattern (0.6%) is expected to
continue between 1995 and 2000. The service area's 1995 median household
income is slightly below the State (8%) and slightly above the U.S. average
(5%).
According to the San Luis Obispo Chamber of Commerce, County unemployment was
5.9% in 1994. The economy of the County is stabilized by virtue of the fact
that approximately 21% of the work force are government employees. These
include prisons, nuclear power plant, and university employees.
TULARE, CALIFORNIA - Table 2D depicts various relevant demographic statistics
for the service area which consists of numerous communities between Fresno and
Bakersfield (see Figure 4). Annual household growth between 1990 and 1995 was
2.2% which is approximately 80% higher than that of the State and double the
U.S. average. This annual growth rate is expected to moderate somewhat between
1995 and 2000 (1.9%) but it is still about double both State and U.S.
projections. The service area's 1995 median household income is significantly
below the State average (37%) and U.S. average (28%).
The Region's economic base is largely agricultural with a growing manufacturing
base. A number of poor weather years, particularly 1991 have adversely
affected the area, reducing employment. In recent years, a number of
distribution and manufacturing concerns have relocated or added additional
facilities in the area.
-44-
<PAGE> 51
CENTRAL REGION, OREGON - Table 2E depicts various demographics for the service
area which encompasses a number of communities around Eugene and running well
to the south along Interstate 5 (see Figure 5). Household growth rates, both
historical and projected, are slightly above the U.S. but below the State.
Median age is above the U.S. and about equal to the State's. Median household
income us well-below both the State and the U.S. On net the service area is
below average.
The area of the Region near Eugene benefits from a thriving economy which has
attracted high-tech firms. Hyundai and Sony have located there and will employ
approximately 2,200 people in computer chip manufacturing. In fact, this area
has been referred to as the Silicon Forrest. The number of high-tech jobs has
surpassed the number of jobs in the timber industry.
DALLAS REGION, OREGON - The Dallas Region includes cable systems located around
the city of Salem in Polk and Marion Counties and systems located along the
coast in Tillamook County, which lies west of Portland (see Figure 6). These
two areas within the Region are widely separated geographically and somewhat
different demographically. The Region's coastal area is a resort/retirement
area. The other portion of the Region is located on both sides of I5, a major
interstate which runs north to Portland and south to Eugene. This area is
largely suburban to rural.
Table 2F depicts the demographics for the Region. Between 1990 and 1995
households grew at an annual compound rate of 2.4%, higher than the state and
U.S. Between 1995 and 2000 the area's growth rate will moderate slightly,
while households are projected to grow at a rate higher than the State and more
than twice that of the U.S.
-45-
<PAGE> 52
Median household income is below that for the State and U.S. and the median age
is above that of the State and the U.S. However, if the coastal systems are
excluded both income and the median age will approximate that of the state.
COOS BAY/FLORENCE, OREGON - The Region lies along the Oregon coast in Coos,
Douglas and Lane counties (see Figure 7). Coos Bay, a port city, is industrial
while the other communities in the Region are resort/retirement areas. Table
2G depicts the demographic statistics for the Region. Households have grown at
a lower rate then the State and U.S. and are expected to grow at lower rates
through 2000. Florence, which is the northern most community in the Region is
the fastest growing area in the Region primarily due to an influx of retirees.
As can be seen from the Table median age is higher than the State and U.S.,
while household income in much lower, again reflecting the large population of
retirees. Older subscribers tend to subscribe to basic services only and not
subscribe to pay TV and other services. Coos Bay is home to a Coast Guard
base, commercial fishing, timber, and export operations. Timber is exported
primarily to Japan; and Weyerhaeuser and Georgia Pacific both have a plant
there. These plants produce plywood, linerboard, and wood chips for paper
manufacturers. Multichannel video competition exists especially in Florence
where the electric cooperative is selling DirecTV and TCI is selling Primestar
from Eugene via an 800 number.
The demographics of this Region are generally less favorable to growing a cable
TV business than the average market.
The following paragraphs describe the physical plant, revenue and cash flow
generating capacity of the Regions. Tables 3A through 3G delineate the revenue
per subscriber from various services on the 1994 and 1995 historical time
periods, as well as budgeted 1996. These revenues per subscriber by revenue
category have been used in our discounted cash
-46-
<PAGE> 53
- -------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY TABLE 3A REVENUE ANALYSIS
GILROY REGION, CALIFORNIA VALUATION DATE: DECEMBER 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 BUDGET DEC MO 1995 ACTUAL 1995 ACTUAL 1994 ACTUAL
------------------ ------------------- ------------------ ------------------
($000) /EBU/MO ($000) /EBU ($000) /EBU/MO ($000) /EBU/MO
--------- ------- -------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Primary / Commercial $8,272.2 $20.25 $672.4 $20.12 $7,827.0 $19.84 $8,859.4 $23.06
Expanded Tier 1,929.2 4.72 152.8 4.57 1,839.2 4.66 961.0 2.50
--------- ------ -------- ------ --------- ------ --------- ------
Total Reg. Prog. 10,201.5 24.98 825.2 24.69 9,666.2 24.50 9,820.3 25.57
--------- ------ -------- ------ --------- ------ --------- ------
Radio Services 44.5 0.11 3.6 0.11 48.1 0.12 51.2 0.13
Pay Cable 1,246.8 3.05 103.6 3.10 1,228.4 3.11 1,209.3 3.15
New Product Tier 788.2 1.93 58.8 1.76 655.1 1.66 603.7 1.57
Mini-Pay 17.6 0.04 1.1 0.03 14.2 0.04 16.0 0.04
Pay Per View 169.8 0.42 4.5 0.13 133.7 0.34 173.9 0.45
--------- ------ -------- ------ --------- ------ --------- ------
Total Unreg. Prog. 2,266.9 5.55 171.7 5.14 2,079.3 5.27 2,054.0 5.35
--------- ------ -------- ------ --------- ------ --------- ------
Remote Control 8.4 0.02 0.7 0.02 18.9 0.05 26.8 0.07
Converter Rental 193.2 0.47 17.5 0.52 205.6 0.52 230.3 0.60
Other - VCR 3.4 0.01 0.3 0.01 3.4 0.01 3.4 0.01
--------- ------ -------- ------ --------- ------ --------- ------
Total Equipment 205.0 0.50 18.4 0.55 227.9 0.58 260.5 0.68
--------- ------ -------- ------ --------- ------ --------- ------
Wire Maint. Agreements 49.9 0.12 4.1 0.12 41.1 0.10 24.6 0.06
Installation 195.2 0.48 12.3 0.37 191.9 0.49 201.9 0.53
--------- ------ -------- ------ --------- ------ --------- ------
Total Install / Service 245.1 0.60 16.4 0.49 233.0 0.59 226.5 0.59
--------- ------ -------- ------ --------- ------ --------- ------
Guide Revenue 6.2 0.02 0.3 0.01 3.8 0.01 3.3 0.01
Late Charges 202.5 0.50 14.7 0.44 194.7 0.49 179.5 0.47
Home Shopping 112.2 0.27 6.5 0.19 98.9 0.25 100.5 0.26
FCC User Fee Pass Thru 16.5 0.04 1.4 0.04 15.4 0.04 0.8 0.00
Franchise Pass Thru 323.1 0.79 28.5 0.85 308.8 0.78 310.7 0.81
Miscellaneous/Rent 21.16 0.05 1.7 0.05 20.9 0.05 42.3 0.11
--------- ------ -------- ------ --------- ------ --------- ------
Total Non-Service / Misc. 681.6 1.67 53.1 1.59 642.5 1.63 637.1 1.66
--------- ------ -------- ------ --------- ------ --------- ------
Advertising 390.0 0.95 26.1 0.78 296.8 0.75 252.0 0.66
--------- ------ -------- ------ --------- ------ --------- ------
Total Revenues $13,990.1 $34.25 $1,110.8 $33.23 $13,145.7 $33.32 $13,250.4 $34.50
========= ====== ======== ====== ========= ====== ========= ======
% Change From Prior Yr. 6.4% 2.8% -0.8% -3.4%
========= ====== ========= ======
Revenue / Pay Unit / Mo. $7.81 $7.95 $7.37 $6.56
====== ====== ====== ======
</TABLE>
-47-
<PAGE> 54
- -------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY TABLE 3B REVENUE ANALYSIS
HESPERIA REGION, CALIFORNIA VALUATION DATE: DECEMBER 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 BUDGET DEC MO 1995 ACTUAL 1995 ACTUAL 1994 ACTUAL
-------------------- ------------------- -------------------- -------------------
($000S) EBU/MO ($000S) EBU/MO ($000S) EBU/MO ($000S) EBU/MO
------- ------ ------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Primary / Commercial $4,278.6 $18.28 $353.9 $18.33 $4,166.4 $18.42 $4,608.4 $21.60
Expanded Tier 1,556.1 6.65 125.7 6.51 1,520.8 6.73 764.6 3.58
------- ---- ----- ---- ------- ---- ----- ----
Total Regulated Programming 5,834.7 24.93 479.6 24.84 5,687.2 25.15 5,373.0 25.18
------- ----- ----- ----- ------- ----- ------- -----
Radio Services 37.4 0.16 3.1 0.16 40.9 0.18 51.2 0.24
Pay Cable 709.0 3.03 59.7 3.09 710.6 3.14 616.6 2.89
New Product Tier 389.6 1.66 30.5 1.58 335.2 1.48 287.1 1.35
Mini-Pay 7.3 0.03 0.5 0.03 5.8 0.03 7.6 0.04
Pay Per View 131.1 0.56 3.7 0.19 102.9 0.46 105.5 0.49
----- ---- --- ---- ----- ---- ----- ----
Total Unregulated Programming 1,274.4 5.45 97.5 5.05 1,195.4 5.29 1,068.0 5.00
------- ---- ---- ---- ------- ---- ------- ----
Remote Control 22.6 0.10 4.0 0.21 42.4 0.19 37.3 0.17
Converter Rental 363.1 1.55 27.9 1.45 326.2 1.44 323.3 1.52
Other - VCR 0.0 0.00 0.1 0.01 0.0 0.00 2.0 0.01
--- ---- --- ---- --- ---- --- ----
Total Equipment 385.7 1.65 32.0 1.66 368.6 1.63 362.6 1.70
----- ---- ---- ---- ----- ---- ----- ----
Wire Maintenance Agreements 55.4 0.24 4.5 0.23 52.6 0.23 34.2 0.16
Installation 168.8 0.72 9.3 0.48 158.2 0.70 148.7 0.70
----- ---- --- ---- ----- ---- ----- ----
Total Installation / Service 224.2 0.96 13.8 0.71 210.8 0.93 182.9 0.86
----- ---- ---- ---- ----- ---- ----- ----
Guide Revenue 3.4 0.01 0.0 0.00 0.0 0.00 0.0 0.00
Late Charges 65.7 0.28 5.8 0.30 63.2 0.28 58.8 0.28
Home Shopping 67.4 0.29 5.8 0.30 67.4 0.30 38.5 0.18
FCC User Fee Pass Thru 9.2 0.04 0.8 0.04 8.6 0.04 0.4 0.00
Franchise Pass Thru 68.5 0.29 5.5 0.28 65.5 0.29 63.2 0.30
Miscellaneous / Rent 9.1 0.04 0.9 0.05 9.1 0.04 8.6 0.04
--- ---- --- ---- --- ---- --- ----
Total Non-Service / Misc. 223.3 0.95 18.8 0.97 213.8 0.95 169.5 0.79
----- ---- ---- ---- ----- ---- ----- ----
Advertising 239.6 1.02 16.8 0.87 170.8 0.76 164.5 0.77
----- ---- ---- ---- ----- ---- ----- ----
Total Revenues $8,181.9 $34.96 $658.5 $34.11 $7,846.6 $34.70 $7,320.5 $34.31
======== ====== ====== ====== ======== ====== ======== ======
% Change From Prior Year 4.27% 0.76% 7.19% 1.15%
==== ==== ==== ====
Revenue / Pay Unit / Month $6.99 $7.19 $6.86 $6.29
===== ===== ===== =====
</TABLE>
-48-
<PAGE> 55
- -------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY TABLE 3C REVENUE ANALYSIS
SAN LUIS OBISPO REGION, CALIFORNIA VALUATION DATE: DECEMBER 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 BUDGET DEC MO 1995 ACTUAL 1995 ACTUAL 1994 ACTUAL
-------------------- ------------------- -------------------- -------------------
($000S) EBU/MO ($000S) EBU/MO ($000S) EBU/MO ($000S) EBU/MO
------- ------ ------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Primary / Commercial $3,235.2 $16.63 $254.5 $15.92 $2,974.1 $15.52 $3,803.4 $19.83
Expanded Tier 1,334.1 6.86 102.6 6.42 1,198.2 6.25 676.8 3.53
------- ---- ----- ---- ------- ---- ----- ----
Total Regulated Programming 4,569.3 23.48 357.1 22.33 4,172.3 21.78 4,480.2 23.36
------- ----- ----- ----- ------- ----- ----- -----
Radio Services 28.5 0.15 2.4 0.15 30.8 0.16 36.4 0.19
Pay Cable 375.4 1.93 32.1 2.01 415.7 2.17 395.1 2.06
New Product Tier 201.3 1.03 15.1 0.94 177.4 0.93 192.9 1.01
Mini-Pay 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
Pay Per View 69.1 0.36 2.2 0.14 29.8 0.16 36.5 0.19
---- ---- --- ---- ---- ---- ---- ----
Total Unregulated Programming 674.3 3.47 51.8 3.24 653.7 3.41 660.9 3.45
----- ---- ---- ---- ----- ---- ----- ----
Remote Control 8.2 0.04 0.7 0.04 14.6 0.08 22.3 0.12
Converter Rental 187.8 0.97 14.3 0.89 215.9 1.13 300.7 1.57
Other - VCR 0.7 0.00 0.1 0.01 0.7 0.00 0.8 0.00
--- ---- --- ---- --- ---- --- ----
Total Equipment 196.7 1.01 15.1 0.94 231.2 1.21 323.8 1.69
----- ---- ---- ---- ----- ---- ----- ----
Wire Maintenance Agreements 21.8 0.11 1.8 0.11 21.4 0.11 16.0 0.08
Installation 45.4 0.23 3.9 0.24 42.9 0.22 53.6 0.28
---- ---- --- ---- ---- ---- ---- ----
Total Installation / Service 67.2 0.35 5.7 0.36 64.3 0.34 69.6 0.36
---- ---- --- ---- ---- ---- ---- ----
Guide Revenue 3.0 0.02 0.0 0.00 0.1 0.00 0.1 0.00
Late Charges 51.4 0.26 3.9 0.24 49.5 0.26 42.1 0.22
Home Shopping 54.0 0.28 12.0 0.75 80.8 0.42 41.5 0.22
FCC User Fee Pass Thru 7.7 0.04 0.6 0.04 7.3 0.04 0.3 0.00
Franchise Pass Thru 256.4 1.32 19.6 1.23 235.4 1.23 251.9 1.31
Miscellaneous / Rent 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
--- ---- --- ---- --- ---- --- ----
Total Non-Service / Misc. 372.5 1.91 36.1 2.26 373.1 1.95 335.9 1.75
----- ---- ---- ---- ----- ---- ----- ----
Advertising 271.6 1.40 23.8 1.49 233.9 1.22 264.1 1.38
----- ---- ---- ---- ----- ---- ----- ----
Total Revenues $6,151.6 $31.62 $489.6 $30.62 $5,728.5 $29.90 $6,134.5 $31.99
======== ====== ====== ====== ======== ====== ======== ======
% Change From Prior Year 7.39% 5.74% -6.62% -6.52%
==== ==== ===== =====
Revenue / Pay Unit / Month $8.25 $8.58 $7.74 $6.34
===== ===== ===== =====
</TABLE>
-49-
<PAGE> 56
- -------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY TABLE 3D REVENUE ANALYSIS
TULARE REGION, CALIFORNIA VALUATION DATE: DECEMBER 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 BUDGET DEC MO 1995 ACTUAL 1995 ACTUAL 1994 ACTUAL
-------------------- ------------------- -------------------- -------------------
($000S) EBU/MO ($000S) EBU/MO ($000S) EBU/MO ($000S) EBU/MO
------- ------ ------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Primary / Commercial $3,223.6 $16.88 $254.3 $16.35 $3,151.2 $16.67 $3,707.8 $18.84
Expanded Tier 975.5 5.11 74.0 4.76 883.2 4.67 451.7 2.29
----- ---- ---- ---- ----- ---- ----- ----
Total Regulated Programming 4,199.1 21.99 328.3 21.11 4,034.4 21.34 4,159.5 21.13
------- ----- ----- ----- ------- ----- ------- -----
Radio Services 1.7 0.01 0.1 0.01 1.8 0.01 1.8 0.01
Pay Cable 601.8 3.15 48.6 3.12 603.1 3.19 695.0 3.53
New Product Tier 503.2 2.63 35.7 2.30 459.5 2.43 552.5 2.81
Mini-Pay 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
Pay Per View 123.7 0.65 3.1 0.20 87.7 0.46 126.2 0.64
----- ---- --- ---- ---- ---- ----- ----
Total Unregulated Programming 1,230.4 6.44 87.5 5.63 1,152.1 6.09 1,375.5 6.99
------- ---- ---- ---- ------- ---- ------- ----
Remote Control 25.4 0.13 2.1 0.14 26.4 0.14 27.9 0.14
Converter Rental 361.9 1.89 29.2 1.88 368.4 1.95 400.2 2.03
Other - VCR 0.9 0.00 0.1 0.01 1.1 0.01 1.3 0.01
--- ---- --- ---- --- ---- --- ----
Total Equipment 388.2 2.03 31.4 2.02 395.9 2.09 429.4 2.18
----- ---- ---- ---- ----- ---- ----- ----
Wire Maintenance Agreements 47.7 0.25 3.8 0.24 44.6 0.24 28.2 0.14
Installation 73.9 0.39 1.4 0.09 72.3 0.38 67.1 0.34
---- ---- --- ---- ---- ---- ---- ----
Total Installation / Service 121.6 0.64 5.2 0.33 116.9 0.62 95.3 0.48
----- ---- --- ---- ----- ---- ---- ----
Guide Revenue 91.0 0.48 4.0 0.26 53.0 0.28 70.8 0.36
Late Charges 227.2 1.19 18.0 1.16 218.5 1.16 193.1 0.98
Home Shopping 26.9 0.14 4.0 0.26 27.9 0.15 26.5 0.13
FCC User Fee Pass Thru 7.6 0.04 0.6 0.04 7.2 0.04 0.4 0.00
Franchise Pass Thru 254.4 1.33 19.6 1.26 242.3 1.28 254.8 1.29
Miscellaneous / Rent 6.6 0.03 0.7 0.05 7.2 0.04 5.5 0.03
--- ---- --- ---- --- ---- --- ----
Total Non-Service / Misc. 613.7 3.21 46.9 3.02 556.1 2.94 551.1 2.80
----- ---- ---- ---- ----- ---- ----- ----
Advertising 282.0 1.48 22.0 1.41 250.6 1.33 191.5 0.97
----- ---- ---- ---- ----- ---- ----- ----
Total Revenues $6,835.0 $35.79 $521.3 $33.51 $6,506.0 $34.42 $6,802.3 $34.56
======== ====== ====== ====== ======== ====== ======== ======
% Change From Prior Year 5.06% 3.98% -4.36% -0.40%
==== ==== ===== =====
Revenue / Pay Unit / Month $6.89 $6.82 $6.15 $5.71
===== ===== ===== =====
</TABLE>
-50-
<PAGE> 57
FALCON CABLE SYSTEMS COMPANY TABLE 3E
REVENUE ANALYSIS
CENTRAL REGION, OREGON
VALUATION DATE: DECEMBER 31, 1995
<TABLE>
<CAPTION>
1996 BUDGET DEC MO 1995 ACTUAL 1995 ACTUAL 1994 ACTUAL
----------------- ------------------ ----------------- -----------------
($000) /EBU/MO ($000) /EBU ($000) /EBU/MO ($000) /EBU/MO
------ ------- ------ ---- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Primary $2,941.4 $16.53 $235.6 $16.14 $2,822.6 $16.13 $3,212.3 $18.64
Expanded Tier 830.6 4.67 64.4 4.35 788.3 4.50 454.7 2.64
----- ---- ---- ---- ----- ---- ----- ----
Total Reg. Prog. 3,772.0 21.20 300.0 20.48 3,610.9 20.63 3,666.9 21.28
------- ----- ----- ----- ------- ----- ------- -----
Radio Services 0.9 0.00 0.1 0.00 0.8 0.00 0.9 0.01
Pay Cable 467.9 2.63 45.4 3.11 527.6 3.01 485.5 2.82
New Product Tier 585.0 3.29 40.8 2.80 468.1 2.67 443.7 2.57
Mini-Pay 1.2 0.01 0.1 0.00 0.7 0.00 0.6 0.00
Pay Per View 0.0 0.00 0.1 0.01 11.9 0.07 9.6 0.06
--- ---- --- ---- ---- ---- --- ----
Total Unreg. Prog. 1,054.9 5.93 86.4 5.92 1,009.0 5.77 940.3 5.46
------- ---- ---- ---- ------- ---- ----- ----
Primary Add'l Outlet 0.0 0.00 0.0 0.00 0.0 0.00 2.7 0.02
Remote Control 7.9 0.04 1.4 0.09 20.3 0.12 29.8 0.17
Converter Rental 45.8 0.26 3.3 0.23 83.4 0.48 149.3 0.87
Other - VCR 0.8 0.00 0.1 0.00 0.8 0.00 0.5 0.00
--- ---- --- ---- --- ---- --- ----
Total Equipment 54.5 0.31 4.7 0.33 104.5 0.60 182.3 1.06
---- ---- --- ---- ----- ---- ----- ----
Wire Maint. Agreements 41.3 0.23 3.4 0.23 36.8 0.21 23.0 0.13
Installation 95.7 0.54 5.4 0.37 90.8 0.52 71.2 0.41
---- ---- --- ---- ---- ---- ---- ----
Total Install/Service 137.0 0.77 8.8 0.60 127.6 0.73 94.2 0.55
----- ---- --- ---- ----- ---- ---- ----
Guide Revenue 2.7 0.01 0.0 0.00 0.1 0.00 0.0 0.00
Late Charges 78.6 0.44 6.0 0.41 75.6 0.43 91.4 0.53
Home Shopping 43.4 0.24 5.7 0.39 41.3 0.24 24.1 0.14
FCC User Fee Pass Thru 7.0 0.04 0.6 0.04 6.6 0.04 0.3 0.00
Franchise Pass Thru 21.4 0.12 1.9 0.13 20.9 0.12 21.6 0.13
Miscellaneous/Rent 2.6 0.01 0.0 0.00 1.8 0.01 4.1 0.02
--- ---- --- ---- --- ---- --- ----
Total Non-Service/Misc. 155.7 0.88 14.2 0.97 146.2 0.84 141.5 0.82
----- ---- ---- ---- ----- ---- ----- ----
Advertising 0.0 0.00 0.0 0.00 2.8 0.02 3.8 0.02
--- ---- --- ---- --- ---- --- ----
Total Revenues $5,174.1 $29.08 $414.2 28.37 $5,001.0 $28.11 $5,029.0 $29.18
======== ====== ====== ===== ======== ====== ======== ======
% Change From Prior Yr. 3.5% 3.5% -0.6% -3.7%
==== ==== ===== =====
Revenue/ Pay Unit/ Mo. $6.98 $8.26 $8.06 $7.56
===== ===== ===== =====
</TABLE>
-51-
<PAGE> 58
FALCON CABLE SYSTEMS COMPANY TABLE 3F
REVENUE ANALYSIS
DALLAS REGION, OREGON
VALUATION DATE: DECEMBER 31, 1995
<TABLE>
<CAPTION>
1996 BUDGET DEC MO 1995 ACTUAL 1995 ACTUAL 1994 ACTUAL
----------------- ------------------ ----------------- -----------------
($000) /EBU/MO ($000) /EBU ($000) /EBU/MO ($000) /EBU/MO
------ ------- ------ ---- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Primary $3,622.0 $16.86 $295.8 $16.70 $3,497.9 $16.70 $3,955.0 $20.32
Expanded Tier 989.2 4.61 74.2 4.14 920.8 4.40 482.8 2.48
----- ---- ---- ---- ----- ---- ----- ----
Total Reg. Prog. 4,611.2 21.47 369.9 20.85 4,418.6 21.10 4,437.7 22.80
------- ----- ----- ----- ------- ----- ------- -----
Radio Services 24.7 0.12 2.1 0.12 25.8 0.12 29.0 0.15
Pay Cable 668.9 3.11 57.5 3.25 654.0 3.12 576.4 2.96
New Product Tier 441.8 2.06 32.4 1.83 349.0 1.67 314.6 1.62
Mini-Pay 12.0 0.06 0.7 0.04 8.9 0.04 9.7 0.05
Pay Per View 49.6 0.23 2.0 0.11 43.0 0.21 39.1 0.20
---- ---- --- ---- ---- ---- ---- ----
Total Unreg. Prog. 1,197.0 5.57 94.8 5.35 1,080.7 5.16 968.8 4.98
------- ---- ---- ---- ------- ---- ----- ----
Primary Add'l Outlet 0.0 0.00 0.1 0.00 0.6 0.00 0.7 0.00
Remote Control 5.3 0.02 0.4 0.02 6.5 0.03 10.2 0.05
Converter Rental 66.5 0.31 5.6 0.32 110.0 0.53 192.1 0.99
Other - VCR 1.6 0.01 0.1 0.01 1.5 0.01 1.7 0.01
--- ---- --- ---- --- ---- --- ----
Total Equipment 73.4 0.34 6.2 0.35 118.7 0.57 204.7 1.05
---- ---- --- ---- ----- ---- ----- ----
Wire Maint. Agreements 39.5 0.18 3.3 0.19 29.9 0.14 21.4 0.11
Installation 85.4 0.40 2.6 0.15 78.6 0.38 74.8 0.38
---- ---- --- ---- ---- ---- ---- ----
Total Install/Service 124.9 0.58 5.9 0.33 108.5 0.52 96.2 0.49
----- ---- --- ---- ----- ---- ---- ----
Guide Revenue 3.2 0.01 0.0 0.00 0.0 0.00 0.0 0.00
Late Charges 116.5 0.54 9.8 0.56 112.1 0.53 103.5 0.53
Home Shopping 40.6 0.19 7.1 0.40 35.1 0.17 23.2 0.12
FCC User Fee Pass Thru 8.3 0.04 0.7 0.04 7.7 0.04 0.2 0.00
Franchise Pass Thru 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
Miscellaneous/Rent 2.7 0.01 0.1 0.00 2.6 0.01 2.8 0.01
--- ---- --- ---- --- ---- --- ----
Total Non-Service/Misc. 171.3 0.80 17.7 1.00 157.4 0.75 129.7 0.67
----- ---- ---- ---- ----- ---- ----- ----
Advertising 227.0 1.06 22.9 1.30 190.2 0.91 168.5 0.87
----- ---- ---- ---- ----- ---- ----- ----
Total Revenues $6,404.8 $29.82 $517.3 $29.22 $6,074.2 $28.28 $6,005.6 $30.86
======== ====== ====== ====== ======== ====== ======== ======
% Change From Prior Yr. 5.4% 5.4% 1.1% -8.4%
==== ==== ==== =====
Revenue/ Pay Unit/ Mo. $7.73 $8.18 $7.41 $6.65
===== ===== ===== =====
</TABLE>
-52-
<PAGE> 59
FALCON CABLE SYSTEMS COMPANY TABLE 3G
REVENUE ANALYSIS
COOS BAY/FLORENCE REGION, OREGON
VALUATION DATE: DECEMBER 31, 1995
<TABLE>
<CAPTION>
1996 BUDGET DEC MO 1995 ACTUAL 1995 ACTUAL 1994 ACTUAL
----------------- ------------------ ----------------- -----------------
($000) /EBU/MO ($000) /EBU ($000) /EBU/MO ($000) /EBU/MO
------ ------- ------ ---- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Primary $5,267.3 $19.01 $423.9 $19.41 $5,044.9 $18.39 $5,313.9 $19.57
Expanded Tier 1,035.6 3.74 79.8 3.46 961.0 3.50 576.8 2.12
------- ----- ----- ----- ------- ----- ------- -----
Total Reg. Prog. 6,302.9 22.75 503.8 22.87 6,005.9 21.89 5,890.7 21.69
------- ----- ----- ----- ------- ----- ------- -----
Radio Services 11.4 0.04 0.9 0.04 12.3 0.04 13.6 0.05
Pay Cable 688.5 2.48 57.3 2.63 688.0 2.51 680.4 2.51
New Product Tier 761.1 2.75 57.4 2.63 548.5 2.00 477.2 1.76
Mini-Pay 15.8 0.06 0.8 0.04 13.2 0.05 15.6 0.06
Video Games 24.5 0.09 2.6 0.12 8.3 0.03 0.0 0.00
Pay Per View 172.5 0.62 10.9 0.50 140.0 0.51 126.6 0.47
------- ---- ---- ---- ----- ---- ----- ----
Total Unreg. Prog. 1,673.7 6.04 130.0 5.95 1,410.2 5.14 1,313.3 4.84
------- ---- ----- ---- ------- ---- ------- ----
Primary Add'l Outlet 0.0 0.00 0.0 0.00 0.0 0.00 3.3 0.01
Remote Control 20.4 0.07 1.8 0.08 20.6 0.08 19.5 0.07
Converter Rental 290.9 1.05 24.7 1.13 275.8 1.01 264.1 0.97
Other - VCR 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
--- ---- --- ---- --- ---- --- ----
Total Equipment 311.4 1.12 26.5 1.21 296.4 1.08 286.9 1.06
----- ---- ---- ---- ----- ---- ----- ----
Wire Maint. Agreements 78.1 0.28 6.4 0.29 73.8 0.27 46.5 0.17
Installation 146.7 0.53 10.5 0.48 140.8 0.51 177.9 0.66
----- ---- ---- ---- ----- ---- ----- ----
Total Install/Service 224.8 0.81 16.9 0.78 214.6 0.78 224.4 0.83
----- ---- ---- ---- ----- ---- ----- ----
Guide Revenue 5.3 0.02 0.2 0.01 0.9 0.00 0.6 0.00
Late Charges 94.1 0.34 9.6 0.44 90.4 0.33 87.3 0.32
Home Shopping 96.7 0.35 12.7 0.58 124.8 0.45 57.4 0.21
FCC User Fee Pass Thru 10.7 0.04 0.9 0.04 10.2 0.04 0.3 0.00
Franchise Pass Thru 143.5 0.52 11.7 0.53 134.5 0.49 130.3 0.48
Video Game Activation 1.8 0.01 0.7 0.03 5.4 0.02 0.0 0.00
Miscellaneous/Rent 42.7 0.15 3.0 0.14 38.1 0.14 10.5 0.04
---- ---- --- ---- ---- ---- ---- ----
Total Non-Service/Misc. 394.8 1.42 38.7 1.77 404.3 1.47 286.4 1.05
----- ---- ---- ---- ----- ---- ----- ----
Advertising 330.4 1.19 37.0 1.69 301.4 1.10 352.2 1.30
----- ---- ---- ---- ----- ---- ----- ----
Total Revenues $9,237.9 $33.34 $752.9 $34.48 $8,632.8 $31.47 $8,354.0 $30.76
======== ====== ====== ====== ======== ====== ======== ======
% Change From Prior Yr. 7.0% 5.9% 3.3% 2.3%
==== ==== ==== ====
Revenue/ Pay Unit/ Mo. $7.32 $7.48 $6.75 $7.01
===== ===== ===== =====
</TABLE>
-53-
<PAGE> 60
flow analysis methodology to determine each Region's fair market value at
December 31, 1995.
System Description
GILROY, CALIFORNIA - The Gilroy Region serves subscribers from four (4)
headends, namely: Gilroy, Soledad Peak (Gilroy 2), Greenfield, and King City.
The current plant which dates back to the early 1980s is built to 300 MHz with
the exception of a small portion of the plant served by the Soledad Peak
headend which was rebuilt to 400 MHz in 1989. Certain areas of the plant are
not meeting FCC specifications and the Company is installing fiber optics to
reduce amplifier cascades to improve picture quality. According to management,
a large portion of the plant, serving approximately 75% of subscribers, is
scheduled for a complete rebuild in the 1997-2000 time frame. The rebuild
corresponds to expiration dates of the key Gilroy franchise.
In addition to the Gilroy office (see Exhibit A) the Region has customer
service offices in King City (see Exhibit A) and part time offices in
Greenfield and Soledad.
Gilroy's operating statistics as of the valuation date follow;
<TABLE>
<CAPTION>
December 31, 1995
-----------------
<S> <C>
Homes passed 56,219
Equivalent Billing Units (EBU's) 33,427
Penetration % 59.5%
Pay Units 13,070
Pay-to-EBU's % 39.1%
Plant Miles: Aerial 324
Underground 341
---
Total 665
===
Density (Homes/Miles) 84.6
====
</TABLE>
-54-
<PAGE> 61
EBU and pay unit penetrations are well-below industry averages of 66.6% and
76.5% respectively. This is in spite of the areas relatively high median
household income and the fact that certain portions of the service area have
poor off-air reception. The planned plant rebuild coupled with increased
marketing efforts should result in improved subscriber growth and revenues per
subscriber particularly from ancillary revenue sources. The Region's average
density of 84.6 homes/mile is below the industry average of 105 homes/mile.
The higher the density the more efficient the use of capital, thus the higher
the return on investment.
Table 3A details the Gilroy's actual revenues for 1994 and the month of
December and year 1995; and the budget for 1996. The Table shows the impact of
FCC rate regulation and FCSC's efforts to minimize its impact.
Primary/Commercial (Basic) revenue declined 14% on an EBU basis between 1994
and 1995 offset by retiering and increasing the rates for expanded basic
service. Total 1995 revenue/EBU declined 3.4% and total revenues remained
essentially flat as compared to 1994.
Total 1996 budgeted revenues are expected to increase 6.4% while revenues/EBU
are expected to increase 2.8%. The largest year-to-year increases are expected
to come from non-regulated services such as pay-per-view and advertising.
Exhibit C1 presents operating cash flow statements for time periods comparable
to Table 3A. Cash flow margins after an allocation of corporate expenses were
54.5% of revenues for 1994 and 1995. The 1996 Budget reflect a margin increase
to 57.6%. These margins are quite high based upon our experience and
discussion with management. Factors which contribute to these high margins are
very lean staffing, sometimes at the expense of customer service; low marketing
and advertising expenses; and an aggressive in-house labor capitalization
policy, i.e., moving labor costs to capital expenditures ("capex")
-55-
<PAGE> 62
accounts which increased cash flow margins. However, net cash flow, i.e., cash
flow minus capex negates the effect of this expense capitalization policy.
HESPERIA, CALIFORNIA - The Hesperia Region serves its subscribers from five
headends that offer between 28 and 43 channels. The Hesperia and Adelanto
plant was originally built in 1972 and rebuilt in 1988 to 330 MHz. The Boron
plant was originally built in 1967 and 60% rebuilt in 1991 with 300 MHz trunk
and 270 MHz feeder. North Edwards was built in 1990 at 450 MHz and the
Rosamond/Mojave plant was built in the mid- 1970s at 300 MHz. All are
addressable except for Boron and Rosamond/Mojave.
According to Falcon management, the Hesperia and Adelanto plant will be rebuilt
in the next few years.
Hesperia's operating statistics as of the valuation date follow:
<TABLE>
<CAPTION>
December 31, 1995
-----------------
<S> <C>
Homes passed 28,280
EBU's 19,130
Penetration % 68.3%
Pay Units 8,366
Pay-to-EBU's % 43.3%
Plant Miles: Aerial 478.3
Underground 199.7
-----
Total 678.0
=====
Density (Homes/Miles) 41.7
====
</TABLE>
EBU penetration of 68.3% is approximately equal to the industry average of
66.6% while pay unit penetration of 43.3% is well-below the industry average of
76.5%. This is in part due to the relatively low median household income of
the service area which ranks in
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<PAGE> 63
the 31 centile in California. In addition, there is a large Hispanic
population with a dearth of Spanish language programming, as well as an overall
high unemployment rate.
The Regions average density of 41.7 homes/mile is well-below the industry
average of 105 homes/mile.
Table 3B details Hesperia's actual revenues for 1994, and the month of December
and year 1995, as well as the 1996 budget. The Table shows the impact of FCC
rate regulation and FCSC's efforts to minimize its impact. Primary/Commercial
(Basic) revenue declined almost 15% on an EBU basis between 1994 and 1995,
offset by retiering and rate increase for expanded basic service. Total 1995
revenue/EBU rose by only 1% and total revenue increased by 7% as compared to
1994.
Total budgeted 1996 revenues are expected to increase by only 4%, while
revenue/EBU are expected to increase by less than 1%.
Exhibit C2 presents operating cash flow statements for time periods comparable
to Table 3B. Cash flow margins after allocated corporate expense (3.7% less
than before allocated corporate expenses) were 52.5% in 1994 and 40.0% in 1995.
The 1996 budget reflects a margin increase to 52.3%. These margins are on the
high end based upon our experience. Factors which contribute to these high
margins are very lean staffing, low marketing and administrative expenses, and
an aggressive in-house labor capitalization policy. However, net cash flow,
i.e., cash flow minus capex, negates the effect of this expense capitalization
policy.
SAN LUIS OBISPO, CALIFORNIA - The San Luis Obispo Region serves its subscribers
from two separate headends (see Exhibit A) and three AML microwave hub sites
that offer between 37 and 95 channels. The plant ranges from 330 MHz to 750
MHz in capacity.
-57-
<PAGE> 64
The County portion of San Luis Obispo that is served by Falcon was rebuilt in
1995 to 750 MHz. It is projected that the Atascadero area will be rebuilt in
the next few years. Atascadero comprises approximately 204 miles or 50% of the
total of 409 plant miles.
San Luis Obispo operating statistics as of the valuation date follows:
<TABLE>
<CAPTION>
December 31, 1995
-----------------
<S> <C>
Homes Passed 26,138
EBU's 15,973
Penetration % 61.1%
Pay Units 3,733
Pay-to-EBU's % 23.4%
Plant Miles: Aerial 341.1
Underground 67.8
------
Total 408.9
=====
Density (Homes/Mile) 63.9
====
</TABLE>
This area of California has suffered along with most of the State from a long
and severe downtown in the economy, therefore keeping both basic and pay-to-EBU
penetration below average.
EBU and pay unit penetration of 61.1% and 23.4% respectively are below industry
averages of 66.6% and 76.5% respectively. This is in spite of the areas
relatively high median household income and the fact that most of the service
area has poor off-air reception. The planned rebuild and the continued rebound
in the California economy should result in improved subscriber growth and
revenue per subscriber, particularly from pay and ancillary revenue sources.
The Region's average density of 63.9 homes/miles is well-below the industry
average of 105 homes/mile. The higher the density the more efficient the use
of capital, thus the higher the return on investment.
-58-
<PAGE> 65
Table 3C details San Luis Obispo's actual revenues for 1994 and the month of
December and year 1995, and the budget for 1996. The Table shows the impact of
FCC rate regulation and FCSC's efforts to minimize its impact.
Primary/Commercial (Basic) revenue declined almost 22% on an EBU basis between
1994 and 1995, partially offset by an retiering and increasing the rates for
expanded basic service. Total 1995 revenue/EBU declined 6.5% and total
revenues declined 6.6% as compared to 1994.
Total 1996 budgeted revenues are expected to increase 7.4% while revenue/EBU
are expected to increase 5.8%. The largest year-to-year increases are expected
to come from regulated services.
Exhibit C3 presents operating cash flow statements for time periods comparable
to Table 3C. Cash flow margins after allocated corporate expenses (3.7% less
than before allocated corporate expenses) were 47.9% in 1994 and 40.8% in 1995.
The 1996 budget reflects a margin increase to 44.9% These margins are
approximately at levels that other cable systems with these characteristics
would exhibit.
TULARE, CALIFORNIA - The Tulare Region serves its subscribers from three
headends that offer between 32 and 42 channels. The plant ranges between 300
MHz to 400 MHz. Almost the entire Region is served from the Porterville
headend. The Porterville plant was built in 1975 and rebuilt in 1981. Plant
bandwidth ranges between 300 MHz and 400 MHz with a fiber overlay at 750 MHz
put in place in 1995. The California Hot Springs and Posey/Jack Ranch areas
were built in 1963 and upgraded in 1986 to 400 MHz. The Porterville area is
the only one with addressable converters. The Region has been scheduled for a
rebuild in the next few years.
-59-
<PAGE> 66
Tulare's operating statistics as of the valuation date follows:
<TABLE>
<CAPTION>
December 31, 1995
-----------------
<S> <C>
Homes Passed 41,053
EBU's 15,563
Penetration % 37.9%
Pay Units 7,110
Pay-to-EBU's % 45.7%
Plant Miles: Aerial 532.8
Underground 143.0
------
Total 675.8
=====
Density (Homes/Mile) 60.7
====
</TABLE>
The Tulare Region has been losing both basic and pay units in recent years due
to a poor economy caused mostly by bad weather which has affected the
agricultural economy of the areas. An additional factor is a large Hispanic
population, and a dearth of Spanish language programming.
This has led to EBU and pay unit penetration of 37.9% and 45.7% respectively,
well-below the industry average of 66.6% and 76.5% respectively. The planned
rebuild combined with increased marketing and an improved economy should result
in improved subscriber growth. The Region's average density of 60.7 homes/mile
is well-below the industry average of 105 homes/mile. The higher the density
the more efficient the use of capital, thus the higher the return on
investment.
Table 3D details Tulare's actual revenues for 1994 and the month of December
and year 1995, and the budget for 1996. The Table shows the impact of FCC rate
regulation and FCSC's efforts to minimize its impact. Primary/Commercial
(Basic) revenue declined 11.5% on an EBU basis between 1994 and 1995, offset by
retiering and increasing the
-60-
<PAGE> 67
rates for expanded basic service. Total 1995 revenue/EBU declined
approximately 0.4% and total revenues declined 4.4% as compared to 1994.
Total 1996 budgeted revenues are expected to increase 5.1% while revenues/EBU
are expected to increase 4.0%.
Exhibit C4 presents operating cash flow statements for time periods comparable
to Table 3D. Cash flow margins after allocated corporate expense were 45.3%
and 45.1% in 1994 and 1995 respectively after a reduction of 3.7% from before
allocation margins. The 1996 budget reflects a margin of 44.9%, virtually,
identical to 1995. These margins are high based upon our experience. Factors
which contribute to these high margins are very lean staffing, low marketing
and advertising expense and an aggressive in-house labor capitalization policy,
which increases cash flow margin. However, net cash flow, i.e., cash flow
minus capital expenditures, negates the effect of this expense capitalization
policy.
CENTRAL REGION, OREGON - The Central Region serves subscribers from six (6)
headends; namely, Bear Mountain which feeds eight (8) areas via AML microwave,
Veneta (see Exhibit A), Cottage Grove, Brownsville, Sutherlin and Cave
Junction. The plant served by the Bear Mountain headend has a capacity ranging
between 300 MHz and 450 MHz. The headend itself was built in 1988 and upgraded
in 1992 and 1995. The Veneta area was built in 1980 and upgraded in 1995. The
upgrade included the use of fiber to replace coax trunk. Cottage Grove and
Cave Junction operate at 450 MHz while Brownsville operates at 300 MHz.
The Sutherlin area has the oldest plant in the Region. Originally built in
1971 it was upgraded from 12 to 21-channels in 1981. The plant suffers from
considerable physical, economic and functional obsolesence. Management plans
to complete the rebuild of the
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<PAGE> 68
system in 1998. Given the location of these properties, other than the
Sutherlin rebuild, significant capital would not need to be expended for plant
replacement. Also, as can be seen in Exhibit B5 the Region has a number of
long lived franchises which should serve to lessen the pressure to upgrade the
facilities.
Central Region's operating statistics as of the valuation date follows:
<TABLE>
<CAPTION>
December 31, 1995
-----------------
<S> <C>
Homes Passed 26,355
EBU's 14,609
Penetration % 55.4%
Pay Units 5,505
Pay-to-EBU's % 37.7%
Plant Miles: Aerial 605
Underground 55
----
Total 660
===
Density (Homes/Mile) 39.9
====
</TABLE>
EBU and pay unit penetration are well-below industry averages of 66.6% and
76.5% respectively. Density of 39.9 homes/mile is extremely low. The Region
is below average with respect to penetrations and density.
Table 3E details Central's actual revenue for 1994 and the month of December
and year 1995; and the 1996 budget. The Table shows the impact of FCC rate
regulation and FCSC's response to it. Primary (Basic) revenue/EBU and total
revenues/EBU declined 13% and near 4% respectively from 1994. FCSC responded
by retiering. Total 1996 budgeted revenues/EBU are expected to be below 1994s.
Total 1996 revenues are expected to be 2.9% higher than 1994. The appraisers
believe advertising could represent an important new revenue source for the
Region. Currently, there are no advertising revenues primarily due to
technical difficulties associated with inserting spots at the Bear
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<PAGE> 69
Mountain headend. We have included the capital in our projections to
facilitate for ad insertion and have projected advertising revenues.
Pay-per-view represents another opportunity and we have projected revenues
beginning in year three of our projections.
Exhibit B5 presents operating cash flow statements for time periods comparable
to Table E. Cash flow margins after allocation of corporate expenses were
50.5% and 52.2% for 1995 and 1994 respectively. The capitalization of in-house
labor and overhead increased margins by 2.2% and 3.9% in 1995 and 1994
respectively. This reflects a margin of 50.2% and we believe this to be
reasonable.
DALLAS REGION, OREGON - The Dallas Region serves subscribers from six (6)
headends, namely: Dallas, Brickyard, Netarts, Tillamook (see Exhibit A),
Silverton, and Nehalem. The plant with the exception of Dallas (330 MHz),
which was built in 1987, is quite old and capacity ranges between 270 MHz and
330 MHz. Wilson River with 175 homes passed offers five off-air channels and
while it has an off-air receive site it was not considered a headend. Exhibit
B6 depicts various operating statistics.
The plant suffers from functional and economic obsolescence as well as physical
depreciation. Management plans to or has begun rebuilds of Brickyard, Nehalem,
Netarts, and Tillamook and has added fiber to the Dallas plant during 1995.
Dallas' operating statistics as of the valuation date follows:
<TABLE>
<CAPTION>
December 31, 1995
-----------------
<S> <C>
Homes Passed 23,770
EBU's 17,736
Penetration % 74.6%
Pay Units 7,139
Pay-to-EBU's % 40.3%
</TABLE>
-63-
<PAGE> 70
<TABLE>
<S> <C>
Plant Miles: Aerial 380
Underground 87
-----
Total 467
===
Density (Homes/Mile) 51
==
</TABLE>
EBU penetration is well-above industry average due in part to the classic
nature of the Tillamook County systems, i.e., the coastal systems. The systems
surrounding Salem have good to poor receptions of Portland and Eugene TV
stations. This is a positive factor for the cable TV business. The pay-to-EBU
ratio of 40.3% is well-below the industry.
The Region's average density is less than one-half the industry's. However,
the Region has a relatively high growth rate and home growth will likely occur
behind existing plant. Therefore over time density should increase.
Table 3F details Dallas' actual revenues for 1994; and the month of December
and year 1995; and the 1996 budget. The Table shows the impact of FCC rate
regulation and FCSC's response. Basic (Primary) revenue/EBU for 1995 declined
nearly 18% and total revenue/EBU declined 8% for 1994. Budgeted 1996 basic
revenue/EBU and total revenues/EBU have set to recover to 1994 levels. FCSC
mitigated the impact of the regulation somewhat by retiering, raising rates of
unregulated programming, and marketing unregulated ancillary services, e.g.,
advertising.
Exhibit B6 presents operating cash flow statements for time periods comparable
to Table 3F. Cash flow margins after the allocation of corporate expenses were
56.6% and 56.4% for 1995 and 1994 respectively. These margins are expected to
decline to 52.2% in 1996. The 1994 and 1995 margins are high princially due to
FCSC's aggressive capitalization policy. Capitalization of in-house labor and
overhead added 7.5% and 5.9% to 1995 and 1994 margins. The appraiser adjusted
the margins going forward reflecting a reduced in-house capitalization policy.
-64-
<PAGE> 71
COOS BAY/FLORENCE, OREGON - Subscribers are served from seven (7) headends
located in Coos Bay, Coquille, Reedsport, Florence, Powers, Bandon and
Mapleton. The Region has 576 miles of plant of which about 85% is aerial.
Areas served by the Coos Bay headend were rebuilt with fiber- to-feeder
architecture to 450 MHz in 1993. Florence was rebuilt to 450 MHz with fiber
trunk between 1991 and 1993. Together these two areas make up about 62% of the
Region's total plant. Complete rebuilds are projected by management in Powers
and Coquille in 1997. A plant upgrade is projected in Coos Bay in 1998.
Coos Bay/Florence operating statistics as of the valuation date follow:
<TABLE>
<CAPTION>
December 31, 1995
-----------------
<S> <C>
Homes Passed 31,489
EBU's 22,898
Penetration % 72.7%
Pay Units 7,771
Pay-to-EBU's % 33.9%
Plant Miles: Aerial 482
Underground 94
-----
Total 576
===
Density (Homes/Mile) 54.7
====
</TABLE>
The EBU penetration rate of 72.7% is well-above the industry penetration rate
of 66.6%. This reflects the near classic nature of the market. The area can
get five channels off-air. There are stations from other cities, e.g., Eugene,
which are received via translators. Reception because of the terrain and low
power nature of the translators is quite spotty. The pay-to-EBU ratio of 33.9%
is well-below the industry's 76.5%.
-65-
<PAGE> 72
Plant density is 54.7 home per mile which is about half the national average.
The Region has many long dead runs, i.e., plant miles without homes to pass.
The low density greatly reduces capital efficiency and increases plant
maintenance on a per subscriber basis.
Table 3G details the Regions actual revenues for 1994 and the month of December
and year 1995; and the 1996 budget. Primary (basic) revenues/EBU for 1995
declined 6% from 1994 due to rate regulation. This decline was offset by an
increase in expanded tier revenues/EBU. Total revenues grew by 3.3% in 1995 as
compared to 1994. Management expects 1996 revenues to increase by 7% and
revenues/EBU to increase nearly 6%. Thus, the vast majority of the revenue
increase is due to rate changes and existing customers buying more services.
The largest 1996 revenue increases are expected from the new product tier and
pay-per-view revenues.
Exhibit C7 presents operating cash flow statements for the same time periods as
Table 3G. Cash flow margins after an allocation of headquarters services were
51.3% and 51.9% for 1995 and 1994 respectively.
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<PAGE> 73
FAIR MARKET VALUATION
OF FALCON CABLE SYSTEMS COMPANY,
A CALIFORNIA LIMITED PARTNERSHIP
AS OF DECEMBER 31, 1995
PART IV - BUSINESS ENTERPRISE VALUATION
The purpose of developing a business enterprise value ("BEV") is to determine
the fair market value for a going concern entity. The business enterprise
value includes the additional value that all the assets generate together as a
going concern. This additional value is estimated from the returns achieved by
the operating assets (both tangible and intangible) of FCSC.
There are several possible approaches to value for any cable television system.
The three classical approaches to value, based upon cost, market, and income,
may all have relevance and validity in the valuation of a cable system.
However, approaches that are based on cost would be the least meaningful and
most subjective because a major element of value is the intangible assets, such
as franchises, licenses, and subscriber relationships which permit a system to
operate, and the cost of directly obtaining these assets usually bears little
relation to the value of those intangible assets. Consequently, the best
approaches to value are those which rely on estimates of future income to be
realized from operating the system, and to a lesser extent, on market data from
the sales of other systems.
THE VALUATION OF FCSC
We have utilized the two most commonly employed methods for valuing a CATV
business namely: income approach and market approach. The cost approach was
considered, but rejected as inappropriate.
-67-
<PAGE> 74
INCOME APPROACH
There are several adaptions, or versions, of the income approach. The method
most applicable to valuing properties like the subject is the Discounted Cash
Flow Method ("DCF"). In this method, the anticipated future cash flows of the
Region are discounted at a rate commensurate with the property's risk
characteristics.
The DCF approach is standard investor and appraisal industry practice. The
appraiser determined system operating cash flow, defined as income before
depreciation, amortization, debt retirement, interest on funds invested in the
property, and taxes, in arriving at a value indicator for each Region.
In determining each Region's operating cash flows, the appraiser derived
average annual revenue per subscriber, number of homes passed, operating
margin, and market penetration as a percent of homes passed. This data, along
with historical financial statements and other information obtained from Region
management and industry sources, are reflected in our projections as of the
valuation date. Exhibit D details the assumptions made and methodology
employed in developing the cash flow projections in Exhibit E.
In using the DCF, value results from the sum of two sources: the present value
of the annual cash flows of the projection period and the present value of the
property's residual value at the end of the projection period. The reliability
of this method rests directly with the accuracy of the revenue forecast, the
income-expense relationship, and other assumptions required to produce the
yearly cash flows.
In any analysis of future cash flows, a critical factor is the selection of the
discount rate which will be utilized in the calculation of the present value of
these future values. The investment's discount rate, also referred to as a
return requirement, is the overall return
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<PAGE> 75
which an investor expects to achieve on an investment. The development of the
discount rate starts with the determination of a weighted average cost of
capital.
The weighted average cost of capital is made up of two components: debt and
equity.(9) The cost of equity is arrived at by using the widely accepted
Capital Asset Pricing Model ("CAPM"). The derivation of the cost of equity and
its formula are shown in Table 4 and are consistent with the general form of
the CAPM.
The derived equity rate represents the return expected on equity capital by an
investor and is consistent with our experience with respect to equity investor
expectations in today's CATV marketplace. Briefly, this method begins with the
risk free rate of return, generally the rate on U.S. government debt
instruments of appropriate duration, and then applies an equity risk premium, a
small stock premium, and a unsystematic or company specific premium that an
equity investor requires in order to invest. The appraiser considered various
factors, such as competition, demographics, geography, clustering, etc. in
arriving at FCSC's unsystematic risk of 5%. In addition to these factors, the
unsystematic risk must consider the single system as opposed to the portfolio
of systems implicit in the CAPM. To determine the total equity return
requirement, these components are summed.
__________________________________
(9) Stocks, Bonds, Bills and Inflation 1995 Yearbook, Ibbotson Associates
Weighted Average Cost of Capital
________________________________
r = (re x we) + (rd x wd)
_____________________
we + wd
r = weighted average cost of capital
re = expected rate or return on equity
rd = expected rate of return on debt
we = appropriate weight of equity
wd = appropriate weight of debt
Equity Cost of Capital
______________________
rs = rf + (B x rp)
rs = the equity cost of capital
rf = the current riskless rate
B = the beta or market risk of the stock
rp = the arithmetic equity risk (or market) premium
sp = small stock premium is added if appropriate
-69-
<PAGE> 76
TABLE 4
WEIGHTED AVERAGE COST OF CAPITAL
FALCON CABLE SYSTEMS COMPANY
AS OF DECEMBER 31, 1995
<TABLE>
<S> <C> <C>
Cost of Equity
- --------------
Risk Free Rate
(10-Year Treasury Securities Composite; December 27, 1995;
Source: Value Line) 5.65%
--------
Equity Risk Premium Intermediate-Term (Entire Market) 7.40%
(Ibbotson Associates, 1995)
Market Beta CATV Stocks x 1.40
------
Adjusted Equity Risk Premium 10.36%
--------
Small Stock Premium
(Ibbotson Associates, 1995) 4.00%
Unsystematic Risk - Company Specific 5.00%
--------
Cost of Equity = 25.01%
========
Cost of Debt
- ------------
Kagan High Yield Media Bonds 10.18%
Less Tax Effect (at 35%) 3.56%
--------
After Tax Cost of Debt 6.62%
========
</TABLE>
Weighting
<TABLE>
<CAPTION>
% % of Capital Weighted Cost
Return Structure of Capital
------ --------- ----------
<S> <C> <C> <C>
Equity 25.01% 40% 10.00%
Debt 6.62% 60% 3.97%
--------
Weighted Average Cost of Capital 13.97%
========
Rounded to 14.00%
========
</TABLE>
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<PAGE> 77
The next step is to determine the cost of debt capital. This rate is
principally affected by the credit worthiness of the borrower and the general
risk associated with the industry. To estimate the cost of debt as of the
valuation date, we looked to the cable television debt market. Paul Kagan, in
his Cable TV Investor of December 18, 1995, reported a yield to maturity for
high yield cable bonds of 10.18%. Cable TV Investor tracked 47 cable bonds
providing a cable high-yield bond average. The appraiser then tax effected
this cost of debt, taking into consideration statutory federal tax rates.
The final step is to determine the mixture of debt and equity in the capital
structure. The capital structure percentages were derived based upon a review
of the industry lending practices as of the valuation date. Senior debt
lending limits are typically discussed in terms of cash flow multiples. The
debt-to-equity ratio is derived by comparing the debt lending limit multiples
to the valuation cash flow multiples. The calculation for the weighted average
cost of capital for FCSC is shown in Table 4. The weighted average cost of
capital for FCSC was 14% (rounded).
Beyond the projection horizon, the Regions will still have value. This
residual value is based upon the theory that the investor would sell the
property at the end of the projection period. The present value of this
hypothetical sale (residual) is then added to the present value of annual cash
flows to arrive at a value indication under this approach. The appraiser
selected a residual multiple of 8.0 for all Regions except Gilroy. This 8.0
multiple was derived based on the appraisers opinion that due to increased risk
over time, competition, and maturity of markets that the multiples ten years in
the future generally should be equal to or lower, but not higher than today's
multiple. For Gilroy a multiple of 9.0 was used, reflecting its more
attractive long-term growth prospects.
The value indications, under the income approach from Exhibit E, for 100% of
the assets for each Region and FCSC as of December 31, 1995 were as follows:
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<PAGE> 78
<TABLE>
<S> <C>
Gilroy $ 67,670,000
Hesperia 34,740,000
San Luis Obispo 22,480,000
Tulare 25,280,000
Central 25,080,000
Dallas 25,740,000
Coos Bay/Florence 41,550,000
-----------------
Total Income Approach Value Indication $ 242,540,000
=================
</TABLE>
MARKET APPROACH
Another approach to be considered in the valuation of CATV businesses is known
as the market approach or comparable sales approach. The market approach
requires the appraiser to collect and analyze recent comparable market
transactions and then make value adjustments based on a comparative analysis
between the market transactions and the subject property. It is important to
use transactions which are on or about the valuation date and which, if
possible, straddle that date.
The application of the market approach is most commonly found in the appraisal
of real estate. The market for real estate is characterized by frequent sales
within a geographic area, reliably known sale prices, and readily discernable
attributes of properties sold. This is not the case for sales of cable
television businesses. The businesses are comprised of a number of types of
tangible and intangible assets, and data on these transactions are available
only through the press and trade publications. The quality of this reported
data is suspect and quite incomplete. The appraiser's experience in the cable
industry has been that the publicly available data is at best an approximation.
The buyers and sellers in this market are under no obligation to report the
information.
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<PAGE> 79
The application of a classic market approach to cable television business would
be extremely difficult and unreliable due to the lack of comparative data and
the subjectivity of any comparative value adjustments. Due to the unique
nature of each cable property, to complete a valid comparative analysis the
following variables would needed to be collected and analyzed for each market
transaction:
- Homes in Franchise Area
- Homes Passed by Cable
- Subscriber Penetration
- Revenues Per Subscriber
- Current Cash Flow
- Operating Margin
- System/Size Configuration
- Location
- Service Area Demographics
- Physical Plant Condition
- Required Capital Expenditures
- Regulatory Environment
- Competition
- Specific Buyer and Seller Motivations
- Liabilities Assumed
Even if all the necessary information was available, the quantification of
value adjustments to reflect differences between market transaction comparative
indicators and the subject property's comparative indicators would be extremely
difficult. As such, the classic market approach was not given a great deal of
weight in arriving at a value conclusion for each Region.
Industry practice is to describe market transactions for cable systems in terms
of subscriber (Price/Number of Subscribers) and cash flow multiples (Price/Cash
Flow). The appraiser reviewed the cable television transaction market, as
reported in Cable TV Investor (Paul Kagan Associates) and selected the
transactions, between 10,000 and 50,000 subscribers, announced between August
31, 1995 and January 31, 1996 (Table 5). The weighted average multiples and
standard deviations are as follows:
-73-
<PAGE> 80
TABLE 5
FALCON CABLE SYSTEMS COMPANY
MARKET APPROACH VALUATION DATA
1995 ANNOUNCED/PROPOSED CABLE SYSTEM SALES (10K-50K SUBS)
ANNOUNCED 8/31/95 - 1/31/96
<TABLE>
<CAPTION>
PRICE BASIC HOMES % CASH PROJ
LOCATION STATE SELLER BUYER ($MIL) SUBS PASSED PEN. VPS FLOW CFx
- -------- ----- ------ ----- ------ ---- ------ ---- --- ---- ---
(000s) (000s) ($000s)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REEDLEY CA CONSOLIDATED CONTINENTAL $15.2 12.2 37.0 33.0% $1,252 $1,809.5 8.4
FT. COLLINS CO JOURNAL WORLD TCI 59.6 30.0 42.3 71.0% 1,986 5,843.1 10.2
MS BASED SYS AZ TIME WARNER POST-NEWSWEEK 70.0 41.0 51.3 80.0% 1,707 6,862.7 10.2
TEXARKANA AR/TX COX POST-NEWSWEEK 50.0 24.0 34.3 70.0% 2,083 4,065.0 12.3
ATLANTA GA PREMIERE CABLE CHARTER 36.0 18.0 25.7 70.0% 2,000 3,750.0 9.6
CA, IL BASED SYS POST-NEWSWEEK TCI 89.0 39.4 61.6 64.0% 2,258 8,396.2 10.6
NC, SC BASED SYS TCA (STAR) TW-AN 59.1 29.0 38.2 76.0% 2,038 5,851.5 10.1
ALEXANDRIA/PINEVILLE LA TW-AN TCA 61.0 29.0 38.2 76.0% 2,103 5,809.5 10.5
NC, SC-BASED SYSTEMS STAR CABLE TCA CABLE 59.1 29.0 38.2 76.0% 2,038 5,851.5 10.1
RI, EAST PROVIDENCE SUSQUEHANA COX 36.4 15.5 23.5 66.0% 2,346 3,956.5 9.2
TN, KNOXVILLE MID TENN. CATV E.W. SCRIPPS 62.5 34.0 42.5 80.0% 1,838 6,944.4 9.0
TX, OK MISSION CABLE CLASSIC CABLE 57.5 42.6 63.6 67.0% 1,351 7,666.7 7.5
TX, AR, NM, CO UNITED VIDEO CLASSIC CABLE 37.4 22.4 35.0 64.0% 1,672 4,250.0 8.8
SC-BASED SYS. PREMIERE CHARTER COMM. 36.0 21.3 38.0 56.0% 1,690 3,956.0 9.1
TRONA/RDGCRST/KERN BENCHMARK CVISION MEDIACOM, LLC 20.8 11.0 17.5 62.9% 1,891 2,773.3 7.5
IA, IL, KS, MO, NE DOUGLAS COMM. ANDERSON PAC. GRP. 17.1 16.0 28.9 55.4% 1,067 2,111.1 8.1
---- ---- ---- ----- ----- ------- ---
TOTALS / SIMPLE AVERAGES $766.7 414.4 615.5 66.7% $1,833 $79,897 9.5
------ ----- ----- ----- ------ ------- ---
WEIGHTED AVERAGES 67.3% $1,850 9.6
----- ------ ---
STANDARD DEVIATION $359 1.3
---- ---
SIMPLE AVERAGE RANGE WITHIN 1 STANDARD DEVIATION - HIGH $2,192 10.7
------ ----
SIMPLE AVERAGE RANGE WITHIN 1 STANDARD DEVIATION - LOW $1,473 8.2
------ ---
</TABLE>
-74-
<PAGE> 81
<TABLE>
<CAPTION>
Std. Dev.
---------
<S> <C> <C>
Price/Subscriber $1,850 $359
====== ====
Price/Cash Flow 9.6 1.3
=== ===
</TABLE>
The standard deviations for the subscriber and cash flow multiples indicate
that the multiples can vary between 19% and 14% respectively, above and below
the mean. The subscriber multiple has greater variation and hence is less
useful as a value indicator than the cash flow multiple. The weighted average
multiples yield the following value indicators.
<TABLE>
<CAPTION>
San Luis Coos Bay/
Multiple Base Gilroy Hesperia Obispo Tulare Central Dallas Florence
- -------- ---- ------ -------- ------ ------ ------- ------ --------
($000s)
<S> <C> <C> <C> <C> <C> <C> <C>
Price/EBU $1,850/EBU
12/31/95 EBU's 33,941 19,310 15,973 15,563 14,609 17,736 22,898
-------- -------- -------- -------- -------- -------- --------
Price/EBU
Value Indicator $61,958 $35,724 $29,550 $28,792 $27,027 $32,812 $42,361
======= ======= ======= ======= ======= ======= =======
Price/Cash Flow 9.6x
1996 or Year One
Cash Flow $7,700 $4,267 $2,768 $3,082 $2,594 $3,332 $4,791
------ ------ ------ ------ ------ ------ ------
Price/Cash Flow
Value
Indicator $73,916 $40,964 $26,575 $29,586 $24,902 $31,987 $45,996
======= ======= ======= ======= ======= ======= =======
</TABLE>
In arriving at the value indicator under the market approach the appraiser
weighted the subscriber multiple value indication 25% and the cash flow value
indication 75%. This weighting considers investors' preference for the cash
flow multiple and the variability, as described above, of the subscriber
multiple.
Therefore, the value indicator for 100% of each Region's assets under the
market approach as of December 31, 1995 was (rounded):
-75-
<PAGE> 82
<TABLE>
<S> <C> <C>
Gilroy $ 70,927,000
Hesperia 39,654,000
San Luis Obispo 27,319,000
Tulare 29,388,000
Central 25,433,000
Dallas 32,193,000
Coos Bay/Florence 45,087,000
-----------------
Total Market Approach Value Indication $ 270,000,000 (Rounded)
=================
</TABLE>
CORRELATION AND CONCLUSION
The valuation indicators, as of the valuation date, under the income and market
approaches follow as of December 31, 1995:
<TABLE>
<CAPTION>
San Luis Coos Bay/
Gilroy Hesperia Obispo Tulare Central Dallas Florence
------ -------- ------ ------ ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Income $67,670,000 $34,740,000 $22,480,000 $25,280,000 $25,080,000 $25,740,000 $41,550,000
=========== =========== =========== =========== =========== =========== ===========
Market $70,927,000 $39,654,000 $27,319,000 $29,388,000 $25,433,000 $32,193,000 $45,087,000
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
The appraiser considered the approaches used in light of the strengths and
weaknesses inherent in each. The market approach is generally much weaker than
the income approach for at least two reasons:
1. Our experience has shown that seasoned cable system investors
only use the market approach to "get a feel for value" and
rely heavily on the income approach before making system
purchases.
2. In spite of the large number of transactions occurring around
the valuation date, it is an almost impossible task to find
"truly" comparable properties where all or most of the key
parameters, such as date of sale, location, character, size,
and situation are similar. General appraisal practice would
hold that when reliable market or cost data is not available
for like properties, greater emphasis falls on the
capitalization of net income method of appraisal.
-76-
<PAGE> 83
The market approach, using market derived multiples, is a much less reliable
method to value the System for the reasons stated above, and those discussed in
the previous section of this report. However, the market approach does provide
corroborative information. We have therefore weighted the market approach at
10% and the income approach at 90%.
It is the appraiser's opinion that the fair market value of 100% of the assets
of each of the Regions and FCSC as of December 31 1995 were (rounded):
<TABLE>
<S> <C>
Gilroy $ 68,000,000
Hesperia 35,230,000
San Luis Obispo 22,960,000
Tulare 25,690,000
Central 25,120,000
Dallas 26,390,000
Coos Bay/Florence 41,900,000
------------------
Total $ 245,290,000
==================
</TABLE>
-77-
<PAGE> 84
FAIR MARKET VALUATION
OF FALCON CABLE SYSTEMS COMPANY,
A CALIFORNIA LIMITED PARTNERSHIP
AS OF DECEMBER 31, 1995
PART V - VALUATION OF EXCHANGE AND SALE SYSTEMS
This section briefly discusses the valuation of the Exchange and Sale Systems
pursuant to the Preliminary Proposal as defined in the transmittal letter and
Part I of this report. The attributes and valuation of these systems have been
discussed in Parts III and IV, augmented by Exhibits A through E. Valuation
methodology employed was also discussed. The methodology employed by the
appraisers to value the Exchange Systems is consistent with the methodology
employed to value the Regions. The appraisers analyzed revenue, operating
statistics, capital expenditures, demographics and qualitative factors in
arriving at input variables for the Exchange System projections. Exhibit F
presents the detailed operating statistics and lists the Exchange Systems in
the Dallas and Central Regions and includes the cash flow projections. The
Hesperia Region, whose systems are all Exchange Systems, are valued in Part IV
and are not repeated here.
The appraisers' valuation conclusions for the Exchange and Sale Systems are
presented, along with summarized operating statistics and financial
projections, in Tables 6 and 7 respectively.
It is Kane Reece's opinion that the fair market value of the Exchange and Sale
Systems as of December 31, 1995 were:
<TABLE>
<S> <C>
Exchange Systems $ 66,070,000
============
Sale Systems $179,220,000
============
</TABLE>
-78-
<PAGE> 85
TABLE 6
FALCON CABLE SYSTEMS COMPANY (EXCHANGE SYSTEMS)
VALUATION SUMMARY
VALUATION DATE: DECEMBER 31, 1995
<TABLE>
<CAPTION>
($000 EXCEPT WHERE INDICATED)
COOS BAY/
HESPERIA DALLAS FLORENCE TOTAL
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Homes Passed 28,280 14,561 13,392 56,233
EBU's 19,310 10,823 8,706 38,839
% 68.3% 74.3% 65.0% 69.1%
Pay Units 8,366 3,871 1,937 14,174
Pay/EBU 43.3% 35.8% 22.2% 36.5%
Plant Miles 678 304 249 1,231
Density 42 48 54 46
1996 Cash Flow $4,267 $2,027.6 $1,718.7 $8,013.4
Franchise Exp. 2006-8 99-2002 96-2004 n/a
CapEx Total (10 yr) $18,187 $7,594 $3,743 $29,524
Per Home ($) $643 $522 $280 $525
Income Approach: $34,740 $14,710 $15,560 $65,010
Per EBU ($) $1,799 $1,359 $1,787 $1,674
CF Multiple 8.1 7.3 9.1 8.1
Market Approach:
Sub Multiple: $1,850 $35,724 $20,023 $16,106 $71,852
CF Multiple: 9.6 40,964 19,465 16,500 76,929
Conclusions:
Market Approach $39,654 $19,604 $16,401 $75,660
Income Approach $34,740 $14,710 $15,560 $65,010
CONCLUSION $35,231 $15,199 $15,644 $66,075
Rounded $35,230 $15,200 $15,640 $66,070
-------- -------- -------- --------
Per EBU ($) $1,824 $1,404 $1,796 $1,701
CF Multiple 8.3 7.5 9.1 8.2
</TABLE>
-79-
<PAGE> 86
TABLE 7
FALCON CABLE SYSTEMS COMPANY (SALE SYSTEMS)
VALUATION SUMMARY
VALUATION DATE: DECEMBER 31, 1995
<TABLE>
<CAPTION>
($000 EXCEPT WHERE INDICATED)
COOS BAY/
REGION: GILROY HESPERIA SLO TULARE CENTRAL DALLAS FLORENCE TOTAL
------- ------ -------- ------- ------- --------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Homes Passed 56,219 26,138 41,053 26,355 9,209 18,097 177,071
EBU's 33,491 15,973 15,563 14,609 6,913 14,192 100,741
% 59.6% 61.1% 37.9% 55.4% 75.1% 78.4% 56.9%
Pay Units 13,070 3,773 7,110 5,505 3,268 5,834 38,560
Pay/EBU 39.0% 23.6% 45.7% 37.7% 47.3% 41.1% 38.3%
Plant Miles 664.7 409 676 660 163 327 2,900
Density 84.6 64 61 40 57 55 61
1996 Cash Flow $7,700 $2,768 $3,082 $2,594 $1,304 $3,072 $20,520
Franchise Exp. 97-98 99-2006 95-98 2005-2007 99-2002 2004 n/a
CapEx Total (10 yr) $20,083 $8,995 $15,882 $6,233 $3,508 $5,529 $60,229
Per Home ($) $357 $344 $387 $236 $381 $306 $340
Income Approach: $67,670 $22,480 $25,280 $25,080 $11,030 $25,990 $177,530
Per EBU ($) $2,021 $1,407 $1,624 $1,717 $1,596 $1,831 $1,762
CF Multiple 8.8 8.1 8.2 9.7 8.5 8.5 8.7
Market Approach:
Sub Multiple: $1,850 $61,958 $29,550 $28,792 $27,027 $12,789 $26,255 $186,371
CF Multiple: 9.6 73,916 26,575 29,586 24,902 12,522 29,496 196,996
Conclusions:
Market Approach $70,927 $27,319 $29,388 $25,433 $12,589 $28,686 $194,340
Income Approach $67,670 $22,480 $25,280 $25,080 $11,030 $25,990 $177,530
CONCLUSION $67,996 $22,964 $25,691 $25,115 $11,186 $26,260 $179,211
Rounded $68,000 $22,960 $25,690 $25,120 $11,190 $26,260 $179,220
------- ------- ------- -------- ------- ------- --------
Per EBU ($) $2,030 $1,437 $1,651 $1,719 $1,619 $1,850 $1,779
CF Multiple 8.8 8.3 8.3 9.7 8.6 8.5 8.7
</TABLE>
-80-
<PAGE> 87
APPRAISAL CERTIFICATE
The determination of the fair market value of 100% of the assets of Falcon
Cable Systems Company serving Regions in California and Oregon has been
appraised by John E. Kane and Henry E. Sherman of Kane Reece Associates, Inc.,
Metro Park, New Jersey. The effective date of the appraisal is December 31,
1995.
We certify that, to the best of our knowledge and belief:
- The statements of fact contained in this report are true and
correct.
- The reported analysis, opinions, and conclusions, are limited only
by the reported assumptions and limiting conditions and are our
personal, unbiased professional analyses, opinions, and conclusions.
- Neither Kane Reece Associates, Inc., nor we have any present or
prospective interest in the property that is subject of this report,
and we have no personal interest or bias with respect to the parties
involved.
- Kane Reece Associates, Inc.'s compensation is not contingent on an
action or event resulting from the analyses, opinions, or
conclusions in, or the use of, this report.
- Our analyses, opinions, and conclusions were developed, and this
report has been prepared in conformity with the Uniform Standards of
Professional Appraisal Practice.
- No one provided significant professional assistance to the person(s)
signing this report.
The appraisers personally interviewed management and inspected the Regions'
service areas between January 15 and 19, 1996.
No investigation has been made of the title to or the liabilities against the
assets which have been appraised.
It is understood that this report is provided for the purpose(s) described in
the transmittal letter and introduction of this report. It is not to be quoted
in whole or in part or
-81-
<PAGE> 88
otherwise referred to or disseminated to any other person, entity or government
agency without the prior written consent of Kane Reece Associates, Inc.
KANE REECE ASSOCIATES, INC.
/s/ JOHN E. KANE
- -----------------------------------
John E. Kane
Principal
/s/ HENRY E. SHERMAN
- -----------------------------------
Henry E. Sherman
Vice President
399 Thornall Street
Metro Park, NJ 08837-2236
April 29, 1996
-82-
<PAGE> 89
EXHIBIT A
PHOTOGRAPHS
<PAGE> 90
[PHOTOGRAPH]
Gilroy Regional Office
[PHOTOGRAPH]
Gilroy Region
King City Office and Headend
<PAGE> 91
[PHOTOGRAPH]
Hesperia Region
Hesperia AML Microwave Tower
[PHOTOGRAPH]
Hesperia Region
Adelanto Earth Station Facilities
<PAGE> 92
[PHOTOGRAPH]
San Luis Obispo Region
Atascadero Headend Receivers, Modulators, etc.
[PHOTOGRAPH]
Tulare Region
Porterville AML Microwave Equipment
<PAGE> 93
[PHOTOGRAPH]
Central Region
Veneta Earth Station Facilities and Headend Building
[PHOTOGRAPH]
Dallas Region
Tillamook Headend
<PAGE> 94
[PHOTOGRAPH]
Coos Bay/Florence Region
Coos Bay Office-Customer Service Representatives
[PHOTOGRAPH]
Coos Bay/Florence Region
Bandon Headend Building and Earth Station Facilities
<PAGE> 95
EXHIBIT B
REGION OPERATING STATISTICS
<PAGE> 96
EXHIBIT B1
FALCON CABLE SYSTEMS COMPANY OPERATING STATISICS
GILROY, CALIFORNIA VALUATION DATE: DECEMBER 31, 1995
<TABLE>
<CAPTION>
Homes Passed Basic Subscribers Pay Units
------------------------ ------------------------ 1995 EBU's EBU 1995 % Chg
1995 1994 % Chg. 1995 1994 % Chg. FCC Method Pene Pay Units Pay/EBUs v. 94
---- ---- ------ ---- ---- ------ ---------- ---- --------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Soledad 2,531 2,475 2.3% 1,648 1,612 2.2% 1,676 66.2% 462 27.6% -11.7%
Gonzales 1,804 1,752 3.0% 1,109 1,116 -0.6% 1,116 61.9% 292 26.2% -0.3%
Monterey Cty. 55 60 -8.3% 20 19 5.3% 20 36.4% 1 5.0% -66.7%
Gilroy 11,664 11,392 2.4% 7,157 6,881 4.0% 7,220 61.9% 3,147 43.6% -9.4%
Hollister 10,434 9,631 8.3% 5,223 4,834 8.0% 5,243 50.3% 1,653 31.5% -7.1%
Santa Clara Cty. (San Martin) 569 556 2.3% 258 231 11.7% 258 45.3% 135 52.3% -9.4%
Morgan Hill 10,237 10,090 1.5% 6,765 6,260 8.1% 6,810 66.5% 3,262 47.9% -5.9%
San Benito Cty. 1,231 1,203 2.3% 899 863 4.2% 899 73.0% 239 26.6% -27.8%
San Juan Bautista 690 682 1.2% 386 385 0.3% 397 57.6% 156 39.3% -12.4%
Monterey Cty. (Castorville) 2,094 2,066 1.4% 851 966 -11.9% 856 40.9% 305 35.6% -37.9%
Monterey Cty. (Oak Hills) 610 614 -0.7% 471 489 -3.7% 476 78.1% 226 47.5% -16.3%
Monterey Cty. (Salinas) 3,292 3,208 2.6% 2,031 2,048 -0.8% 2,031 61.7% 989 48.7% -11.5%
Monterey Cty. (Los Lomas) 2,426 2,376 2.1% 970 1,016 -4.5% 975 40.2% 479 49.1% -22.9%
Monterey Cty. (Chualar) 162 159 1.9% 28 24 16.7% 28 17.3% 6 21.4% -33.3%
Monterey Cty. (Moss Landing) 117 115 1.7% 48 55 -12.7% 48 41.0% 19 39.6% -24.0%
King City 2,972 2,847 4.4% 2,033 2,001 1.6% 2,102 70.7% 527 25.1% -8.7%
Monterey Cty. (King City) 561 559 0.4% 469 473 -0.8% 469 83.6% 212 45.2% -11.7%
Greenfield 2,660 2,621 1.5% 1,470 1,448 1.5% 1,483 55.7% 322 21.7% -15.5%
Monterey Cty. (Greenfield) 28 27 3.7% 11 9 22.2% 11 39.3% 5 45.5% 25.0%
Monterey Cty. (Laguna Seca) 491 481 2.1% 232 240 -3.3% 281 57.2% 161 57.3% -24.4%
Monterey Cty. (Carmel High.) 474 464 2.2% 321 322 -0.3% 348 73.4% 180 51.7% -8.2%
Monterey Cty. (R.T. Grande) 220 220 0.0% 175 176 -0.6% 175 79.5% 75 42.9% -15.7%
La Mesa Navy Base 897 898 -0.1% 503 528 -4.7% 503 56.1% 217 43.1% -17.2%
--- --- --- --- ---
Total Gilroy 56,219 54,496 3.2% 33,078 31,996 3.4% 33,427 59.5% 13,070 39.1% -11.0%
------ ------ ---- ------ ------ ------ ----- ------ ----- ------
</TABLE>
<TABLE>
<CAPTION>
Plant Miles
------------------------------------------------ 1995 Channel Address-
Aerial UG Total '95 1994 % Chg. Density Capacity able Rebuild*
------ -- --------- ---- ------ ------- -------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Soledad 11.79 7.32 19.11 18.51 3.2% 132.4 35 Yes
Gonzales 7.00 6.52 13.52 13.52 0.0% 133.4 35 Yes
Monterey Cty. 0.00 0.34 0.34 0.34 0.0% 161.8 35 Yes
Gilroy (Two H/E) 32.44 80.28 112.72 110.38 2.1% 103.5 35 Yes 100%/97-99
Hollister 33.70 68.34 102.04 96.87 5.3% 102.3 35 Yes
Santa Clara Cty. (San Martin) 7.30 2.19 9.49 9.49 0.0% 60.0 35 Yes
Morgan Hill 27.47 76.78 104.25 102.45 1.8% 98.2 35 Yes
San Benito Cty. 1.13 9.67 10.80 10.80 0.0% 114.0 35 Yes
San Juan Bautista 7.50 1.25 8.75 8.75 0.0% 78.9 35 Yes
Monterey Cty. (Castorville) 13.14 1.54 14.68 14.47 1.5% 142.6 35 Yes
Monterey Cty. (Oak Hills) 0.00 7.54 7.54 7.54 0.0% 80.9 35 Yes
Monterey Cty. (Salinas) 65.98 10.95 76.93 76.53 0.5% 42.8 35 Yes
Monterey Cty. (Los Lomas) 28.25 2.02 30.27 29.39 3.0% 80.1 35 Yes
Monterey Cty. (Chualar) 1.23 0.00 1.23 1.23 0.0% 131.7 35 Yes
Monterey Cty. (Moss Landing) 2.57 0.00 2.57 2.57 0.0% 45.5 35 Yes
King City 44.34 15.11 59.45 59.18 0.5% 50.0 35 No
Monterey Cty. (King City) 1.60 1.54 3.14 3.14 -0.0% 178.7 35 No
Greenfield 19.16 21.48 40.64 39.56 2.7% 65.5 35 No
Monterey Cty. (Greenfield) 0.00 0.00 0.00 0.00 n/a n/a 35 No
Monterey Cty. (Laguna Seca) 0.00 4.24 4.24 4.24 0.0% 115.8 35 Yes 100%/97-99
Monterey Cty. (Carmel High.) 12.40 0.70 13.10 13.10 -0.0% 36.2 35 Yes
Monterey Cty. (R.T. Grande) 5.40 12.10 17.50 17.50 0.0% 12.6 35 Yes
La Mesa Navy Base 1.36 11.00 12.36 12.36 0.0% 72.6 35 Yes
---- ----- ----- -----
Total Gilroy 323.76 340.91 664.67 651.92 2.0% 84.6
------ ------ ------ ------ ---- ----
</TABLE>
<TABLE>
<CAPTION>
Franchise
-------------------------------------
Fee Expiration Life (Yrs)
--- ---------- ----------
<S> <C> <C>
Soledad 5% Jun-2002 6.4
Gonzales 5% Jul-2002 6.5
Monterey Cty. 3% Aug-97 1.6
Gilroy (Two H/E) 3% May-99 3.4
Hollister 5% Dec-97 2.0
Santa Clara Cty. (San Martin) 2% Apr-2002 6.3
Morgan Hill 3% sub+net May-96 0.4
San Benito Cty. 5% sub Dec-94 (1.0)
San Juan Bautista 3% basic Aug-95 (0.4)
Monterey Cty. (Castorville) 3% Aug-97 1.6
Monterey Cty. (Oak Hills) 3% Aug-97 1.6
Monterey Cty. (Salinas) 3% Aug-97 1.6
Monterey Cty. (Los Lomas) 3% Aug-97 1.6
Monterey Cty. (Chualar) 3% Aug-97 1.6
Monterey Cty. (Moss Landing) 3% Aug-97 1.6
King City 5% Mar-2003 7.2
Monterey Cty. (King City) 3% Oct-98 2.8
Greenfield 5% Nov-2003 7.8
Monterey Cty. (Greenfield) 3% Oct-98 2.8
Monterey Cty. (Laguna Seca) 3% Oct-98 2.8
Monterey Cty. (Carmel High.) 3% Oct-98 2.8
Monterey Cty. (R.T. Grande) 3% Oct-98 2.8
La Mesa Navy Base 0% Mar-94 (1.8)
Total Gilroy
</TABLE>
* Rebuild per FCSC 10 Yr. Plan. Portion of H/E service area to be rebuilt/
Yr.(s) of rebuild.
-88-
<PAGE> 97
FALCON CABLE SYSTEMS COMPANY EXHIBIT B2
HESPERIA, CALIFORNIA
OPERATING STATISICS
VALUATION DATE: DECEMBER 31, 1995
<TABLE>
<CAPTION>
Homes Passed Basic Subscribers
-------------------------- -------------------------- 1995 EBU's EBU
1995 1994 % Chg. 1995 1994 % Chg. FCC Method Pene
------ ------ ------ ------ ------ ------ ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Hesperia 16,948 16,850 0.6% 10,708 10,188 5.1% 11,207 66.1%
Adelanto 2,626 2,526 4.0% 2,264 2,023 11.9% 2,418 92.1%
San Bernardino Cty. (Slvr Lk) 1,802 1,800 0.1% 1,251 1,197 4.5% 1,262 70.0%
Kern Co. (Boron) 1,256 1,255 0.1% 704 714 -1.4% 738 58.7%
Kern Co. (N. Edwards) 235 235 0.0% 212 227 -6.6% 219 93.0%
Kern Co. (Rosamond) 4,313 4,265 1.1% 2,696 2,621 2.9% 2,761 64.0%
Kern Co. (Mojave) 1,100 1,100 0.0% 678 641 5.8% 707 64.3%
------ ------ ---- ------ ------ ------ -----
Total Hesperia 28,280 28,031 0.9% 18,513 17,611 5.1% 19,310 68.3%
====== ====== ==== ====== ====== ====== =====
<CAPTION>
1995 Pay Units
Pay Units Pay/EBUs % Chg v. 94
--------- -------- -----------
<S> <C> <C> <C>
Hesperia 4,999 44.6% -6.7%
Adelanto 1,138 47.1% -6.0%
San Bernardino Cty. (Slvr Lk) 478 37.9% 1.9%
Kern Co. (Boron) 102 13.8% -13.6%
Kern Co. (N. Edwards) 142 65.0% -5.3%
Kern Co. (Rosamond) 1,119 40.5% -7.6%
Kern Co. (Mojave) 388 54.9% -1.0%
----- ----- ------
Total Hesperia 8,366 43.3% -6.1%
===== ===== ======
</TABLE>
<TABLE>
<CAPTION>
Plant Miles
------------------------------------------- 1995 Channel Address-
Aerial UG Total '95 1994 % Chg. Density Capacity able Rebuild
------- ------ --------- ------ ------ ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hesperia 351.07 64.92 415.99 399.78 4.1% 40.7 43 Yes '97 - '98
Adelanto 28.66 33.63 62.29 56.19 10.9% 42.2 43 Yes '97 - '98
San Bernardino Cty. (Slvr Lk) 0.00 41.25 41.25 41.25 0.0% 43.7 35 Yes
Kern Co. (Boron) 26.78 1.18 27.96 27.96 0.0% 44.9 28 No 1991 (60%)
Kern Co. (N. Edwards) 7.00 0.00 7.00 7.00 0.0% 33.6 42 Yes
Kern Co. (Rosamond) 27.80 47.21 75.01 69.82 7.4% 57.5 42 No
Kern Co. (Mojave) 37.00 11.50 48.50 42.00 15.5% 22.7 42 No
------ ------ ------ ------ ----- ----
Total Hesperia 478.31 199.69 678.00 644.00 5.3% 41.7
====== ====== ====== ====== ==== ====
<CAPTION>
Franchise
-------------------------------
Fee Expiration Life (Yrs)
---- ---------- ----------
<S> <C> <C> <C>
Hesperia 5% Jun-2006 10.4
Adelanto 3% n/a
San Bernardino Cty. (Slvr Lk) 5% Apr-2008 12.3
Kern Co. (Boron) 5% Jan-2007 11.1
Kern Co. (N. Edwards) 5% Jan-2007 11.1
Kern Co. (Rosamond) 5% Jan-2007 11.1
Kern Co. (Mojave) 5% Jan-2007 11.1
----
Total Hesperia
</TABLE>
-89-
<PAGE> 98
FALCON CABLE SYSTEMS COMPANY EXHIBIT B3
SAN LUIS OBISPO, CALIFORNIA
OPERATING STATISICS
VALUATION DATE: DECEMBER 31, 1995
<TABLE>
<CAPTION>
Homes Passed Basic Subscribers
------------------------- -------------------------- 1995 EBU's EBU
1995 1994 % Chg. 1995 1994 % Chg. FCC Method Pene
------ ------ ------ ------ ------ ------ ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Atascadero 10,214 10,145 0.7% 5,746 5,945 -3.3% 5,814 56.9%
SLO County 13,676 13,332 2.6% 8,809 8,649 1.8% 9,054 66.2%
Guadalupe 1,802 1,791 0.6% 823 813 1.2% 823 45.7%
Los Alamos 446 431 3.5% 257 262 -1.9% 281 63.1%
------ ------ ---- ------ ------ ----- ------ -----
Total San Luis Obispo 26,138 25,699 1.7% 15,635 15,669 -0.2% 15,973 61.1%
====== ====== ==== ====== ====== ====== =====
<CAPTION>
1995 Pay Units
Pay Units Pay/EBUs % Chg v. 94
--------- -------- -----------
<S> <C> <C> <C>
Atascadero 1,391 23.9% -32.4%
SLO County 1,983 21.9% -27.0%
Guadalupe 190 23.1% -20.2%
Los Alamos 169 60.1% -20.7%
----- ----- ------
Total San Luis Obispo 3,733 23.4% -28.5%
===== ===== ======
</TABLE>
<TABLE>
<CAPTION>
Plant Miles
------------------------------------------------- 1995 Channel Address-
Aerial UG Total '95 1994 % Chg. Density Capacity able Rebuild
------ ----- --------- ------ ------ ------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Atascadero 183.87 20.50 204.37 204.29 0.0% 50.0 37 Yes '98 - 2000
SLO County 144.00 42.00 186.00 175.71 5.9% 73.5 95 Yes 1995
Guadalupe 7.90 4.20 12.10 12.10 0.0% 148.9 37 Yes
Los Alamos 5.34 1.08 6.42 6.38 0.6% 69.5 54 No
------ ----- ------ ------ ---- -----
Total San Luis Obispo 341.11 67.78 408.89 398.48 2.6% 63.9
====== ===== ====== ====== ==== =====
<CAPTION>
Franchise
-------------------------------
Fee Expiration Life (Yrs)
--- ---------- ----------
<S> <C> <C> <C>
Atascadero 5% Jul-2001 5.5
SLO County 5% Jun-2006 10.4
Guadalupe 5% Aug-2006 10.6
Los Alamos 5% Feb-99 3.1
Total San Luis Obispo
</TABLE>
-90-
<PAGE> 99
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY EXHIBIT B4 OPERATING STATISICS
TULARE, CALIFORNIA VALUATION DATE: DECEMBER 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Homes Passed Basic Subscribers
---------------------- ----------------------- 1995 EBU's EBU 1995 Pay Units
1995 1994 % Chg. 1995 1994 % Chg. FCC Method Pene Pay Units Pay/EBUs % Chg v. 94
------ ------ ------ ------- ------- ------ ---------- ----- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tulare Cty. (Jack Ranch) 316 309 2.3% 119 130 -8.5% 129 40.9% 7 5.4% 75.0%
Tulare Cty. (Springville) 1,386 1,344 3.1% 770 767 0.4% 782 56.4% 384 49.1% -13.1%
Tulare Cty. (Cal. Hot Springs) 483 479 0.8% 161 188 -14.4% 161 33.3% 12 7.5% -45.5%
Tulare Cty. (Camp Nelson) 539 527 2.3% 261 266 -1.9% 353 65.5% 93 26.3% 0.0%
Tulare Cty. (Three Rivers) 1,349 1,333 1.2% 670 680 -1.5% 670 49.7% 315 47.0% -18.2%
Woodlake 1,875 1,845 1.6% 799 763 4.7% 810 43.2% 249 30.8% -18.4%
Tulare Cty. (Woodlake) 637 627 1.6% 276 285 -3.2% 276 43.3% 170 61.6% -19.0%
Tulare Cty. (T. Bella / Ducor) 858 852 0.7% 110 126 -12.7% 110 12.8% 63 57.3% -27.6%
Tulare Cty. (Woodville/Pop 1,164 1,152 1.0% 129 128 0.8% 129 11.1% 64 49.6% -21.0%
Tulare Cty. (Strat/Plview) 1,254 1,250 0.3% 263 304 -13.5% 390 31.1% 112 28.7% -34.5%
Porterville 11,090 10,718 3.5% 5,206 5,133 1.4% 5,217 47.0% 2,247 43.1% -21.8%
Tulare Cty (Porterville) 6,910 6,809 1.5% 3,243 3,308 -2.0% 3,253 47.1% 1,367 42.0% -23.6%
Tulare Cty (Tip/Pix/Earl) 1,982 1,723 15.0% 214 264 -18.9% 224 11.3% 172 76.7% -38.4%
Exeter 2,533 2,419 4.7% 773 810 -4.6% 773 30.5% 492 63.6% -18.5%
Farmersville 1,566 1,501 4.3% 294 326 -9.8% 294 18.8% 195 66.3% -30.1%
Tulare Cty (Ivanhoe) 1,393 1,271 9.6% 295 315 -6.3% 295 21.2% 213 72.2% -23.9%
Tulare Cty (Cutler/Orosi) 1,817 1,705 6.6% 306 396 -22.7% 306 16.8% 225 73.5% -42.2%
Orange Cove 982 813 20.8% 246 224 9.8% 246 25.1% 217 88.2% 1.9%
Tulare Cty (Oak Ranch) 173 172 0.6% 112 128 -12.5% 143 82.8% 71 49.6% -19.3%
Lindsay 2,218 2,146 3.4% 778 856 -9.1% 778 35.1% 328 42.2% -34.4%
Tulare Cty (Lindsay) 528 519 1.7% 224 231 -3.0% 224 42.4% 114 50.9% -13.6%
------ ------ ----- ------ ------ ------ ------ ----- ----- ----- ------
Total Tulare 41,053 39,514 3.9% 15,249 15,628 -2.4% 15,563 37.9% 7,110 45.7% -23.0%
====== ====== ===== ====== ====== ====== ====== ===== ===== ===== ======
</TABLE>
<TABLE>
<CAPTION>
Plant Miles Franchise
-------------------------------------- 1995 Channel Address- --------------------------
Aerial UG Total '95 1994 % Chg. Density Capacity able Rebuild Fee Expiration Life (Yrs)
------ ----- --------- ----- ------ ------- -------- -------- --------- --- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tulare Cty. (Jack Ranch) 12.15 0.00 12.15 12.15 0.0% 26.0 32 No Assuming 5% Feb-98 2.1
Tulare Cty. (Springville) 34.82 2.72 37.54 37.54 0.0% 36.9 42 Yes a rebuild 5% Feb-98 2.1
Tulare Cty. (Cal. Hot Springs) 18.01 0.57 18.58 18.58 0.0% 26.0 32 No of entire 5% Feb-98 2.1
Tulare Cty. (Camp Nelson) 13.16 0.93 14.09 14.09 0.0% 38.3 42 Yes system @ 5% Feb-98 2.1
Tulare Cty. (Three Rivers) 38.71 5.63 44.34 44.34 0.0% 30.4 42 Yes 75% of 5% Feb-98 2.1
Woodlake 14.69 5.77 20.46 20.46 0.0% 91.6 42 Yes existing 5% Sep-2009 13.7
Tulare Cty. (Woodlake) 31.69 5.23 36.92 36.92 0.0% 17.3 42 Yes miles 5% Feb-98 2.1
Tulare Cty. (T. Bella / Ducor) 15.75 0.32 16.07 16.07 0.0% 53.4 42 Yes in '97-'98 5% Feb-98 2.1
Tulare Cty. (Woodville/Pop) 15.25 0.25 15.50 15.50 0.0% 75.1 42 Yes 5% Feb-98 2.1
Tulare Cty. (Strat/Plview) 14.64 1.15 15.79 15.79 0.0% 79.4 42 Yes 5% Feb-98 2.1
Porterville 78.20 56.44 134.64 130.79 2.9% 82.4 42 Yes Fiber OL ' 5% May-95 (0.7)
Tulare Cty (Porterville) 52.89 11.85 64.74 61.13 5.9% 106.7 42 Yes 5% Feb-98 2.1
Tulare Cty (Tip/Pix/Earl) 17.40 4.27 21.67 21.28 1.8% 91.5 42 Yes 5% Feb-98 2.1
Exeter 32.65 10.28 42.93 42.95 -0.0% 59.0 42 Yes 5% Jan-97 1.1
Farmersville 21.80 5.21 27.01 26.80 0.8% 58.0 42 Yes 5% Jan-97 1.1
Tulare Cty (Ivanhoe) 37.56 9.85 47.41 44.01 7.7% 29.4 42 Yes 5% Feb-98 2.1
Tulare Cty (Cutler/Orosi) 25.96 5.79 31.75 31.19 1.8% 57.2 42 Yes 5% Feb-98 2.1
Orange Grove 21.74 3.08 24.82 24.32 2.1% 39.6 42 Yes 5% May-2002 6.3
Tulare Cty (Oak Ranch) 3.00 2.45 5.45 5.45 0.0% 31.7 42 Yes 5% Feb-98 2.1
Lindsay 25.12 8.89 34.01 33.36 1.9% 65.2 42 Yes 5% Sep-99 3.7
Tulare Cty (Lindsay) 7.65 2.33 9.98 9.98 0.0% 52.9 42 Yes 5% Feb-98 2.1
------ ------ ------ ------ ----- ----- --- -----
Total Tulare 532.84 143.01 675.85 662.70 2.0% 60.7
====== ====== ====== ====== ===== =====
</TABLE>
-91-
<PAGE> 100
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY EXHIBIT B5 OPERATING STATISICS
CENTRAL REGION, OREGON VALUATION DATE: DECEMBER 31, 1995.
- -----------------------------------------------------------------------------------------------------------------------------------
Homes Passed Basic Subscribers
----------------------- ---------------------- 1995 EBU's EBU 1995 Pay Units
1995 1994 % Chg. 1995 1994 Chg. FCC Method Pene Pay Units Pay/EBUs % Chg v. 94
------ ------ ------ ----- ----- ----- ---------- ----- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Creswell 1,195 1,195 0.0% 556 539 3.2% 578 48.4% 234 40.5% -8.6%
Lane Cty. (Creswell) 564 564 0.0% 323 324 -0.3% 330 58.6% 151 45.7% 2.7%
Drain 601 601 0.0% 328 330 -0.6% 335 55.8% 128 38.2% -10.5%
Yoncalla 483 483 0.0% 289 267 8.2% 289 59.8% 109 37.7% 1.9%
Douglas Cty. (Drain/Yoncalla) 320 320 0.0% 164 168 -2.4% 171 53.6% 53 30.9% -1.9%
Lane Cty. 1,058 1,058 0.0% 431 431 0.0% 431 40.7% 199 46.2% -2.9%
Brownsville 723 723 0.0% 386 392 -1.5% 400 55.3% 163 40.8% -6.3%
Coburg 361 361 0.0% 145 148 -2.0% 160 44.3% 72 45.0% 4.3%
Lane Cty. (Coburg) 304 304 0.0% 150 146 2.7% 165 54.4% 80 48.4% 0.0%
Lowell 345 345 0.0% 224 201 11.4% 224 64.9% 77 34.4% 16.7%
Lane Cty. (McKenzie) 4,026 4,026 0.0% 2,507 2,489 0.7% 2,522 62.6% 1,022 40.5% -0.7%
Cave Junction 982 982 0.0% 469 478 -1.9% 477 48.5% 141 29.6% 2.2%
Josephine Cty. (Kerby/CJ) 783 783 0.0% 346 367 -5.7% 369 47.1% 132 35.8% -1.5%
Lane Cty. (Whitewater) 1,747 1,747 0.0% 954 952 0.2% 1,038 59.4% 329 31.7% -13.4%
Oakridge 1,955 1,955 0.0% 1,100 1,080 1.9% 1,156 59.1% 412 35.6% 7.9%
West Fir 243 243 0.0% 160 170 -5.9% 160 65.8% 57 35.6% 5.6%
Lane Cty. (Oakridge/W. Fir) 374 374 0.0% 192 186 3.2% 192 51.3% 56 29.2% -8.2%
Sutherlin 2,445 2,445 0.0% 1,502 1,531 -1.9% 1,556 63.6% 564 36.3% 5.2%
Oakland 496 496 0.0% 259 279 -7.2% 259 52.2% 104 40.2% 9.5%
Douglas Cty. (Sutherlin/Oklnd) 718 718 0.0% 262 273 -4.0% 270 37.6% 103 38.2% 14.4%
Cottage Grove 3,046 3,046 0.0% 1,683 1,591 5.8% 1,723 56.6% 508 29.5% -2.9%
Lane Cty. (Cottage Grove) 366 366 0.0% 198 214 -7.5% 198 54.1% 72 36.4% 1.4%
Veneta 1,283 1,283 0.0% 661 646 2.3% 670 52.2% 318 47.5% 10.8%
Lane Cty. (Veneta) 634 634 0.0% 360 381 -5.5% 360 56.8% 156 43.3% 2.6%
Lane Cty. (Noti/Elmira) 863 863 0.0% 413 466 -11.4% 413 47.9% 184 44.6% -8.5%
Linn Cty. (Brown./Craw.) 440 440 0.0% 163 149 9.4% 163 37.0% 81 49.7% 88.4%
------ ------ ------ ------ ------ -----
Total Central 26,355 26,355 0.0% 14,225 14,198 0.2% 14,609 55.4% 5,505 37.7% 0.5%
====== ====== ==== ====== ====== ==== ====== ===== ===== ===== ====
</TABLE>
<TABLE>
<CAPTION>
Plant Miles
----------------------------------------
1995 Channel Address-
Aerial UG Total '95 1994 % Chg. Density Capacity able Rebuild*
------- ---- --------- ------ ------ ------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Creswell 19.80 9.00 28.80 28.80 0.0% 41.5 40 Yes
Lane Cty. (Creswell) 9.00 3.20 12.20 12.20 0.0% 46.2 40 Yes
Drain 17.00 1.00 18.00 18.00 0.0% 33.4 40 Yes
Yoncalla 7.00 2.00 9.00 9.00 0.0% 53.7 40 Yes
Douglas Cty. (Drain/Yoncalla) 3.00 1.00 4.00 4.00 0.0% 80.0 40 Yes
Lane Cty. 19.50 0.50 20.00 20.00 0.0% 52.9 40 Yes
Brownsville 25.50 1.00 26.50 26.50 0.0% 27.3 40 Yes
Coburg 19.00 1.00 20.00 20.00 0.0% 18.1 40 Yes
Lane Cty. (Coburg) 10.00 2.00 12.00 12.00 0.0% 25.3 40 Yes
Lowell 5.00 0.50 5.50 5.50 0.0% 62.7 40 Yes
Lane Cty. (McKenzie) 110.00 9.40 119.40 119.40 0.0% 33.7 40 Yes
Cave Junction 15.00 0.75 15.75 15.75 0.0% 62.3 26 No
Josephine Cty. (Kerby/CJ) 10.50 0.25 10.75 10.75 0.0% 72.8 26 No
Lane Cty. (Whitewater) 79.00 2.30 81.30 81.30 0.0% 21.5 40 Yes
Oakridge 55.00 1.50 56.50 56.50 0.0% 34.6 40 Yes
West Fir 4.00 0.25 4.25 4.25 0.0% 57.2 40 Yes
Lane Cty. (Oakridge/W. Fir) 17.00 0.25 17.25 17.25 0.0% 21.7 40 Yes
Sutherlin 35.00 2.50 37.50 37.50 0.0% 65.2 28 No 100%/98
Oakland 7.00 1.00 8.00 8.00 0.0% 62.0 28 No
Douglas Cty. (Sutherlin/Oklnd) 6.00 0.50 6.50 6.50 0.0% 110.5 28 No
Cottage Grove 38.00 7.00 45.00 45.00 0.0% 67.7 52 Yes
Lane Cty. (Cottage Grove) 10.40 0.90 11.30 11.30 -0.0% 32.4 52 Yes
Veneta 30.00 5.00 35.00 35.00 0.0% 36.7 25 No
Lane Cty. (Veneta) 20.00 1.00 21.00 21.00 0.0% 30.2 25 No
Lane Cty. (Noti/Elmira) 10.00 1.00 11.00 11.00 0.0% 78.5 25 No
Linn Cty. (Brown./Craw.) 23.80 0.00 23.80 23.80 0.0% 18.5 40 Yes
------ ----- ------ ------
Total Central 605.50 54.80 660.30 660.30 0.0% 39.9
====== ===== ====== ====== ===== =====
<CAPTION>
Franchise
---------------------------------------
Fee Expiration Life (Yrs)
------------- ---------- ----------
<S> <C> <C> <C>
Creswell 5% Nov-2005 9.9
Lane Cty. (Creswell) 5% Jun-2007 11.5
Drain 5% Sep-2009 13.7
Yoncalla 5% Nov-2007 11.9
Douglas Cty. (Drain/Yoncalla)
Lane Cty. 5% Jun-2007 11.5
Brownsville 5% Jul-2002 6.5
Coburg 5% Feb-2008 12.1
Lane Cty. (Coburg) 5% Jun-2007 11.5
Lowell 3% May-91 (4.6)
Lane Cty. (McKenzie) 5% Jun-2007 11.5
Cave Junction 3% Aug-2007 11.7
Josephine Cty. (Kerby/CJ)
Lane Cty. (Whitewater) 5% Jun-2007 11.5
Oakridge 5%, net pay Jun-2005 9.5
West Fir 5%, net pay Jun-2005 9.5
Lane Cty. (Oakridge/W. Fir) 5% Jun-2007 11.5
Sutherlin 3%,-install Nov-99 3.8
Oakland 3% Nov-99 3.9
Douglas Cty. (Sutherlin/Oklnd)
Cottage Grove 5% Nov-98 2.9
Lane Cty. (Cottage Grove) 5% Jun-2007 11.5
Veneta 3% Nov-2005 9.9
Lane Cty. (Veneta) 5% Jun-2007 11.5
Lane Cty. (Noti/Elmira) 5% Jun-2007 11.5
Linn Cty. (Brown./Craw.)
</TABLE>
* Rebuild per FCSC 10 Yr. Plan. Portion of H/E service area to be rebuilt/
Yr.(s) of rebuild.
-92-
<PAGE> 101
<TABLE>
- -----------------------------------------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY EXHIBIT B6 OPERATING STATISICS
DALLAS REGION, OREGON VALUATION DATE: DECEMBER 31, 1995.
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
Homes Passed Basic Subscribers
1995 EBU's EBU
1995 1994 % Chg. 1995 1994 % Chg. FCC Method Pene
------ ------ ------ ------ ------ ------ ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dallas 3,902 3,737 4.4% 2,728 2,608 4.6% 2,802 71.8%
Polk Cty. (Dallas) 225 225 0.0% 135 140 -3.6% 135 60.0%
Independence 1,798 1,744 3.1% 1,237 1,151 7.5% 1,249 69.5%
Monmouth 1,782 1,700 4.8% 1,688 1,545 9.3% 1,725 96.8%
Silverton 2,951 2,927 0.8% 1,434 1,327 8.1% 1,464 49.6%
Mt. Angel 577 577 0.0% 276 270 2.2% 282 48.9%
Marion Cty. (Sliverton) 286 286 0.0% 43 44 -2.3% 43 15.0%
Jefferson 931 899 3.6% 511 478 6.9% 511 54.9%
Marion Cty. (Jefferson) 46 46 0.0% 154 139 10.8% 154 334.8%
Cannon Beach 1,221 1,221 0.0% 1,109 1,082 2.5% 1,305 106.9%
Clatsop Cty. (Cannon Beach) 250 250 0.0% 254 244 4.1% 260 103.9%
Bay City 584 558 4.7% 458 473 -3.2% 458 78.4%
Garibaldi 573 573 0.0% 383 417 -8.2% 426 74.4%
Rockaway Beach 1,352 1,352 0.0% 873 836 4.4% 998 73.8%
Tillamook Cty. (Nehalem) 522 522 0.0% 307 311 -1.3% 325 62.3%
Manzanita 916 898 2.0% 537 521 3.1% 572 62.5%
Nehalem 300 292 2.7% 132 114 15.8% 132 44.0%
Wheeler 219 207 5.8% 88 91 -3.3% 106 48.3%
Tillamook Cty. (Nehalem) 260 260 0.0% 467 478 -2.3% 478 183.9%
Falls City 310 310 0.0% 194 185 4.9% 194 62.6%
Polk Cty. (Falls City) 40 40 0.0% 37 34 8.8% 37 92.5%
Tillamook 1,425 1,425 0.0% 1,502 1,534 -2.1% 1,547 108.5%
Tillamook Cty. (Tillamook) 1,800 1,800 0.0% 976 952 2.5% 987 54.8%
Netarts/Oceanside 850 850 0.0% 830 829 0.1% 933 109.8%
Brickyard Road 475 475 0.0% 484 480 0.8% 508 106.9%
Wilson River 175 175 0.0% 91 97 -6.2% 105 59.8%
------ ------ ------ ------ ------
Total Dallas 23,770 23,349 1.8% 16,928 16,380 3.3% 17,736 74.6%
====== ====== ==== ====== ====== ===== ====== ======
<CAPTION>
Pay Units
Pay Units Pay/EBUs % Chg v. 94
--------- -------- -----------
<S> <C> <C> <C>
Dallas 1,306 46.6% -4.3%
Polk Cty. (Dallas) 55 40.7% -22.5%
Independence 650 52.0% 7.6%
Monmouth 746 43.2% 5.2%
Silverton 698 47.7% -7.5%
Mt. Angel 158 56.0% 1.9%
Marion Cty. (Sliverton) 45 104.7% 2.3%
Jefferson 308 60.3% -2.2%
Marion Cty. (Jefferson) 87 56.5% 14.5%
Cannon Beach 433 33.2% -12.2%
Clatsop Cty. (Cannon Beach) 53 20.4% 0.0%
Bay City 184 40.2% -4.7%
Garibaldi 168 39.4% -6.1%
Rockaway Beach 390 39.1% -4.2%
Tillamook Cty. (Nehalem) 125 38.5% 1.6%
Manzanita 116 20.3% -12.8%
Nehalem 51 38.6% 6.3%
Wheeler 27 25.5% -46.0%
Tillamook Cty. (Nehalem) 169 35.3% -9.6%
Falls City 103 53.1% -8.8%
Polk Cty. (Falls City) 13 35.1% 18.2%
Tillamook 526 34.0% -20.4%
Tillamook Cty. (Tillamook) 375 38.0% -12.0%
Netarts/Oceanside 177 19.0% -10.2%
Brickyard Road 176 34.7% -16.6%
Wilson River 0 0.0% n/a
----- ----- ------
Total Dallas 7,139 40.3% -5.8%
===== ===== ======
</TABLE>
<TABLE>
<CAPTION>
Plant Miles
-------------------------------------------------- 1995 Channel Address-
Aerial UG Total '95 1994 % Chg. Density Capacity able Rebuild*
------- ----- --------- ------ ------ ------- -------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dallas 42.40 20.70 63.10 57.40 9.9% 62 40 Yes
Polk Cty. (Dallas) 11.30 0.40 11.70 8.60 36.0% 19 40 Yes
Independence 20.00 3.70 23.70 22.50 5.3% 76 40 Yes
Monmouth 15.20 7.50 22.70 20.90 8.6% 79 40 Yes
Silverton 20.60 9.60 30.20 29.00 4.1% 98 37 Yes
Mt. Angel 6.50 1.50 8.00 8.00 0.0% 72 37 Yes
Marion Cty. (Sliverton) 13.80 0.50 14.30 14.30 0.0% 20 37 Yes
Jefferson 10.50 3.20 13.70 13.00 5.4% 68 40 Yes
Marion Cty. (Jefferson) 2.30 0.00 2.30 2.30 0.0% 20 40 Yes
Cannon Beach 10.20 5.50 15.70 15.70 0.0% 78 34 Yes
Clatsop Cty. (Cannon Beach) 5.60 4.00 9.60 9.60 0.0% 26 34 Yes
Bay City 11.30 0.50 11.80 11.30 4.4% 49 34 Yes
Garibaldi 7.40 0.50 7.90 7.90 0.0% 73 34 Yes
Rockaway Beach 16.00 4.30 20.30 20.30 0.0% 67 34 Yes
Tillamook Cty. (Nehalem) 24.00 1.80 25.80 25.80 0.0% 20 34 Yes
Manzanita 9.50 3.50 13.00 12.70 2.4% 70 34 Yes
Nehalem 3.10 0.70 3.80 3.60 5.6% 79 34 Yes 50%,50%/97,98
Wheeler 4.00 0.70 4.70 4.50 4.4% 47 34 Yes
Tillamook Cty. (Nehalem) 11.00 6.30 17.30 17.30 0.0% 15 34 Yes
Falls City 16.00 0.00 16.00 16.00 0.0% 19 39 Yes
Polk Cty. (Falls City) 2.50 2.00 4.50 4.50 0.0% 9 39 Yes
Tillamook 21.70 1.50 23.20 23.20 0.0% 61 29 No 50%,50%/97,98
Tillamook Cty. (Tillamook) 50.70 5.60 56.30 56.30 0.0% 32 29 No
Netarts/Oceanside 15.00 2.00 17.00 17.00 0.0% 50 22 No 75%,25%/95,96
Brickyard Road 24.00 1.00 25.00 25.00 0.0% 19 22 No 75%,25%/95,96
Wilson River 5.00 0.00 5.00 5.00 0.0% 35 5 No
------ ----- ------ ------
Total Dallas 379.60 87.00 466.60 451.70 3.3% 51
====== ===== ====== ====== ==== ==
<CAPTION>
Franchise
Fee Expiration Life (Yrs)
--------- ---------- ----------
<S> <C> <C> <C>
Dallas 5% Oct-2002 6.8
Polk Cty. (Dallas)
Independence 5% Aug-2002 6.7
Monmouth 5% Aug-2002 6.6
Silverton 5% Jan-2000 4.0
Mt. Angel 3% Oct-95 (0.2)
Marion Cty. (Sliverton) 5% Aug-96 0.6
Jefferson 5% Basic Jan-2002 6.0
Marion Cty. (Jefferson) 5% Aug-96 0.6
Cannon Beach 5% Jul-2002 6.5
Clatsop Cty. (Cannon Beach)
Bay City 3% May-2000 4.4
Garibaldi 5% Sep-97 1.7
Rockaway Beach 5% Dec-2002 6.9
Tillamook Cty. (Nehalem)
Manzanita 3% Feb-97 1.1
Nehalem 3% Basic Aug-2001 5.6
Wheeler 5% Nov-2013 17.9
Tillamook Cty. (Nehalem)
Falls City 5% Mar-99 3.2
Polk Cty. (Falls City)
Tillamook 5% Local Dec-99 4.0
Tillamook Cty. (Tillamook)
Netarts/Oceanside
Brickyard Road
Wilson River
Total Dallas
</TABLE>
* Rebuild per FCSC 10 Yr. Plan. Portion of H/E service area to be rebuilt/
Yr.(s) of rebuild.
-93-
<PAGE> 102
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY EXHIBIT B7 OPERATING STATISICS
COOS BAY/FLORENCE REGION, OREGON VALUATION DATE: DECEMBER 31, 1995.
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Homes Passed Basic Subscribers Pay Units
---------------- ----------------- 1995 EBU's EBU % Chg
1995 1994 % Chg. 1995 1994 % Chg. FCC Method Pene Pay Units Pay/EBUs v. 94
---- ---- ------ ---- ---- ------ ---------- ---- --------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Coos Bay 6,454 6,454 0.0% 4,665 4,638 0.6% 4,808 74.5% 2,177 45.3% -9.6%
North Bend 3,640 3,640 0.0% 2,958 2,940 0.6% 3,025 83.1% 1,193 39.4% -13.5%
Coos Cty. (Coos Bay/North Bend) 3,551 3,551 0.0% 2,762 2,774 -0.4% 2,853 80.4% 1,430 50.1% -11.5%
Myrtle Point 1,108 1,108 0.0% 726 745 -2.6% 741 66.9% 123 16.6% -10.9%
Coos Cty. (Myrtle Point) 48 48 0.0% 48 54 -11.1% 48 100.0% 8 16.7% -11.1%
Powers 315 315 0.0% 201 212 -5.2% 209 66.5% 19 9.1% -36.7%
Coos Cty. (Powers) 4 4 0.0% 2 2 0.0% 2 50.0% 1 50.0% 0.0%
Reedsport 1,980 1,980 0.0% 1,687 1,729 -2.4% 1,732 87.5% 465 26.8% -8.3%
Winchester Bay 325 325 0.0% 235 247 -4.9% 267 82.1% 86 32.2% 0.0%
Douglas Cty. (Reedsport) 100 100 0.0% 70 70 0.0% 70 70.0% 18 25.7% -35.7%
Coos Cty. (Lakeside) 300 300 0.0% 97 105 -7.6% 97 32.3% 18 18.6% -5.3%
Lakeside 784 784 0.0% 511 526 -2.9% 524 66.8% 105 20.0% -7.1%
Gardiner 145 145 0.0% 102 108 -5.6% 102 70.3% 42 41.2% -17.6%
Coquille 1,301 1,301 0.0% 1,418 1,443 -1.7% 1,449 111.4% 291 20.1% -17.1%
Coos Cty. (Coquille) 1,012 1,012 0.0% 378 391 -3.3% 378 37.4% 82 21.7% -12.8%
Bandon 1,381 1,283 7.6% 1,099 1,044 5.3% 1,247 90.3% 359 28.8% 35.5%
Coos Cty. (Brandon) 740 718 3.1% 450 455 -1.1% 465 62.8% 100 21.5% -21.3%
Hauser 475 475 0.0% 491 489 0.4% 499 105.0% 239 47.9% -1.6%
--- --- --- --- --- ---
Total Coos Bay 23,663 23,543 0.5% 17,900 17,972 -0.4% 18,516 78.3% 6,756 36.5% -9.5%
------ ------ ---- ------ ------ ----- ------ ----- ----- ----- -----
Florence 4,286 4,113 4.2% 2,053 1,952 5.2% 2,253 52.6% 520 23.1% -6.8%
Dunes City 843 818 3.1% 465 478 -2.7% 543 64.4% 139 25.6% -12.0%
Mapleton 343 336 2.1% 196 194 1.0% 216 62.8% 61 28.3% -14.1%
Lane Cty. (Florence) 2,354 2,268 3.8% 1,233 1,171 5.3% 1,370 58.2% 295 21.5% -20.9%
----- ----- ----- ----- ----- ---
Total Florence 7,826 7,535 3.9% 3,947 3,795 4.0% 4,382 56.0% 1,015 23.2% -12.5%
----- ----- ---- ----- ----- ---- ----- ----- ----- ----- ------
Total Coos Bay/Florence 31,489 31,078 1.3% 21,847 21,767 0.4% 22,898 72.7% 7,771 33.9% -9.9%
------ ------ ---- ------ ------ ---- ------ ----- ----- ----- -----
</TABLE>
<TABLE>
<CAPTION>
Plant Miles
----------------------------------------- 1995 Channel Address-
Aerial UG Total '95 1994 % Chg. Density Capacity able Rebuild*
------ -- --------- ---- ------ ------- -------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Coos Bay 67.75 7.17 74.92 74.80 0.2% 86.1 34 Yes 100%/95
North Bend 33.43 3.69 37.12 37.00 0.3% 98.1 34 Yes
Coos Cty. (Coos Bay/North Bend) 104.56 11.57 116.13 116.13 0.0% 30.6 34 Yes
Myrtle Point 13.81 2.08 15.89 15.89 0.0% 69.7 37 No
Coos Cty. (Myrtle Point) 11.72 0.00 11.72 11.72 0.0% 4.1 37 No
Powers 5.00 1.00 6.00 6.00 0.0% 52.5 37 No 100%/97
Coos Cty. (Powers) 0.53 0.00 0.53 0.53 0.0% 7.5 37 No
Reedsport 17.20 3.50 20.70 20.70 0.0% 95.7 34 No 100%/99
Winchester Bay 6.25 3.18 9.43 9.30 1.4% 34.5 34 No
Douglas Cty. (Reedsport) 12.50 0.00 12.50 12.50 0.0% 8.0 34 No
Coos Cty. (Lakeside) 4.50 1.00 5.50 5.50 0.0% 54.5 34 No
Lakeside 14.00 2.24 16.24 15.00 8.3% 48.3 34 No
Gardiner 1.60 0.30 1.90 1.90 0.0% 76.3 0 No
Coquille 23.79 1.50 25.29 25.29 0.0% 51.4 61 No 100%/97
Coos Cty. (Coquille) 19.51 0.00 19.51 19.51 0.0% 51.9 61 No
Bandon 15.51 9.07 24.58 24.17 1.7% 56.2 61 No 100%/97
Coos Cty. (Brandon) 10.95 4.80 15.75 14.65 7.5% 47.0 61 No
Hauser 16.36 9.70 26.06 26.06 0.0% 18.2 61 Yes
----- ---- ----- -----
Total Coos Bay 378.97 60.80 439.77 436.64 0.7% 53.8
------ ----- ------ ------ ---- ----
Florence 29.70 18.95 48.65 48.65 0.0% 88.1 62 Yes
Dunes City 25.30 4.00 29.30 29.20 0.3% 28.8 62 Yes
Mapleton 6.50 0.00 6.50 6.50 0.0% 52.8 17 No
Lane Cty. (Florence) 41.14 10.80 51.94 51.79 0.3% 45.3 62 Yes
----- ----- ----- -----
Total Florence 102.64 33.75 136.39 136.14 0.2% 57.4
------ ----- ------ ------ ---- ----
Total Coos Bay/Florence 481.61 94.55 576.16 572.78 0.6% 54.7
------ ----- ------ ------ ---- ----
Fiber Miles 84.33 0.98 85.31 n/a n/a
----- ---- ----- --- ---
</TABLE>
<TABLE>
<CAPTION>
Franchises
---------------------------------
Fee Expiration Life (Yrs)
--- ---------- ----------
<S> <C> <C> <C>
Coos Bay 5% Jun-2004 8.5
North Bend 5% Jun-2004 8.5
Coos Cty. (Coos Bay/North Bend)
Myrtle Point 5% Jun-2001 5.4
Coos Cty. (Myrtle Point)
Powers 3% Mar-96 0.2
Coos Cty. (Powers)
Reedsport 3% Oct-98 2.8
Winchester Bay
Douglas Cty. (Reedsport)
Coos Cty. (Lakeside)
Lakeside 3% Dec-2004 9.0
Gardiner
Coquille 5% Jun-96 0.5
Coos Cty. (Coquille)
Bandon 3% Basic Jun-94 (1.6)
Coos Cty. (Brandon)
Hauser
Total Coos Bay
Florence 3% Sep-2003 7.7
Dunes City 5% Sep-2003 7.7
Mapleton
Lane Cty. (Florence) 5% Jun-2007 11.5
Total Florence
Total Coos Bay/Florence
Fiber Miles
</TABLE>
* Rebuild per FCSC 10 Yr. Plan. Portion of H/E service area to be rebuilt/
Yr.(s) of rebuild.
-94-
<PAGE> 103
EXHIBIT C
REGION CASH FLOW STATEMENTS
<PAGE> 104
FALCON CABLE SYSTEMS COMPANY EXHIBIT C1
GILROY REGION, CALIFORNIA
OPERATING CASH FLOW: ACTUAL & BUDGET
<TABLE>
<CAPTION>
1996 Budget Dec Mo 1995 Actual 1995 Actual 1994 Actual
--------------------- ------------------ ------------------ ------------------
($000) % to Rev. ($000) % to Rev. ($000) % to Rev. ($000) % to Rev.
------ --------- ------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Primary 8,174.5 58.4% $664.0 59.8% $7,728.2 58.8% $8,762.5 66.1%
Commercial 97.6 0.7% 8.3 0.7% 98.8 0.8% 96.1 0.7%
Expanded Tier 1,929.2 13.8% 152.8 13.8% 1,839.2 14.0% 961.0 7.3%
------- ----- ----- ----- ------- ----- ----- ----
Total Reg. Prog. 10,201.4 72.9% 825.0 74.3% 9,666.2 73.5% 9,819.6 74.1%
-------- ----- ----- ----- ------- ----- ------- -----
Radio Services 44.5 0.3% 3.6 0.3% 48.1 0.4% 51.2 0.4%
Pay Cable - 1st Outlet 1,246.8 8.9% 96.6 8.7% 1,146.2 8.7% 1,129.2 8.5%
Pay Cable - Add'l Outlet 4.2 0.4% 48.1 0.4% 45.6 0.3%
New Product Tier 788.2 5.6% 58.8 5.3% 655.1 5.0% 603.7 4.6%
Commercial Pay 2.8 0.3% 34.1 0.3% 34.5 0.3%
Mini-Pay 17.6 0.1% 1.0 0.1% 13.4 0.1% 15.2 0.1%
Mini-Pay - Add'l Outlet 0.1 0.0% 0.8 0.0% 0.8 0.0%
Pay Per View 169.8 1.2% 4.5 0.4% 133.7 1.0% 173.9 1.3%
----- ---- --- ---- ----- ---- ----- ----
Total Unreg. Prog. 2,266.9 16.2% 171.7 15.5% 2,079.3 15.8% 2,054.0 15.5%
------- ----- ----- ----- ------- ----- ------- -----
Primary Add'l Outlet 0.0 0.0% 0.1 0.0% 0.7 0.0%
Remote Control 8.4 0.1% 0.7 0.1% 18.9 0.1% 26.8 0.2%
Converter Rental 193.2 1.4% 17.5 1.6% 205.6 1.6% 230.3 1.7%
Other - VCR 3.4 0.0% 0.3 0.0% 3.4 0.0% 3.4 0.0%
--- ---- --- ---- --- ---- --- ----
Total Equipment 205.0 1.5% 18.4 1.7% 227.9 1.7% 261.2 2.0%
----- ---- ---- ---- ----- ---- ----- ----
Wire Maint. Agreements 49.9 0.4% 4.1 0.4% 41.1 0.3% 24.6 0.2%
New Cust. - Pay Installs 0.0 0.0% 0.0 0.0% 0.7 0.0%
New Cust. - Basic Installs 195.2 1.4% 3.7 0.3% 41.2 0.3% 69.6 0.5%
Install Mat'l Charge 0.0 0.0% 0.7 0.0% 0.0 0.0%
Installs - Non New Cust. 8.6 0.8% 149.9 1.1% 131.6 1.0%
--- ---- ----- ---- ----- ----
Total Install/Service 245.1 1.8% 16.4 1.5% 233.0 1.8% 226.5 1.7%
----- ---- ---- ---- ----- ---- ----- ----
Guide Revenue 6.2 0.0% 0.3 0.0% 3.8 0.0% 3.3 0.0%
Late Charges 202.5 1.4% 14.7 1.3% 194.7 1.5% 179.5 1.4%
Rent 21.2 0.2% 1.7 0.2% 20.9 0.2% 14.0 0.1%
Franchise Pass Thru 323.1 2.3% 28.5 2.6% 308.8 2.3% 310.7 2.3%
Miscellaneous 0.0 0.0% 0.0 0.0% 0.0 0.0% 28.3 0.2%
Shopping Net Car. Fee 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0%
FCC User Fee Pass Thru 16.5 0.1% 1.4 0.1% 15.4 0.1% 0.8 0.0%
QVC Monthly Comm. 84.1 0.6% 6.0 0.5% 89.4 0.7% 71.0 0.5%
QVC Carriage Payment 16.6 0.1% 0.0 0.0% (1.5) -0.0% 29.5 0.2%
HSN Monthly Comm. 5.3 0.0% 0.0 0.0% 4.8 0.0% 0.0 0.0%
HSN Carriage Payment 6.2 0.0% 0.5 0.0% 6.2 0.0% 0.0 0.0%
--- ---- --- ---- --- ---- --- ----
Total Non-Service/Misc. 681.6 4.9% 53.1 4.8% 642.4 4.9% 637.1 4.8%
----- ---- ---- ---- ----- ---- ----- ----
Advertising 390.0 2.8% 26.1 2.3% 296.8 2.3% 252.0 1.9%
----- ---- ----- -----
Total Revenues 13,990.1 100.0% 1,110.8 100.0% 13,145.7 100.0% 13,250.4 100.0%
-------- ------ ------- ------ -------- ------ -------- ------
Operating Expenses:
Technical
Personnel 1,172.3 21.7 2.0% 474.7 3.6% 485.5 3.7%
Other 79.3 7.1% 756.7 5.8% 608.8 4.6%
Programming 1,966.8 169.5 15.3% 1,999.9 15.2% 1,989.2 15.0%
Capitalized Labor & O/H (1.8) -0.2% (161.4) -1.2% (250.5) -1.9%
---- ----- ------ ----- ------ -----
Total Technical 3,139.1 22.44% 268.6 24.2% 3,069.9 23.4% 2,832.9 21.4%
------- ------ ----- ----- ------- ----- ------- -----
Ad Sales
Personnel 5.4 0.5% 66.2 0.5% 50.8 0.4%
Other 6.8 0.6% 23.0 0.2% 20.7 0.2%
--- ---- ---- ---- ---- ----
Total Ad Sales 133.2 0.95% 12.1 1.1% 89.2 0.7% 71.5 0.5%
----- ----- ---- ---- ---- ---- ---- ----
Marketing
Commissions 0.2 0.0% 5.2 0.0% 9.4 0.1%
Other 19.1 1.7% 279.8 2.1% 370.5 2.8%
---- ---- ----- ---- ----- ----
Total Marketing 218.6 1.56% 19.3 1.7% 284.9 2.2% 379.9 2.9%
----- ----- ---- ---- ----- ---- ----- ----
0.0%
General & Administrative
Personnel 26.3 2.4% 367.1 2.8% 359.2 2.7%
Other 162.7 14.7% 1,683.8 12.8% 1,893.2 14.3%
----- ----- ------- ----- ------- -----
Total G & A 1,954.5 13.97% 189.0 17.0% 2,050.9 15.6% 2,252.4 17.0%
------- ------ ----- ----- ------- ----- ------- -----
Total Operating Expense
Before Alloc. Corp. Exp. 5,445.4 38.92% 489.1 44.0% 5,494.8 41.8% 5,536.7 41.8%
------- ------ ----- ----- ------- ----- ------- -----
Total Oper. Cash Flow
Before Alloc. Corp. Exp. 8,544.7 61.1% 621.7 56.0% 7,650.9 58.2% 7,713.7 58.2%
------- ----- ----- ----- ------- ----- ------- -----
Allocated Corporate Exp.
Expenses 492.4 3.5% 40.8 3.7% 489.7 3.7% 496.1 3.7%
----- ---- ---- ---- ----- ---- ----- ----
Total Oper. Cash Flow
After Alloc. Corp. Exp. $8,052.3 57.6% $580.9 52.3% $7,161.2 54.5% $7,217.6 54.5%
-------- ----- ------ ----- -------- ----- -------- -----
</TABLE>
-95-
<PAGE> 105
FALCON CABLE SYSTEMS COMPANY EXHIBIT C2
HESPERIA REGION, CALIFORNIA
OPERATING CASH FLOW: BUDGET & ACTUAL
<TABLE>
<CAPTION>
1996 Budget Dec Mo 1995 Actual 1995 Actual 1994 Actual
------------------- ------------------ -------------------- ------------------
($000s) % to Rev. ($000s) % to Rev. ($000s) % to Rev. ($000s) % to Rev.
------- --------- ------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Primary / Commercial $4,278.6 52.29% $353.9 53.74% $4,166.4 53.10% $4,608.4 62.95%
Expanded Tier 1,556.1 19.02% 125.7 19.09% 1,520.8 19.38% 764.6 10.44%
------- ------ ----- ------ ------- ------ ----- ------
Total Regulated Programming 5,834.7 71.31% 479.6 72.83% 5,687.2 72.48% 5,373.0 73.40%
------- ------ ----- ------ ------- ------ ------- ------
Radio Services 37.4 0.46% 3.1 0.47% 40.9 0.52% 51.2 0.70%
Pay Cable 709.0 8.67% 59.7 9.07% 710.6 9.06% 616.6 8.42%
New Product Tier 389.6 4.76% 30.5 4.63% 335.2 4.27% 287.1 3.92%
Mini-Pay 7.3 0.09% 0.5 0.08% 5.8 0.07% 7.6 0.10%
Pay Per View 131.1 1.60% 3.7 0.56% 102.9 1.31% 105.5 1.44%
----- ----- --- ----- ----- ----- ----- -----
Total Unregulated Programming 1,274.4 15.58% 97.5 14.81% 1,195.4 15.23% 1,068.0 14.59%
------- ------ ---- ------ ------- ------ ------- ------
Remote Control 22.6 0.28% 4.0 0.61% 42.4 0.54% 37.3 0.51%
Converter Rental 363.1 4.44% 27.9 4.24% 326.2 4.16% 323.3 4.42%
Other - VCR 0.0 0.00% 0.1 0.02% 0.0 0.00% 2.0 0.03%
--- ----- --- ----- --- ----- --- -----
Total Equipment 385.7 4.71% 32.0 4.86% 368.6 4.70% 362.6 4.95%
----- ----- ---- ----- ----- ----- ----- -----
Wire Maintenance Agreements 55.4 0.68% 4.5 0.68% 52.6 0.67% 34.2 0.47%
Installation 168.8 2.06% 9.3 1.41% 158.2 2.02% 148.7 2.03%
----- ----- --- ----- ----- ----- ----- -----
Total Installation / Service 224.2 2.74% 13.8 2.10% 210.8 2.69% 182.9 2.50%
----- ----- ---- ----- ----- ----- ----- -----
Guide Revenue 3.4 0.04% 0.0 0.00% 0.0 0.00% 0.0 0.00%
Late Charges 65.7 0.80% 5.8 0.88% 63.2 0.81% 58.8 0.80%
Home Shopping 67.4 0.82% 5.8 0.88% 67.4 0.86% 38.5 0.53%
FCC User Fee Pass Thru 9.2 0.11% 0.8 0.12% 8.6 0.11% 0.4 0.01%
Franchise Pass Thru 68.5 0.84% 5.5 0.84% 65.5 0.83% 63.2 0.86%
Miscellaneous / Rent 9.1 0.11% 0.9 0.14% 9.1 0.12% 8.6 0.12%
--- ----- --- ----- --- ----- --- -----
Total Non-Service / Misc. 223.3 2.73% 18.8 2.85% 213.8 2.72% 169.5 2.32%
----- ----- ---- ----- ----- ----- ----- -----
Advertising 239.6 2.93% 16.8 2.55% 170.8 2.18% 164.5 2.25%
----- ----- ---- ----- ----- ----- ----- -----
Total Revenues 8,181.9 100.00% 658.5 100.00% 7,846.6 100.00% 7,320.5 100.00%
------- ------- ----- ------- ------- ------- ------- -------
Operating Expenses:
Technical
Personnel 770.7 9.42% 18.4 2.79% 254.9 3.25% 242.7 3.32%
Other 43.9 6.67% 469.7 5.99% 412.4 5.63%
Programming 1,299.8 15.89% 113.2 17.19% 1,384.3 17.64% 1,202.3 16.42%
------- ------
Capitalized Labor & O/H (8.4) -1.28% (89.0) -1.13% (190.5) -2.60%
---- ------ ----- ------ ------ ------
Total Technical 2,070.5 25.31% 167.1 25.38% 2,019.9 25.74% 1,666.9 22.77%
------- ------ ----- ------ ------- ------ ------- ------
Ad Sales
Personnel 7.1 1.08% 60.9 0.78% 50.1 0.68%
Other 4.8 0.73% 12.3 0.16% 5.9 0.08%
--- ----- ---- ----- ---- -----
Total Ad Sales 77.8 0.95% 11.9 1.81% 73.2 0.93% 56.0 0.76%
---- ----- ---- ----- ---- ----- ---- -----
Marketing
Commissions 0.1 0.02% 2.3 0.03% 2.4 0.03%
Other 14.9 2.26% 273.9 3.49% 234.7 3.21%
---- ----- ----- ----- ----- -----
Total Marketing 125.3 1.53% 15.0 2.28% 276.2 3.52% 237.1 3.24%
----- ----- ---- ----- ----- ----- ----- -----
General & Administrative
Personnel 11.4 1.73% 233.7 2.98% 198.3 2.71%
Other 86.7 13.17% 1,026.8 13.09% 1,045.7 14.28%
---- ------ ------- ------ ------- ------
Total G & A 1,330.5 16.26% 98.1 14.90% 1,260.5 16.06% 1,244.0 16.99%
------- ------ ---- ------ ------- ------ ------- ------
Total Operating Expense
Before Alloc. Corp. Expenses* 3,604.1 44.05% 292.1 44.36% 3,629.8 46.26% 3,204.0 43.77%
------- ------ ----- ------ ------- ------ ------- ------
Total Oper. Cash Flow
Before Alloc. Corp. Expenses* $4,577.8 55.95% $366.4 55.64% $4,216.8 53.74% $4,116.5 56.23%
======== ====== ====== ====== ======== ====== ======== ======
</TABLE>
*Allocated Corporate Expenses are approximately 3.7%.
-96-
<PAGE> 106
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY EXHIBIT C3
SAN LUIS OBISPO REGION, CALIFORNIA
OPERATING CASH FLOW: BUDGET & ACTUAL
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1996 Budget Dec Mo 1995 Actual 1995 Actual 1994 Actual
------------------- ------------------- ------------------- -------------------
($000s) % to Rev. ($000s) % to Rev. ($000s) % to Rev. ($000s) % to Rev.
-------- --------- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Primary / Commercial $3,235.2 52.59% $254.5 51.98% $2,974.1 51.92% $3,803.4 62.00%
Expanded Tier 1,334.1 21.69% 102.6 20.96% 1,198.2 20.92% 676.8 11.03%
-------- --------- -------- --------- -------- --------- -------- ---------
Total Regulated Programming 4,569.3 74.28% 357.1 72.94% 4,172.3 72.83% 4,480.2 73.03%
-------- --------- -------- --------- -------- --------- -------- ---------
Radio Services 28.5 0.46% 2.4 0.49% 30.8 0.54% 36.4 0.59%
Pay Cable 375.4 6.10% 32.1 6.56% 415.7 7.26% 395.1 6.44%
New Product Tier 201.3 3.27% 15.1 3.08% 177.4 3.10% 192.9 3.14%
Mini-Pay 0.0 0.00% 0.0 0.00% 0.0 0.00% 0.0 0.00%
Pay Per View 69.1 1.12% 2.2 0.45% 29.8 0.52% 36.5 0.59%
-------- --------- -------- --------- -------- --------- -------- ---------
Total Unregulated Programming 674.3 10.96% 51.8 10.58% 653.7 11.41% 660.9 10.77%
-------- --------- -------- --------- -------- --------- -------- ---------
Remote Control 8.2 0.13% 0.7 0.14% 14.6 0.25% 22.3 0.36%
Converter Rental 187.8 3.05% 14.3 2.92% 215.9 3.77% 300.7 4.90%
Other - VCR 0.7 0.01% 0.1 0.02% 0.7 0.01% 0.8 0.01%
-------- --------- -------- --------- -------- --------- -------- ---------
Total Equipment 196.7 3.20% 15.1 3.08% 231.2 4.04% 323.8 5.28%
-------- --------- -------- --------- -------- --------- -------- ---------
Wire Maintenance Agreements 21.8 0.35% 1.8 0.37% 21.4 0.37% 16.0 0.26%
Installation 45.4 0.74% 3.9 0.80% 42.9 0.75% 53.6 0.87%
-------- --------- -------- --------- -------- --------- -------- ---------
Total Installation / Service 67.2 1.09% 5.7 1.16% 64.3 1.12% 69.6 1.13%
-------- --------- -------- --------- -------- --------- -------- ---------
Guide Revenue 3.0 0.05% 0.0 0.00% 0.1 0.00% 0.1 0.00%
Late Charges 51.4 0.84% 3.9 0.80% 49.5 0.86% 42.1 0.69%
Home Shopping 54.0 0.88% 12.0 2.45% 80.8 1.41% 41.5 0.68%
FCC User Fee Pass Thru 7.7 0.13% 0.6 0.12% 7.3 0.13% 0.3 0.00%
Franchise Pass Thru 256.4 4.17% 19.6 4.00% 235.4 4.11% 251.9 4.11%
Miscellaneous / Rent 0.0 0.00% 0.0 0.00% 0.0 0.00% 0.0 0.00%
-------- --------- -------- --------- -------- --------- -------- ---------
Total Non-Service / Misc. 372.5 6.06% 36.1 7.37% 373.1 6.51% 335.9 5.48%
-------- --------- -------- --------- -------- --------- -------- ---------
Advertising 271.6 4.42% 23.8 4.86% 233.9 4.08% 264.1 4.31%
-------- --------- -------- --------- -------- --------- -------- ---------
Total Revenues 6,151.6 100.00% 489.6 100.00% 5,728.5 100.00% 6,134.5 100.00%
-------- --------- -------- --------- -------- --------- -------- ---------
Operating Expenses:
Technical
Personnel 787.3 12.80% 19.5 3.98% 262.5 4.58% 230.4 3.76%
Other 17.2 3.51% 433.4 7.57% 437.3 7.13%
Programming 1,046.8 17.02% 95.6 19.53% 1,138.1 19.87% 1,058.0 17.25%
Capitalized Labor & O/H -------- --------- (5.8) -1.18% (68.6) -1.20% (90.3) -1.47%
-------- --------- -------- --------- -------- ---------
Total Technical 1,834.1 29.82% 126.5 25.84% 1,765.4 30.82% 1,635.4 26.66%
-------- --------- -------- --------- -------- --------- -------- ---------
Ad Sales
Personnel 5.4 1.10% 51.8 0.90% 58.3 0.95%
Other 6.3 1.29% 35.8 0.62% 17.8 0.29%
-------- --------- -------- --------- -------- ---------
Total Ad Sales 89.7 1.46% 11.7 2.39% 87.6 1.53% 76.1 1.24%
-------- --------- -------- --------- -------- --------- -------- ---------
Marketing
Commissions 0.0 0.00% 0.0 0.00% 0.0 0.00%
Other 38.4 7.84% 227.0 3.96% 198.8 3.24%
-------- --------- -------- --------- -------- ---------
Total Marketing 173.3 2.82% 38.4 7.84% 227.0 3.96% 198.8 3.24%
-------- --------- -------- --------- -------- --------- -------- ---------
General & Administrative
Personnel 16.3 3.33% 193.5 3.38% 173.4 2.83%
Other 110.5 22.57% 906.2 15.82% 883.0 14.39%
-------- --------- -------- --------- -------- ---------
Total G & A 1,068.0 17.36% 126.8 25.90% 1,099.7 19.20% 1,056.4 17.22%
-------- --------- -------- --------- -------- --------- -------- ---------
Total Operating Expense
Before Alloc. Corp. Expenses* 3,165.1 51.45% 303.4 61.97% 3,179.7 55.51% 2,966.7 48.36%
-------- --------- -------- --------- -------- --------- -------- ---------
Total Oper. Cash Flow
Before Alloc. Corp. Expenses* $2,986.5 48.55% $186.2 38.03% $2,548.8 44.49% $3,167.8 51.64%
======== ========= ======== ========= ======== ========= ======== =========
</TABLE>
*Allocated Corporate Expenses are approximately 3.7%.
-97-
<PAGE> 107
FALCON CABLE SYSTEMS COMPANY EXHIBIT C4
TULARE REGION, CALIFORNIA
OPERATING CASH FLOW: BUDGET & ACTUAL
<TABLE>
<CAPTION>
1996 Budget Dec Mo 1995 Actual 1995 Actual 1994 Actual
----------- ------------------ ----------- -----------
($000s) % to Rev. ($000s) % to Rev. ($000s) % to Rev. ($000s) % to Rev.
------- --------- ------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Primary / Commercial $3,223.6 47.16% $254.3 48.78% $3,151.2 48.44% $3,707.8 54.51%
Expanded Tier 975.5 14.27% 74.0 14.20% 883.2 13.58% 451.7 6.64%
-------- ----- ------ ----- -------- ----- -------- ------
Total Regulated Programming 4,199.1 61.44% 328.3 62.98% 4,034.4 62.01% 4,159.5 61.15%
-------- ----- ------ ----- -------- ----- -------- ------
Radio Services 1.7 0.02% 0.1 0.02% 1.8 0.03% 1.8 0.03%
Pay Cable 601.8 8.80% 48.6 9.32% 603.1 9.27% 695.0 10.22%
New Product Tier 503.2 7.36% 35.7 6.85% 459.5 7.06% 552.5 8.12%
Mini-Pay 0.0 0.00% 0.0 0.00% 0.0 0.00% 0.0 0.00%
Pay Per View 123.7 1.81% 3.1 0.59% 87.7 1.35% 126.2 1.86%
-------- ----- ------ ----- -------- ----- -------- ------
Total Unregulated Programming 1,230.4 18.00% 87.5 16.78% 1,152.1 17.71% 1,375.5 20.22%
-------- ----- ------ ----- -------- ----- -------- ------
Remote Control 25.4 0.37% 2.1 0.40% 26.4 0.41% 27.9 0.41%
Converter Rental 361.9 5.29% 29.2 5.60% 368.4 5.66% 400.2 5.88%
Other - VCR 0.9 0.01% 0.1 0.02% 1.1 0.02% 1.3 0.02%
-------- ----- ------ ----- -------- ----- -------- ------
Total Equipment 388.2 5.68% 31.4 6.02% 395.9 6.09% 429.4 6.31%
-------- ----- ------ ----- -------- ----- -------- ------
Wire Maintenance Agreements 47.7 0.70% 3.8 0.73% 44.6 0.69% 28.2 0.41%
Installation 73.9 1.08% 1.4 0.27% 72.3 1.11% 67.1 0.99%
-------- ----- ------ ----- -------- ----- -------- ------
Total Installation / Service 121.6 1.78% 5.2 1.00% 116.9 1.80% 95.3 1.40%
-------- ----- ------ ----- -------- ----- -------- ------
Guide Revenue 91.0 1.33% 4.0 0.77% 53.0 0.81% 70.8 1.04%
Late Charges 227.2 3.32% 18.0 3.45% 218.5 3.36% 193.1 2.84%
Home Shopping 26.9 0.39% 4.0 0.77% 27.9 0.43% 26.5 0.39%
FCC User Fee Pass Thru 7.6 0.11% 0.6 0.12% 7.2 0.11% 0.4 0.01%
Franchise Pass Thru 254.4 3.72% 19.6 3.76% 242.3 3.72% 254.8 3.75%
Miscellaneous / Rent 6.6 0.10% 0.7 0.13% 7.2 0.11% 5.5 0.08%
-------- ----- ------ ----- -------- ----- -------- ------
Total Non-Service / Misc. 613.7 8.98% 46.9 9.00% 556.1 8.55% 551.1 8.10%
-------- ----- ------ ----- -------- ----- -------- ------
Advertising 282.0 4.13% 22.0 4.22% 250.6 3.85% 191.5 2.82%
-------- ----- ------ ----- -------- ----- -------- ------
Total Revenues 6,835.0 100.00% 521.3 100.00% 6,506.0 100.00% 6,802.3 100.00%
-------- ----- ------ ----- -------- ----- -------- ------
Operating Expenses:
Technical
Personnel 804.5 11.77% 23.1 4.43% 334.2 5.14% 309.0 4.54%
Other 40.7 7.81% 505.1 7.76% 469.9 6.91%
Programming 1,283.8 18.78% 100 19.18% 1,279.2 19.66% 1,320.7 19.42%
-------- ----- ------ ----- -------- ----- -------- -----
Capitalized Labor & O/H (0.7) -0.13% (204.4 -3.14% (223.0) -3.28%
------ ----- -------- ----- -------- -----
Total Technical 2,088.3 30.55% 163.1 31.29% 1,914.1 29.42% 1,876.6 27.59%
-------- ----- ------ ----- -------- ----- -------- -----
Ad Sales
Personnel 8.5 1.63% 80.7 1.24% 72.8 1.07%
Other 6.6 1.27% 41.8 0.64% 38.6 0.57%
------ ----- -------- ----- -------- -----
Total Ad Sales 121.2 1.77% 15.1 2.90% 122.5 1.88% 111.4 1.64%
-------- ----- ------ ----- -------- ----- -------- -----
Marketing
Commissions 0.0 0.00% 0.0 0.00% 0.0 0.00%
Other 20.5 3.93% 184.3 2.83% 278.3 4.09%
------ ----- -------- ----- -------- -----
Total Marketing 150.4 2.20% 20.5 3.93% 184.3 2.83% 278.3 4.09%
-------- ----- ------ ----- -------- ----- -------- -----
General & Administrative
Personnel 16.2 3.11% 215.9 3.32% 195.8 2.88%
Other 76.8 14.73% 891.4 13.70% 1,006.7 14.80%
------ ----- -------- ----- -------- -----
Total G & A 1,151.9 16.85% 93.0 17.84% 1,107.3 17.02% 1,202.5 17.68%
-------- ----- ------ ----- -------- ----- -------- -----
Total Operating Expense
Before Alloc. Corp. Expenses* 3,511.8 51.38% 291.7 55.96% 3,328.2 51.16% 3,468.8 50.99%
-------- ----- ------ ----- -------- ----- -------- -----
Total Oper. Cash Flow
Before Alloc. Corp. Expenses* $3,323.2 48.62% $229.6 44.04% $3,177.8 48.84% $3,333.5 49.01%
======== ===== ====== ===== ======== ===== ======== =====
</TABLE>
*Allocated Corporate Expenses are approximately 3.7%.
-98-
<PAGE> 108
FALCON CABLE SYSTEMS COMPANY EXHIBIT C5
CENTRAL REGION, OREGON
OPERATING CASH FLOW: ACTUAL & BUDGET
<TABLE>
<CAPTION>
1996 Budget Dec Mo 1995 Actual 1995 Actual 1994 Actual
($000) % to Rev. ($000) % to Rev. ($000) % to Rev. ($000) % to Rev.
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Primary 2,842.2 54.9% $227.4 54.9% $2,726.3 54.5% $3,118.0 62.0%
Commercial 99.1 1.9% 8.2 2.0% 96.3 1.9% 94.3 1.9%
Expanded Tier 830.6 16.1% 64.4 15.6% 788.3 15.8% 454.7 9.0%
-------- ----- ------ ----- -------- ----- -------- -----
Total Reg. Prog. 3,772.0 72.9% 300.0 72.4% 3,610.9 72.2% 3,666.9 72.9%
-------- ----- ------ ----- -------- ----- -------- -----
Radio Services 0.9 0.0% 0.1 0.0% 0.8 0.0% 0.9 0.0%
Pay Cable - 1st Outlet 467.9 9.0% 43.9 10.6% 511.0 10.2% 467.3 9.3%
Pay Cable - Add'l Outlet 1.1 0.3% 11.7 0.2% 8.8 0.2%
New Product Tier 585.0 11.3% 40.8 9.9% 468.1 9.4% 443.7 8.8%
Commercial Pay 0.4 0.1% 4.9 0.1% 9.4 0.2%
Mini-Pay 1.2 0.0% 0.1 0.0% 0.7 0.0% 0.6 0.0%
Mini-Pay - Add'l Outlet 0.0 0.0% 0.0 0.0% 0.0 0.0%
Pay Per View 0.0 0.0% 0.1 0.0% 11.9 0.2% 9.6 0.2%
-------- ----- ------ ----- -------- ----- -------- -----
Total Unreg. Prog. 1,054.9 20.4% 86.4 20.9% 1,009.0 20.2% 940.3 18.7%
-------- ----- ------ ----- -------- ----- -------- -----
Primary Add'l Outlet 0.0 0.0% 0.0 0.0% 0.0 0.0% 2.7 0.1%
Remote Control 7.9 0.2% 1.4 0.3% 20.3 0.4% 29.8 0.6%
Converter Rental 45.8 0.9% 3.3 0.8% 83.4 1.7% 149.3 3.0%
Other - VCR 0.8 0.0% 0.1 0.0% 0.8 0.0% 0.5 0.0%
-------- ----- ------ ----- -------- ----- -------- -----
Total Equipment 54.5 1.1% 4.7 1.1% 104.5 2.1% 182.3 3.6%
-------- ----- ------ ----- -------- ----- -------- -----
Wire Maint. Agreements 41.3 0.8% 3.4 0.8% 36.8 0.7% 23.0 0.5%
New Cust. - Pay Installs 0.1 0.0% 0.2 0.0% 3.3 0.1%
New Cust. - Basic Installs 95.7 1.8% 1.4 0.3% 38.1 0.8% 22.8 0.5%
Install Mat'l Charge 0.5 0.1% 3.9 0.1% 0.0 0.0%
Installs - Non New Cust. 3.3 0.8% 48.6 1.0% 45.1 0.9%
------ ---- -------- ---- -------- ----
Total Install/Service 137.0 2.6% 8.8 2.1% 127.6 2.6% 94.2 1.9%
-------- ----- ------ ----- -------- ----- -------- -----
Guide Revenue 2.7 0.1% 0.0 0.0% 0.1 1.5% 0.0 0.0%
Late Charges 78.6 1.5% 6.0 1.5% 75.6 0.0% 91.4 1.8%
Rent 2.6 0.1% 0.0 0.0% 1.8 0.0% 4.1 0.1%
Franchise Pass Thru 21.4 0.4% 1.9 0.5% 20.9 0.4% 21.6 0.4%
Miscellaneous 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0%
Shopping Net Car. Fee 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0%
FCC User Fee Pass Thru 7.0 0.1% 0.6 0.1% 6.6 0.1% 0.3 0.0%
QVC Monthly Comm. 26.3 0.5% 4.5 1.1% 27.3 0.5% 20.0 0.4%
QVC Carriage Payment 3.1 0.1% 0.0 0.0% 1.1 0.0% 4.1 0.1%
HSN Monthly Comm. 5.1 0.1% 0.5 0.1% 4.6 0.1% 0.0 0.0%
HSN Carriage Payment 9.0 0.2% 0.7 0.2% 8.3 0.2% 0.0 0.0%
-------- ----- ------ ----- -------- ----- -------- -----
Total Non-Service/Misc. 155.7 3.0% 14.2 3.4% 146.1 2.9% 141.5 2.8%
-------- ----- ------ ----- -------- ----- -------- -----
Advertising 0.0 0.0% 0.0 0.0% 2.8 0.1% 3.8 0.1%
-------- ----- ------ ----- -------- ----- -------- -----
Total Revenues 5,174.1 100.0% 414.2 100.0% 5,001.0 100.0% 5,029.0 100.0%
-------- ----- ------ ----- -------- ----- -------- -----
Operating Expenses:
Technical
Personnel 624.1 35.9 8.7% 310.4 6.2% 277.3 5.5%
Other 20.1 4.9% 244.8 4.9% 203.8 4.1%
Programming 759.0 169.5 40.9% 868.0 17.4% 812.7 16.2%
Capitalized Labor & O/H (4.2) -1.0% (111.8) -2.2% (197.8) -3.9%
-------- ----- ------ ----- -------- ----- -------- -----
Total Technical 1,383.2 26.7% 221.3 53.4% 1,311.5 26.2% 1,096.0 21.8%
-------- ----- ------ ----- -------- ----- -------- -----
Ad Sales
Personnel 0.0 0.0% 0.0 0.0% 0.0 0.0%
Other 0.0 0.0% 0.0 0.0% 0.0 0.0%
-------- ----- ------ ----- -------- ----- -------- -----
Total Ad Sales 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0%
-------- ----- ------ ----- -------- ----- -------- -----
Marketing
Commissions 0.0 0.0% 0.0 0.0% 0.0 0.0%
Other 14.9 3.6% 120.3 2.4% 113.2 2.3%
Total Marketing 101.1 2.0% 14.9 3.6% 120.3 2.4% 113.2 2.3%
0.0%
General & Administrative
Personnel 10.0 2.4% 141.4 2.8% 147.7 2.9%
Other 61.1 14.7% 715.3 14.3% 860.6 17.1%
-------- ----- ------ ----- -------- ----- -------- -----
Total G & A 911.0 17.6% 71.0 17.1% 856.8 17.1% 1,008.2 20.0%
-------- ----- ------ ----- -------- ----- -------- -----
Total Operating Expense
Before Alloc. Corp. Exp. 2,395.3 46.3% 307.3 74.2% 2,288.6 45.8% 2,217.4 44.1%
-------- ----- ------ ----- -------- ----- -------- -----
Total Oper. Cash Flow
Before Alloc. Corp. Exp. 2,778.8 53.7% 106.9 25.8% 2,712.4 54.2% 2,811.6 55.9%
-------- ----- ------ ----- -------- ----- -------- -----
Reimbursable Allocated
Corporate Expenses 182.1 3.5% 15.5 3.7% 186.3 3.7% 188.3 3.7%
-------- ----- ------ ----- -------- ----- -------- -----
Total Oper. Cash Flow
After Alloc. Corp. Exp. $2,596.7 50.2% $91.4 22.1% $2,526.1 50.5% $2,623.3 52.2%
======== ===== ====== ===== ======== ===== ======== =====
</TABLE>
-99-
<PAGE> 109
FALCON CABLE SYSTEMS COMPANY EXHIBIT C6
DALLAS REGION, OREGON
OPERATING CASH FLOW: ACTUAL & BUDGET
<TABLE>
<CAPTION>
1996 Budget Dec Mo 1995 Actual 1995 Actual 1994 Actual
------------------ ------------------ -------------------- ------------------
($000) % to Rev. ($000) % to Rev. ($000) % to Rev. ($000) % to Rev.
------ --------- ------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Primary 3,412.7 53.3% $278.9 53.9% $3,296.4 54.3% $3,761.1 62.6%
Commercial 209.3 3.3% 16.9 3.3% 201.4 3.3% 193.9 3.2%
Expanded Tier 989.2 15.4% 74.2 14.3% 920.8 15.2% 482.8 8.0%
----- ----- ---- ----- ----- ----- ----- ----
Total Reg. Prog. 4,611.2 72.0% 369.9 71.5% 4,418.6 72.7% 4,437.7 73.9%
------- ----- ----- ----- ------- ----- ------- -----
Radio Services 24.7 0.4% 2.1 0.4% 25.8 0.4% 29.0 0.5%
Pay Cable - 1st Outlet 668.9 10.4% 53.9 10.4% 610.6 10.1% 535.6 8.9%
Pay Cable - Add'l Outlet 1.5 0.3% 15.4 0.3% 12.5 0.2%
New Product Tier 441.8 6.9% 32.4 6.3% 349.0 5.7% 314.6 5.2%
Commercial Pay 2.1 0.4% 28.0 0.5% 28.4 0.5%
Mini-Pay 12.0 0.2% 0.7 0.1% 8.6 0.1% 9.5 0.2%
Mini-Pay - Add'l Outlet 0.0 0.0% 0.3 0.0% 0.2 0.0%
Pay Per View 49.6 0.8% 2.0 0.4% 43.0 0.7% 39.1 0.7%
---- ---- --- ---- ---- ---- ---- ----
Total Unreg. Prog. 1,197.0 18.7% 94.8 18.3% 1,080.7 17.8% 968.8 16.1%
------- ----- ---- ----- ------- ----- ----- -----
Primary Add'l Outlet 0.0 0.0% 0.1 0.0% 0.6 0.0% 0.7 0.0%
Remote Control 5.3 0.1% 0.4 0.1% 6.5 0.1% 10.2 0.2%
Converter Rental 66.5 1.0% 5.6 1.1% 110.0 1.8% 192.1 3.2%
Other - VCR 1.6 0.0% 0.1 0.0% 1.5 0.0% 1.7 0.0%
--- ---- --- ---- --- ---- --- ----
Total Equipment 73.4 1.1% 6.2 1.2% 118.7 2.0% 204.7 3.4%
---- ---- --- ---- ----- ---- ----- ----
Wire Maint. Agreements 39.5 0.6% 3.3 0.6% 29.9 0.5% 21.4 0.4%
New Cust. - Pay Installs 0.0 0.0% 0.5 0.0% 0.0 0.0%
New Cust. - Basic Installs 85.4 1.3% 0.5 0.1% 17.2 0.3% 22.1 0.4%
Install Mat'l Charge 0.0 0.0% 0.0 0.0% 0.0 0.0%
Installs - Non New Cust. 2.1 0.4% 60.9 1.0% 52.7 0.9%
----- --- ---- ---- ---- ---- ----
Total Install/Service 124.9 2.0% 5.9 1.1% 108.5 1.8% 96.2 1.6%
----- ---- --- ---- ----- ---- ---- ----
Guide Revenue 3.2 0.0% 0.0 0.0% 0.0 1.8% 0.0 0.0%
Late Charges 116.5 1.8% 9.8 1.9% 112.1 0.0% 103.5 1.7%
Rent 2.7 0.0% 0.1 0.0% 2.6 0.0% 2.8 0.0%
Franchise Pass Thru 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0%
Miscellaneous 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0%
Shopping Net Car. Fee 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0%
FCC User Fee Pass Thru 8.3 0.1% 0.7 0.1% 7.7 0.1% 0.2 0.0%
QVC Monthly Comm. 24.4 0.4% 6.5 1.3% 27.3 0.4% 22.8 0.4%
QVC Carriage Payment 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0%
HSN Monthly Comm. 7.0 0.1% 0.5 0.1% 6.4 0.1% 0.0 0.0%
HSN Carriage Payment 9.2 0.1% 0.1 0.0% 1.5 0.0% 0.4 0.0%
--- ---- --- ---- --- ---- --- ----
Total Non-Service/Misc. 171.3 2.7% 17.7 3.4% 157.4 2.6% 129.7 2.2%
----- ---- ---- ---- ----- ---- ----- ----
Advertising 227.0 3.5% 22.9 4.4% 190.2 3.1% 168.5 2.8%
----- ---- ---- ---- ----- ---- ----- ----
Total Revenues 6,404.8 100.0% 517.4 00.0% 6,074.2 00.0% 6,005.6 100.0%
------- ------ ----- ----- ------- ----- ------- ------
Operating Expenses:
Technical
Personnel 594.5 32.3 6.2% 338.7 5.6% 301.7 5.0%
Other 29.9 1.7 0.3% 256.9 4.2% 184.3 3.1%
Programming 989.2 91.5 17.7% 1,067.4 17.6% 1,033.0 17.2%
Capitalized Labor & O/H (22.5) -4.3% (345.5) -5.7% (282.6 ) -4.7%
------- ----- ----- ----- ------- ----- ------- -----
Total Technical 1,613.6 25.2% 103.0 19.9% 1,317.6 21.7% 1,236.3 20.6%
------- ----- ----- ----- ------- ----- ------- -----
Ad Sales
Personnel 4.5 0.9% 42.4 0.7% 36.7 0.6%
Other 2.3 0.4% 30.2 0.5% 22.5 0.4%
--- ---- ---- ---- ---- ----
Total Ad Sales 92.0 1.4% 6.8 1.3% 72.6 1.2% 59.2 1.0%
---- ---- --- ---- ---- ---- ---- ----
Marketing
Commissions 0.1 0.0% 3.6 0.1% 0.1 0.0%
Other 20.7 4.0% 84.3 1.4% 98.3 1.6%
---- ---- ---- ---- ---- ----
Total Marketing 92.9 1.5% 20.8 4.0% 87.9 1.4% 98.5 1.6%
---- ---- ---- ---- ---- ---- ---- ----
General & Administrative
Personnel 16.2 3.1% 226.1 3.7% 210.9 3.5%
Other 71.0 13.7% 813.4 13.4% 859.5 14.3%
Capitalized Labor & O/H (12.7) -2.5% (107.4) -1.8% (70.8 ) -1.2%
----- ----- ------ ----- ----- -----
Total G & A 1,038.2 16.2% 74.6 14.4% 932.1 15.3% 999.5 16.6%
------- ----- ---- ----- ----- ----- ----- -----
Total Operating Expense
Before Alloc. Corp. Exp. 2,836.7 44.3% 205.1 39.6% 2,410.2 39.7% 2,393.5 39.9%
Total Oper. Cash Flow
Before Alloc. Corp. Exp. 3,568.1 55.7% 312.3 60.4% 3,664.0 60.3% 3,612.0 60.1%
------- ----- ----- ----- ------- ----- ------- -----
Reimbursable Allocated
Corporate Expenses 225.4 3.5% 18.9 3.6% 226.3 3.7% 224.9 3.7%
----- ---- ---- ---- ----- ---- ----- ----
Total Oper. Cash Flow
After Alloc. Corp. Exp. $3,342.7 52.2% $293.4 56.7% $3,437.7 56.6% $3,387.1 56.4%
-------- ----- ------ ----- -------- ----- -------- -----
</TABLE>
-100-
<PAGE> 110
FALCON CABLE SYSTEMS COMPANY EXHIBIT C7
COOS BAY/FLORENCE REGION, OREGON
OPERATING CASH FLOW: ACTUAL & BUDGET
<TABLE>
<CAPTION>
1996 Budget Dec Mo 1995 Actual 1995 Actual 1994 Actual
------------------ ------------------ -------------------- ------------------
($000) % to Rev. ($000) % to Rev. ($000) % to Rev. ($000) % to Rev.
------ --------- ------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Primary $4,958.6 53.7% $400.9 53.2% $4,771.0 55.3% $5,025.2 60.2%
Commercial 308.8 3.3% 23.1 3.1% 273.9 3.2% 288.7 3.5%
Expanded Tier 1,035.6 11.2% 79.8 10.6% 961.0 11.1% 576.8 6.9%
------- ----- ---- ----- ----- ----- ----- ----
Total Reg. Prog. 6,302.9 68.2% 503.8 66.9% 6,005.9 69.6% 5,890.7 70.5%
------- ----- ----- ----- ------- ----- ------- -----
Radio Services 11.4 0.1% 0.9 0.1% 12.3 0.1% 13.6 0.2%
Pay Cable - 1st Outlet 688.5 7.5% 54.0 7.2% 647.2 7.5% 642.4 7.7%
Pay Cable - Add'l Outlet 1.2 0.2% 13.6 0.2% 12.1 0.1%
New Product Tier 761.1 8.2% 57.4 7.6% 548.5 6.4% 477.2 5.7%
Commercial Pay 2.2 0.3% 27.2 0.3% 25.9 0.3%
Mini-Pay 15.8 0.2% 0.8 0.1% 12.3 0.1% 14.7 0.2%
Mini-Pay - Add'l Outlet 0.1 0.0% 0.9 0.0% 0.9 0.0%
Video Games 24.5 0.3% 2.6 0.3% 8.3 0.1% 0.0 0.0%
Pay Per View 172.5 1.9% 10.9 1.4% 140.0 1.6% 126.6 1.5%
------- ---- ---- ---- ----- ---- ----- ----
Total Unreg. Prog. 1,673.7 18.1% 130.0 17.3% 1,410.2 16.3% 1,313.3 15.7%
------- ----- ----- ----- ------- ----- ------- -----
Primary Add'l Outlet 0.0 0.0% 0.0 0.0% 0.0 0.0% 3.3 0.0%
Remote Control 20.4 0.2% 1.8 0.2% 20.6 0.2% 19.5 0.2%
Converter Rental 290.9 3.1% 24.7 3.3% 275.8 3.2% 264.1 3.2%
Other - VCR 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0%
--- ---- --- ---- --- ---- --- ----
Total Equipment 311.4 3.4% 26.5 3.5% 296.4 3.4% 286.9 3.4%
----- ---- ---- ---- ----- ---- ----- ----
Wire Maint. Agreements 78.1 0.8% 6.4 0.9% 73.8 0.9% 46.5 0.6%
New Cust. - Pay Installs 0.0 0.0% 0.3 0.0% 6.0 0.1%
New Cust. - Basic Installs 146.7 1.6% 3.7 0.5% 36.0 0.4% 94.4 1.1%
Install Mat'l Charge 0.0 0.0% 0.1 0.0% 0.0 0.0%
Installs - Non New Cust. 6.7 0.9% 104.5 1.2% 77.5 0.9%
----- --- ---- ----- ---- ---- ----
Total Install/Service 224.8 2.4% 16.9 2.2% 214.6 2.5% 224.4 2.7%
----- ---- ---- ---- ----- ---- ----- ----
Guide Revenue 5.3 0.1% 0.2 0.0% 0.9 1.0% 0.6 0.0%
Late Charges 94.1 1.0% 9.6 1.3% 90.4 0.4% 87.3 1.0%
Rent 42.4 0.5% 3.0 0.4% 37.8 0.4% 10.4 0.1%
Franchise Pass Thru 143.5 1.6% 11.7 1.6% 134.5 1.6% 130.3 1.6%
Miscellaneous 0.3 0.0% 0.0 0.0% 0.3 0.0% 0.2 0.0%
Shopping Net Car. Fee 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0%
FCC User Fee Pass Thru 10.7 0.1% 0.9 0.1% 10.2 0.1% 0.3 0.0%
Video Game Activation 1.8 0.0% 0.7 0.1% 5.4 0.1% 0.0 0.0%
QVC Monthly Comm. 54.0 0.6% 10.0 1.3% 57.2 0.7% 53.0 0.6%
QVC Carriage Payment 2.5 0.0% 0.0 0.0% 29.3 0.3% 4.4 0.1%
HSN Monthly Comm. 21.3 0.2% 1.1 0.1% 19.3 0.2% 0.0 0.0%
HSN Carriage Payment 19.0 0.2% 1.6 0.2% 19.0 0.2% 0.0 0.0%
---- ---- --- ---- ---- ---- --- ----
Total Non-Service/Misc. 394.8 4.3% 38.7 5.1% 404.3 4.7% 286.5 3.4%
----- ---- ---- ---- ----- ---- ----- ----
Advertising 330.4 3.6% 37.0 4.9% 301.4 3.5% 352.2 4.2%
----- ---- ---- ---- ----- ---- ----- ----
Total Revenues 9,237.9 100.0% 752.9 100.0% 8,632.8 100.0% 8,354.0 100.0%
------- ------ ----- ------ ------- ------ ------- ------
Operating Expenses:
Technical
Personnel 908.1 9.8% 47.4 6.3% 479.4 5.6% 416.5 5.0%
Other 7.6 1.0% 376.1 4.4% 357.4 4.3%
Programming 1,504.9 16.3% 140.4 18.7% 1,576.6 18.3% 1,378.5 16.5%
Capitalized Labor & O/H (28.3) -3.8% (161.3 ) -1.9% (157.7) -1.9%
------- ----- ----- ----- ------- ----- ------- -----
Total Technical 2,413.0 26.1% 167.2 22.2% 2,270.8 26.3% 1,994.7 23.9%
------- ----- ----- ----- ------- ----- ------- -----
Ad Sales
Personnel 9.6 1.3% 77.5 0.9% 80.3 1.0%
Other 3.1 0.4% 32.6 0.4% 32.6 0.4%
---- ---- ---- ---- ---- ----
Total Ad Sales 135.4 1.5% 12.7 1.7% 110.1 1.3% 113.0 1.4%
----- ---- ---- ---- ----- ---- ----- ----
Marketing
Commissions 0.1 0.0% 3.4 0.0% 2.5 0.0%
Other 28.9 3.8% 228.1 2.6% 182.0 2.2%
---- ---- ----- ---- ----- ----
Total Marketing 174.6 1.9% 28.9 3.8% 231.6 2.7% 184.5 2.2%
----- ---- ---- ---- ----- ---- ----- ----
General & Administrative
Personnel 17.5 2.3% 285.5 3.3% 312.4 3.7%
Other 99.5 13.2% 1,032.7 12.0% 1,139.5 13.6%
Capitalized Labor & O/H (2.8) -0.4% (44.1) -0.5% (41.3) -0.5%
----- ----- ------- ----- ------- -----
Total G & A 1,378.6 14.9% 114.2 15.2% 1,274.1 14.8% 1,410.6 16.9%
------- ----- ----- ----- ------- ----- ------- -----
Total Operating Expense
Before Alloc. Corp. Exp. 4,101.7 44.4% 323.0 42.9% 3,886.6 45.0% 3,702.7 44.3%
------- ----- ----- ----- ------- ----- ------- -----
Total Oper. Cash Flow
Before Alloc. Corp. Exp. 5,136.2 55.6% 429.9 57.1% 4,746.2 55.0% 4,651.3 55.7%
------- ----- ----- ----- ------- ----- ------- -----
Reimbursable Allocated
Corporate Expenses 325.1 3.5% 26.8 3.6% 321.6 3.7% 312.8 3.7%
------- ----- ----- ----- ------- ----- ------- -----
Total Oper. Cash Flow
After Alloc. Corp. Exp. $4,811.1 52.1% $403.1 53.5% $4,424.6 51.3% $4,338.5 51.9%
------- ----- ----- ----- ------- ----- ------- -----
</TABLE>
-101-
<PAGE> 111
EXHIBIT D
REGION CASH FLOW PROJECTION ASSUMPTIONS
<PAGE> 112
EXHIBIT D
REGION CASH FLOW PROJECTION ASSUMPTIONS
BEGINNING DECEMBER 31, 1995
INTRODUCTION
A cash flow projection has been developed for each Region. These projections
are shown in Exhibit E.
HOMES PASSED
Homes passed are based upon current passings and projection of growth provided
by CACI (see Tables 2A-2G). According to CACI, households are projected to
grow at the following annual rates during the projection period.
<TABLE>
<CAPTION>
Years 1-5 Years 6-10
Annual Annual
Region Growth Rate Growth Rate
------ ----------- -----------
<S> <C> <C>
Gilroy 2.00% 1.00%
Hesperia 2.90% 1.45%
San Luis Obispo 0.60% 0.30%
Tulare 1.94% 0.97%
Central 1.30% 0.65%
Dallas 2.10% 1.05%
Coos Bay/Florence 1.00% 0.50%
</TABLE>
EBU PENETRATION
Current penetrations are shown below. The national average basic penetration
is 66.6%. Penetration is increased as shown in the table below. This growth
considers the relatively poor off-air reception in the areas and increased
System channel offerings after projected rebuilds.
<TABLE>
<CAPTION>
Current Projected Projected
Region Penetration Year 1 Penetration Year 10 Penetration
------ ----------- ------------------ -------------------
<S> <C> <C> <C>
Gilroy 59.6% 59.5% 65.0%
Hesperia 68.3% 68.6% 73.1%
San Luis Obispo 61.1% 61.0% 65.5%
Tulare 37.9% 38.4% 47.4%
Central 55.4% 56.0% 65.0%
Dallas 74.6% 74.7% 75.0%
Coos Bay/Florence 72.7% 73.0% 78.0%
</TABLE>
EBU'S
This is the product of homes passed times EBU penetration.
AVERAGE EBU REVENUE
Tables 3A-3G analyze Regional revenues for 1994, 1995 and projected 1996. This
analysis provides a baseline for the projections. The first page of Exhibit E
shows the revenue projection assumptions by service. Many of these assumptions
are compared to projections prepared by Paul Kagan Associates, Inc. and
published in The Cable TV Financial Databook (1995). Revenues for digital and
telephony services have not been
-102-
<PAGE> 113
EXHIBIT D (CONTINUED)
projected as they were too speculative, nor were the capital expenditures
needed to implement these services forecasted.
TOTAL REVENUE
This is the product of EBU's times average EBU revenue. Page 2 of Exhibit E-1
details the revenue projections by service.
OPERATING CASH FLOW MARGIN (%)
The operating margin is a function of the average revenue per EBU and the cost
of providing services. The operating performance of each Region was reviewed
for prior years and for 1995. The 1995 cash flow margin, before corporate
expense allocation is shown below. Including the corporate expense allocation
reduces the margins by approximately 3.75%. The appraiser understands that
this allocation accounts for the System's use of corporate legal, finance and
tax services. The appraisers believe it is appropriate to use the lower
margin. Kane Reece assumed that the likely buyer would be a large MSO and the
allocated services provided would require approximately an equivalent reduction
in margin.
The following table delineates the 1995 margin, the year one projected margin,
the ultimate margin, and the year achieved.
<TABLE>
<CAPTION>
Ultimate Margin
---------------
1995 Year One Year
Region Actual Margin Margin % Achieved
- ------ ------------- ------ - --------
<S> <C> <C> <C> <C>
Gilroy 54.5% 55.0% 52.0% 7
Hesperia 50.0% 52.2% 52.0% 5
San Luis Obispo 40.8% 45.0% 46.0% 3
Tulare 45.1% 45.0% 46.0% 3
Central 50.5% 50.0% 51.0% 4
Dallas 56.6% 52.0% 50.0% 5
Coos Bay/Florence 51.3% 52.0% 51.0% 3
</TABLE>
Year one margin is based upon appraisers review of the FCSC management prepared
1996 budget.
OPERATING CASH FLOW
This is the computational result of Total Revenue times Operating Margin.
CAPITAL EXPENDITURES
Capital expenditures were incorporated into the projections based upon the
appraisers physical inspection of each Region, the appraisers determination of
various components of customer and replacement capital, and the FCSC management
prepared ten year plan.
For modelling purposes, capital expenditures were separated into two
components; rebuild capital and recurring capital. Recurring capital includes
subscriber capital (drops and converters), new build, both fill-in and line
extension capital, pre and post wire of multiple dwelling units, headend
equipment, furniture, vehicles, etc.
The following table outlines the ten year projected capital expenditure
requirements by Region ($000s).
-103-
<PAGE> 114
EXHIBIT D (CONTINUED)
<TABLE>
<CAPTION>
Region Rebuild Recurring Total
------ ------- --------- -----
<S> <C> <C> <C>
Gilroy $14,883 $5,201 $20,084
Hesperia 14,129 4,058 18,187
San Luis Obispo 5,831 3,165 8,996
Tulare 12,001 3,879 15,880
Central 2,845 3,385 6,230
Dallas 7,476 3,625 11,101
Coos Bay/Florence 5,766 3,506 9,272
-------- -------- --------
Total $62,931 $26,819 $89,750
======= ======= =======
</TABLE>
NET CASH FLOW
This is the computational result of operating cash flow minus capital
expenditures.
PRESENT VALUE FACTOR
A 14% mid-year convention. The reader is referred to the text for a discussion
of the discount rate.
PRESENT VALUE CASH FLOW
This is the result of multiplying the net cash flow times the present value
factor. The sum of the yearly "present valued" cash flows is shown as an
element of the value indication.
RESIDUAL VALUE
A multiple of eight times (Gilroy at nine times) year 11 cash flow was used.
The reader is referred to the text for a discussion of the residual multiple.
Taxes, adjusted for an estimated remaining tax basis in the assets
(calculations shown on the next page), are deducted and the after tax proceeds
are then discounted to present value. The discounted residual is then added to
the present value of the annual cash flows to yield the value indication.
-104-
<PAGE> 115
EXHIBIT D (CONTINUED)
<TABLE>
<CAPTION>
San Luis Coos Bay/
Gilory Hesperia Obispo Tulare Central Dallas Florence
------ -------- ------ ------ ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Estimated Tax Basis for Residual
Calculation
- --------------------------------------
Business Enterprise Value $67,670,000 $34,740,000 $22,480,000 $25,280,000 $25,080,000 $25,740,000 $41,550,000
Unamortized Basis:
Tangible @ 25% life less than 10 yrs 0 0 0 0 0 0 0
Amortizable intangibles at 75% 16,900,583 8,676,315 5,614,380 6,313,680 6,263,730 6,428,565 10,377,113
Capital Expenditures 2,071,938 2,346,031 1,388,342 2,088,721 1,348,152 1,349,371 1,381,426
----------- ----------- ----------- ----------- ----------- ----------- -----------
Tax Basis 18,972,521 11,022,346 7,002,722 8,402,401 7,611,882 7,777,936 11,758,539
Year 10 "Sales Price" 136,017,704 72,092,529 41,907,660 56,929,729 45,409,400 50,026,717 71,542,268
Percent of "Sales Price" not Taxable 13.9% 15.3% 16.7% 14.8% 16.8% 15.5% 16.4%
Net Capital Gains Tax 29.3% 28.8% 28.3% 29.0% 28.3% 28.7% 28.4%
===== ===== ===== ===== ===== ===== =====
</TABLE>
-105-
<PAGE> 116
EXHIBIT E
REGION CASH FLOW PROJECTIONS
<PAGE> 117
- -------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY KANE REECE ASSOCIATES, INC.
GILROY REGION, CALIFORNIA CATV SYSTEM VALUATION MODEL EXHIBIT E-1A
VALUATION DATE: DECEMBER 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Growth Rate in Homes Passed 2.0% Thru Yr 5
Homes Passed @ 12/31/95 56,219
Equivalent Billing Units @ 12/31/95 33,491 59.6% EBU's/HP
Pay Units @ 12/31/95 13,070 39.0% Pay Units/EBU's
Operating Margin for 95 Yr. 54.5% After reimbursable expenses.
Operating Margin for 94 Yr. 54.5% After reimbursable expenses.
Weighted average discount rate 14.0%
</TABLE>
<TABLE>
<CAPTION>
Year 1 2 3 4 5 6 7 8 9 10
----- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic Rev/EBU (now $24.69) $24.98 $26.00 $27.00 $28.10 $29.20 $30.40 $31.60 $32.90 $34.20 $35.60
Growth rate 1.2% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Kagan Projection $24.58 $25.56 $26.57 $27.64 $28.74 $29.87 $31.07 $32.33 $33.62 n/a
Growth rate 6.5% 4.0% 4.0% 4.0% 4.0% 3.9% 4.0% 4.1% 4.0%
Pay Rev/Pay Unit (now $7.95) $7.81 $7.81 $8.04 $8.04 $8.29 $8.29 $8.53 $8.53 $8.79 $8.79
Growth rate -1.8% 0% 3% 0% 3% 0% 3% 0% 3% 0%
Kagan Projection $8.20 $8.12 $8.04 $7.96 $7.88 $7.80 $7.80 $7.80 $7.80 n/a
Growth rate -1.1% -1.0% -1.0% -1.0% -1.0% -1.0% 0.0% 0.0% 0.0%
New Product Tier (now $1.66) $1.93 $2.03 $2.13 $2.23 $2.35 $2.46 $2.59 $2.72 $2.85 $2.99
Growth rate 16.3% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Mini-Pay/EBU (now $0.03) $0.04 $0.05 $0.06 $0.08 $0.10 $0.12 $0.15 $0.19 $0.24 $0.30
Growth rate 33.3% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0%
Pay-Per-View Rev/EBU (now $0.34) $0.42 $0.53 $0.68 $0.82 $0.94 $1.08 $1.25 $1.37 $1.51 $1.66
Growth rate 23.5% 25.0% 30.0% 20.0% 15.0% 15.0% 15.0% 10.0% 10.0% 10.0%
Kagan Projection $0.74 $1.01 $1.27 $1.65 $2.01 $2.36 $2.81 $3.25 $3.66 n/a
Growth rate 22.0% 36.5% 25.7% 29.9% 21.8% 17.4% 19.1% 15.7% 12.6%
Equipment/EBU (now $0.55) $0.50 $0.52 $0.53 $0.55 $0.56 $0.58 $0.60 $0.61 $0.63 $0.65
Growth rate -9.1% 3% 3% 3% 3% 3% 3% 3% 3% 3%
Advertising/EBU (now $0.75) $0.95 $1.14 $1.37 $1.64 $1.89 $2.17 $2.39 $2.63 $2.89 $3.18
Growth rate 26.7% 20.0% 20.0% 20.0% 15.0% 15.0% 10.0% 10.0% 10.0% 10.0%
Kagan Projection $2.00 $2.24 $2.49 $2.75 $3.08 $3.47 $3.87 $4.28 $4.69 n/a
Growth rate 14.0% 12.0% 11.2% 10.4% 12.0% 12.7% 11.5% 10.6% 9.6%
Home Shopping/EBU (now $0.25) $0.27 $0.34 $0.42 $0.53 $0.63 $0.76 $0.87 $1.00 $1.15 $1.33
Growth rate 8.0% 25% 25% 25% 20% 20% 15% 15% 15% 15%
Install/Service/EBU (now $.59) $0.60 $0.63 $0.66 $0.69 $0.73 $0.77 $0.80 $0.84 $0.89 $0.93
Growth rate 1.7% 5% 5% 5% 5% 5% 5% 5% 5% 5%
Franchise Fee Pass-thru/EBU (now $0.82) $0.83 $0.87 $1.11 $1.36 $1.63 $1.71 $1.79 $1.88 $1.97 $2.07
Growth rate n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Late Fees & Other/EBU (now $0.67) $0.69 $0.70 $0.72 $0.73 $0.75 $0.76 $0.78 $0.79 $0.81 $0.82
growth rate 3.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Pay-to-EBU (now 39.5%) 39.0% 40.0% 41.0% 42.0% 43.0% 44.0% 45.0% 46.0% 47.0% 48.0%
Kagan Projection 77.5% 78.5% 79.5% 80.0% 80.3% 80.5% 80.8% 81.0% 81.3% n/a
Total Annual EBU Rev $411.02 $431.01 $455.72 $481.30 $508.03 $533.54 $559.91 $586.38 $615.28 $645.01
monthly (now $33.32) $34.25 $35.92 $37.98 $40.11 $42.34 $44.46 $46.66 $48.86 $51.27 $53.75
Compound growth 5.1%
Kagan Projection $33.72 $35.22 $36.85 $38.70 $40.62 $42.60 $44.74 $46.91 $49.15
Compound growth 4.8%
</TABLE>
-106-
<PAGE> 118
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY K A N E R E E C E A S S O C I A T E S, I N C. EXHIBIT E-1B
GILROY REGION, CALIFORNIA CATV SYSTEM VALUATION MODEL
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year 1 2 3 4 5
---- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Homes Passed 57,215 58,359 59,526 60,717 61,931
EBU Penetration 59.5% 60.0% 60.5% 61.0% 62.5%
Kagan Penetration Projection 67.5% 68.0% 68.3% 68.2% 67.7%
Equivalent Billing Units 34,060 35,033 36,031 37,055 38,707
Basic Revenue/EBU $24.98 $26.00 $27.00 $28.10 $29.20
Basic Revenue 10,209,826 10,930,295 11,674,138 12,495,115 13,562,967
----------- ----------- ----------- ----------- -----------
Pay-to-Basic Ratio 39.0% 40.0% 41.0% 42.0% 43.0%
Pay Units 13,283 14,013 14,773 15,563 16,644
Pay Revenue/Pay Unit $7.81 $7.81 $8.04 $8.04 $8.29
Pay Revenue 1,244,920 1,313,317 1,426,045 1,502,351 1,654,877
----------- ----------- ----------- ----------- -----------
New Product Tier/EBU $1.93 $2.03 $2.13 $2.23 $2.35
New Product Tier Revenue 788,830 851,932 920,019 993,480 1,089,648
----------- ----------- ----------- ----------- -----------
Mini-Pay Revenue/EBU $0.04 $0.05 $0.06 $0.08 $0.10
Mini-Pay Revenue/EBU 16,349 21,020 27,023 34,740 45,360
----------- ----------- ----------- ----------- -----------
Pay-Per-View Revenue/EBU $0.42 $0.53 $0.68 $0.82 $0.94
Pay-Per-View Revenue 171,662 220,708 295,096 364,181 437,475
----------- ----------- ----------- ----------- -----------
Equipment Revenue/EBU $0.50 $0.52 $0.53 $0.55 $0.56
Equipment Revenue 204,360 216,504 229,354 242,949 261,391
----------- ----------- ----------- ----------- -----------
Advertising Revenue/EBU $0.95 $1.14 $1.37 $1.64 $1.89
Advertising Revenue/EBU 388,284 479,251 591,490 729,964 876,874
----------- ----------- ----------- ----------- -----------
Home Shopping/EBU $0.27 $0.34 $0.42 $0.53 $0.63
HomeShopping Revenue 110,354 141,884 182,408 234,492 293,932
----------- ----------- ----------- ----------- -----------
Installation Revenue/EBU $0.60 $0.63 $0.66 $0.69 $0.73
Installation Revenue 245,232 264,849 286,016 308,854 338,751
----------- ----------- ----------- ----------- -----------
Franchise Fee Pass-thru Revenue/EBU $0.83 $0.87 $1.11 $1.36 $1.63
Franchise Fee Pass-thru Revenue 337,447 363,970 478,259 603,110 756,328
----------- ----------- ----------- ----------- -----------
Late Fees & Other Revenue/EBU $0.69 $0.70 $0.72 $0.73 $0.75
Late Fees & Other Revenue 282,017 295,875 310,392 325,599 346,914
----------- ----------- ----------- ----------- -----------
Total Revenue $13,999,281 $15,099,605 $16,420,241 $17,834,835 $19,664,517
=========== =========== =========== =========== ===========
<CAPTION>
Year 6 7 8 9 10
---- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Homes Passed 62,551 63,176 63,808 64,446 65,090
EBU Penetration 63.0% 63.5% 64.0% 64.5% 65.0%
Kagan Penetration Projection 67.1% 66.5% 65.9% 65.3%
Equivalent Billing Units 39,407 40,117 40,837 41,568 42,309
Basic Revenue/EBU $30.40 $31.60 $32.90 $34.20 $35.60
Basic Revenue 14,375,645 15,212,318 16,122,479 17,059,376 18,074,324
----------- ----------- ----------- ----------- -----------
Pay-to-Basic Ratio 44.0% 45.0% 46.0% 47.0% 48.0%
Pay Units 17,339 18,053 18,785 19,537 20,308
Pay Revenue/Pay Unit $8.29 $8.53 $8.53 $8.79 $8.79
Pay Revenue 1,723,979 1,848,773 1,923,785 2,060,795 2,142,167
----------- ----------- ----------- ----------- -----------
New Product Tier/EBU $2.46 $2.59 $2.72 $2.85 $2.99
New Product Tier Revenue 1,164,817 1,245,092 1,330,817 1,422,357 1,520,103
----------- ----------- ----------- ----------- -----------
Mini-Pay Revenue/EBU $0.12 $0.15 $0.19 $0.24 $0.30
Mini-Pay Revenue/EBU 57,725 73,456 93,469 118,926 151,308
----------- ----------- ----------- ----------- -----------
Pay-Per-View Revenue/EBU $1.08 $1.25 $1.37 $1.51 $1.66
Pay-Per-View Revenue 512,193 599,633 671,438 751,796 841,720
----------- ----------- ----------- ----------- -----------
Equipment Revenue/EBU $0.58 $0.60 $0.61 $0.63 $0.65
Equipment Revenue 274,101 287,410 301,347 315,940 331,220
----------- ----------- ----------- ----------- -----------
Advertising Revenue/EBU $2.17 $2.39 $2.63 $2.89 $3.18
Advertising Revenue/EBU 1,026,637 1,149,646 1,287,314 1,441,379 1,613,786
----------- ----------- ----------- ----------- -----------
Home Shopping/EBU $0.76 $0.87 $1.00 $1.15 $1.33
Home Shopping Revenue 359,096 420,400 492,139 576,085 674,310
----------- ----------- ----------- ----------- -----------
Installation Revenue/EBU $0.77 $0.80 $0.84 $0.89 $0.93
Installation Revenue 362,119 387,075 413,725 442,184 472,571
----------- ----------- ----------- ----------- -----------
Franchise Fee Pass-thru Revenue/EBU $1.71 $1.79 $1.88 $1.97 $2.07
Franchise Fee Pass-thru Revenue 808,662 863,915 920,997 983,684 1,049,607
----------- ----------- ----------- ----------- -----------
Late Fees & Other Revenue/EBU $0.76 $0.78 $0.79 $0.81 $0.82
Late Fees & Other Revenue 360,250 374,075 388,406 403,262 418,661
----------- ----------- ----------- ----------- -----------
Total Revenue $21,025,222 $22,461,792 $23,945,916 $25,575,785 $27,289,776
=========== =========== =========== =========== ===========
</TABLE>
-107-
<PAGE> 119
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY K A N E R E E C E A S S O C I A T E S, I N C. EXHIBIT E-1C
GILROY REGION, CALIFORNIA CATV SYSTEM VALUATION MODEL
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year 1 2 3 4 5
---- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total Revenue $13,999,281 $15,099,605 $16,420,241 $17,834,835 $19,664,517
Margin % to Revenue 55.0% 54.0% 54.0% 53.0% 53.0%
Operating Cash Flow 7,699,605 8,153,787 8,866,930 9,452,463 10,422,194
Captal Expenditures:
- Rebuild/Extensions 759,000 5,764,000 6,226,000 384,000 399,000
- Recurring 682,000 464,000 479,000 495,000 613,000
----------- ----------- ----------- ----------- -----------
Total 1,441,000 6,228,000 6,705,000 879,000 1,012,000
=========== =========== =========== =========== ===========
Net Cash Flow 6,258,605 1,925,787 2,161,930 8,573,463 9,410,194
Present Value Factor @ 14.0% 0.93659 0.82157 0.72067 0.63217 0.55453
PV Net Cash Flow 5,861,720 1,582,162 1,558,043 5,419,875 5,218,272
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Year 6 7 8 9 10
---- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total Revenue $21,025,222 $22,461,792 $23,945,916 $25,575,785 $27,289,776
Margin % to Revenue 53.0% 52.0% 52.0% 52.0% 52.0%
Operating Cash Flow 11,143,368 11,680,132 12,451,876 13,299,408 14,190,684
Captal Expenditures:
- Rebuild/Extensions 257,000 263,000 270,000 277,000 284,000
- Recurring 467,000 480,000 493,000 507,000 521,000
----------- ----------- ----------- ----------- -----------
Total 724,000 743,000 763,000 784,000 805,000
=========== =========== =========== =========== ===========
0
Net Cash Flow 10,419,368 10,937,132 11,688,876 12,515,408 13,385,684
Present Value Factor @ 14.0% 0.48643 0.42670 0.37429 0.32833 0.28801
PV Net Cash Flow 5,068,328 4,666,829 4,375,084 4,109,167 3,855,178
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<S> <C>
Present Value of Net Cash Flows $41,714,659
Present Value of Residual 25,955,381
-----------
Value Indication under Income Approach $67,670,040
===========
Value Indication (Rounded) $67,670,000
===========
Value Indication/EBU $2,021
======
Cash Flow Multiple - Projected 8.8
===
<C> <C>
Residual Value
----------------------------------------------------
9x's Yr 11 Operating Cash Flow $136,017,704
Less: Taxes (see Schedule) @ 29.3% 39,795,362
------------
After Tax Proceeds (end of year 10) 96,222,342
------------
Present Value @ 14.0% $25,955,381
============
</TABLE>
-108-
<PAGE> 120
- -------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY KANE REECE ASSOCIATES, INC.
HESPERIA REGION, CALIFORNIA CATV SYSTEM VALUATION MODEL EXHIBIT E-2A
VALUATION DATE: DECEMBER 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Growth Rate in Homes Passed 2.90% Thru Yr 5
Homes Passed @ 12/31/95 28,280
Equivalent Billing Units @ 12/31/95 19,310 68.3% EBU's/HP
Pay Units @ 12/31/95 8,366 43.3% Pay Units/EBU's
Operating Margin for 95 Yr. 50.0% After reimbursable expenses.
Operating Margin for 94 Yr. 52.5% After reimbursable expenses.
Weighted average discount rate 14.0%
</TABLE>
<TABLE>
<CAPTION>
Year 1 2 3 4 5 6 7 8 9 10
---- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic Rev/EBU (now $25.15) $24.93 $25.90 $26.90 $28.00 $29.10 $30.30 $31.50 $32.80 $34.10 $35.50
Growth rate -0.9% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Kagan Projection $24.58 $25.56 $26.57 $27.64 $28.74 $29.87 $31.07 $32.33 $33.62 n/a
Growth rate 6.5% 4.0% 4.0% 4.0% 4.0% 3.9% 4.0% 4.1% 4.0%
Pay Rev/Pay Unit (now $6.86) $6.99 $6.99 $7.20 $7.20 $7.42 $7.42 $7.42 $7.42 $7.42 $7.42
Growth rate 1.9% 0% 3% 0% 3% 0% 0% 0% 0% 0%
Kagan Projection $8.20 $8.12 $8.04 $7.96 $7.88 $7.80 $7.80 $7.80 $7.80 n/a
Growth rate -1.1% -1.0% -1.0% -1.0% -1.0% -1.0% 0.0% 0.0% 0.0%
New Product Tier (now $1.48) $1.66 $1.74 $1.83 $1.92 $2.02 $2.12 $2.22 $2.34 $2.45 $2.58
Growth rate 12.2% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Mini-Pay/EBU (now $0.03) $0.03 $0.04 $0.05 $0.06 $0.07 $0.09 $0.11 $0.14 $0.18 $0.22
Growth rate 0.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0%
Pay-Per-View Rev/EBU (now $0.46) $0.56 $0.70 $0.91 $1.09 $1.26 $1.44 $1.66 $1.83 $2.01 $2.21
Growth rate 21.7% 25.0% 30.0% 20.0% 15.0% 15.0% 15.0% 10.0% 10.0% 10.0%
Kagan Projection $0.74 $1.01 $1.27 $1.65 $2.01 $2.36 $2.81 $3.25 $3.66 n/a
Growth rate 22.0% 36.5% 25.7% 29.9% 21.8% 17.4% 19.1% 15.7% 12.6%
Equipment/EBU (now $1.63) $1.65 $1.70 $1.75 $1.80 $1.86 $1.91 $1.97 $2.03 $2.09 $2.15
Growth rate 1.2% 3% 3% 3% 3% 3% 3% 3% 3% 3%
Advertising/EBU (now $0.76) $1.02 $1.12 $1.23 $1.33 $1.44 $1.55 $1.66 $1.79 $1.92 $2.07
Growth rate 34.2% 10.0% 10.0% 8.0% 8.0% 7.5% 7.5% 7.5% 7.5% 7.5%
Kagan Projection $2.00 $2.24 $2.49 $2.75 $3.08 $3.47 $3.87 $4.28 $4.69 n/a
Growth rate 14.0% 12.0% 11.2% 10.4% 12.0% 12.7% 11.5% 10.6% 9.6%
Home Shopping/EBU (now $0.30) $0.29 $0.36 $0.45 $0.57 $0.68 $0.82 $0.94 $1.08 $1.24 $1.43
Growth rate -3.3% 25% 25% 25% 20% 20% 15% 15% 15% 15%
Install/Service/EBU (now $.93) $0.96 $1.01 $1.06 $1.11 $1.17 $1.23 $1.29 $1.35 $1.42 $1.49
Growth rate 3.2% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Franchise Fee Pass-thru/EBU (now $0.29) $0.29 $0.45 $0.67 $0.90 $1.15 $1.42 $1.71 $1.91 $2.00 $2.09
Growth rate n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Late Fees & Other/EBU (now $0.54) $0.53 $0.56 $0.58 $0.61 $0.64 $0.68 $0.71 $0.75 $0.78 $0.82
growth rate -1.9% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Pay-to-EBU (now 43.3%) 43.0% 44.0% 45.0% 46.0% 47.0% 48.0% 49.0% 50.0% 51.0% 52.0%
Kagan Projection 77.5% 78.5% 79.5% 80.0% 80.3% 80.5% 80.8% 81.0% 81.3% n/a
Total Annual EBU Rev $419.11 $439.89 $464.07 $488.48 $514.40 $541.34 $568.99 $596.62 $623.72 $652.99
monthly (now $34.11) $34.93 $36.66 $38.67 $40.71 $42.87 $45.11 $47.42 $49.72 $51.98 $54.42
Compound growth 5.1%
Kagan Projection $33.72 $35.22 $36.85 $38.70 $40.62 $42.60 $44.74 $46.91 $49.15
Compound growth 4.8%
</TABLE>
-109-
<PAGE> 121
- --------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY KANE REECE ASSOCIATES, INC. EXHIBIT E-2B
HESPERIA REGION, CALIFORNIA CATVSYSTEM VALUATION MODEL
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year 1 2 3 4 5
---- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Homes Passed 28,440 29,265 30,113 30,987 31,885
EBU Penetration 68.6% 69.1% 69.6% 70.1% 70.6%
Kagan Penetration Projection 67.5% 68.0% 68.3% 68.2% 67.7%
Equivalent Billing Units 19,501 20,213 20,950 21,712 22,501
Basic Revenue/EBU $24.93 $25.90 $26.90 $28.00 $29.10
Basic Revenue 5,833,919 6,282,155 6,762,529 7,295,254 7,857,398
---------- ---------- ---------- ----------- -----------
Pay-to-Basic Ratio 43.0% 44.0% 45.0% 46.0% 47.0%
Pay Units 8,385 8,894 9,427 9,988 10,576
Pay Revenue/Pay Unit $6.99 $6.99 $7.20 $7.20 $7.42
Pay Revenue 703,370 746,000 814,486 862,888 941,099
---------- ---------- ---------- ----------- -----------
New Product Tier/EBU $1.66 $1.74 $1.83 $1.92 $2.02
New Product Tier Revenue 388,460 422,772 460,091 500,678 544,818
---------- ---------- ---------- ----------- -----------
Mini-Pay Revenue/EBU $0.03 $0.04 $0.05 $0.06 $0.07
Mini-Pay Revenue/EBU 7,020 9,096 11,784 15,266 19,776
Pay-Per-View Revenue/EBU $0.56 $0.70 $0.91 $1.09 $1.26
Pay-Per-View Revenue 131,047 169,788 228,770 284,515 339,083
---------- ---------- ---------- ----------- -----------
Equipment Revenue/ EBU $1.65 $1.70 $1.75 $1.80 $1.86
Equipment Revenue 386,120 412,221 440,063 469,762 501,440
---------- ---------- ---------- ----------- -----------
Advertising Revenue/EBU $1.02 $1.12 $1.23 $1.33 $1.44
Advertising Revenue/EBU 238,692 272,146 310,272 347,290 388,704
---------- ---------- ---------- ----------- -----------
Home Shopping/EBU $0.29 $0.36 $0.45 $0.57 $0.68
Home Shopping Revenue 67,863 87,926 113,913 147,574 183,525
---------- ---------- ---------- ----------- -----------
Installation Revenue/EBU $0.96 $1.01 $1.06 $1.11 $1.17
Installation Revenue 224,652 244,495 266,077 289,549 315,075
---------- ---------- ---------- ----------- -----------
Franchise Fee Pass-thru Revenue/ $0.29 $0.45 $0.67 $0.90 $1.15
Franchise Fee Pass-thru Revenue 67,863 109,770 167,210 233,384 309,784
---------- ---------- ---------- ----------- -----------
Late Fees & Other Revenue/EBU $0.53 $0.56 $0.58 $0.61 $0.64
Late Fees & Other Revenue 124,026 134,981 146,896 159,855 173,948
---------- ---------- ---------- ----------- -----------
Total Revenue $8,173,033 $8,891,349 $9,722,091 $10,606,015 $11,574,650
========== ========== ========== =========== ===========
<CAPTION>
Year 6 7 8 9 10
---- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Homes Passed 32,348 32,817 33,293 33,775 34,265
EBU Penetration 71.1% 71.6% 72.1% 72.6% 73.1%
Kagan Penetration Projection 67.1% 66.5% 65.9% 65.3%
Equivalent Billing Units 22,989 23,487 23,994 24,510 25,037
Basic Revenue/EBU $30.30 $31.50 $32.80 $34.10 $35.50
Basic Revenue 8,358,854 8,877,924 9,443,877 10,029,645 10,665,804
----------- ----------- ----------- ----------- -----------
Pay-to-Basic Ratio 48.0% 49.0% 50.0% 51.0% 52.0%
Pay Units 11,035 11,508 11,997 12,500 13,019
Pay Revenue/Pay Unit $7.42 $7.42 $7.42 $7.42 $7.42
Pay Revenue 981,967 1,024,115 1,067,574 1,112,380 1,158,565
----------- ----------- ----------- ----------- -----------
New Product Tier/EBU $2.12 $2.22 $2.34 $2.45 $2.58
New Product Tier Revenue 584,465 626,967 672,527 721,363 773,708
----------- ----------- ----------- ----------- -----------
Mini-Pay Revenue/EBU $0.09 $0.11 $0.14 $0.18 $0.22
Mini-Pay Revenue/EBU 25,257 32,254 41,188 52,594 67,155
----------- ----------- ----------- ----------- -----------
Pay-Per-View Revenue/EBU $1.44 $1.66 $1.83 $2.01 $2.21
Pay-Per-View Revenue 398,403 468,077 526,000 591,062 664,140
----------- ----------- ----------- ----------- -----------
Equipment Revenue/ EBU $1.91 $1.97 $2.03 $2.09 $2.15
Equipment Revenue 527,684 555,275 584,280 614,770 646,821
----------- ----------- ----------- ----------- -----------
Advertising Revenue/EBU $1.55 $1.66 $1.79 $1.92 $2.07
Advertising Revenue/EBU 426,919 468,868 514,914 565,455 620,927
----------- ----------- ----------- ----------- -----------
Home Shopping/EBU $0.82 $0.94 $1.08 $1.24 $1.43
Home Shopping Revenue 225,006 264,356 310,572 364,851 428,595
----------- ----------- ----------- ----------- -----------
Installation Revenue/EBU $1.23 $1.29 $1.35 $1.42 $1.49
Installation Revenue 338,004 362,583 388,931 417,174 447,446
----------- ----------- ----------- ----------- -----------
Franchise Fee Pass-thru Revenue/ $1.42 $1.71 $1.91 $2.00 $2.09
Franchise Fee Pass-thru Revenue 391,728 483,022 550,583 587,984 628,808
----------- ----------- ----------- ----------- -----------
Late Fees & Other Revenue/EBU $0.68 $0.71 $0.75 $0.78 $0.82
Late Fees & Other Revenue 186,606 200,176 214,722 230,315 247,027
----------- ----------- ----------- ----------- -----------
Total Revenue $12,444,893 $13,363,618 $14,315,169 $15,287,591 $16,348,995
=========== =========== =========== =========== ===========
</TABLE>
-110-
<PAGE> 122
- -------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY KANE REECE ASSOCIATES, INC. EXHIBIT E-2C
HESPERIA REGION, CALIFORNIA CATV SYSTEM VALUATION MODEL
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year 1 2 3 4 5 6
---- - - - - - -
<S> <C> <C> <C> <C> <C> <C>
Total Revenue $8,173,033 $8,891,349 $9,722,091 $10,606,015 $11,574,650 $12,444,893
Margin % to Revenue 52.2% 52.5% 53.0% 53.0% 52.0% 52.0%
Operating Cash Flow 4,267,140 4,667,958 5,152,708 5,621,188 6,018,818 6,471,344
Captal Expenditures:
- Rebuild/Extensions 384,000 2,102,000 3,876,000 3,898,000 2,168,000 320,000
- Recurring 548,000 375,000 386,000 399,000 412,000 369,000
------- ------- ------- ------- ------- -------
Total 932,000 2,477,000 4,262,000 4,297,000 2,580,000 689,000
------- ------- ------- ------- ------- -------
Net Cash Flow 3,335,140 2,190,958 890,708 1,324,188 3,438,818 5,782,344
Present Value Factor
@ 14.0% 0.93659 0.82157 0.72067 0.63217 0.55453 0.48643
PV Net Cash Flow 3,123,645 1,800,018 641,909 837,110 1,906,941 2,812,725
========= ========= ======= ======= ========= =========
</TABLE>
<TABLE>
<CAPTION>
7 8 9 10
- - - --
<S> <C> <C> <C> <C>
Total Revenue $13,363,618 $14,315,169 $15,287,591 $16,348,995
Margin % to Revenue 52.0% 52.0% 52.0% 52.0%
Operating Cash Flow 6,949,081 7,443,888 7,949,547 8,501,477
Captal Expenditures:
- Rebuild/Extensions 329,000 340,000 350,000 362,000
- Recurring 378,000 387,000 397,000 407,000
------- ------- ------- -------
Total 707,000 727,000 747,000 769,000
------- ------- ------- -------
Net Cash Flow 6,242,081 6,716,888 7,202,547 7,732,477
Present Value Factor
@ 14.0% 0.42670 0.37429 0.32833 0.28801
PV Net Cash Flow 2,663,471 2,514,095 2,364,803 2,227,012
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Residual Value
-------------------------------------------------------
<S> <C> <C> <C> <C>
Present Value of Net Cash Flows $20,891,729
Present Value of Residual 13,845,590
----------
8x's Yr 11 Operating Cash Flow $72,092,529
Value Indication under Income Approach $34,737,319 Less: Taxes (see Schedule) 28.8% 20,763,862
----------- ----------
Value Indication (Rounded) $34,740,000 After Tax Proceeds (end of year 10) 51,328,667
----------- ----------
Value Indication/EBU $1,799 Present Value @ 14.0% $13,845,590
------ -----------
Cash Flow Multiple - Project 8.1
---
</TABLE>
-111-
<PAGE> 123
- -------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY KANE REECE ASSOCIATES, INC.
SAN LUIS OBISPO REGION, CALIFORNIA CATV SYSTEM VALUATION MODEL EXHIBIT E-3A
VALUATION DATE: DECEMBER 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Growth Rate in Homes Passed 0.60% Thru Yr 5
Homes Passed @ 12/31/95 26,138
Equivalent Billing Units @ 12/31/95 15,973 61.1% EBU's/HP
Pay Units @ 12/31/95 3,733 23.4% Pay Units/EBU's
Operating Margin for 95 Yr. 40.8% After reimbursable expenses.
Operating Margin for 94 Yr. 47.9% After reimbursable expenses.
Weighted average discount rate 14.0%
</TABLE>
<TABLE>
<CAPTION>
Year 1 2 3 4 5 6 7 8 9 10
---- - - - - - - - - - --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic Rev/EBU (now $22.33) $23.48 $24.40 $25.40 $26.40 $27.50 $28.60 $29.70 $30.90 $32.10 $33.40
Growth rate 5.2% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Kagan Projection $24.58 $25.56 $26.57 $27.64 $28.74 $29.87 $31.07 $32.33 $33.62 n/a
Growth rate 6.5% 4.0% 4.0% 4.0% 4.0% 3.9% 4.0% 4.1% 4.0%
Pay Rev/Pay Unit (now $7.74) $8.25 $8.25 $8.25 $8.25 $8.25 $8.25 $8.25 $8.25 $8.25 $8.25
Growth rate 6.6% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Kagan Projection $8.20 $8.12 $8.04 $7.96 $7.88 $7.80 $7.80 $7.80 $7.80 n/a
Growth rate -1.1% -1.0% -1.0% -1.0% -1.0% -1.0% 0.0% 0.0% 0.0%
New Product Tier (now $0.93) $1.03 $1.08 $1.30 $1.56 $1.87 $2.15 $2.36 $2.54 $2.67 $2.80
Growth rate 10.8% 5.0% 20.0% 20.0% 20.0% 15.0% 10.0% 7.5% 5.0% 5.0%
Mini-Pay/EBU (now $0.00) $0.00 $0.05 $0.06 $0.08 $0.10 $0.12 $0.15 $0.19 $0.24 $0.30
Growth rate 0.0% n/a 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0%
Pay-Per-View Rev/EBU (now $0.16) $0.36 $0.45 $0.59 $0.70 $0.81 $0.93 $1.07 $1.17 $1.29 $1.42
Growth rate 125.0% 25.0% 30.0% 20.0% 15.0% 15.0% 15.0% 10.0% 10.0% 10.0%
Kagan Projection $0.74 $1.01 $1.27 $1.65 $2.01 $2.36 $2.81 $3.25 $3.66 n/a
Growth rate 22.0% 36.5% 25.7% 29.9% 21.8% 17.4% 19.1% 15.7% 12.6%
Equipment/ EBU (now $0.94) $1.01 $1.04 $1.07 $1.10 $1.14 $1.17 $1.21 $1.24 $1.28 $1.32
Growth rate 7.4% 3% 3% 3% 3% 3% 3% 3% 3% 3%
Advertising/EBU (now $1.22) $1.40 $1.54 $1.69 $1.83 $1.98 $2.12 $2.28 $2.45 $2.64 $2.84
Growth rate 14.8% 10.0% 10.0% 8.0% 8.0% 7.5% 7.5% 7.5% 7.5% 7.5%
Kagan Projection $2.00 $2.24 $2.49 $2.75 $3.08 $3.47 $3.87 $4.28 $4.69 n/a
Growth rate 14.0% 12.0% 11.2% 10.4% 12.0% 12.7% 11.5% 10.6% 9.6%
Home Shopping /EBU (now $0.42) $0.28 $0.35 $0.44 $0.55 $0.66 $0.79 $0.91 $1.04 $1.20 $1.38
Growth rate -33.3% 25% 25% 25% 20% 20% 15% 15% 15% 15%
Install/Service/EBU (now $.34) $0.35 $0.37 $0.39 $0.41 $0.43 $0.45 $0.47 $0.49 $0.52 $0.54
Growth rate 2.9% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Franchise Fee Pass-thru/EBU (now $1.23) $1.26 $1.32 $1.39 $1.47 $1.55 $1.63 $1.71 $1.79 $1.87 $1.96
Growth rate n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Late Fees & Other/EBU (now $0.46) $0.47 $0.49 $0.52 $0.54 $0.57 $0.60 $0.63 $0.66 $0.69 $0.73
growth rate 2.2% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Pay-to-EBU (now 23.4%) 24.0% 25.0% 26.0% 27.0% 28.0% 29.0% 30.0% 31.0% 32.0% 33.0%
Kagan Projection 77.5% 78.5% 79.5% 80.0% 80.3% 80.5% 80.8% 81.0% 81.3% n/a
Total Annual EBU Rev $379.40 $397.84 $419.86 $442.32 $466.75 $491.39 $515.53 $540.56 $565.68 $592.94
monthly (now $29.90) $31.62 $33.15 $34.99 $36.86 $38.90 $40.95 $42.96 $45.05 $47.14 $49.41
Compound growth 5.1%
Kagan Projection $33.72 $35.22 $36.85 $38.70 $40.62 $42.60 $44.74 $46.91 $49.15
Compound growth 4.8%
</TABLE>
-112-
<PAGE> 124
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY K A N E R E E C E A S S O C I A T E S, I N C. EXHIBIT E-3B
SAN LUIS OBISPO REGION, CALIFORNIA CATV SYSTEM VALUATION MODEL
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year 1 2 3 4 5
---- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Homes Passed 26,588 26,900 27,062 27,224 27,388
EBU Penetration 61.0% 61.5% 62.0% 62.5% 63.0%
Kagan Penetration Projection 67.5% 68.0% 68.3% 68.2% 67.7%
Equivalent Billing Units 16,214 16,539 16,774 17,010 17,249
Basic Revenue/EBU $23.48 $24.40 $25.40 $26.40 $27.50
Basic Revenue 4,568,457 4,842,630 5,112,587 5,388,876 5,692,283
----------- ----------- ----------- ----------- -----------
Pay-to-Basic Ratio 24.0% 25.0% 26.0% 27.0% 28.0%
Pay Units 3,891 4,135 4,361 4,593 4,830
Pay Revenue/Pay Unit $8.25 $8.25 $8.25 $8.25 $8.25
Pay Revenue 385,245 409,341 431,752 454,686 478,152
----------- ----------- ----------- ----------- -----------
New Product Tier/EBU $1.03 $1.08 $1.30 $1.56 $1.87
New Product Tier Revenue 200,405 214,644 261,225 317,895 386,833
----------- ----------- ----------- ----------- -----------
Mini-Pay Revenue/EBU $0.00 $0.05 $0.06 $0.08 $0.10
Mini-Pay Revenue/EBU 0 9,923 12,580 15,947 20,214
----------- ----------- ----------- ----------- -----------
Pay-Per-View Revenue/EBU $0.36 $0.45 $0.59 $0.70 $0.81
Pay-Per-View Revenue 70,044 89,311 117,751 143,295 167,105
----------- ----------- ----------- ----------- -----------
Equipment Revenue/EBU $1.01 $1.04 $1.07 $1.10 $1.14
Equipment Revenue 196,514 206,467 215,676 225,282 235,301
----------- ----------- ----------- ----------- -----------
Advertising Revenue/EBU $1.40 $1.54 $1.69 $1.83 $1.98
Advertising Revenue/EBU 272,395 305,641 340,973 373,449 408,992
----------- ----------- ----------- ----------- -----------
Home Shopping/EBU $0.28 $0.35 $0.44 $0.55 $0.66
Home Shopping Revenue 54,479 69,464 88,061 111,630 135,839
----------- ----------- ----------- ----------- -----------
Installation Revenue/EBU $0.35 $0.37 $0.39 $0.41 $0.43
Installation Revenue 68,099 72,937 77,670 82,705 88,060
----------- ----------- ----------- ----------- -----------
Franchise Fee Pass-thru Revenue/EBU $1.26 $1.32 $1.39 $1.47 $1.55
Franchise Fee Pass-thru Revenue 244,553 261,578 279,971 299,108 320,065
----------- ----------- ----------- ----------- -----------
Late Fees & Other Revenue/EBU $0.47 $0.49 $0.52 $0.54 $0.57
Late Fees & Other Revenue 91,447 97,944 104,300 111,061 118,252
----------- ----------- ----------- ----------- -----------
Total Revenue $6,151,638 $6,579,880 $7,042,546 $7,523,935 $8,051,095
=========== =========== =========== =========== ===========
<CAPTION>
Year 6 7 8 9 10
---- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Homes Passed 27,470 27,552 27,635 27,718 27,801
EBU Penetration 63.5% 64.0% 64.5% 65.0% 65.5%
Kagan Penetration Projection 67.1% 66.5% 65.9% 65.3%
Equivalent Billing Units 17,438 17,629 17,820 18,012 18,205
Basic Revenue/EBU $28.60 $29.70 $30.90 $32.10 $33.40
Basic Revenue 5,984,872 6,282,802 6,607,498 6,938,076 7,296,428
----------- ----------- ----------- ----------- -----------
Pay-to-Basic Ratio 29.0% 30.0% 31.0% 32.0% 33.0%
Pay Units 5,057 5,289 5,524 5,764 6,008
Pay Revenue/Pay Unit $8.25 $8.25 $8.25 $8.25 $8.25
Pay Revenue 500,658 523,567 546,883 570,608 594,746
----------- ----------- ----------- ----------- -----------
New Product Tier/EBU $2.15 $2.36 $2.54 $2.67 $2.80
New Product Tier Revenue 449,735 500,101 543,435 576,757 612,085
----------- ----------- ----------- ----------- -----------
Mini-Pay Revenue/EBU $0.12 $0.15 $0.19 $0.24 $0.30
Mini-Pay Revenue/EBU 25,545 32,279 40,786 51,532 65,105
----------- ----------- ----------- ----------- -----------
Pay-Per-View Revenue/EBU $0.93 $1.07 $1.17 $1.29 $1.42
Pay-Per-View Revenue 194,277 225,854 251,132 279,222 310,436
----------- ----------- ----------- ----------- -----------
Equipment Revenue/ EBU $1.17 $1.21 $1.24 $1.28 $1.32
Equipment Revenue 245,017 255,118 265,620 276,537 287,886
----------- ----------- ----------- ----------- -----------
Advertising Revenue/EBU $2.12 $2.28 $2.45 $2.64 $2.84
Advertising Revenue/EBU 444,486 483,031 524,886 570,333 619,679
----------- ----------- ----------- ----------- -----------
Home Shopping/EBU $0.79 $0.91 $1.04 $1.20 $1.38
Home Shopping Revenue 164,793 191,578 222,702 258,868 300,889
----------- ----------- ----------- ----------- -----------
Installation Revenue/EBU $0.45 $0.47 $0.49 $0.52 $0.54
Installation Revenue 93,477 99,220 105,311 111,768 118,614
----------- ----------- ----------- ----------- -----------
Franchise Fee Pass-thru Revenue/EBU $1.63 $1.71 $1.79 $1.87 $1.96
Franchise Fee Pass-thru Revenue 340,655 361,289 382,936 405,049 429,117
----------- ----------- ----------- ----------- -----------
Late Fees & Other Revenue/EBU $0.60 $0.63 $0.66 $0.69 $0.73
Late Fees & Other Revenue 125,526 133,239 141,417 150,088 159,282
----------- ----------- ----------- ----------- -----------
Total Revenue $8,569,041 $9,088,078 $9,632,605 $10,188,838 $10,794,266
=========== =========== =========== =========== ===========
</TABLE>
-113-
<PAGE> 125
- -------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY KANE REECE ASSOCIATES, INC. EXHIBIT E-3c
SAN LUIS OBISPO REGION, CALIFORNIA CATV SYSTEM VALUATION MODEL
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year 1 2 3 4 5
---- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total Revenue $6,151,638 $6,579,880 $7,042,546 $7,523,935 $8,051,095
Margin % to Revenue 45.0% 45.5% 46.0% 46.0% 46.0%
Operating Cash Flow 2,768,237 2,993,845 3,239,571 3,461,010 3,703,504
Capital Expenditures:
- Rebuild/Extensions 747,000 88,000 1,396,000 1,451,000 1,509,000
- Recurring 436,000 304,000 294,000 298,000 303,000
---------- ---------- ---------- ----------- -----------
Total 1,183,000 392,000 1,690,000 1,749,000 1,812,000
---------- ---------- ---------- ----------- -----------
Net Cash Flow 1,585,237 2,601,845 1,549,571 1,712,010 1,891,504
Present Value Factor @ 14.0% 0.93659 0.82157 0.72067 0.63217 0.55453
PV Net Cash Flow 1,484,710 2,137,589 1,116,733 1,082,279 1,048,903
---------- ---------- ---------- ----------- -----------
Year 6 7 8 9 10
---- ---------- ---------- ---------- ----------- -----------
Total Revenue $8,569,041 $9,088,078 $9,632,605 $10,188,838 $10,794,266
Margin % to Revenue 46.0% 46.0% 46.0% 46.0% 46.0%
Operating Cash Flow 3,941,759 4,180,516 4,430,998 4,686,865 4,965,363
Capital Expenditures:
- Rebuild/Extensions 126,000 127,000 128,000 129,000 130,000
- Recurring 298,000 302,000 306,000 310,000 314,000
---------- ---------- ---------- ----------- -----------
Total 424,000 429,000 434,000 439,000 444,000
---------- ---------- ---------- ----------- -----------
Net Cash Flow 3,517,759 3,751,516 3,996,998 4,247,865 4,521,363
Present Value Factor @ 14.0% 0.48643 0.42670 0.37429 0.32833 0.28801
PV Net Cash Flow 1,711,155 1,600,756 1,496,055 1,394,696 1,302,187
---------- ---------- ---------- ----------- -----------
Present Value of Net Cash Flows $14,375,064
Present Value of Residual 8,103,099
-----------
Value Indication under Income Approach $22,478,163
-----------
Value Indication (Rounded) $22,480,000
-----------
Value Indication/EBU $1,407
-----------
Cash Flow Multiple - Projected 8.1
-----------
Residual Value
--------------
8x's Yr 11 Operating Cash Flow $41,907,660
Less: Taxes (see Schedule) @ 28.3% 11,867,679
-----------
After Tax Proceeds (end of year 10) 30,039,981
-----------
Present Value @ 14.0% $8,103,099
-----------
</TABLE>
-114-
<PAGE> 126
- --------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY KANE REECE ASSOCIATES, INC.
TULARE REGION, CALIFORNIA CATV SYSTEM VALUATION MODEL EXHIBIT E-4A
VALUATION DATE: DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Growth Rate in Homes Passed 1.94% Thru Yr 5
Homes Passed @ 12/31/95 41,053
Equivalent Billing Units @ 12/31/95 15,563 37.9% EBU's/HP
Pay Units @ 12/31/95 7,110 45.7% Pay Units/EBU's
Operating Margin for 95 Yr. 45.1% After reimbursable expenses.
Operating Margin for 94 Yr. 45.3% After reimbursable expenses.
Weighted average discount rate 14.0%
</TABLE>
<TABLE>
<CAPTION>
Year 1 2 3 4 5 6 7 8 9 10
---- ------- ------- ------- ------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic Rev/EBU (now $21.34) $21.99 $22.90 $23.80 $24.80 $25.80 $26.80 $27.90 $29.00 $30.20 $31.40
Growth rate 3.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Kagan Projection $24.58 $25.56 $26.57 $27.64 $28.74 $29.87 $31.07 $32.33 $33.62 n/a
Growth rate 6.5% 4.0% 4.0% 4.0% 4.0% 3.9% 4.0% 4.1% 4.0%
Pay Rev/Pay Unit (now $6.82) $6.89 $6.89 $7.10 $7.10 $7.31 $7.31 $7.31 $7.31 $7.31 $7.31
Growth rate 1.0% 0% 3% 0% 3% 0% 0% 0% 0% 0%
Kagan Projection $8.20 $8.12 $8.04 $7.96 $7.88 $7.80 $7.80 $7.80 $7.80 n/a
Growth rate -1.1% -1.0% -1.0% -1.0% -1.0% -1.0% 0.0% 0.0% 0.0%
New Product Tier (now $2.43) $2.63 $2.76 $2.90 $3.04 $3.20 $3.36 $3.52 $3.70 $3.89 $4.08
Growth rate 8.2% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Mini-Pay/EBU (now $0.00) $0.00 $0.05 $0.06 $0.08 $0.10 $0.12 $0.15 $0.19 $0.24 $0.30
Growth rate n/a n/a 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0%
Pay-Per-View Rev/EBU (now $0.46) $0.65 $0.81 $1.06 $1.27 $1.46 $1.68 $1.93 $2.12 $2.33 $2.57
Growth rate 41.3% 25.0% 30.0% 20.0% 15.0% 15.0% 15.0% 10.0% 10.0% 10.0%
Kagan Projection $0.74 $1.01 $1.27 $1.65 $2.01 $2.36 $2.81 $3.25 $3.66 n/a
Growth rate 22.0% 36.5% 25.7% 29.9% 21.8% 17.4% 19.1% 15.7% 12.6%
Equipment/EBU (now $2.09) $2.03 $2.09 $2.15 $2.22 $2.28 $2.35 $2.42 $2.50 $2.57 $2.65
Growth rate -2.9% 3% 3% 3% 3% 3% 3% 3% 3% 3%
Advertising/EBU (now $1.33) $1.48 $1.63 $1.79 $1.93 $2.09 $2.25 $2.41 $2.59 $2.79 $3.00
Growth rate 11.3% 10.0% 10.0% 8.0% 8.0% 7.5% 7.5% 7.5% 7.5% 7.5%
Kagan Projection $2.00 $2.24 $2.49 $2.75 $3.08 $3.47 $3.87 $4.28 $4.69 n/a
Growth rate 14.0% 12.0% 11.2% 10.4% 12.0% 12.7% 11.5% 10.6% 9.6%
Home Shopping/EBU (now $0.15) $0.14 $0.18 $0.22 $0.27 $0.33 $0.39 $0.45 $0.52 $0.60 $0.69
Growth rate -6.7% 25% 25% 25% 20% 20% 15% 15% 15% 15%
Install/Service/EBU (now $.62) $0.64 $0.67 $0.71 $0.74 $0.78 $0.82 $0.86 $0.90 $0.95 $0.99
Growth rate 3.2% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Franchise Fee Pass-thru/EBU (now $1.28) $1.38 $1.45 $1.52 $1.59 $1.67 $1.75 $1.83 $1.91 $1.99 $2.08
Growth rate n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Late Fees & Other/EBU (now $1.53) $1.75 $1.84 $1.93 $2.03 $2.13 $2.23 $2.35 $2.46 $2.59 $2.71
growth rate 14.4% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Pay-to-EBU (now 45.7%) 46.0% 47.0% 48.0% 49.0% 50.0% 50.0% 50.0% 50.0% 50.0% 50.0%
Kagan Projection 77.5% 78.5% 79.5% 80.0% 80.3% 80.5% 80.8% 81.0% 81.3% n/a
Total Annual EBU Rev $430.30 $451.35 $474.53 $497.45 $521.83 $544.78 $569.75 $594.57 $621.53 $649.49
monthly (now $34.42) $35.86 $37.61 $39.54 $41.45 $43.49 $45.40 $47.48 $49.55 $51.79 $54.12
Compound growth 4.7%
Kagan Projection $33.72 $35.22 $36.85 $38.70 $40.62 $42.60 $44.74 $46.91 $49.15
Compound growth 4.8%
</TABLE>
-115-
<PAGE> 127
- --------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY KANE REECE ASSOCIATES, INC. EXHIBIT E-4B
TULARE REGION, CALIFORNIA CATV SYSTEM VALUATION MODEL
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year 1 2 3 4 5
---- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Homes Passed 41,405 42,208 43,027 43,862 44,713
EBU Penetration 38.4% 39.4% 40.4% 41.4% 42.4%
Kagan Penetration Projection 67.5% 68.0% 68.3% 68.2% 67.7%
Equivalent Billing Units 15,916 16,647 17,400 18,176 18,976
Basic Revenue/EBU $21.99 $22.90 $23.80 $24.80 $25.80
Basic Revenue 4,199,914 4,574,555 4,969,461 5,409,253 5,874,969
---------- ---------- ---------- ---------- ----------
Pay-to-Basic Ratio 46.0% 47.0% 48.0% 49.0% 50.0%
Pay Units 7,321 7,824 8,352 8,906 9,488
Pay Revenue/Pay Unit $6.89 $6.89 $7.10 $7.10 $7.31
Pay Revenue 605,330 646,890 711,263 758,469 832,242
---------- ---------- ---------- ---------- ----------
New Product Tier/EBU $2.63 $2.76 $2.90 $3.04 $3.20
New Product Tier Revenue 502,309 551,643 605,434 664,063 727,945
---------- ---------- ---------- ---------- ----------
Mini-Pay Revenue/EBU $0.00 $0.05 $0.06 $0.08 $0.10
Mini-Pay Revenue/EBU 0 9,988 13,050 17,040 22,237
Pay-Per-View Revenue/EBU $0.65 $0.81 $1.06 $1.27 $1.46
Pay-Per-View Revenue 124,145 162,307 220,546 276,461 331,919
---------- ---------- ---------- ---------- ----------
Equipment Revenue/ EBU $2.03 $2.09 $2.15 $2.22 $2.28
Equipment Revenue 387,714 417,683 449,679 483,831 520,272
---------- ---------- ---------- ---------- ----------
Advertising Revenue/EBU $1.48 $1.63 $1.79 $1.93 $2.09
Advertising Revenue/EBU 282,668 325,213 373,921 421,848 475,642
---------- ---------- ---------- ---------- ----------
Home Shopping/EBU $0.14 $0.18 $0.22 $0.27 $0.33
Home Shopping Revenue 26,739 34,958 45,675 59,641 74,718
---------- ---------- ---------- ---------- ----------
Installation Revenue/EBU $0.64 $0.67 $0.71 $0.74 $0.78
Installation Revenue 122,235 134,240 147,330 161,597 177,143
---------- ---------- ---------- ---------- ----------
Franchise Fee Pass-thru Revenue/EBU $1.38 $1.45 $1.52 $1.59 $1.67
Franchise Fee Pass-thru Revenue 263,412 288,982 317,569 347,763 380,859
---------- ---------- ---------- ---------- ----------
Late Fees & Other Revenue/EBU $1.75 $1.84 $1.93 $2.03 $2.13
Late Fees & Other Revenue 334,236 367,063 402,855 441,867 484,374
---------- ---------- ---------- ---------- ----------
Total Revenue $6,848,701 $7,513,523 $8,256,782 $9,041,833 $9,902,321
========== ========== ========== ========== ==========
<CAPTION>
Year 6 7 8 9 10
---- ----------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Homes Passed 45,146 45,584 46,027 46,473 46,924
EBU Penetration 43.4% 44.4% 45.4% 46.4% 47.4%
Kagan Penetration Projection 67.1% 66.5% 65.9% 65.3%
Equivalent Billing Units 19,612 20,258 20,914 21,582 22,261
Basic Revenue/EBU $26.80 $27.90 $29.00 $30.20 $31.40
Basic Revenue 6,307,068 6,782,247 7,278,201 7,821,306 8,387,776
----------- ----------- ----------- ----------- -----------
Pay-to-Basic Ratio 50.0% 50.0% 50.0% 50.0% 50.0%
Pay Units 9,806 10,129 10,457 10,791 11,130
Pay Revenue/Pay Unit $7.31 $7.31 $7.31 $7.31 $7.31
Pay Revenue 860,115 888,450 917,254 946,534 976,295
----------- ----------- ----------- ----------- -----------
New Product Tier/EBU $3.36 $3.52 $3.70 $3.89 $4.08
New Product Tier Revenue 789,942 856,763 928,767 1,006,335 1,089,875
----------- ----------- ----------- ----------- -----------
Mini-Pay Revenue/EBU $0.12 $0.15 $0.19 $0.24 $0.30
Mini-Pay Revenue/EBU 28,728 37,093 47,869 61,747 79,610
----------- ----------- ----------- ----------- -----------
Pay-Per-View Revenue/EBU $1.68 $1.93 $2.12 $2.33 $2.57
Pay-Per-View Revenue 394,490 468,609 532,182 604,087 685,388
----------- ----------- ----------- ----------- -----------
Equipment Revenue/ EBU $2.35 $2.42 $2.50 $2.57 $2.65
Equipment Revenue 553,828 589,235 626,589 665,988 707,536
----------- ----------- ----------- ----------- -----------
Advertising Revenue/EBU $2.25 $2.41 $2.59 $2.79 $3.00
Advertising Revenue/EBU 528,440 586,788 651,247 722,438 801,040
----------- ----------- ----------- ----------- -----------
Home Shopping/EBU $0.39 $0.45 $0.52 $0.60 $0.69
Home Shopping Revenue 92,664 110,075 130,690 155,091 183,962
----------- ----------- ----------- ----------- -----------
Installation Revenue/EBU $0.82 $0.86 $0.90 $0.95 $0.99
Installation Revenue 192,229 208,490 226,012 244,888 265,217
----------- ----------- ----------- ----------- -----------
Franchise Fee Pass-thru Revenue/EBU $1.75 $1.83 $1.91 $1.99 $2.08
Franchise Fee Pass-thru Revenue 410,925 443,914 478,273 515,921 556,076
----------- ----------- ----------- ----------- -----------
Late Fees & Other Revenue/EBU $2.23 $2.35 $2.46 $2.59 $2.71
Late Fees & Other Revenue 525,627 570,090 618,001 669,614 725,202
=========== =========== =========== =========== ===========
Total Revenue $10,684,057 $11,541,753 $12,435,085 $13,413,947 $14,457,977
</TABLE>
-116-
<PAGE> 128
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY K A N E R E E C E A S S O C I A T E S, I N C. EXHIBIT E-4c
TULARE REGION, CALIFORNIA CATV SYSTEM VALUATION MODEL
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year 1 2 3 4 5
---- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total Revenue $6,848,701 $7,513,523 $8,256,782 $9,041,833 $9,902,321
Margin % to Revenue 45.0% 45.5% 46.0% 46.0% 46.0%
Operating Cash Flow 3,081,916 3,418,653 3,798,120 4,159,243 4,555,068
Capital Expenditures:
- Rebuild/Extensions 196,000 1,824,000 3,433,000 3,445,000 1,860,000
- Recurring 337,000 366,000 377,000 388,000 401,000
----------- ----------- ----------- ----------- -----------
Total 533,000 2,190,000 3,810,000 3,833,000 2,261,000
----------- ----------- ----------- ----------- -----------
Net Cash Flow 2,548,916 1,228,653 (11,880) 326,243 2,294,068
Present Value Factor @ 14.0% 0.93659 0.82157 0.72067 0.63217 0.55453
PV Net Cash Flow 2,387,278 1,009,420 (8,562) 206,241 1,272,139
=========== =========== =========== =========== ===========
<CAPTION>
Year 6 7 8 9 10
---- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total Revenue $10,684,057 $11,541,753 $12,435,085 $13,413,947 $14,457,977
Margin % to Revenue 46.0% 46.0% 46.0% 46.0% 46.0%
Operating Cash Flow 4,914,666 5,309,206 5,720,139 6,170,416 6,650,669
Capital Expenditures:
- Rebuild/Extensions 237,000 243,000 248,000 254,000 261,000
- Recurring 381,000 391,000 402,000 412,000 424,000
----------- ----------- ----------- ----------- -----------
Total 618,000 634,000 650,000 666,000 685,000
----------- ----------- ----------- ----------- -----------
Net Cash Flow 4,296,666 4,675,206 5,070,139 5,504,416 5,965,669
Present Value Factor @ 14.0% 0.48643 0.42670 0.37429 0.32833 0.28801
PV Net Cash Flow 2,090,042 1,994,891 1,897,726 1,807,257 1,718,158
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<S> <C> <C> <C>
Present Value of Net Cash Flows $14,374,590 Residual Value
Present Value of Residual 10,905,860 --------------
-----------
8x's Yr 11 Operating Cash Flow $56,929,729
Value Indication under Income Approach $25,280,450 Less: Taxes (see Schedule) @ 29.0% 16,499,292
----------- -----------
Value Indication (Rounded) $25,280,000 After Tax Proceeds (end of year 10) 40,430,437
----------- -----------
Value Indication/EBU $1,624 Present Value @ 14.0% $10,905,860
------ -----------
Cash Flow Multiple - Projected 8.2
---
</TABLE>
-117-
<PAGE> 129
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY K A N E R E E C E A S S O C I A T E S, I N C.
CENTRAL REGION, OREGON CATV SYSTEM VALUATION MODEL EXHIBIT E-5A
VALUATION DATE: DECEMBER 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Growth Rate in Homes Passed 1.3% Thru Yr 5
Homes Passed @ 12/31/95 26,355
Equivalent Billing Units @ 12/31/95 14,609 55.4% EBU's/HP
Pay Units @ 12/31/95 5,505 37.7% Pay Units/EBU's
Operating Margin for 95 Yr. 50.5% After reimbursable expenses.
Operating Margin for 94 Yr. 52.2% After reimbursable expenses.
Weighted average discount rate 14.0%
</TABLE>
<TABLE>
<CAPTION>
Year 1 2 3 4 5 6 7 8 9 10
---- - - - - - - - - - --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic Rev/EBU (now $20.63) $21.20 $22.00 $22.90 $23.80 $24.80 $25.80 $26.80 $27.90 $29.00 $30.20
Growth rate 2.8% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Kagan Projection $24.58 $25.56 $26.57 $27.64 $28.74 $29.87 $31.07 $32.33 $33.62 n/a
Growth rate 6.5% 4.0% 4.0% 4.0% 4.0% 3.9% 4.0% 4.1% 4.0%
Pay Rev/Pay Unit (now $8.06) $6.98 $6.98 $7.19 $7.19 $7.41 $7.41 $7.63 $7.63 $7.86 $7.86
Growth rate -12.2% 0% 3% 0% 3% 0% 3% 0% 3% 0%
Kagan Projection $8.20 $8.12 $8.04 $7.96 $7.88 $7.80 $7.80 $7.80 $7.80 n/a
Growth rate -1.1% -1.0% -1.0% -1.0% -1.0% -1.0% 0.0% 0.0% 0.0%
New Product Tier (now $2.75) $3.29 $3.45 $3.63 $3.81 $4.00 $4.20 $4.41 $4.63 $4.86 $5.10
Growth rate 19.6% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Mini-Pay/EBU (now $0.00) $0.01 $0.01 $0.02 $0.02 $0.02 $0.03 $0.04 $0.05 $0.06 $0.07
Growth rate n/a 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0%
Pay-Per-View Rev/EBU (now $0.01) $0.00 $0.00 $0.20 $0.24 $0.28 $0.32 $0.37 $0.42 $0.48 $0.56
Growth rate n/a n/a n/a 20.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0%
Kagan Projection $0.74 $1.01 $1.27 $1.65 $2.01 $2.36 $2.81 $3.25 $3.66 n/a
Growth rate 22.0% 36.5% 25.7% 29.9% 21.8% 17.4% 19.1% 15.7% 12.6%
Equipment/ EBU (now $0.32) $0.31 $0.32 $0.33 $0.34 $0.35 $0.36 $0.37 $0.38 $0.39 $0.40
Growth rate -3.1% 3% 3% 3% 3% 3% 3% 3% 3% 3%
Advertising/EBU (now $0.0) $0.00 $0.00 $0.00 $0.50 $0.63 $0.78 $0.98 $1.22 $1.53 $1.91
Growth rate n/a n/a n/a n/a 25.0% 25.0% 25.0% 25.0% 25.0% 25.0%
Kagan Projection $2.00 $2.24 $2.49 $2.75 $3.08 $3.47 $3.87 $4.28 $4.69 n/a
Growth rate 14.0% 12.0% 11.2% 10.4% 12.0% 12.7% 11.5% 10.6% 9.6%
Home Shopping /EBU (now $0.24) $0.24 $0.30 $0.38 $0.47 $0.56 $0.68 $0.78 $0.89 $1.03 $1.18
Growth rate 0.0% 25% 25% 25% 20% 20% 15% 15% 15% 15%
Install/Service/EBU (now $.73) $0.77 $0.81 $0.85 $0.89 $0.94 $0.98 $1.03 $1.08 $1.14 $1.19
Growth rate 5.5% 5% 5% 5% 5% 5% 5% 5% 5% 5%
Franchise Fee Pass-thru/EBU (now $0.16) $0.16 $0.21 $0.32 $0.67 $1.23 $1.29 $1.36 $1.42 $1.50 $1.57
Growth rate n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Late Fees & Other/EBU (now $0.44) $0.46 $0.47 $0.48 $0.49 $0.50 $0.51 $0.52 $0.53 $0.54 $0.55
growth rate 4.5% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Pay-to-EBU (now 37.7%) 39.0% 40.0% 41.0% 42.0% 43.0% 44.0% 45.0% 46.0% 47.0% 48.0%
Kagan Projection 77.5% 78.5% 79.5% 80.0% 80.3% 80.5% 80.8% 81.0% 81.3% n/a
Total Annual EBU Rev $349.94 $364.41 $384.47 $410.95 $437.85 $458.44 $480.87 $504.40 $530.55 $558.17
monthly (now $28.11) $29.16 $30.37 $32.04 $34.25 $36.49 $38.20 $40.07 $42.03 $44.21 $46.51
Compound growth 5.3%
Kagan Projection $33.72 $35.22 $36.85 $38.70 $40.62 $42.60 $44.74 $46.91 $49.15
Compound growth 4.8%
</TABLE>
-118-
<PAGE> 130
- -------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY KANE REECE ASSOCIATES, INC. EXHIBIT E-5b
CENTRAL REGION, OREGON CATV SYSTEM VALUATION MODEL
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year 1 2 3 4 5
---- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Homes Passed 26,482 26,826 27,175 27,528 27,886
EBU Penetration 56.0% 56.5% 57.0% 57.5% 62.5%
Kagan Penetration Projection 67.5% 68.0% 68.3% 68.2% 67.7%
Equivalent Billing Units 14,825 15,152 15,485 15,824 17,429
Basic Revenue/EBU $21.20 $22.00 $22.90 $23.80 $24.80
Basic Revenue 3,771,480 4,000,090 4,255,197 4,519,234 5,186,824
---------- ---------- ---------- ---------- ----------
Pay-to-Basic Ratio 39.0% 40.0% 41.0% 42.0% 43.0%
Pay Units 5,782 6,061 6,349 6,646 7,494
Pay Revenue/Pay Unit $6.98 $6.98 $7.19 $7.19 $7.41
Pay Revenue 484,279 507,648 547,723 573,363 665,960
---------- ---------- ---------- ---------- ----------
New Product Tier/EBU $3.29 $3.45 $3.63 $3.81 $4.00
New Product Tier Revenue 585,291 628,105 673,998 723,189 836,379
---------- ---------- ---------- ---------- ----------
Mini-Pay Revenue/EBU $0.01 $0.01 $0.02 $0.02 $0.02
Mini-Pay Revenue/EBU 1,779 2,273 2,903 3,709 5,106
---------- ---------- ---------- ---------- ----------
Pay-Per-View Revenue/EBU $0.00 $0.00 $0.20 $0.24 $0.28
Pay-Per-View Revenue 0 0 37,163 45,572 57,724
---------- ---------- ---------- ---------- ----------
Equipment Revenue/ EBU $0.31 $0.32 $0.33 $0.34 $0.35
Equipment Revenue 55,149 58,056 61,111 64,322 72,973
---------- ---------- ---------- ---------- ----------
Advertising Revenue/EBU $0.00 $0.00 $0.00 $0.50 $0.63
Advertising Revenue/EBU 0 0 0 94,942 130,716
---------- ---------- ---------- ---------- ----------
Home Shopping/EBU $0.24 $0.30 $0.38 $0.47 $0.56
Home Shopping Revenue 42,696 54,547 69,681 89,008 117,645
---------- ---------- ---------- ---------- ----------
Installation Revenue/EBU $0.77 $0.81 $0.85 $0.89 $0.94
Installation Revenue 136,983 147,003 157,744 169,257 195,748
---------- ---------- ---------- ---------- ----------
Franchise Fee Pass-thru Revenue/EBU $0.16 $0.21 $0.32 $0.67 $1.23
Franchise Fee Pass-thru Revenue 28,377 38,381 58,944 127,506 258,062
---------- ---------- ---------- ---------- ----------
Late Fees & Other Revenue/EBU $0.46 $0.47 $0.48 $0.49 $0.50
Late Fees & Other Revenue 81,834 85,311 88,929 92,693 104,138
---------- ---------- ---------- ---------- ----------
Total Revenue $5,187,869 $5,521,414 $5,953,394 $6,502,794 $7,631,275
---------- ---------- ---------- ---------- ----------
6 7 8 9 10
---------- ---------- ---------- ---------- ----------
Homes Passed 28,067 28,250 28,433 28,618 28,804
EBU Penetration 63.0% 63.5% 64.0% 64.5% 65.0%
Kagan Penetration Projection 67.1% 66.5% 65.9% 65.3%
Equivalent Billing Units 17,682 17,939 18,197 18,459 18,723
Basic Revenue/EBU $25.80 $26.80 $27.90 $29.00 $30.20
Basic Revenue 5,474,492 5,769,071 6,092,497 6,423,661 6,785,143
---------- ---------- ---------- ---------- ----------
Pay-to-Basic Ratio 44.0% 45.0% 46.0% 47.0% 48.0%
Pay Units 7,780 8,072 8,371 8,676 8,987
Pay Revenue/Pay Unit $7.41 $7.63 $7.63 $7.86 $7.86
Pay Revenue 691,364 738,841 766,154 817,875 847,223
---------- ---------- ---------- ---------- ----------
New Product Tier/EBU $4.20 $4.41 $4.63 $4.86 $5.10
New Product Tier Revenue 890,977 949,080 1,010,909 1,076,701 1,146,705
---------- ---------- ---------- ---------- ----------
Mini-Pay Revenue/EBU $0.03 $0.04 $0.05 $0.06 $0.07
Mini-Pay Revenue/EBU 6,476 8,212 10,413 13,203 16,739
---------- ---------- ---------- ---------- ----------
Pay-Per-View Revenue/EBU $0.32 $0.37 $0.42 $0.48 $0.56
Pay-Per-View Revenue 67,349 78,573 91,663 106,926 124,724
---------- ---------- ---------- ---------- ----------
Equipment Revenue/ EBU $0.36 $0.37 $0.38 $0.39 $0.40
Equipment Revenue 76,256 79,681 83,256 86,985 90,876
---------- ---------- ---------- ---------- ----------
Advertising Revenue/EBU $0.78 $0.98 $1.22 $1.53 $1.91
Advertising Revenue/EBU 165,773 210,219 266,564 337,991 428,531
---------- ---------- ---------- ---------- ----------
Home Shopping/EBU $0.68 $0.78 $0.89 $1.03 $1.18
Home Shopping Revenue 143,228 167,099 194,935 227,396 265,245
---------- ---------- ---------- ---------- ----------
Installation Revenue/EBU $0.98 $1.03 $1.08 $1.14 $1.19
Installation Revenue 208,527 222,125 236,596 251,994 268,378
---------- ---------- ---------- ---------- ----------
Franchise Fee Pass-thru Revenue/EBU $1.29 $1.36 $1.42 $1.50 $1.57
Franchise Fee Pass-thru Revenue 274,127 291,704 310,393 331,174 353,398
---------- ---------- ---------- ---------- ----------
Late Fees & Other Revenue/EBU $0.51 $0.52 $0.53 $0.54 $0.55
Late Fees & Other Revenue 107,766 111,514 115,385 119,383 123,513
---------- ---------- ---------- ---------- ----------
Total Revenue $8,106,335 $8,626,119 $9,178,764 $9,793,288 $10,450,474
---------- ---------- ---------- ---------- ----------
</TABLE>
-119-
<PAGE> 131
<TABLE>
<S> <C> <C>
FALCON CABLE SYSTEMS COMPANY KANE REECE ASSOCIATES, INC. EXHIBIT E-5c
CENTRAL REGION, OREGON CATV SYSTEM VALUATION MODEL
</TABLE>
<TABLE>
<CAPTION>
Year 1 2 3 4 5
---- - - - - -
<S> <C> <C> <C> <C> <C> <C>
Total Revenue $5,187,869 $5,521,414 $5,953,394 $6,502,794 $7,631,275
Margin % to Revenue 50.0% 50.0% 50.0% 51.0% 51.0%
Operating Cash Flow 2,593,934 2,760,707 2,976,697 3,316,425 3,891,950
Capital Expenditures:
- Rebuild/Extensions 113,000 145,000 1,102,000 258,000 265,000
- Recurring 396,000 250,000 305,000 460,000 477,000
--------- --------- --------- --------- ---------
Total 509,000 395,000 1,407,000 718,000 742,000
Net Cash Flow 2,084,934 2,365,707 1,569,697 2,598,425 3,149,950
Present Value Factor @ 14.0% 0.93659 0.82157 0.72067 0.63217 0.55453
PV Net Cash Flow 1,952,720 1,943,586 1,131,237 1,642,643 1,746,755
--------- --------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
Year 6 7 8 9 10
---- - - - - --
<S> <C> <C> <C> <C> <C> <C>
Total Revenue $8,106,335 $8,626,119 $9,178,764 $9,793,288 $10,450,474
Margin % to Revenue 51.0% 51.0% 51.0% 51.0% 51.0%
Operating Cash Flow 4,134,231 4,399,321 4,681,170 4,994,577 5,329,742
Capital Expenditures:
- Rebuild/Extensions 186,000 189,000 192,000 196,000 199,000
- Recurring 310,000 264,000 319,000 274,000 330,000
--------- --------- --------- --------- ---------
Total 496,000 453,000 511,000 470,000 529,000
--------- --------- --------- --------- ---------
Net Cash Flow 3,638,231 3,946,321 4,170,170 4,524,577 4,800,742
Present Value Factor @ 14.0% 0.48643 0.42670 0.37429 0.32833 0.28801
PV Net Cash Flow 1,769,757 1,683,879 1,560,872 1,485,548 1,382,650
--------- --------- --------- --------- ---------
</TABLE>
<TABLE>
<S> <C> <C> <C>
Present Value of Net Cash Flows $16,299,646 Residual Value
Present Value of Residual 8,782,385 ------------------------------------------------------
----------- 8x's Yr 11 Operating Cash Flow $45,409,400
Value Indication under Income Approach $25,082,031 Less: Taxes (see Schedule) @ 28.3% 12,851,156
----------- ----------
Value Indication (Rounded) $25,080,000 After Tax Proceeds (end of year 10) 32,558,244
----------- ----------
Value Indication/EBU $1,717 Present Value @ 14.0% $8,782,385
------ ----------
Cash Flow Multiple - Projected 9.7
---
</TABLE>
-120-
<PAGE> 132
<TABLE>
<S> <C> <C>
FALCON CABLE SYSTEMS COMPANY K A N E R E E C E A S S O C I A T E S, I N C.
DALLAS REGION, OREGON CATV SYSTEM VALUATION MODEL EXHIBIT E-6a
VALUATION DATE: DECEMBER 31, 1995
</TABLE>
<TABLE>
<S> <C>
Growth Rate in Homes Passed 2.1% Thru Yr 5
Homes Passed @ 12/31/95 23,770
Equivalent Billing Units @ 12/31/95 17,736 74.6% EBU's/HP
Pay Units @ 12/31/95 7,139 40.3% Pay Units/EBU's
Operating Margin for 95 Yr. 52.1% After reimbursable expenses & capitalization adjustments.
Operating Margin for 94 Yr. 53.5% After reimbursable expenses & capitalization adjustments.
Weighted average discount rate 14.0%
</TABLE>
<TABLE>
<CAPTION>
Year 1 2 3 4 5 6 7 8 9 10
---- - - - - - - - - - --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic Rev/EBU (now $21.10) $21.47 $22.30 $23.20 $24.10 $25.10 $26.10 $27.10 $28.20 $29.30 $30.50
Growth rate 1.8% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Kagan Projection $24.58 $25.56 $26.57 $27.64 $28.74 $29.87 $31.07 $32.33 $33.62 n/a
Growth rate 6.5% 4.0% 4.0% 4.0% 4.0% 3.9% 4.0% 4.1% 4.0%
Pay Rev/Pay Unit (now $7.41) $7.73 $7.73 $7.96 $7.96 $8.20 $8.20 $8.20 $8.20 $8.20 $8.20
Growth rate 4.3% 0% 3% 0% 3% 0% 0% 0% 0% 0%
Kagan Projection $8.20 $8.12 $8.04 $7.96 $7.88 $7.80 $7.80 $7.80 $7.80 n/a
Growth rate -1.1% -1.0% -1.0% -1.0% -1.0% -1.0% 0.0% 0.0% 0.0%
New Product Tier (now $1.83) $2.06 $2.16 $2.27 $2.38 $2.50 $2.63 $2.76 $2.90 $3.04 $3.20
Growth rate 12.6% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Mini-Pay/EBU (now $0.04) $0.06 $0.08 $0.09 $0.12 $0.15 $0.18 $0.23 $0.29 $0.36 $0.45
Growth rate n/a 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0%
Pay-Per-View Rev/EBU (now $0.21) $0.23 $0.28 $0.33 $0.40 $0.46 $0.53 $0.60 $0.70 $0.80 $0.92
Growth rate 9.5% 20.0% 20.0% 20.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0%
Kagan Projection $0.74 $1.01 $1.27 $1.65 $2.01 $2.36 $2.81 $3.25 $3.66 n/a
Growth rate 22.0% 36.5% 25.7% 29.9% 21.8% 17.4% 19.1% 15.7% 12.6%
Equipment/EBU (now $0.35) $0.34 $0.35 $0.36 $0.37 $0.38 $0.39 $0.41 $0.42 $0.43 $0.44
Growth rate -2.9% 3% 3% 3% 3% 3% 3% 3% 3% 3%
Advertising/EBU (now $.91) $1.06 $1.33 $1.66 $1.90 $2.19 $2.52 $2.77 $3.05 $3.35 $3.69
Growth rate 16.5% 25.0% 25.0% 15.0% 15.0% 15.0% 10.0% 10.0% 10.0% 10.0%
Kagan Projection $2.00 $2.24 $2.49 $2.75 $3.08 $3.47 $3.87 $4.28 $4.69 n/a
Growth rate 14.0% 12.0% 11.2% 10.4% 12.0% 12.7% 11.5% 10.6% 9.6%
Home Shopping/EBU (now $0.17) $0.19 $0.24 $0.30 $0.37 $0.45 $0.53 $0.61 $0.71 $0.81 $0.93
Growth rate 11.8% 25% 25% 25% 20% 20% 15% 15% 15% 15%
Install/Service/EBU (now $.52) $0.58 $0.61 $0.64 $0.67 $0.70 $0.74 $0.78 $0.82 $0.86 $0.90
Growth rate 11.5% 5% 5% 5% 5% 5% 5% 5% 5% 5%
Franchise Fee Pass-thru/EBU (now $.04) $0.04 $0.26 $0.37 $0.73 $1.31 $1.37 $1.43 $1.50 $1.57 $1.65
Growth rate n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Late Fees & Other/EBU (now $0.65) $0.67 $0.68 $0.70 $0.71 $0.73 $0.74 $0.75 $0.77 $0.79 $0.80
growth rate 3.1% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Pay-to-EBU (now 40.3%) 40.5% 41.5% 42.5% 43.5% 44.5% 45.5% 46.5% 47.5% 48.5% 49.5%
Kagan Projection 77.5% 78.5% 79.5% 80.0% 80.3% 80.5% 80.8% 81.0% 81.3% n/a
Total Annual EBU Rev $357.97 $377.83 $399.59 $422.67 $451.39 $473.64 $495.17 $518.81 $543.43 $570.41
monthly (now $28.11) $29.83 $31.49 $33.30 $35.22 $37.62 $39.47 $41.26 $43.23 $45.29 $47.53
Compound growth 5.3%
Kagan Projection $33.72 $35.22 $36.85 $38.70 $40.62 $42.60 $44.74 $46.91 $49.15
Compound growth 4.8%
</TABLE>
-121-
<PAGE> 133
- --------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY KANE REECE ASSOCIATES, INC. EXHIBIT E-6b
DALLAS REGION, OREGON CATV SYSTEM VALUATION MODEL
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year 1 2 3 4 5
---- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Homes Passed 23,975 24,478 24,993 25,517 26,053
EBU Penetration 74.7% 75.0% 75.0% 75.0% 75.0%
Kagan Penetration Projection 67.5% 68.0% 68.3% 68.2% 67.7%
Equivalent Billing Units 17,900 18,359 18,744 19,138 19,540
Basic Revenue/EBU $21.47 $22.30 $23.20 $24.10 $25.10
Basic Revenue 4,611,756 4,912,830 5,218,439 5,534,717 5,885,425
---------- ---------- ---------- ---------- ----------
Pay-to-Basic Ratio 40.5% 41.5% 42.5% 43.5% 44.5%
Pay Units 7,250 7,619 7,966 8,325 8,695
Pay Revenue/Pay Unit $7.73 $7.73 $7.96 $7.96 $8.20
Pay Revenue 672,464 706,732 761,129 795,398 855,693
---------- ---------- ---------- ---------- ----------
New Product Tier/EBU $2.06 $2.16 $2.27 $2.38 $2.50
New Product Tier Revenue 442,488 476,522 510,856 547,663 587,122
---------- ---------- ---------- ---------- ----------
Mini-Pay Revenue/EBU $0.06 $0.08 $0.09 $0.12 $0.15
Mini-Pay Revenue 12,888 16,523 21,087 26,913 34,348
---------- ---------- ---------- ---------- ----------
Pay-Per-View Revenue/EBU $0.23 $0.28 $0.33 $0.40 $0.46
Pay-Per-View Revenue 49,404 60,805 74,498 91,275 107,170
---------- ---------- ---------- ---------- ----------
Equipment Revenue/ EBU $0.34 $0.35 $0.36 $0.37 $0.38
Equipment Revenue 73,032 77,151 81,135 85,324 89,729
---------- ---------- ---------- ---------- ----------
Advertising Revenue/EBU $1.06 $1.33 $1.66 $1.90 $2.19
Advertising Revenue 227,688 291,906 372,545 437,423 513,601
---------- ---------- ---------- ---------- ----------
Home Shopping/EBU $0.19 $0.24 $0.30 $0.37 $0.45
Home Shopping Revenue 40,812 52,323 66,777 85,224 104,416
---------- ---------- ---------- ---------- ----------
Installation Revenue/EBU $0.58 $0.61 $0.64 $0.67 $0.70
Installation Revenue 124,584 134,167 143,833 154,196 165,306
---------- ---------- ---------- ---------- ----------
Franchise Fee Pass-thru Revenue/EBU $0.04 $0.26 $0.37 $0.73 $1.31
Franchise Fee Pass-thru Revenue 8,592 56,969 83,068 167,615 307,329
---------- ---------- ---------- ---------- ----------
Late Fees & Other Revenue/EBU $0.67 $0.68 $0.70 $0.71 $0.73
Late Fees & Other Revenue 143,916 150,557 156,793 163,288 170,051
---------- ---------- ---------- ---------- ----------
Total Revenue $6,407,624 $6,936,484 $7,490,160 $8,089,035 $8,820,190
---------- ---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
6 7 8 9 10
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Homes Passed 26,327 26,603 26,883 27,165 27,450
EBU Penetration 75.0% 75.0% 75.0% 75.0% 75.0%
Kagan Penetration Projection 67.1% 66.5% 65.9% 65.3%
Equivalent Billing Units 19,745 19,952 20,162 20,374 20,588
Basic Revenue/EBU $26.10 $27.10 $28.20 $29.30 $30.50
Basic Revenue 6,184,163 6,488,526 6,822,792 7,163,363 7,535,039
---------- ---------- ---------- ---------- ----------
Pay-to-Basic Ratio 45.5% 46.5% 47.5% 48.5% 49.5%
Pay Units 8,984 9,278 9,577 9,881 10,191
Pay Revenue/Pay Unit $8.20 $8.20 $8.20 $8.20 $8.20
Pay Revenue 884,109 913,027 942,455 972,400 1,002,870
---------- ---------- ---------- ---------- ----------
New Product Tier/EBU $2.63 $2.76 $2.90 $3.04 $3.20
New Product Tier Revenue 622,951 660,967 701,302 744,099 789,508
---------- ---------- ---------- ---------- ----------
Mini-Pay Revenue/EBU $0.18 $0.23 $0.29 $0.36 $0.45
Mini-Pay Revenue 43,385 54,801 69,220 87,434 110,440
---------- ---------- ---------- ---------- ----------
Pay-Per-View Revenue/EBU $0.53 $0.60 $0.70 $0.80 $0.92
Pay-Per-View Revenue 124,540 144,724 168,181 195,439 227,114
---------- ---------- ---------- ---------- ----------
Equipment Revenue/ EBU $0.39 $0.41 $0.42 $0.43 $0.44
Equipment Revenue 93,391 97,203 101,170 105,299 109,597
---------- ---------- ---------- ---------- ----------
Advertising Revenue/EBU $2.52 $2.77 $3.05 $3.35 $3.69
Advertising Revenue 596,843 663,420 737,425 819,685 911,121
---------- ---------- ---------- ---------- ----------
Home Shopping/EBU $0.53 $0.61 $0.71 $0.81 $0.93
Home Shopping Revenue 126,615 147,137 170,984 198,696 230,900
---------- ---------- ---------- ---------- ----------
Installation Revenue/EBU $0.74 $0.78 $0.82 $0.86 $0.90
Installation Revenue 175,394 186,097 197,454 209,504 222,289
---------- ---------- ---------- ---------- ----------
Franchise Fee Pass-thru Revenue/EBU $1.37 $1.43 $1.50 $1.57 $1.65
Franchise Fee Pass-thru Revenue 325,411 343,357 363,079 383,854 406,666
---------- ---------- ---------- ---------- ----------
Late Fees & Other Revenue/EBU $0.74 $0.75 $0.77 $0.79 $0.80
Late Fees & Other Revenue 175,273 180,656 186,204 191,922 197,816
---------- ---------- ---------- ---------- ----------
Total Revenue $9,352,075 $9,879,915 $10,460,267 $11,071,696 $11,743,361
---------- ---------- ----------- ----------- -----------
</TABLE>
-122-
<PAGE> 134
FALCON CABLE SYSTEMS COMPANY KANE REECE ASSOCIATES, INC. EXHIBIT E-6c
DALLAS REGION, OREGON CATV SYSTEM VALUATION MODEL
<TABLE>
<CAPTION>
Year 1 2 3 4 5
<S> <C> <C> <C> <C> <C>
Total Revenue $6,407,624 $6,936,484 $7,490,160 $8,089,035 $8,820,190
Margin % to Revenue 52.0% 52.0% 51.0% 51.0 % 50.0%
Operating Cash Flow 3,331,964 3,606,972 3,819,982 4,125,408 4,410,095
Capital Expenditures:
- Rebuild/Extensions 930,000 2,441,000 2,542,000 271,000 280,000
- Recurring 759,000 281,000 324,000 481,000 288,000
---------- ---------- ---------- ---------- ----------
Total 1,689,000 2,722,000 2,866,000 752,000 568,000
---------- ---------- ---------- ---------- ----------
Net Cash Flow 1,642,964 884,972 953,982 3,373,408 3,842,095
Present Value Factor @ 14.0% 0.93659 0.82157 0.72067 0.63217 0.55453
PV Net Cash Flow 1,538,777 727,063 687,508 2,132,563 2,130,572
---------- ---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
6 7 8 9 10
<S> <C> <C> <C> <C> <C>
Total Revenue $9,352,075 $9,879,915 $10,460,267 $11,071,696 $11,743,361
Margin % to Revenue 50.0% 50.0% 50.0% 50.0% 50.0%
Operating Cash Flow 4,676,038 4,939,958 5,230,134 5,535,848 5,871,680
Capital Expenditures:
- Rebuild/Extensions 194,000 198,000 202,000 207,000 211,000
- Recurring 309,000 264,000 318,000 273,000 328,000
---------- ---------- ----------- ----------- -----------
Total 503,000 462,000 520,000 480,000 539,000
---------- ---------- ----------- ----------- -----------
Net Cash Flow 4,173,038 4,477,958 4,710,134 5,055,848 5,332,680
Present Value Factor @ 14.0% 0.48643 0.42670 0.37429 0.32833 0.28801
PV Net Cash Flow 2,029,905 1,910,726 1,762,978 1,659,980 1,535,852
---------- ---------- ----------- ----------- -----------
</TABLE>
<TABLE>
<S> <C> <C>
Present Value of Net Cash Flows $16,115,924 Residual Value
Present Value of Residual 9,619,639 -------------------------------------------------------
-----------
8x's Yr 11 Operating Cash Flow $50,026,717
Value Indication under Income Approach $25,735,563 Less: Taxes (see Schedule) @ 28.7% 14,364,586
----------- -----------
Value Indication (Rounded) $25,740,000 After Tax Proceeds (end of year 10) 35,662,132
----------- ----------
Value Indication/EBU $1,451 Present Value @ 14.0% $9,619,639
------ ----------
Cash Flow Multiple - Projected 7.7
---
</TABLE>
-123-
<PAGE> 135
- --------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY KANE REECE ASSOCIATES, INC.
COOS BAY/FLORENCE REGION, OREGON CATV SYSTEM VALUATION MODEL EXHIBIT E-7a
VALUATION DATE: DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Growth Rate in Homes Passed 1.0% Thru Yr 5
Homes Passed @ 12/31/95 31,489
Equivalent Billing Units @ 12/31/95 22,898 72.7% EBU's/HP
Pay Units @ 12/31/95 7,771 33.9% Pay Units/EBU's
Operating Margin for 95 Yr. 51.3% After reimbursable expenses.
Operating Margin for 94 Yr. 51.9% After reimbursable expenses.
Weighted average discount rate 14.0%
</TABLE>
<TABLE>
<CAPTION>
Year 1 2 3 4 5 6 7 8 9 10
---- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic Rev/EBU (now $21.89) $22.75 $23.70 $24.60 $25.60 $26.60 $27.70 $28.80 $30.00 $31.20 $32.40
Growth rate 3.9% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Kagan Projection $24.58 $25.56 $26.57 $27.64 $28.74 $29.87 $31.07 $32.33 $33.62 n/a
Growth rate 6.5% 4.0% 4.0% 4.0% 4.0% 3.9% 4.0% 4.1% 4.0%
Pay Rev/Pay Unit (now $6.75) $7.32 $7.54 $7.54 $7.77 $7.77 $8.00 $8.00 $8.00 $8.00 $8.00
Growth rate 8.4% 3.0% 0% 3% 0% 3% 0% 0% 0% 0%
Kagan Projection $8.20 $8.12 $8.04 $7.96 $7.88 $7.80 $7.80 $7.80 $7.80 n/a
Growth rate -1.1% -1.0% -1.0% -1.0% -1.0% -1.0% 0.0% 0.0% 0.0%
New Product Tier (now $2.63) $2.75 $2.89 $3.03 $3.18 $3.34 $3.51 $3.69 $3.87 $4.06 $4.27
Growth rate 4.6% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Mini-Pay/EBU (now $0.05) $0.06 $0.08 $0.09 $0.12 $0.15 $0.18 $0.23 $0.29 $0.36 $0.45
Growth rate 0 0 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0%
Video Games & Activ./EBU (now $0.05) $0.10 $0.15 $0.19 $0.23 $0.29 $0.37 $0.46 $0.57 $0.72 $0.89
Growth rate 1 1 0 0 0 25.0% 25.0% 25.0% 25.0% 25.0%
Pay-Per-View Rev/EBU (now $0.51) $0.62 $0.74 $0.89 $1.07 $1.23 $1.42 $1.63 $1.87 $2.15 $2.48
Growth rate 21.6% 20.0% 20.0% 20.0% 15.0% 15.0% 15.0% 15.0% 15.0% 15.0%
Kagan Projection $0.74 $1.01 $1.27 $1.65 $2.01 $2.36 $2.81 $3.25 $3.66 n/a
Growth rate 22.0% 36.5% 25.7% 29.9% 21.8% 17.4% 19.1% 15.7% 12.6%
Equipment/EBU (now $1.08) $1.12 $1.15 $1.19 $1.22 $1.26 $1.30 $1.34 $1.38 $1.42 $1.46
Growth rate 3.7% 3% 3% 3% 3% 3% 3% 3% 3% 3%
Advertising/EBU (now $1.10) $1.19 $1.37 $1.57 $1.81 $1.99 $2.19 $2.41 $2.65 $2.91 $3.21
Growth rate 8.2% 15.0% 15.0% 15.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Kagan Projection $2.00 $2.24 $2.49 $2.75 $3.08 $3.47 $3.87 $4.28 $4.69 n/a
Growth rate 14.0% 12.0% 11.2% 10.4% 12.0% 12.7% 11.5% 10.6% 9.6%
Home Shopping/EBU (now $0.45) $0.35 $0.44 $0.55 $0.68 $0.82 $0.98 $1.13 $1.30 $1.50 $1.72
Growth rate -22.2% 25% 25% 25% 20% 20% 15% 15% 15% 15%
Install/Service/EBU (now $.78) $0.81 $0.85 $0.89 $0.94 $0.98 $1.03 $1.09 $1.14 $1.20 $1.26
Growth rate 3.8% 5% 5% 5% 5% 5% 5% 5% 5% 5%
Franchise Fee Pass-thru/EBU (now $0.49) $0.56 $0.73 $0.77 $0.81 $0.84 $0.89 $0.93 $0.98 $1.03 $1.08
Growth rate n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Late Fees & Other/EBU (now $0.67) $0.55 $0.56 $0.57 $0.58 $0.60 $0.61 $0.62 $0.63 $0.64 $0.66
growth rate -17.9% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Pay-to-EBU (now 33.9%) 34.0% 35.0% 36.0% 37.0% 38.0% 39.0% 40.0% 41.0% 42.0% 43.0%
Kagan Projection 77.5% 78.5% 79.5% 80.0% 80.3% 80.5% 80.8% 81.0% 81.3% n/a
Total Annual EBU Rev $400.24 $423.57 $444.72 $469.50 $492.73 $519.57 $546.19 $575.54 $606.63 $639.75
monthly (now $31.47) $33.35 $35.30 $37.06 $39.12 $41.06 $43.30 $45.52 $47.96 $50.55 $53.31
Compound growth 5.3%
Kagan Projection $33.72 $35.22 $36.85 $38.70 $40.62 $42.60 $44.74 $46.91 $49.15
Compound growth 4.8%
</TABLE>
-124-
<PAGE> 136
<TABLE>
<CAPTION>
FALCON CABLE SYSTEMS COMPANY K A N E R E E C E A S S O C I A T E S, I N C. EXHIBIT E-7b
COOS BAY/FLORENCE REGION, OREGON CATV SYSTEM VALUATION MODEL
Year 1 2 3 4 5
<S> <C> <C> <C> <C> <C>
Homes Passed 31,657 31,974 32,293 32,616 32,942
BU Penetration 73% 74% 74% 75% 75%
Kagan Penetration Projection 68% 68% 68% 68% 68%
Equivalent Billing Units 23,090 23,501 23,897 24,299 24,707
Basic Revenue/EBU $22.75 $23.70 $24.60 $25.60 $26.60
Basic Revenue 6,303,570 6,683,563 7,054,408 7,464,683 7,886,411
Pay-to-Basic Ratio 34.0% 35.0% 36.0% 37.0% 38.0%
Pay Units 7,851 8,225 8,603 8,991 9,389
Pay Revenue/Pay Unit $7.32 $7.54 $7.54 $7.77 $7.77
Pay Revenue 689,597 744,177 778,352 837,835 874,917
New Product Tier/EBU $2.75 $2.89 $3.03 $3.18 $3.34
New Product Tier Revenue 761,970 814,295 869,434 928,265 991,032
Mini-Pay Revenue/EBU $0.06 $0.08 $0.09 $0.12 $0.15
Mini-Pay Revenue/EBU 16,625 21,151 26,884 34,171 43,430
Pay-Per-View Revenue/EBU $0.62 $0.74 $0.89 $1.07 $1.23
Pay-Per-View Revenue 171,790 209,813 256,023 312,397 365,284
Equipment Revenue/ EBU $1.12 $1.15 $1.19 $1.22 $1.26
Equipment Revenue 310,330 325,323 340,736 356,863 373,736
Advertising Revenue/EBU $1.19 $1.37 $1.57 $1.81 $1.99
Advertising Revenue/EBU 329,725 385,926 451,303 527,730 590,243
Home Shopping/EBU $0.35 $0.44 $0.55 $0.68 $0.82
Home Shopping Revenue 96,978 123,378 156,824 199,329 243,208
Installation Revenue/EBU $0.81 $0.85 $0.89 $0.94 $0.98
Installation Revenue 224,435 239,847 256,088 273,416 291,904
Franchise Fee Pass-thru Revenue/EBU $0.56 $0.73 $0.77 $0.81 $0.84
Franchise Fee Pass-thru Revenue 156,445 206,240 219,629 235,128 250,330
Late Fees & Other Revenue/EBU $0.55 $0.56 $0.57 $0.58 $0.60
Late Fees & Other Revenue 152,394 158,206 164,092 170,190 176,507
Total Revenue $9,213,858 $9,911,919 $10,573,775 $11,340,006 $12,087,001
---------- ---------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Year 6 7 8 9 10
<S> <C> <C> <C> <C> <C>
Homes Passed 33,107 33,273 33,439 33,606 33,774
EBU Penetration 76% 76% 77% 77% 78%
Kagan Penetration Projection 67% 67% 66% 65%
Equivalent Billing Units 24,996 25,287 25,581 25,877 26,175
Basic Revenue/EBU $27.70 $28.80 $30.00 $31.20 $32.40
Basic Revenue 8,308,627 8,739,261 9,209,104 9,688,266 10,176,853
Pay-to-Basic Ratio 39.0% 40.0% 41.0% 42.0% 43.0%
Pay Units 9,748 10,115 10,488 10,868 11,255
Pay Revenue/Pay Unit $8.00 $8.00 $8.00 $8.00 $8.00
Pay Revenue 935,701 970,879 1,006,706 1,043,190 1,080,338
New Product Tier/EBU $3.51 $3.69 $3.87 $4.06 $4.27
New Product Tier Revenue 1,052,758 1,118,280 1,187,829 1,261,649 1,340,000
Mini-Pay Revenue/EBU $0.18 $0.23 $0.29 $0.36 $0.45
Mini-Pay Revenue/EBU 54,923 69,453 87,825 111,051 140,414
Pay-Per-View Revenue/EBU $1.42 $1.63 $1.87 $2.15 $2.48
Pay-Per-View Revenue 424,992 494,437 575,205 669,139 778,379
Equipment Revenue/ EBU $1.30 $1.34 $1.38 $1.42 $1.46
Equipment Revenue 389,452 405,811 422,839 440,562 459,009
Advertising Revenue/EBU $2.19 $2.41 $2.65 $2.91 $3.21
Advertising Revenue/EBU 656,864 730,972 813,406 905,098 1,007,083
Home Shopping/EBU $0.98 $1.13 $1.30 $1.50 $1.72
Home Shopping Revenue 295,264 343,511 399,625 464,885 540,780
Installation Revenue/EBU $1.03 $1.09 $1.14 $1.20 $1.26
Installation Revenue 310,085 329,384 349,870 371,613 394,691
Franchise Fee Pass-thru Revenue/EBU $0.89 $0.93 $0.98 $1.03 $1.08
Franchise Fee Pass-thru Revenue 266,411 282,715 300,719 319,974 340,661
Late Fees & Other Revenue/EBU $0.61 $0.62 $0.63 $0.64 $0.66
Late Fees & Other Revenue 182,143 187,952 193,937 200,104 206,458
Total Revenue $12,877,219 $13,672,655 $14,547,064 $15,475,531 $16,464,666
----------- ----------- ----------- ----------- -----------
</TABLE>
-125-
<PAGE> 137
- --------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY KANE REECE ASSOCIATES, INC. EXHIBIT E-7c
COOS BAY/FLORENCE REGION, OREGON CATV SYSTEM VALUATION MODEL
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year 1 2 3 4 5
---- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total Revenue $9,213,858 $9,911,919 $10,573,775 $11,340,006 $12,087,001
Margin % to Revenue 52.0% 52.0% 51.0% 51.0% 51.0%
Operating Cash Flow 4,791,206 5,154,198 5,392,625 5,783,403 6,164,371
Capital Expenditures:
- Rebuild/Extensions 198,000 1,694,000 1,471,000 1,389,000 209,000
- Recurring 385,000 291,000 344,000 501,000 308,000
---------- ---------- ----------- ----------- -----------
Total 583,000 1,985,000 1,815,000 1,890,000 517,000
Net Cash Flow 4,208,206 3,169,198 3,577,625 3,893,403 5,647,371
Present Value Factor @ 14.0% 0.9366 0.8216 0.7207 0.6322 0.5545
PV Net Cash Flow 3,941,346 2,603,707 2,578,296 2,461,288 3,131,659
---------- ---------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Year 6 7 8 9 10
---- ----------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Total Revenue $12,877,219 $13,672,655 $14,547,064 $15,475,531 $16,464,666
Margin % to Revenue 51.0% 51.0% 51.0% 51.0% 51.0%
Operating Cash Flow 6,567,382 6,973,054 7,419,002 7,892,521 8,396,980
Capital Expenditures:
- Rebuild/Extensions 157,000 159,000 161,000 163,000 165,000
- Recurring 343,000 299,000 355,000 312,000 368,000
----------- ----------- ----------- ----------- -----------
Total 500,000 458,000 516,000 475,000 533,000
Net Cash Flow 6,067,382 6,515,054 6,903,002 7,417,521 7,863,980
Present Value Factor @ 14.0% 0.4864 0.4267 0.3743 0.3283 0.2880
PV Net Cash Flow 2,951,377 2,779,947 2,583,757 2,435,384 2,264,886
----------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<S> <C> <C> <C>
Present Value of Net Cash Flows $27,731,646 Residual Value
Present Value of Residual 13,815,145 ---------------------------------------------------
-----------
8x's Yr 11 Operating Cash Flow $71,542,268
Value Indication under Income Approach $41,546,791 Less: Taxes (see Schedule) @ 28.4% 20,326,468
----------- -----------
Value Indication (Rounded) $41,550,000 After Tax Proceeds (end of year 10) 51,215,800
----------- -----------
Value Indication/EBU $1,815 Present Value @ 14.0% $13,815,145
------ -----------
Cash Flow Multiple - Projected 8.7
---
</TABLE>
-126-
<PAGE> 138
EXHIBIT F
REGION EXCHANGE AND SALE SYSTEM VALUATION
<PAGE> 139
FALCON CABLE SYSTEMS COMPANY OPERATING STATISICS EXHIBIT F-1a
DALLAS REGION, OREGON (EXCHANGE SYSTEMS) VALUATION DATE: DECEMBER 31, 1995.
<TABLE>
<CAPTION>
Homes Passed Basic Subscribers
--------------------------------------------- 1995 EBU's EBU Pay Units
1995 1994 % Chg. 1995 1994 % Chg. FCC Method Pene Pay Units Pay/EBUs % Chg v. 94
---- ---- ------ ---- ---- ------ ---------- ---- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Silverton 2,951 2,927 0.8% 1,434 1,327 8.1% 1,464 49.6% 698 47.7% -7.5%
Mt. Angel 577 577 0.0% 276 270 2.2% 282 48.9% 158 56.0% 1.9%
Marion Cty. (Silverton) 286 286 0.0% 43 44 -2.3% 43 15.0% 45 104.7% 2.3%
------ ------ ----- ------ ------ -----
Subtotal 3,814 3,790 0.6% 1,753 1,641 6.8% 1,789 46.9% 901 50.4% -5.6%
Cannon Beach 1,221 1,221 0.0% 1,109 1,082 2.5% 1,305 106.9% 433 33.2% -12.2%
Clatsop Cty. (Cannon Beach) 250 250 0.0% 254 244 4.1% 260 103.9% 53 20.4% 0.0%
Bay City 584 558 4.7% 458 473 -3.2% 458 78.4% 184 40.2% -4.7%
Garibaldi 573 573 0.0% 383 417 -8.2% 426 74.4% 168 39.4% -6.1%
Rockaway Beach 1,352 1,352 0.0% 873 836 4.4% 998 73.8% 390 39.1% -4.2%
Tillamook Cty. (Nehalem) 522 522 0.0% 307 311 -1.3% 325 62.3% 125 38.5% 1.6%
Manzanita 916 898 2.0% 537 521 3.1% 572 62.5% 116 20.3% -12.8%
Nehalem 300 292 2.7% 132 114 15.8% 132 44.0% 51 38.6% 6.3%
Wheeler 219 207 5.8% 88 91 -3.3% 106 48.3% 27 25.5% -46.0%
Tillamook Cty. (Nehalem) 260 260 0.0% 467 478 -2.3% 478 183.9% 169 35.3% -9.6%
------ ------ ----- ------ ------ -----
Subtotal 6,197 6,133 1.0% 4,608 4,567 0.9% 5,060 81.6% 1,716 33.9% -8.0%
Tillamook 1,425 1,425 0.0% 1,502 1,534 -2.1% 1,547 108.5% 526 34.0% -20.4%
Tillamook Cty. (Tillamook) 1,800 1,800 0.0% 976 952 2.5% 987 54.8% 375 38.0% -12.0%
Subtotal 3,225 3,225 0.0% 2,478 2,486 -0.3% 2,534 78.6% 901 35.6% -17.1%
Netarts/Oceanside 850 850 0.0% 830 829 0.1% 933 109.8% 177 19.0% -10.2%
Brickyard Road 475 475 0.0% 484 480 0.8% 508 106.9% 176 34.7% -16.6%
------ ------ ----- ------ ------ -----
Total Dallas Exchange 14,561 14,473 0.6% 10,153 10,003 1.5% 10,823 74.3% 3,871 35.8% -10.3%
------ ------ ----- ------ ------ -----
</TABLE>
<TABLE>
<CAPTION>
Plan Miles Franchise
-------------------------------------- 1995 Channel Address- -----------------------------
Aerial UG Total '95 1994 % Chg. Density Capacity able Rebuild* Fee Expiration Life (Yrs)
------ -- --------- ---- ------ ------- -------- -------- -------- --- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Silverton 20.60 9.60 30.20 29.00 4.1% 98 37 Yes 5% Jan-2000 4.0
Mt. Angel 6.50 1.50 8.00 8.00 0.0% 72 37 Yes 3% Oct-95 (0.2)
Marion Cty.
(Silverton) 13.80 0.50 14.30 14.30 0.0% 20 37 Yes 5% Aug-96 0.6
----- ---- ----- -----
Subtotal 40.9 11.6 52.5 51.3 2.3% 73
Cannon Beach 10.20 5.50 15.70 15.70 0.0% 78 34 Yes 5% Jul-2002 6.5
Clatsop Cty.
(Cannon Beach) 5.60 4.00 9.60 9.60 0.0% 26 34 Yes
Bay City 11.30 0.50 11.80 11.30 4.4% 49 34 Yes 3% May-2000 4.4
Garibaldi 7.40 0.50 7.90 7.90 0.0% 73 34 Yes 5% Sep-97 1.7
Rockaway Beach 16.00 4.30 20.30 20.30 0.0% 67 34 Yes 5% Dec-2002 6.9
Tillamook Cty.
(Nehalem) 24.00 1.80 25.80 25.80 0.0% 20 34 Yes
Manzanita 9.50 3.50 13.00 12.70 2.4% 70 34 Yes 3% Feb-97 1.1
Nehalem 3.10 0.70 3.80 3.60 5.6% 79 34 Yes 50%,50%/ 3% Basic Aug-2001 5.6
97,98
Wheeler 4.00 0.70 4.70 4.50 4.4% 47 34 Yes 5% Nov-2013 17.9
Tillamook Cty.
(Nehalem) 11.00 6.30 17.30 17.30 0.0% 15 34 Yes
----- ---- ----- -----
Subtotal 102.1 27.8 129.9 128.7 0.9% 48
Tillamook 21.70 1.50 23.20 23.20 0.0% 61 29 No 50%,50% 5% Local Dec-99 4.0
97,98
Tillamook Cty.
(Tillamook) 50.70 5.60 56.30 56.30 0.0% 32 29 No
----- ---- ----- -----
Subtotal 72.40 7.10 79.50 79.50 0.0% 41
Netarts/Oceanside 15.00 2.00 17.00 17.00 0.0% 50 22 No 75%,25%/
95,96
Brickyard Road 24.00 1.00 25.00 25.00 0.0% 19 22 No 75%,25%/
----- ---- ----- ----- 95,96
Total Dallas
Exchange 254.4 49.5 303.9 301.5 0.8% 48
----- ---- ----- -----
</TABLE>
-127-
<PAGE> 140
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FALCON CABLE SYSTEMS COMPANY KANE REECE ASSOCIATES, INC.
DALLAS REGION, OREGON (EXCHANGE SYSTEMS) CATV SYSTEM VALUATION MODEL EXHIBIT F-1b
VALUATION DATE: DECEMBER 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Growth Rate in Homes Passed 2.1% Thru Yr 5
Homes Passed @ 12/31/95 14,561
Equivalent Billing Units @ 12/31/95 10,823 74.3% EBU's/HP
Pay Units @ 12/31/95 3,871 35.8% Pay Units/EBU's
Operating Margin for 95 Yr. 52.1% After reimbursable expenses & capitalization adjustments.
Operating Margin for 94 Yr. 53.5% After reimbursable expenses & capitalization adjustments.
Weighted average discount rate 14.0%
</TABLE>
<TABLE>
<CAPTION>
Year 1 2 3 4 5
---- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Basic Rev/EBU (now $21.10) $21.47 $22.30 $23.20 $24.10 $25.10
Growth rate 1.8% 4.0% 4.0% 4.0% 4.0%
Kagan Projection $24.58 $25.56 $26.57 $27.64 $28.74
Growth rate 6.5% 4.0% 4.0% 4.0% 4.0%
Pay Rev/Pay Unit (now $7.41) $7.73 $7.73 $7.96 $7.96 $8.20
Growth rate 4.3% 0% 3% 0% 3%
Kagan Projection $8.20 $8.12 $8.04 $7.96 $7.88
Growth rate -1.1% -1.0% -1.0% -1.0% -1.0%
New Product Tier (now $1.83) $2.06 $2.16 $2.27 $2.38 $2.50
Growth rate 12.6% 5.0% 5.0% 5.0% 5.0%
Mini-Pay/EBU (now $0.04) $0.06 $0.08 $0.09 $0.12 $0.15
Growth rate n/a 25.0% 25.0% 25.0% 25.0%
Pay-Per-View Rev/EBU (now $0.21) $0.23 $0.28 $0.33 $0.40 $0.46
Growth rate 9.5% 20.0% 20.0% 20.0% 15.0%
Kagan Projection $0.74 $1.01 $1.27 $1.65 $2.01
Growth rate 22.0% 36.5% 25.7% 29.9% 21.8%
Equipment/EBU (now $0.35) $0.34 $0.35 $0.36 $0.37 $0.38
Growth rate -2.9% 3% 3% 3% 3%
Advertising/EBU (now $.91) $1.06 $1.33 $1.66 $1.90 $2.19
Growth rate 16.5% 25.0% 25.0% 15.0% 15.0%
Kagan Projection $2.00 $2.24 $2.49 $2.75 $3.08
Growth rate 14.0% 12.0% 11.2% 10.4% 12.0%
Home Shopping/EBU (now $0.17) $0.19 $0.24 $0.30 $0.37 $0.45
Growth rate 11.8% 25% 25% 25% 20%
Install/Service/EBU (now $.52) $0.58 $0.61 $0.64 $0.67 $0.70
Growth rate 11.5% 5% 5% 5% 5%
Franchise Fee Pass-thru/EBU (now $.04) $0.04 $0.26 $0.37 $0.72 $1.30
Growth rate n/a n/a n/a n/a n/a
Late Fees & Other/EBU (now $0.65) $0.67 $0.68 $0.70 $0.71 $0.73
growth rate 3.1% 2.0% 2.0% 2.0% 2.0%
Pay-to-EBU (now 35.8%) 36.0% 37.0% 38.0% 39.0% 40.0%
Kagan Projection 77.5% 78.5% 79.5% 80.0% 80.3%
Total Annual EBU Rev $353.79 $373.62 $395.25 $418.28 $446.81
monthly (now $28.11) $29.48 $31.14 $32.94 $34.86 $37.23
Compound growth 5.4%
Kagan Projection $33.72 $35.22 $36.85 $38.70 $40.62
Compound growth 4.8%
<CAPTION>
Year 6 7 8 9 10
---- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Basic Rev/EBU (now $21.10) $26.10 $27.10 $28.20 $29.30 $30.50
Growth rate 4.0% 4.0% 4.0% 4.0% 4.0%
Kagan Projection $29.87 $31.07 $32.33 $33.62 n/a
Growth rate 3.9% 4.0% 4.1% 4.0%
Pay Rev/Pay Unit (now $7.41) $8.20 $8.20 $8.20 $8.20 $8.20
Growth rate 0% 0% 0% 0% 0%
Kagan Projection $7.80 $7.80 $7.80 $7.80 n/a
Growth rate -1.0% 0.0% 0.0% 0.0%
New Product Tier (now $1.83) $2.63 $2.76 $2.90 $3.04 $3.20
Growth rate 5.0% 5.0% 5.0% 5.0% 5.0%
Mini-Pay/EBU (now $0.04) $0.18 $0.23 $0.29 $0.36 $0.45
Growth rate 25.0% 25.0% 25.0% 25.0% 25.0%
Pay-Per-View Rev/EBU (now $0.21) $0.53 $0.60 $0.70 $0.80 $0.92
Growth rate 15.0% 15.0% 15.0% 15.0% 15.0%
Kagan Projection $2.36 $2.81 $3.25 $3.66 n/a
Growth rate 17.4% 19.1% 15.7% 12.6%
Equipment/EBU (now $0.35) $0.39 $0.41 $0.42 $0.43 $0.44
Growth rate 3% 3% 3% 3% 3%
Advertising/EBU (now $.91) $2.52 $2.77 $3.05 $3.35 $3.69
Growth rate 15.0% 10.0% 10.0% 10.0% 10.0%
Kagan Projection $3.47 $3.87 $4.28 $4.69 n/a
Growth rate 12.7% 11.5% 10.6% 9.6%
Home Shopping/EBU (now $0.17) $0.53 $0.61 $0.71 $0.81 $0.93
Growth rate 20% 15% 15% 15% 15%
Install/Service/EBU (now $.52) $0.74 $0.78 $0.82 $0.86 $0.90
Growth rate 5% 5% 5% 5% 5%
Franchise Fee Pass-thru/EBU (now $.04) $1.36 $1.42 $1.49 $1.56 $1.63
Growth rate n/a n/a n/a n/a n/a
Late Fees & Other/EBU (now $0.65) $0.74 $0.75 $0.77 $0.79 $0.80
growth rate 2.0% 2.0% 2.0% 2.0% 2.0%
Pay-to-EBU (now 35.8%) 41.0% 42.0% 43.0% 44.0% 45.0%
Kagan Projection 80.5% 80.8% 81.0% 81.3% n/a
Total Annual EBU Rev $469.06 $490.59 $514.23 $538.85 $565.83
monthly (now $28.11) $39.09 $40.88 $42.85 $44.90 $47.15
Compound growth
Kagan Projection $42.60 $44.74 $46.91 $49.15
Compound growth
</TABLE>
-128-
<PAGE> 141
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FALCON CABLE SYSTEMS COMPANY KANE REECE ASSOCIATES, INC. EXHIBIT F-1c
DALLAS REGION, OREGON (EXCHANGE SYSTEMS) CATV SYSTEM VALUATION MODEL
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year 1 2 3 4 5
---- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Homes Passed 14,695 15,004 15,319 15,640 15,969
EBU Penetration 75.0% 75.0% 75.0% 75.0% 75.0%
Kagan Penetration Projection 67.5% 68.0% 68.3% 68.2% 67.7%
Equivalent Billing Units 11,021 11,253 11,489 11,730 11,977
Basic Revenue/EBU $21.47 $22.30 $23.20 $24.10 $25.10
Basic Revenue 2,839,515 3,011,222 3,198,538 3,392,395 3,607,354
---------- ---------- ---------- ---------- ----------
Pay-to-Basic Ratio 36.0% 37.0% 38.0% 39.0% 40.0%
Pay Units 3,968 4,163 4,366 4,575 4,791
Pay Revenue/Pay Unit $7.73 $7.73 $7.96 $7.96 $8.20
Pay Revenue 368,039 386,206 417,123 437,090 471,443
---------- ---------- ---------- ---------- ----------
New Product Tier/EBU $2.06 $2.16 $2.27 $2.38 $2.50
New Product Tier Revenue 272,445 292,075 313,119 335,679 359,865
---------- ---------- ---------- ---------- ----------
Mini-Pay Revenue/EBU $0.06 $0.08 $0.09 $0.12 $0.15
Mini-Pay Revenue 7,935 10,127 12,925 16,496 21,053
---------- ---------- ---------- ---------- ----------
Pay-Per-View Revenue/EBU $0.23 $0.28 $0.33 $0.40 $0.46
Pay-Per-View Revenue 30,419 37,269 45,662 55,945 65,688
---------- ---------- ---------- ---------- ----------
Equipment Revenue/ EBU $0.34 $0.35 $0.36 $0.37 $0.38
Equipment Revenue 44,967 47,288 49,730 52,297 54,997
---------- ---------- ---------- ---------- ----------
Advertising Revenue/EBU $1.06 $1.33 $1.66 $1.90 $2.19
Advertising Revenue 140,190 178,918 228,344 268,110 314,801
---------- ---------- ---------- ---------- ----------
Home Shopping/EBU $0.19 $0.24 $0.30 $0.37 $0.45
Home Shopping Revenue 25,128 32,070 40,930 52,236 64,000
---------- ---------- ---------- ---------- ----------
Installation Revenue/EBU $0.58 $0.61 $0.64 $0.67 $0.70
Installation Revenue 76,708 82,235 88,160 94,512 101,321
---------- ---------- ---------- ---------- ----------
Franchise Fee Pass-thru Revenue/EBU $0.04 $0.26 $0.37 $0.72 $1.30
Franchise Fee Pass-thru Revenue 5,290 34,589 50,421 101,727 186,515
---------- ---------- ---------- ---------- ----------
Late Fees & Other Revenue/EBU $0.67 $0.68 $0.70 $0.71 $0.73
Late Fees & Other Revenue 88,611 92,281 96,103 100,084 104,229
---------- ---------- ---------- ---------- ----------
Total Revenue $3,899,248 $4,204,280 $4,541,055 $4,906,571 $5,351,267
---------- ---------- ---------- ---------- ----------
<CAPTION>
Year 6 7 8 9 10
---- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Homes Passed 16,136 16,306 16,477 16,650 16,825
EBU Penetration 75.0% 75.0% 75.0% 75.0% 75.0%
Kagan Penetration Projection 67.1% 66.5% 65.9% 65.3%
Equivalent Billing Units 12,102 12,229 12,358 12,488 12,619
Basic Revenue/EBU $26.10 $27.10 $28.20 $29.30 $30.50
Basic Revenue 3,790,460 3,977,013 4,181,895 4,390,641 4,618,453
---------- ---------- ---------- ---------- ----------
Pay-to-Basic Ratio 41.0% 42.0% 43.0% 44.0% 45.0%
Pay Units 4,962 5,136 5,314 5,495 5,678
Pay Revenue/Pay Unit $8.20 $8.20 $8.20 $8.20 $8.20
Pay Revenue 488,303 505,465 522,933 540,713 558,809
---------- ---------- ---------- ---------- ----------
New Product Tier/EBU $2.63 $2.76 $2.90 $3.04 $3.20
New Product Tier Revenue 381,826 405,127 429,849 456,081 483,913
---------- ---------- ---------- ---------- ----------
Mini-Pay Revenue/EBU $0.18 $0.23 $0.29 $0.36 $0.45
Mini-Pay Revenue 26,592 33,589 42,427 53,591 67,692
---------- ---------- ---------- ---------- ----------
Pay-Per-View Revenue/EBU $0.53 $0.60 $0.70 $0.80 $0.92
Pay-Per-View Revenue 76,334 88,706 103,083 119,790 139,205
---------- ---------- ---------- ---------- ----------
Equipment Revenue/ EBU $0.39 $0.41 $0.42 $0.43 $0.44
Equipment Revenue 57,242 59,579 62,010 64,541 67,175
---------- ---------- ---------- ---------- ----------
Advertising Revenue/EBU $2.52 $2.77 $3.05 $3.35 $3.69
Advertising Revenue 365,823 406,630 451,990 502,409 558,453
---------- ---------- ---------- ---------- ----------
Home Shopping/EBU $0.53 $0.61 $0.71 $0.81 $0.93
Home Shopping Revenue 77,606 90,184 104,801 121,787 141,525
---------- ---------- ---------- ---------- ----------
Installation Revenue/EBU $0.74 $0.78 $0.82 $0.86 $0.90
Installation Revenue 107,504 114,065 121,026 128,411 136,247
---------- ---------- ---------- ---------- ----------
Franchise Fee Pass-thru Revenue/EBU $1.36 $1.42 $1.49 $1.56 $1.63
Franchise Fee Pass-thru Revenue 197,578 208,558 220,627 233,340 247,302
---------- ---------- ---------- ---------- ----------
Late Fees & Other Revenue/EBU $0.74 $0.75 $0.77 $0.79 $0.80
Late Fees & Other Revenue 107,430 110,730 114,130 117,635 121,248
---------- ---------- ---------- ---------- ----------
Total Revenue $5,676,699 $5,999,645 $6,354,772 $6,728,940 $7,140,023
---------- ---------- ---------- ---------- ----------
</TABLE>
-129-
<PAGE> 142
- --------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY KANE REECE ASSOCIATES, INC. EXHIBIT F-1d
DALLAS REGION, OREGON CATV SYSTEM VALUATION MODEL
(EXCHANGE SYSTEMS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year 1 2 3 4 5
---- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total Revenue $3,899,248 $4,204,280 $4,541,055 $4,906,571 $5,351,267
Margin % to Revenue 52.0% 52.0% 51.0% 51.0% 50.0%
Operating Cash Flow 2,027,609 2,186,226 2,315,938 2,502,351 2,675,633
Capital Expenditures:
- Rebuild/Extensions 500,000 2,352,000 2,448,000 72,000 76,000
- Recurring 400,000 173,000 151,000 255,000 159,000
---------- ---------- ---------- ---------- ----------
Total 900,000 2,525,000 2,599,000 327,000 235,000
---------- ---------- ---------- ---------- ----------
Net Cash Flow 1,127,609 (338,774) (283,062) 2,175,351 2,440,633
Present Value Factor @ 14.0% 0.93659 0.82157 0.72067 0.63217 0.55453
PV Net Cash Flow 1,056,102 (278,326) (203,995) 1,375,189 1,353,414
---------- ---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
Year 6 7 8 9 10
---- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total Revenue $5,676,699 $5,999,645 $6,354,772 $6,728,940 $7,140,023
Margin % to Revenue 50.0% 50.0% 50.0% 50.0% 50.0%
Operating Cash Flow 2,838,349 2,999,823 3,177,386 3,364,470 3,570,012
Capital Expenditures:
- Rebuild/Extensions 40,000 41,000 43,000 45,000 47,000
- Recurring 167,000 145,000 151,000 151,000 179,000
---------- ---------- ---------- ---------- ----------
Total 207,000 186,000 194,000 196,000 226,000
---------- ---------- ---------- ---------- ----------
Net Cash Flow 2,631,349 2,813,823 2,983,386 3,168,470 3,344,012
Present Value Factor @ 14.0% 0.48643 0.42670 0.37429 0.32833 0.28801
PV Net Cash Flow 1,279,976 1,200,647 1,116,665 1,040,299 963,101
---------- ---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<S> <C> <C> <C>
Present Value of Net Cash Flows $ 8,903,073 Residual Value
Present Value of Residual 5,802,352 --------------------------------------------------
-----------
8x's Yr 11 Operating Cash Flow $30,416,498
Value Indication under Income Approach $14,705,426 Less: Taxes (see Schedule) @ 29.3% 8,905,894
----------- -----------
Value Indication (Rounded) $14,710,000 After Tax Proceeds (end of year 10) 21,510,605
----------- -----------
Value Indication/EBU $1,359 Present Value @ 14.0% $5,802,352
------ ----------
Cash Flow Multiple - Projected 7.3
---
</TABLE>
-130-
<PAGE> 143
<TABLE>
<CAPTION>
<S> <C> <C>
FALCON CABLE SYSTEMS COMPANY EXHIBIT F-2
COOS BAY/FLORENCE, OREGON (EXCHANGE SYSTEMS)
OPERATING STATISICS
VALUATION DATE: DECEMBER 31, 1995
</TABLE>
<TABLE>
<CAPTION>
Homes Passed Basic Subscribers Pay Units
--------------- ----------------- 1995 EBU's EBU % Chg
1995 1994 % Chg. 1995 1994 % Chg. FCC Method Pene Pay Units Pay/EBUs v. 94
---- ---- ------ ---- ---- ------ ---------- ---- --------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Myrtle Point 1,108 1,108 0.0% 726 745 -2.6% 741 66.9% 123 16.6% -10.9%
Coos Cty. (Myrtle Point) 48 48 0.0% 48 54 -11.1% 48 100.0% 8 16.7% -11.1%
Powers 315 315 0.0% 201 212 -5.2% 209 66.5% 19 9.1% -36.7%
Coos Cty. (Powers) 4 4 0.0% 2 2 0.0% 2 50.0% 1 50.0% 0.0%
Coquille 1,301 1,301 0.0% 1,418 1,443 -1.7% 1,449 111.4% 291 20.1% -17.1%
Coos Cty. (Coquille) 1,012 1,012 0.0% 378 391 -3.3% 378 37.4% 82 21.7% -12.8%
Bandon 1,381 1,283 7.6% 1,099 1,044 5.3% 1,247 90.3% 359 28.8% 35.5%
Coos Cty. (Bandon) 740 718 3.1% 450 455 -1.1% 465 62.8% 100 21.5% -21.3%
------ ------ ----- ----- ----- -----
Total Coos Bay 5,909 5,789 2.1% 4,322 4,346 -0.6% 4,539 76.8% 983 21.7% -3.2%
Florence 4,286 4,113 4.2% 2,053 1,952 5.2% 2,253 52.6% 520 23.1% -6.8%
Dunes City 843 818 3.1% 465 478 -2.7% 543 64.4% 139 25.6% -12.0%
Lane Cty. (Florence) 2,354 2,268 3.8% 1,233 1,171 5.3% 1,370 58.2% 295 21.5% -20.9%
------ ------ ----- ----- -----
Total Florence 7,483 7,199 3.9% 3,751 3,601 4.2% 4,166 55.7% 954 22.9% -12.4%
Total Coos Bay/Flor Exchange 13,392 12,988 3.1% 8,073 7,947 1.6% 8,706 65.0% 1,937 22.2% -7.9%
------ ------ ---- ----- ----- ---- ----- ----- ----- ----- -----
</TABLE>
<TABLE>
<CAPTION>
Plant Miles
----------------------------------------- 1995 Channel Address-
Aerial UG Total '95 1994 % Chg. Density Capacity able Rebuild*
------ -- --------- ---- ------ ------- -------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Myrtle Point 13.81 2.08 15.89 15.89 0.0% 269.7 37 No
Coos Cty. (Myrtle Point) 11.72 0.00 11.72 11.72 0.0% 4.1 37 No
Powers 5.00 1.00 6.00 6.00 0.0% 52.5 37 No 100%/97
Coos Cty. (Powers) 0.53 0.00 0.53 0.53 0.0% 7.5 37 No
Coquille 23.79 1.50 25.29 25.29 0.0% 51.4 61 No 100%/97
Coos Cty. (Coquille) 19.51 0.00 19.51 19.51 0.0% 51.9 61 No
Bandon 15.51 9.07 24.58 24.17 1.7% 56.2 61 No 100%/97
Coos Cty. (Brandon) 10.95 4.80 15.75 14.65 7.5% 47.0 61 No
------ ------ ------- ------- ----
Total Coos Bay 100.82 18.445 119.265 117.757 1.3% 49.5
Florence 29.70 18.95 48.65 48.65 0.0% 88.1 62 Yes
Dunes City 25.30 4.00 29.30 29.20 0.3% 28.8 62 Yes
Lane Cty. (Florence) 41.14 10.80 51.94 51.79 0.3% 45.3 62 Yes
------ ------ ------- -------
Total Florence 96.14 33.75 129.89 129.64 0.2% 57.6
Total Coos Bay/Flor Exchange 196.96 52.195 249.155 247.397 0.7% 53.7
------ ------ ------- -------
</TABLE>
<TABLE>
<CAPTION>
Franchises
------------------------------
Fee Expiration Life (Yrs)
--- ---------- ----------
<S> <C> <C>
Myrtle Point 5% Jun-2001 5.4
Coos Cty. (Myrtle Point)
Powers 3% Mar-96 0.2
Coos Cty. (Powers)
Coquille 5% Jun-96 0.5
Coos Cty. (Coquille)
Bandon 3% Basic Jun-94 (1.6)
Coos Cty. (Brandon)
Total Coos Bay
Florence 3% Sep-2003 7.7
Dunes City 5% Sep-2003 7.7
Lane Cty. (Florence) 5% Jun-2007 11.5
Total Florence
Total Coos Bay/Flor Exchange
</TABLE>
-131-
<PAGE> 144
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FALCON CABLE SYSTEMS COMPANY KANE REECE ASSOCIATES, INC.
COOS BAY/FLORENCE, OREGON (EXCHANGE SYSTEMS) CATV SYSTEM VALUATION MODEL EXHIBIT F-2b
VALUATION DATE: DECEMBER 31, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Growth Rate in Homes Passed 1.1% Thru Yr 5
Homes Passed @ 12/31/95 13,392
Equivalent Billing Units @ 12/31/95 8,706 65.0% EBU's/HP
Pay Units @ 12/31/95 1,937 22.2% Pay Units/EBU's
Operating Margin for 95 Yr. 51.3% After reimbursable expenses.
Operating Margin for 94 Yr. 51.9% After reimbursable expenses.
Weighted average discount rate 14.0%
</TABLE>
<TABLE>
<CAPTION>
Year 1 2 3 4 5
---- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Basic Rev/EBU (now $22.56) $23.43 $24.40 $25.40 $26.40 $27.50
Growth rate 3.9% 4.0% 4.0% 4.0% 4.0%
Kagan Projection $24.58 $25.56 $26.57 $27.64 $28.74
Growth rate 6.5% 4.0% 4.0% 4.0% 4.0%
Pay Rev/Pay Unit (now $8.38) $8.00 $7.40 $7.40 $7.03 $7.03
Growth rate -4.5% -7.5% 0% -5% 0%
Kagan Projection $8.20 $8.12 $8.04 $7.96 $7.88
Growth rate -1.1% -1.0% -1.0% -1.0% -1.0%
New Product Tier (now $2.05) $2.15 $2.26 $2.37 $2.49 $2.61
Growth rate 4.9% 5.0% 5.0% 5.0% 5.0%
Mini-Pay/EBU (now $0.00) $0.00 $0.05 $0.06 $0.08 $0.10
Growth rate n/a n/a 25.0% 25.0% 25.0%
Video Games & Activ./EBU (now $0.00) $0.00 $0.00 $0.00 $0.00 $0.25
Growth rate n/a n/a n/a n/a n/a
Pay-Per-View Rev/EBU (now $0.27) $0.30 $0.36 $0.43 $0.52 $0.60
Growth rate 11.1% 20.0% 20.0% 20.0% 15.0%
Kagan Projection $0.74 $1.01 $1.27 $1.65 $2.01
Growth rate 22.0% 36.5% 25.7% 29.9% 21.8%
Equipment/EBU (now $0.33) $0.34 $0.35 $0.36 $0.54 $0.82
Growth rate 3.7% 3% 3% 50% 50%
Advertising/EBU (now $1.10) $1.19 $1.37 $1.57 $1.81 $1.99
Growth rate 7.4% 15.0% 15.0% 15.0% 10.0%
Kagan Projection $2.00 $2.24 $2.49 $2.75 $3.08
Growth rate 14.0% 12.0% 11.2% 10.4% 12.0%
Home Shopping/EBU (now $0.45) $0.35 $0.44 $0.55 $0.68 $0.82
Growth rate -22.2% 25% 25% 25% 20%
Install/Service/EBU (now $.63) $0.81 $0.85 $0.89 $0.94 $0.98
Growth rate 3.8% 5% 5% 5% 5%
Franchise Fee Pass-thru/EBU (now $0.04) $0.04 $0.20 $0.21 $0.40 $0.81
Growth rate n/a n/a n/a n/a n/a
Late Fees & Other/EBU (now $0.53) $0.54 $0.55 $0.56 $0.57 $0.58
growth rate 1.9% 2.0% 2.0% 2.0% 2.0%
Pay-to-EBU (now 22.2%) 23.0% 24.0% 25.0% 26.0% 30.0%
Kagan Projection 77.5% 78.5% 79.5% 80.0% 80.3%
Total Annual EBU Rev $371.91 $391.26 $411.16 $435.13 $470.05
monthly (now $29.76) $30.99 $32.61 $34.26 $36.26 $39.17
Compound growth 5.6%
Kagan Projection $33.72 $35.22 $36.85 $38.70 $40.62
Compound growth 4.8%
<CAPTION>
Year 6 7 8 9 10
---- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Basic Rev/EBU (now $22.56) $28.60 $29.70 $30.90 $32.10 $33.40
Growth rate 4.0% 4.0% 4.0% 4.0% 4.0%
Kagan Projection $29.87 $31.07 $32.33 $33.62 n/a
Growth rate 3.9% 4.0% 4.1% 4.0%
Pay Rev/Pay Unit (now $8.38) $7.24 $7.24 $7.24 $7.24 $7.24
Growth rate 3% 0% 0% 0% 0%
Kagan Projection $7.80 $7.80 $7.80 $7.80 n/a
Growth rate -1.0% 0.0% 0.0% 0.0%
New Product Tier (now $2.05) $2.74 $2.88 $3.03 $3.18 $3.34
Growth rate 5.0% 5.0% 5.0% 5.0% 5.0%
Mini-Pay/EBU (now $0.00) $0.12 $0.15 $0.19 $0.24 $0.30
Growth rate 25.0% 25.0% 25.0% 25.0% 25.0%
Video Games & Activ./EBU (now $0.00) $0.31 $0.39 $0.49 $0.61 $0.76
Growth rate 25.0% 25.0% 25.0% 25.0% 25.0%
Pay-Per-View Rev/EBU (now $0.27) $0.69 $0.79 $0.91 $1.04 $1.20
Growth rate 15.0% 15.0% 15.0% 15.0% 15.0%
Kagan Projection $2.36 $2.81 $3.25 $3.66 n/a
Growth rate 17.4% 19.1% 15.7% 12.6%
Equipment/EBU (now $0.33) $1.23 $1.26 $1.30 $1.34 $1.38
Growth rate 50% 3% 3% 3% 3%
Advertising/EBU (now $1.10) $2.19 $2.41 $2.65 $2.91 $3.21
Growth rate 10.0% 10.0% 10.0% 10.0% 10.0%
Kagan Projection $3.47 $3.87 $4.28 $4.69 n/a
Growth rate 12.7% 11.5% 10.6% 9.6%
Home Shopping/EBU (now $0.45) $0.98 $1.13 $1.30 $1.50 $1.72
Growth rate 20% 15% 15% 15% 15%
Install/Service/EBU (now $.63) $1.03 $1.09 $1.14 $1.20 $1.26
Growth rate 5% 5% 5% 5% 5%
Franchise Fee Pass-thru/EBU (now $0.04) $0.85 $0.89 $0.94 $0.98 $1.03
Growth rate n/a n/a n/a n/a n/a
Late Fees & Other/EBU (now $0.53) $0.60 $0.61 $0.62 $0.63 $0.65
growth rate 2.0% 2.0% 2.0% 2.0% 2.0%
Pay-to-EBU (now 22.2%) 31.0% 32.0% 33.0% 34.0% 35.0%
Kagan Projection 80.5% 80.8% 81.0% 81.3% n/a
Total Annual EBU Rev $499.12 $523.45 $550.20 $578.33 $609.28
monthly (now $29.76) $41.59 $43.62 $45.85 $48.19 $50.77
Compound growth
Kagan Projection $42.60 $44.74 $46.91 $49.15
Compound growth
</TABLE>
-132-
<PAGE> 145
<TABLE>
<CAPTION>
<S> <C> <C>
FALCON CABLE SYSTEMS COMPANY KANE REECE ASSOCIATES, INC. EXHIBIT F-2c
COOS BAY/FLORENCE, OREGON (EXCHANGE SYSTEMS) CATV SYSTEM VALUATION MODEL
VALUATION DATE: DECEMBER 31, 1995
</TABLE>
<TABLE>
<CAPTION>
Year 1 2 3 4 5
---- - - - - --
<S> <C> <C> <C> <C> <C>
Homes Passed 13,466 13,614 13,764 13,915 14,068
EBU Penetration 66% 67% 68% 69% 70%
Kagan Penetration Projection 68% 68% 68% 68% 68%
Equivalent Billing Units 8,887 9,121 9,359 9,601 9,848
Basic Revenue/EBU $23.43 $24.40 $25.40 $26.40 $27.50
Basic Revenue 2,498,763 2,670,697 2,852,684 3,041,692 3,249,706
Pay-to-Basic Ratio 23.0% 24.0% 25.0% 26.0% 30.0%
Pay Units 2,044 2,189 2,340 2,496 2,954
Pay Revenue/Pay Unit $8.00 $7.40 $7.40 $7.03 $7.03
Pay Revenue 196,232 194,392 207,774 210,591 249,223
New Product Tier/EBU $2.15 $2.26 $2.37 $2.49 $2.61
New Product Tier Revenue 229,293 247,094 266,218 286,759 308,821
Mini-Pay Revenue/EBU $0.00 $0.05 $0.06 $0.08 $0.10
Mini-Pay Revenue/EBU 0 5,473 7,019 9,001 11,540
Pay-Per-View Revenue/EBU $0.30 $0.36 $0.43 $0.52 $0.60
Pay-Per-View Revenue 31,994 39,404 48,518 59,728 70,449
Equipment Revenue/ EBU $0.34 $0.35 $0.36 $0.54 $0.82
Equipment Revenue 36,495 38,579 40,773 62,742 96,527
Advertising Revenue/EBU $1.19 $1.37 $1.57 $1.81 $1.99
Advertising Revenue/EBU 126,911 149,789 176,751 208,522 235,258
Home Shopping/EBU $0.35 $0.44 $0.55 $0.68 $0.82
Home Shopping Revenue 37,327 47,886 61,420 78,761 96,937
Installation Revenue/EBU $0.81 $0.85 $0.89 $0.94 $0.98
Installation Revenue 86,385 93,091 100,296 108,035 116,347
Franchise Fee Pass-thru Revenue/EBU $0.04 $0.20 $0.21 $0.40 $0.81
Franchise Fee Pass-thru Revenue 4,266 22,112 23,615 45,927 95,395
Late Fees & Other Revenue/EBU $0.54 $0.55 $0.56 $0.57 $0.58
Late Fees & Other Revenue 57,590 60,288 63,098 66,025 69,073
---------- ---------- ---------- ---------- ----------
Total Revenue $3,305,256 $3,568,804 $3,848,167 $4,177,783 $4,599,276
---------- ---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
Year 6 7 8 9 10
---- - - - - --
<S> <C> <C> <C> <C> <C>
Homes Passed 14,145 14,223 14,301 14,380 14,459
EBU Penetration 71% 72% 73% 74% 75%
Kagan Penetration Projection 67% 67% 66% 65%
Equivalent Billing Units 10,043 10,241 10,440 10,641 10,844
Basic Revenue/EBU $28.60 $29.70 $30.90 $32.10 $33.40
Basic Revenue 3,446,830 3,649,778 3,871,158 4,099,005 4,346,418
Pay-to-Basic Ratio 31.0% 32.0% 33.0% 34.0% 35.0%
Pay Units 3,113 3,277 3,445 3,618 3,796
Pay Revenue/Pay Unit $7.24 $7.24 $7.24 $7.24 $7.24
Pay Revenue 270,525 284,743 299,357 314,373 329,796
New Product Tier/EBU $2.74 $2.88 $3.03 $3.18 $3.34
New Product Tier Revenue 330,703 354,066 379,006 405,626 434,037
Mini-Pay Revenue/EBU $0.12 $0.15 $0.19 $0.24 $0.30
Mini-Pay Revenue/EBU 14,712 18,751 23,895 30,445 38,782
Pay-Per-View Revenue/EBU $0.69 $0.79 $0.91 $1.04 $1.20
Pay-Per-View Revenue 82,626 96,888 113,590 133,146 156,040
Equipment Revenue/ EBU $1.23 $1.26 $1.30 $1.34 $1.38
Equipment Revenue 147,667 155,087 162,849 170,967 179,458
Advertising Revenue/EBU $2.19 $2.41 $2.65 $2.91 $3.21
Advertising Revenue/EBU 263,924 296,025 331,966 372,201 417,236
Home Shopping/EBU $0.98 $1.13 $1.30 $1.50 $1.72
Home Shopping Revenue 118,635 139,113 163,094 191,173 224,046
Installation Revenue/EBU $1.03 $1.09 $1.14 $1.20 $1.26
Installation Revenue 124,591 133,392 142,788 152,817 163,521
Franchise Fee Pass-thru Revenue/EBU $0.85 $0.89 $0.94 $0.98 $1.03
Franchise Fee Pass-thru Revenue 103,015 109,927 117,543 125,677 134,657
Late Fees & Other Revenue/EBU $0.60 $0.61 $0.62 $0.63 $0.65
Late Fees & Other Revenue 71,854 74,732 77,710 80,792 83,981
---------- ---------- ---------- ---------- ----------
Total Revenue $4,975,082 $5,312,502 $5,682,957 $6,076,223 $6,507,973
---------- ---------- ---------- ---------- ----------
</TABLE>
-133-
<PAGE> 146
<TABLE>
<S> <C> <C>
FALCON CABLE SYSTEMS COMPANY KANE REECE ASSOCIATES, INC.
COOS BAY/FLORENCE, OREGON (EXCHANGE SYSTEMS) EXHIBIT F-2d
CATV SYSTEM VALUATION MODEL
VALUATION DATE: DECEMBER 31, 1995
</TABLE>
<TABLE>
<CAPTION>
Year 1 2 3 4 5
---- - - - - -
<S> <C> <C> <C> <C> <C>
Total Revenue $3,305,256 $3,568,804 $3,848,167 $4,177,783 $4,599,276
Margin % to Revenue 52.0% 52.0% 51.0% 51.0% 51.0%
Operating Cash Flow 1,718,733 1,855,778 1,962,565 2,130,669 2,345,631
Capital Expenditures:
- Rebuild/Extensions 73,000 1,653,000 58,000 60,000 63,000
- Recurring 140,000 141,000 169,000 246,000 150,000
---------- ---------- ---------- ---------- ----------
Total 213,000 1,794,000 227,000 306,000 213,000
Net Cash Flow 1,505,733 61,778 1,735,565 1,824,669 2,132,631
Present Value Factor @ 14.0% 0.9366 0.8216 0.7207 0.6322 0.5545
PV Net Cash Flow 1,410,248 50,755 1,250,774 1,153,499 1,182,616
---------- ---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
Year 6 7 8 9 10
<S> <C> <C> <C> <C> <C>
Total Revenue $4,975,082 $5,312,502 $5,682,957 $6,076,223 $6,507,973
Margin % to Revenue 51.0% 51.0% 51.0% 51.0% 51.0%
Operating Cash Flow 2,537,292 2,709,376 2,898,308 3,098,874 3,319,066
Capital Expenditures:
- Rebuild/Extensions 33,000 34,000 35,000 36,000 38,000
- Recurring 168,000 146,000 173,000 151,000 179,000
---------- ---------- ---------- ---------- ----------
Total 201,000 180,000 208,000 187,000 217,000
Net Cash FLow 2,336,292 2,529,376 2,690,308 2,911,874 3,102,066
Present Value Factor @ 14.0% 0.4864 0.4267 0.3743 0.3283 0.2880
PV Net Cash Flow 1,136,450 1,079,274 1,006,968 956,052 893,419
---------- ---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<S> <C> <C> <C>
Present Value of Net Cash Flows $10,120,055 Residual Value
Present Value of Residual 5,439,880 ------------------------------------------------
-----------
8x's Yr 11 Operating Cash Flow $28,278,445
Value Indication under Income Approach $15,559,935 Less: Taxes (see Schedule) @ 28.7% 8,111,605
----------- -----------
Value Indication (Rounded) $15,560,000 After Tax Proceeds (end of year 10) 20,166,840
----------- -----------
Value Indication/EBU $1,787 Present Value @ 14.0% $ 5,439,880
------ -----------
Cash Flow Multiple - Projected 9.1
---
</TABLE>
-134-
<PAGE> 147
QUALIFICATIONS OF THE APPRAISERS
<PAGE> 148
STATEMENT OF BACKGROUND AND EXPERIENCE
JOHN E. KANE CFA, ASA
John E. (Jack) Kane is a Principal and President of Kane Reece Associates,
Inc., a Firm he co-founded in 1986.
Mr. Kane has personally conducted valuation and appraisal studies of real and
personal property and intangible assets of media/communications businesses with
aggregate values over $40 billion. He has served as a valuation and
communications industry expert, providing advice, management consulting,
testimony, and litigation support. The clients he serves number among the
largest in the industry. Mr. Kane has been accepted as an expert in the
media/communication industry in Federal Courts, U.S. Bankruptcy Courts, various
trial courts, various administrative hearing boards, and the American
Arbitration Association. He has spoken on valuation, industry, and tax issues
at meetings of the National Cable Television Association, the Broadcast Cable
Financial Management Association, the Cable Television Tax Professionals
Institute, and the American Society of Appraisers.
Prior to his current position, Mr. Kane was Chief Operating Officer of Frazier,
Gross & Kadlec, Inc., a Washington, DC communications consultancy and was
Executive Vice President of Valuation Research Corporation in Princeton, New
Jersey. While at these firms, he was responsible for all media/communications
clients.
Mr. Kane has been actively involved in the communications industry for eighteen
years, gaining experience as a Vice President of Group W Cable (formerly one of
the largest cable television companies) where he was involved with
acquisitions, divestitures, strategic planning, and capital investments. In
that position, Mr. Kane was responsible for the analysis, approval, and
monitoring of approximately $100 million of annual capital expenditures. Prior
to Group W, Mr. Kane was Director of Financial Analysis for the RCA Corporation
and later, Director of Corporate Planning for the RCA Communications Group.
While at RCA, Mr. Kane was intimately involved in the start-up of RCA's
domestic satellite communications business (RCA American Communications).
He received an undergraduate degree from Upsala College and an M.B.A. in
Finance from St. Johns University where he was elected to the National Business
Honor Society, Beta Gamma Sigma and the National Economics Honor Society,
Omicron Delta Epsilon. Mr. Kane is a member of the Institute of Chartered
Financial Analysts (CFA), as well as the New York Society of Security Analysts
and the Association for Investment Management and Research. He or his Firm is
also a member of the American Economic Association, National Cable Television
Association, the Cable Television Tax Professionals Institute, National
Association of Broadcasters, the Broadcast Cable Financial Management
Association, the Personal Communications Industry Association, and
International Licensing Industry Merchandisers' Association. He is an
Accredited Senior Appraiser - Business Valuation of the American Society of
Appraisers (ASA) and the Firm's representative to the ASA's Affiliate Firm
Committee.
Mr. Kane and his Firm received the 1993 Presidents Award from the Cable
Television Tax Professionals Institute.
Mr. Kane serves on the Executive Board of the Watchung Area Council of the Boy
Scouts of America.
KANE REECE PROVIDES VALUATION, MANAGEMENT AND TECHNICAL CONSULTING TO THE MEDIA
AND COMMUNICATIONS INDUSTRIES.
<PAGE> 149
STATEMENT OF BACKGROUND AND EXPERIENCE
HENRY E. SHERMAN CFA, CPA
Henry E. Sherman is a Vice President of Kane Reece Associates, Inc. Mr.
Sherman joined the Firm in June 1988.
Mr. Sherman is responsible for the analysis and evaluation of business
operations for determining fair market value of closely held and thinly- traded
public corporations, purchase price allocations, due diligence support, and
solvency and fairness opinions. Mr. Sherman is experienced in valuing business
interests and intangible and tangible assets in media oriented businesses such
as cable television, broadcast radio and television, publishing, and
telecommunications.
Prior to his current position, Mr. Sherman was a Senior Consultant of Standard
Research Consultants in New York City. While at Standard Research, he was
responsible for all solvency letters and fairness opinions. Previous to
employment at Standard Research, Mr. Sherman was a Supervising Appraiser of
Valuation Research Corporation where he had responsibility for clients in a
broad range of industries.
Mr. Sherman has been involved in the industry for over sixteen years, beginning
as Manager of Business Analysis of Group W Cable where he had responsibility in
the areas of acquisitions, divestitures, and capital expenditure analysis. Mr.
Sherman is also experienced in developing and implementing business and
strategic plans.
Mr. Sherman received an undergraduate degree from Johnston College of the
University of Redlands and an M.B.A. from the Bernard Baruch College of the
City University of New York. Mr. Sherman is a member of The Institute of
Chartered Financial Analysts (CFA), a Certified Public Accountant (CPA), a
member of The American Institute of Certified Public Accountants, The New York
State Society of Certified Public Accountants, a member of The New York Society
of Security Analysts, a member of The American Bankruptcy Institute, and a
candidate for Senior Member - Business Valuation of the American Society of
Appraisers (ASA).
KANE REECE PROVIDES VALUATION, MANAGEMENT AND TECHNICAL CONSULTING TO THE MEDIA
AND COMMUNICATIONS INDUSTRIES.
<PAGE> 150
APPENDIX
GLOSSARY OF CABLE TV TERMS
<PAGE> 151
GLOSSARY OF CABLE TELEVISION TERMS
ACCESS CHANNELS - Channels set aside by the cable
operator for use by the public,
educational institutions,
municipal government, or for
lease on a non-discriminatory
basis.
ACCESS TIME - Total time required to locate,
recover and display data
on-screen after initiating
command to do so, in other
words, the time it takes to get
from point A to point B in
getting data from a computer.
ACTIVATED CHANNEL - A cable channel that is
technically equipped to carry
and deliver video programming.
ADDRESSABILITY
(Addressable Converter) - The capability of transmitting
video, audio, and/or data to
specific locations or "addresses"
on the cable system. This
requires an addressable converter
which permits the cable
operator to authorize the
reception of programs
according to subscribers' orders.
ADDRESSABLE - Control of customers' home
receiving equipment from the
headend.
AERIAL PLANT - Cable that is suspended in the
air on telephone or electric
utility poles.
ALPHANUMERIC KEYBOARD - Keyboard which allows
communications with a
computer in letters and numbers.
ALTERNATIVE ACCESS
PROVIDER - A telecommunications provider,
other than the local telephone
company that provides a
connection, between a customer's
premises (usually a large
business customer) to the point
of presence of the long distance
carrier, or portions thereof.
AML SYSTEM - A microwave system that is used
to distribute the signals of a
cable system from the central
headend to receive locations in
the service area where the
signals are placed on the
coaxial distribution system.
The frequency of operation is
licensed by the FCC.
AMPLIFIER - A device that boosts the
strength of an electrical
signal. In a cable system,
amplifiers are spaced at regular
intervals throughout the system
to keep signals picture-perfect
no matter where you live.
ANTENNA - A device designed to receive
radio frequency signals.
ANTI-ALIASING - A manipulation of software that
make combinations of diagonal or
curved lines appear consistent
in computer generated images.
-A1-
<PAGE> 152
ASCERTAINMENT - A survey of a community to
determine local concerns, needs,
and interests, especially in
regard to cable programming.
AUTOMATED CHANNEL/
PROGRAMMING - A channel programmed with text
or graphics utilizing a character
generator. Typical information
includes news, weather, program
guides, and bulletin boards.
BANDWIDTH - Frequency spectrum used to
transmit pictures, sounds or
both. The average television
station uses a bandwidth of six
million cycles per second (6
megahertz).
BASIC SERVICE - The channels and services
subscribers for their minimum
monthly fee. Basic fare
normally includes broadcast
stations, plus satellite signals
(e.g. superstations) and access
channels.
BAUD - The measure of data rates via
modems. Common BAUD rates are
2400, 9600, and 14,000. At
2,400 BAUD, a modem is
transferred 2,400 bits per
second. It takes 10 bits to
represent a BTYE in
communications situations, so
2,400 BAUD represents 240 bytes
per second.
BIRD - Colloquial for any
communications satellite.
BIT - The smallest unit of data in a
computer, either a zero or a one.
BIT MAP - The representation of a graphic
image in terms of dots or pixels
that create the image.
BROADBAND COMMUNICATIONS
SYSTEM - Frequently used as a synonym for
cable television. It can describe
any system capable of delivering
"wideband" channels and services.
BURST - In color TV terms, a reference
point that appears in the
vertical blanking interval; in
computer terms, a program
encoded in a digital audio tone.
BUS INTERFACE - Refers to a connection between a
circuit or group of circuits
providing an electronic pathway
for two central processing
input/output units.
BYTE - 8 bits make a byte. A byte is
the standard unit of memory and
processing in most personal
computers.
CABLECASTING - Production of programming on a
private communications system,
using coaxial cable as the means
of transmission to paying
subscribers.
-A2-
<PAGE> 153
CABLE READY TELEVISION
SET - A television set or a VCR that
has the following attributes:
an improved tuner that is more
resistant to interference than
traditional tuners, the ability
to tune cable channels according
to an FCC approved channel plan,
and a special connector known as
a "decoder interface connector"
that allows the seamless
connection of cable service to
the cable ready set without the
use of a traditional set-top box.
If a device has all three of the
above, it may be marketed as a
"Cable Ready" device.
CABLE SYSTEM - A communication system that
distributes broadcast television
signals, satellite signals,
original programming, and other
services by means of coaxial
cable. Also known as cable
communications or Community
Antenna Television (CATV).
CABLE TELEVISION - Communications system that
distributes broadcast and
non-broadcast signals, as well
as multiplicity of satellite
signals, original programming
and other signals by means of a
coaxial cable and/or optical
fiber.
CARS (Cable Television
Relay Services) - Terrestrial microwave frequency
band used to relay television,
FM radio, cablecasting and other
band signals from the original
reception site to the headend
terminal for distribution over
cable.
CASH FLOW - Cash flow is operating income
minus interest expense; and it
basically indicates the amount
of cash available before taxes,
capital expenditures and debt
retirement. Due to its capital-
intensive nature, the cable
industry is considered a "cash
flow" business since the
depreciation allowance
acceptable for tax purposes is a
non-cash expenditure, and thus
can generate funds available for
use by the system.
CAV - Constant Angular Velocity; a
videodisc playback mode in which
a given disc rotates at a
persistent speed,
notwithstanding the position of
the reading head or stylus.
CD-ROM XA - Compact disc read-only memory
extender architecture; a more
sophisticated form of CD-ROM,
permitting interleaving of sound
and data for animation and sound
synchronization.
CENTRAL OFFICE - A telecommunications facility
where calls are switched. It
generally represents a
10,000-line service area.
CG (Character Generator)- Device which electronically
displays letters and numbers
on the television screen.
-A3-
<PAGE> 154
CHANNEL - A designated portion of the
electromagnetic spectrum, 6 MHz
wide, which carries a television
signals. (Audio and data
signals occupy far less spectrum
space.)
CHANNEL CAPACITY - Maximum number of channels that
a cable system can carry
simultaneously.
CHARACTER GENERATOR - A device which electronically
displays letters and numerals
on the TV screen.
CHERRY PICKING - Overbuilding economically
desirable portions of a
franchised community.
CHROMINANCE - The color portion of a video
signal that defines the
luminance and hue of an
on-screen image.
CIRC - Cross Interleaved Reed-Solomon
Code; method of error detection
and correction for CD audio
discs.
CLI - Cumulative Leakage Index is
defined as the basic signal
leakage performance criteria as
per FCC 76.611 with measurements
(in microvolts/meter) made over
a large percentage of the
system.
CLOCK RATE - The clock speed that
synchronizes internal operations
of a central processing chip.
Clock rates range from 8 million
cycles per second (in the
original IBM-AT) up to 166
million cycles per second (in
the latest Intel processors).
CLV - Constant Lineary Velocity;
alternate format for video
discs, allowing twice the
playing time per side, although
it can be read in linear playing
time alone.
COAXIAL CABLE - Actual line of transmission for
carrying television signals.
Its principal conductor is
either a pure copper or
copper-coated wire, surrounded
by insulation and then encased
in aluminum.
COLLOCATION - The circumstance whereby
competitors to local telephone
companies locate facilities at
or close to the local telephone
company central offices to
facilitate their offering of an
alternative means of delivering
local telecommunications
services. A form of
collocation, known as "virtual
collocation", permits the
achievement much of the
functionality of physical
collocation by technical means.
This technique can be used where
telephone companies decline to
make physical collocation
available.
COLOR DEPTH - The number of colors displayed
at any given pixel. If the
color is one bit deep, then the
pixel can be black or white; if
the color is 8 bits deep, then
64
-A4-
<PAGE> 155
colors can be displayed. So
called "True Color" is 32 bits
deep and represent over 16
million colors at any given
pixel.
COMMON CARRIER - An entity that provides
communication services to the
public, at rates approved by
state or federal authority, on a
non-discriminatory basis, and
exercises no control over the
message content.
COMMUNICATIONS COMMON
CARRIER - General name for any medium which
carries messages prepared by
others for a fee and is
required by law to offer its
services on a non-discriminatory
basis. Common carriers are
regulated by federal and state
agencies and excercise no control
over the message content carried.
COMMUNITY ANTENNA
TELEVISION - A system comprised of antennas,
coaxial cables or other
electrical conductors, and
other electronic equipment used
to receive and distribute radio
and/or television signals,
directly or indirectly,
off-the-air, to subscribers
for a fee.
COMPETITIVE ACCESS
PROVIDER - A telecommunications entity
engaged in providing competitive
access service.
CONDUIT - Metal or plastic tubing that
protects coaxial cable in
underground installations and
makes it possible to install
additional cables for
transmitting information.
CONVERTER - Device that is attached between
the television set and the cable
system that can increase the
number of channels available on
the TV set, enabling it to
accommodate the multiplicity of
channels offered by cable TV.
CPU - Central processing unit; the
"brain" that facilitates the
functions of any computer.
CRAWL - The movement of a printed
message from right to left or
bottom to top of a television
screen, usually while a picture
is on screen.
CROSS-OWNERSHIP - Legal term for ownership of two
or more kinds of communication
outlets (radio, TV, newspaper)
by the same individual or
company in the same market. The
FCC prohibits companies from
owning certain combinations of
media within given markets to
avoid monopoly situations.
CRT - Cathode Ray Tube
(television/computer screen).
-A5-
<PAGE> 156
CYCLE TIME - Refers to time required for
performance of particular
functions; in the context of
video games, refers to the
relative responsiveness of a
particular system or platform.
DATA PATH - The number of data bits
simultaneously processed
internally in a central
processor. A 32-bit CPU has a
data path that is twice as wide
as a 16-bit CPU.
DATA RATES - Data rates are a key concern in
communications applications and
CD-ROM applications. Telephone
engineers refer to bit rates and
calculate the number of bits per
second that can be transferred;
so an ISDN "B-Channel" has a
data rate of 64 kbps - which
means 64 thousand bits per
second. A computer engineer
might refer to this as 64
kilo-BAUD. The opportunity for
confusion is great when talking
about bit rates off a CD-ROM
drive, which is often written as
150 kbps. While this looks like
bits per second, it is actually
Bytes per second! The bit rate
off a CD-ROM drive is about 1.2
megabits per second! The usual
convention is to refer to bits
with a "b" and bytes with a "B",
but this is not always
rigorously followed.
DBS (Direct Broadcasting
Satellite) - System in which signals are
transmitted directly from a
satellite to a home rooftop
receiving dish (antenna).
DEDICATED CHANNEL - A cable channel designated
exclusively for a specific
purpose or type of programming.
Examples include public access,
educational use, or business
data.
DEMOGRAPHICS - Breakdown of television viewers
by such factors as age, sex,
income levels, education and
race. These figures are used in
selling advertising time.
DESCRAMBLER - Electronic circuit that restores
a scrambled video signal to its
standard form.
DIALING PARITY - The offering to all
telecommunications providers
the capability to provide
service that includes the
dialing by their customers of
the same number of digits to
complete calls.
DIGITAL COMPRESSION - An engineering technique for
converting a cable television
signal into a digital format (in
which it can easily be stored
and manipulated) which may then
be processed so as to require a
smaller portion of spectrum for
its transmission. It could
allow many channels to be
carried in the capacity
currently needed for one signal.
-A6-
<PAGE> 157
DIRECT BROADCASTING
BY SATELLITE - A distribution system in which
programming is transmitted
directly via satellite to a
receiving dish on an apartment
building (multiple subscribers)
or to an individual residence.
DISTANT SIGNALS - Television channel from another
market imported and carried
locally by a cable television
system.
DISTRIBUTION CABLE - Cable branching off the trunk
line and passing residences
that may subscribe to cable
services.
DISTRIBUTION SYSTEM - Part of a cable system
consisting of trunk and feeder
cables used to carry signals
from headend to customer
terminals.
DONGLE - Yes, it's a real part of
multimedia jargon; it's a
electronic device that controls
access to a range of licensed
applications.
DOWNLINK - Reception of video and audio
programming from satellites in
orbit using dish antennas and
electronic equipment.
DOWNSTREAM - Flow of signals from the cable
system headend through the
distribution network to the
customer.
DRIVE BAY - The opening in a computer unit
to hold a floppy drive, a hard
drive, a tape drive or other
device.
DROP CABLE - The last piece of cable that
connects the customer's home to
the cable system.
DUAL CABLE - Two independent distribution
systems operating side-by side
providing double the channel
capacity of a single cable.
DVI - Digital Video Interaction;
enables compressing,
decompressing and displaying
digital graphics and full motion
video with audio; works with
CD-ROM, CD-I and hard or floppy
discs.
EARTH STATION - Structure, referred to as a
"dish", used for receiving
and/or transmitting those
electromagnetic signals coming
from or going to a satellite.
EDC/ECC - Stands for Error Detection
Code/Error Correction Code;
effective and complex means of
discerning errors and correcting
CD-ROM discs.
EDITING - The process of combining various
segments of master videotape
into a new or altered program.
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EDUCATIONAL ACCESS
CHANNEL - A channel on a cable system which
is designated for exclusive use
by educational entities.
EEPROM - A read-only memory program that
can be erased electronically or
a type of PROM, programmable
read-only memory that can be
erased with electric current.
EMERGENCY OVERRIDE - The capability to interrupt all
channels of a cable system with
an emergency message to
subscribers.
EQUAL ACCESS - The offering of access to local
exchange facilities on a
nondiscriminatory basis.
EXCLUSIVITY - Contractual right to be the sole
exhibition of a program in a
particular area during a
particular time.
FAT - Nothing to do with dieting;
stands for File Allocation
Table; it's that part of a DOS
system that keeps record of just
where all those files are on a
given disk.
FCC - Federal Communications
Commission; the federal
government's policy, licensing,
and regulatory agency which
governs communications within
its jurisdiction.
FEEDER CABLE (or BRANCH) - An intermediate cable
distribution line that
connects housedrops to the
main trunk line.
FEEDER LINE - Cable distribution lines that
connect the main trunk line
or cable to the smaller drop
cable.
FIBER OPTICS - Very thin and pliable tubes of
glass or plastic used to carry
wide bands of frequencies.
FILTER - A circuit which allows signals
of desired channels to pass
through but blocks others. Used
in trunk and feeder lines for
special cable services, such as
two-way operation and also as a
method to secure service.
FM CABLE SERVICE - FM radio signals offered by a
cable system (the cable must be
connected to the customer's FM
stereo receiver).
FM SERVICE - CABLE RADIO - Audio services provided by
attaching cable to an FM
converter. Audio services can
include radio stations,
satellite audio, simulcasting of
broadcast, satellite, or pay
services, and special programs
for the visually impaired such
as radio reading services.
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FOOTPRINT - Term used to describe the
geographic area which receives
sufficient satellite signal
strength for reception.
FORBEARANCE - The practice whereby a
regulatory agency, although
possessing jurisdiction to
regulate, declines to regulate,
either entirely or to the extent
permitted by law. Forbearance
has usually been based upon the
conclusion that the presence of
competition limits a regulated
company's market power.
FRANCHISE - Contractual agreement between a
cable operator and a
governmental body which defines
the rights and responsibilities
of each in the construction and
operation of a cable system
within a specified geographic
area. Under the Cable Act, a
cable operation may not provide
cable service without a
franchise.
FRANCHISE FEE - Annual fee collected from cable
operator by franchising
authority. Generally based on 2
to 5 percent of cable operator's
gross revenues. Limited to 5%
by Cable Act of 1984.
FRANCHISING AUTHORITY - Governmental body responsible
for awarding a franchise,
specifying the terms of a
franchise, and regulating its
operation. While the franchise
authority is usually a local
city of county body, some areas
are regulated exclusively on the
state level.
FREQUENCY - A measure of the number of times
an electromagnetic signal
repeats an identical cycle
within a unit of time. One
hertz (Hz) is one cycle per
second. A Kilohertz (KHz) is
1,000 cycles per second, a
megahertz (MHz) is one million
cycles per second, and a
gigahertz (GHz) is one billion
cycles per second.
GATEWAY - A computer system that can
transfer data between two
normally incompatible
applications or networks. A
gateway reformats data so that
it is readable by the other
network or applications. In a
functional sense, a gateway
might convert data carried over
a cable TV network to a format
readable by the worldwide
telephone network, or translate
between data on an Ethernet
local area network and the
Internet.
GLASS MASTER - Part of the disc making process;
a highly polished glass disc,
coated with photoresist and
imprinted with the use of a
laser beam.
GOVERNMENT ACCESS
CHANNEL - A channel on a cable system
dedicated for use by local
government.
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GOVERNMENTAL
CABLECASTING - An opportunity for government
officials to disseminate
information to their
constituents via cable
television. This can be
achieved for example, by the
official periodically
submitting 3/4 inch
videocassettes to the cable
operator, sending abridged
newsletters for display on a
system's alphanumeric channel
or participating in interview
programs on access channels.
GROSS RECEIPTS - Total revenue (as defined in the
governing franchise agreement)
derived from programming and
services on a cable system.
HARDWARE - Equipment involved in
production, storage,
distribution, or reception of
electronic signals, such as the
headend, the coaxial cable
network, amplifiers, the
television receiver and
production equipment like
cameras and videotape recorders.
HDTV - A television signal with greater
detail and fidelity than the
current TV systems used. The
USA currently uses a system
called NTSC; HDTV would provide
a picture with twice the visual
resolution as NTSC as well as
CD-quality audio.
HEADEND - Electronic control center of the
cable system. This is the site
of the receiving antenna and the
signal processing equipment
essential to proper functioning
of a cable system.
HIGH BAND - Television broadcast channels
seven through thirteen.
HIGH DEFINITION TELEVISION
(HDTV) - Television transmission which
increases the number of lines
on the television screen so as
to enhance picture resolution.
Standards are currently under
evaluation by the FCC.
HOMES PASSED - The total number of homes which
have the potential for being
hooked up to the cable system.
HOUSEDROP - The cable which connects the
subscriber's set to the feeder
(or branch) line of the cable
system. Also referred to as
drop cable.
HUBS - Local distribution centers where
signals are taken from a master
feed, and transmitted over cable
to customers.
HYPERMEDIA - Refers to incorporation of other
media in hypertext or the
promotional pump-priming
preceding every new wrinkle in
media these days.
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HYPERTEXT - The format for the great
interactive American novel;
writing in non-linear style
intended to allow the reader to
select and arrange segments to
determine plot.
INDEPENDENT - Individually owned and operated
cable television system, not
affiliated with an MSO.
INSTITUTIONAL NETWORK - A network which is operated in
conjunction with a cable TV
system, which is designed to
satisfy the needs of schools,
businesses, or government.
INTERACTIVE CABLE - A cable system that can carry
information both to and from
subscribers. Examples of uses
include opinion polling,
requests for pay-per-view,
information retrieval, and video
games. (See also TWO-WAY
SYSTEM.)
INTERCONNECT - Connection of two or more cable
systems by microwave, fiber,
coaxial cable, or satellite, so
that programming or advertising
may be exchanged, shared, or
simultaneously viewed.
INTERCONNECTION - The practice of linking cable
systems, usually with microwave,
so that users of different cable
systems can receive the same
services simultaneously.
INTERDICTION - A method of receiving TV signals
by jamming unauthorized signals
but having all other signals
received in the clear. Because
the jamming is accomplished
outside the home and does not
require a set-top terminal in
the home, interdiction is
receiving more operator
interest, especially in light of
recent FCC actions encouraging
more consumer friendly
approaches.
INTEREXCHANGE CARRIER - A long distance carrier between
serving areas of LATAs.
INTERLACED DISPLAY - A raster display is "interlaced"
when the display screen skips
every other line the first time
through and then comes back to
scan the alternate lines.
Television screens are
interlaced. In computer
applications, interlaced
displays are thought to
contribute to image flicker.
INTER-LATA - The provision of
telecommunications services
between LATAs. Pursuant to the
AT&T Consent Decree, the RBOC's
are prohibited from providing
telecommunications services
between LATAs.
INTRA-LATA - The area within a LATA in which,
pursuant to the AT&T Consent
Decree, the RBOCs are permitted
to offer local telephone
service.
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ISDN - Integrated Service Digital
Network; a universal digital
telecommunications standard
developed to facilitate
simultaneous transmission of
high-bandwidth data, video and
audio signals.
ITFS (Instructional
Television Fixed Service) - An instructional broadcasting
system where signals are
distributed on a special
microwave band to one or more
fixed receiving points.
JANUS DISC - Incidental allusion to the Roman
god; CD-ROM that possess
god-like capacity to incorporate
data in two or more otherwise
incompatible formats.
LASER ROT - Degeneration of a laser disc
resulting from contamination of
raw material or improper process
control.
LATA - Local Access and Transport Area.
LAYERED ECC - Layered Error Correction Code;
means of preserving integrity of
CD-ROM material; term refers to
the fact that it is used on top
of the CIRC error correction of
CD audio discs.
LEASED CHANNELS - Any channels made available by
the operator to potential
programmers for a fee.
LINE EXTENSION AREA - Area outside the initial service
area of a cable system where
service will be provided after
the area reaches a certain
density.
LOCAL AREA NETWORK - Network within a building of
office complex.
LOCAL EXCHANGE CARRIER
(LEC) - A local telephone company within
a serving area or LATA.
LOCAL LOOP - The set of facilities used by a
telephone company to transport
signals between a central
office, roughly similar to a
cable TV headend, and a customer
location. The LOCAL LOOP using
twisted pair copper wire
typically stretches a maximum of
18,000 feet between CO and
customer premises.
LOCAL ORIGINATION
CHANNEL - A channel that carries
programming produced by a
cable system for the community
it serves. Unlike access
channels, it is under the
operator's exclusive control
and may carry advertising.
LOCAL ORIGINATION
PROGRAMMING - Programming developed by an
individual cable television
system specifically for the
community it serves.
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LOCAL PROGRAMMING - All programming on a cable
system that is originated
locally.
LOCKOUT DEVICE OR
LOCKBOX - A mechanism designed to prevent
the reception of specific
programs. Usually used to
prevent reception of pay cable
movies.
LOOP - A dedicated local information
distribution service, using
phone lines, cable or other
technologies, usually between
business machines or locations
of an institution.
LOW BAND - Television broadcast channels
two through six.
MAGNETO OPTICAL - An information storage format
magnetically sensitive at high
temperatures only; a magneto
optical disc can be erased or
recorded over.
MATV (Master Antenna
Television System) - A system that serves a
concentration of television
sets such as an apartment
building, hotel, etc.,
utilizing one antenna to pick
up broadcast signals.
MICROWAVE - One method of interconnecting a
cable system with a series of
high frequency receive and
transmit antennas mounted on
towers spaced up to 50 miles
apart.
MIDBAND - The part of the electromagnetic
spectrum that lies between
television channels 6 and 7,
allocated by the FCC for
aeronautical, maritime, and land
mobile radio. These frequencies
can be used on cable systems
with appropriate waivers, and
may require converters for
reception on home TV sets.
MMDS (Multichannel Multipoint
Distribution Service) - Private service utilizing a
very high frequency (2 GHz) to
transmit multiple television
signals (also called wireless
cable).
MODULATOR An electronic device that
adjusts the level and frequency
of TV channels to that desired.
MONITOR - A device used to display a video
signal.
MPEG - Motion Picture Experts Group;
the working committee operating
under the auspices of the
International Standards
Organization to set standards
for digital compression and
decompression of motion
video/audio.
MSO (Multiple System Operator) - Company that owns and operates
more than one cable television
system.
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MULTIMEDIA - Literally, more than one medium
simultaneously. In popular
usage, typically refers to
graphics (with or without
animation) accompanied by sound.
Some computer-based
encyclopedias claim to be
multimedia because they use both
text and still pictures,
although this seems a weaker
definition of the word.
MULTIPLEXING - The potential transmission of
several feeds of the same cable
network with the same
programming available at
different times of the day.
This is seen as one possible use
of the additional channel
capacity that may be made
available by digital
compression. Multiplexing is
also used by some cable networks
to mean transmitting several
slightly different versions of
the network, for example several
MTV channels carrying different
genres of music.
MUST-CARRY CHANNEL - Local broadcast signals that are
required to be carried over a
cable system by the FCC.
NARROWCASTING - Delivery of programming that
address a specific need or
highly focused audience.
NCTA (National Cable
Television Association) - The major trade association for
the cable television industry.
NEAR VIDEO ON DEMAND (a.k.a.
Near Movie on Demand) - An entertainment and information
service that "broadcasts" a
common set of programs to
customers on a scheduled basis.
At least initially, NVOD
services are expected to focus
on delivery of movies and other
video entertainment. NVOD
typically features a schedule of
popular movies and events,
offered on a staggered-start
basis (every 15 to 30 minutes,
for example). See VIDEO ON
DEMAND.
NON-DUPLICATION RULES - Restrictions placed on cable
television systems prohibiting
them from importing distant
programming that is
simultaneously available
locally.
NON-INTERLACED DISPLAY - Whenever a line on a raster
display is scanned in order, the
display is "non-interlaced".
This presents a steadier,
sharper image.
NONPROFIT ACCESS
CORPORATION - A corporation formed exclusively
for the purpose of facilitating
program production on access
channels. May be responsible for
setting policies, administering
grants, and/or promoting use of
access facilities.
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NUMBER PORTABILITY - A capability that permits
telecommunications users to
maintain the same telephone
access number as they change
telecommunications suppliers.
OFF-AIR - Reception of a television signal
that has been broadcast through
the air.
OLE - Object linking and embedding; a
specification enabling
developers to readily integrate
information drawn from different
applications by extending
graphical connections under
Microsoft Windows, OS/2
Presentation Manager and Apple
Macintosh System 7.0.
OOP - Object-Oriented Programming; a
programming method where each
element is self-contained,
including all data and
instructions related to a
particular object.
ORDINANCE - Enabling legislation passed by a
local government to establish
guidelines for the franchising
process.
ORIGINATION EQUIPMENT - A category of television
equipment which includes, but is
not limited to, cameras, film
chains, videotape recorders,
lighting, and remote location
equipment.
OROM - Optical Read-Only Memory; a
laser-encoded optical memory
storage format for digital data
storage.
PAY-CABLE - Pay-TV delivered over cable,
where subscribers pay an
additional fee for programs such
as first- run movies or sports
events.
PAY-PER-VIEW - Cable programming for which
customers pay on a one-time
basis (e.g., for prize fights,
Broadway shows and movie
premieres).
PAY PROGRAMMING - Movies, sports, and
made-for-cable specials that are
available to the cable customer
for a charge in addition to the
basic fee.
PEL - Abbreviation for a "Picture
Element", used by television
engineers to refer to the
smallest display point on a
screen.
PENETRATION - Ratio of the number of cable
customers (or pay-TV customers)
to the total number of
households passed by the system.
PERFORMANCE STANDARDS - Minimum technical criteria that
a cable system must meet as
defined by the FCC and/or a
local ordinance.
PERSONAL COMMUNICATIONS
SERVICES - A new wireless communications
service that allows users to
communicate through the use
of miniature
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hand held devices transmitted
over radio waves. The technology
uses a network of transmission
towers or "mini-cells" to relay
the signal from one point to
another.
PIRATING - Illegal tapping of pay TV or
cable TV signals.
PIXEL - Abbreviation for a "Picture
Element", used by computer
scientists. A pixel is the
smallest dot on the screen that
is managed by a screen display
program. A VGA screen with 640
x 480 resolution displays over
300,000 pixels.
PLANT - The hardware, buildings, and
distribution system of a cable
system.
POINT OF PRESENCE - The place at which, pursuant to
the AT&T consent decree, a long
distance carrier interconnects
with a local telephone company.
POLE ATTACHMENT - Cable television hook-ups to
telephone or electric utility
poles.
POLE REARRANGEMENTS - The process of spacing utility
lines and cable on a pole in a
sequence regulated by the Public
Utilities Commission or the
utility. This rearrangement
often involves adding cross-arms
or replacing the pole.
POLE RENTAL - A fee paid to a utility company
for the right to use its poles.
POLLING/OPINION POLLING - Using an interactive converter,
the process whereby a cable
subscriber may register a
response to a request or a
question posed on a cable
program.
PULSE CODE MODULATION - Means of changing analog audio
to a digital format by use of
successive samples of materials
to be copied.
PREMIUM SERVICES - Optional services that have
charges above basic cable. Can
include pay cable for special
types of programming, video
games, text and/or interactive
services.
PROGRAMMER - Individual, organization, or
company providing programs to
cable systems.
PUBLIC ACCESS CHANNEL - A channel designated for use by
the general public or nonprofit
entities within a community on a
nondiscriminatory basis, with no
charges for channel time.
RAM - Random Access Memory; that
portion of a computer's memory
that read and writes data,
representing the day-to-day
capacity enabling most
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<TABLE>
<S> <C>
computer tasks, expressed in video
game terms as VRAM (Video
Random Access Memory).
RASTER DISPLAY - The standard television display
in which the screen is scanned
horizontally in interlaced lines
from upper left to lower right.
The standard television display
is 525 lines.
REBUILD - The systematic replacement of
old cable plant -- to improve
signal quality or increase
channel capacity.
RESOLUTION - The amount of detail in a
picture.
RIEF - Resource Interchange File
Format; a multimedia
specification, not tied to a
particular platform, which
permits assorted audio and video
elements to be stored in common
formats.
RISC - Reduced Instruction Set
Computing; RISC differs from
CISC (Complex Instruction Set
Computing) in that complex
operations are defined in terms
of a sequence of smaller,
simpler operations. The
computer hardware in a RISC
computer is designed to optimize
the speed at which the simplest
operations are performed and
thus achieve overall high
performance levels. Direct
comparisons between RISC and
CISC based hardware are not easy
to make, but each has its
proponents and detractors.
SATELLITE (Domestic
Communications) - Device located in geostationary
orbit above the earth which
receives transmissions from
separate points and retransmits
them to cable systems, DBS and
others over a wide area.
SATELLITE MASTER ANTENNA
TELEVISION SYSTEM (SMATV) - Systems that serve a
concentration of TV sets such
as an apartment building, hotel,
etc., utilizing one central
antenna to pick up broadcast
and/or satellite signals.
SATELLITE SERVICE - Any channel delivered to cable
systems by a communications
satellite.
SATURATED SYSTEM - Any cable system carrying up to
its existing channel capacity.
SCRAMBLING - A signal security technique for
rendering a TV picture
unviewable, while permitting
full restoration with a properly
authorized decoder or
descrambler.
SCSI - Small Computer Systems
Interface, a standard way to
connect external systems to a
computer. In general, CD-ROM
drives are connected to
computers
</TABLE>
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through an SCSI (pronounced
"scuzzy") interface card.
SECURITY SYSTEMS - General term encompassing fire
alarms, smoke detectors,
burglary devices, and other
services aimed at protecting the
welfare and property of
subscribers and users. Some use
cable system from subscriber's
home to police or fire
departments.
SERVICE/TEST EQUIPMENT - A category of equipment which
includes, but is not limited to,
oscilloscopes, field strength
meters, spectrum analyzers, and
cable testing equipment.
SERVO Electronic/mechanical machine
using feedback to make precise
starts and stops of the optical
head; focuses the laser beam.
SET TOP BOX - Any of several different
electronic devices that may be
used in a customer's home to
enable services to be on that
customer's television set. If
the "set top" device is for
extended tuning of channels
only, it is called a CONVERTER.
It restores scrambled or
otherwise protected signals, it
is a DESCRAMBLER.
SHOP-AT-HOME - Programs allowing customers to
view products and/or order them
by cable television, inlcuding
catalogues, shopping shows, etc.
SIGNAL COMPRESSION A method of combining television
signals so that a larger number
of channels than usual can be
transmitted over a fixed
bandwidth. A device to "expand"
the wanted signal a the receive
location is also required.
SIGNAL-TO-NOISE-RATIO - The ratio of the desired signal
to the amount of noise
(interference or degradation) in
a picture. The higher the S/N
ratio, the better.
SMATV - Satellite master antenna
television. Satellite dishes
and aerial antennae erected on
apartment buildings and
multi-unit dwellings to receive
and re-transmit satellite and
off-the-air television signals
to occupants of such buildings
or dwellings.
SOFTWARE - Materials used in programming
such as films, slides, video
tapes, or video discs, and the
information they carry. Also
languages and formats used in
computer programming. Compare
to hardware.
SPECIAL-EFFECTS
GENERATOR - A device used in the production
of television programs that
facilities transitions from one
scene to another.
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SPIN UP - Getting up to speed, referring
to the rotation rate of a CD-ROM
that must be reached for the
disc to be readable.
SPRITE - A graphic element defined on a
plane in front of the background
plane. Video games are
optimized to use sprites;
computer displays are optimized
around bit-maps.
STOPWORD - A word in the data base that is
not included in the index.
STV (Subscription Television) - Pay-TV delivered by UHF
over-the-air. Signals are
scrambled and decoded at the
subscriber's set by special
receiver.
SUBSCRIBER - Customer paying a monthly fee to
cable system operators for the
capability of receiving a
diversity or programs and
services.
SUPERSTATIONS - Broadcast stations whose signals
are transmitted over satellite
and available nationwide for
distribution over cable systems.
Examples include WGN-Chicago,
WTBS-Atlanta, and WWOR-New York.
SUPERTRUNK - Cable that carries several video
signals between facilities of a
cable system.
SYNDICATED EXCLUSIVITY - Requirement by which cable
systems must blackout
significant portions of their
distant signals in order to
protect syndicated programming
which local television
broadcasters had under an
exclusive contract. The FCC
eliminated this requirement in
1980 and reimposed it in 1990.
TAP - The connection from the feeder
cable to the subscriber
housedrop.
TELECONFERENCING - A term for simultaneous sound
hookup that allows individuals
in two or more locations to meet
with one another in a
long-distance "conference" mode.
Video conferencing includes
pictures and sound. Can be
video one-way, audio two-way or
two-way video.
TELETEXT - One-way system of storing and
displaying printed and graphic
material on the home television
screen.
TERMINAL - Device that serves as interface
between user and communication
system, e.g. computer keyboard
or a Fax machine.
TIERED PROGRAMMING - A group of programs for which
the customer is charged a fee.
For example, most cable systems
offer a satellite programming
tier.
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TIERS - Levels of programming or
services offered in packages or
singly to cable subscribers.
Usually progressive in price,
quality and quantity of
programs. Compare to basic
service.
TIME BASE CORRECTOR - An electronic device that
corrects and stabilizes the
video image during editing
and/or cablecasting. Local
cable channels which are not
equipped with time base
correctors usually produce
inferior picture quality.
TRANSLATOR - Relay system that picks up
distant television signals,
converts the signals to another
channel to avoid interference,
and retransmits them into areas
the original television station
could not reach.
TRANSPONDER - The part of a satellite that
receives and transmits a signal.
TRUNKING - Transporting signals from one
point (an antenna site for
instance) to another point (such
as a headend), usually without
serving customers directly.
Trunking can be accomplished by
using coaxial cable, fiber
optics or microwave radio.
TRUNK LINE - The major distribution cable
used in cable television systems.
TWO-WAY SYSTEM - A cable system which can carry
signals in both directions, from
the headend to the subscriber
and back to the headend.
TVRO - A television receive-only earth
station which receives signals
from satellites in
geosynchronous orbit.
TV TRANSLATOR - A relay system that picks up
distant broadcast television
signals, converts the signals to
another channel to avoid
interference, and re-transmits
them into areas the original
station could not reach.
UNBUNDLING - The separation and discrete
offering of the components of
the local telephone service.
UNBUNDLING of network components
facilitates the provision of
"pieces" of the local network,
such as local switching and
transport, by telephone company
competitors.
UNDERGROUND
INSTALLATION - Method of installing cable
underground as opposed to aerial
suspension of cable on poles.
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UPGRADE (or SYSTEM
UPGRADE) - Modification of cable plant or
home terminal equipment
(converters) to improve quality
and/or increase channel capacity.
UPLINK - A satellite dish antenna and
transmitter designed to send
programming to a satellite for
distribution.
UPSTREAM - Flow of any information from the
customer, through the cable
system, to the headend.
UPWARD COMPATIBLE - The high-tech equipment of
upwardly mobile; an entity that
can be incorporated in a larger,
or more sophisticated
environment, such as software
that can run on computer systems
of expanded capacity.
VCR (Video Cassette Recorder) - A machine used to record and
playback images on magnetic
tape, packaged in a cassette for
storage, convenience and
longevity.
VAPORWARE - Word that connotes any
multimedia product that is real
only in the mind of its creator;
related slang includes
hyperware, indicating hardware
that has not yet been delivered
and slideware, something that
only exits in slide
presentations.
VIDEO DIALTONE - A means by which telephone
companies may provide
transmission facilities and for
on-telco video programming as
well as certain enhanced
services to third party
programmers.
VIDEO ON DEMAND - An entertainment and information
service that allows customers to
order programs from library of
material at any time they
desire.
WORD - Typically 2 or 4 bytes make up a
"word". Word is not often used
today, but in use it would refer
to the size of the instruction a
CPU is required to process.
WORM - Write Once Read Many; a
permanent optical storage that
permits the user to record
information on a blank disc.
YELLOW BOOK - The physical specification for
any form of laser encoded
optical memory storage medium
(CD-ROM disc).
-A21-
<PAGE> 1
EXHIBIT 3
FALCON CABLE SYSTEMS COMPANY
Fair Market Value
As of December 31, 1995
W A L L E R C A P I T A L
---------------------------
CORPORATION
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TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION I INTRODUCTION
Preamble...................................................... I - 1
Statement of Appraisal and Limiting Conditions................ I - 3
Summary and Conclusion........................................ I - 5
General Economic Outlook and the Specific Industry Outlook.... I - 7
SECTION II THE SYSTEMS
Gilroy Region................................................. II - 1
Hesperia Region............................................... II - 10
San Louis Obispo Region....................................... II - 19
Tulare Region................................................. II - 28
Central Oregon Region......................................... II - 37
Dallas Region................................................. II - 45
Coos Bay Region............................................... II - 55
SECTION III DISCOUNTED CASH FLOW ANALYSIS
Introduction.................................................. III - 1
Income Statement Summary...................................... III - 1
Capital Expenditure Summary................................... III - 6
Terminal Value................................................ III - 7
Comparable System Sales....................................... III - 7
Discount Rate................................................. III - 8
Conclusion.................................................... III - 9
SECTION IV APPENDIX
A. Discounted Cash Flow Analysis by Region
B. Summary Appraisal of Exchange Systems
</TABLE>
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INTRODUCTION
I. PREAMBLE
At the request of Falcon Cable Systems Company ("Falcon" or the "Company"), a
California Limited Partnership, Waller Capital Corporation ("Waller Capital")
has conducted an appraisal of the fair market value of the assets of Falcon. The
Company operates cable television systems that serve approximately 135,000
subscribers located in California and Oregon (the "Systems").
Neither Waller Capital nor any of their representatives have any active or
contemplated direct interest in Falcon or any affiliates of Falcon.
The purpose of this appraisal is to determine the value a buyer would assign to
the Company on a going concern basis if a willing seller, under no undue
pressure to sell, placed the Company for sale. The valuation is determined as of
December 31, 1995, on a cash-for-assets basis.
As directed by Falcon, the Systems were divided into seven regions; Gilroy
Region, Tulare Region, Hesperia Region, San Luis Obispo Region, Coos Bay Region,
Dallas Region and Central Oregon Region (the "Regions"). The general methodology
of the appraisal was to evaluate the Discounted Cash Flow ("DCF") stream
generated by each Region over a ten-year period (fiscal 1996 to 2005) and apply
relevant market and economic factors. Ten-year projections have been prepared by
Waller Capital as part of the DCF analysis. Developing projections required a
general understanding of each Region's current business and future plans. This
understanding was obtained through: i) discussions with management concerning
business operations and future prospects; ii) a review of each Region's December
31, 1995 fiscal year end unaudited financial statements; iii) a review of
Falcon's 1993 and 1994 unaudited regional and audited consolidated financial
statements; iv) a review of other operating and subscriber data; v) an analysis
of demographic data as it relates to the service areas of each Region; and (vi)
on-site due diligence of the Systems.
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INTRODUCTION
Projections for the years 1996 to 2005 were made by Waller Capital based upon
each Region's 1995 unaudited financial statements which we believe to be
generally reasonable. The general expense structure of the Systems was projected
according to market and inflationary factors as it was judged to be efficient.
In addition, specific adjustment was made for partnership expenses, as
determined by Waller Capital, which were not allocated back to each Region.
A sale is assumed to occur in the tenth year (2005) of the DCF model. The cash
flow sales multiples selected for each Region reflect the long-term prospects
for cash flow growth and the cash flow quality. The multiples selected also
account for the presumed technical condition of each Region at the time of sale.
The multiples were applied against the full tenth-year of each Region's cash
flow.
This analysis utilized a discount rate derived from Waller Capital's Weighted
Average Cost of Capital ("WACC") model. This discount rate is consistent with
the WACC for an average cable buyer, private or public, utilizing a mix of debt
and equity to capitalize operations.
Waller Capital's analysis was further supported by comparable system sales.
Waller Capital examined specific transactions to determine if an appropriate
multiple of cash flow could be derived from current market information. Waller
Capital examined multiples from announced and completed cable television
transactions for the twelve months preceding December 31, 1995, relying upon
data from Paul Kagan Associates, Inc., transactions executed by Waller Capital
and general industry information. However, comparable sales data is difficult to
generalize from because of the variability of factors such as system size,
growth prospects, penetration, location, demographics, technical system
condition and franchise terms, which are often not publicly available. Given
these limitations, Waller Capital is of the opinion that comparable sales data
offers only an approximation of factors that help determine a fair market value.
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INTRODUCTION
II. STATEMENT OF APPRAISAL ASSUMPTIONS AND LIMITING CONDITIONS
This appraisal has been prepared pursuant to the following general assumptions
and general limiting conditions:
1. Waller Capital assumes no responsibility for the legal description or
matters including legal or title considerations. Title to the subject
assets, properties, and business interests are assumed to be good and
marketable unless otherwise stated.
2. The subject assets, properties, and business interests are appraised
free and clear of any and all liens or encumbrances unless otherwise
stated.
3. Waller Capital assumes responsible ownership and competent management
with respect to the subject assets, properties, or business interests.
4. The information furnished by others is believed to be generally
reliable. However, Waller Capital issues no warranty or other form of
assurance regarding its accuracy.
5. Waller Capital assumes that there is full compliance with all
applicable federal, state, and local regulations and laws unless
noncompliance is stated, defined, and considered in the appraisal
report.
6. Waller Capital assumes that all required licenses, certificates of
occupancy, rights of entry or easement, consents, or legislative or
administrative authority from any local, state, or national government,
private entity or organization have been or can be obtained or renewed
for any use on which the valuation opinion contained in this report is
based.
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INTRODUCTION
7. Possession of this valuation report, or a copy thereof, does not carry
with it the right of publication. It may not be used for any purpose by
any person other than the party to whom it is addressed without Waller
Capital's prior written consent and, in any event, only with proper
written qualifications and only in its entirety.
8. Waller Capital, by reason of this valuation, is not required to furnish
a complete valuation report, or to give testimony, or to be in
attendance in a court of law or other arbitration with reference to the
assets, properties, and business interests in question unless
arrangements have been previously made.
9. No part of the contents of this report (especially any conclusions of
value, the identity of the appraisers, or the firm with which the
appraisers are associated) shall be disseminated to the public through
advertising, public relations, news, sales, or other media without
Waller Capital's prior written consent and approval.
10. Waller Capital assumes no responsibility for any financial reporting
judgements which are appropriately those of management. Management
accepts the responsibility for any related financial reporting with
respect to the assets, properties, and business interests encompassed
by this appraisal.
11. Waller Capital has no responsibility to update this report for any
changes occurring subsequent to the issuance of this report, except as
Waller Capital may be retained to do so in the future under a separate
contract and agreement.
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INTRODUCTION
III. SUMMARY AND CONCLUSION
Based on the investigation and analyses discussed in this report, it is Waller
Capital Corporation's opinion that the fair market value of Falcon Cable Systems
Company, as of December 31, 1995, was $213,672,442. On a per region basis the
value was determined as follows:
<TABLE>
<S> <C>
Gilroy $ 57,640,720
Hesperia 28,865,947
San Luis Obispo 21,988,550
Tulare 22,269,159
Coos Bay 35,486,280
Dallas 27,257,132
Central 20,164,654
------------
TOTAL VALUE $213,672,442
</TABLE>
This value was based on the Discounted Cash Flow analysis and was supported by
our comparable system sales analysis.
Falcon Cable Systems Company serves 135,470 subscribers in 35 systems which are
grouped into seven regions. The systems are spread over 800 miles from southern
California to northern Oregon. There is an average of 3,871 subscribers per
headend with an average technical capacity of 41 channels. After four years of a
lack of liquidity and capital scarcity, the Systems are generally in need of
upgrades and rebuilds. Two of the Company's regions have lost basic subscribers
in the last three years, however, during the period from FYE 1993 through FYE
1995 overall basic subscribers have increased at a 2.2% annual rate. Pay
subscription has fallen 11% over the same period. From FY 1993 to FY 1995
revenue has dropped by over $800 thousand or -1.5% and cash flow has dropped by
$2.8 million, or 8.9%. On a pre-management fee and partnership expense basis
five of the seven regions had operating margins in excess of 50%.
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INTRODUCTION
The California regions are all located within areas adjacent to the operations
of a number of different MSOs, however, all of the regions in Oregon are
surrounded by either TCI or other Falcon owned systems.
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INTRODUCTION
IV. GENERAL ECONOMIC OUTLOOK AND THE SPECIFIC INDUSTRY OUTLOOK
GENERAL ECONOMY
1995 was a blockbuster year for almost all U.S. equity markets. The Dow Jones
Industrials and the S&P 500 returned 36.8 % and 37.5%, respectively. The U.S.
bond market fared equally well, with 30-year Treasury yields dropping from 7.85%
to 6.25% and providing a total return of over 25%. Real GDP growth ended the
year at 3.3%, with an inflation rate (CPI, which includes the volatile energy
and food components) of 2.9%. The average unemployment rate held steady at 5.6%.
Most economists feel that the Federal Reserve orchestrated a "soft-landing",
quelling runaway inflation fears, while not stifling economic output and future
capital spending plans. Public companies showed overpowering strength in the
equity markets, benefiting from decreasing interest rates, low and stable
inflation, increasing productivity, lower operating costs, restructurings and a
tremendous increase in liquidity due to substantial mutual fund inflows.
Companies with international sales exposure benefitted from the weaker U.S.
dollar. The technology sector fared best as companies not only increased actual
capital spending dollars, but also increased the percentage of technology
spending as a percent of total capital spending to approximately 50% -- up
dramatically from years past. The merger and acquisition market was also highly
active, with media, cable, technology, defense and health care companies leading
the charge. A record $442 billion in merger and acquisition deals were recorded
by Securities Data Co., a leading database for merger and acquisition activity.
The prognosis for 1996 appears less optimistic than 1995, yet moderately strong,
for the financial markets. In early December, the Federal Reserve lowered the
discount rate from 5.50% to 5.25% as a preemptive strike against a stagnating
economy. Inflation is expected to edge up slightly to 3.2% and GDP growth is
expected to decrease moderately to 2.8%. Bond yields are expected to primarily
maintain their current historical low levels, which bodes well for residential
construction activity. Finally, with U.S. equities at record levels, companies
are finding that acquisitions are a faster and
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INTRODUCTION
more cost effective way to grow revenues in a marketplace where raising prices
is not an option.
Corporate capital spending is expected to remain healthy and companies are
projecting moderate growth with controlled costs. Consumer spending is showing
signs of flattening, as consumer debt begins to approach the saturation point.
On the legislative front, Congress also aims to complete a tax-reform bill and
pass a balanced-budget bill during 1996. Labor cost control improvements,
technology, inventory management and manufacturing efficiencies appear to have
built a solid foundation for long-term, sustainable, non-inflationary economic
growth in 1996.
HISTORY OF THE CABLE MARKET
The robust merger and acquisition market for cable television systems witnessed
from 1986 to middle of 1989 was driven by the very positive outlook for the
fundamentals of the cable industry and readily available credit. With the prior
arrival of basic rate deregulation, rising penetration of services and growing
ancillary revenues, the cable television industry utilized its natural operating
leverage to produce strong cash flow growth. Simultaneously, the high yield debt
market and commercial banks made enormous amounts of capital available at ever
increasing multiples of cash flow.
In late 1989, the market for cable systems reversed, with price multiples
falling approximately 20% on average and the volume of sales greatly reduced.
The principle cause of this reversal was a severe constriction of credit. The
high yield market virtually collapsed in conjunction with Drexel Burnham
Lambert's failure. Commercial banks virtually ceased providing new credit to
cable television in response to the implementation of Highly Leveraged
Transactions ("HLT") reporting requirements by the Comptroller of the Currency,
and banks' overall need to improve capital ratios.
The cable television market experienced some improvements beginning in late
1991. Waller Capital experienced a renewed interest in transactions, with
increased numbers of interested buyers and bidders. Commercial banks slowly
returned to the market, albeit at reduced debt/cash flow multiples.
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INTRODUCTION
Large Multiple System Operators ("MSOs") accessed long-term fixed-rate debt at
attractive terms. Also, many new equity investors successfully sought entry into
the market, including: Hallmark, Meredith Corp., Kohlberg, Kravis and Roberts &
Co. and Warburg, Pincus. In addition, low interest rates aided buyers in the
market. While the overall consensus for cable television's future prospects were
attractive in this period, many cable operators were experiencing a decline in
their fundamentals. The economic recession and other factors lead to reduced
basic unit growth and pay unit declines. Basic rate growth was flattening.
Simultaneously, expense pressures from programming suppliers and customer
service requirements were rising. The overall impact of these forces would limit
cash flow growth from traditional video services in many markets.
In 1992 and 1993, enthusiasm grew among cable operators and the investment
community for cable television's prospects for generating revenue from the
distribution of data and voice, in addition to expanded video services. Spurred
by improved economics of fiber optic deployment and prospects for video
compression, financial expectations for large MSOs in large markets rose.
On October 5, 1992, Congress voted to override a presidential veto and enacted
the 1992 Cable Act. On April 1, 1993, the FCC disclosed the methodology by which
it began to regulate cable television. The 1992 Cable Act allows for a greater
degree of regulation of the cable industry with respect to, among other things:
(1) cable system rates for both basic and certain nonbasic services; (2)
programming access and exclusivity arrangements; (3) access to cable channels by
unaffiliated programming services; (4) leased access terms and conditions; (5)
horizontal and vertical ownership of cable systems; (6) customer service
requirements; (7) franchise renewals; (8) television broadcast signal carriage
and payments for retransmission consent; (9) technical standards; (10)
subscriber privacy; (11) consumer protection issues; (12) cable equipment
compatibility; (13) obscene or indecent programming; and (14) prohibiting cable
operators from requiring subscribers to subscribe to tiers of service other than
basic service as a condition of purchasing premium services. Additionally, the
legislation encourages competition with existing cable systems by: (1) allowing
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INTRODUCTION
municipalities to own and operate their own cable systems without having to
obtain a franchise; (2) preventing franchising authorities from granting
exclusive franchises or unreasonably refusing to award additional franchises
covering an existing cable system's service area; and (3) prohibiting the common
ownership of cable systems and co-located MMDS or SMATV systems.
The disclosure of the benchmarks imposed by the FCC in April 1993 had a negative
impact on the market for cable television systems. Rate freezes through the
summer limited cash flow growth. More importantly, many systems faced basic rate
rollbacks with future cash flow growth limited by inflation related increases.
The uncertainty lend to reduced commercial bank lending, a critical aspect of
the marketplace.
However, as the September 1, 1993, compliance date for benchmark pricing
approached, increasing rumors of Regional Bell Operating Company ("RBOC")
acquisition interest following the Southwestern Bell acquisition of Hauser
Communications, combined with a clear incentive for cable MSOs to consolidate to
access capital and compete in voice and data telecommunications, pushed system
market values higher. During late September, Paul Kagan's Cable TV Finance
newsletter noted Southwestern Bell, BellSouth and NYNEX as interested in
acquiring Viacom Cable. Clearly, confidence in cable capital markets and
valuations were on an upswing.
Regulatory matters dictated the market for cable systems again in 1994. RBOC
interest early in the year created a near frenzy in the market. Moreover, the
FCCs announced alterations to current rate regulation schemes on February 22nd
once again caused a serious market disruption. The market's bellwether
transaction, Bell Atlantic/TCI, collapsed, bringing the market for cable systems
down. Other RBOCs were soon to follow Bell Atlantic's lead and the demand for
cable systems was greatly reduced.
The transaction marketplace stalled until mid-summer 1994, as cable operators
once again worked
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INTRODUCTION
to understand the impact of potential 17% basic rate rollbacks and unclear
cost-of-service guidelines. However, as in the prior year, cable operators were
willing to focus on acquisition opportunities once they assimilated these
changes. Perhaps the forces driving consolidation were now even stronger as
competition from telephone companies was more likely. The necessity to amass
capital and critical market mass to compete in voice and data telecommunications
was more evident.
Transaction activity picked up strongly in the second half of 1994 despite
generally weak capital markets. Commercial banks were supportive of the largest
MSOs, with commercial bank capital in short supply for many smaller and
mid-sized operators. The high yield debt market was weak as rising short-term
rates limited demand among high yield buyers. Public equity markets were
depressed by the exodus of RBOCs. However, many sellers were willing to accept
securities from buyers, the sale of Times Mirror, Summit Communications and
Newhouse Broadcasting being noteworthy.
Competitive forces increased their pressures upon the cable industry in late
1994 with two new digital DBS/DSS providers joining the four-year veteran
PrimeStar Partners ("PrimeStar") owned by GE American Communications. October
saw the launch of GM-Hughes Electronics' DirecTV ("DirecTV") and Hubbard
Broadcasting's United States Satellite Broadcasting ("USSB"), both using the
much-publicized 18-inch (Ku-band) digital satellite dish technology. The reduced
size of these antennae, coupled with broad channel offerings and digital-quality
audio, in large measure offset the initial high startup equipment price
associated with the new systems, and demand for the dishes was very brisk. While
most attractive to rural customers outside cable service areas, the DBS/DSS
systems are also very competitive inside cable service areas in the market for
premium and tier-level customers. The entry of DirecTV and USSB, along with
PrimeStar, has subjected cable MSOs in many areas to effective competition,
placing pressure on service rates. This pressure is likely to increase in the
future as DBS/DSS providers introduce interactivity to their product offerings.
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INTRODUCTION
By year-end 1994, the market for systems had stabilized. In addition, the fall
elections brought optimism on the regulatory front. Republican Senate Commerce
Committee chairman Larry Pressler introduced legislation that aimed to achieve
sweeping cable/telecommunications deregulation and reform. The market was
enthusiastic that an approved bill would provide for the repeal of the current
federally controlled cable rate structure, and fully open the local cable and
telephony markets to both MSOs and telcos. In addition, the legislation
contemplated allowing the RBOCs to enter long-distance and telecom equipment
making markets, as well as relax the restrictive broadcast station ownership
rules currently in place.
1995 was a year of restructurings, mergers, acquisitions, strategic
joint-ventures, leveraging and the beginning of a what will prove to be a long
battle for the multimedia consumer dollar. Telcos, MSOs and long-distance
carriers ("LDC"s) formed alliances in an attempt either to protect themselves
from unserved areas or to complement their current product offerings: i) Bell
Atlantic/NYNEX (wireless, video programming) ii) U.S. West/Pactel's Airtouch
Communications (wireless); iii) AT&T/McCaw Cellular (wireless); iv)
Disney/BellSouth Corp./Ameritech Corp./SBC Communications (programming); v)
MCI/News Corp. (DBS, Internet); vi) Sprint/TCI/Comcast/Cox (cable, wireline and
wireless telephony). Perhaps the last alliance is the most telling of what will
be MSO's preferred method of competing in an open playing field where consumers
can choose one provider for cable, telephony and long-distance. Senator
Pressler's pending telecommunications reform legislation reform has caused
cellular providers, MSOs and LDCs to rethink their growth and product strategies
in an open, competitive environment and without exclusive franchise areas or
protected products.
Over $20 billion in mergers occured during 1995, including Time
Warner/Cablevision Industries, Intermedia/Viacom, TCI/Viacom, Time
Warner/Houston Industries (Paragon/KBLCOM), Comcast/E.W. Scripps, Marcus/Sammons
and Gannett/Multimedia. MSOs faced the key operating decision of whether to
consolidate into strategic clusters or to sell-out to the highest bidder. Access
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INTRODUCTION
to capital was a key factor in this decision. The enormous expected costs to
upgrade cable plant using fiber so that voice and data transmission would be
possible prompted MSOs to look for scale economies by growing quickly via
acquisitions.
While the demand for capital remained strong throughout the year, the supply of
capital was also available through private and public debt markets to qualified
MSOs. In addition, an abundance of private equity was available to cable
companies as demonstrated by the following: i) Austin Ventures/B.T. Capital
extended $20 million to Classic Cable; ii) Calpers extended $250 million to
Comcast; iii) Goldman Sachs extended $180 million to Marcus Cable; iv) Hicks
Muse extended $115 million to Marcus; v) J.P. Morgan extended $125 million to
FrontierVision; vi) Kelso/Charterhouse extended $300 million to Charter
Communications; and vii) Spectrum Partners/Fleet Ventures/T.A. Associates
extended $50 million to Galaxy.
DBS competition also grew into a credible threat to cable's subscriber base.
Primestar, DirecTV, USSB and Echostar began to acquire subscribers at an
increasing rate. Due to several multi-million dollar marketing campaigns, DBS
has now become a significant threat to the high-end cable customer. However, the
lack of local broadcast stations, the high cost of initial setup and certain
logistical problems have hampered wide-scale defections to DBS services.
RBOCs have also entered the video market by acquiring wireless cable operators,
or MDS/MMDS operators. The markets believe that RBOCs view wireless cable as a
short-term, stop-gap measure to deliver video to the home, while they are
developing a long-term, cost-effective, quality delivery method. Among some of
the more salient deals are NYNEX & Bell Atlantic/CAI Wireless ($668), CS
Wireless/Bakersfield, CA ($186 MM)/Cleveland and Dayton, OH and Dallas, TX ($502
MM), CAWS/ACS Entertainment ($248 MM), Pacific Telesis/S.A. Cross Country ($175
MM).
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INTRODUCTION
In conclusion, the major themes for cable television in 1995 were consolidation,
capital formation, competition and deregulation legislation. The cable industry
continues to exhibit attractive opportunities for growth and appreciation to
well positioned MSOs. In the long- term, cable television will play an integral
part in the dynamic reshaping of the larger media and telecommunications
industry.
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II. THE SYSTEMS
<PAGE> 18
GILROY REGION
<PAGE> 19
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GILROY REGION
INTRODUCTION
The Gilroy Region ("Gilroy" or the "Region") is composed of four cable
television systems (the "Systems") which serve communities in Monterey County
and San Benito County in Northern California. The Systems are served by four
headends located in Gilroy, Soledad Peak, Greenfield and King City. The
following map highlights the location of the Systems within the state of
California.
[Map of Region]
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GILROY REGION
[CHART 1]
<TABLE>
<CAPTION>
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TABLE 1:
HISTORICAL SUBSCRIBER SUMMARY
(Fiscal Years Ended December 31)
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
HOMES PASSED 54,557 54,496 56,219
BASIC SUBSCRIBERS 31,338 31,996 33,078
% PENETRATION 57.4% 58.7% 58.8%
PAY UNITS 16,011 14,693 13,070
% PENETRATION 51.1% 45.9% 39.5%
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GILROY REGION
[CHART 2]
<TABLE>
<CAPTION>
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TABLE 1:
HISTORICAL FINANCIAL SUMMARY
(Fiscal Years Ended December 31)
($ IN THOUSANDS) 1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
REVENUES $13,602 $13,249 $13,146
EXPENSES 4,763 5,537 5,512
SYSTEM CASH FLOW $ 8,839 $ 7,713 $7,633
% MARGIN 64.9% 58.2% 58.1%
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GILROY REGION
As of December 31, 1995, the Systems passed 56,219 homes with 664 miles of plant
(84 homes per mile) and served 33,078 basic subscribers (58.8% basic
penetration) and 13,070 pay units (39.5% pay penetration). The charts and tables
on the preceding pages demonstrate the historical operating and financial
performance of the Systems.
The Gilroy Region generated homes passed growth of 1.5% annually since 1993 and
subscriber growth of 2.7% annually over the same period. This subscriber growth
resulted in a small increase in basic penetration from 57.4% in 1993 to 58.8% in
1995. Pay subscription eroded over time from 15,573 (51.1% penetration) to
13,070 (39.5% penetration) over the same period.
Gilroy has had a relatively flat revenue history with an actual $456 thousand
decline in revenue from FY 1993 through FY 1995. This decline was attributable
to revenue losses sustained as a result of reregulation and pay subscription
losses. System cash flow has declined from a high of $8.8 million in 1993 to
$7.6 million in 1995, which is flat from the previous year. The operating margin
has been flat at 58% for the last two years.
MARKET OVERVIEW
The communities served by the Gilroy Region are situated in the heart of the
fertile Santa Clara Valley, just 15 miles from the Pacific Ocean in the
surrounding rolling hills and farmland. Gilroy is approximately one-half hour
from the center of the nations computer industry in San Jose/Silicon Valley and
the beautiful and diverse recreational areas on the Monterey Peninsula. The
communities are also strategically located at the junction of two of
California's most important highways, Interstate 101 between San Francisco and
Los Angeles, and US 152 linking 101 and Interstate 5 which serves California's
Central Valley. The demographics of the Gilroy Region vary from the rapidly
expanding companies of Silicon Valley to the north, to a migrant worker
component in King City to the south.
Gilroy is the self-proclaimed Garlic Capital of the World, and since 1979, home
to the Gilroy Garlic
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Festival. Surrounding the Region is an important agricultural center which
provides enormous quantities of broccoli, cauliflower and other staples. The
city is a regional shopping hub with over 130 stores in 517,500 square feet of
retail space. King City and Soledad Peak are small communities that support the
surrounding farmland and serve as a base for the large migrant work force. The
largest employers in the Region are highlighted below:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
COMPANY EMPLOYEES PRODUCT/SERVICE
- ------- --------- -----------------
<S> <C> <C>
Gilroy Foods, Inc. 1,100* Food Processing
Outlet Shopping Centers 1,000+ Discount Retail
Gilroy Unified School District 865** Education
A&D Christopher 574* Grower, Processor
Nob Hill Foods/Corp. Offices 418 Supermarket Chain
South Valley Hospital 310 General Hospital
Gilroy Auto Dealers 303 Sales
Hecker Pass, A Family Adventure 300* Theme Park
WalMart 240 Discount Retail
City of Gilroy 225 City Government
* Seasonal peak employment ** Contract basis
- ----------------------------------------------------------------------------------------------
</TABLE>
The communities within the Gilroy Region have enjoyed historically strong
growth. However, the Region has suffered as of late along with the rest of the
California economy. The closure of the nearby Fort Ord military base in 1993
also adversly impacted the local economy.
TECHNICAL OVERVIEW
The Gilroy Region is served by four headends identified as Gilroy, Greenfield,
Soledad Peak and King City.
The system serving the city of Gilroy is the largest in the region. The system
was originally constructed in 1970 and upgraded in 1983 to 300 MHz . The headend
is primarily Scientific Atlanta components with a mix of Regal and Scientific
Atlanta electronics in the plant. The Gilroy headend is located several miles
west of Gilroy in the mountains to improve off-air reception and improve sight
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paths for microwave links. The headend microwaves signal to receive sites in the
City of Gilroy, Morgan Hill, Hollister and Spring Hill. Spring Hill is a
repeater which feeds Aromos, Las Lomas, Oak Hill/Castorville, San Juan Bautista
and Prunedale. The Spring Hill site also feeds Laguana Seca which further feeds
La Mesa and Carmel Highlands.
The Greenfield system passes 2,621 homes with 40 miles of plant. The system is
operating at 300 MHz. The headend is a mix of Scientific Atlanta, Standard,
Jerrold, Blonder Tongue and ISS components with a mix of Magnavox and Scientific
Atlanta electronics in the plant.
The headend located on Soledad Peak is located just west of Highway 101 in the
mountains. The headend uses microwave to deliver signal to the Soledad and
Gonzalez systems. The Gonzalez receive site is fiber connected to the Chualar
system. The systems are primarily 400 MHz with Scientific Atlanta components in
the headend and plant.
The King City system passes 2,847 homes with 60 miles of plant. The system is
operating at 300 MHz. The headend is a mix of Scientific Atlanta, Standard,
Jerrold, Blonder Tongue and ISS components with a mix of Regal, Magnavox and
Scientific Atlanta electronics in the plant.
RATES/CHANNELS
The Systems' rate and channel line-ups vary slightly by system due to technical
capacity, franchise and retransmission/must-carry issues, but generally offer a
basic service, a tier and a satellite package. The following highlights the
basic rates, tier rates and the total number of channels.
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<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
SERVICE RATE SUMMARY
BASIC TIER TOTAL
FRANCHISE RATE RATE CHANNELS
- --------- ---- ---- --------
<S> <C> <C> <C>
Gilroy, CA $20.76 $5.57 35
Hollister, CA 21.03 5.82 35
Morgan Hill, CA 21.72 5.55 35
San Benito County, CA 22.76 5.86 35
Santa Clara County, CA 21.83 5.21 35
King City, CA 20.18 1.66 35
Monterey County, CA 20.97 1.23 35
Gonzales, CA 11.74 7.95 35
Monterey County, CA 12.68 8.34 35
Soledad, CA 11.85 7.95 35
Monterey County, CA 21.99 4.05 35
San Juan Bautista, CA 19.44 5.21 35
La Mesa Naval Post Grad School, CA 19.21 1.29 35
Monterey County (Lag Seca/RTG), CA 22.45 4.05 35
Greenfield, CA 19.75 1.82 35
Monterey County, CA 20.22 0.70 35
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Gilroy has approximately 12,600 addressable subscribers which generated an
average 5.6% buy rate in 1995.
OPERATIONS OVERVIEW
The Gilroy Region systems are operated from a centrally located facility in
Gilroy, two satellite offices in King City and Soledad and a part time office in
Greenfield. The Gilroy facility serves as the office, warehouse and technical
center for the entire Region. The two other offices are walk-in payment centers.
The Region utilizes a PC-based CSG billing system under master contract through
Falcon. The Region is operated by a total of 27 staff members including: a
System Manager, an Office Manager, a Plant Manager, 7 Technicians, 1 Lead
Installer, 5 Installers / Dispatchers, 7 Customer Service Representatives
("CSRs") and an Advertising Salesperson. There are also 2 CSRs in King City and
1 CSR in Soledad. None of the employees are covered by collective bargaining
agreements, nor has there been any organized effort to unionize.
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The Region operates under the authority of 13 franchises. Approximately 80% of
the subscribers are in franchises that are within 3 years of renewal or in some
cases have not been renewed and are still being negotiated.
MANAGEMENT FEES
Falcon Cable charges Falcon Cable Systems Company a Management Fee of 5.0% of
total revenues. For the purposes of this appraisal, system cash flow was
determined prior to the Management Fee. Each region was then charged a
reimbursement of partnership expenses of 5.73% of total revenues. This charge is
comprised of reimbursed partnership expenses and miscellaneous charges. The
reimbursed partnership expense was calculated as 3.73% of total revenues. In
FY1995 the Gilroy Region was charged $1,980,591 (3.73% of Partnership Revenues
of $52.9 million) as Reimbursed Expense under Partnership Expense which
discussions with Falcon management confirmed represented expenses of the entire
Company and should be allocated accordingly. An additional 2% of revenues was
added to each Region's Unallocated Partnership expense to account for
miscellaneous services and support provided by the general partner of Falcon
Cable Systems Company including management, financial, programming, billing,
marketing, legal, programming and other services and discounts.
COMPETITION AND POTENTIAL ACQUIRORS
The Systems are not currently overbuilt by any other franchised cable operator.
There is an MMDS operator which delivers signal in Greenfield which has caused a
small subscriber loss. Within the immediate surrounding area are the following
operators: Tele-Communications, Inc., Intermedia Partners and Post Newsweek
Cable.
SUMMARY
The Gilroy region has the widest range of demographics of the Falcon systems.
The systems to the north including Gilroy have excellent growth prospects as
Silicon Valley continues to expand,
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however King City to the south is at the lower end of the demographic scale.
The franchising environment in the Systems appears difficult as many of the
franchising authorities have filed to prevent Falcon's bid for the small system
exclusion following the lead of the Naval Postgraduate School. In addition,
approximately 80% of subscribers are in franchises that have either expired or
expire within the next three years.
Homes passed growth is projected to be relatively robust at 1.7% versus an
historical 1.5% with continual improvement in subscriber penetration. Revenue
and cash flow are projected to increase, reversing the historical trend, due to
rate increases, subscriber gains and continued generation of revenue from other
sources.
The plant will require a rebuild in the next three years to eliminate channel
lock, permit revenue gains, eliminate multiple microwave connections, improve
system signal integrity, reduce cost of operation, and to aid the franchise
renewal process for those areas due to expire in the next three years.
In the event of a sale the most likely buyer is TCI/Intermedia, and possibly
Post Newsweek. However, TCI is the dominant player in the northern California
markets.
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HESPERIA REGION
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INTRODUCTION
The Hesperia region ("Hesperia" or the "Region") is composed of five cable
television systems (the "Systems") which serve the communities of Adelanto,
Rosamond/Mojave, North Edwards, Boron and Hesperia in the state of California.
The following map highlights the location of the Systems in the state of
California.
[MAP OF REGION]
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[CHART 1]
TABLE 1:
HISTORICAL SUBSCRIBER SUMMARY
(Fiscal Years Ended December 31)
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
HOMES PASSED 27,332 28,031 28,312
BASIC SUBSCRIBERS 16,420 17,611 18,513
% PENETRATION 60.1% 62.8% 65.4%
PAY UNITS 7,438 8,907 8,366
% PENETRATION 45.3% 50.6% 45.2%
</TABLE>
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[CHART 2]
TABLE 1:
HISTORICAL FINANCIAL SUMMARY
(Fiscal Years Ended December 31)
<TABLE>
<CAPTION>
($ in thousands) 1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
REVENUES $7,085 $7,321 $7,847
EXPENSES 2,956 3,204 3,645
SYSTEM CASH FLOW $4,129 $4,117 $4,202
% MARGIN 58.3% 56.2% 53.5%
</TABLE>
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As of December 31, 1995, the Systems passed 28,312 homes with 678 miles of plant
(42 homes per mile) and served 18,513 basic subscribers (65.4% basic
penetration) who subscribed to 8,366 pay units (45.2% pay penetration). Revenue
and cash flow for the fiscal year ended December 31, 1995 were $7.847 million
and $4.202 million respectively (53.5% operating margin). The charts and tables
on the preceding pages demonstrate the historical operating and financial
performance of the Systems.
The historical subscriber summary indicates that the Hesperia Region generated
homes passed growth of 1.8% annually since 1993 and subscriber growth of 6.2%
over the same period. Homes passed growth slowed in 1995 to 1.0% versus 2.6% in
1994. Basic subscribers continued to climb with penetration reaching 65% in 1995
from 60% in 1993. Pay subscribers declined from 8,907 at FYE 1994 to 8,366 at
FYE 1995, a loss of 6.1%.
In the Hesperia Region, revenue has climbed over the preceding three years at a
compound growth rate of 5.2% fueled by subscriber gains which offset revenue
losses as a result of reregulation. However, the operating margin declined over
the period from 58.3% in 1993 to 53.5% in 1995 resulting in a flat actual cash
flow over the three year period.
MARKET OVERVIEW
Hesperia is the largest community in the Hesperia Region. Hesperia is located
approximately 20 miles north of the City of San Bernardino along Interstate 15
and approximately 80 miles north and east of Los Angeles. The area is an extreme
outer bedroom community for Los Angeles and for San Bernardino. The closing of
George Air Force Base, a large area employer, approximately three years ago, had
a severe negative effect on the economy. System management estimated that a
large portion of the population was on welfare and the area suffered from high
unemployment.
The City of Adelanto was founded in 1915 by inventor E.H. Richardson. Richardson
built the
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community with money received from the sale of his patent for what was later
developed as the Hotpoint Electric Iron. Adelanto was developed as one of the
first master planned communities in Southern California. The city is located
approximately 95 miles northeast of Los Angeles on State Highway 395 in the
California High Desert and 35 miles north of San Bernardino via Interstate 15.
Major employers in Adelanto include:
<TABLE>
<CAPTION>
EMPLOYER EMPLOYEES
- -------- ---------
<S> <C>
Roadway Express, Inc. 1,000
Adelanto School District 272
Iron Horse Trucking 200
</TABLE>
Adelanto, like Hesperia, suffers from unemployment and a large percentage of
welfare recipients. However, the city has constructed several industrial parks
to encourage the influx of new business and has developed a Fast Track process
to minimize the time it takes to gain building permits and other authorizations
required to begin business operations in the city.
Boron is located approximately 35 miles to the north of Adelanto and is an
abandoned boron mining town. The mine has been closed and the community is
slowly shrinking. The Rosamond/Mojave system is located approximately 60 miles
from Adelanto and approximately 20 miles west of Boron. The communities are
composed of small tract homes and are outer bedroom communities for Los Angeles
and other cities in Los Angeles and San Bernardino counties. North Edwards is
adjacent to Edwards Air Force base and approximately 10 miles west of Boron.
Edwards is a major U.S. base and is the West Coast home and landing site for the
NASA Space Shuttle.
TECHNICAL OVERVIEW
The system serving Hesperia passes 16,948 homes with 415 miles of plant. The
system was originally constructed in 1972 and rebuilt in 1988 to 330 MHz. The
plant is technically sound and there is a nearly complete fiber project which
will replace significant portions of the trunk in order to reduce
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amplifier cascades. Management indicated that the area was built out and that
future growth was occurring primarily under existing plant. The system has a
microwave receive site at the office/headend which receives microwave signals
from Los Angeles off-air networks at a site on Blue Ridge Mountain. The Blue
Ridge site is also used to send the off-air signals to Adelanto.
The Adelanto system passes 2,600 homes with 62 miles of plant. The system was
constructed in 1972 and rebuilt in 1988 to 330 MHz. Adelanto acts as a microwave
distribution source for the community of Silver Lake, a small retirement
community with 1,802 homes passed by 41 miles of plant located outside of
Adelanto.
The Rosamond/Mojave system is linked together via a fiber run which permitted
the elimination of a headend. The system was originally built in 1974 and is
currently operating at 300 MHz. The Boron system passes 1,256 homes with 27
miles of plant. The system was originally constructed in 1967 and 60% rebuilt in
1991. The system is operating at 270 MHz. The North Edwards system passes 235
homes with 7 miles of plant. The system was constructed in 1990 and is operating
at 450 MHz.
OPERATIONS OVERVIEW
The Hesperia Region has a main office located in Hesperia and a satellite office
in Mojave. The Hesperia office is open for walk-in payments customer service and
subscriber inquires. The Region uses a CSG-based billing system under a master
contract through Falcon. The Hesperia Region is operated by 21 employees
including, a System Manager, an Office Manager, a Chief Technician, 3
Technicians, 3 Installers, 1 Dispatch Supervisor and 6 Customer Service
Representatives ("CSRs"). The Mojave office has 2 CSRs and 3 Technicians. None
of the employees are covered by collective bargaining agreements, nor has there
been any organized effort to unionize.
The Hesperia Region operates under the authority of four franchises. The
earliest franchise expiration
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is in 2006.
RATES/CHANNELS
The Systems rate and channel line-ups vary slightly by system due to franchise
and retransmission/must-carry issues but generally offer a basic package
composed of a variety of Los Angeles off-air signals, a tier package, a
satellite package, premium networks, and pay-per-view channels. The following
highlights the basic rates, tier rates and the number of channels available in
each franchise area:
SERVICE RATES SUMMARY
<TABLE>
<CAPTION>
FRANCHISE BASIC RATE TIER RATE TOTAL CHANNELS
- --------- ---------- --------- --------------
<S> <C> <C> <C>
Hesperia, CA $19.43 $7.95 44
Kern County, CA 15.66 4.90 41
Adelanto, CA 18.36 7.78 43
San Bern. Co. (Silver Lake), CA 17.85 9.25 44
Kern County, CA 16.54 6.07 41
Kern County, CA 15.39 1.70 28
</TABLE>
Hesperia has approximately 6,000 addressable subscribers which generated an
average buy rate of 11% in 1995.
MANAGEMENT FEES
Falcon Cable charges Falcon Cable Systems Company a Management Fee of 5.0% of
total revenues. For the purposes of this appraisal, system cash flow was
determined prior to the Management Fee. Each region was then charged a
reimbursement of partnership expenses of 5.73% of total revenues. This charge is
comprised of reimbursed partnership expenses and miscellaneous charges. The
reimbursed partnership expense was calculated as 3.73% of total revenues. In
FY1995 the Gilroy Region was charged $1,980,591 (3.73% of Partnership Revenues
of $52.9 million) as Reimbursed Expense under Partnership Expense which
discussions with Falcon management confirmed
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represented expenses of the entire Company and should be allocated accordingly.
An additional 2% of revenues was added to each Region's Unallocated Partnership
expense to account for miscellaneous services and support provided by the
general partner of Falcon Cable Systems Company including management, financial,
programming, billing, marketing, legal, programming and other services and
discounts.
COMPETITION & POTENTIAL ACQUIRORS
The systems are not currently overbuilt by any other franchised cable system.
Within the immediate surrounding area are Booth American Company, Century
Communications, Comcast Corp. and Tele-Communications, Inc.
SUMMARY
The Hesperia Region has had strong growth over the preceding three years,
however, the economy of the communities served by the Systems continues to
suffer. Homes passed growth based on information from management and other
sources is projected to decrease to .8% per annum, however, basic penetration is
projected to continue to rise.
The Systems were originally constructed in the early 1970s. They are operated at
330 MHz and are channel locked. The Systems will require a rebuild over the next
few years in order to raise rates and fend off competition.
In the event of a sale, the most likely buyers include Century,
Tele-Communications, Inc. and Mediacom, which recently announced the purchase of
11,000 subscribers in Ridgecrest, CA for $120.8 million ($1,890 per subscriber),
or 7.5x cash flow. (This transaction will not close until early 1996). The
Systems would command a premium market price due to the historical growth in
subscribers and revenues. However, at 65% basic penetration, continual
subscriber growth will be more difficult to maintain and the market demographics
present a difficult economic outlook. In
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addition, the purchase price would be discounted for the cost of rebuilding all
of the Systems.
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SAN LUIS OBISPO REGION
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INTRODUCTION
The San Luis Obispo Region ("SLO" or the "Region") is composed of two cable
television systems (the "Systems") which serve the communities of Atascadero,
Los Alamos, Guadeloupe, Los Osos, Cambria and portions of San Luis Obispo County
in the state of California. The following map highlights the location of the
Systems within the state of California.
[MAP OF REGION]
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[GRAPHIC OMITTED]
TABLE 1:
HISTORICAL SUBSCRIBER SUMMARY
(Fiscal Years Ended December 31)
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
HOMES PASSED 25,399 25,699 26,138
BASIC SUBSCRIBERS 15,717 15,669 15,635
% PENETRATION 61.9% 61.0% 59.8%
PAY UNITS 5,161 5,224 3,733
% PENETRATION 32.8% 33.3% 23.9%
</TABLE>
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[GRAPHIC OMITTED]
TABLE 1:
HISTORICAL FINANCIAL SUMMARY
(Fiscal Years Ended December 31)
<TABLE>
<CAPTION>
($ IN THOUSANDS) 1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
REVENUES $6,486 $6,134 $5,729
EXPENSES 2,734 2,967 3,194
SYSTEM CASH FLOW $3,751 $3,168 $2,535
% MARGIN 57.8% 51.6% 44.2%
</TABLE>
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As of December 31, 1995, the Systems passed 26,138 homes with 409 miles of plant
(64 homes per mile) and served 15,635 basic subscribers (59.8% basic
penetration) who subscribed to 3,733 pay units (23.9% pay penetration). Revenue
and cash flow for the fiscal year ended December 31, 1995 were $5.729 million
and $2.535 million respectively (44.2% operating margin). The charts and tables
on the preceding pages demonstrate the historical operating and financial
performance of the Systems.
The SLO Region experienced homes passed growth of approximately 1.4% annually
over the period from 1993 through 1995. Over the same period, basic subscribers
dropped resulting in a three year net subscriber loss of 82 subscribers. This
resulted in basic penetration declining from 61.9% in 1993 to 59.8% in 1995. Pay
subscription also declined precipitously from 5,161 to 3,733 (32.8% pay
penetration to 23.9%) over the period.
The SLO Region's revenues have fallen by $757 thousand over the period from 1993
through 1995. This decline was attributable to regulation which decreased rates,
and the falling number of pay subscribers. Over the period, the Region had
incremental expense increases which caused system cash flow to decline from $3.8
million to $2.5 million, a decline of 34%, resulting in a margin decrease from
57.8% to 44.2%.
MARKET OVERVIEW
The communities served by SLO are located in the heart of California's Central
Coast, approximately 210 miles south of San Francisco, 210 miles north of Los
Angeles, and 17 miles inland from the Pacific Ocean, in the San Lucia Mountains.
Atascadero, with a population of over 25,000, and the largest city served in the
SLO region, is the second largest community in San Luis Obispo County.
Following the general trend in California, the economy in San Luis Obispo County
has suffered over the last few years, however, the 1996 San Luis Obispo County
Economic Outlook prepared by the
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Regents of the University of California indicates that a recovery is in
progress. The report concluded that labor markets have demonstrated clear
improvement, retail gains are underway and that incomes have begun to modestly
rise again. The report also points to new residential development, positive net
in-migration and estimates that 2,775 people will relocate to the county in
1996. In the near term the report predicts population growth of 1.4% per annum
through 2004.
The employment environment of SLO County remains relatively stable as one-fourth
of all residents work for some level of government. The county is also
increasing its tourism base which serves the Hearst Castle, the local vineyards
and the beaches along California's scenic Route 1.
The city of Atascadero was founded in 1913 as a planned utopian colony by Edward
Gardner Lewis, a successful magazine publisher from the East. Many of Mr.
Gardner's principles have survived through to the present as a result of
Atascadero's city charter, which calls for the preservation of open space and
the protection of trees and hillsides. The population of Atascadero is 25,225.
Growth from 1980 through 1990 was 43%, and since 1980 the city has averaged 700
new residents per year. The major employer in the area is the Atascadero State
Hospital which has over 1,500 employees.
Cambria is a small community to the northwest of Atascadero along Route 1, and
just south of San Simeon State Park. The community is comprised primarily of
retirees, artists and individuals who serve the tourist trade. Los Osos is to
the southwest of Atascadero and just south of Morro Bay. The community is a
small bedroom community for the City of San Luis Obispo as well as home to
employees of Pacific Gas & Electric's Diablo Canyon Nuclear Facility. Los Osos
also has a significant retirement component. Guadeloupe is the southern most
system located approximately 30 miles to the south of Atascadero just outside of
Santa Maria.
The following chart highlights the population and economic growth of San Luis
Obispo County:
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<TABLE>
<CAPTION>
1990 1992 1994 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
County
Population 221,843 221,902 231,549 236,038
Growth N/A .03% 4.3% 1.9%
Taxable Retail Sales
(000s) $1,260,520 $1,914,174 $1,246,975 N/A
</TABLE>
The following chart highlights the demographic and economic growth of the City
of Atascadero:
<TABLE>
<CAPTION>
(DOLLAR VALUES IN MILLIONS) 1990 1991 1993 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Population in the County 217,162 221,340 228,380 236,038
Taxable Retail
Sales
- - County $1,730.5 $1,662.5 $1,679.0(1) 1,654.0(1)
Populations in City Limits
- - Atascadero 23,138 23,382 24,091 25,225
Taxable Retail Sales
- - City $132.0 $187.0 $185.0 $151.0(1)
Total Number of Dwellings
- - City 8,875 8,973 9,127 9,273
Total School Enrollment
- -Atascadero 5,275 5,436 5,686 5,924
</TABLE>
TECHNICAL OVERVIEW
The SLO Region is served by two headends located in Atascadero and Los Alamos.
Atascadero serves the city of Atascadero and surrounding areas of San Louis
Obispo County, and microwaves signal to Cambria, Los Osos and Guadeloupe. Los
Alamos is a stand-alone system.
The Atascadero headend is located on the grounds of the Atascadero State
Hospital. The system uses a receive site located on Cuesta Peak to receive
off-air signals which are then fibered to the Atascadero headend and microwaved
to the other receive sites. All satellite signals are received at the Atascadero
headend and fibered to Cuesta Peak for transmission to the other systems. Los
Angeles off-air networks are received via a microwave signal from a vendor.
- -----------
(1) Results from previous years.
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The SLO Region, with the exception of the city of Atascadero, Guadeloupe and Los
Alamos, have been rebuilt (approximately 50% of the Region's plant miles) within
the last year to 750 MHz fiber-to-the-node technology at an estimated cost of
$5.5 million. The fiber project also included the installation of a new headend
in Atascadero and a fiber connection between Atascadero and Cuesta Peak. This
has significantly increased signal quality and reduced outages. Atascadero is
slated to be rebuilt in the next few years as part of the refranchising effort
(franchise expiration for Atascadero is 2001).
Los Alamos is a small community that was built in 1985 to 450 MHz with a
40-channel capacity.
OPERATIONS OVERVIEW
The Region is served by one office located in Atascadero. The Atascadero office
also shares space with the Falcon Western Region Division Office. The office is
open for walk-in payments, customer service and subscriber inquires. The Region
uses a CSG-based billing system under a master contract through Falcon. The SLO
Region is operated by 17 employees including, a System Manager, an Office
Manager, a Chief Technician, 2 Maintenance Technicians, 1 Service Technician, 1
Installer/Technician, 2 Installers, 1 Dispatch Supervisor, 1 Warehouse
Supervisor, 5 Customer Service Representatives and 1 Advertising Sales Manager.
None of the employees are covered by collective bargaining agreements, nor has
there been any organized effort to unionize.
RATES/CHANNELS
The Systems' rate and channel line-ups vary slightly by system due to franchise
and retransmission/must-carry issues but generally offer a basic line-up
composed of a variety of Oxnard, Los Angeles, Santa Maria, Santa Barbara and San
Luis Obispo, California off-air signals, a tier package, a satellite package,
premium networks, and pay-per-view channels. The following highlights the basic
rates, tier rates and the total number of channels available by franchise area:
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SAN LUIS OBISPO REGION
SERVICE RATE SUMMARY
<TABLE>
<CAPTION>
BASIC TIER TOTAL
FRANCHISE RATE RATE CHANNELS
- --------- ---- ---- --------
<S> <C> <C> <C>
Atascadero, CA $16.56 $7.66 37
Guadalupe, CA 17.42 6.10 37
Los Alamos, CA 15.60 2.18 21
San Luis Obispo, CA 15.83 7.03 58
</TABLE>
At FYE 1995, the Systems had 5,019 addressable subscribers and an average buy
rate of 5.5%.
MANAGEMENT FEES
Falcon Cable charges Falcon Cable Systems Company a Management Fee of 5.0% of
total revenues. For the purposes of this appraisal, system cash flow was
determined prior to the Management Fee. Each region was then charged a
reimbursement of partnership expenses of 5.73% of total revenues. This charge is
comprised of reimbursed partnership expenses and miscellaneous charges. The
reimbursed partnership expense was calculated as 3.73% of total revenues. In
FY1995 the Gilroy Region was charged $1,980,591 (3.73% of Partnership Revenues
of $52.9 million) as Reimbursed Expense under Partnership Expense which
discussions with Falcon management confirmed represented expenses of the entire
Company and should be allocated accordingly. An additional 2% of revenues was
added to each Region's Unallocated Partnership expense to account for
miscellaneous services and support provided by the general partner of Falcon
Cable Systems Company including management, financial, programming, billing,
marketing, legal, programming and other services and discounts.
COMPETITION & POTENTIAL ACQUIRORs
The Systems are not currently overbuilt by any other franchised cable system.
Within the immediate surrounding area are Sonic Communications, Time Warner
Cable and Comcast Corp.
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SAN LUIS OBISPO REGION
SUMMARY
The SLO Region serves attractive, stable, economically improving markets. Falcon
completed a portion of the rebuild of the Systems that was required, however, a
large portion of the plant, located in the city of Atascadero, must be rebuilt
within the next few years, not only to assure a franchise renewal, but also to
ensure the reversal of subscriber erosion already sustained.
The revenue losses sustained since 1993 should be reversed as the advent of
deregulation permits the service rates to rise. The state of the economy and a
refranchising environment will not permit a large recapture, but rate increases
in the 4% range are sustainable. The completion of the rebuild will also improve
signal quality, reduce outages and lead to basic subscriber gains as well as
permit growth of other revenue sources and the retention of pay subscribers.
Homes passed growth of 1.7% is projected and penetration increases are projected
to increase the number of basic subscribers by approximately 2.4% per annum.
In the event of a sale of SLO, likely acquirors include Comcast, Time Warner and
possibly TCI/Intermedia as they continue to consolidate much of Northern
California. The Systems would command an average price in the market based on
growth potential and demographics, but would be discounted by the cost of
rebuilding Atascadero, and for the negative trend of historical operating and
financial results.
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TULARE REGION
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TULARE REGION
INTRODUCTION
The Tulare Region ("Tulare"or the "Region") is composed of three cable systems
(the "Systems") which serve the communities of Posey, Springville, California
Hot Springs, Camp Nelson, Three Rivers, Woodlake, Lemon Cove, Terra Bella,
Woodville, Strathmore, Porterville, Pet, Exeter, Farmersville, Ivanhoe, Cutler,
Orosi, Orange Cove, Oak Ranch and Lindsay. These communities are all located in
and around Tulare County, California. The following map indicates the location
of the Tulare Region within the state of California.
[Map of Region]
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TULARE REGION
[CHART 1 OMITTED]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
TABLE 1:
HISTORICAL SUBSCRIBER SUMMARY
(Fiscal Years Ended December 31)
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Homes Passed 38,340 39,514 41,053
Basic Subscribers 16,552 15,562 15,249
% Penetration 43.2% 39.4% 37.1%
Pay Units 11,064 9,316 7,110
% Penetration 66.8% 59.9% 46.6%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
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[CHART 2 OMITTED]
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
TABLE 1:
ISTORICAL FINANCIAL SUMMARY
(Fiscal Years Ended December 31)
($ in thousands) 1993 1994 1995
- ---------------- ---- ---- ----
<S> <C> <C> <C>
Revenues $7,493 $6,802 $6,506
Expenses $3,787 $3,469 $3,338
System Cash Flow $3,706 $3,334 $3,169
% Margin 49.5% 49.0% 48.7%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
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TULARE REGION
As of December 31, 1995, the Systems passed 41,053 homes with 675 miles of plant
(60 homes per mile) and served 15,249 basic subscribers (37.1% basic
penetration) who subscribed to 7,110 pay units (46.6% pay penetration). Revenue
and system cash flow for the fiscal year ended December 31, 1995 were $6,506,018
and $3,168,517 respectively (48.7% operating margin). The charts and tables on
the preceding pages demonstrate the operating and financial perfomance of the
Systems over the last three years.
As the historical results indicate, the Systems have been losing subscribers
over the last three years despite a 7% increase in homes passed over the period.
Subscribers have fallen from 16,552 in 1993 to 15,249 in 1995, a 7.7% decline,
and penetration has fallen from 43.2% in 1993 to 37.1% in 1995.
The Tulare Region revenues and cash flow have also been decreasing over the last
three years from $7.4 million in revenues in 1993 to $6.5 million in 1995, a 12%
decline, and from $3.7 million to $3.2 million in cash flow for the same period,
a 14% decline. The declines were attributable to subscriber losses as well as
reregulation related rate decreases and other incremental expense increases.
MARKET OVERVIEW
The communities served by the Tulare Region systems are located approximately
180 miles north of Los Angeles, 230 miles south of San Francisco and Sacremento
and 45 miles south of Fresno. There are three systems in the Region,
Porterville, Posey/Jack Ranch and California Hot Springs.
Porterville is the largest with approximately 98% of the Region's total
subscribers. Porterville is located in Tulare County which is the heart of
California's agri-business region. Tulare County's agri-business' produce over
46 products which yield over $1,000,000 in annual sales including almonds,
cotton, citrus and grapes. In the county, approximately 32,000, or 25% of the
employment base is employed in agriculture. The area was hit with a disaterous
freeze in the early 1990s which destroyed a large number of the citrus and other
trees. Replanted trees are just beginning to mature and output
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TULARE REGION
is again begining to surge.
Posey/Jack Ranch and California Hot Springs are east of the Porterville system,
in or near the mountains. Posey/Jack Ranch is a retirement community drawing
retirees from as far away as Los Angeles who, in a search for cheaper housing
and a quieter lifestyle, will commute or semi-retire to the area. There is also
a sprinkling of logging and cattle ranching in the communities and surrounding
areas.
The following chart highlights the major employers in Tulare County:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
EMPLOYER EMPLOYEES DESCRIPTION
- -------- --------- -----------
<S> <C> <C>
Dairyman's Coop. Creamery Assoc. 650 Dairy Products
Tulare City School District 640 Education
Tulare Joint Union H.S. District 450 Education
Tulare District Hospital 435 Medical Facilities
Haagen-Dazs 300 Ice Cream
Kraft General Foods 300 Cheese & Dairy Products
City of Tulare 250 Municipality
Southern Cal. Edison 250 Utility Services
Grumman/Olsen Ind., Inc. 200 Truck Bodies
PSI Tronix 175 Electronics
Kings County Truck Lines 150 Transportation Services
Kraft U.S.A. South 130 Cheese & Dairy Products
Stella Cheese 120 Cheese & Dairy Products
J.D. Heiskell 100 Grain Processor
- -------------------------------------------------------------------------------------------------------------
</TABLE>
The following chart highlights the demographic trends in Tulare County over the
last 10 years:
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TULARE REGION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
1985 1988 1990 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Population-County 260,300 295,000 319,600 340,000
Taxable Sales-County(in $1,000's) $1,549,525 $1,793,916 $2,148,811 $2,243,541
Population City of Tulare (area 225,000) 26,356 28,040 33,249 39,314
Taxable Sales City of Tulare(in 1,000's) $177,463 $218,719 $266,637 $283,997
Housholds City of Tulare 9,550 10,500 11,900 13,500
K-12 School Enrollment 8,029 8,744 9,364 10,512
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
TECHNICAL OVERVIEW
The Tulare Region is served by three headends located in Porterville, Posey/Jack
Ranch and California Hot Springs. The Tulare Systems have a total of 675 miles
of plant (79% aerial and 21% underground).
The Porterville headend serves as a microwave distribution site for 16
sub-systems in the surrounding area. Porterville microwaves signal to Blue
Ridge, Rich Grove, Pixley (which distributes via microwave to Earlimont),
Tipton, Lindsay and Venus Hills. Blue Ridge is a secondary site which
distributes to Springville, Camp Nelson and Three Rivers. Venus Hills is also a
secondary distibution site which transmits to Woodlake, Lin Cove, Farmerville,
Pat Tract and Orosi. Headend hardware is primarily Scientific Atlanta components
and the system is a mixture of various manufactures. Presently the system is
configured to a mixture of between 300 MHz to 750 MHz with a 24-mile fiber trunk
overlay completed in 1995 (estimated cost of $196,000) which is engineered to
750 MHz.
The California Hot Springs system is composed of 18 miles of plant serving 161
basic subscribers. The system was built in 1963 and upgraded in 1986 to 400 MHz.
The headend is primarily Scientific Atlanta equipment with a mixture of Jerrold
and Scientific Atlanta equipment in the system.
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TULARE REGION
The Posey/Jack Ranch system is composed of 12 miles of plant serving 126 basic
subscribers. The system was built in 1963 and upgraded in 1986 to 400 MHz. The
headend is primarily Scientific Atlanta equipment with a mixture of Jerrold and
Scientific Atlanta equipment in the system.
RATES/CHANNELS
The Systems' rate and channel line-ups vary slightly by system due to franchise
and retransmission/must-carry issues but generally offer a basic composed of a
variety of Fresno, Los Angeles, Bakersfield, Hanford and Visalia, California
off-air signals, a tier, a satellite package, 5 premium networks, and 1 channel
of pay-per-view (Request 1). The following highlights the basic rates, tier
rates and the number of channels available by franchise area:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
SERVICE RATE SUMMARY
BASIC TIER TOTAL
FRANCHISE RATE RATE CHANNELS
- --------- ---- ---- --------
<S> <C> <C> <C>
Exeter, CA $18.69 4.97 40
Farmersville, CA 18.36 4.79 40
Lindsay, CA 17.25 5.32 40
Orange Cove, CA 14.92 3.90 40
Porterville, CA 15.90 5.80 40
Tulare County, CA 18.48 4.88 40
Woodlake, CA 15.86 5.95 40
Tulare County, CA 19.72 0.00 13
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
There are 7,857 addressable subscribers in the Systems which generated a 5.8%
average buy rate.
OPERATIONS OVERVIEW
The Tulare Region is operated from a centrally located facility in Porterville.
The Porterville facility serves as the office, warehouse and technical center
for the entire Region. The office is open for walk in payments, customer service
and inquiries. The office utilizes a PC-based CSG billing system under a master
contract through Falcon. The Tulare Region is operated by a total of 25 staff
members
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TULARE REGION
including: a System Manager, an Office Manager, a Chief Technician, 4
Technicians, 5 Installers, 1 converter repair/warehouse/inventory, 2
Dispatchers, 1 Construction/Engineering Supervisor, 7 Customer Service
Representatives and 2 Advertising Salepersons. None of the employees are covered
by collective bargaining agreements, nor has there been any organized effort to
unionize.
The Region operates under the authority of 7 franchises, of which 5 expire
within the next 3 years, including Tulare County, the largest in terms of
subscribers.
MANAGEMENT FEES
Falcon Cable charges Falcon Cable Systems Company a Management Fee of 5.0% of
total revenues. For the purposes of this appraisal, system cash flow was
determined prior to the Management Fee. Each region was then charged a
reimbursement of partnership expenses of 5.73% of total revenues. This charge is
comprised of reimbursed partnership expenses and miscellaneous charges. The
reimbursed partnership expense was calculated as 3.73% of total revenues. In
FY1995 the Gilroy Region was charged $1,980,591 (3.73% of Partnership Revenues
of $52.9 million) as Reimbursed Expense under Partnership Expense which
discussions with Falcon management confirmed represented expenses of the entire
Company and should be allocated accordingly. An additional 2% of revenues was
added to each Region's Unallocated Partnership expense to account for
miscellaneous services and support provided by the general partner of Falcon
Cable Systems Company including management, financial, programming, billing,
marketing, legal, programming and other services and discounts.
COMPETITION & POTENTIAL ACQUIORs
The Systems are not currently overbuilt by any other franchised cable system,
however, a Fresno based MMDS operator currently has approximately 3,000
subscribers within the zip codes of areas served by the Systems. The MMDS
provider does not have a comparable channel line-up but is competing for the
more price sensitive subscribers.
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TULARE REGION
Within the immediate surrounding area are Continental Cablevision and Northland
Communications.
SUMMARY
The Tulare Region is suffering from the severe effects of the general California
economic slump, the aftershocks of the damage done to its citrus crops and the
effect of cable reregulation. The introduction of competition to the market has
also hurt subscriber growth and retention, and increased the price awareness of
the subscribers.
Homes passed growth was projected to continue at historic levels in the short
term, and subscriber losses should be stemmed and begin to grow as the economy
improves. The Systems are in need of a rebuild from the current 270/330/400 MHz
capacity in order to encourage subscriber growth, permit rate increases, fend
off competition and to ensure orderly franchise renewals. The introduction of
digital MMDS will vastly increase the competitivness of MMDS and reduce its
dependence on price comparisons.
In the event of a sale, there are several operators in the region including
Continental and Northland. The purchase price for the Region, however, would be
depressed by the recent historical subscriber, revenue and cash flow trends, by
the presence of a viable, operating competitor and by the cost of the rebuild of
the Systems.
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CENTRAL OREGON REGION
<PAGE> 59
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CENTRAL OREGON REGION
INTRODUCTION
The Central Oregon Region ("Central Oregon" or the "Region) is composed of six
cable television systems (the "Systems") in areas surrounding Eugene, Oregon and
one system near the border of California. The Systems were operated from
headends located in Brownsville, Veneta/Noti, Cottage Grove, Sutherlin, Cave
Junction and one located atop Bear Mountain which services nine hub sites via
microwave. The following map indicates the location of the Systems within the
state of Oregon.
[MAP OF REGION]
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CENTRAL OREGON REGION
[GRAPHIC OMITTED]
TABLE 1:
HISTORICAL SUBSCRIBER SUMMARY
(Fiscal Years Ended December 31)
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
HOMES PASSED 26,355 26,355 26,355
BASIC SUBSCRIBERS 13,808 14,198 14,225
% PENETRATION 52.4% 53.9% 54.0%
PAY UNITS 5,293 5,477 5,505
% PENETRATION 38.3% 38.6% 38.7%
</TABLE>
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[GRAPHIC OMITTED]
TABLE 2:
HISTORICAL FINANCIAL SUMMARY
(Fiscal Years Ended December 31)
<TABLE>
<CAPTION>
($ IN THOUSANDS) 1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
REVENUES $5,228 $5,029 $5,001
EXPENSES 2,180 2,217 2,289
SYSTEM CASH FLOW $3,048 $2,812 $2,712
% MARGIN 58.3% 55.9% 54.2%
</TABLE>
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CENTRAL OREGON REGION
As of December 31, 1995, the Systems passed 26,355 homes with 660.3 miles of
plant (39.9 homes per mile) and served 14,225 basic subscribers (54.0% basic
penetration) who subscribed to 5,505 pay units (38.7% pay penetration). Revenue
and system cash flow for the fiscal year ended December 31, 1995 were $5,001,040
and $2,712,460, respectively (54.2% margin). The charts and tables on the
preceding pages, depict the operating and financial performance of the Systems
over the last three years.
The Central Oregon Region has not experienced any homes passed growth in the
last three years. Basic subscribers in the Region have increased at a compound
annual growth rate of 1.5% since 1993 and only .2% between 1994 and 1995. Pay
penetration has remained flat at between 38.3% and 38.7%.
In terms of revenue and cash flow, the Region generated a compound annual growth
rate of 3.3% and 1.8%, respectively, over the period from 1993 through 1995. The
Region's operating margin is extremly high at 55% especially when considering
the geographic spread of the Systems and the average system size.
MARKET OVERVIEW
The Central Oregon Region has been evolving from a logging based economy towards
high tech industries, recently being labeled the "Silicon Forest". Two large
international manufacturers, Sony and Hyundai, have opened plants just outside
Eugene. The Sony plant employs 600 people and produces CD ROM discs, and the
Hyundai plant staffs over 1,600 people.
Cottage Grove is experiencing growth in trailer parks and retirees. McKinsey
River is growing and is already a highly cable saturated area. Coburg, Creswell,
Marcola and Brownsville, the suburbs of Eugene, are undergoing subdivision
growth as the population moves outside the larger city. The caves in Cottage
Grove have also been instrumental in luring tourist dollars to the area.
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CENTRAL OREGON REGION
TECHNICAL OVERVIEW
The Central Oregon Region is operated from headends in Cave Junction, Sutherlin,
Brownsville, Cottage Grove,Veneta and Bear Mountain. The Region passes 26,355
homes with 660 miles of plant, of which 605 (92%) is of aerial contruction and
54 (8%) is underground construction.
The Bear Mountain headend uses AML microwave to feed nine additional systems in
Drain, Oak Ridge/Westford, Rural Cottage Grove, Creswell, Coburg,
Marcola/Walterville, Vida/Nimord, Blue River/McKinsey Ridge and Pleasant
Hill/Dexter/Lowell, over an eight hub split.
The Veneta and Cave Junction systems were rebuilt in 1995. Management plans to
increase channel offerings in early 1996.
RATES/CHANNEL
The Systems offer various amounts of programming from 28 channels of service in
Oakland, Sutherlin and the outlying Douglas County areas of Oakland and
Sutherlin, to 44 channels of service in the Cottage Grove and Lane County
(Cottage Grove) franchises. The Systems rate and channel line-ups vary slightly
by system due to technical capacities and franchise and
retransmission/must-carry issues. They generally offer a basic service composed
of a variety of Eugene, Roseburg, Medford, Corvallis and Winston off-air
signals, a tier package, up to two satellite packages and up to six pay services
(pay services available include Cinemax, The Disney Channel, HBO, The Movie
Channel, Showtime and Encore). There are no pay-per-view services in any of the
addressable systems.
Rates vary from $14.01 to $25.87 for basic, $1.46 to $5.80 for the tier package,
$2.17 to $6.00 for satellite package 1 and $4.50 or $5.00 for satellite package
2. The relations with the franchising authorities are good, and only Florence
and Dunes City have certified with the FCC. The following table lists rates for
the three packages of service and the number of basic and pay channels being
offered.
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CENTRAL OREGON REGION
SERVICE RATE SUMMARY
<TABLE>
<CAPTION>
BASIC TIER SATELLITE 1 SATELLITE 2 TOTAL PAY
FRANCHISE RATE RATE RATE RATE CHANNELS CHANNELS
- --------- ---- ---- ---- ---- -------- --------
<S> <C> <C> <C> <C> <C>
Brownsville $20.06 $5.57 $3.85 N/A 33 4
Cave Junction 17.27 9.83 2.95 N/A 34 4
Coburg 15.98 7.39 5.00 $4.00 38 5
Cottage Grove 20.46 1.18 7.19 N/A 45 6
Creswell 15.95 7.39 5.00 4.00 38 5
Douglas Co. (Drain/Yoncalla) 15.08 6.95 5.00 4.00 38 5
Douglas Co. (Sutherlin/Oakland) 19.04 3.15 4.55 N/A 29 4
Drain 15.84 6.95 5.00 4.00 38 5
Josephine County 17.51 10.09 2.95 N/A 34 4
Lane Co. (Bear Mtn.) 16.15 7.76 5.00 4.00 38 5
Lane Co. (Cottage Grove) 20.43 0.78 7.19 N/A 45 6
Lane Co. (Cott. Grv./Bear Mtn.) 18.48 7.07 5.00 4.00 38 5
Lane Co. (Veneta) 15.90 4.92 5.90 N/A 31 4
Linn Co. (Brownsville) 23.95 2.40 3.84 N/A 33 4
Lowell 15.57 7.39 5.00 4.00 38 5
Oakland 19.45 2.80 4.55 N/A 28 4
Oakridge 14.34 7.39 5.00 4.00 38 5
Sutherlin 19.48 2.89 4.55 N/A 29 4
Veneta 15.51 4.89 5.90 N/A 31 4
West Fir 14.37 6.36 5.00 4.00 38 5
Yoncalla 15.21 6.95 5.00 4.00 38 5
</TABLE>
OPERATIONS OVERVIEW
The regional office for Central Oregon is located in Springfield due to its
location in the center of the sprawling Bear Mountain system. Springfield is not
serviced by Falcon. Additional offices include a leased office site in Cottage
Grove and a part-time leased office site in Oak Ridge. The Springfield office is
staffed by an Office Manager, 4 Customer Service Representatives ("CSRs"), 4
Technicians, 3 Installers and a Dispatcher, in addition to the Regional Manager
and Chief Technician. The other offices are both staffed with a single CSR.
Additionally, the Region operates two tech centers, in Sutherlin and Cave
Junction, each staffing one Technician.
Although nearly all of the systems in the Region are addressable, channel
capacity limitations have restricted the option of pay-per-view services. There
are no ad insertions in the Central Oregon
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CENTRAL OREGON REGION
Region as well.
MANAGEMENT FEES
Falcon Cable charges Falcon Cable Systems Company a Management Fee of 5.0% of
total revenues. For the purposes of this appraisal, system cash flow was
determined prior to the Management Fee. Each region was then charged a
reimbursement of partnership expenses of 5.73% of total revenues. This charge is
comprised of reimbursed partnership expenses and miscellaneous charges. The
reimbursed partnership expense was calculated as 3.73% of total revenues. In
FY1995 the Gilroy Region was charged $1,980,591 (3.73% of Partnership Revenues
of $52.9 million) as Reimbursed Expense under Partnership Expense which
discussions with Falcon management confirmed represented expenses of the entire
Company and should be allocated accordingly. An additional 2% of revenues was
added to each Region's Unallocated Partnership expense to account for
miscellaneous services and support provided by the general partner of Falcon
Cable Systems Company including management, financial, programming, billing,
marketing, legal, programming and other services and discounts.
COMPETITION & POTENTIAL ACQUIRORS OVERVIEW
The Systems are beginning to see a smattering of DBS dishes in the area,
although the impact to date has been insignificant. They are not currently
overbuilt by any other franchised cable operator. American Telecasting has
announced plans to begin MMDS service within two years. There are some SMATV
operators but they are largely unsuccessful due to the inability to receive
off-air channels without microwave. Franchise relations with all of the
authorities have been excellent to date.
The Systems are surrounded by either TCI systems or other Falcon partnerships,
with very minimal local, single system operators.
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CENTRAL OREGON REGION
SUMMARY
The Central Oregon region is composed of small (average of 2,300 subscribers per
system) cable systems in the heart of northern Oregon. The Region has maintained
steady growth as the Systems have been built out and have increased revenue and
cash flow on a marginal basis every year. This growth is expected to continue,
however, at a slower pace into the future.
The Systems with the exception of Veneta and Cave Junction, are in need of a
rebuild including the unwieldy 8 hub AML microwave distrution site.
In the event of a sale, the Systems would command a below average price due to
the small system size, the announced intent of American Telecasting, the low
historical subscriber growth and the cost of rebuild. In addition, the Systems
are surrounded by TCI and Falcon systems thus limiting the pool of likely
acquirers and minimizing the possible bidders.
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DALLAS REGION
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DALLAS REGION
INTRODUCTION
The Dallas Region ("Dallas" or the "Region") is composed of seven cable systems
(the "Systems") including five which serve communities along the northern coast
of Oregon approximately 75 miles west of Portland (the "Tillamook Systems") and
two others located 75 miles south of Portland (the "Dallas Systems"). The
Systems are located in Tillamook, Netarts, Nehalem, Brickyard Road and Wilson
River on the coast and in Dallas and Silverton in the interior of the state. The
following map indicates the location of the Dallas Region within the state of
Oregon.
[Map of Region]
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[CHART 1 OMITTED]
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
TABLE 1:
HISTORICAL SUBSCRIBER SUMMARY
(Fiscal Years Ended December 31)
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Homes Passed 21,514 23,349 23,770
Basic Subscribers 14,466 16,380 16,928
% Penetration 67.2% 70.2% 71.2%
Pay Units 6,868 7,578 7,139
% Penetration 47.5% 46.3% 42.2%
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[CHART 2 OMITTED]
<TABLE>
<CAPTION>
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TABLE 2:
HISTORICAL FINANCIAL SUMMARY
(Fiscal Years Ended December 31)
($ in thousands) 1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Revenues $5,750 $6,006 $6,074
Expenses 2,273 2,394 2,410
System Cash Flow $3,477 $3,612 $3,664
% Margin 60.5% 60.1% 60.3%
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DALLAS REGION
As of December 31, 1995, the Systems passed 23,770 homes with 467 miles of plant
(51 homes per mile) and served 16,928 basic subscribers (71.2% basic
penetration) who subscribed to 7,139 pay units (42.2% pay penetration). Revenue
and system cash flow for the fiscal year ended December 31, 1995 were $6,074,204
and $3,664,003 respectively (60.3% margin). The charts and tables on the
preceding pages demonstrate the operating and financial performance of the
Dallas Region over the last three years.
The Dallas Region has been increasing homes passed at a compound annual growth
rate of 5.1% since 1993. The area is benefitting from infill new home
construction as well as new subdivision growth. The growth peaked in 1994 at
8.5% annual growth and declined to 1.8% in 1995. Basic subscriber growth has
been continuous with a compound annual rate of 8.1%, however, like homes passed
growth, this was primarily in 1994 and dropped to 3.3% in 1995 on a year-to-year
basis. Basic penetration is 71.2% which would indicate that the market is well
saturated.
The Systems' revenues and cash flows have grown steadily over the past three
years. Total revenue and cash flow have grown at a compound annual rate of 2.8%,
which lags subscriber growth due to rate adjustments resulting from
reregulation. The Systems' operating margin of over 60% is well in excess of
industry norms.
MARKET OVERVIEW
The Systems experienced steady historical growth in the past and this is
projected to continue into the future. The Oregon coastal area in and around the
Tillamook Systems is growing rapidly from the expanding tourist trade as well as
the existing fishing industry. Many of the communities comprising the Tillamook
Systems are becoming second homes for Portland and northern California
residents, and many of the franchise areas are witnessing the development of a
number of new subdivisions.
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DALLAS REGION
The Dallas and Silverton systems serving the communities of Monmouth,
Independence, Silverton, Dallas and Falls City are undergoing growth from the
immigration of residents from Salem and Portland. These towns offer a higher
quality of life and a small town atmosphere within easy commuting distance.
Major businesses in the Dallas area include Pregitser Computer Chips, Boise
Cascade, a new WalMart, Caterpillar and Western Oregon State College in addition
to a large scale logging industry. The area is experiencing strong housing
growth and Falcon is building nearly 20 miles of new plant each year and
benefitting from continuous infill growth.
TECHNICAL SUMMARY
The Systems currently operate from 7 headend sites located in Nehalem,
Tillamook, Netarts, Brickyard, Wilson River, Dallas and Silverton. The Systems
pass 23,700 homes with 467 miles of plant of which 382 (82%) is underground
construction and 84 (18%) is of aerial construction.
Tillamook Systems
The five headends comprising the Tillamook Systems serve the communities of Bay
City, Brickyard Road, Cannon Beach, Garibaldi, Manzanita, Nehalem, Netarts,
Oceanside, Rockaway Beach, Tillamook, Wheeler and Wilson River. The headend in
Nehalem microwaves to a site on Angora Peak and then down to Cannon Beach,
Nehalem and Garibaldi. The other four headends, in Tillamook, Netarts, Brickyard
Road and Wilson River, service their own towns and neighboring communities.
The largest of the Tillamook Systems' headends is located in Nehalem. The
Nehalem system passes 6,197 homes with 129.9 plant miles (47.7 homes per mile)
of which 102.1 miles (78.6%) are aerial and 27.8 miles (21.4%) are underground.
Nehalem provides service to 4,608 customers or 27.2% of the Systems' total
subscribers. Nehalem was rebuilt in 1986 and currently is designed to 330 MHz
capacity.
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Netarts, Brickyard Road and Wilson River were all built in the 1960's and
operate at 270 MHz capacity. The Tillamook headend was built in 1958 and given
an electronics upgrade in 1983. It is operating at 330 MHz channel capacity.
A complete rebuild was begun in October of 1995 to consolidate and upgrade the
five headends comprising the Tillamook Systems into one central headend to be
located in Tillamook. The rebuild will be completed by the end of 1996. The
rebuild is being engineered at 750 MHz using a fiber to feeder design. The
majority of the new plant will be underground at a cost of $22,500 per mile and
any aerial additions will cost $16,500 per mile. All of the rebuilt areas will
become addressable. The rebuild will be instrumental in allowing Falcon to
increase rates while offering additional services and increasing penetrations.
It will also correct the leakage problems dominant in the Tillamook systems. The
completed Tillamook system will be built to 500 homes per node. Nehalem will be
interconnected by March 1996 and Wilson River by May 1996.
Dallas Systems
The headend in Dallas feeds Monmouth via a seven mile fiber run, and Falls City
and Jefferson through fiber to microwave hops. The Dallas system is the Region's
largest providing service to 6,684 customers or 39.5% of the Systems' total
subscriber base. The headend was built in 1987 and upgraded in 1995 with 750 MHz
fiber plant. The coaxial plant is currently operating at 330 MHz. The Dallas
system passes 9,034 homes with 157.7 miles of plant (57.3 homes per mile) of
which 120.2 miles (76.2%) are aerial and 37.5 miles (23.8%) are underground.
The Dallas and Silverton systems are building line extensions at 330 MHz at a
cost of $10,500 per mile for aerial and $18,500 per mile for underground with
the majority built in conduit.
CLI testing is ongoing in all of the Systems, and all systems have passed the
FCC proof of performance tests. A complete audit of the Systems was conducted
three years ago.
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RATES/CHANNELS
The Systems offer various amounts of programming from a five channel basic
package in Wilson River to 40 channels of service in all of the Dallas Systems'
franchises. The Systems rate and channel line-ups vary slightly by system due to
technical capacities and franchise and retransmission/must- carry issues. They
generally offer a basic service composed of a variety of Portland and Vancouver,
Washington off-air signals, a tier package, a satellite package, up to seven pay
services (pay services available include Cinemax, The Disney Channel, HBO, The
Movie Channel, Showtime, Playboy and Encore), and one channel of pay-per-view
(Request 1) in all of the addressable systems. The following table lists rates
for the three packages of service and the number of basic and pay channels being
offered.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
SERVICE RATE SUMMARY
BASIC TIER SATELLITE TOTAL PAY
FRANCHISE RATE RATE RATE CHANNELS CHANNELS
- --------- ---- ---- ---- -------- --------
<S> <C> <C> <C> <C> <C>
Bay City $14.58 $7.56 $5.18 34 7
Brickyard Road 17.23 0.00 0.00 18 2
Cannon Beach 13.91 8.39 5.18 34 7
Clatsop County 15.68 10.97 5.18 40 10
Dallas 17.00 5.70 6.40 40 7
Falls City 16.59 5.24 5.94 40 7
Garibaldi 14.43 7.71 5.18 34 7
Independence 16.76 5.22 6.40 40 7
Jefferson 17.99 4.38 5.93 40 7
Manzanita 14.60 8.57 5.18 34 7
Marion County 18.39 3.91 5.94 40 7
Monmouth 16.87 5.20 6.40 40 7
Mt. Angel 18.14 4.97 6.40 37 7
Nehalem 15.85 8.26 5.18 34 7
Netarts/Oceanside 17.23 0.00 0.00 18 2
Polk County 18.01 5.64 5.93 40 7
Rockaway Beach 14.43 7.49 5.18 34 7
Silverton 18.70 5.06 6.40 37 7
Tillamook 19.04 5.47 2.42 29 5
Tillamook Co. (Tillamook) 20.16 4.45 2.42 29 5
Tillamook Co. (Nehalem) 15.24 9.07 5.18 34 7
Wheeler 15.85 7.15 5.18 34 7
Wilson River 10.00 0.00 0.00 5 0
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Rates vary from $10.00 to $20.16 for basic, $3.91 to $9.07 for the tier package
and $2.30 to 5.95 for the satellite package. Only the franchising authorities in
Dallas, Monmouth, Independence and Silverton have certified.
The Systems have 6,768 addressable subscribers and generated a 5.3% average buy
rate in 1995.
OPERATIONS OVERVIEW
The Dallas Region is operated from a Company-owned and centrally located
facility in Dallas. The Dallas facility serves as the office, warehouse and
technical center for the entire Region. The office is open for walk-in payments,
customer service and inquiries. The office utilizes a PC-based CSG billing
system under a master contract through Falcon. The Dallas office is staffed by a
total of 11 workers including: a System Manager, an Office Manager, an Engineer,
a Lead Technician, 1 Technician, 2 Installers, 1 Dispatcher, 2 Customer Service
Representatives ("CSRs") and 1 Advertising Salesperson. Additional full-time
offices are located in Tillamook, Nehalem and Silverton and one part-time office
is located in Garibaldi. The Tillamook office is operated under an Office
Manager, a Technical Supervisor, 2 CSRs and 4 Installer/Technicians. Each of the
Nehalem and Garibaldi offices are run by a CSR, while the Silverton office is
staffed by 2 CSRs. The Tillamook Systems' customers can receive service by
calling an 800 telephone number which rings in Tillamook. None of the employees
are covered by collective bargaining agreements, nor has there been any
organized effort to unionize.
MANAGEMENT FEES
Falcon Cable charges Falcon Cable Systems Company a Management Fee of 5.0% of
total revenues. For the purposes of this appraisal, system cash flow was
determined prior to the Management Fee. Each region was then charged a
reimbursement of partnership expenses of 5.73% of total revenues. This charge is
comprised of reimbursed partnership expenses and miscellaneous charges. The
reimbursed partnership expense was calculated as 3.73% of total revenues. In
FY1995 the Gilroy
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DALLAS REGION
Region was charged $1,980,591 (3.73% of Partnership Revenues of $52.9 million)
as Reimbursed Expense under Partnership Expense which discussions with Falcon
management confirmed represented expenses of the entire Company and should be
allocated accordingly. An additional 2% of revenues was added to each Region's
Unallocated Partnership expense to account for miscellaneous services and
support provided by the general partner of Falcon Cable Systems Company
including management, financial, programming, billing, marketing, legal,
programming and other services and discounts.
COMPETITION & POTENTIAL ACQUIRORS
The Systems are not currently overbuilt by any other franchised cable operator,
nor are there any nearby MMDS or SMATV operators. The Systems have experienced
minimal DBS subscriber erosion and non-cable customers can only receive off-airs
from Eugene or Portland. Franchise relations with all of the authorities have
been excellent to date.
The Systems are surrounded by either TCI systems or other Falcon partnerships.
Opportunities do exist to tie the northern Tillamook area into Falcon's Astoria
system, and the southern Tillamook area into Falcon's Lincoln City System.
SUMMARY
The Dallas Region experienced strong growth over the last three years, but this
growth appears to have slowed down in 1995. Homes passed growth fell to 1.8% in
1995 and basic subscriber growth was 3.3%. The Region has built plant in all
existing locations where economically feasible and basic penetration has climbed
to an above average 71%. This growth is projected to slow down, especially
penetration growth, as the market is saturated.
The Tillamook portion of the plant will undergo a rebuild in 1996 to 750 MHz and
the remainder of the Dallas systems will require a rebuild in the near future to
compete effectively and to relieve
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DALLAS REGION
channel lock.
In the event of a sale, the likely acquirers of the Systems would be either
Falcon or TCI. An analysis of the neighboring operators indicates that Falcon
and TCI are the only operators close enough to permit any consolidation
opportunity and economies of scale. This would severely hamper any marketing
effort. In addition, the Systems are comprised of two clusters over 75 miles
apart effectively diluting a purchase price premium that could be generated from
selling a 17,000 subscriber cluster. The Region's operating margin of over 60%
while impressive, is well in excess of industry averages and would most likely
be discounted by a potential acquior.
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COOS BAY REGION
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COOS BAY REGION
INTRODUCTION
The Coos Bay Region ("Coos Bay" or the "Region") is composed of eight cable
television systems (the "Systems") along the central Oregon coast just southwest
of Eugene in the communities of Mapleton and Florence (the "Florence Systems"),
and Reedsport, Coos Bay, Coquille, Myrtle Point, Bandon and Powers (the "Coos
Bay Systems"). The Systems are serviced through a regional office in Coos Bay
and smaller offices in outlying areas. The following map indicates the location
of the Coos Bay Region within the state of Oregon.
[Map of Region]
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[CHART 1 Omitted]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
TABLE 1:
HISTORICAL SUBSCRIBER SUMMARY
(Fiscal Years Ended December 31)
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Homes Passed 30,526 31,078 31,489
Basic Subscribers 21,439 21,767 21,847
% Penetration 70.2% 70.0% 69.4%
Pay Units 7,551 8,624 7,771
% Penetration 35.2% 39.6% 35.6%
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[CHART 2 Omitted]
<TABLE>
<CAPTION>
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TABLE 2:
HISTORICAL FINANCIAL SUMMARY
(Fiscal Years Ended December 31)
($ in thousands) 1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Revenues $8,090 $8,354 $8,633
Expenses 3,508 3,703 3,886
System Cash Flow $4,591 $4,651 $4,747
% Margin 56.7% 55.7% 55.0%
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COOS BAY REGION
As of December 31, 1995, the Systems passed 31,489 homes with 580 miles of plant
(54 homes per mile) and served 21,847 basic subscribers (69.4% basic
penetration) who subscribed to 7,771 pay units (35.6% pay penetration). Revenue
and system cash flow for the fiscal year ended December 31, 1995 were $8,632,868
and $4,746,505, respectively (55.0% margin). The charts and tables on the
preceding pages, depict the operating and financial performance of the Systems
over the last three years.
The Systems have been increasing homes passed at a 1.6% compound annual growth
rate over the period from 1993 to 1995. Over the same period, basic subscribers
increased at a 1% compound annual rate and basic penetration hovered at 70%
indicating the market reached saturation. Pay subscription spiked to 39% in
1994, from 35% in 1993, but retreated to 35% in 1995.
Revenue and cash flow increased at a 3.3% and 1.6% compound annual growth rate,
respectively, between 1993 and 1995. The slow cash flow growth resulted in the
operating margin declining from 56% in 1993 to 55% in 1995.
MARKET OVERVIEW
Coos Bay's port has helped the city to become a major exporter of lumber and to
develop a strong fishing industry. The city has numerous businesses and is also
a common retirement area. Nearby Bandon conducts a strong tourist trade. Bandon
has a large cranberry industry and is also home to many retirees. Coquille is
the county seat and is home to many Coos Bay commuters. It has a modest lumber
industry and some retirees. These three towns are all experiencing slow growth.
TECHNICAL SUMMARY
The Coos Bay Region's eight cable systems consist of 580 miles of plant,
consisting of 485 (84%) miles are of aerial construction and 95 (16%) are
underground construction.
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The largest system in Coos Bay recently underwent a complete rebuild, including
electronics and drops, in 1993 to 450 MHz using a fiber to feeder design. To
date, a total of 235 miles of plant have been rebuilt. The rebuild included a 16
node fiber run to Hauser which previously operated as a stand-alone headend.
There is an ongoing plan to replace old drops in the Coos Bay Region. Coos Bay
represents the majority of the Region's total customers.
The remaining headends comprising the Coos Bay Systems are Reedsport, Coquille,
Myrtle Point, Bandon and Powers. Reedsport was constructed in 1971 to 270 MHz
and last underwent an electronics upgrade in 1985. A former stand alone headend
in Gardiner was fiber connected to Reedsport in 1993. The Coquille headend
underwent a complete coax rebuild in 1992 to 61 channels and 450 MHz capacity.
Myrtle Point was constructed in 1970 as a 300 MHz system. Myrtle Point shares
its headend site with Coquille as well as some of its electronics. Myrtle Point
is tied into the headends with fiber. Powers is a 300 MHz system built in 1980.
Bandon, originally constructed in 1980, underwent an electronics upgrade in 1992
and now is designed to 450 MHz.
There are plans underway to tie the Bandon headend into the Coos Bay system with
AML microwave or fiber, and then Coquille via a 25 mile fiber run. Myrtle Point
and Reedsport also are potential interconnect candidates to the Coos Bay system,
however, both will need to be rebuilt to handle the additional channel capacity.
The Reedsport system is only a six mile fiber run from Hauser in the Coos Bay
system and Myrtle Point is already partially connected to the Coquille system.
A rebuild of the Florence system was completed in 1993. It included a new
headend and the replacement of all drops, trunks and feeder. The system was
originally operating at 450 MHz and the rebuild was spaced at 450 MHz but could
be upgraded to 550 MHz with a module changeout. All rebuild completed in the
last 9 months was spaced to 750 MHz. Currently the system has 1,500 addressable
converters in the field. Florence, due to its channel capacity and other revenue
generating sources, has the highest revenue per subscriber in the Company.
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Mapleton is a small headend that completes the Florence Systems and operates at
300 MHz capacity. The Florence Systems previously operated autonomously, but
joined the Coos Bay Region on January 1, 1996.
The five channels of pay-per-view available from the Coos Bay and Florence
headends, have been very successful in the addressable homes with over half of
the region's subscribers having addressable converters. Buy rates for the
addressable customers in 1995 averaged 31% in Coos Bay and 22% in Florence. The
addressable converters are also required for the premium channels and the
satellite packages.
OPERATIONS OVERVIEW
The Coos Bay Region is operated out of a regional office in Coos Bay, an office
in Florence, and a satellite office in Reedsport. The offices are owned and also
house the headends for those systems. The office in Coos Bay is staffed by a
System Manager, an Office Manager, a Chief Technician, 4 Technicians, 4
Installers, 6 Customer Service Representatives ("CSRs"), and 2 Advertising
Executives. The Florence office employs a Lead Technician, a Technician, an
Installer, 2 CSRs, and 1 part-time CSR. The Reedsport office staffs 1 CSR and 1
technician. The Coos Bay office utilizes a PC-based CSG billing system that is
received via satellite under a master contract through Falcon.
Advertising revenue is growing from the ad insertions underway on five channels
in the Coos Bay Systems and 6 channels in Florence. The Coos Bay service area
has the option of subscribing to the Sega Channel, an additional source of
revenue for the Company.
Marketing takes the form of telemarketing and twice yearly non-subscriber
promotions. Door-to- door sales are contracted out of house.
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RATES/CHANNELS
The Systems offer various amounts of programming from 20 channels in the Lane
County (Mapleton) franchise to 61 channels of service in the Coos Bay, North
Bend and Hauser franchises. The Systems' rate and channel line-ups vary slightly
by system due to technical capacities and franchise and
retransmission/must-carry issues. The following table lists rates for the three
packages of service and the number of basic and pay channels being offered.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
SERVICE RATE SUMMARY
BASIC TIER SATELLITE 1 SATELLITE 2 TOTAL PAY
FRANCHISE RATE RATE RATE RATE CHANNELS CHANNELS
- --------- ---- ---- ---- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Bandon $17.61 $2.74 $3.96 N/A 37 4
Coos Bay 17.42 5.80 6.00 $5.00 61 7
Coos Co. (Bandon) 19.95 3.89 3.96 N/A 37 4
Coos Co. (Coos Bay/N. Bend) 17.32 5.60 6.00 5.00 61 7
Coos Co. (Coquille) 17.48 3.98 3.55 N/A 37 4
Coos Co. (Myrtle Point) 20.19 1.54 4.41 N/A 36 5
Coos Co. (Powers) 15.18 3.89 3.30 N/A 23 2
Coos Co. (Winchester Bay) 23.44 1.85 3.33 N/A 35 5
Coquille 17.38 3.97 3.55 N/A 37 4
Dunes City 25.87 5.02 3.50 4.50 56 6
Florence 25.87 4.99 3.50 4.50 56 6
Gardiner 23.20 1.46 3.33 N/A 35 5
Hauser 18.89 4.48 6.00 5.00 61 7
Lakeside 22.95 2.25 3.33 N/A 35 5
Lane Co. (Florence) 25.87 3.45 3.50 4.50 56 6
Lane Co. (Mapleton) 14.01 1.73 2.17 N/A 17 2
Myrtle Point 20.19 1.54 4.41 N/A 36 5
North Bend 17.62 5.64 6.00 5.00 61 7
Powers 17.00 2.45 3.30 N/A 23 2
Reedsport 23.20 2.44 3.33 N/A 35 5
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The Systems generally offer a basic service composed of a variety of Eugene,
Coos Bay, Portland, Medford and Corvallis off-air signals, a tier package, up to
two satellite packages, up to seven pay services (pay services available include
Cinemax, The Disney Channel, HBO, The Movie Channel, Showtime, Playboy, Encore
and Sega), and five channels of pay-per-view (Request 1 and 4, Spice,
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Action and Viewer's Choice) in all of the addressable systems.
Rates vary from $14.01 to $25.87 for basic, $1.46 to $5.80 for the tier package,
$2.17 to 6.00 for the satellite package 1 and $4.50 or $5.00 for satellite
package 2. The relations with the franchising authorities are good.
MANAGEMENT FEES
Falcon Cable charges Falcon Cable Systems Company a Management Fee of 5.0% of
total revenues. For the purposes of this appraisal, system cash flow was
determined prior to the Management Fee. Each region was then charged a
reimbursement of partnership expenses of 5.73% of total revenues. This charge is
comprised of reimbursed partnership expenses and miscellaneous charges. The
reimbursed partnership expense was calculated as 3.73% of total revenues. In
FY1995 the Gilroy Region was charged $1,980,591 (3.73% of Partnership Revenues
of $52.9 million) as Reimbursed Expense under Partnership Expense which
discussions with Falcon management confirmed represented expenses of the entire
Company and should be allocated accordingly. An additional 2% of revenues was
added to each Region's Unallocated Partnership expense to account for
miscellaneous services and support provided by the general partner of Falcon
Cable Systems Company including management, financial, programming, billing,
marketing, legal, programming and other services and discounts.
COMPETITION & POTENTIAL ACQUIRORS OVERVIEW
The Systems are beginning to see a strong influx of DBS, C-Band, Primestar and
DirecTV satellite dishes in the area. They are not currently overbuilt by any
other franchised cable operator, nor are there any MMDS or SMATV operators.
Non-cable customers can receive off-airs from locally originated NBC and CBS
stations in Coos Bay, and Eugene based FOX and ABC stations from translators in
Coos Bay.
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COOS BAY REGION
The Systems are surrounded by either TCI systems or other Falcon partnerships,
with very minimal local, single system operators. An opportunity exists to
acquire a nearby 130 subscriber system in Green Acres.
SUMMARY
The Coos Bay Region is composed of extremely attractive cable systems. Homes
passed growth is expected to continue at rates fairly consistent with historical
trends, and subscriber growth will be fueled by homes passed growth and modest
increases in penetration above the current 69%.
The majority of the Systems have been rebuilt and headends have been
interconnected via fiber trunk, which has also been used to reduce cascades in
the last few years. The exceptions are Reedsport and Gardiner which need to be
rebuilt immediately. To date, the rebuilds have been to 450 MHz limiting channel
availability in the future and requiring updating to compete with digital
mega-channel capacity competitors.
As noted above, the only nearby operators are Falcon and TCI. The entire Region
hugs the Oregon coastline and is fairly remote from other major population
centers. The opportunity for a buyer to acquire the Coos Bay Region would not
include the opportunity to build a significant cluster in the Region and would
reduce the pool of likely buyers which would be reflected in the sales price for
the Region.
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<PAGE> 88
DISCOUNTED CASH FLOW ANALYSIS BY REGION
<PAGE> 89
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FALCON CABLE SYSTEMS COMPANY
- --------------------------------------------------------------------------------
DISCOUNTED CASH FLOW ANALYSIS
INTRODUCTION
A discounted cash flow ("DCF") approach was utilized to value Falcon because the
DCF measures the current value of an investment as the present value of its
future economic benefits such as earnings, cost savings, and proceeds from
disposition.
DCF models were developed for each of the regions (the "Regions") to value
Falcon. To arrive at system cash flow, operating expenses were deducted from
projected revenues. Cash flows recorded on the balance sheet (capital
expenditures) were subtracted from system cash flow to determine debt free net
cash flow. In addition, we incorporated our estimates of long-term growth,
discount rate and other factors. Our DCF analysis yielded the value of Falcon's
aggregate assets, as of December 31, 1995.
INCOME STATEMENT SUMMARY
Homes Passed and Subscriber Revenues
HOMES PASSED:
Homes passed growth was projected on a by-Region basis based on a combination of
trailing homes passed growth, economic variables, future prospects and unserved
areas reachable by existing plant. This analysis resulted in homes passed growth
ranging from .8% to 1.7% per annum depending on the Region.
BASIC/EXPANDED TIER:
Basic and expanded basic service were combined, in order to evaluate these
rates. Basic/Expanded Tier reflects the subscribers for the most penetrated
service in the region's rate package. Subscriber growth was based on a
combination of factors including the region's demographics, current
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FALCON CABLE SYSTEMS COMPANY
- --------------------------------------------------------------------------------
DISCOUNTED CASH FLOW ANALYSIS
penetration, historical trends, availability of off-air signals, current rates,
service offerings, and technical quality of the system plant.
NEW PRODUCT TIER:
The New Product Tier was projected according to historical trends, system
demographics, quality of service and overall penetration. There can be no
assurance that the Regions' will continue to offer a New Product Tier Service,
however, it is assumed that if the service is canceled it would be rolled into a
different package in a revenue neutral manner.
PAY SUBSCRIBERS:
Subscriber growth was based on a combination of factors including the Regions'
demographics, current penetration, historical trends, availability of off-air
signals, other entertainment alternatives, rates, service offerings, and
technical quality of the system plant. Pay subscription for the Systems has been
tending downward. This was projected to stabilize then grow slightly over time
as the Systems were rebuilt and were able to expand channel options and offer
multi-plexing.
MINI-PAY:
Mini Pay subscribers were projected according to historical trends, system
demographics, quality of service and overall penetration. There can be no
assurance that the Regions will continue to offer a Mini-Pay, however it is
assumed that if the service is canceled it would be rolled into a different
package in a revenue neutral manner.
Service Rates
BASIC REVENUE & TIER/SUB/MONTH:
For the purposes of this analysis, the basic and tier revenue were combined and
analyzed against the number of basic subscribers. Basic revenue includes Primary
1st Outlet, Primary Commercial,
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DISCOUNTED CASH FLOW ANALYSIS
Expanded Tier and Al Tier as defined in Falcon's unaudited financial
presentation. This method was used because there were over 80 separate channel
line-ups and rates cards utilized by the Company with wide discrepancies within
regions. Rate growth was projected after considering current rates and a
combination of factors including the region's demographics, current penetration,
historical trends, availability of off-air signals, service offerings, and
technical quality of the system plant.
NPT REVENUE/SUB/MONTH:
NPT Revenue/Sub/Month was determined by averaging total NPT Revenue over total
NPT subscribers in a given Region. However, each Region had differences within
its various systems in rates and offerings. Growth in averaged revenue was
determined by considering current rates and a combination of factors including
the Region's demographics, current penetration, historical trends, service
offerings, and technical quality of the system plant.
PAY REVENUE/SUB/MONTH:
Pay Revenue/Sub/Month was determined be averaging total Pay Revenue over total
Pay Subscribers in a given Region. Each Region had differences within its
various systems in rates and offerings. Growth in average rates was determined
by considering current rates and a combination of factors including the Region's
demographics, current penetration, historical trends, service offerings, and
technical quality of the system plant.
MINI-PAY REVENUE/SUB/MONTH:
Mini-Pay Revenue/Sub/Month was determined be averaging total Mini-Pay Revenue
over total Mini-Pay subscribers in a given Region. Each Region had differences
within its various systems in rates and offerings. Growth in average revenue was
determined by considering current rates and a combination of factors including
the Region's demographics, current penetration, historical trends, availability
of off-air signals, service offerings, and technical quality of the system
plant.
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DISCOUNTED CASH FLOW ANALYSIS
PPV REV/SUB/MONTH:
PPV Rev/Sub/Month was determined by dividing PPV Revenue by Basic Subscribers
and allocating the revenue on a per subscriber (whether or not addressable)
basis. Each Region was composed of varying demographics which were averaged over
the ten year projections It is assumed that significant capital would be
allocated to rebuilding the Systems over the term creating the subsequent
availability of PPV to all subscribers. Therefore, the allocation of revenue
over the entire subscriber base would reflect the average revenue generated by
PPV over the term of the projections. Each of the Regions was individually
analyzed and factors including demographics, and other services was considered
when determining the revenue growth.
OTHER REVENUE/SUB/MONTH:
Other Revenue/Sub/Month was determined by dividing total other revenues by the
number of basic subscribers. Other Revenue includes Radio Services, Primary
Additional Outlet, Remote Control, Converter Rental, Other-VCR, Maintenance
Contracts, New Customer-Pay Installs, New Customer Basic Installs, Installs-Non
New Customers, Guide Revenues, Other-Late Charges, Other-Franchise Pass Thru,
FCC User Fees Pass Through, QVC Monthly Commission, QVC Carriage Payment,
Classified Ads and Ad Insertions Sales as allocated in Falcon's unaudited
financial presentation.
Operating Expenses
Revenues were reduced by the following expenses in order to determine system
cash flow:
TECHNICAL:
Technical Expenses were determined by dividing 1995 Technical Expense by the
number of Basic Subscribers in the Region to determine Technical Expenses per
Basic Subscribers. This number was then increased by an inflation factor and
multiplied by year-end subscribers in the Region.
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DISCOUNTED CASH FLOW ANALYSIS
PRODUCTION AND LOCAL ORIGINATION:
Production and Local Origination expense was allocated only in the Coos Bay and
Dallas Regions. This expense was projected based on its 1995 percentage of
revenue, and applied throughout the projection period.
ADVERTISING:
Advertising Expense was determined by applying 1995's Advertising Expenses as a
percentage of total revenues. This percentage was utilized throughout the
projection period.
MARKETING:
Marketing Expense was determined by dividing 1995 Marketing Expense by Region by
the number of Basic Subscribers in the Region to determine a marketing
coefficient which was then increased by an inflation factor and multiplied by
year-end subscribers in the Region.
GENERAL AND ADMINISTRATIVE:
General and Administrative Expenses were determined by dividing 1995 General and
Administrative Expense by Region by the number of Basic Subscribers in the
Region to determine a general and administrative coefficient which was then
increased by an inflation factor and multiplied by year-end subscribers in the
Region.
PROGRAMMING:
Programming Expenses was determined by calculating the programming operating
margin as a percent of total "service only" revenues. That margin was then
applied to programming revenue in the applicable year.
UNALLOCATED PARTNERSHIP:
Unallocated Partnership Expenses were calculated as 5.073% of total revenues.
This percent was
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DISCOUNTED CASH FLOW ANALYSIS
calculated by allocating the Partnership Expenses which accrue in the Gilroy
Region financial presentation ($1.9 million) prepared by Falcon, which Falcon
management confirmed represented expenses of the entire Company. This line item
represented 3.073% of total revenue. This expense was allocated to each Region.
An additional 2.0% was added to each Region's Unallocated Partnership expense to
account for miscellaneous services provided by the General Partner which are not
allocated including management, financial, programming, billing, marketing,
legal, programming and other services and discounts.
CAPITAL EXPENDITURE SUMMARY
System cash flow was then reduced by capital expenditures to determine debt free
net cash flow.
Capital Expenditures can be segregated into three categories; maintenance,
growth and rebuild. Maintenance capital is defined as normal and ordinary
capital expenditures required to maintain the cable plant and headend in normal
working condition. Capital expenditures are also required in order to expand the
size of existing plant to pass new homes. The Falcon systems also need
significant capital to rebuild and upgrade existing plant. On average the Falcon
systems have 41 channels of capacity which is nearly fully allocated. In order
to increase service rates or add new services Falcon will have to rebuild the
majority of its systems.
Over the period from 1993 through 1995, the Partnership delayed a number of
rebuild and upgrade projects because of uncertainty related to the reregulation
of the cable industry and in addition the Partnership's limited access to
capital. The result of these delays was that the Systems are less technically
advanced than many comparable cable systems. The Systems are in need of a major
capital influx to upgrade its facilities so as to renew franchises, remain
competitive against overbuilds, MMDS and DTH providers and to implement of
services which will add incremental revenues. In addition, the technical
deficiencies of the plant have limited channel capacity and hampered rate
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<PAGE> 95
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FALCON CABLE SYSTEMS COMPANY
- --------------------------------------------------------------------------------
DISCOUNTED CASH FLOW ANALYSIS
increases.
The DCF analysis assumed a buyer with sufficient liquidity would begin a program
of rebuilds and upgrades, focusing on the most deficient systems and then moving
to upgrade the higher technical quality systems in later years.
TERMINAL VALUE
The valuation model utilized an exit multiple (which was applied to the 10th
year's cash flow) thereby assuming a sale of the Systems at the end of the DCF
projection period. The exit multiple utilized for all of the Regions' was 9.0x
with the exception of Central Oregon for which an 8.75x multiple was applied.
The exit multiple was determined after analyzing current and projected
demographics, growth prospects, the technical condition of the Systems at the
time of sale and projected operating margins. This was then offset against the
number of logical buyers for Systems with the above characteristics, the amount
of consolidation that has already occurred in the Regions' general market and
comparable system sales in the previous twelve months.
COMPARABLE SYSTEMS SALES
The Falcon systems have 135,000 subscribers operating as seven regions with an
average of 19,300 subscribers per region. The Regions are all located on the
west coast, from southern California to northern Oregon. While a 135,000
subscriber company is attractive, the geographic spread (approximately 850
miles) of the Systems would reduce their attractiveness to any one buyer and
would most likely be packaged for sale by Region. For a comparable system sale
analysis, systems of similar size both for the whole company and for the Regions
were incorporated. Comparables were selected for a variety of criteria including
size, multiple locations and ex-urban demographics. The following is a selected
list of comparable transactions completed in 1995.
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<PAGE> 96
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FALCON CABLE SYSTEMS COMPANY
- --------------------------------------------------------------------------------
DISCOUNTED CASH FLOW ANALYSIS
<TABLE>
<CAPTION>
SELLER BUYER VALUE SUBS VPS CF CF MULT.
- ------ ----- ----- ---- --- -- --------
($000,000) (000) ($000,000)
<S> <C> <C> <C> <C> <C> <C>
US Cable V Cable $219.0 252.5 $ 867 $34.2 6.4
Leadership/Ist Carol Adelphia/Olympus 177.9 108.0 1,647 22.0 8.1
Clear Channels Adelphia 122.3 69.2 1,767 15.1 8.1
United Video FrontierVision 120.0 88.0 1,364 13.0 9.2
Donrey Media Group TCA Cable Prtnrs 101.6 60.0 1,693 10.4 9.8
TCI Post-Newsweek 89.0 63.0 1,413 10.9 8.2
Century Rock Associates 84.0 47.0 1,787 8.7 9.7
Douglas Cable Comm. Galaxy Telecom LP 65.5 60.0 1,092 7.8 8.4
WK Communications Classic Cable 65.1 31.0 2,100 6.6 9.8
Mission Cable Classic 57.5 42.6 1,350 7.0 8.3
C-4 Media FrontierVision 44.7 40.4 1,106 5.3 8.5
United Video Classic Cable 37.0 22.4 1,652 3.9 9.5
Friendship Cable Galaxy Telecom 21.0 18.0 1,167 3.0 7.0
Fanch Comm. Leonard Comm. 17.2 12.1 1,421 2.0 8.4
Doulgas Comm. Anderson Pac. Corp. 17.1 16.0 1,069 2.1 8.1
Cable Vid. Enterprises Universal Cab. Comm. 16.0 12.2 1,311 1.9 8.5
American Cable Ent. Classic Cable 13.3 9.8 1,357 1.6 8.5
------ ----- ------ ----- ---
TOTALS/WEIGHTED AVERAGES $1,332 8.2
</TABLE>
The comparable system sales analysis yielded an average sales price of $1,322
per subscriber and 8.2x cash flow. This supports and validates the Waller
Capital's analysis which resulted in $1,577 per subscriber and 8.33x operating
cash flow for Falcon Cable Systems Company.
DISCOUNT RATE
The resultant debt-free net cash flow streams and terminal value were discounted
to present value at 13.5%. The discount rate was based on the risk-adjusted
industry Weighted Average Cost of Capital ("WACC"). WACC is an estimate of the
overall rate of return required for an investment by both equity and debt
owners. Determination of the weighted average cost of capital required a
separate analysis of the cost of equity and the cost of debt.
The equity component was determined by using the Capital Asset Pricing Model
("CAPM"). The CAPM incorporates estimates of the risk-free rate for the use of
funds, an equity risk premium, an
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<PAGE> 97
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FALCON CABLE SYSTEMS COMPANY
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DISCOUNTED CASH FLOW ANALYSIS
industry premium (Beta), as well as the risks inherent with a specific
investment in the Systems. The debt component of the cost of capital was
determined by using the after-tax cost of debt appropriate for the Company.
CONCLUSION
Based on the investigation and analysis outlined in this report, the fair market
value of Falcon's seven regional systems, as of December 31, 1995, were as
follows:
<TABLE>
<S> <C>
Gilroy $ 57,640,720
Hesperia 28,865,947
San Louis Obispo 21,988,550
Tulare 22,269,159
Coos Bay 35,486,280
Dallas 27,257,132
Central 20,164,654
----------
TOTAL VALUE $213,672,442
</TABLE>
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WALLER CAPITAL CORPORATION
III - 9
<PAGE> 98
IV. APPENDIX
<PAGE> 99
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W A L L E R C A P I T A L C O R P O R A T I O N
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Falcon Cable TV - Gilroy, California
Discounted Cash Flow Analysis (000 unless otherwise specified)
<TABLE>
<CAPTION>
12/31/95 FYE 12/31, (Projected)
---------------------------------------
Year 1995 1996 1997 1998
Period 0 1 2 3
---------- ---------------------------------------
Operations Statistics
- --------------------------------------
% Growth
--------
<S> <C> <C> <C> <C> <C>
Homes Passed: 56,219 57,231 58,175 59,135
% Growth 1.8% 1.7% 1.7%
Basic/Expanded Tier 33,073 33,652 34,323 35,008
% Penetration 58.8% 58.8% 59.0% 59.2%
% Growth - - 1.8% 2.0% 2.0%
New Product Tier (NPT 1) 13,992 14,235 14,519 14,913
% Penetration 42.3% 42.3% 42.3% 42.6%
% Growth - - 1.7% 2.0% 2.7%
Pay 13,010 13,192 13,626 14,073
% Penetration 39.3% 39.2% 39.7% 40.2%
% Growth - - 1.4% 3.3% 3.3%
Mini-Pay 403 404 412 420
% Penetration 1.2% 1.2% 1.2%
% Growth - - 0.2% 2.0% 2.0%
Basic Revenue& Tier/Sub/Month $ 24.36 $ 25.09 $ 25.84 $ 26.61
% Growth - - 3.0% 3.0% 3.0% 3.0%
NPT 1 Revenue/Sub/Month $ 3.90 $ 4.02 $ 4.14 $ 4.26
% Growth - - 3.0% 3.0% 3.0% 3.0%
Pay Revenue/Sub/Month $ 7.87 $ 8.00 $ 8.14 $ 8.28
% Growth - - 1.7% 1.7% 1.7% 1.7%
Mini-Pay Revenue/Sub/Month $ 2.94 $ 2.99 $ 3.05 $ 3.12
% Growth - - 2.0% 2.0% 2.0% 2.0%
PPV Rev/Sub/Month $ 0.34 $ 0.35 $ 0.36 $ 0.37
% Growth 3.0% 3.0% 3.0%
Other Revenue/Sub/Month $ 3.65 $ 3.76 $ 3.87 $ 3.99
% Growth - - 3.0% 3.0% 3.0% 3.0%
</TABLE>
<TABLE>
<CAPTION>
FYE 12/31, (Projected)
------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003 2004 2005
4 5 6 7 8 9 10
------------------------------------------------------------------------------------------
Operations Statistics
- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Homes Passed: 60,111 61,103 62,111 63,136 64,177 65,236 66,313
% Growth 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7%
Basic/Expanded Tier 35,706 36,417 37,142 37,881 38,635 39,403 40,186
% Penetration 59.4% 59.6% 59.8% 60.0% 60.2% 60.4% 60.6%
% Growth 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
New Product Tier (NPT 1) 15,318 15,732 16,157 16,592 17,038 17,495 17,963
% Penetration 42.9% 43.2% 43.5% 43.8% 44.1% 44.4% 44.7%
% Growth 2.7% 2.7% 2.7% 2.7% 2.7% 2.7% 2.7%
Pay 14,532 15,004 15,488 15,986 16,497 17,022 17,561
% Penetration 40.7% 41.2% 41.7% 42.2% 42.7% 43.2% 43.7%
% Growth 3.3% 3.2% 3.2% 3.2% 3.2% 3.2% 3.2%
Mini-Pay 428 437 446 455 464 473 482
% Penetration 1.2% 1.2% 1.2% 1.2% 1.2% 1.2% 1.2%
% Growth 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Basic Revenue& Tier/Sub/Month $ 27.41 $ 28.24 $ 29.08 $ 29.95 $ 30.85 $ 31.78 $ 32.73
% Growth 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
NPT 1 Revenue/Sub/Month $ 4.39 $ 4.52 $ 4.66 $ 4.80 $ 4.94 $ 5.09 $ 5.24
% Growth 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Pay Revenue/Sub/Month $ 8.42 $ 8.56 $ 8.71 $ 8.85 $ 9.00 $ 9.16 $ 9.31
% Growth 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7%
Mini-Pay Revenue/Sub/Month $ 3.18 $ 3.24 $ 3.31 $ 3.37 $ 3.44 $ 3.51 $ 3.58
% Growth 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
PPV Rev/Sub/Month $ 0.38 $ 0.39 $ 0.40 $ 0.41 $ 0.43 $ 0.44 $ 0.45
% Growth 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Other Revenue/Sub/Month $ 4.15 $ 4.31 $ 4.48 $ 4.66 $ 4.85 $ 5.05 $ 5.25
% Growth 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
</TABLE>
<PAGE> 100
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Falcon Cable TV - Gilroy, California
Discounted Cash Flow Analysis (000 unless otherwise specified)
<TABLE>
<CAPTION>
12/31/95 FYE 12/31, (Projected)
-------- ---------------------------------------------------------------
Year 1995 1996 1997 1998 1999
Period 0 1 2 3 4
-------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income Statement Summary
- ------------------------
Revenues
Basic & Tier $ 9,666,283 $10,130,511 $10,642,671 $11,180,596 $11,745,576
NPT 1 655,057 686,412 721,115 762,936 807,133
Pay 1,228,380 1,266,691 1,330,694 1,397,693 1,467,821
Mini-Pay 14,197 14,510 15,096 15,705 16,339
PPV 133,654 140,073 147,154 154,592 162,404
Other 1,448,122 1,517,669 1,594,396 1,674,984 1,776,708
---------- ----------- ----------- ----------- -----------
Total Revenue 13,145,693 $13,755,867 $14,451,127 $15,186,505 $15,975,980
% Growth -- 4.6% 5.1% 5.1% 5.2%
Expenses:
Adjusted
Technical $ 1,069,936 $ 1,126,764 $ 1,189,475 $ 1,255,662 $ 1,325,516
Production and Local Origination 0 0 0 0 0
Advertising 89,174 93,313 98,029 103,018 108,373
Marketing 284,931 300,065 316,765 334,391 352,994
General and Administrative 2,050,887 2,159,816 2,280,022 2,406,892 2,540,792
Programming 1,999,921 2,092,310 2,198,057 2,310,013 2,427,605
Partnership Expenses 753,248 788,211 828,050 870,187 915,424
---------- ----------- ----------- ----------- -----------
Total Operating Expenses $ 6,248,097 $ 6,560,478 $ 6,910,398 $ 7,280,162 $ 7,670,704
% Growth -- 5.0% 5.3% 5.4% 5.4%
* 1995 Adjusted for Partnership Expenses
U.L.System Cash Flow (EBITDA) $ 6,897,596 $ 7,195,389 $ 7,540,729 $ 7,906,343 $ 8,305,276
% Margin 52.5% 52.3% 52.2% 52.1% 52.0%
% Growth -- 4.3% 4.8% 4.8% 5.0%
Revenue / Subscriber / Month $ 33.12 $ 34.06 $ 35.09 $ 36.15 $ 37.29
SCF / Subscriber / Year $ 208.6 $ 213.8 $ 219.7 $ 225.8 $ 232.6
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
2000 2001 2002 2003 2004 2005
Income Statement Summary 5 6 7 8 9 10
- ------------------------------- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Basic & Tier $12,338,965 $12,962,186 $13,616,733 $14,304,174 $15,026,154 $15,784,402
NPT 1 853,839 903,194 955,345 1,010,450 1,068,671 1,130,184
Pay 1,541,218 1,618,029 1,698,404 1,782,502 1,870,487 1,962,530
Mini-Pay 16,997 17,682 18,395 19,136 19,907 20,708
PPV 170,609 179,226 188,276 197,781 207,764 218,248
Other 1,884,589 1,998,997 2,120,328 2,248,998 2,385,449 2,530,152
----------- ----------- ----------- ----------- ----------- -----------
Total Revenue $16,806,216 $17,679,314 $18,597,482 $19,563,041 $20,578,432 $21,646,224
% Growth 5.2% 5.2% 5.2% 5.2% 5.2% 5.2%
Expenses:
Technical $ 1,399,241 $ 1,477,050 $ 1,559,169 $ 1,645,834 $ 1,737,298 $ 1,833,824
Production and Local Origination 0 0 0 0 0 0
Advertising 114,005 119,928 126,156 132,706 139,594 146,837
Marketing 372,627 393,348 415,217 438,296 462,654 488,359
General and Administrative 2,682,110 2,831,257 2,988,664 3,154,787 3,330,107 3,515,132
Programming 2,551,114 2,680,835 2,817,079 2,960,171 3,110,453 3,268,283
Partnership Expenses 962,996 1,013,025 1,065,636 1,120,962 1,179,144 1,240,329
----------- ----------- ----------- ----------- ----------- -----------
Total Operating Expenses $ 8,082,094 $ 8,515,443 $ 8,971,920 $ 9,452,757 $ 9,959,250 $10,492,765
% Growth 5.4% 5.4% 5.4% 5.4% 5.4% 5.4%
* 1995 Adjusted for Partnership Expenses
U.L.System Cash Flow (EBITDA) $ 8,724,122 $ 9,163,871 $ 9,625,562 $10,110,284 $10,619,183 $11,153,459
% Margin 51.9% 51.8% 51.8% 51.7% 51.6% 51.5%
% Growth 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Revenue / Subscriber / Month $ 38.46 $ 39.67 $ 40.91 $ 42.20 $ 43.52 $ 44.89
SCF / Subscriber / Year $ 239.6 $ 246.7 $ 254.1 $ 261.7 $ 269.5 $ 277.5
</TABLE>
<PAGE> 101
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- --------------------------------------------------------------------------
Falcon Cable TV - Gilroy, California
Discounted Cash Flow Analysis (000 unless otherwise specified)
<TABLE>
<CAPTION>
12/31/95 FYE 12/31, (Projected)
-------- ------------------------------------------------------
Year 1995 1996 1997 1998
Period 0 1 2 3
------------------------------------------------------
Capital Expenditure Analysis
- ------------------------------------------------
<S> <C> <C> <C> <C>
System Cash Flow $ 6,897,596 $ 7,195,389 $ 7,540,729 $ 7,906,343
% Growth 4.3% 4.8% 4.8%
Total Capital Expenditures 4,826,776 4,841,563 4,871,729
% of Revenue 35.1% 33.5% 32.1%
Total Capex / Basic Sub $ 143.4 $ 141.1 $ 139.2
- -----------------------------------------------------------------------------------------------------------------------------
Debt Free Cash Flow $ 2,368,613 $ 2,699,166 $ 3,034,614
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FYE 12/31, (Projected)
--------------------------------------------------------------------------
1999 2000 2001 2002
4 5 6 7
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
System Cash Flow $ 8,305,276 $ 8,724,122 $ 9,163,871 $ 9,625,562
% Growth 5.0% 5.0% 5.0% 5.0%
Total Capital Expenditures 1,602,472 1,633,801 1,665,727 1,698,263
% of Revenue 10.0% 9.7% 9.4% 9.1%
Total Capex / Basic Sub $ 44.9 $ 44.9 $ 44.8 $ 44.8
- ---------------------------------------------------------------------------------------------------------------------------------
Debt Free Cash Flow $ 6,702,804 $ 7,090,321 $ 7,498,144 $ 7,927,299
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FYE 12/31, (Projected)
------------------------------------------------------
2003 2004 2005
8 9 10
------------------------------------------------------
<S> <C> <C> <C>
System Cash Flow $ 10,110,284 $ 10,619,183 $ 11,153,459
% Growth 5.0% 5.0% 5.0%
Total Capital Expenditures 1,731,418 1,765,206 1,799,637
% of Revenue 8.9% 8.6% 8.3%
Total Capex / Basic Sub $ 44.8 $ 44.8 $ 44.8
- -----------------------------------------------------------------------------------------------------------
Debt Free Cash Flow $ 8,378,866 $ 8,853,977 $ 9,353,823
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Aggregate Value Value per 1995 Subscriber Multiple of 1995 SCF
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FAIR MARKET VALUE $57,640,720 $1,743 8.4
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 102
- --------------------------------------------------------------------------------
W A L L E R C A P I T A L C O R P O R A T I O N
- --------------------------------------------------------------------------------
FALCON CABLE TV - HESPERIA, CALIFORNIA
DISCOUNTED CASH FLOW ANALYSIS (000 UNLESS OTHERWISE SPECIFIED)
<TABLE>
<CAPTION>
12/31/95 FYE 12/31, (PROJECTED)
---------- ----------------------------------------------
YEAR 1995 1996 1997 1998 1999 2000
PERIOD 0 1 2 3 4 5
- -------------------------------------------------------- ---------- ----------------------------------------------
OPERATIONS STATISTICS
- --------------------------------------------------------
% GROWTH
-------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Homes Passed: 28,280 28,492 28,731 28,973 29,216 29,462
% Growth 0.8% 0.8% 0.8% 0.8% 0.8%
Basic/Expanded Tier 18,513 18,737 18,995 19,256 19,520 19,787
% Penetration 65.5% 65.8% 66.1% 66.5% 66.8% 67.2%
% Growth -- 1.2% 1.4% 1.4% 1.4% 1.4%
New Product Tier (NPT 1) 8,712 8,825 8,966 9,108 9,253 9,399
% Penetration 47.1% 47.1% 47.2% 47.3% 47.4% 47.5%
% Growth -- 1.3% 1.6% 1.6% 1.6% 1.6%
Pay 8,366 8,469 8,586 8,704 8,921 9,142
% Penetration 45.2% 45.2% 45.2% 45.2% 45.7% 46.2%
% Growth -- 1.2% 1.4% 1.4% 2.5% 2.5%
Mini-Pay 141 150 152 154 351 554
% Penetration 0.8% 0.8% 0.8% 0.8% 1.8% 2.8%
% Growth -- 6.3% 1.4% 1.4% 1.4% 1.4%
Basic Revenue& Tier/Sub/Month $25.60 $26.37 $27.16 $27.97 $28.81 $29.68
% Growth -- 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
NPT 1 Revenue/Sub/Month $3.21 $3.33 $3.47 $3.61 $3.75 $3.90
% Growth -- 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Pay Revenue/Sub/Month $7.08 $7.22 $7.36 $7.51 $7.66 $7.81
% Growth -- 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Mini-Pay Revenue/Sub/Month $3.44 $3.51 $3.58 $3.65 $3.73 $3.80
% Growth -- 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
PPV Rev/Sub/Month $0.46 $0.48 $0.49 $0.51 $0.54 $0.57
% Growth 3.0% 3.0% 3.0% 6.0% 6.0%
Other Revenue/Sub/Month $4.52 $4.70 $4.89 $5.09 $5.29 $5.50
% Growth -- 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
<CAPTION>
FYE 12/31, (PROJECTED)
------------------------------
YEAR 2001 2002 2003
PERIOD 6 7 8
- -------------------------------------------------------- ------------------------------
OPERATIONS STATISTICS
- --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Homes Passed: 29,709 29,959 30,210
% Growth 0.8% 0.8% 0.8%
Basic/Expanded Tier 20,058 20,331 20,607
% Penetration 67.5% 67.9% 68.2%
% Growth 1.4% 1.4% 1.4%
New Product Tier (NPT 1) 9,547 9,698 9,850
% Penetration 47.6% 47.7% 47.8%
% Growth 1.6% 1.6% 1.6%
Pay 9,367 9,596 9,830
% Penetration 46.7% 47.2% 47.7%
% Growth 2.5% 2.4% 2.4%
Mini-Pay 762 976 1,195
% Penetration 3.8% 4.8% 5.8%
% Growth 1.4% 1.4% 1.4%
Basic Revenue& Tier/Sub/Month $30.57 $31.49 $32.43
% Growth 3.0% 3.0% 3.0%
NPT 1 Revenue/Sub/Month $4.06 $4.22 $4.39
% Growth 4.0% 4.0% 4.0%
Pay Revenue/Sub/Month $7.97 $8.13 $8.29
% Growth 2.0% 2.0% 2.0%
Mini-Pay Revenue/Sub/Month $3.88 $3.96 $4.04
% Growth 2.0% 2.0% 2.0%
PPV Rev/Sub/Month $0.60 $0.64 $0.68
% Growth 6.0% 6.0% 6.0%
Other Revenue/Sub/Month $5.72 $5.95 $6.19
% Growth 4.0% 4.0% 4.0%
<CAPTION>
FYE 12/31, (PROJECTED)
-------------------
YEAR 2004 2005
PERIOD 9 10
- -------------------------------------------------------- -------------------
OPERATIONS STATISTICS
- --------------------------------------------------------
<S> <C> <C> <C> <C>
Homes Passed: 30,464 30,720
% Growth 0.8% 0.8%
Basic/Expanded Tier 20,887 21,170
% Penetration 68.6% 68.9%
% Growth 1.4% 1.4%
New Product Tier (NPT 1) 10,005 10,162
% Penetration 47.9% 48.0%
% Growth 1.6% 1.6%
Pay 10,068 10,310
% Penetration 48.2% 48.7%
% Growth 2.4% 2.4%
Mini-Pay 1,420 1,651
% Penetration 6.8% 7.8%
% Growth 1.4% 1.4%
Basic Revenue& Tier/Sub/Month $33.40 $34.40
% Growth 3.0% 3.0%
NPT 1 Revenue/Sub/Month $4.56 $4.75
% Growth 4.0% 4.0%
Pay Revenue/Sub/Month $8.46 $8.63
% Growth 2.0% 2.0%
Mini-Pay Revenue/Sub/Month $4.12 $4.20
% Growth 2.0% 2.0%
PPV Rev/Sub/Month $0.72 $0.76
% Growth 6.0% 6.0%
Other Revenue/Sub/Month $6.44 $6.69
% Growth 4.0% 4.0%
</TABLE>
<PAGE> 103
- --------------------------------------------------
W A L L E R C A P I T A L C O R P O R A T I O N
- --------------------------------------------------
FALCON CABLE TV - HESPERIA, CALIFORNIA
DISCOUNTED CASH FLOW ANALYSIS (000 UNLESS OTHERWISE SPECIFIED)
<TABLE>
<CAPTION>
12/31/95 FYE 12/31, (PROJECTED)
---------- ------------------------------------------------------
Year 1995 1996 1997 1998 1999
Period 0 1 2 3 4
------ ---------- ------------------------------------------------------
INCOME STATEMENT SUMMARY
- -------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES
Basic & Tier $5,687,270 $5,928,869 $6,190,805 $6,464,133 $6,749,341
NPT 1 335,208 353,149 373,122 394,211 416,479
Pay 710,582 733,741 758,719 784,525 820,160
Mini-Pay 5,827 6,319 6,534 6,756 15,718
PPV 102,952 107,325 112,067 117,015 125,736
Other 1,004,759 1,057,611 1,115,058 1,175,592 1,239,378
--------- --------- --------- --------- ---------
TOTAL REVENUE 7,846,598 $8,187,014 $8,556,304 $8,942,232 $9,366,812
% Growth -- 4.3% 4.5% 4.5% 4.7%
EXPENSES: Adjusted
Technical $ 635,589 $ 665,806 $ 698,596 $ 732,980 $769,035
Production and Local Origination 0 0 0 0 0
Advertising 73,173 76,348 79,791 83,390 87,350
Marketing 276,177 289,307 303,555 318,495 334,162
General and Administrative 1,260,508 1,320,434 1,385,464 1,453,655 1,525,161
Programming 1,384,338 1,442,512 1,505,599 1,571,427 1,643,751
Partnership Expenses 449,610 469,116 490,276 512,390 536,718
------- ------- ------- ------- -------
Total Operating Expenses $4,079,395 $4,263,522 $4,463,281 $4,672,338 $4,896,178
% Growth -- 4.5% 4.7% 4.7% 4.8%
* Adjusted for Partnership Expenses
U.L.SYSTEM CASH FLOW (EBITDA) $3,767,203 $3,923,491 $4,093,024 $4,269,895 $4,470,635
% Margin 48.0% 47.9% 47.8% 47.7% 47.7%
% Growth -- 4.1% 4.3% 4.3% 4.7%
Revenue / Subscriber / Month $ 35.32 $ 36.41 $ 37.54 $ 38.70 $ 39.99
SCF / Subscriber / Year $ 203.5 $ 209.4 $ 215.5 $ 221.7 $ 229.0
<CAPTION>
FYE 12/31, (PROJECTED)
--------------------------------------------------------
2000 2001 2002 2003
5 6 7 8
--------------------------------------------------------
INCOME STATEMENT SUMMARY
- -------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Basic & Tier $7,046,939 $7,357,460 $7,681,457 $8,019,508
NPT 1 439,991 464,816 491,026 518,697
Pay 857,288 895,966 936,258 978,226
Mini-Pay 25,280 35,472 46,326 57,873
PPV 135,104 145,166 155,973 167,580
Other 1,306,589 1,377,408 1,452,026 1,530,646
--------- --------- --------- ---------
TOTAL REVENUE $9,811,191 $10,276,288 $10,763,066 $11,272,530
% Growth 4.7% 4.7% 4.7% 4.7%
EXPENSES:
Technical $ 806,842 $ 846,485 $ 888,051 $ 931,634
Production and Local Origination 0 0 0 0
Advertising 91,494 95,831 100,370 105,121
Marketing 350,590 367,816 385,877 404,815
General and Administrative 1,600,140 1,678,759 1,761,194 1,847,628
Programming 1,719,307 1,798,235 1,880,682 1,966,805
Partnership Expenses 562,181 588,831 616,724 645,916
------- ------- ------- -------
Total Operating Expenses $5,130,554 $ 5,375,957 $ 5,632,899 $ 5,901,918
% Growth 4.8% 4.8% 4.8% 4.8%
* Adjusted for Partnership Expenses
U.L.SYSTEM CASH FLOW (EBITDA) $4,680,637 $ 4,900,332 $ 5,130,167 $ 5,370,612
% Margin 47.7% 47.7% 47.7% 47.6%
% Growth 4.7% 4.7% 4.7% 4.7%
Revenue / Subscriber / Month $ 41.32 $ 42.70 $ 44.12 $ 45.58
SCF / Subscriber / Year $ 236.5 $ 244.3 $ 252.3 $ 260.6
<CAPTION>
FYE 12/31, (PROJECTED)
--------------------------
2004 2005
9 10
--------------------------
INCOME STATEMENT SUMMARY
- -------------------------------------
<S> <C> <C>
REVENUES
Basic & Tier $ 8,372,217 $ 8,740,210
NPT 1 547,912 578,754
Pay 1,021,935 1,067,455
Mini-Pay 70,148 83,185
PPV 180,046 193,434
Other 1,613,480 1,700,752
--------- ---------
TOTAL REVENUE $11,805,737 $12,363,790
% Growth 4.7% 4.7%
EXPENSES:
Technical $ 977,330 $ 1,025,240
Production and Local Origination 0 0
Advertising 110,094 115,298
Marketing 424,671 445,489
General and Administrative 1,938,252 2,033,269
Programming 2,056,762 2,150,722
Partnership Expenses 676,469 708,445
------- -------
Total Operating Expenses $ 6,183,577 $ 6,478,463
% Growth 4.8% 4.8%
* Adjusted for Partnership Expenses
U.L.SYSTEM CASH FLOW (EBITDA) $ 5,622,160 $ 5,885,327
% Margin 47.6% 47.6%
% Growth 4.7% 4.7%
Revenue / Subscriber / Month $ 47.10 $ 48.67
SCF / Subscriber / Year $ 269.2 $ 278.0
</TABLE>
<PAGE> 104
- -------------------------------------------------------------------------------
W A L L E R C A P I T A L C O R P O R A T I O N
- -------------------------------------------------------------------------------
FALCON CABLE TV - HESPERIA, CALIFORNIA
DISCOUNTED CASH FLOW ANALYSIS (000 UNLESS OTHERWISE SPECIFIED)
<TABLE>
<CAPTION>
12/31/95 FYE 12/31, (PROJECTED)
----------- ---------------------------------------------------
Year 1995 1996 1997 1998 1999
Period 0 1 2 3 4
----------- ---------------------------------------------------
- --------------------------------------------------------------
CAPITAL EXPENDITURE ANALYSIS
- --------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
System Cash Flow $3,767,203 $3,923,491 $4,093,024 $4,269,895 $4,470,635
% Growth 4.1% 4.3% 4.3% 4.7%
Total Capital Expenditures 823,481 3,743,300 3,754,439 3,765,707
% of Revenue 10.1% 43.7% 42.0% 40.2%
Total Capex / Basic Sub $43.9 $197.1 $195.0 $192.9
------------------------------------------------------------------------------------------------------------------------------
DEBT FREE CASH FLOW $3,100,010 $349,724 $515,455 $704,928
========== ======== ======== ========
------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FYE 12/31, (PROJECTED)
-------------------------------------
2000 2001 2002
5 6 7
-------------------------------------
- ------------------------------------------------------
CAPITAL EXPENDITURE ANALYSIS
- ------------------------------------------------------
<S> <C> <C> <C>
System Cash Flow $4,680,637 $4,900,332 $5,130,167
% Growth 4.7% 4.7% 4.7%
Total Capital Expenditures 877,104 888,631 900,289
% of Revenue 8.9% 8.6% 8.4%
Total Capex / Basic Sub $44.3 $44.3 $44.3
------------------------------------------------------------------------------------------
DEBT FREE CASH FLOW $3,803,534 $4,011,701 $4,229,877
========== ========== ==========
------------------------------------------------------------------------------------------
<CAPTION>
FYE 12/31, (PROJECTED)
--------------------------------------
2003 2004 2005
8 9 10
--------------------------------------
- ------------------------------------------------------
CAPITAL EXPENDITURE ANALYSIS
- ------------------------------------------------------
<S> <C> <C> <C>
System Cash Flow $5,370,612 $5,622,160 $5,885,327
% Growth 4.7% 4.7% 4.7%
Total Capital Expenditures 912,081 924,008 936,070
% of Revenue 8.1% 7.8% 7.6%
Total Capex / Basic Sub $44.3 $44.2 $44.2
-------------------------------------------------------------------------------------------
DEBT FREE CASH FLOW $4,458,531 $4,698,153 $4,949,257
========== ========== ==========
-------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE VALUE VALUE PER 1995 SUBSCRIBER MULTIPLE OF 1995 SCF
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FAIR MARKET VALUE $28,865,947 $1,559 7.7
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 105
W A L L E R C A P I T A L C O R P O R A T I O N
FALCON CABLE TV - SAN LOUIS OBISPO, CALIFORNIA
DISCOUNTED CASH FLOW ANALYSIS (000 UNLESS OTHERWISE SPECIFIED)
<TABLE>
<CAPTION>
12/31/95 FYE 12/31, (Projected)
-------- -------------------------------
Year 1995 1996 1997 1998 1999
Period 0 1 2 3 4
------ -------- -------------------------------
Operations Statistics % Growth
- --------------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Homes Passed: 26,138 26,582 27,034 27,494 27,961
% Growth 1.7% 1.7% 1.7% 1.7%
Basic/Expanded Tier 15,635 16,003 16,418 16,843 17,277
% Penetration 59.8% 60.2% 60.7% 61.3% 61.8%
% Growth -- 2.4% 2.6% 2.6% 2.6%
New Product Tier (NPT 1) 4,466 4,561 4,728 4,901 5,080
% Penetration 28.6% 28.5% 28.8% 29.1% 29.4%
% Growth -- 2.1% 3.7% 3.7% 3.6%
Pay 3,733 3,873 4,104 4,345 4,596
% Penetration 23.9% 24.2% 25.0% 25.8% 26.6%
% Growth -- 3.7% 6.0% 5.9% 5.8%
Mini-Pay 0 0 0 0 0
% Penetration 0.0% 0.0% 0.0% 0.0%
% Growth -- -- -- -- --
Basic Revenue & Tier/
Sub/Month $22.24 $23.22 $24.24 $25.30 $26.42
% Growth -- 4.4% 4.4% 4.4% 4.4% 4.4%
NPT 1 Revenue/Sub/Month $ 3.31 $ 3.44 $ 3.58 $ 3.72 $ 3.87
% Growth -- 4.0% 4.0% 4.0% 4.0% 4.0%
Pay Revenue/Sub/Month $ 9.28 $ 9.47 $ 9.66 $ 9.85 $10.05
% Growth -- 2.0% 2.0% 2.0% 2.0% 2.0%
Mini-Pay Revenue/Sub/Month -- -- -- -- --
% Growth -- -- -- -- -- --
PPV Rev/Sub/Month $ 0.16 $ 0.16 $ 0.17 $ 0.18 $ 0.20
% Growth 3.0% 3.0% 8.0% 8.0%
Other Revenue/Sub/Month $ 4.97 $ 5.17 $ 5.38 $ 5.60 $ 5.82
% Growth -- 4.0% 4.0% 4.0% 4.0% 4.0%
<CAPTION>
FYE 12/31, (Projected)
-----------------------------------------------
2000 2001 2002 2003 2004 2005
5 6 7 8 9 10
-----------------------------------------------
Operations Statistics
- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Homes Passed: 28,437 28,920 29,412 29,912 30,420 30,937
% Growth 1.7% 1.7% 1.7% 1.7% 1.7% 1.7%
Basic/Expanded Tier 17,722 18,176 18,641 19,117 19,603 20,100
% Penetration 62.3% 62.9% 63.4% 63.9% 64.4% 65.0%
% Growth 2.6% 2.6% 2.6% 2.6% 2.5% 2.5%
New Product Tier (NPT 1) 5,263 5,453 5,648 5,850 6,057 6,271
% Penetration 29.7% 30.0% 30.3% 30.6% 30.9% 31.2%
% Growth 3.6% 3.6% 3.6% 3.6% 3.5% 3.5%
Pay 4,856 5,126 5,406 5,697 5,998 6,311
% Penetration 27.4% 28.2% 29.0% 29.8% 30.6% 31.4%
% Growth 5.7% 5.6% 5.5% 5.4% 5.3% 5.2%
Mini-Pay 0 0 0 0 0 0
% Penetration 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
% Growth -- -- -- -- -- --
Basic Revenue & Tier/
Sub/Month $27.58 $28.79 $30.06 $31.38 $32.76 $34.21
% Growth 4.4% 4.4% 4.4% 4.4% 4.4% 4.4%
NPT 1 Revenue/Sub/Month $ 4.03 $ 4.19 $ 4.36 $ 4.53 $ 4.71 $ 4.90
% Growth 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Pay Revenue/Sub/Month $10.25 $10.45 $10.66 $10.87 $11.09 $11.31
% Growth 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Mini-Pay Revenue/Sub/Month -- -- -- -- -- --
% Growth -- -- -- -- -- --
PPV Rev/Sub/Month $ 0.21 $ 0.23 $ 0.25 $ 0.27 $ 0.29 $ 0.31
% Growth 8.0% 8.0% 8.0% 8.0% 8.0% 8.0%
Other Revenue/Sub/Month $ 6.05 $ 6.29 $ 6.55 $ 6.81 $ 7.08 $ 7.36
% Growth 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
</TABLE>
<PAGE> 106
W A L L E R C A P I T A L C O R P O R A T I O N
FALCON CABLE TV - SAN LOUIS OBISPO, CALIFORNIA
DISCOUNTED CASH FLOW ANALYSIS (000 UNLESS OTHERWISE SPECIFIED)
<TABLE>
<CAPTION>
12/31/95 FYE 12/31, (Projected)
--------- ---------------------------------------------------------------
Year 1995 1996 1997 1998 1999 2000
Period 0 1 2 3 4 5
------ --------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Summary
- ------------------------
Revenues
Basic & Tier $4,172,358 $4,458,348 $4,775,317 $5,114,432 $5,477,218 $5,865,307
NPT 1 177,400 188,410 203,148 218,998 236,042 254,368
Pay 415,739 439,914 475,577 513,565 554,012 597,061
Mini-Pay 0 0 0 0 0 0
PPV 29,828 31,445 33,229 36,816 40,787 45,183
Other 933,229 993,376 1,059,924 1,130,844 1,206,419 1,286,950
--------- --------- --------- --------- --------- ---------
Total Revenue $5,728,554 $6,111,493 $6,547,194 $7,014,654 $7,514,479 $8,048,869
% Growth -- 6.7% 7.1% 7.1% 7.1% 7.1%
Expenses: Adjusted
Technical $627,259 $664,476 $705,582 $749,173 $795,399 $844,414
Production and Local Origination 0 0 0 0 0 0
Advertising 87,515 93,365 100,021 107,163 114,799 122,962
Marketing 226,985 240,453 255,327 271,102 287,829 305,566
General and Administrative 1,099,901 1,165,161 1,237,240 1,313,678 1,394,734 1,480,683
Programming 1,138,066 1,214,767 1,302,500 1,396,342 1,496,711 1,604,049
Partnership Expenses 328,246 350,189 375,154 401,940 430,580 461,200
--------- --------- --------- --------- --------- ---------
Total Operating Expenses $3,507,972 $3,728,410 $3,975,824 $4,239,398 $4,520,051 $4,818,874
% Growth -- 6.3% 6.6% 6.6% 6.6% 6.6%
* Adjusted for Partnership Expenses
U.L.System Cash Flow (EBITDA) $2,220,582 $2,383,083 $2,571,370 $2,775,256 $2,994,428 $3,229,995
% Margin 38.8% 39.0% 39.3% 39.6% 39.8% 40.1%
% Growth -- 7.3% 7.9% 7.9% 7.9% 7.9%
Revenue / Subscriber / Month $30.53 $31.83 $33.23 $34.71 $36.24 $37.85
SCF / Subscriber / Year $142.0 $148.9 $156.6 $164.8 $173.3 $182.3
<CAPTION>
FYE 12/31, (Projected)
------------------------------------------------------------------
Year 2001 2002 2003 2004 2005
Period 6 7 8 9 10
------ ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income Statement Summary
- ------------------------
Revenues
Basic & Tier $6,280,439 $6,724,476 $7,199,403 $7,707,342 $8,250,560
NPT 1 274,069 295,245 318,003 342,460 368,738
Pay 642,860 691,565 743,343 798,366 856,819
Mini-Pay 0 0 0 0 0
PPV 50,049 55,436 61,398 67,996 75,298
Other 1,372,757 1,464,182 1,561,586 1,665,355 1,775,900
--------- --------- --------- ---------- ----------
Total Revenue $8,620,175 $9,230,903 $9,883,733 $10,581,519 $11,327,314
% Growth 7.1% 7.1% 7.1% 7.1% 7.0%
Expenses:
Technical $896,385 $951,487 $1,009,905 $1,071,837 $1,137,489
Production and Local Origination 0 0 0 0 0
Advertising 131,690 141,020 150,994 161,654 173,047
Marketing 324,373 344,313 365,452 387,863 411,621
General and Administrative 1,571,814 1,668,435 1,770,873 1,879,470 1,994,591
Programming 1,718,830 1,841,561 1,972,780 2,113,064 2,263,026
Partnership Expenses 493,936 528,931 566,338 606,321 649,055
--------- --------- --------- --------- ---------
Total Operating Expenses $5,137,028 $5,475,747 $5,836,342 $6,220,208 $6,628,830
% Growth 6.6% 6.6% 6.6% 6.6% 6.6%
* Adjusted for Partnership Expenses
U.L.System Cash Flow (EBITDA) $3,483,146 $3,755,157 $4,047,391 $4,361,311 $4,698,484
% Margin 40.4% 40.7% 41.0% 41.2% 41.5%
% Growth 7.8% 7.8% 7.8% 7.8% 7.7%
Revenue / Subscriber / Month $39.52 $41.27 $43.09 $44.98 $46.96
SCF / Subscriber / Year $191.6 $201.4 $211.7 $222.5 $231.8
</TABLE>
<PAGE> 107
W A L L E R C A P I T A L C O R P O R A T I O N
FALCON CABLE TV - SAN LOUIS OBISPO, CALIFORNIA
DISCOUNTED CASH FLOW ANALYSIS (000 UNLESS OTHERWISE SPECIFIED)
<TABLE>
<CAPTION>
12/31/95 FYE 12/31, (Projected)
--------- -------------------------------------------------------------
Year 1995 1996 1997 1998 1999 2000
Period 0 1 2 3 4 5
------ --------- -------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Capital Expenditure Analysis
- ----------------------------
System Cash Flow $2,220,582 $2,383,083 $2,571,370 $2,775,256 $2,994,428 $3,229,995
% Growth 7.3% 7.9% 7.9% 7.9% 7.9%
Total Capital Expenditures 745,900 2,464,311 2,483,133 802,374 822,043
% of Revenue 12.2% 37.6% 35.4% 10.7% 10.2%
Total Capex / Basic Sub $46.6 $150.1 $147.4 $46.4 $46.4
- -----------------------------------------------------------------------------------------------------------------------------------
Debt Free Cash Flow $1,637,183 $107,059 $292,123 $2,192,054 $2,407,952
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Aggregate Value Value per 1995 Subscriber
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
FAIR MARKET VALUE $21,988,550 $1,406
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FYE 12/31, (Projected)
-------------------------------------------------------------------
Year 2001 2002 2003 2004 2005
Period 6 7 8 9 10
------ -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Capital Expenditure Analysis
- ----------------------------
System Cash Flow $3,483,146 $3,755,157 $4,047,391 $4,361,311 $4,698,484
% Growth 7.8% 7.8% 7.8% 7.8% 7.7%
Total Capital Expenditures 842,149 862,701 883,708 905,180 927,127
% of Revenue 9.8% 9.3% 8.9% 8.6% 8.2%
Total Capex / Basic Sub $46.3 $46.3 $46.2 $46.2 $46.1
- --------------------------------------------------------------------------------------------------------------------
Debt Free Cash Flow $2,640,998 $2,892,456 $3,163,683 $3,456,131 $3,771,357
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Multiple of 1995 SCF
<S> <C>
- --------------------------------------------------------------------------------------------------------------------
FAIR MARKET VALUE 9.9
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 108
W A L L E R C A P I T A L C O R P O R A T I O N
Falcon Cable TV - Tulare, California
Discounted Cash Flow Analysis (000 unless otherwise specified)
<TABLE>
<CAPTION>
12/31/95 FYE 12/31, (Projected)
-------- -----------------------------------------------
Year 1995 1996 1997 1998 1999 2000
Period 0 1 2 3 4 5
------ -------- -----------------------------------------------
Operations Statistics % Growth
- --------------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Homes Passed: 41,053 41,464 41,878 42,297 42,720 43,147
% Growth 1.0% 1.0% 1.0% 1.0% 1.0%
Basic/Expanded Tier 15,249 15,466 15,788 16,115 16,490 16,871
% Penetration 37.1% 37.3% 37.7% 38.1% 38.6% 39.1%
% Growth -- 1.4% 2.1% 2.1% 2.3% 2.3%
New Product Tier (NPT 1) 7,001 7,099 7,247 7,429 7,635 7,845
% Penetration 45.9% 45.9% 45.9% 46.1% 46.3% 46.5%
% Growth -- 1.4% 2.1% 2.5% 2.8% 2.8%
Pay 7,110 7,207 7,389 7,574 7,783 7,997
% Penetration 46.6% 46.6% 46.8% 47.0% 47.2% 47.4%
% Growth -- 1.4% 2.5% 2.5% 2.8% 2.7%
Mini-Pay 0 0 0 0 0 0
% Penetration 0.0% 0.0% 0.0% 0.0% 0.0%
% Growth -- -- -- -- -- --
Basic Revenue& Tier/Sub/Month $22.05 $22.98 $23.96 $24.98 $26.04 $27.15
% Growth -- 4.3% 4.3% 4.3% 4.3% 4.3% 4.3%
NPT 1 Revenue/Sub/Month $5.47 $ 5.63 $ 5.80 $ 5.98 $ 6.16 $ 6.34
% Growth -- 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Pay Revenue/Sub/Month $7.07 $ 7.28 $ 7.50 $ 7.72 $ 7.96 $ 8.19
% Growth -- 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Mini-Pay Revenue/Sub/Month $0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
% Growth -- 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
PPV Rev/Sub/Month $0.48 $ 0.49 $ 0.51 $ 0.52 $ 0.54 $ 0.56
% Growth 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Other Revenue/Sub/Month $7.22 $ 7.44 $ 7.66 $ 7.89 $ 8.13 $ 8.37
% Growth -- 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
<CAPTION>
-----------------------------------------------
2001 2002 2003 2004 2005
6 7 8 9 10
-----------------------------------------------
Operations Statistics
- ---------------------
<S> <C> <C> <C> <C> <C>
Homes Passed: 43,579 44,014 44,455 44,899 45,348
% Growth 1.0% 1.0% 1.0% 1.0% 1.0%
Basic/Expanded Tier 17,257 17,650 18,049 18,454 18,865
% Penetration 39.6% 40.1% 40.6% 41.1% 41.6%
% Growth 2.3% 2.3% 2.3% 2.2% 2.2%
New Product Tier (NPT 1) 8,059 8,278 8,501 8,729 8,961
% Penetration 46.7% 46.9% 47.1% 47.3% 47.5%
% Growth 2.7% 2.7% 2.7% 2.7% 2.7%
Pay 8,214 8,437 8,663 8,895 9,131
% Penetration 47.6% 47.8% 48.0% 48.2% 48.4%
% Growth 2.7% 2.7% 2.7% 2.7% 2.7%
Mini-Pay 0 0 0 0 0
% Penetration 0.0% 0.0% 0.0% 0.0% 0.0%
% Growth -- -- -- -- --
Basic Revenue& Tier/Sub/Month $28.30 $29.50 $30.76 $32.07 $33.43
% Growth 4.3% 4.3% 4.3% 4.3% 4.3%
NPT 1 Revenue/Sub/Month $ 6.53 $ 6.73 $ 6.93 $ 7.14 $ 7.35
% Growth 3.0% 3.0% 3.0% 3.0% 3.0%
Pay Revenue/Sub/Month $ 8.44 $ 8.69 $ 8.95 $ 9.22 $ 9.50
% Growth 3.0% 3.0% 3.0% 3.0% 3.0%
Mini-Pay Revenue/Sub/Month $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
% Growth 0.0% 0.0% 0.0% 0.0% 0.0%
PPV Rev/Sub/Month $ 0.57 $ 0.59 $ 0.61 $ 0.63 $ 0.64
% Growth 3.0% 3.0% 3.0% 3.0% 3.0%
Other Revenue/Sub/Month $ 8.62 $ 8.88 $ 9.15 $ 9.42 $ 9.70
% Growth 3.0% 3.0% 3.0% 3.0% 3.0%
</TABLE>
<PAGE> 109
WALLER CAPITAL CORPORATION
FALCON CABLE TV - TULARE, CALIFORNIA
DISCOUNTED CASH FLOW ANALYSIS (000 UNLESS OTHERWISE SPECIFIED)
<TABLE>
<CAPTION>
-------- ---------------------------------------------------------
12/31/95 FYE 12/31, (PROJECTED)
-------- ---------------------------------------------------------
Year 1995 1996 1997 1998 1999
Income Statement Summary Period 0 1 2 3 4
- ---------------------------------------------------------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Basic & Tier $4,034,444 $4,265,731 $4,539,661 $4,830,638 $5,153,049
NPT 1 459,527 479,928 504,623 532,841 564,025
Pay 603,044 629,619 664,858 701,977 742,999
Mini-Pay 0 0 0 0 0
PPV 87,677 91,592 96,305 101,249 106,711
Other 1,321,320 1,380,317 1,451,343 1,525,852 1,608,175
--------- ---------- ---------- ---------- ----------
Total Revenue $6,506,012 $6,847,187 $7,256,790 $7,692,557 $8,174,959
% Growth - - 5.2% 6.0% 6.0% 6.3%
Expenses: Adjusted
Technical $634,621 $666,175 $703,854 $743,581 $787,503
Production and Local Origination 0 0 0 0 0
Advertising 122,569 128,997 136,713 144,923 154,011
Marketing 184,260 193,422 204,362 215,896 228,649
General and Administrative 1,116,860 1,172,392 1,238,703 1,308,617 1,385,915
Programming 1,279,191 1,349,026 1,432,816 1,522,239 1,621,276
Partnership Expenses 372,794 392,344 415,814 440,783 468,425
---------- ---------- ---------- ---------- ----------
Total Operating Expenses $3,710,295 $3,902,356 $4,132,262 $4,376,039 $4,645,778
% Growth - - 5.2% 5.9% 5.9% 6.2%
* Adjusted for Partnership Expenses
U.L.System Cash Flow (EBITDA) $2,795,717 $2,944,832 $3,124,528 $3,316,518 $3,529,181
% Margin 43.0% 43.0% 43.1% 43.1% 43.2%
% Growth - - 5.3% 6.1% 6.1% 6.4%
Revenue / Subscriber / Month $35.55 $36.89 $38.30 $39.78 $41.31
SCF / Subscriber / Year $183.3 $190.4 $197.9 $205.8 $214.0
<CAPTION>
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
2000 2001 2002 2003 2004 2005
Income Statement Summary 5 6 7 8 9 10
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Basic & Tier $5,496,056 $5,860,937 $6,249,045 $6,661,818 $7,100,779 $7,567,544
NPT 1 596,923 631,625 668,226 706,824 747,526 790,440
Pay 786,271 831,913 880,049 930,809 984,330 1,040,756
Mini-Pay 0 0 0 0 0 0
PPV 112,450 118,478 124,808 131,457 138,439 145,770
Other 1,694,655 1,785,494 1,880,902 1,981,100 2,086,319 2,196,802
---------- ---------- ---------- ----------- ----------- -----------
Total Revenue $8,686,356 $9,228,447 $9,803,030 $10,412,008 $11,057,392 $11,741,311
% Growth 6.3% 6.2% 6.2% 6.2% 6.2% 6.2%
Expenses:
Technical $833,880 $882,843 $934,533 $989,095 $1,046,683 $1,107,461
Production and Local Origination 0 0 0 0 0 0
Advertising 163,645 173,858 184,683 196,155 208,314 221,199
Marketing 242,114 256,330 271,338 287,180 303,901 321,548
General and Administrative 1,467,532 1,553,702 1,644,670 1,740,693 1,842,042 1,949,004
Programming 1,726,476 1,838,214 1,956,883 2,082,902 2,216,714 2,358,789
Partnership Expenses 497,728 528,790 561,714 596,608 633,589 672,777
---------- ---------- ---------- ---------- ---------- ----------
Total Operating Expenses $4,931,376 $5,233,737 $5,553,820 $5,892,633 $6,251,243 $6,630,778
% Growth 6.1% 6.1% 6.1% 6.1% 6.1% 6.1%
* Adjusted for Partnership Expenses
U.L.System Cash Flow (EBITDA) $3,754,980 $3,994,709 $4,249,210 $4,519,375 $4,806,149 $5,110,533
% Margin 43.2% 43.3% 43.3% 43.4% 43.5% 43.5%
% Growth 6.4% 6.4% 6.4% 6.4% 6.3% 6.3%
Revenue / Subscriber / Month $42.91 $44.56 $46.28 $48.07 $49.93 $51.87
SCF / Subscriber / Year $222.6 $231.5 $240.8 $250.4 $260.4 $270.9
</TABLE>
<PAGE> 110
W A L L E R C A P I T A L C O R P O R A T I O N
Falcon Cable TV - Tulare, California
Discounted Cash Flow Analysis (000 unless otherwise specified)
<TABLE>
<CAPTION>
12/31/95 FYE 12/31, (Projected)
--------- ---------------------------------------------------------------
Year 1995 1996 1997 1998 1999 2000
Capital Expenditure Analysis Period 0 1 2 3 4 5
- ---------------------------- ------ --------- ---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
System Cash Flow $2,795,717 $2,944,832 $3,124,528 $3,316,518 $3,529,181 $3,754,980
% Growth 5.3% 6.1% 6.1% 6.4% 6.4%
Total Capital Expenditures 798,598 3,614,122 3,629,877 3,647,787 865,973
% of Revenue 11.7% 49.8% 47.2% 44.6% 10.0%
Total Capex / Basic Sub $51.6 $228.9 $225.2 $221.2 $51.3
Debt Free Cash Flow $2,146,234 $(489,594 ) $(313,359 ) $(118,606 ) $2,889,007
<CAPTION>
--------------------------------------------------------------
2001 2002 2003 2004 2005
Capital Expenditure Analysis 6 7 8 9 10
- ------------------------------ --------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
System Cash Flow $3,994,709 $4,249,210 $4,519,375 $4,806,149 $5,110,533
% Growth 6.4% 6.4% 6.4% 6.3% 6.3%
Total Capital Expenditures 884,438 903,186 922,220 941,544 961,163
% of Revenue 9.6% 9.2% 8.9% 8.5% 8.2%
Total Capex / Basic Sub $51.3 $51.2 $51.1 $51.0 $51.0
Debt Free Cash Flow $3,110,271 $3,346,024 $3,597,155 $3,864,605 $4,149,370
<CAPTION>
Aggregate Value Value per 1995 Subscriber Multiple of 1995 SCF
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
FAIR MARKET VALUE $22,269,159 1,460 8.0
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 111
W A L L E R C A P I T A L C O R P O R A T I O N
FALCON CABLE TV - CENTRAL OREGON
Discounted Cash Flow Analysis (000 unless otherwise specified)
<TABLE>
<CAPTION>
12/31/95
--------
Year 1995
Period 0
Operations Statistics --------
- ---------------------
% Growth
--------
<S> <C> <C>
Homes Passed: 26,355
% Growth
Basic/Expanded Tier 14,225
% Penetration 54.0%
% Growth --
New Product Tier (NPT 1) 9,266
% Penetration 65.1%
% Growth --
Pay 5,505
% Penetration 38.7%
% Growth --
Mini-Pay 11
% Penetration 0.1%
% Growth --
Basic Revenue& Tier/Sub/Month $21.16
% Growth -- 4.3%
NPT 1 Revenue/Sub/Month $ 4.19
% Growth -- 4.0%
Pay Revenue/Sub/Month $ 7.96
% Growth -- 2.0%
Mini-Pay Revenue/Sub/Month $ 5.53
% Growth -- 2.0%
PPV Rev/Sub/Month $ 0.08
% Growth
Other Revenue/Sub/Month $ 2.26
% Growth -- 4.0%
<CAPTION>
FYE 12/31, (Projected)
----------------------------------------------------------------------------------------
Year 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Period 1 2 3 4 5 6 7 8 9 10
Operations Statistics ----------------------------------------------------------------------------------------
- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Homes Passed: 26,487 26,672 26,859 27,047 27,236 27,427 27,619 27,812 28,007 28,203
% Growth 0.5% 0.7% 0.7% 0.7% 0.7% 0.7% 0.7% 0.7% 0.7% 0.7%
Basic/Expanded Tier 14,455 14,690 14,927 15,166 15,409 15,654 15,901 16,152 16,405 16,661
% Penetration 54.6% 55.1% 55.6% 56.1% 56.6% 57.1% 57.6% 58.1% 58.6% 59.1%
% Growth 1.6% 1.6% 1.6% 1.6% 1.6% 1.6% 1.6% 1.6% 1.6% 1.6%
New Product Tier (NPT 1) 9,560 9,862 10,171 10,486 10,808 11,136 11,471 11,813 12,162 12,519
% Penetration 66.1% 67.1% 68.1% 69.1% 70.1% 71.1% 72.1% 73.1% 74.1% 75.1%
% Growth 3.2% 3.2% 3.1% 3.1% 3.1% 3.0% 3.0% 3.0% 3.0% 2.9%
Pay 5,594 5,685 5,851 6,021 6,194 6,371 6,551 6,735 6,923 7,114
% Penetration 38.7% 38.7% 39.2% 39.7% 40.2% 40.7% 41.2% 41.7% 42.2% 42.7%
% Growth 1.6% 1.6% 2.9% 2.9% 2.9% 2.9% 2.8% 2.8% 2.8% 2.8%
Mini-Pay 14 15 15 15 15 16 16 16 16 17
% Penetration 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%
% Growth 31.4% 1.6% 1.6% 1.6% 1.6% 1.6% 1.6% 1.6% 1.6% 1.6%
Basic Revenue & Tier/Sub/Month $22.06 $23.00 $23.97 $24.99 $26.05 $27.16 $28.32 $29.52 $30.77 $32.08
% Growth 4.3% 4.3% 4.3% 4.3% 4.3% 4.3% 4.3% 4.3% 4.3% 4.3%
NPT 1 Revenue/Sub/Month $4.36 $4.53 $4.71 $4.90 $5.10 $5.30 $5.52 $5.74 $5.97 $6.20
% Growth 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Pay Revenue/Sub/Month $8.12 $8.28 $8.45 $8.62 $8.79 $8.97 $9.15 $9.33 $9.52 $9.71
% Growth 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Mini-Pay Revenue/Sub/Month $5.64 $5.75 $5.87 $5.98 $6.10 $6.23 $6.35 $6.48 $6.61 $6.74
% Growth 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
PPV Rev/Sub/Month $0.08 $0.08 $0.08 $0.09 $0.09 $0.10 $0.10 $0.11 $0.12 $0.12
% Growth 3.0% 3.0% 3.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
Other Revenue/Sub/Month $2.35 $2.45 $2.55 $2.70 $2.86 $3.03 $3.21 $3.41 $3.61 $3.83
% Growth 4.0% 4.0% 4.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
</TABLE>
<PAGE> 112
W A L L E R C A P I T A L C O R P O R A T I O N
FALCON CABLE TV - CENTRAL OREGON
Discounted Cash Flow Analysis (000 unless otherwise specified)
<TABLE>
<CAPTION>
12/31/95 FYE 12/31, (Projected)
-------- ----------------------------------
Year 1995 1996 1997 1998
Period 0 1 2 3
Income Statement Summary ----------------------------------
- ------------------------
<S> <C> <C> <C> <C>
Revenues
Basic & Tier $3,611,860 $3,826,258 $4,053,597 $4,294,089
NPT 1 466,060 500,103 536,538 575,452
Pay 526,042 545,247 565,176 593,354
Mini-Pay 730 978 1,014 1,051
PPV 12,829 13,428 14,055 14,710
Other 386,283 408,231 431,450 455,951
---------- ---------- ---------- ----------
Total Revenue $5,003,805 $5,294,245 $5,601,829 $5,934,606
% Growth -- 5.8% 5.8% 5.9%
Expenses: Adjusted
Technical $443,453 $466,396 $490,553 $515,918
Production and Local Origination 0 0 0 0
Advertising 0 0 0 0
Marketing 120,328 126,554 133,108 139,991
General and Administrative 856,767 901,094 947,765 996,772
Programming 868,032 918,533 972,020 1,030,010
Partnership Expenses 286,718 303,360 320,985 340,053
--------- --------- --------- ---------
Total Operating Expenses $2,575,298 $2,715,937 $2,864,432 $3,022,743
% Growth -- 5.5% 5.5% 5.5%
U.L.System Cash Flow (EBITDA) $2,428,507 $2,578,308 $2,737,397 $2,911,863
% Margin 48.5% 48.7% 48.9% 49.1%
% Growth -- 6.2% 6.2% 6.4%
Revenue / Subscriber / Month $29.31 $30.52 $31.78 $33.13
SCF / Subscriber / Year $170.7 $178.4 $186.3 $195.1
<CAPTION>
FYE 12/31, (Projected)
--------------------------------------------------------------------------------------
Year 1999 2000 2001 2002 2003 2004 2005
Period 4 5 6 7 8 9 10
Income Statement Summary --------------------------------------------------------------------------------------
- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
Basic & Tier $4,548,482 $4,817,562 $5,102,162 $5,403,160 $5,721,483 $6,058,112 $6,414,078
NPT 1 617,005 661,368 708,722 759,257 813,179 870,702 932,057
Pay 622,784 653,519 685,611 719,114 754,088 790,589 828,681
Mini-Pay 1,089 1,129 1,170 1,212 1,256 1,301 1,347
PPV 15,843 17,062 18,374 19,784 21,301 22,933 24,688
Other 491,070 528,851 569,496 613,216 660,244 710,825 765,226
---------- --------- ---------- ---------- ---------- ---------- ----------
Total Revenue $6,296,273 $6,679,491 $7,085,533 $7,515,744 $7,971,550 $8,454,462 $8,966,079
% Growth 6.1% 6.1% 6.1% 6.1% 6.1% 6.1% 6.1%
Expenses:
Technical $ 542,551 $ 570,513 $ 599,869 $ 630,688 $ 663,040 $ 697,000 $ 732,645
Production and Local Origination 0 0 0 0 0 0 0
Advertising 0 0 0 0 0 0 0
Marketing 147,217 154,805 162,770 171,133 179,911 189,126 198,798
General and Administrative 1,048,227 1,102,251 1,158,969 1,218,511 1,281,016 1,346,628 1,415,497
Programming 1,091,354 1,156,243 1,224,877 1,297,468 1,374,241 1,455,432 1,541,291
Partnership Expenses 360,776 382,735 406,001 430,652 456,770 484,441 513,756
--------- --------- --------- --------- --------- --------- ---------
Total Operating Expenses $3,190,126 $3,366,546 $3,552,486 $3,748,452 $3,954,979 $4,172,627 $4,401,988
% Growth 5.5% 5.5% 5.5% 5.5% 5.5% 5.5% 5.5%
U.L.System Cash Flow (EBITDA) $3,106,147 $3,312,945 $3,533,047 $3,767,292 $4,016,572 $4,281,836 $4,564,091
% Margin 49.3% 49.6% 49.9% 50.1% 50.4% 50.6% 50.9%
% Growth 6.7% 6.7% 6.6% 6.6% 6.6% 6.6% 6.6%
Revenue / Subscriber / Month $34.60 $36.12 $37.72 $39.39 $41.13 $42.95 $44.85
SCF / Subscriber / Year $204.8 $215.0 $225.7 $236.9 $248.7 $261.0 $273.9
</TABLE>
<PAGE> 113
W A L L E R C A P I T A L C O R P O R A T I O N
FALCON CABLE TV - CENTRAL OREGON
Discounted Cash Flow Analysis (000 unless otherwise specified)
<TABLE>
<CAPTION>
12/31/95 FYE 12/31, (Projected)
-------- ---------------------------------------
Year 1995 1996 1997 1998
Period 0 1 2 3
-------- ---------------------------------------
Capital Expenditure Analysis
- ----------------------------
<S> <C> <C> <C> <C>
System Cash Flow $2,428,507 $2,578,308 $2,737,397 $2,911,863
% Growth 6.2% 6.2% 6.4%
Total Capital Expenditures 701,160 2,632,342 2,643,512
% of Revenue 13.2% 47.0% 44.5%
Total Capex / Basic Sub $48.5 $179.2 $177.1
Debt Free Cash Flow $1,877,148 $105,055 $268,351
<CAPTION>
FYE 12/31, (Projected)
----------------------------------------------------------------------------------
Year 1999 2000 2001 2002 2003 2004 2005
Period 4 5 6 7 8 9 10
----------------------------------------------------------------------------------
Capital Expenditure Analysis
- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
System Cash Flow $3,106,147 $3,312,945 $3,533,047 $3,767,292 $4,016,572 $4,281,836 $4,564,091
% Growth 6.7% 6.7% 6.6% 6.6% 6.6% 6.6% 6.6%
Total Capital Expenditures 3,454,802 766,214 777,748 789,407 801,190 813,100 825,138
% of Revenue 54.9% 11.5% 11.0% 10.5% 10.1% 9.6% 9.2%
Total Capex / Basic Sub $227.8 $49.7 $49.7 $49.6 $49.6 $49.6 $49.5
Debt Free Cash Flow $(348,655) $2,546,732 $2,755,298 $2,977,885 $3,215,382 $3,468,736 $3,738,953
</TABLE>
<TABLE>
<CAPTION>
Aggregate Value Value per 1995 Subscriber Multiple of 1995 SCF
<S> <C> <C> <C>
FAIR MARKET VALUE $20,164,654 $1,418 8.3
</TABLE>
<PAGE> 114
W A L L E R C A P I T A L C O R P O R A T I O N
FALCON CABLE TV - DALLAS, OREGON
DISCOUNTED CASH FLOW ANALYSIS (000 UNLESS OTHERWISE SPECIFIED)
<TABLE>
<CAPTION>
12/31/95 FYE 12/31, (Projected)
-------- --------------------------------------------------------------------
Year 1995 1996 1997 1998 1999 2000 2001 2002
Period 0 1 2 3 4 5 6 7
- -------------------------------------- -------- --------------------------------------------------------------------
Operations Statistics
- --------------------------------------
% Growth
--------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Homes Passed: 23,770 24,174 24,585 25,003 25,428 25,860 26,300 26,747
% Growth 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7%
Basic/Expanded Tier 16,928 17,212 17,505 17,802 18,105 18,413 18,726 19,044
% Penetration 71.2% 71.2% 71.2% 71.2% 71.2% 71.2% 71.2% 71.2%
% Growth -- 1.7% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7%
New Product Tier (NPT 1) 7,458 7,635 7,817 8,003 8,194 8,388 8,587 8,790
% Penetration 44.1% 44.4% 44.7% 45.0% 45.3% 45.6% 45.9% 46.2%
% Growth -- 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4%
Pay 7,139 7,310 7,487 7,668 7,853 8,041 8,234 8,431
% Penetration 42.2% 42.5% 42.8% 43.1% 43.4% 43.7% 44.0% 44.3%
% Growth -- 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4%
Mini-Pay 241 241 245 249 253 258 262 267
% Penetration 1.4% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4%
% Growth -- -0.0% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7%
Basic Revenue& Tier/Sub/Month $21.74 $22.61 $23.52 $24.46 $25.44 $26.45 $27.51 $28.61
% Growth -- 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
NPT 1 Revenue/Sub/Month $3.86 $4.01 $4.17 $4.34 $4.51 $4.69 $4.88 5.08
% Growth -- 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Pay Revenue/Sub/Month $7.60 $7.67 $7.75 $7.83 $7.90 $7.98 $8.06 $8.14
% Growth -- 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
Mini-Pay Revenue/Sub/Month $3.08 $3.15 $3.21 $3.27 $3.34 $3.41 $3.47 $3.54
% Growth -- 2.0% $2.0% $2.0% $2.0% $2.0% $2.0% $2.0% $2.0%
PPV Rev/Sub/Month $0.22 $0.23 $0.24 $0.25 $0.26 $0.27 $0.28 $0.29
% Growth 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Other Revenue/Sub/Month $2.93 $3.02 $3.11 $3.20 $3.30 $3.40 $3.50 $3.61
% Growth -- 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
<CAPTION>
12/31/95 FYE 12/31, (Projected)
--------
Year 1995 2003 2004 2005
Period 0 8 9 10
- -------------------------------------- -------- ------------------------
Operations Statistics
- -------------------------------------- ------------------------
<S> <C> <C> <C> <C>
Homes Passed: 27,202 27,664 28,134
% Growth 1.7% 1.7% 1.7%
Basic/Expanded Tier 19,368 19,697 20,032
% Penetration 71.2% 71.2% 71.2%
% Growth 1.7% 1.7% 1.7%
New Product Tier (NPT 1) 8,998 9,210 9,426
% Penetration 46.5% 46.8% 47.1%
% Growth 2.4% 2.4% 2.4%
Pay 8,633 8,839 9,049
% Penetration 44.6% 44.9% 45.2%
% Growth 2.4% 2.4% 2.4%
Mini-Pay 271 276 280
% Penetration 1.4% 1.4% 1.4%
% Growth 1.7% 1.7% 1.7%
Basic Revenue& Tier/Sub/Month $29.76 $30.95 $32.18
% Growth 4.0% 4.0% 4.0%
NPT 1 Revenue/Sub/Month $5.28 $5.49 $5.71
% Growth 4.0% 4.0% 4.0%
Pay Revenue/Sub/Month $8.22 $8.31 $8.39
% Growth 1.0% 1.0% 1.0%
Mini-Pay Revenue/Sub/Month $3.61 $3.69 $3.76
% Growth 2.0% 2.0% 2.0%
PPV Rev/Sub/Month $0.30 $0.31 $0.33
% Growth 4.0% 4.0% 4.0%
Other Revenue/Sub/Month $3.71 $3.83 $3.94
% Growth 3.0% 3.0% 3.0%
</TABLE>
<PAGE> 115
- -------------------------------------------------------------------------------
W A L L E R C A P I T A L C O R P O R A T I O N
- -------------------------------------------------------------------------------
FALCON CABLE TV - DALLAS, OREGON
DISCOUNTED CASH FLOW ANALYSIS (000 UNLESS OTHERWISE SPECIFIED)
<TABLE>
<CAPTION>
12/31/95 FYE 12/31, (PROJECTED)
-------------------------------------
Year 1995 1996 1997 1998
Period 0 1 2 3
- ---------------------------------------------------------------------- ---------- -------------------------------------
INCOME STATEMENT SUMMARY
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Basic & Tier $4,416,771 $4,670,493 $4,939,887 $5,224,820
NPT 1 345,351 367,677 391,514 416,879
Pay 650,659 672,942 696,108 720,036
Mini-Pay 8,919 9,096 9,436 9,788
PPV 44,723 47,292 50,020 52,905
Other 595,570 623,727 653,360 684,401
------- ------- ------- -------
TOTAL REVENUE $6,061,993 $6,391,227 $6,740,325 $7,108,829
% Growth - - 5.4% 5.5% 5.5%
EXPENSES: Adjusted
Technical $237,985 $250,446 $263,618 $277,483
Production and Local Origination 12,181 12,843 13,544 14,285
Advertising 72,619 76,563 80,745 85,159
Marketing 87,885 92,487 97,351 102,471
General and Administrative 932,115 980,922 1,032,513 1,086,818
Programming 1,067,415 1,126,185 1,188,543 1,254,414
Partnership Expenses 347,352 366,217 386,221 407,336
------- ------- ------- -------
Total Operating Expenses $2,757,552 $2,905,662 $3,062,536 $3,227,967
% Growth - - 5.4% 5.4% 5.4%
* Adjusted for Partnership Expenses
U.L.System Cash Flow (EBITDA) $3,304,441 $3,485,565 $3,677,789 $3,880,862
% Margin 54.5% 54.5% 54.6% 54.6%
% Growth - - 5.5% 5.5% 5.5%
Revenue / Subscriber / Month $29.84 $30.94 $32.09 $33.28
SCF / Subscriber / Year $195.2 $202.5 $210.1 $218.0
<CAPTION>
12/31/95 FYE 12/31, (PROJECTED)
---------------------------------------------
Year 1995 1999 2000 2001 2002
Period 0 4 5 6 7
---------- ---------------------------------------------
- ----------------------------------------------------------------------
INCOME STATEMENT SUMMARY
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES
Basic & Tier $4,416,771 $5,526,187 $5,844,938 $6,182,074 $6,538,656
NPT 1 345,351 443,867 472,581 503,131 535,633
Pay 650,659 744,751 770,277 796,640 823,868
Mini-Pay 8,919 10,154 10,533 10,926 11,334
PPV 44,723 55,957 59,184 62,598 66,208
Other 595,570 716,917 750,978 786,657 824,031
------- ------- ------- ------- -------
TOTAL REVENUE 6,061,993 $7,497,832 $7,908,491 $8,342,026 $8,799,730
% Growth - - 5.5% 5.5% 5.5% 5.5%
EXPENSES: Adjusted
Technical $237,985 $292,078 $307,439 $323,609 $340,629
Production and Local Origination 12,181 15,066 15,891 16,763 17,682
Advertising 72,619 89,819 94,739 99,932 105,415
Marketing 87,885 107,861 113,534 119,505 125,790
General and Administrative 932,115 1,143,979 1,204,147 1,267,479 1,334,142
Programming 1,067,415 1,323,998 1,397,507 1,475,164 1,557,207
Partnership Expenses 347,352 429,626 453,157 477,998 504,225
------- ------- ------- ------- -------
Total Operating Expenses $2,757,552 $3,402,428 $3,586,414 $3,780,450 $3,985,091
% Growth - - 5.4% 5.4% 5.4% 5.4%
* Adjusted for Partnership Expenses
U.L.System Cash Flow (EBITDA) $3,304,441 $4,095,405 $4,322,077 $4,561,576 $4,814,639
% Margin 54.5% 54.6% 54.7% 54.7% 54.7%
% Growth - - 5.5% 5.5% 5.5% 5.5%
Revenue / Subscriber / Month $29.84 $34.51 $35.79 $37.12 $38.51
SCF / Subscriber / Year $195.2 $226.2 $234.7 $243.6 $252.8
<CAPTION>
12/31/95 FYE 12/31, (PROJECTED)
-------------------------------------
Year 1995 2003 2004 2005
Period 0 8 9 10
---------- -------------------------------------
- ----------------------------------------------------------------------
INCOME STATEMENT SUMMARY
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES
Basic & Tier $4,416,771 $6,915,806 $7,314,709 $7,736,622
NPT 1 345,351 570,210 606,995 646,125
Pay 650,659 851,987 881,025 911,013
Mini-Pay 8,919 11,758 12,197 12,652
PPV 44,723 70,027 74,067 78,339
Other 595,570 863,181 904,190 947,148
------- ------- ------- -------
TOTAL REVENUE $6,061,993 $9,282,968 $9,793,182 $10,331,899
% Growth - - 5.5% 5.5% 5.5%
EXPENSES: Adjusted
Technical $237,985 $358,545 $377,403 $397,252
Production and Local Origination 12,181 18,653 19,678 20,761
Advertising 72,619 111,204 117,316 123,770
Marketing 87,885 132,406 139,370 146,700
General and Administrative 932,115 1,404,311 1,478,171 1,555,916
Programming 1,067,415 1,643,886 1,735,467 1,832,230
Partnership Expenses 347,352 531,914 561,149 592,018
------- ------- ------- -------
Total Operating Expenses $2,757,552 $4,200,921 $4,428,556 $4,668,647
% Growth - - 5.4% 5.4% 5.4%
* Adjusted for Partnership Expenses
U.L.SYSTEM CASH FLOW (EBITDA) $3,304,441 $5,082,047 $5,364,627 $5,663,252
% Margin 54.5% 54.7% 54.8% 54.8%
% Growth - - 5.6% 5.6% 5.6%
Revenue / Subscriber / Month $29.84 $39.94 $41.43 $42.98
SCF / Subscriber / Year $195.2 $262.4 $272.4 $282.7
</TABLE>
<PAGE> 116
- -------------------------------------------------------------------------------
W A L L E R C A P I T A L C O R P O R A T I O N
- -------------------------------------------------------------------------------
FALCON CABLE TV - DALLAS, OREGON
DISCOUNTED CASH FLOW ANALYSIS (000 UNLESS OTHERWISE SPECIFIED)
<TABLE>
<CAPTION>
12/31/95 FYE 12/31, (PROJECTED)
--------------------------------------
Year 1995 1996 1997 1998
Period 0 1 2 3
------------- --------------------------------------
- ----------------------------------------------------------------------
CAPITAL EXPENDITURE ANALYSIS
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
System Cash Flow $3,304,441 $3,485,565 $3,677,789 $3,880,862
% Growth 5.5% 5.5% 5.5%
Total Capital Expenditures 2,893,388 2,908,575 2,924,021
% of Revenue 45.3% 43.2% 41.1%
Total Capex/Basic Sub $168.1 $166.2 $164.3
--------------------------------------------------------------------------------------------------------------------------
DEBT FREE CASH FLOW $592,177 $769,214 $956,841
======== ======== ========
--------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FYE 12/31, (PROJECTED)
-----------------------------------
1999 2000 2001
4 5 6
-----------------------------------
- -------------------------------------------------------
CAPITAL EXPENDITURE ANALYSIS
- -------------------------------------------------------
<S> <C> <C> <C>
System Cash Flow $4,095,405 $4,322,077 $4,561,576
% Growth 5.5% 5.5% 5.5%
Total Capital Expenditures 939,730 955,705 971,952
% of Revenue 12.5% 12.1% 11.7%
Total Capex/Basic Sub $51.9 $51.9 $51.9
---------------------------------------------------- ----------------------------------------
DEBT FREE CASH FLOW $3,155,675 $3,366,372 $3,589,624
========== ========== ==========
---------------------------------------------------- ----------------------------------------
<CAPTION>
FYE 12/31, (PROJECTED)
-----------------------------------------------
2002 2003 2004 2005
7 8 9 10
-----------------------------------------------
- -------------------------------------------------------
CAPITAL EXPENDITURE ANALYSIS
- -------------------------------------------------------
<S> <C> <C> <C> <C>
System Cash Flow $4,814,639 $5,082,017 $5,364,627 $5,663,252
% Growth 5.5% 5.6% 5.6% 5.6%
Total Capital Expenditures 988,475 1,005,279 1,022,369 1,039,749
% of Revenue 11.2% 10.8% 10.4% 10.1%
Total Capex/Basic Sub $51.9 $51.9 $51.9 $51.9
--------------------------------------------------------------------------------------------------------------------------------
DEBT FREE CASH FLOW $3,826,164 $4,076,768 $4,342,258 $4,623,503
========== ========== ========== ==========
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
AGGREGATE VALUE VALUE PER 1995 SUBSCRIBER MULTIPLE OF 1995 SCF
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FAIR MARKET VALUE $27,257,132 $1,610 8.2
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 117
WALLER CAPITAL CORPORATION
FALCON CABLE TV - COOS BAY, OREGON
DISCOUNTED CASH FLOW ANALYSIS (000 UNLESS OTHERWISE SPECIFIED)
<TABLE>
<CAPTION>
-------- ------------------------------------
12/31/95 FYE 12/31, (PROJECTED)
-------- ------------------------------------
Year 1995 1996 1997 1998 1999
Period 0 1 2 3 4
- ---------------------------------------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C>
Operations Statistics
% Growth
Homes Passed: 31,489 31,804 32,122 32,443 32,768
% Growth 1.0% 1.0% 1.0% 1.0%
Basic/Expanded Tier 21,847 22,097 22,350 22,606 22,865
% Penetration 69.4% 69.5% 69.6% 69.7% 69.8%
% Growth - - 1.1% 1.1% 1.1% 1.1%
New Product Tier (NPT 1) 13,487 13,686 13,865 14,046 14,230
% Penetration 61.7% 61.9% 62.0% 62.1% 62.2%
% Growth - - 1.5% 1.3% 1.3% 1.3%
Pay 7,771 7,971 8,174 8,380 8,590
% Penetration 35.6% 36.1% 36.6% 37.1% 37.6%
% Growth - - 2.6% 2.5% 2.5% 2.5%
Mini-Pay 306 309 313 316 320
% Penetration 1.4% 1.4% 1.4% 1.4% 1.4%
% Growth - - 1.1% 1.1% 1.1% 1.1%
Basic Revenue& Tier/Sub/Month $22.91 $23.77 $24.66 $25.58 $26.54
% Growth - - 3.8% 3.8% 3.8% 3.8% 3.8%
NPT 1 Revenue/Sub/Month $3.39 $3.52 $3.67 $3.81 $3.96
% Growth - - 4.0% 4.0% 4.0% 4.0% 4.0%
Pay Revenue/Sub/Month $7.38 $7.45 $7.53 $7.60 $7.68
% Growth - - 1.0% 1.0% 1.0% 1.0% 1.0%
Mini-Pay Revenue/Sub/Month $3.60 $3.67 $3.74 $3.82 $3.89
% Growth - - 2.0% 2.0% 2.0% 2.0% 2.0%
PPV Rev/Sub/Month $0.53 $0.56 $0.58 $0.60 $0.62
% Growth 4.0% 4.0% 4.0% 4.0% 4.0%
Other Revenue/Sub/Month $4.72 $4.86 $5.01 $5.16 $5.31
% Growth - - 3.0% 3.0% 3.0% 3.0% 3.0%
<CAPTION>
FYE 12/31, (PROJECTED)
---------------------------------------------------------
2000 2001 2002 2003 2004 2005
5 6 7 8 9 10
- -------------------------------------------------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations Statistics
Homes Passed:
% Growth 33,095 33,426 33,760 34,098 34,439 34,783
1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
Basic/Expanded Tier
% Penetration 23,127 23,392 23,659 23,930 24,204 24,481
% Growth 69.9% 70.0% 70.1% 70.2% 70.3% 70.4%
1.1% 1.1% 1.1% 1.1% 1.1% 1.1%
New Product Tier (NPT 1)
% Penetration 14,416 14,604 14,795 14,988 15,184 15,382
% Growth 62.3% 62.4% 62.5% 62.6% 62.7% 62.8%
1.3% 1.3% 1.3% 1.3% 1.3% 1.3%
Pay
% Penetration 8,712 8,835 8,960 9,086 9,214 9,344
% Growth 37.7% 37.8% 37.9% 38.0% 38.1% 38.2%
1.4% 1.4% 1.4% 1.4% 1.4% 1.4%
Mini-Pay
% Penetration 324 327 331 335 339 343
% Growth 1.4% 1.4% 1.4% 1.4% 1.4% 1.4%
1.1% 1.1% 1.1% 1.1% 1.1% 1.1%
Basic Revenue& Tier/Sub/Month
% Growth $27.54 $28.57 $29.64 $30.75 $31.91 $33.10
3.8% 3.8% 3.8% 3.8% 3.8% 3.8%
NPT 1 Revenue/Sub/Month
% Growth $4.12 $4.29 $4.46 $4.64 $4.82 $5.02
4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Pay Revenue/Sub/Month
% Growth $7.75 $7.83 $7.91 $7.99 $8.07 $8.15
1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
Mini-Pay Revenue/Sub/Month
% Growth $3.97 $4.05 $4.13 $4.21 $4.30 $4.38
2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
PPV Rev/Sub/Month
% Growth $0.65 $0.68 $0.70 $0.73 $0.76 $0.79
4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Other Revenue/Sub/Month
% Growth $5.47 $5.64 $5.80 $5.98 $6.16 $6.34
3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
</TABLE>
<PAGE> 118
WALLER CAPITAL CORPORATION
FALCON CABLE TV - COOS BAY, OREGON
DISCOUNTED CASH FLOW ANALYSIS (000 UNLESS OTHERWISE SPECIFIED)
<TABLE>
<CAPTION>
-------- -------------------------------------------------------
12/31/95 FYE 12/31, (PROJECTED)
-------- -------------------------------------------------------
Year 1995 1996 1997 1998 1999
Period 0 1 2 3 4
- --------------------------------------------------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income Statement Summary
Revenues
Basic & Tier $6,005,889 $6,302,492 $6,613,729 $6,940,322 $7,283,027
NPT 1 548,476 578,819 609,849 642,541 676,981
Pay 687,957 712,675 738,139 764,367 791,382
Mini-Pay 13,209 13,621 14,053 14,498 14,957
PPV 139,973 147,240 154,883 162,923 171,380
Other 1,237,351 1,289,072 1,342,951 1,399,080 1,457,552
--------- ---------- ---------- ---------- -----------
Total Revenue 8,632,855 $9,043,918 $9,473,604 $9,923,730 $10,395,279
% Growth - - 4.8% 4.8% 4.8% 4.8%
Expenses: Adjusted
Technical $683,125 $715,134 $748,641 $783,717 $820,434
Production and Local Origination 10,937 11,458 12,002 12,572 13,170
Advertising 110,004 115,242 120,717 126,453 132,462
Marketing 231,570 242,421 253,779 265,669 278,116
General and Administrative 1,274,150 1,333,852 1,396,350 1,461,772 1,530,256
Programming 1,576,577 1,653,081 1,733,080 1,816,946 1,904,867
Partnership Expenses 494,663 518,217 542,838 568,630 595,649
---------- ---------- ---------- ---------- ----------
Total Operating Expenses $4,381,026 $4,589,404 $4,807,407 $5,035,759 $5,274,954
% Growth - - 4.8% 4.8% 4.8% 4.7%
* Adjusted for Partnership Expenses
U.L.System Cash Flow (EBITDA) $4,251,829 $4,454,514 $4,666,197 $4,887,971 $5,120,324
% Margin 49.3% 49.3% 49.3% 49.3% 49.3%
% Growth - - 4.8% 4.8% 4.8% 4.8%
Revenue / Subscriber / Month $32.93 $34.11 $35.32 $36.58 $37.89
SCF / Subscriber / Year $194.6 $201.6 $208.8 $216.2 $223.9
<CAPTION>
FYE 12/31, (PROJECTED)
----------------------------------------------------------------------------------
2000 2001 2002 2003 2004 2005
5 6 7 8 9 10
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income Statement Summary
Revenues
Basic & Tier $7,642,638 $8,019,990 $8,415,956 $8,831,454 $9,267,447 $9,724,943
NPT 1 713,264 751,488 791,758 834,181 878,873 925,955
Pay 810,598 830,272 850,417 871,042 892,159 913,781
Mini-Pay 15,431 15,920 16,424 16,944 17,481 18,034
PPV 180,275 189,632 199,474 209,827 220,716 232,170
Other 1,518,464 1,581,919 1,648,022 1,716,883 1,788,619 1,863,348
----------- ----------- ----------- ----------- ----------- -----------
Total Revenue $10,880,671 $11,389,221 $11,922,050 $12,480,331 $13,065,294 $13,678,231
% Growth 4.7% 4.7% 4.7% 4.7% 4.7% 4.7%
Expenses:
Technical $858,870 $899,105 $941,222 $985,310 $1,031,462 $1,079,773
Production and Local Origination 13,785 14,429 15,104 15,811 16,552 17,329
Advertising 138,647 145,127 151,917 159,030 166,484 174,295
Marketing 291,145 304,784 319,061 334,007 349,651 366,028
General and Administrative 1,601,946 1,676,990 1,755,547 1,837,780 1,923,860 2,013,969
Programming 1,995,171 2,089,854 2,189,131 2,293,229 2,402,384 2,516,844
Partnership Expenses 623,462 652,602 683,133 715,123 748,641 783,763
---------- ---------- ---------- ---------- ---------- ----------
Total Operating Expenses $5,523,025 $5,782,891 $6,055,116 $6,340,291 $6,639,036 $6,952,000
% Growth 4.7% 4.7% 4.7% 4.7% 4.7% 4.7%
* Adjusted for Partnership Expenses
U.L.System Cash Flow (EBITDA) $5,357,645 $5,606,330 $5,866,935 $6,140,040 $6,426,259 $6,726,231
% Margin 49.2% 49.2% 49.2% 49.2% 49.2% 49.2%
% Growth 4.6% 4.6% 4.6% 4.7% 4.7% 4.7%
Revenue / Subscriber / Month $39.21 $40.57 $41.99 $43.46 $44.98 $46.56
SCF / Subscriber / Year $231.7 $239.7 $248.0 $256.6 $265.5 $274.8
</TABLE>
<PAGE> 119
WALLER CAPITAL CORPORATION
FALCON CABLE TV - COOS BAY, OREGON
DISCOUNTED CASH FLOW ANALYSIS (000 UNLESS OTHERWISE SPECIFIED)
<TABLE>
<CAPTION>
-------- -------------------------------------------------
12/31/95 FYE 12/31, (PROJECTED)
-------- -------------------------------------------------
Year 1995 1996 1997 1998 1999
Period 0 1 2 3 4
- ------------------------------------------------------------ ---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital Expenditure Analysis
System Cash Flow $4,251,829 $4,454,514 $4,666,197 $4,887,971 $5,120,324
% Growth 4.8% 4.8% 4.8% 4.8%
Total Capital Expenditures 1,184,920 1,648,376 1,661,982 2,725,740
% of Revenue 13.1% 17.4% 16.7% 26.2%
Total Capex / Basic Sub $53.6 $73.8 $73.5 $119.2
- --------------------------------------------------------------------------------------------------------------------
Debt Free Cash Flow $3,269,594 $3,017,822 $3,225,990 $2,394,585
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
----------------------------------------------------------------------------
FYE 12/31, (PROJECTED)
----------------------------------------------------------------------------
2000 2001 2002 2003 2004 2005
5 6 7 8 9 10
- ----------------------------------------- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Capital Expenditure Analysis
System Cash Flow $5,357,645 $5,606,330 $5,866,935 $6,140,040 $6,426,259 $6,726,231
% Growth 4.6% 4.6% 4.6% 4.7% 4.7% 4.7%
Total Capital Expenditures 2,739,652 2,753,720 1,267,945 1,282,329 1,296,875 1,311,583
% of Revenue 25.2% 24.2% 10.6% 10.3% 9.9% 9.6%
Total Capex / Basic Sub $118.5 $117.7 $53.6 $53.6 $53.6 $53.6
- ----------------------------------------- ---------------------------------------------------------------------------
Debt Free Cash Flow $2,617,993 $2,852,611 $4,598,990 $4,857,711 $5,129,384 $5,414,648
- ----------------------------------------- ---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Aggregate Value Value per 1995 Subscriber Multiple of 1995 SCF
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FAIR MARKET VALUE $35,486,280 $1,624 8.3
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 120
SUMMARY APPRAISAL OF EXCHANGE SYSTEMS
<PAGE> 121
- ------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY
- ------------------------------------------------------------------------------
SUMMARY APPRAISAL OF EXCHANGE SYSTEMS
As part of the appraisal (the "Appraisal") process Waller Capital determined
that appraised value of certain cable systems (the "Systems") which could be
subject to Section 3.14 of the Falcon Cable Systems Company partnership
agreement's plan of liquidation.
Falcon Holdings Group, L.P. provided the following list of Systems which
separated those Systems which would be allocated (the "Allocation") to Marc
Nathanson (the "Proposed Exchange Systems") and the remaining cable systems
(the "Remaining Systems").
PROPOSED EXCHANGE SYSTEMS REMAINING SYSTEMS
Bandon (System) Gilroy (Region)
Coquille (System) San Luis Obispo (Region)
Myrtle Point (System) Central Oregon (Region)
Powers (System) Tulare (Region)
Nehalem (System) Coos Bay (System)
Netarts (System) Dallas (System)
Tillamook (System) Gardiner (System)
Brickyard Road (System) Hauser (System)
Silverton (System) Reedsport (System)
Florence (System) Mapleton (System)
Hesperia (Region) Wilson River (System)
In the Allocation, if a Region was left intact, the value determined in the
Appraisal was incorporated, however, if a Region's systems were split between
the Proposed Exchange Systems and the Remaining Systems, the valuation on a per
system basis was subject to the methodology described below.
METHODOLOGY
The appraisal analysis of the Proposed Exchange Systems and the Remaining
Systems was consistent with the analysis performed to provide the appraisal of
all of Falcon Cable Systems Company. In
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WALLER CAPITAL CORPORATION
<PAGE> 122
- ------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY
- ------------------------------------------------------------------------------
SUMMARY APPRAISAL OF EXCHANGE SYSTEMS
addition, certain assumptions were required including but not limited to; (a)
the use of a one month annualized billing statement prepared on a per headend
basis to allocate regional revenue on a per headend basis; (b) capital
expenditures were allocated on a per headend basis versus across a Region as in
the Appraisal; (c) capital expenditures were not increased to create headends
for those systems that would be separated from a signal origination source due
to the allocation; (d) the assumed operating margin was the margin achieved by
the Region in which the headend is located as it was determined to be
unreasonable to derive a margin on a per headend basis (due to among other
things a wide disparity in channel line-ups, rates and operating expenses), and
(e) the exit multiple and the weighted average cost of capital remained
consistent with the assumptions in the Appraisal's Discounted Cash Flow
Analysis made for each applicable Region.
EXCHANGE SYSTEM'S VALUE
The following table summarizes the values assigned on a per headend basis (or
in the case of Hesperia, the entire Region) for those assigned for distribution
subject to the Section 3.14 sale, a plan of liquidation:
PROPOSED EXCHANGE SYSTEMS
<TABLE>
<CAPTION>
<S> <C> <C>
SYSTEM SUBSCRIBERS VALUATION
- ------ ----------- -----------
Bandon 1,549 $ 2,015,229
Coquille 1,796 2,279,242
Myrtle Point 774 996,374
Powers 203 216,457
Nehalem 4,608 7,314,278
Netarts 830 948,909
Tillamook 2,478 4,053,336
Brickyard Road 484 502,530
Silverton 1,753 2,734,442
Florence 3,751 7,300,686
Hesperia (Region) 18,513 28,865,947
----------- ----------
TOTAL 36,739 $57,227,430
</TABLE>
- ---------------------------------------------------------------------------
WALLER CAPITAL CORPORATION
<PAGE> 123
- --------------------------------------------------------------------------------
FALCON CABLE SYSTEMS COMPANY
- --------------------------------------------------------------------------------
SUMMARY APPRAISAL OF EXCHANGE SYSTEMS
The Remaining Systems and appraised values are as follows:
<TABLE>
<CAPTION>
REMAINING SYSTEMS
-----------------
<S> <C> <C>
SYSTEM SUBSCRIBERS VALUATION
- ------ ----------- -----------
Gilroy (Region) 33,073 $57,640,720
San Louis Obispo (Region) 15,635 21,988,550
Central Oregon (Region) 14,225 20,164,654
Tulare (Region) 15,249 22,269,159
Coos Bay (System) 10,385 17,981,662
Dallas (System) 6,684 11,670,175
Gardiner (System) 102 87,396
Hauser (System) 491 606,994
Reedsport (System) 2,600 3,834,126
Mapleton (System) 196 168,124
Wilson River (System) 91 33,453
----------- ------------
TOTAL 98,731 $156,445,013
</TABLE>
I have included this analysis as an Appendix to our formal appraisal because of
the inter-related nature of the information. The analysis and conclusions are
subject to the caveats and other limitations discussed herein.
- -----------------------------------------------------------------------------
WALLER CAPITAL CORPORATION
<PAGE> 1
EXHIBIT 4
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
FALCON CABLE SYSTEMS COMPANY II, L.P.
AND
FALCON CABLE SYSTEMS COMPANY,
A CALIFORNIA LIMITED PARTNERSHIP
DATED AS OF JUNE 13, 1996
<PAGE> 2
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of June 13, 1996 (this
"Agreement") by and between Falcon Cable Systems Company, L.P., a California
limited partnership ("FCSC"), and Falcon Cable Systems Company II, L.P., a
California limited partnership ("New Falcon").
WHEREAS, pursuant to the Amended and Restated Agreement of
Limited Partnership of FCSC, dated as of December 15, 1986, amended on June 15,
1987 and January 23, 1990 (as so amended, the "Partnership Agreement")
(capitalized terms used in this Agreement and not otherwise defined herein
shall have the meaning ascribed thereto in the Partnership Agreement), from and
after the sixth year after the closing of the sale to the underwriters in the
initial public offering of the Units (the "IPO"), the General Partner may cause
the sale of all or substantially all of the Cable Systems to the General
Partner or to any Affiliate of the General Partner for cash so long as the
purchase price (without deduction for any Disposition Fee or other brokerage
fees) is equal to or greater than the Appraised Value of the Cable Systems
being sold; and
WHEREAS, as of the date hereof, it is in excess of six years
following the IPO; and
WHEREAS, New Falcon is an Affiliate of the General Partner, as
the General Partner is Falcon Cable Investors Group, a California limited
partnership ("FCIG"), and Falcon Holding Group, L.P., a Delaware limited
partnership ("FHGLP") is the general partner of FCIG, and FHGLP is a general
partner of New Falcon; and
WHEREAS, as determined in accordance with the terms of the
Partnership Agreement, the Appraised Value of all of the Cable Systems owned by
FCSC is $247,396,814; and
WHEREAS, New Falcon desires to purchase all of the Cable
Systems of FCSC at their Appraised Value and FCIG desires to cause FCSC to sell
all of the Cable Systems to New Falcon at their Appraised Value;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to
<PAGE> 3
be legally bound hereby, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1. DEFINED TERMS. The following terms, as used in
this Agreement, shall have the following meanings (and such meanings shall be
equally applicable to both the singular and plural forms of the terms defined
herein):
"Bill of Sale" shall mean such bills of sale, instruments of
conveyance and assignment and assumption as may be necessary to effect
the Sale of the Cable Systems.
"Cable Systems" shall mean all right, title and interest of
FCSC in all assets, rights, privileges, interests, claims and
properties, whether tangible or intangible, owned, used or held by
FCSC for use in connection with the provision of cable television
services.
"Cable System Contracts" shall mean all contracts, purchase
orders and other agreements of FCSC to the extent relating to the
construction, operation or maintenance of the Cable Systems. Cable
System Contracts shall not include any Local Authorization or FCC
License.
"Closing" shall mean the consummation of the Sale.
"Communications Act" shall mean the Communications Act of
1934, as amended.
"FCC" shall mean the Federal Communications Commission.
"FCC Consents" shall mean consents of the FCC to the transfer
of the FCC Licenses to New Falcon in connection with the Sale.
-2-
<PAGE> 4
"FCC Licenses" shall mean the licenses and permits of the FCC
held by FCSC in connection with the operation of the Cable Systems.
"Franchise Areas" shall mean the areas in which FCSC is
authorized to provide cable television service under the Local
Authorizations and the areas served by any of the Cable Systems in
which FCSC provides cable television service without a Local
Authorization.
"Governmental Authority" shall mean any federal, state,
municipal or local governmental authority or political subdivision
thereof.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Legal Requirement" shall mean the requirements of any law,
ordinance, statute, rule, regulation, code, order, judgment, decree,
injunction, franchise, determination, approval, permit, license,
authorization or other requirement of any Governmental Authority.
"Lien" shall mean, with respect to any asset, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in
respect of such asset.
"Local Authority" shall mean any Governmental Authority having
jurisdiction to grant a cable television franchise with respect to all
or a portion of any System.
"Local Authority Consent" shall mean any approval,
authorization or consent of a Local Authority necessary for a change
in control of a Local Authorization or otherwise in connection with
the consummation of the Sale.
"Local Authorizations" shall mean all authorizations,
approvals, franchises, licenses and permits of Local Authorities
granted to the Company which permit the operation of the Systems as
amended, modified or supplemented.
-3-
<PAGE> 5
"Material Adverse Effect" shall mean a material adverse effect
on the business, financial condition or results of operations of the
business of FCSC or any of the Cable Systems.
"Permitted Liens" shall mean (i) Liens for Taxes not yet due
and payable; (ii) any carrier's, warehousemen's, mechanic's,
materialmen's, repairmen's, employees' or other like Lien arising in
the ordinary course of business; (iii) easements, rights-of-way,
restrictions, encroachments and other similar encumbrances which do
not materially interfere with the use of the Cable Systems as
presently used; and (iv) rights of first refusal in favor of, and
restrictions imposed by, Governmental Authorities.
"Person" shall mean and include an individual, a corporation,
a partnership (general, limited or limited liability), a joint
venture, a limited liability company, an association, a trust or any
other organization or entity, including a Governmental Authority.
"Purchase Price" shall mean $247,396,814.
"Right of First Refusal" shall mean any right of first refusal
of a Local Authority in regard to or arising as a result of the Sale.
"Taxes" shall mean all taxes, fees, duties, imposts, levies,
withholdings, tax deficiencies, assessments, and charges, including,
without limitation, all net income, gross income, gross receipts,
sales, use, value-added, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, excise, estimated,
severance, stamp, occupation, property or other taxes and customs
duties of any kind whatsoever, together with any interest and any
penalties, additions to tax or additional amounts relating thereto,
imposed by any Governmental Authority (domestic or foreign).
"Unapproved FCC Assets" shall mean all equipment relating
-4-
<PAGE> 6
to Unapproved FCC Licenses.
"Unapproved FCC License" shall mean an FCC License as to which
all FCC Consents have not been obtained or do not remain in full force
and effect immediately prior to the Closing Date.
"Unapproved Franchise Areas" shall mean Franchise Areas
covered by Unapproved Local Authorizations.
"Unapproved Franchise Assets" shall mean, with respect to all
Unapproved Franchise Areas, all Unapproved Local Authorizations and
all related real property and equipment.
"Unapproved Local Authorizations" shall mean a Local
Authorization (other than Right of First Refusal Local Authorizations)
as to which all Local Authority Consents have not been obtained or do
not remain in full force and effect immediately prior to the Closing
Date.
ARTICLE II.
PURCHASE AND SALE
SECTION 2.1. PURCHASE AND SALE. (a) Subject to the
satisfaction or waiver in writing of the conditions set forth herein and to the
other terms, conditions and provisions hereof, on a date as soon as practicable
following the satisfaction or waiver of the conditions set forth herein (the
"Closing Date"), FCSC shall execute and deliver to New Falcon the Bill of Sale
pursuant to which FCSC shall sell, convey, assign, transfer and deliver to New
Falcon, and New Falcon shall purchase, acquire, accept and pay for, all of
FCSC's right, title and interest in all Cable Systems owned by FCSC, including,
subject to Section 2.2, FCSC's rights under the Cable System Contracts and New
Falcon shall execute and deliver the Bill of Sale and thereby assume and agree
to perform in accordance with their terms the Cable System Contracts, FCC
Licenses and Local Authorizations (the "Sale").
-5-
<PAGE> 7
SECTION 2.2. LACK OF CONSENTS. If the Sale requires the
consent of another Person under any Cable System Contract and such consent has
not been obtained prior to the Closing Date or does not remain in full force
and effect at the Closing Date, such failure to obtain such consent or failure
of such consent to be in full force and effect shall not itself constitute a
breach of any provision hereof. FCSC shall, with respect to each such Cable
System Contract, use its reasonable commercial efforts (at the expense of New
Falcon and at no out-of-pocket expense to FCSC, but without New Falcon being
required to provide any consideration therefor) to: (i) keep each such Cable
System Contract in effect and obtain such consent; (ii) provide to New Falcon
the benefits of each such Cable System Contract through subcontract or
otherwise; (iii) cooperate in any reasonable arrangement designed to provide
such benefits to New Falcon; and (iv) enforce, at the request and sole expense
of New Falcon, any rights of New Falcon included in the Cable Systems under or
with respect to any such Cable System Contract against all other Persons
(including termination of the foregoing in accordance with the terms thereof
upon the election of New Falcon), in each case of clauses (i)-(iv) to the
extent that New Falcon performs all obligations of FCSC under such Cable System
Contract. If all such consents under any such Cable System Contract are
obtained after the Closing Date, FCSC shall promptly assign such Cable System
Contract to New Falcon and New Falcon shall assume all obligations under such
Cable System Contract with respect to periods following such assignment, in
each case without the payment of additional consideration by New Falcon or
FCSC.
SECTION 2.3. LACK OF REGULATORY APPROVALS. (a) If
immediately prior to the Closing Date any Local Authority Consent or FCC
Consent has not been obtained or does not remain in full force and effect
immediately prior to the Closing Date, such failure to obtain such Local
Authority Consent or FCC Consent or such failure of such Local Authority
Consents or FCC Consent to be in full force and effect shall not itself
constitute a breach of any provision hereof.
(b) If at any time following the Closing Date, FCSC
-6-
<PAGE> 8
is able to transfer to New Falcon (or a designee of New Falcon) an Unapproved
Local Authorization or an Unapproved FCC License, FCSC shall promptly transfer
to New Falcon (or such designee of New Falcon) such Unapproved Local
Authorization and all related Unapproved Franchise Assets and such Unapproved
FCC License and all related Unapproved FCC Assets, as the case may be. New
Falcon (or such designee of New Falcon), as the case may be, shall assume, pay,
perform and discharge the obligations arising after the Closing Date under or
in respect of any such Unapproved Local Authorization or Unapproved FCC License
so transferred.
SECTION 2.4. RECEIPT OF CONSENTS. It is the intent of the
parties that the arrangements described in Sections 2.2 and 2.3 continue for
the shortest possible time, and to this end they agree to use reasonable
commercial efforts to obtain all consents (including Local Authority Consents)
to the Sale referred to in said Sections as promptly as practicable following
the Closing Date. New Falcon shall coordinate the efforts to obtain such
consents, and New Falcon shall be responsible for all costs, expenses,
liabilities, obligations and burdens with respect to such consents.
SECTION 2.5. NO ASSUMPTION OF LIABILITIES. FCSC shall
retain, shall continue to be responsible after the Closing for, shall pay,
perform and discharge, and shall indemnify and hold New Falcon and each of its
Affiliates harmless from and against all liabilities and obligations (whether
incurred, accrued, arising or known prior to, at or after the Closing, whether
or not known, suspected, asserted or claimed at the Closing or at any time
theretofore or thereafter, whether or not reflected or provided for, or
required to be reflected or provided for, in any balance sheet of FCSC and
whether fixed, liquidated, unliquidated, absolute, contingent or otherwise)
which relate to or arise out of the business, assets or operations of FCSC as
heretofore, currently or hereafter conducted through the Closing Date, any of
the Cable Systems or the past operation, condition or use of any of the Cable
System, including those related to: (i) product liability, (ii) general tort
liability, (iii) any other activity undertaken by FCSC or relating to the Cable
Systems, any (iv) any obligation or li-
-7-
<PAGE> 9
ability of FCSC to any of its partners or in respect of any management fee or
sales fee; other, however, than obligations under the Cable System Contracts,
FCC Licenses and Local Authorizations specifically assumed by New Falcon.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF FCSC
FCSC represents and warrants to New Falcon that:
SECTION 3.1. EXISTENCE AND POWER. FCSC (i) is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of California, (ii) is authorized to transact business and is
in good standing in each state in which its ownership of assets or conduct of
business requires such qualification, and (iii) has all partnership powers
required to carry on its business as conducted on the date hereof, with such
exceptions to clauses (i), (ii) and (iii) as would not have a Material Adverse
Effect or materially and adversely affect the ability of New Falcon to
consummate the Sale.
SECTION 3.2. AUTHORIZATION. FCSC has the partnership power
to own and operate the Cable Systems. FCSC has the partnership power to enter
into this Agreement and to consummate the Sale. The execution and delivery by
FCSC of this Agreement and the consummation by FCSC of the Sale has been duly
authorized by all necessary partnership action.
SECTION 3.3. GOVERNMENTAL AUTHORIZATION. The execution and
delivery of this Agreement by FCSC, and the performance by FCSC of this
Agreement, and the consummation by FCSC of the Sale, require no material action
by or in respect of, or material filing with, any Governmental Authority other
than compliance with any applicable requirements of the HSR Act, and the Local
Authorizations.
SECTION 3.4. CONSENTS. Except as set out in Schedule
-8-
<PAGE> 10
3.4, no material consent by any Person under any Cable System Contract is
required or necessary for the execution and delivery of this Agreement by FCSC,
or the performance by FCSC of this Agreement, or the consummation of the Sale
contemplated to be consummated by it pursuant hereto, except as would not have
a Material Adverse Effect.
SECTION 3.5. NON-CONTRAVENTION. (a) The execution, delivery
and performance of this Agreement by FCSC, and the consummation by FCSC of the
Sale, do not or on or before the Closing Date will not, (x) contravene the
Partnership Agreement or (y) subject to obtaining the consents described in
Schedules 3.3 and subject to obtaining, taking or making the actions and
filings described in Section 3.4, result in the imposition of any Lien upon any
assets of FCSC pursuant to, or constitute a breach or default (including any
event that, with the passage of time or giving of notice, or both, would become
a breach or default) under or give rise to a right of termination,
cancellation, first refusal or acceleration under any applicable Legal
Requirement or any judgment, injunction, order, decree, contract, license,
lease, indenture, mortgage, loan agreement, note or other agreement or
instrument as to which FCSC is a party or by which any of its properties may be
bound, the effect of which would be to materially impair the ability of FCSC to
perform its obligations under this Agreement.
(b) FCSC is not in breach or default (including any event
that, with the passage of time or giving of notice, or both, would become a
breach or default) under any Cable System Contract or contract by which any of
its assets may be bound, the effect of which would be to impair the ability of
FCSC in any material respect to operate any Cable System as presently operated.
SECTION 3.6. BINDING EFFECT. This Agreement has been duly
executed and delivered by FCSC, and when executed by the parties hereto, this
Agreement constitutes a valid and binding obligation of FCSC, enforceable
against FCSC in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar
-9-
<PAGE> 11
laws affecting creditors' rights generally or by the principles governing the
availability of equitable remedies.
SECTION 3.7. SYSTEMS; AUTHORIZATIONS; LICENSES. (a)
Schedule 3.7 sets forth a complete list for each of the Cable Systems of the
Local Authorizations and FCC Licenses (other than any such authorization,
approval, certification, franchise, license or permit which is not material to
the ownership or operation of a System) in effect as of the date hereof and
indicates those Local Authorizations and FCC Licenses requiring the consent of
the Local Authority or the FCC, respectively, for consummation of the Sale.
(b) Each Local Authorization (x) is in all material
respects validly held by FCSC in accordance with and as required by the terms
thereof and according to all material applicable Legal Requirements and (y) is
in all material respects in full force and effect and has not been revoked or
canceled and FCSC is in material compliance therewith. To the knowledge of
FCSC and except as set forth on Schedule 3.7, no proceeding to revoke, cancel
or modify in any manner any such Local Authorization has been initiated or
threatened in writing.
(c) Each FCC Licenses (x) is in all material respects
validly held by FCSC in accordance with and as required by the terms thereof
and according to all material applicable Legal Requirements and (y) is in all
material respects in full force and effect and has not been revoked or canceled
and FCSC is in material compliance therewith. To the knowledge of FCSC and
except as set forth on Schedule 3.7, no proceeding to revoke, cancel or modify
in any manner any such FCC License has been initiated or threatened in writing.
SECTION 3.8. ASSETS. FCSC has good and marketable title to,
or a valid leasehold or license interest in, all assets purported to be owned,
leased or licensed by FCSC which constitute the Cable Systems, free and clear
of all Liens other than Permitted Liens and other than any Liens which shall be
fully satisfied, discharged and released effective as of the Closing. The Bill
of Sale is sufficient to transfer to FCSC
-10-
<PAGE> 12
good and, subject to Permitted Liens, marketable title to the Cable Systems.
SECTION 3.9. INTELLECTUAL PROPERTY. To the knowledge of
FCSC, the conduct of its business does not infringe upon the patents,
trademarks, trade names or other intellectual property rights of any Person,
with such exceptions as would not result in a Material Adverse Effect.
SECTION 3.10. CABLE SYSTEM CONTRACTS. (a) Schedule 3.10
lists all Cable System Contracts in effect on the date hereof.
(b) Except as disclosed in Schedule 3.10, FCSC is not in
material default or breach of any Cable System Contract and, to the knowledge
of FCSC, (i) there exists no state of facts which after notice or lapse of time
or both would constitute such a material default or breach and (ii) no other
party to such Cable System Contract is in default or breach thereunder.
(c) Except as set forth on Schedule 3.10, the real property
and personal property which are the subject of leases that constitute Cable
System Contracts are currently used in the construction, operation or
maintenance of the FCSC business.
SECTION 3.11. LITIGATION. Except as set out in Schedule
3.11, there are no actions, suits or proceedings pending and, to the knowledge
of FCSC, there are no claims, grievances, governmental investigations, actions,
suits or proceedings threatened, against or affecting FCSC with respect to its
business at law or in equity or before or by any Governmental Authority, or
before or by an arbitrator or arbitration board which would have a Material
Adverse Effect or materially delay the Closing. Except as set out in Schedule
3.11, there are no judgments, decrees or orders outstanding against FCSC with
respect to its business or any of the Cable Systems or the Sale.
SECTION 3.12. COMPLIANCE WITH LEGAL REQUIREMENTS. Except as
set forth on Schedule 3.12, (i) FCSC is in compliance with all applicable Legal
Requirements and (ii) FCSC's business
-11-
<PAGE> 13
is being conducted in compliance with all applicable Legal Requirements, with
such exceptions to clauses (i) and (ii) as would not have a Material Adverse
Effect or materially delay the Closing.
SECTION 3.13. REPORTS AND FINANCIAL STATEMENTS. FCSC has
filed all reports (including without limitation proxy statements) required to
be filed with the Securities Exchange Commission ("SEC") since January 1, 1993
(collectively, the "FCSC SEC Reports"), and has previously furnished or made
available to New Falcon true and complete copies of all the FCSC SEC Reports.
None of the FCSC SEC Reports, as of their respective dates (as amended through
the date hereof), contained any untrue statement of material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Each of the balance sheets (including the related notes)
included in the FCSC SEC Reports presents fairly, in all material respects, the
consolidated financial position of FCSC as of the respective dates thereof, and
the other related statements (including the related notes) included therein
present fairly, in all material respects, the results of operations and the
changes in financial position of FCSC for the respective periods or as of the
respective dates set forth therein, all in conformity with generally accepted
accounting principles consistently applied during the periods involved, except
as otherwise noted therein and subject, in the case of the unaudited interim
financial statements, to normal year-end adjustments and any other adjustments
described therein. All of the FCSC SEC Reports, as of their respective dates
(as amended through the date hereof), complied in all material respects with
the requirements of the Securities Exchange Act of 1934 and the applicable
rules and regulations thereunder.
SECTION 3.14. FINDERS' FEES. There is no investment banker,
broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of FCSC who might be entitled to any fee or
commission from FCSC in connection with the execution, delivery or performance
of this Agreement or
-12-
<PAGE> 14
the Sale, other than the General Partner as provided for in the Partnership
Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF NEW FALCON
New Falcon represents and warrants to FCSC that:
SECTION 4.1. EXISTENCE AND POWER. New Falcon is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of Delaware and has conducted no operations other than in
connection with the Sale.
SECTION 4.2. AUTHORIZATION. New Falcon has the partnership
power to enter into this Agreement and to consummate the Sale. The execution
and delivery by New Falcon of this Agreement and the consummation by New Falcon
of the Sale has been duly authorized by all necessary partnership action.
SECTION 4.3. GOVERNMENTAL AUTHORIZATION. The execution and
delivery of this Agreement by New Falcon, and the performance by New Falcon of
this Agreement, and the consummation by New Falcon of the Sale, require no
material action by or in respect of, or material filing with, any Governmental
Authority other than compliance with any applicable requirements of the HSR
Act, and the Local Authorizations.
SECTION 4.4. NON-CONTRAVENTION. The execution, delivery and
performance of this Agreement by New Falcon, and the consummation by New Falcon
of the Sale, do not or on or before the Closing Date will not, (a) contravene
the partnership agreement of New Falcon or (b) subject to obtaining the
consents described in Schedules 4.4 constitute a breach or default (including
any event that, with the passage of time or giving of notice, or both, would
become a breach or default) under or give rise to a right of termination,
cancellation, first refusal or acceleration under any applicable Legal
Requirement or any judgment, injunction, order, decree, contract, license,
lease,
-13-
<PAGE> 15
indenture, mortgage, loan agreement, note or other agreement or instrument as
to which New Falcon is a party or by which any of its properties may be bound,
the effect of which would be to materially impair the ability of New Falcon to
perform its obligations under this Agreement.
SECTION 4.5. BINDING EFFECT. This Agreement has been duly
executed and delivered by New Falcon, and when executed by the parties hereto,
this Agreement constitutes a valid and binding obligation of New Falcon,
enforceable against New Falcon in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally or by the principles governing the availability of equitable
remedies.
SECTION 4.6. LITIGATION. Except as set out in Schedule 4.6,
there are no actions, suits or proceedings pending and, to the knowledge of New
Falcon, there are no claims, grievances, governmental investigations, actions,
suits or proceedings threatened, against or affecting New Falcon at law or in
equity or before or by any Governmental Authority, or before or by an
arbitrator or arbitration board which would materially delay the Closing.
Except as set out in Schedule 4.6, there are no judgments, decrees or orders
outstanding against New Falcon with respect to the Sale.
SECTION 4.7. COMPLIANCE WITH LEGAL REQUIREMENTS. New Falcon
is in compliance with all applicable Legal Requirements, except as would not
materially delay the Closing.
SECTION 4.8. QUALIFICATION OF NEW FALCON. New Falcon is and
pending Closing will be legally, technically, financially and otherwise
qualified under the Communications Act to acquire and operate the Cable
Systems. To the knowledge of New Falcon, there are no facts or proceedings
which would reasonably be expected to disqualify New Falcon under the
Communications Act from acquiring or operating the Cable Systems or would cause
the FCC to not approve the transfer of control of the FCC Licenses to New
Falcon. New Falcon has no knowledge of any fact or
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circumstance relating to New Falcon or its Affiliates that would reasonably be
expected to (i) cause the filing of any material objection to the FCC
application for transfer of control of the FCC Licenses as provided for in this
Agreement, or (ii) cause the FCC to deny the FCC application for transfer of
control of the FCC Licenses as provided for in this Agreement, or (iii) lead to
a delay in the processing of the FCC application for transfer of control of the
FCC Licenses as provided for in this Agreement. No waiver of any FCC rule or
policy is necessary to be obtained by New Falcon and/or its Affiliates for the
grant of the FCC Consents as provided for in this Agreement, nor will
processing pursuant to any exception to a rule of general applicability be
requested or required in connection with the consummation by New Falcon of the
transactions contemplated hereby.
SECTION 4.9. FINDERS' FEES. There is no investment banker,
broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of New Falcon who might be entitled to any fee or
commission from New Falcon in connection with the execution, delivery or
performance of this Agreement or the Sale, other than the General Partner as
provided for in the Partnership Agreement.
ARTICLE V.
CONDITIONS
SECTION 5.1. MUTUAL CONDITIONS. The obligations of FCSC and
New Falcon to take the actions required to be taken by them pursuant to Article
II shall be subject to the satisfaction of each of the following conditions,
each of which may be waived by FCSC or New Falcon:
(a) Any applicable waiting period (and any extension thereof)
under the HSR Act shall have expired or been terminated without the
commencement or threat of any litigation by a Governmental Authority of
competent jurisdiction to restrain the consummation of the Sale contemplated by
this Agreement in any
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<PAGE> 17
material respect.
(b) No order, stay, judgment or decree shall have been issued
by any court and be in effect restraining or prohibiting the consummation of
the Sale in any material respect.
(c) All consents required to be obtained in connection with
the Sale shall have been obtained and remain in full force and effect.
SECTION 5.2 ACCURACY OF REPRESENTATIONS AND WARRANTIES. (a)
The obligations of FCSC to take the actions required to be taken by it pursuant
to Article II shall be subject to the satisfaction of the following condition,
which may be waived by FCSC: the representations and warranties of New Falcon
set forth in Article IV shall be true and correct as of the date of this
Agreement and as of the Closing except as would not have a material adverse
affect on the ability of New Falcon to consummate the transactions contemplated
hereby.
(b) The obligations of New Falcon to take the actions required
to be taken by it pursuant to Article II shall be subject to the satisfaction
of the following condition, which may be waived by New Falcon: the
representations and warranties of FCSC set forth in Article III shall be true
and correct as of the date of this Agreement and as of the Closing except as
would not have a material adverse affect on (i) the ability of New Falcon to
consummate the transactions contemplated hereby or (ii) the business,
operations, financial condition or results of operation of FCSC.
SECTION 5.3. ADDITIONAL CONDITION TO THE OBLIGATIONS OF NEW
FALCON. The obligations of New Falcon to take the action required to be taken
by it pursuant to Article II shall be subject to the receipt by New Falcon of
financing in an amount necessary to satisfy New Falcon's obligations under
Article II.
ARTICLE VI.
COVENANTS
SECTION 6.1. PRESERVATION OF BUSINESS. Except as
contemplated by this Agreement, FCSC will use its best efforts to preserve its
business organization intact, to keep available to New Falcon the services of
its present employees, and to preserve for New Falcon the goodwill of the
suppliers, customers and others having business relations with FCSC.
SECTION 6.2. CONSUMMATION OF THE SALE. Each of the parties
hereto agrees that it shall, prior to, on and after the Closing, take or cause
to be taken and cause their respective affiliates to take or cause to be taken
such actions, and execute, deliver and file or cause to be executed, delivered
and filed, such certificates, documents and instruments, and obtain such
consents, as may be necessary or reasonably requested in connection with the
consummation of the Sale contemplated by this Agreement or in order to fully
effectuate the purposes, terms and conditions of this Agreement.
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<PAGE> 18
ARTICLE VII.
MISCELLANEOUS
SECTION 7.1. TERMINATION. This Agreement may be terminated
at any time prior to the Closing by either FCSC or New Falcon if the Sale shall
not have been consummated on or before December 31, 1996, unless the failure to
consummate the Sale is the result of a willful and material breach of this
Agreement by the party seeking to terminate this Agreement.
SECTION 7.2. EXPENSES. Except as expressly set forth herein,
the fees and expenses (including the fees of any lawyers, accountants,
investment bankers or others engaged by such party) in connection with this
Agreement and the transactions contemplated hereby whether or not the Sale is
consummated will be paid by New Falcon.
SECTION 7.3. HEADINGS. The section headings herein are for
convenience of reference only, do not constitute part of this Agreement and
will not be deemed to limit or otherwise affect any of the provisions hereof.
References to Sections, Schedules and Exhibits, unless otherwise indicated, are
references to Sections, Schedules and Exhibits hereof.
SECTION 7.4. ASSIGNMENT. This Agreement and all provisions
hereof will be binding upon and inure to the benefit of the parties hereto and
their respective successors, however, neither this Agreement nor any right,
interest, or obligation hereunder may be assigned by FCSC (other than by
operation of law) without the prior written consent of New Falcon, and any such
assignment or purported assignment without such consent shall be void.
SECTION 7.5. ENTIRE AGREEMENT. This Agreement embody the
entire agreement and understanding of the parties with respect to the
transactions contemplated hereby and supersede all prior written or oral
commitments, arrangements or understandings with respect thereto.
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<PAGE> 19
SECTION 7.6. AMENDMENT; WAIVER. (a) This Agreement may only
be amended or modified in writing signed by the party against whom enforcement
of any such amendment or modification is sought.
(b) Any party hereto may, by an instrument in writing, waive
compliance with any term or provision of this Agreement on the part of such
other party hereto. The waiver by any party hereto of a breach of any term or
provision of this Agreement will not be construed as a waiver of any subsequent
breach.
SECTION 7.7. COUNTERPARTS. This Agreement may be executed in
two or more counterparts, all of which will be considered one and the same
agreement and each of which will be deemed an original. All signatures need
not be on one counterpart.
SECTION 7.8. GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED
BY THE LAWS OF THE STATE OF CALIFORNIA (REGARDLESS OF THE LAWS THAT MIGHT BE
APPLICABLE UNDER PRINCIPLES OF CONFLICTS OF LAW) AS TO ALL MATTERS, INCLUDING
BUT NOT LIMITED TO MATTERS OF VALIDITY, CONSTRUCTION, EFFECT AND PERFORMANCE.
SECTION 7.9. SEVERABILITY. If any one or more of the
provisions of this Agreement is held to be invalid, illegal or unenforceable,
the validity, legality or enforceability of the remaining provisions of this
Agreement will not be affected thereby, and New Falcon and FCSC will use their
reasonable efforts to substitute one or more valid, legal and enforceable
provisions which insofar as practicable implement the purposes and intent
hereof. To the extent permitted by applicable law, each party waives any
provision of law which renders any provision of this Agreement invalid, illegal
or unenforceable in any respect.
SECTION 7.10. THIRD PERSON BENEFICIARIES. This Agreement is
not intended and shall not be construed to confer upon any Person (other than
FCSC and New Falcon) any rights or remedies whatever.
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<PAGE> 20
SECTION 7.11. SPECIFIC PERFORMANCE. New Falcon and FCSC
recognize that any breach of any covenant or agreement contained in this
Agreement may give rise to irreparable harm for which money damages would not
be an adequate remedy, and accordingly agree that, in addition to other
remedies, any non-breaching party will be entitled to enforce the agreements
and covenants contained herein of New Falcon and FCSC, as the case may be, by a
decree of specific performance without the necessity of proving the inadequacy
as a remedy of money damages.
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<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
FALCON CABLE SYSTEMS COMPANY, L.P.
By: Falcon Cable Investors Group
Managing General Partner
By: Falcon Holding Group, L.P.
General Partner
By: Falcon Holding Group, Inc.
General Partner
By: /s/ Michael K. Menerey
---------------------------------
Michael K. Menerey, Secretary
and Chief Financial Officer
FALCON CABLE SYSTEMS
COMPANY II, L.P.
By: Falcon Cable Investors Group
Managing General Partner
By: Falcon Holding Group, L.P.
General Partner
By: /s/ Michael K. Menerey
---------------------------------
Michael K. Menerey, Secretary
and Chief Financial Officer
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<PAGE> 1
EXHIBIT 5
IRELL & MANELLA LLP
David Siegel (State Bar No. 101355)
Daniel P. Lefler (State Bar No. 151253)
Craig Varnen (State Bar No. 170263) [STAMP]
1800 Avenue of the Stars, Suite 900
Los Angeles, California 90067-4276
(310) 277-1010
WACHTELL, LIPTON, ROSEN & KATZ
Paul K. Rowe
51 West 52nd Street
New York, New York 10019
(212) 403-1000
Attorneys for Defendants
Marc Nathanson, Falcon Cable Systems
Company, Falcon Cable Investors
Group and Falcon Holding Group, Inc.
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF LOS ANGELES
FRANK O'SHEA, IRA, on behalf of himself and) CASE NO. BC147386
all others similarly situated, )
) CLASS ACTION
Plaintiffs, )
) ANSWER TO UNVERIFIED COMPLAINT
vs. )
) Hearing: None
WALLER CAPITAL CORP., MARK NATHANSON, ) Department: 59
FALCON CABLE SYSTEMS COMPANY, FALCON ) Trial date: None
CABLE INVESTORS GROUP and FALCON )
HOLDING GROUP, INC., )
)
Defendants. )
___________________________________________)
Pursuant to Section 431.30(d) of the California Code of Civil
Procedure, defendants Marc Nathanson, Falcon Cable Systems Company, Falcon
Cable Investors Group and Falcon Holding Group, Inc. (collectively, the "Falcon
Defendants"), answer the unverified complaint (the "Complaint") of plaintiff
Frank O'Shea, IRA, on behalf of himself and all others similarly situated (the
<PAGE> 2
"Plaintiff"), by making a general denial of each and every material allegation
of the Complaint and of each and every cause of action contained therein, and
by denying that Plaintiff is entitled to the injunctive, declaratory and
monetary relief sought therein.
AFFIRMATIVE DEFENSES TO COMPLAINT
Without admitting any of the allegations set forth in the Complaint,
the Falcon Defendants allege as follows:
FIRST AFFIRMATIVE DEFENSE
(Failure to State a Cause of Action)
1. The allegations set forth in the Complaint do not state facts
sufficient to constitute a cause of action against the Falcon Defendants.
SECOND AFFIRMATIVE DEFENSE
(Adequacy of Monetary Damages)
2. Any harm suffered by Plaintiff, if any, is adequately remedied
through the imposition of monetary damages, and thus injunctive relief is
improper.
THIRD AFFIRMATIVE DEFENSE
(Absence of Harm Caused by the Falcon Defendants)
3. Plaintiff did not suffer any harm as a result of any acts or
omissions of the Falcon Defendants as alleged in the Complaint, and any harm
alleged therein is attributable to unrelated or independent causes other than
any alleged acts or omissions of the Falcon Defendants.
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<PAGE> 3
FOURTH AFFIRMATIVE DEFENSE
(Full Performance)
4. The parties' respective rights and obligations are set forth
in the Amended and Restated Agreement of Limited Partnership of Falcon Cable
Systems Company (the "Agreement"). The Falcon Defendants have fully complied
with and fully performed each and every applicable provision and obligation of
the Agreement.
FIFTH AFFIRMATIVE DEFENSE
(Lack of Reliance)
5. The Plaintiff did not rely upon any representations or
reasonably rely on any representations of the Falcon Defendants.
SIXTH AFFIRMATIVE DEFENSE
(Public Policy)
6. Failure to enforce the express provisions of the Agreement
would be contrary to public policy and the Plaintiff is consequently barred
from obtaining the relief requested in the Complaint.
SEVENTH AFFIRMATIVE DEFENSE
(Statute of Frauds)
7. To the extent that Plaintiff's claims, or any of them, are in
whole or in part based upon any alleged oral agreements or understandings not
contained in the Agreement, the same are barred by the Statute of Frauds,
California Civil Code Section 1624.
EIGHTH AFFIRMATIVE DEFENSE
(Failure to Mitigate Damages)
8. The Plaintiff has failed to mitigate damages, if any, and is
therefore barred from recovery of any such damages.
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<PAGE> 4
NINTH AFFIRMATIVE DEFENSE
(Accord and Satisfaction and/or Novation)
9. Any duty of performance or further performance by the Falcon
Defendants was excused by an accord and satisfaction or novation effective
between the Falcon Defendants and Plaintiff.
TENTH AFFIRMATIVE DEFENSE
(Modification, Termination and/or Rescission)
10. Any duty of performance or further performance owed by the
Falcon Defendants was excused by an agreement between the parties modifying,
amending, terminating, abrogating, rescinding, or abandoning the Agreement.
ELEVENTH AFFIRMATIVE DEFENSE
(Unclean Hands)
11. Plaintiff is guilty of having unclean hands herein and should
be barred from any recovery against the Falcon Defendants.
TWELFTH AFFIRMATIVE DEFENSE
(Justification and Privilege)
12. The Falcon Defendants' conduct with respect to Plaintiff was
justified, privileged, fair, and effected in good faith, without malice, spite
or conscious, reckless or negligent disregard of any purported rights of
Plaintiffs, or with improper purpose or ill-will of any kind and without the
employment of any improper, wrongful or illegal methods. Consistent with the
foregoing, the Falcon Defendants did not directly or indirectly perform or fail
to perform any act that constitutes a violation of any purported rights of
Plaintiff or a violation of any duties or obligations purportedly owed to
Plaintiff. At all times the
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<PAGE> 5
Falcon Defendants acted in good faith and in justifiable reliance on
independent advisors.
The Falcon Defendants expressly adopt, accept and join in each and
every affirmative defense proffered by codefendant Waller Capital Corporation
in its response to the Complaint. Moreover, the Falcon Defendants reserve the
right to allege additional affirmative defenses as they become known through
the course of discovery.
WHEREFORE, the Falcon Defendants pray for judgment as follows:
1. For a judgment and order that the Falcon Defendants are not
liable to Plaintiff on any cause of action alleged in the Complaint and that
Plaintiff is not entitled to any relief by virtue of any of the causes of
action alleged therein;
2. For attorneys' fees and costs incurred herein; and
3. For such other and further relief as the Court may deem just
and proper.
Dated: May 31, 1996 IRELL & MANELLA LLP
David Siegel
Daniel P. Lefler
Craig Varnen
WACHTELL, LIPTON, ROSEN & KATZ
Paul K. Rowe
By: /s/ CRAIG VARNEN
------------------------------------
Craig Varnen
Attorneys for Defendants
Marc Nathanson, Falcon Cable Systems
Company, Falcon Cable Investors
Group and Falcon Holding Group, Inc.
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<PAGE> 6
PROOF OF SERVICE
I am employed in the County of Los Angeles, State of California. I am
over the age of 18 and not a party to the within action. My business address
is 1800 Avenue of the Stars, Suite 900, Los Angeles, California 90067.
On May 31, 1996, I served the foregoing document described as ANSWER
TO UNVERIFIED COMPLAINT on all interested parties in this action as stated on
the attached service list.
(BY MAIL) I placed true copies of the foregoing document in sealed
envelopes addressed as stated on the attached service list. I placed each such
envelope, with postage thereon fully prepaid, for collection and mailing at
Irell & Manella LLP, Los Angeles, California. I am readily familiar with Irell
& Manella LLP's practice for collection and processing of correspondence for
mailing with the United States Postal Service. Under that practice, the
correspondence would be deposited in the United States Postal Service on that
same day in the ordinary course of business.
Executed on May 31, 1996, at Los Angeles, California.
I declare under penalty of perjury under the laws of the State of
California that the foregoing is true and correct.
V. E. HOLB /s/ V. E. HOLB
- ---------------------------------- -------------------------------------
Name Signature
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<PAGE> 7
SERVICE LIST
Alan Schulman, Esq.
Steven W. Pepich, Esq.
Milberg Weiss Bershad Hynes & Lerach LLP
600 West Broadway, Suite 1800
San Diego, CA 92101
Stephen Lowey, Esq.
Thomas Skelton, Esq.
Lowey Dannenberg Bemporad & Selinger, P.C.
747 Third Avenue
New York, NY 10017
John Wilson Spiegel, Esq.
Munger Tolles & Olson
355 South Grand Avenue, 35th Floor
Los Angeles, CA 90071-1560
Charles Bachman, Esq.
O'Sullivan Graev & Karabell
30 Rockefeller Plaza, 41st Floor
New York, NY 10112
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