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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number: 0-18266
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
(Exact name of Registrant as specified in its charter)
CALIFORNIA 95-4200409
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10900 WILSHIRE BOULEVARD - 15TH FLOOR
LOS ANGELES, CALIFORNIA 90024
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 824-9990
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Securities registered pursuant to Section 12 (b) of the Act: NONE
Securities registered pursuant to Section 12 (g) of the Act:
Name of each exchange
Title of each Class on which registered
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UNITS OF LIMITED PARTNERSHIP INTEREST NONE
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
State the aggregate market value of the voting equity
securities held by non-affiliates of the registrant: all of the registrant's
71,879 Units of limited partnership interests, its only class of equity
securities, are held by non-affiliates. There is no public trading market for
the Units and transfers of Units are subject to certain restrictions;
accordingly, the registrant is unable to state the market value of the Units
held by non-affiliates.
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The Exhibit Index is located at Page E-1
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PART I
ITEM 1. BUSINESS
INTRODUCTION
Falcon Classic Cable Income Properties, L.P. (the
"Partnership") is a California limited partnership engaged in the ownership,
operation and development of non-urban cable television systems in small to
medium sized communities and suburban and rural areas (the "Systems"). Such
cable television systems generally are located in areas that do not receive a
wide variety of clear broadcast television reception because of distance from
broadcasters or interference by mountains or other geographic features. The
Partnership offers cable service in five regions in Oregon, North Carolina,
Kentucky, California and Maryland. The Oregon region centers around Redmond,
Oregon, serving customers in central Oregon. The North Carolina region
provides service to Burke County and other communities in central North
Carolina. The Kentucky region provides service to Somerset, Kentucky and
surrounding communities, the California region provides service to California
City, California, and the Maryland region is based in Centreville, Maryland,
and provides service to customers on the Upper Eastern Shore of Chesapeake Bay.
As of December 31, 1996, the Partnership had approximately 67,500 Subscribers(1)
and served approximately 47,600 homes subscribing to cable service in 56
communities located in these five states. See "Description of the
Partnership's Systems."
A cable television system receives television, radio and data
signals at the system's "headend" site by means of over-the-air antennas,
microwave relay systems and satellite earth stations. These signals are then
modulated, amplified and distributed, primarily through coaxial and fiber optic
distribution systems, to customers who pay a fee for this service. Cable
television systems may also originate their own television programming and
other information services for distribution through the system. Cable
television systems generally are constructed and operated pursuant to
non-exclusive franchises or similar licenses granted by local governmental
authorities for a specified term of years.
The Systems offer customers various levels (or "tiers") of
cable services consisting of broadcast television signals of local network,
independent and educational stations, a limited number of television signals
from so-called "super stations" originating from distant cities (such as WTBS
and WGN), various satellite-delivered, non-broadcast channels (such as Cable
News Network ("CNN"), MTV: Music Television ("MTV"), the USA Network ("USA"),
ESPN, Turner Network Television ("TNT") and The Disney Channel), programming
originated locally by the cable television system (such as public, educational
and governmental access programs) and informational displays featuring news,
weather, stock market and financial reports and public service announcements.
A number of the satellite services are also offered in certain packages. For an
extra monthly charge, the Systems offer "premium" television services to their
customers. These services (such as Home Box Office ("HBO"), Showtime and
selected regional sports networks) are satellite channels that consist
principally of feature films, live sporting events, concerts and other special
entertainment features, usually presented without commercial interruption. See
"Legislation and Regulation."
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(1) The Partnership reports subscribers for the Systems on an equivalent
subscriber basis and, unless otherwise indicated, the term "SUBSCRIBERS" means
equivalent subscribers, calculated by dividing aggregate basic service revenues
by the average basic service rate within an operating entity, adjusted to
reflect the impact of regulation. Basic service revenues include charges for
basic programming, bulk and commercial accounts and certain specialized
"packaged programming" services, including the appropriate components of new
product tier revenue, and excluding premium television and non-subscription
services. Consistent with past practices, Subscribers is an analytically
derived number which is reported in order to provide a basis of comparison to
previously reported data. The computation of Subscribers has been impacted by
changes in service offerings made in response to the 1992 Cable Act. See
"Description of the Partnership's Systems" for additional information about
Subscribers and homes subscribing to cable service.
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A customer generally pays an initial installation charge and
fixed monthly fees for basic, expanded basic, other tiers of satellite services
and premium programming services. Such monthly service fees constitute the
primary source of revenues for the Systems. In addition to customer revenues,
the Systems receive revenue from additional fees paid by customers for
pay-per-view programming of movies and special events and from the sale of
available advertising spots on advertiser-supported programming. The Systems
also offer to their customers home shopping services, which pay the Partnership
a share of revenues from sales of products in the System's service areas, in
addition to paying the system a separate fee in return for carrying their
shopping service. Certain other new channels have also recently offered the
Systems fees in return for carrying their service. Due to a lack of channel
capacity available for adding new channels, the Systems' management cannot
predict the impact of such potential payments on the Partnership's business.
See Item 7., "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources."
The Partnership was formed on February 17, 1989, began
offering Units of limited partnership interests ("Units") for sale on May 15,
1989, and continued the offering through May 8, 1990. The Partnership sold a
total of 71,879 Units. Prior to March 1993, the general partner of the General
Partner was Falcon Holding Group, Inc., a California corporation ("FHGI"). In
March 1993, a newly-formed entity, Falcon Holding Group, L.P. ("FHGLP"), was
organized to effect the consolidation of the ownership of various cable
television businesses previously operated by FHGI. In such consolidation,
FHGLP became the general partner of the Partnership's sole general partner,
Falcon Classic Cable Investors, L.P., (the "General Partner"), succeeding FHGI
in that role. The management of FHGLP is substantially the same as that of
FHGI. See Item 13., "Certain Relationships and Related Transactions."
The General Partner receives a management fee from the
Partnership for managing the Partnership's cable television operations. See
Item 11., "Executive Compensation." For more detailed information, see the
Amended and Restated Agreement of Limited Partnership of the Partnership dated
as of May 15, 1989, as amended by the first amendment thereto (hereinafter
collectively referred to as the "Partnership Agreement"), which are exhibits to
this Annual Report on Form 10-K.
Led by Chairman of the Board and Chief Executive Officer, Marc
B. Nathanson, and President and Chief Operating Officer, Frank J. Intiso, the
Partnership's senior management has on average over eighteen years of
experience in the industry and has worked together for over a decade. Mr.
Nathanson, a 27-year veteran of the cable business, is a member of the
Executive Committee of the Board of Directors of the National Cable Television
Association and a past winner of the prestigious Vanguard Award from the
National Cable Television Association for outstanding contributions to the
growth and development of the cable television industry. Mr. Intiso is an
18-year veteran of the cable industry. He is also Chairman of the California
Cable Television Association and is active in various industry boards including
the Board of the Community Antenna Television Association ("CATA"). The
principal executive offices of the Partnership, and its general partner, FHGLP,
are located at 10900 Wilshire Boulevard, 15th Floor, Los Angeles, California
90024, and their telephone number is (310) 824-9990.
RECENT DEVELOPMENTS
As previously disclosed in prior filings with the Securities
and Exchange Commission (the "Commission"), the Partnership may, in the sole
discretion of its General Partner, sell individual Systems and may also sell all
or substantially all of the Partnership's assets to the General Partner or its
affiliates. The Partnership Agreement provides that any such sale of
Partnership assets to the General Partner or any of its affiliates must be made
in cash pursuant to the "Appraisal Process." As previously reported, the
Partnership commenced the Appraisal Process in August 1996 and received the
results of the related appraisals in February 1997. As of the date of this
Report, the General Partner has not made a decision as to whether or not it will
further pursue the acquisition of any Partnership assets at this time. These
matters are discussed more fully under the caption Item 13., "Certain
Relationships and Related Transactions -- Appraisal Process" and
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in the Partnership's Current Reports on Form 8-K dated August 27, 1996, October
17, 1996 and February 6, 1997. Unitholders are urged to review the referenced
materials carefully.
BUSINESS STRATEGY
The Partnership's business strategy has focused on serving
small to medium-sized communities that have favorable demographic
characteristics. The Partnership believes that given a similar technical
profile, its cable television systems generally involve less risk of increased
competition than systems in large urban cities. Cable television service is
necessary in many of the Partnership's markets to receive a wide variety of
broadcast and other television signals. In addition, these markets typically
offer fewer competing entertainment alternatives than large cities. As a
result, the Partnership's cable television systems generally have a more stable
customer base than systems in large cities. Nonetheless, the Partnership
believes that all cable operators will face increased competition in the future
from alternative providers of multi-channel video programming services. See "-
Competition."
Adoption of rules implementing certain provisions of the Cable
Television Consumer Protection and Competition Act of 1992 (the "1992 Cable
Act") by the Federal Communications Commission (the "FCC") has had a negative
impact on the Partnership's revenues and cash flow. These rules are subject to
further amendment to give effect to the Telecommunications Act of 1996 (the
"1996 Telecom Act"). See "Legislation and Regulation" and Item 7.,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Clustering
The Partnership has sought to acquire cable television
operations in communities that are proximate to other owned or affiliated
systems in order to achieve the economies of scale and operating efficiencies
associated with regional "clusters." The Partnership believes clustering can
reduce marketing and personnel costs and can also reduce capital expenditures
in cases where cable service can be delivered through a central headend
reception facility.
Capital Expenditures
The Partnership has invested in the rebuilding and upgrading
of its Systems through prudent capital expenditure programs, to the extent
financing and regulatory conditions have permitted. These rebuilds and upgrades
have consisted primarily of replacing low capacity cable plant with new higher
capacity fiber-optic trunk and feeder lines, adding headend electronics to
increase channel capacity and addressable converters to permit system
addressability, and reducing the number of headends in various regions through
microwave network transmission links, fiber optic super trunk and improved
reception equipment. However, as noted in "Description of the Partnership's
Systems," many of the regions have almost no available channel capacity with
which to add new channels or to further expand their use of pay-per-view
offerings to customers. As a result, significant amounts of capital for future
upgrades will be required in order to increase available channel capacity,
improve quality of service and facilitate the expansion of new services such as
advertising, pay-per-view, new unregulated tiers of satellite-delivered
services and home shopping, so that the Systems remain competitive within the
industry.
As discussed in prior reports, the Partnership postponed a
number of rebuild and upgrade projects that were planned for 1994, 1995 and
1996 because of the uncertainty related to implementation of the 1992 Cable Act
and the negative impact thereof on the Partnership's business and access to
capital. The Partnership is also constrained in a material respect by the
limitation on aggregate borrowing imposed by the Partnership Agreement. As a
result of these factors, the Partnership's Systems are presently significantly
less technically advanced than had been expected prior to the implementation of
re-regulation. The Partnership believes that the delays in upgrading many of
its Systems will, under present market conditions, most likely have
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an adverse effect on the value of those Systems compared to systems that have
been rebuilt to a higher technical standard. Currently the Partnership's
Systems have an average channel capacity of 46 channels, (substantially all of
which is presently utilized), and approximately 62% of its customers are served
by Systems that utilize addressable technology. The Partnership's management
has selected a technical standard that incorporates a 750 MHz fiber to the
feeder architecture for the majority of all its Systems that are to be rebuilt.
A system built to a 750 MHz standard can provide approximately 95 channels of
analog service. Such a system will also permit the introduction of high speed
data transmission and telephony services in the future after incurring
incremental capital expenditures related to these services. As currently
structured, however, the Partnership does not have access to the capital
required to engage in any significant rebuild program. See "Technological
Developments," "Legislation and Regulation" and Item 7., "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Decentralized Management
The Partnership's five regions are managed on a decentralized
basis. The Partnership believes that its decentralized management structure,
by enhancing management presence at the system level, increases its sensitivity
to the needs of its customers, enhances the effectiveness of its customer
service efforts, eliminates the need for maintaining a large centralized
corporate staff and facilitates the maintenance of good relations with local
governmental authorities.
Marketing
The Partnership has made substantial changes in the way in
which it packages and sells its services and equipment in the course of its
implementation of the FCC's rate regulations promulgated under the 1992 Cable
Act. Historically, the Partnership had offered four programming packages in its
upgraded addressable systems. These packages combined services at a lower rate
than the aggregate rates for such services purchased individually on an "a la
carte" basis. The new rules require that charges for cable-related equipment
(e.g., converter boxes and remote control devices) and installation services be
unbundled from the provision of cable service and based upon actual costs plus
a reasonable profit. On November 10, 1994, the FCC announced the adoption of
further significant amendments to its rules. One amendment allows cable
operators to create new tiers of program services which the FCC has chosen to
exclude from rate regulation, so long as the programming is new to the system.
However, in applying this new policy to packages such as those already offered
by the Partnership and numerous other cable operators, the FCC decided that
where only a few services were moved from regulated tiers to a non-premium "new
product tier" package, the package will be treated as if it were a tier of new
program services as discussed above. Substantially all of the new product tier
packages offered by the Partnership have received this desirable treatment. In
addition, the FCC decided that discounted packages of non-premium programming
services will be subject to rate regulation in the future. These amendments to
the FCC's rules have allowed the Partnership to resume its core marketing
strategy and reintroduce programmed service packaging. As a result, in
addition to the basic service package, customers in substantially all of the
Systems may purchase an expanded group of regulated services, additional
unregulated packages of satellite-delivered services and premium services on
either an a la carte or a discounted packaged basis. See "Legislation and
Regulation."
The Partnership has employed a variety of targeted marketing
techniques to attract new customers by focusing on delivering value, choice,
convenience and quality. The Partnership employs direct mail, radio and local
newspaper advertising, telemarketing and door-to- door selling utilizing
demographic "cluster codes" to target specific messages to target audiences.
In many Systems, the Partnership offers discounts to customers who purchase
premium services on a limited trial basis in order to encourage a higher level
of service subscription. The Partnership also has a coordinated strategy for
retaining customers that includes televised retention advertising that
reinforces the value associated with the initial decision to subscribe and that
encourages customers to purchase higher service levels.
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Customer Service and Community Relations
The Partnership places a strong emphasis on customer service
and community relations and believes that success in these areas is critical to
its business. The Partnership has developed and implemented a wide range of
monthly internal training programs for its employees, including its regional
managers, that focus on the Partnership's operations and employee interaction
with customers. The effectiveness of the Partnership's training program as it
relates to the employees' interaction with customers is monitored on an
on-going basis, and a portion of the regional managers' compensation is tied to
achieving customer service targets. The Partnership also conducts an extensive
customer survey on a periodic basis and uses the information in its efforts to
enhance service and better address the needs of its customers. In addition, the
Partnership is participating in the industry's Customer Service Initiative
which emphasizes an on-time guarantee program for service and installation
appointments. The Partnership's corporate executives and regional managers lead
the Partnership's involvement in a number of programs benefiting the
communities the Partnership serves, including, among others, Cable in the
Classroom, Drug Awareness, Holiday Toy Drive and the Cystic Fibrosis
Foundation. Cable in the Classroom is the cable television industry's public
service initiative to enrich education through the use of commercial-free cable
programming. In addition, a monthly publication, Cable in the Classroom
magazine provides educational program listings by curriculum area, as well as
feature articles on how teachers across the country use the programs.
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DESCRIPTION OF THE PARTNERSHIP'S SYSTEMS
The Partnership's Systems are located as follows: Redmond,
Oregon; Burke County, North Carolina; Somerset, Kentucky; Centreville,
Maryland; and California City, California. The table below sets forth certain
operating statistics as of December 31, 1996:
<TABLE>
<CAPTION>
Average
Monthly
Revenue
Homes Per Home
Subscribing Premium Subscribing
Homes to Cable Basic Service Premium to Cable
Region Passed1 Service Penetration2 Units3 Penetration4 Service5 Subscribers6
- ------ ------ ------- ----------- ----- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Redmond, OR 7,252 3,516 48.5% 706 20.1% $ 35.42 5,604
Burke County, NC 18,986 10,516 55.4% 4,614 43.9% $ 39.50 15,615
Somerset, KY 22,060 19,296 87.5% 3,914 20.3% $ 30.68 26,119
Centreville, MD 23,857 12,325 51.7% 7,440 60.4% $ 36.77 18,197
California City, CA 2,858 1,922 67.2% 839 43.7% $ 31.24 2,004
------ ------ ------ ------
Total 75,013 47,575 63.4% 17,513 36.8% $ 34.59 67,539
====== ====== ====== ======
</TABLE>
1 Homes passed refers to estimates by the Partnership of the
approximate number of dwelling units in a particular community that can be
connected to the distribution system without any further extension of principal
transmission lines. Such estimates are based upon a variety of sources,
including billing records, house counts, city directories and other local
sources.
2 Homes subscribing to cable service as a percentage of homes passed
by cable.
3 Premium service units include only single channel services offered
for a monthly fee per channel and do not include tiers of channels offered as a
package for a single monthly fee. Prior to July 1, 1996, The Disney Channel
was offered as a premium service. Effective July 1, 1996, it was offered as
part of an unregulated tier of services. As a result, the number of reported
premium service units was artificially reduced by this service offering change.
The number of Disney Channel premium service units at June 30, 1996 was 1,688.
4 Premium service units as a percentage of homes subscribing to cable
service. A customer may purchase more than one premium service, each of which
is counted as a separate premium service unit. This ratio may be greater than
100% if the average customer subscribes for more than one premium service.
5 Average monthly revenue per home subscribing to cable service has
been computed based on revenue for the year ended December 31, 1996.
6 The Partnership reports subscribers for the Systems on an equivalent
subscriber basis and, unless otherwise indicated, the term "SUBSCRIBERS" means
equivalent subscribers, calculated by dividing aggregate basic service revenues
by the average basic service rate within an operating entity, adjusted to
reflect the impact of regulation. Basic service revenues include charges for
basic programming, bulk and commercial accounts and certain specialized
"packaged programming" services, including the appropriate components of new
product tier revenue, and excluding premium television and non-subscription
services. Consistent with past practices, Subscribers is an analytically
derived number which is reported in order to provide a basis of comparison to
previously reported data. The computation of Subscribers has been impacted by
changes in service offerings made in response to the 1992 Cable Act.
REDMOND, OREGON
The Redmond system serves the communities of Redmond and
Terrebonne in Central Oregon and is the hub of the three cities in the
tri-county region including Bend, Princeville and Madras, Oregon. The basic
industries in the area include wood products, manufacturing, agriculture,
tourism and recreation. Mt. Bachelor, a highly acclaimed ski resort, is located
just outside of Bend. The trade area of the Redmond market district includes
approximately 15,000 people. Expansion of the Redmond airport terminal was
completed during 1993 and Wal-Mart opened a new facility in the community in
August 1994. Ten thousand people live within the Redmond city limits and 96,000
live within the tri- county region. During 1995 and 1996, 26 and 24 miles,
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respectively, of cable plant were built in the region. During 1997, the
Partnership intends to build 29 miles of new cable plant in this region. The
growth in homes subscribing to cable service from the construction of plant
passing new homes has, however, been offset by the loss of homes subscribing to
cable service due to competition, primarily from a multi-channel multipoint
distribution system, resulting in a net decrease in homes subscribing to cable
service in 1995 and 1996. See " - Competition."
At December 31, 1996, the Redmond system had 3,516 homes
subscribing to cable service and addressable technology was available to 100%
of the customers of this region. The System offers 32 channels of programming
which is 100% of capacity.
BURKE COUNTY, NORTH CAROLINA
The Burke system's service area extends along the Interstate
40 corridor of central North Carolina, approximately 70 miles northwest of
Charlotte and 40 miles east of Asheville. The areas served by this system
include unincorporated Burke County and the towns of Connelly Springs, Drexel,
Glen Alpine, Rutherford College and Valdese. Certain portions of the System's
service area are overbuilt with two other cable operators, giving rise to a
highly competitive market. The primary industries in the area are furniture
manufacturing and textiles, with other industries providing a diversified
economic base.
In 1993, 24 hour pay-per-view was implemented in the Burke
County system and local ad insertion capability was increased to four channels.
In 1994, four more local ad insertion channels were added. In 1993, the System
and the Burke County franchise authority joined forces and created a new
informative program about the county to air on the Community Channel. In
February 1994, taping of the program increased from two times a month to
weekly.
At December 31, 1996, the Burke County System had 10,516 homes
subscribing to cable service. This region is fed from one headend, and
addressable technology is available to all customers. The System offers 43
channels of programming which are 100% utilized. During each of 1995 and 1996,
three miles of cable plant were built in the region. The Partnership intends
to add eight additional miles of cable plant in this region in 1997.
A fiber optic overlay project was completed in Burke County
during 1995. This investment has improved picture quality and decreased
service interruptions from power outages. Additional technical improvements
have been made in plant electronics and converter reliability.
SOMERSET, KENTUCKY
The Somerset region serves the communities of Somerset,
Burnside, Columbia, Eubank, McKinney, Ferguson, Science Hill and Laurel County,
Kentucky. The adjacent communities of Somerset and Burnside, in Pulaski
County, are considered to be the hub of commerce, industry, transportation and
recreation in the region. The Kentucky office of tourism boasts the Lake
Cumberland and Big South Fork National Recreation areas as a "water wonderland
of vacation and fun." In addition to the local recreation and resort industry,
many other industries located in the area provide for a well diversified
economic base. They include pressed glassware, wood working, food processing,
clothing manufacturing, compressor/air conditioning, charcoal briquettes
manufacturing and boat manufacturing. Somerset is also home to the newly-
opened Rural Development Center complex, associated with the University of
Kentucky, which coordinates numerous activities, promotes linkages for local
businesses to world-wide markets and provides a community cultural gathering
place.
At December 31, 1996, the Somerset System had 19,296 homes
subscribing to cable service and addressable technology was available to
approximately 71% of the customers of this region. Approximately 20% of this
System utilized approximately 72% of their available channel capacity; the
remaining operations have fully utilized all of their channel capacity.
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Fiber overlay projects have been completed in Columbia,
Somerset and Burnside. The Somerset and Burnside operations have been tied
together with fiber, thereby eliminating the Burnside head-end.
CENTREVILLE, MARYLAND
The Centreville, Maryland System serves Kent, Queen Anne's and
Talbot Counties, located on the Upper Eastern Shore region of Chesapeake Bay.
This region, known for its seafood and fishing industry, is also the ocean
gateway to nearby resorts such as the Delaware beaches and Ocean City,
Maryland. New residents continue to be attracted to this area by the peaceful
setting and the many recreational activities the area has to offer. Many of
these residents commute to nearby Annapolis or Baltimore, Maryland and
Washington, D.C. During 1995, the regional office was relocated from
Centreville to Grasonville, a community approximately 10 miles away. This new
location offers the System greater access to its customers.
The cable system serving this area was built in 1982 and
upgraded during 1990 and 1991. The System has one headend, six microwave sites,
650 miles of cable plant and 12,325 homes subscribing to cable service.
Channel capacity is approximately 61 channels, and the System offers 46
channels, including five premium channels. Addressable technology is not
presently available to the customers of this region. The Partnership added an
additional six miles of new cable plant in 1995 and 11 miles in 1996. During
1997, the Partnership intends to build five miles of new cable plant in this
region.
Fiber overlay projects have been completed in Kent and Queen
Annes County.
CALIFORNIA CITY, CALIFORNIA
The California City System is located 30 miles from the cities
of Palmdale and Lancaster in the high desert of Southern California. The
region is managed and operated by an affiliated company and is serviced out of
the affiliate's satellite office located 15 miles from the System in the city
of Mojave. At December 31, 1996, the System had 1,922 homes subscribing to
cable service.
The Partnership added 10 miles of new cable plant during 1993,
an additional 11 miles of plant in 1994, five miles of plant in 1995 and plans
to add two miles of plant in 1997. In July of 1993, the Partnership completed
a twelve mile fiber optic interconnect from the nearby North Edwards System
(owned by the affiliated entity) to eliminate the previous California City
headend. After the completion of the fiber optic interconnect, 20 channels
were added and addressability was introduced to the region. The System offers
41 channels of programming which is 100% of capacity.
During 1994, previously purchased studio equipment was
activated to bring live city council meetings as well as other government
information to the customers of the community.
OTHER ACTIVITIES
The Partnership is engaged primarily in the business of
owning, operating and developing cable television systems. The Partnership did
not participate in any other activities in 1994, 1995 or 1996 and, based on its
limited access to capital and the beginning of the Appraisal Process, does not
anticipate undertaking any such activities in the foreseeable future. See
"Legislation and Regulation" and Item 7., "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
CUSTOMER RATES AND SERVICES
The Partnership's Systems offer customers packages of services
that include the local area network, independent and educational television
stations, a limited number of television signals from distant cities, numerous
satellite-delivered, non-broadcast channels (such as CNN, MTV, USA, ESPN, TNT
and The
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Disney Channel) and certain information and public access channels. For an
extra monthly charge, the Systems provide certain premium television services,
such as HBO, Showtime and regional sports networks. The Partnership also
offers other cable television services to its customers, including pay-per-view
programming and, in certain test markets, the Sega Channel. For additional
charges, in most of the Systems, the Partnership also rents remote control
devices and VCR compatible devices (devices that make it easier for a customer
to tape a program from one channel while watching a program on another).
The service options offered by the Partnership vary from
System to System, depending upon a System's channel capacity and viewer
interests. Rates for services also vary from market to market and according to
the type of services selected.
Prior to the adoption of the 1992 Cable Act, the Systems
generally were not subject to any rate regulation, i.e., they were adjudged to
be subject to effective competition under then-effective FCC regulations. The
1992 Cable Act, however, substantially changed the statutory and FCC rate
regulation standards. Under the definition of effective competition provided
for in the 1992 Cable Act, nearly all cable television systems in the United
States have become subject to local rate regulation of basic service. The 1996
Telecom Act expanded the definition of effective competition to include
situations in which a local telephone company, or anyone using its facilities,
offers comparable video service by any means except direct broadcast satellite.
In addition, the 1992 Cable Act eliminated the 5% annual basic rate increases
previously allowed by the 1984 Cable Act without local approval; allows the FCC
to review rates for nonbasic service tiers other than premium services in
response to complaints filed by franchising authorities and/or cable customers;
prohibits cable television systems from requiring customers to purchase service
tiers above basic service in order to purchase premium services if the system
is technically capable of doing so; and adopted regulations to establish, on
the basis of actual costs, the price for installation of cable television
service, remote controls, converter boxes and additional outlets. The FCC
implemented these rate regulation provisions on September 1, 1993, affecting
all of the Partnership's Systems not deemed to be subject to effective
competition under the FCC's definition. The FCC substantially amended its rate
regulation rules on February 22, 1994 and again on November 10, 1994. The FCC
will have to conduct a number of additional rule making proceedings in order to
implement many of the provisions of the 1996 Telecom Act. See "Legislation and
Regulation."
At December 31, 1996, the Partnership's monthly rates for
basic cable service for residential customers of the Systems, excluding special
senior citizen discount rates, ranged from $15.80 to $22.97 and premium service
rates ranged from $10.95 to $11.95, excluding special promotions offered
periodically in conjunction with the Partnership's marketing programs. A
one-time installation fee, which the Partnership may wholly or partially waive
during a promotional period, is usually charged to new customers. Prior to
September 1, 1993, the Partnership generally charged monthly fees for
additional outlets, converters, program guides and descrambling and remote
control tuning devices. As described above, these charges have either been
eliminated or altered by the implementation of rate regulation. Substantially
all the Partnership's customers received a decrease in their monthly charges in
July 1994 upon implementation of the FCC's amended rules. Commercial
customers, such as hotels, motels and hospitals, are charged a negotiated,
non-recurring fee for installation of service and monthly fees based upon a
standard discounting procedure. Most multi-unit dwellings are offered a
negotiated bulk rate in exchange for single-point billing and basic service to
all units. These rates are also subject to regulation.
EMPLOYEES
At February 7, 1997, the Partnership had 89 full-time
employees and 6 part-time employees, all of whom work in the regional offices.
The Partnership believes that its relations with its employees are good.
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<PAGE> 11
TECHNOLOGICAL DEVELOPMENTS
As part of its commitment to customer service, the Partnership
emphasizes high technical standards and prudently seeks to apply technological
advances in the cable television industry to its Systems on the basis of cost
effectiveness, capital availability, enhancement of product quality and service
delivery, and industry wide acceptance. Currently, the Partnership's Systems
have an average channel capacity of 46, and many of the Systems have fully used
their present capacity. The Partnership believes that system upgrades would
enable it to provide customers with greater programming diversity, better
picture quality and alternative communications delivery systems made possible
by the introduction of fiber optic technology and by the possible future
application of digital compression. However, as previously discussed, the
Partnership remains significantly limited in the number of Systems that can be
rebuilt or upgraded due to, among other things, the adverse impact of the 1992
Cable Act on the Partnership's business and its access to capital. As a
result, the Partnership expects to incur additional delays in the
implementation of its technological development plan on a wide scale. See
"Business Strategy - Capital Expenditures," "Legislation and Regulation" and
Item 7., "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
The use of fiber optic cable as an alternative to coaxial
cable is playing a major role in expanding channel capacity and improving the
performance of cable television systems. Fiber optic cable is capable of
carrying hundreds of video, data and voice channels and, accordingly, its
utilization is essential to the enhancement of a cable television system's
technical capabilities. The Partnership's current policy is to utilize fiber
optic technology in substantially all rebuild projects which it undertakes.
The benefits of fiber optic technology over traditional coaxial cable
distribution plant include lower per mile rebuild costs due to a reduction in
the number of required amplifiers, the elimination of headends, lower ongoing
maintenance and power costs and improved picture quality and reliability.
As of December 31, 1996, approximately 62% of the
Partnership's customers were served by Systems that utilize addressable
technology. Addressable technology permits the cable operator to activate from
a central control point the cable television services to be delivered to a
customer if that customer has also been supplied with an addressable converter
box. To date, the Partnership has supplied addressable converter boxes to
customers of the Systems utilizing addressable technology who subscribe to one
or more premium services and, in selected regions, to customers who subscribe
to certain new product tiers. As a result, if the System utilizes addressable
technology and the customer has been supplied with an addressable converter
box, the Partnership can upgrade or downgrade services immediately, without the
delay or expense associated with dispatching a technician to the home.
Addressable technology also reduces pay service theft, is an effective
enforcement tool in collecting delinquent payments and allows the Partnership
to offer pay-per-view services.
DIGITAL COMPRESSION
The Partnership has been closely monitoring developments in
the area of digital compression, a technology which is expected to enable cable
operators to increase the channel capacity of cable television systems by
permitting a significantly increased number of video signals to fit in a cable
television system's existing bandwidth. The Partnership believes that the
utilization of digital compression technology in the future could enable the
Partnership to increase channel capacity in certain Systems in a manner that
could be more cost efficient than rebuilding such Systems with higher capacity
distribution plant. The use of digital compression in the Systems also could
expand the number and types of services these Systems offer and enhance the
development of current and future revenue sources in these Systems. Equipment
vendors are beginning to market products to provide this technology, but the
Partnership's management has no plans to install it at this time based on the
current technological profile of its Systems and its present understanding of
the costs as compared to the benefits of the digital equipment currently
available. This issue is under frequent management review.
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<PAGE> 12
PROGRAMMING
The Partnership has various contracts to obtain basic and
premium programming for its Systems from program suppliers whose compensation
is generally based on a fixed fee per customer or a percentage of the gross
receipts for the particular service. Some program suppliers provide volume
discount pricing structures or offer marketing support to the Partnership.
Certain other new channels have also recently offered the Partnership's Systems
fees in return for carrying their service. Due to a lack of channel capacity
available for adding new channels, the Partnership's management cannot predict
the impact of such potential payments on its business. The Partnership's
programming contracts are generally for a fixed period of time and are subject
to negotiated renewal. The Partnership does not have long-term programming
contracts for the supply of a substantial amount of its programming.
Accordingly, no assurance can be given that the Partnership's programming costs
will not increase substantially, or that other materially adverse terms will
not be added to the Partnership's programming contracts. Management believes,
however, that the Partnership's relations with its programming suppliers
generally are good.
The Partnership's cable programming costs have increased in
recent years and are expected to continue to increase due to additional
programming being provided to basic customers, the requirements to carry
channels under retransmission carriage agreements entered into with certain
programming sources, increased costs to produce or purchase cable programming
generally, inflationary increases and other factors. The 1996 retransmission
carriage agreement negotiations resulted in the Partnership agreeing to carry
one new service in its Somerset System, for which it will receive reimbursement
of certain costs related to launching the service. All other negotiations were
completed with essentially no change to the previous agreements. Under the FCC
rate regulations, increases in programming costs for regulated cable services
occurring after the earlier of March 1, 1994, or the date a system's basic
cable service became regulated, may be passed through to customers. See
"Legislation and Regulation - Federal Regulation - Carriage of Broadcast
Television Signals." Generally, programming costs are charged among systems on
a per customer basis.
FRANCHISES
Cable television systems are generally constructed and
operated under non-exclusive franchises granted by local governmental
authorities. These franchises typically contain many conditions, such as time
limitations on commencement and completion of construction; conditions of
service, including number of channels, types of programming and the provision
of free service to schools and certain other public institutions; and the
maintenance of insurance and indemnity bonds. The provisions of local
franchises are subject to federal regulation under the 1984 Cable Act, the 1992
Cable Act and the 1996 Telecom Act. See "Legislation and Regulation."
As of December 31, 1996, the Partnership held 36 franchises.
These franchises, all of which are non-exclusive, provide for the payment of
fees to the issuing authority. Annual franchise fees imposed on the
Partnership's systems range up to 5% of the gross revenues generated by a
system. The 1984 Cable Act prohibits franchising authorities from imposing
franchise fees in excess of 5% of gross revenues and also permits the cable
system operator to seek renegotiation and modification of franchise
requirements if warranted by changed circumstances.
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<PAGE> 13
The following table groups the franchises of the Partnership's
Systems by date of expiration and presents the number of franchises for each
group of franchises and the approximate number and percentage of homes
subscribing to cable service for each group as of December 31, 1996.
<TABLE>
<CAPTION>
Number of Percentage
Homes of Homes
Year of Number of Subscribing to Subscribing to
Franchise Expiration Franchises Cable Service Cable Service
-------------------- ----------- ------------- -------------
<S> <C> <C> <C>
Prior to 1998 4 10,848 22.8%
1998-2002 13 21,889 46.0%
2003 and after 19 13,642 28.7%
-- ------ ----
Total 36 46,379 97.5%
== ====== ====
</TABLE>
The Partnership operates cable television systems which serve
multiple communities and, in some circumstances, portions of such Systems
extend into jurisdictions for which the Partnership believes no franchise is
necessary. In the aggregate, approximately 1,196 homes subscribing to cable
service, comprising approximately 2.5% of the Partnership's customers, are
served by unfranchised portions of such Systems. In general, the Partnership
does not believe that the loss of any single franchise would cause a
substantial reduction in the economies of scale discussed above. In certain
instances, however, where a single franchise comprises a large percentage of
the customers in an operating region, the loss of such franchise could decrease
the economies of scale achieved by the Partnership's clustering strategy. The
Partnership believes that it has satisfactory relationships with substantially
all of its franchising authorities. The Partnership has never had a franchise
revoked for any of its Systems and believes that it has satisfactory
relationships with substantially all of its franchising authorities.
The 1984 Cable Act provides, among other things, for an
orderly franchise renewal process in which franchise renewal will not be
unreasonably withheld or, if renewal is withheld, the franchise authority must
pay the operator the "fair market value" for the system covered by such
franchise. In addition, the 1984 Cable Act establishes comprehensive renewal
procedures which require that an incumbent franchisee's renewal application be
assessed on its own merit and not as part of a comparative process with
competing applications. See "Legislation and Regulation."
COMPETITION
Cable television systems compete with other communications and
entertainment media, including over the air television broadcast signals which
a viewer is able to receive directly using the viewer's own television set and
antenna. The extent to which a cable system competes with over-the-air
broadcasting depends upon the quality and quantity of the broadcast signals
available by direct antenna reception compared to the quality and quantity of
such signals and alternative services offered by a cable system. In many areas,
television signals which constitute a substantial part of basic service can be
received by viewers who use their own antennas. Local television reception for
residents of apartment buildings or other multi-unit dwelling complexes may be
aided by use of private master antenna services. Cable systems also face
competition from alternative methods of distributing and receiving television
signals and from other sources of entertainment such as live sporting events,
movie theaters and home video products, including videotape recorders and
videodisk players. In recent years, the FCC has adopted policies providing for
authorization of new technologies and a more favorable operating environment
for certain existing technologies that provide, or may provide, substantial
additional competition for cable television systems. The extent to which cable
television service is competitive depends in significant part upon the cable
television system's ability to provide an even greater variety of programming
than that available over the air or through competitive
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<PAGE> 14
alternative delivery sources. In addition, certain provisions of the 1992
Cable Act and the 1996 Telecom Act are expected to increase competition
significantly in the cable industry. See "Legislation and Regulation."
Individuals presently have the option to purchase earth
stations, which allow the direct reception of satellite-delivered program
services formerly available only to cable television subscribers. Most
satellite-distributed program signals are being electronically scrambled to
permit reception only with authorized decoding equipment for which the consumer
must pay a fee. From time to time, legislation has been introduced in Congress
which, if enacted into law, would prohibit the scrambling of certain
satellite-distributed programs or would make satellite services available to
private earth stations on terms comparable to those offered to cable systems.
Broadcast television signals are being made available to owners of earth
stations under the Satellite Home Viewer Copyright Act of 1988, which became
effective January 1, 1989 for an initial six-year period. This Act establishes
a statutory compulsory license for certain transmissions made by satellite
owners to home satellite dishes, for which carriers are required to pay a
royalty fee to the Copyright Office. This Act has been extended by Congress
until December 31, 1999. The 1992 Cable Act enhances the right of cable
competitors to purchase nonbroadcast satellite-delivered programming. See
"Legislation and Regulation-Federal Regulation."
Television programming is now also being delivered to
individuals by high-powered direct broadcast satellites ("DBS") utilizing video
compression technology. This technology has the capability of providing more
than 100 channels of programming over a single high-powered DBS satellite with
significantly higher capacity available if multiple satellites are placed in
the same orbital position. Video compression technology may also be used by
cable operators in the future to similarly increase their channel capacity.
DBS service can be received virtually anywhere in the United States through the
installation of a small rooftop or side-mounted antenna, and it is more
accessible than cable television service where cable plant has not been
constructed or where it is not cost effective to construct cable television
facilities. DBS service is being heavily marketed on a nationwide basis by
several service providers.
Multichannel multipoint distribution systems ("MMDS") deliver
programming services over microwave channels licensed by the FCC received by
subscribers with special antennas. MMDS systems are less capital intensive,
are not required to obtain local franchises or to pay franchise fees, and are
subject to fewer regulatory requirements than cable television systems. To
date, the ability of these so-called "wireless" cable services to compete with
cable television systems has been limited by channel capacity constraints and
the need for unobstructed line-of-sight over-the-air transmission. Although
relatively few MMDS systems in the United States are currently in operation or
under construction, virtually all markets have been licensed or tentatively
licensed. The FCC has taken a series of actions intended to facilitate the
development of MMDS and other wireless cable systems as alternative means of
distributing video programming, including reallocating certain frequencies to
these services and expanding the permissible use and eligibility requirements
for certain channels reserved for educational purposes. The FCC's actions
enable a single entity to develop an MMDS system with a potential of up to 35
channels that could compete effectively with cable television. MMDS systems
qualify for the statutory compulsory copyright license for the retransmission
of television and radio broadcast stations. Several of the Regional Bell
Operating Companies have begun to enter the MMDS business as a way of breaking
into video programming delivery.
Additional competition may come from private cable television
systems servicing condominiums, apartment complexes and certain other multiple
unit residential developments. The operators of these private systems, known as
satellite master antenna television ("SMATV") systems, often enter into
exclusive agreements with apartment building owners or homeowners' associations
which preclude franchised cable television operators from serving residents of
such private complexes. However, the 1984 Cable Act gives franchised cable
operators the right to use existing compatible easements within their franchise
areas upon nondiscriminatory terms and conditions. Accordingly, where there
are preexisting compatible easements, cable operators may not be unfairly
denied access or discriminated against with respect to the terms and conditions
of access to those easements. There have been conflicting judicial decisions
interpreting the scope of the access
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<PAGE> 15
right granted by the 1984 Cable Act, particularly with respect to easements
located entirely on private property. Further, while a franchised cable
television system typically is obligated to extend service to all areas of a
community regardless of population density or economic risk, a SMATV system may
confine its operation to small areas that are easy to serve and more likely to
be profitable. Under the 1996 Telecom Act, SMATV systems can interconnect
non-commonly owned buildings without having to comply with local, state and
federal regulatory requirements that are imposed upon cable systems providing
similar services, as long as they do not use public rights-of-way. In some
cases, SMATV operators may be able to charge a lower price than could a cable
system providing comparable services and the FCC's regulations implementing the
1992 Cable Act limit a cable operator's ability to reduce its rates to meet
this competition. Furthermore, the U.S. Copyright Office has tentatively
concluded that SMATV systems are "cable systems" for purposes of qualifying for
the compulsory copyright license established for cable systems by federal law.
The FCC has authorized a new interactive television service
which will permit non-video transmission of information between an individual's
home and entertainment and information service providers. This service will
provide an alternative means for DBS systems and other video programming
distributors, including television stations, to initiate the new interactive
television services. This service may also be used by the cable television
industry.
The FCC also has initiated a new rulemaking proceeding looking
toward the allocation of frequencies in the 28 Ghz range for a new
multi-channel wireless video service which could make 98 video channels
available in a single market. It cannot be predicted at this time whether
competitors will emerge utilizing such frequencies or whether such competition
would have a material impact on the operations of cable television systems.
The 1996 Telecom Act eliminates the restriction against
ownership and operation of cable systems by local telephone companies within
their local exchange service areas. Telephone companies are now free to enter
the retail video distribution business through any means, such as DBS, MMDS,
SMATV or as traditional franchised cable system operators. Alternatively, the
1996 Telecom Act authorizes local telephone companies to operate "open video
systems" without obtaining a local cable franchise, although telephone
companies operating such systems can be required to make payments to local
governmental bodies in lieu of cable franchise fees. Up to two-thirds of the
channel capacity on an "open video system" must be available to programmers
unaffiliated with the local telephone company. The open video system concept
replaces the FCC's video dialtone rules. The 1996 Telecom Act also includes
numerous provisions designed to make it easier for cable operators and others
to compete directly with local exchange telephone carriers. With certain
limited exceptions, neither a local exchange carrier nor a cable operator can
acquire more than 10% of the other entity operating within its own service
area.
Advances in communications technology, as well as changes in
the marketplace and the regulatory and legislative environment, are constantly
occurring. Thus, it is not possible to predict the effect that ongoing or
future developments might have on the cable industry. The ability of cable
systems to compete with present, emerging and future distribution media will
depend to a great extent on obtaining attractive programming. The availability
and exclusive use of a sufficient amount of quality programming may in turn be
affected by developments in regulation or copyright law. See "Legislation and
Regulation."
The cable television industry competes with radio, television
and print media for advertising revenues. As the cable television industry
continues to develop programming designed specifically for distribution by
cable, advertising revenues may increase. Premium programming provided by
cable systems is subject to the same competitive factors which exist for other
programming discussed above. The continued profitability of premium services
may depend largely upon the continued availability of attractive programming at
competitive prices.
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<PAGE> 16
LEGISLATION AND REGULATION
The cable television industry is regulated by the FCC, some
state governments and substantially all local governments. In addition,
various legislative and regulatory proposals under consideration from time to
time by the Congress and various federal agencies have in the past, and may in
the future, materially affect the Partnership and the cable television
industry. The following is a summary of federal laws and regulations affecting
the growth and operation of the cable television industry and a description of
certain state and local laws. The Partnership believes that the regulation of
its industry remains a matter of interest to Congress, the FCC and other
regulatory authorities. There can be no assurance as to what, if any, future
actions such legislative and regulatory authorities may take or the effect
thereof on the Partnership.
CABLE COMMUNICATIONS POLICY ACT OF 1984
The 1984 Cable Act became effective on December 29, 1984.
This federal statute, which amended the Communications Act of 1934 (the
"Communications Act"), created uniform national standards and guidelines for
the regulation of cable television systems. Violations by a cable television
system operator of provisions of the Communications Act, as well as of FCC
regulations, can subject the operator to substantial monetary penalties and
other sanctions. Among other things, the 1984 Cable Act affirmed the right of
franchising authorities (state or local, depending on the practice in
individual states) to award one or more franchises within their jurisdictions.
It also prohibited non-grandfathered cable television systems from operating
without a franchise in such jurisdictions. In connection with new franchises,
the 1984 Cable Act provides that in granting or renewing franchises,
franchising authorities may establish requirements for cable- related
facilities and equipment, but may not establish or enforce requirements for
video programming or information services other than in broad categories. The
1984 Cable Act grandfathered, for the remaining term of existing franchises,
many but not all of the provisions in existing franchises which would not be
permitted in franchises entered into or renewed after the effective date of the
1984 Cable Act.
CABLE TELEVISION CONSUMER PROTECTION AND COMPETITION ACT OF 1992
On October 5, 1992, Congress enacted the 1992 Cable Act. This
legislation has effected significant changes to the legislative and regulatory
environment in which the cable industry operates. It amends the 1984 Cable Act
in many respects. The 1992 Cable Act became effective on December 4, 1992,
although certain provisions, most notably those dealing with rate regulation
and retransmission consent, became effective at later dates. The legislation
required the FCC to conduct a number of rulemaking proceedings to implement
various provisions of the statute. The 1992 Cable Act allows for a greater
degree of regulation of the cable industry with respect to, among other things:
(i) cable system rates for both basic and certain nonbasic services; (ii)
programming access and exclusivity arrangements; (iii) access to cable channels
by unaffiliated programming services; (iv) leased access terms and conditions;
(v) horizontal and vertical ownership of cable systems; (vi) customer service
requirements; (vii) franchise renewals; (viii) television broadcast signal
carriage and retransmission consent; (ix) technical standards; (x) customer
privacy; (xi) consumer protection issues; (xii) cable equipment compatibility;
(xiii) obscene or indecent programming; and (xiv) 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 television systems by allowing municipalities
to own and operate their own cable television systems without having to obtain
a franchise; preventing franchising authorities from granting exclusive
franchises or unreasonably refusing to award additional franchises covering an
existing cable system's service area; and prohibiting the common ownership of
cable systems and co-located MMDS or SMATV systems. The 1992 Cable Act also
precludes video programmers affiliated with cable television companies from
favoring cable operators over competitors and requires such programmers to sell
their programming to other multichannel video distributors.
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<PAGE> 17
A constitutional challenge to the must-carry provisions of the
1992 Cable Act is still ongoing. On April 8, 1993, a three- judge district
court panel granted summary judgment for the government upholding the
must-carry provisions. That decision was appealed directly to the U.S. Supreme
Court which remanded the case back to the district court to determine whether
there was adequate evidence that the provisions were needed and whether the
restrictions chosen were the least intrusive. On December 12, 1995, the
district court again upheld the must-carry provisions. The Supreme Court is
reviewing the district court's decision.
On September 16, 1993, a constitutional challenge to the
balance of the 1992 Cable Act provisions was rejected by the U.S. District
Court in the District of Columbia which upheld the constitutionality of all but
three provisions of the statute (multiple ownership limits for cable operators,
advance notice of free previews for certain programming services and channel
set-asides for DBS operators). On August 30, 1996, the U.S. Court of Appeals
for the District of Columbia Circuit sustained the constitutionality of all
provisions except for the multiple ownership limits and the limits on the
number of channels which can be occupied by programmers affiliated with the
cable operator, both of which are being challenged in a separate appeal.
TELECOMMUNICATIONS ACT OF 1996
On February 8, 1996, the President signed the 1996 Telecom Act
into law. This statute substantially amended the Communications Act by, among
other things, removing barriers to competition in the cable television and
telephone markets and reducing the regulation of cable television rates. As it
pertains to cable television, the 1996 Telecom Act, among other things, (i)
ends the regulation of certain nonbasic programming services in 1999; (ii)
expands the definition of effective competition, the existence of which
displaces rate regulation; (iii) eliminates the restriction against the
ownership and operation of cable systems by telephone companies within their
local exchange service areas; and (iv) liberalizes certain of the FCC's
cross-ownership restrictions. The FCC is in the process of conducting a number
of additional rulemaking proceedings in order to implement many of the
provisions of the 1996 Telecom Act. See "Business - Competition" and "Federal
Regulation-Rate Regulation."
FEDERAL REGULATION
The FCC, the principal federal regulatory agency with
jurisdiction over cable television, has heretofore promulgated regulations
covering such areas as the registration of cable television systems,
cross-ownership between cable television systems and other communications
businesses, carriage of television broadcast programming, consumer education
and lockbox enforcement, origination cablecasting and sponsorship
identification, children's programming, the regulation of basic cable service
rates in areas where cable television systems are not subject to effective
competition, signal leakage and frequency use, technical performance,
maintenance of various records, equal employment opportunity, and antenna
structure notification, marking and lighting. The FCC has the authority to
enforce these regulations through the imposition of substantial fines, the
issuance of cease and desist orders and/or the imposition of other
administrative sanctions, such as the revocation of FCC licenses needed to
operate certain transmission facilities often used in connection with cable
operations. The 1992 Cable Act required the FCC to adopt additional
regulations covering, among other things, cable rates, signal carriage,
consumer protection and customer service, leased access, indecent programming,
programmer access to cable television systems, programming agreements,
technical standards, consumer electronics equipment compatibility, ownership of
home wiring, program exclusivity, equal employment opportunity, and various
aspects of direct broadcast satellite system ownership and operation. The 1996
Telecom Act requires certain changes to various of these regulations. A brief
summary of certain of these federal regulations as adopted to date follows.
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<PAGE> 18
RATE REGULATION
The 1984 Cable Act codified existing FCC preemption of rate
regulation for premium channels and optional nonbasic program tiers. The 1984
Cable Act also deregulated basic cable rates for cable television systems
determined by the FCC to be subject to effective competition. The 1992 Cable
Act substantially changed the previous statutory and FCC rate regulation
standards. The 1992 Cable Act replaced the FCC's old standard for determining
effective competition, under which most cable systems were not subject to local
rate regulation, with a statutory provision that resulted in nearly all cable
television systems becoming subject to local rate regulation of basic service.
The 1996 Telecom Act expands the definition of effective competition to cover
situations where a local telephone company or its affiliate, or any
multichannel video provider using telephone company facilities, offers
comparable video service by any means except DBS. Satisfaction of this test
deregulates both basic and nonbasic tiers. Additionally, the 1992 Cable Act
required the FCC to adopt a formula, for franchising authorities to enforce, to
assure that basic cable rates are reasonable; allowed the FCC to review rates
for nonbasic service tiers (other than per-channel or per-program services) in
response to complaints filed by franchising authorities and/or cable customers;
prohibited cable television systems from requiring subscribers to purchase
service tiers above basic service in order to purchase premium services if the
system is technically capable of doing so; required the FCC to adopt
regulations to establish, on the basis of actual costs, the price for
installation of cable service, remote controls, converter boxes and additional
outlets; and allows the FCC to impose restrictions on the retiering and
rearrangement of cable services under certain limited circumstances. The 1996
Telecom Act limits the class of complainants regarding nonbasic tier rates to
franchising authorities only and ends FCC regulation of nonbasic tier rates on
March 31, 1999.
The FCC adopted rules designed to implement the 1992 Cable
Act's rate regulation provisions on April 1, 1993, and then significantly
amended them on February 22 and November 10, 1994. The FCC's regulations
contain standards for the regulation of basic and nonbasic cable service rates
(other than per-channel or per-program services). The rules have been further
amended several times. Local franchising authorities and/or the FCC are
empowered to order a reduction of existing rates which exceed the maximum
permitted level for either basic and/or nonbasic cable services and associated
equipment, and refunds can be required. The rate regulations adopt a benchmark
price cap system for measuring the reasonableness of existing basic and
nonbasic service rates. Alternatively, cable operators have the opportunity to
make cost-of-service showings which, in some cases, may justify rates above the
applicable benchmarks. The rules also require that charges for cable-related
equipment (e.g., converter boxes and remote control devices) and installation
services be unbundled from the provision of cable service and based upon actual
costs plus a reasonable profit. The regulations also provide that future rate
increases may not exceed an inflation-indexed amount, plus increases in certain
costs beyond the cable operator's control, such as taxes, franchise fees and
increased programming costs. Cost-based adjustments to these capped rates can
also be made in the event a cable operator adds or deletes channels. In
addition, new product tiers consisting of services new to the cable system can
be created free of rate regulation as long as certain conditions are met such
as not moving services from existing tiers to the new tier. These provisions
currently provide limited benefit to the Partnership's systems due to the lack
of channel capacity previously discussed. There is also a streamlined
cost-of-service methodology available to justify a rate increase on basic and
regulated nonbasic tiers for "significant" system rebuilds or upgrades.
Franchising authorities have become certified by the FCC to
regulate the rates charged by the Partnership for basic cable service and for
associated basic cable service equipment. In addition, three of the
Partnership's franchising authorities have filed complaints with the FCC
regarding the rates charged for nonbasic cable service.
The Partnership has adjusted its regulated programming service
rates and related equipment and installation charges in substantially all of
its systems so as to bring these rates and charges into compliance with the
applicable benchmark or equipment and installation cost levels. The
Partnership also
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<PAGE> 19
implemented a program in substantially all of its systems under which a number
of the Partnership's satellite-delivered and premium services are now offered
individually on a per channel (i.e., a la carte) basis, or as a group at a
discounted price. A la carte services were not subject to the FCC's rate
regulations under the rules originally issued to implement the 1992 Cable Act.
The FCC, in its reconsideration of the original rate
regulations, stated that it was going to take a harder look at the regulatory
treatment of such a la carte packages on an ad hoc basis. Such packages which
are determined to be evasions of rate regulation rather than true enhancements
of subscriber choice will be treated as regulated tiers and, therefore, subject
to rate regulation. There have been no FCC rulings related to systems owned by
the Partnership. There have been three rulings, however, on such packages
offered by affiliated partnerships managed by FHGLP. In one case, the FCC's
Cable Services Bureau ruled that a nine-channel a la carte package was an
evasion of rate regulation and ordered this package to be treated as a
regulated tier. In the second case, a seven-channel a la carte package was
ordered to be treated as a regulated tier. In the third case, a six-channel
package was held not to be an evasion, but rather is to be considered an
unregulated new product tier under the FCC's November 10, 1994 rule amendments.
The deciding factor in all of the FCC's decisions related to a la carte tiers
appears to be the number of channels moved from regulated tiers, with six or
fewer channels being deemed not to be an evasion. Almost all of the
Partnership's systems moved six or fewer channels to a la carte packages. Under
the November 10, 1994 amendments, any new a la carte package created after that
date will be treated as a regulated tier, except for packages involving
traditional premium services (e.g., HBO).
On March 11, 1993, the FCC adopted regulations pursuant to the
1992 Act which require cable systems to permit customers to purchase video
programming on a per channel or a per program basis without the necessity of
subscribing to any tier of service, other than the basic service tier, unless
the cable system is technically incapable of doing so. Generally, this
exemption from compliance with the statute for cable systems that do not have
such technical capability is available until a cable system obtains the
capability, but not later than December 2002.
CARRIAGE OF BROADCAST TELEVISION SIGNALS
The 1992 Cable Act contained new signal carriage requirements.
These rules allow commercial television broadcast stations which are "local" to
a cable system, i.e., the system is located in the station's Area of Dominant
Influence, to elect every three years whether to require the cable system to
carry the station, subject to certain exceptions, or whether the cable system
will have to negotiate for "retransmission consent" to carry the station.
Local non-commercial television stations are also given mandatory carriage
rights, subject to certain exceptions, within the larger of: (i) a 50 mile
radius from the station's city of license; or (ii) the station's Grade B
contour (a measure of signal strength). Unlike commercial stations,
noncommercial stations are not given the option to negotiate retransmission
consent for the carriage of their signal. In addition, cable systems will have
to obtain retransmission consent for the carriage of all "distant" commercial
broadcast stations, except for certain "superstations," i.e., commercial
satellite-delivered independent stations such as WTBS. The Partnership has
thus far not been required to pay cash compensation to broadcasters for
retransmission consent or been required by broadcasters to remove broadcast
stations from the cable television channel line-ups. The Partnership has,
however, agreed to carry some services in specified markets pursuant to
retransmission consent arrangements which it believes are comparable to those
entered into by most other large cable operators, and for which it pays monthly
fees to the service providers, as it does with other satellite providers. The
second election between must-carry and retransmission consent for local
commercial television broadcast stations was October 1, 1996, and the
Partnership has agreed to carry one new service in its Somerset System pursuant
to these retransmission consent arrangements. The next election between must-
carry and retransmission consent for local commercial television broadcast
stations will be October 1, 1999.
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NONDUPLICATION OF NETWORK PROGRAMMING
Cable television systems that have 1,000 or more customers
must, upon the appropriate request of a local television station, delete the
simultaneous or nonsimultaneous network programming of a distant station when
such programming has also been contracted for by the local station on an
exclusive basis.
DELETION OF SYNDICATED PROGRAMMING
FCC regulations enable television broadcast stations that have
obtained exclusive distribution rights for syndicated programming in their
market to require a cable system to delete or "black out" such programming from
other television stations which are carried by the cable system. The extent of
such deletions will vary from market to market and cannot be predicted with
certainty. However, it is possible that such deletions could be substantial and
could lead the cable operator to drop a distant signal in its entirety. The
FCC also has commenced a proceeding to determine whether to relax or abolish
the geographic limitations on program exclusivity contained in its rules, which
would allow parties to set the geographic scope of exclusive distribution
rights entirely by contract, and to determine whether such exclusivity rights
should be extended to noncommercial educational stations. It is possible that
the outcome of these proceedings will increase the amount of programming that
cable operators are requested to black out. Finally, the FCC has declined to
impose equivalent syndicated exclusivity rules on satellite carriers who
provide services to the owners of home satellite dishes similar to those
provided by cable systems.
FRANCHISE FEES
Although franchising authorities may impose franchise fees
under the 1984 Cable Act, such payments cannot exceed 5% of a cable system's
annual gross revenues. Under the 1996 Telecom Act, franchising authorities may
not exact franchise fees from revenues derived from telecommunications
services. Franchising authorities are also empowered in awarding new
franchises or renewing existing franchises to require cable operators to
provide cable-related facilities and equipment and to enforce compliance with
voluntary commitments. In the case of franchises in effect prior to the
effective date of the 1984 Cable Act, franchising authorities may enforce
requirements contained in the franchise relating to facilities, equipment and
services, whether or not cable-related. The 1984 Cable Act, under certain
limited circumstances, permits a cable operator to obtain modifications of
franchise obligations.
RENEWAL OF FRANCHISES
The 1984 Cable Act established renewal procedures and criteria
designed to protect incumbent franchisees against arbitrary denials of renewal.
While these formal procedures are not mandatory unless timely invoked by either
the cable operator or the franchising authority, they can provide substantial
protection to incumbent franchisees. Even after the formal renewal procedures
are invoked, franchising authorities and cable operators remain free to
negotiate a renewal outside the formal process. Nevertheless, renewal is by no
means assured, as the franchisee must meet certain statutory standards. Even
if a franchise is renewed, a franchising authority may impose new and more
onerous requirements such as upgrading facilities and equipment, although the
municipality must take into account the cost of meeting such requirements.
The 1992 Cable Act makes several changes to the process under
which a cable operator seeks to enforce his renewal rights which could make it
easier in some cases for a franchising authority to deny renewal. While a cable
operator must still submit its request to commence renewal proceedings within
thirty to thirty-six months prior to franchise expiration to invoke the formal
renewal process, the request must be in writing and the franchising authority
must commence renewal proceedings not later than six months after receipt of
such notice. The four-month period for the franchising authority to grant or
deny the renewal now runs from the submission of the renewal proposal, not the
completion of the public proceeding. Franchising authorities may consider the
"level" of programming service provided by a cable operator in deciding whether
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<PAGE> 21
to renew. For alleged franchise violations occurring after December 29, 1984,
franchising authorities are no longer precluded from denying renewal based on
failure to substantially comply with the material terms of the franchise where
the franchising authority has "effectively acquiesced" to such past violations.
Rather, the franchising authority is estopped if, after giving the cable
operator notice and opportunity to cure, it fails to respond to a written
notice from the cable operator of its failure or inability to cure. Courts may
not reverse a denial of renewal based on procedural violations found to be
"harmless error."
CHANNEL SET-ASIDES
The 1984 Cable Act permits local franchising authorities to
require cable operators to set aside certain channels for public, educational
and governmental access programming. The 1984 Cable Act further requires cable
television systems with thirty-six or more activated channels to designate a
portion of their channel capacity for commercial leased access by unaffiliated
third parties. While the 1984 Cable Act allowed cable operators substantial
latitude in setting leased access rates, the 1992 Cable Act requires leased
access rates to be set according to a formula determined by the FCC.
COMPETING FRANCHISES
Questions concerning the ability of municipalities to award a
single cable television franchise and to impose certain franchise restrictions
upon cable television companies have been considered in several recent federal
appellate and district court decisions. These decisions have been somewhat
inconsistent and, until the U.S. Supreme Court rules definitively on the scope
of cable television's First Amendment protections, the legality of the
franchising process and of various specific franchise requirements is likely to
be uncertain. It is not possible at the present time to predict the
constitutionally permissible bounds of cable franchising and particular
franchise requirements. However, the 1992 Cable Act, among other things,
prohibits franchising authorities from unreasonably refusing to grant
franchises to competing cable television systems and permits franchising
authorities to operate their own cable television systems without franchises.
OWNERSHIP
The 1996 Telecom Act repealed the 1984 Cable Act's prohibition
against local exchange telephone companies ("LECs") providing video programming
directly to customers within their local telephone exchange service areas.
However, with certain limited exceptions, a LEC may not acquire more than a 10%
equity interest in an existing cable system operating within the LEC's service
area. The 1996 Telecom Act also authorized LECs and others to operate "open
video systems" without obtaining a local cable franchise. See "Competition."
The 1984 Cable Act and the FCC's rules prohibit the common
ownership, operation, control or interest in a cable system and a local
television broadcast station whose predicted grade B contour (a measure of a
television station's signal strength as defined by the FCC's rules) covers any
portion of the community served by the cable system. The 1996 Telecom Act
eliminates the statutory ban and directs the FCC to review its rule within two
years. Common ownership or control has historically also been prohibited by the
FCC (but not by the 1984 Cable Act) between a cable system and a national
television network. The 1996 Telecom Act eliminated this prohibition. Finally,
in order to encourage competition in the provision of video programming, the
FCC adopted a rule prohibiting the common ownership, affiliation, control or
interest in cable television systems and MMDS facilities having overlapping
service areas, except in very limited circumstances. The 1992 Cable Act
codified this restriction and extended it to co-located SMATV systems.
Permitted arrangements in effect as of October 5, 1992 are grandfathered. The
1996 Telecom Act exempts cable systems facing effective competition from the
MMDS and SMATV restriction. In addition, a cable operator can purchase a SMATV
system serving the same area and technically integrate it into the cable
system. The 1992 Cable Act permits states or local franchising authorities to
adopt certain additional restrictions on the ownership of cable television
systems.
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<PAGE> 22
Pursuant to the 1992 Cable Act, the FCC has imposed limits on
the number of cable systems which a single cable operator can own. In general,
no cable operator can have an attributable interest in cable systems which pass
more than 30% of all homes nationwide. Attributable interests for these
purposes include voting interests of 5% or more (unless there is another single
holder of more than 50% of the voting stock), officerships, directorships and
general partnership interests. The FCC has stayed the effectiveness of these
rules pending the outcome of the appeal from the U.S. District Court decision
holding the multiple ownership limit provision of the 1992 Cable Act
unconstitutional.
The FCC has also adopted rules which limit the number of
channels on a cable system which can be occupied by programming in which the
entity which owns the cable system has an attributable interest. The limit is
40% of the first 75 activated channels.
EEO
The 1984 Cable Act includes provisions to ensure that
minorities and women are provided equal employment opportunities within the
cable television industry. The statute requires the FCC to adopt reporting and
certification rules that apply to all cable system operators with more than
five full-time employees. Pursuant to the requirements of the 1992 Cable Act,
the FCC has imposed more detailed annual EEO reporting requirements on cable
operators and has expanded those requirements to all multichannel video service
distributors. Failure to comply with the EEO requirements can result in the
imposition of fines and/or other administrative sanctions, or may, in certain
circumstances, be cited by a franchising authority as a reason for denying a
franchisee's renewal request.
PRIVACY
The 1984 Cable Act imposes a number of restrictions on the
manner in which cable system operators can collect and disclose data about
individual system customers. The statute also requires that the system
operator periodically provide all customers with written information about its
policies regarding the collection and handling of data about customers, their
privacy rights under federal law and their enforcement rights. In the event
that a cable operator is found to have violated the customer privacy provisions
of the 1984 Cable Act, it could be required to pay damages, attorneys' fees and
other costs. Under the 1992 Cable Act, the privacy requirements are
strengthened to require that cable operators take such actions as are necessary
to prevent unauthorized access to personally identifiable information.
FRANCHISE TRANSFERS
The 1992 Cable Act requires franchising authorities to act on
any franchise transfer request submitted after December 4, 1992 within 120 days
after receipt of all information required by FCC regulations and by the
franchising authority. Approval is deemed to be granted if the franchising
authority fails to act within such period.
REGISTRATION PROCEDURE AND REPORTING REQUIREMENTS
Prior to commencing operation in a particular community, all
cable television systems must file a registration statement with the FCC
listing the broadcast signals they will carry and certain other information.
Additionally, cable operators periodically are required to file various
informational reports with the FCC.
TECHNICAL REQUIREMENTS
Historically, the FCC has imposed technical standards
applicable to the cable channels on which broadcast stations are carried, and
has prohibited franchising authorities from adopting standards which
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<PAGE> 23
were in conflict with or more restrictive than those established by the FCC.
The FCC has revised such standards and made them applicable to all classes of
channels which carry downstream National Television System Committee (NTSC)
video programming. The FCC also has adopted additional standards applicable to
cable television systems using frequencies in the 108-137 Mhz and 225-400 Mhz
bands in order to prevent harmful interference with aeronautical navigation and
safety radio services and has also established limits on cable system signal
leakage. Periodic testing by cable operators for compliance with the technical
standards and signal leakage limits is required and an annual filing of the
results of these measurements is required. The 1992 Cable Act requires the FCC
to periodically update its technical standards to take into account changes in
technology. Under the 1996 Telecom Act, local franchising authorities may not
prohibit, condition or restrict a cable system's use of any type of subscriber
equipment or transmission technology.
The FCC has adopted regulations to implement the requirements
of the 1992 Cable Act designed to improve the compatibility of cable systems
and consumer electronics equipment. These regulations, inter alia, generally
prohibit cable operators from scrambling their basic service tier and from
changing the infrared codes used in their existing customer premises equipment.
This latter requirement could make it more difficult or costly for cable
operators to upgrade their customer premises equipment and the FCC has been
asked to reconsider its regulations. The 1996 Telecom Act directs the FCC to
set only minimal standards to assure compatibility between television sets,
VCRs and cable systems, and to rely on the marketplace. The FCC must adopt
rules to assure the competitive availability to consumers of customer premises
equipment, such as converters, used to access the services offered by cable
systems and other multichannel video programming distributors.
POLE ATTACHMENTS
The FCC currently regulates the rates and conditions imposed
by certain public utilities for use of their poles unless state public service
commissions are able to demonstrate that they regulate the rates, terms and
conditions of cable television pole attachments. A number of states and the
District of Columbia have certified to the FCC that they regulate the rates,
terms and conditions for pole attachments. In the absence of state regulation,
the FCC administers such pole attachment rates through use of a formula which
it has devised. The 1996 Telecom Act directs the FCC to adopt a new rate
formula for any attaching party, including cable systems, which offer
telecommunications services. This new formula will result in significantly
higher attachment rates for cable systems which choose to offer such services.
OTHER MATTERS
FCC regulation pursuant to the Communications Act, as amended,
also includes matters regarding a cable system's carriage of local sports
programming; restrictions on origination and cablecasting by cable system
operators; application of the fairness doctrine and rules governing political
broadcasts; customer service; obscenity and indecency; home wiring and
limitations on advertising contained in nonbroadcast children's programming.
The 1996 Telecom Act establishes a process for the creation
and implementation of a "voluntary" system of ratings for video programming
containing sexual, violent or other "indecent" material and directs the FCC to
adopt rules requiring most television sets manufactured in the United States or
shipped in interstate commerce to be technologically capable of blocking the
display of programs with a common rating. The 1996 Telecom Act also requires
video programming distributors to employ technology to restrict the reception
of programming by persons not subscribing to those channels. In the case of
channels primarily dedicated to sexually-oriented programming, the distributor
must fully block reception of the audio and video portion of the channels; a
distributor that is unable to comply with this requirement may only provide
such programming during a "safe harbor" period when children are not likely to
be in the audience, as determined by the FCC. This provision has been
temporarily stayed while certain programmers seek Supreme Court review on
constitutional grounds. With respect to other kinds of channels, the 1996
Telecom Act only
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requires that the audio and video portions of the channel be fully blocked, at
no charge, upon request of the person not subscribing to the channel.
COPYRIGHT
Cable television systems are subject to federal copyright
licensing covering carriage of broadcast signals. In exchange for making
semi-annual payments to a federal copyright royalty pool and meeting certain
other obligations, cable operators obtain a statutory license to retransmit
broadcast signals. The amount of this royalty payment varies, depending on the
amount of system revenues from certain sources, the number of distant signals
carried, and the location of the cable system with respect to over-the-air
television stations. Any future adjustment to the copyright royalty rates will
be done through an arbitration process supervised by the U.S. Copyright Office.
Cable operators are liable for interest on underpaid and
unpaid royalty fees, but are not entitled to collect interest on refunds
received for overpayment of copyright fees.
The Copyright Office has commenced a proceeding aimed at
examining its policies governing the consolidated reporting of commonly owned
and contiguous cable television systems. The present policies governing the
consolidated reporting of certain cable television systems have often led to
substantial increases in the amount of copyright fees owed by the systems
affected. These situations have most frequently arisen in the context of cable
television system mergers and acquisitions. While it is not possible to
predict the outcome of this proceeding, any changes adopted by the Copyright
Office in its current policies may have the effect of reducing the copyright
impact of certain transactions involving cable company mergers and cable
television system acquisitions.
Various bills have been introduced into Congress over the past
several years that would eliminate or modify the cable television compulsory
license. Without the compulsory license, cable operators would have to
negotiate rights from the copyright owners for all of the programming on the
broadcast stations carried by cable systems. Such negotiated agreements would
likely increase the cost to cable operators of carrying broadcast signals. The
1992 Cable Act's retransmission consent provisions expressly provide that
retransmission consent agreements between television broadcast stations and
cable operators do not obviate the need for cable operators to obtain a
copyright license for the programming carried on each broadcaster's signal.
Copyrighted music performed in programming supplied to cable
television systems by pay cable networks (such as HBO) and basic cable networks
(such as USA Network) is licensed by the networks through private agreements
with the American Society of Composers and Publishers ("ASCAP") and BMI, Inc.
("BMI"), the two major performing rights organizations in the United States.
As a result of extensive litigation, both ASCAP and BMI now offer "through to
the viewer" licenses to the cable networks which cover the retransmission of
the cable networks' programming by cable systems to their customers.
Copyrighted music performed by cable systems themselves on
local origination channels, in advertisements inserted locally on cable
networks, et cetera, must also be licensed. A blanket license is available
from BMI. Cable industry negotiations with ASCAP are still in progress.
STATE AND LOCAL REGULATION
Because a cable television system uses local streets and
rights-of-way, cable television systems are subject to state and local
regulation, typically imposed through the franchising process. State and/or
local officials are usually involved in franchise selection, system design and
construction, safety, service rates, consumer relations, billing practices and
community related programming and services.
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Cable television systems generally are operated pursuant to
nonexclusive franchises, permits or licenses granted by a municipality or other
state or local government entity. Franchises generally are granted for fixed
terms and in many cases are terminable if the franchise operator fails to
comply with material provisions. Although the 1984 Cable Act provides for
certain procedural protections, there can be no assurance that renewals will be
granted or that renewals will be made on similar terms and conditions.
Franchises usually call for the payment of fees, often based on a percentage of
the system's gross customer revenues, to the granting authority. Upon receipt
of a franchise, the cable system owner usually is subject to a broad range of
obligations to the issuing authority directly affecting the business of the
system. The terms and conditions of franchises vary materially from
jurisdiction to jurisdiction, and even from city to city within the same state,
historically ranging from reasonable to highly restrictive or burdensome. The
1984 Cable Act places certain limitations on a franchising authority's ability
to control the operation of a cable system operator and the courts have from
time to time reviewed the constitutionality of several general franchise
requirements, including franchise fees and access channel requirements, often
with inconsistent results. On the other hand, the 1992 Cable Act prohibits
exclusive franchises, and allows franchising authorities to exercise greater
control over the operation of franchised cable television systems, especially
in the area of customer service and rate regulation. The 1992 Cable Act also
allows franchising authorities to operate their own multichannel video
distribution system without having to obtain a franchise and permits states or
local franchising authorities to adopt certain restrictions on the ownership of
cable television systems. Moreover, franchising authorities are immunized from
monetary damage awards arising from regulation of cable television systems or
decisions made on franchise grants, renewals, transfers and amendments.
The specific terms and conditions of a franchise and the laws
and regulations under which it was granted directly affect the profitability of
the cable television system. Cable franchises generally contain provisions
governing charges for basic cable television services, fees to be paid to the
franchising authority, length of the franchise term, renewal, sale or transfer
of the franchise, territory of the franchise, design and technical performance
of the system, use and occupancy of public streets and number and types of
cable services provided. The 1996 Telecom Act prohibits a franchising
authority from either requiring or limiting a cable operator's provision of
telecommunications services.
Various proposals have been introduced at the state and local
levels with regard to the regulation of cable television systems, and a number
of states have adopted legislation subjecting cable television systems to the
jurisdiction of centralized state governmental agencies, some of which impose
regulation of a character similar to that of a public utility.
The foregoing does not purport to describe all present and
proposed federal, state and local regulations and legislation relating to the
cable television industry. Other existing federal regulations, copyright
licensing and, in many jurisdictions, state and local franchise requirements,
currently are the subject of a variety of judicial proceedings, legislative
hearings and administrative and legislative proposals which could change, in
varying degrees, the manner in which cable television systems operate. Neither
the outcome of these proceedings nor their impact upon the cable television
industry can be predicted at this time.
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ITEM 2. PROPERTIES
The Partnership owns substantially all of the assets related
to its cable television operations, including its program production equipment,
headend equipment (towers, antennae, electronic equipment and satellite earth
stations), cable plant (distribution equipment, amplifiers, customer drops and
hardware), converters, test equipment, tools and maintenance equipment and
vehicles.
The Partnership generally leases the real estate on which its
business offices, microwave receiving antennae, microwave towers, warehouses,
headend facilities and other related equipment are located. Management believes
that the Partnership's leased properties are suitable for such purposes. The
Partnership paid approximately $91,000 pursuant to all such leases for the year
ended December 31, 1996, which leases expire at various dates through 2008.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is a party to various legal proceedings. Such
legal proceedings are ordinary and routine litigation proceedings that are
incidental to the Partnership's business and management believes that the
outcome of all pending legal proceedings will not, in the aggregate, have a
material adverse effect on the financial condition of the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The following summarizes certain provisions of the Partnership
Agreement. All statements made below and elsewhere in this Report on Form 10-K
with respect to the Partnership Agreement are qualified in their entirety by
reference to the Partnership Agreement, a copy of which is filed as an exhibit
hereto. Capitalized terms that are not otherwise defined are used as defined in
the Partnership Agreement.
LIQUIDITY
While the Partnership's equity securities, which consist of
Units of limited partnership interests, are publicly held, there is no
established trading market for the Units and it is not expected that such a
market will develop. The approximate number of equity security holders of
record was 6,206 as of February 1, 1997. In addition to restrictions on the
transferability of Units contained in the Partnership Agreement, the
transferability of Units is affected by restrictions on resales imposed by
federal or state law.
DISTRIBUTIONS
The Partnership will distribute all Cash Available for
Distributions, if any, within 45 days after the end of each calendar month.
The limited partners will receive 99% and the General Partner will receive 1%
of all Cash Available for Distributions. "Cash Available for Distributions"
means for any month (i) the sum of Gross Revenues for such month, (ii) less the
sum of all expenses for such month (prior to the deduction of interest and
depreciation and amortization expenses but including management fees and
general partner expenses) calculated in accordance with generally accepted
accounting principles, (iii) less any reasonable increase in amounts reserved
(or plus any decrease in amounts reserved) for payment by the General Partner
for capital expenditures of the Partnership, (iv) less amounts accrued by the
General Partner for such month for interest on borrowings of the Partnership
and (v) less increases in reserves (or plus decreases in reserves) established
by the General Partner in such month for principal payments on borrowings of
for obligations or other contingent liabilities of the Partnership. No such
distributions have been made since April 15, 1994. See Item 7., "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Distributions of Other Distributable Funds, if any, will be
made 45 days after the end of each calendar month for which there are Other
Distributable Funds. Distributions of Other Distributable Funds will be made
99% to limited partners who own Units which have been issued and outstanding
for at least one year and 1% to the General Partner. Such distributions to
limited partners will be made pro rata based on the number of such Units held
by each limited partner. "Other Distributable Funds" for any month means any
borrowings designated by the General Partner to fund cash distributions to
Partners for such month.
The average distributions to Unitholders amounted to $99.09
per Unit in 1991, $100.28 per Unit in 1992, $84.86 per Unit in 1993 and $11.31
per Unit in 1994. The distributions made during 1993 consisted of
approximately $5.7 million of Cash Available for Distributions (described
above) and $476,000 from borrowings. There were no borrowings required to fund
any portion of the distributions paid in 1994. Cash Available for Distributions
differs from cash provided by operating activities due to increases and
decreases, over the prior year, of receivables, payables, and other assets and
liabilities.
The limited partners will receive 99% and the General Partner
will receive 1% of distributions of Available Sale Proceeds until the limited
partners have received Payback. After the limited partners have received
Payback, the limited partners will receive 75% and the General Partner will
receive 25% of Available Sale Proceeds. The term "Available Sales Proceeds"
means all cash receipts of the Partnership, net of any repayments of
outstanding indebtedness, from any sale or refinancing of Partnership assets
less such amounts
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deemed necessary by the General Partner for payments of or reserves for any
expenses, contingencies, obligations or capital expenditures of the Partnership
and less any proceeds reinvested pursuant to the terms of the Partnership
Agreement. "Payback" means, with respect to any limited partner, aggregate cash
distributions to the limited partner equal to such limited partner's capital
contributions plus the 11% Preferred Return per year computed on such limited
partner's Adjusted Capital Contribution. The term "11% Preferred Return" means
an 11% per annum (cumulative but not compounded) cash return based on each
limited partner's Adjusted Capital Contribution and calculated with respect to
any Units from the date of the closing in which such Units were first issued by
the Partnership.
The "Adjusted Capital Contribution" of a limited partner on
which the Payback and the 11% Preferred Return are calculated is the limited
partner's capital contribution reduced by the aggregate of cash distributions
distributed to the limited partners which is in excess of the amount required
to satisfy any 11% Preferred Return. To the extent the Partnership generates
cash in excess of the 11% Preferred Return, which is not presently expected,
the General Partner intends to apply such excess to retirement of debt. With
respect to any limited partner, the 11% Preferred Return will be calculated
from the date of the closing of the sale of Units in which such limited
partner's Units were first issued by the Partnership.
The Partnership Agreement limits borrowings incurred to make
distributions to partners to not more than 10% of Gross Proceeds (as defined)
from the public offering of the Units (approximately $7.2 million). As of
December 31, 1996, the Partnership had incurred an aggregate of approximately
$5.4 million in borrowings to make distributions to partners. As noted above,
the Partnership suspended distributions subsequent to the April 15, 1994
payment.
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<PAGE> 29
ITEM 6. SELECTED FINANCIAL DATA
Set forth below is selected financial data of the Partnership
for the five years ended December 31, 1996. This data should be read in
conjunction with the Partnership's financial statements included in Item 8
hereof and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included in Item 7.
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------------------------
OPERATIONS STATEMENT DATA 1992 1993 1994 1995 1996
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues $14,496 $16,785 $17,382 $ 18,363 $ 19,826
Costs and expenses (7,923) (9,578) (9,497) (10,100) (10,316)
Depreciation and amortization (7,942) (8,404) (8,924) (8,526) (7,712)
------- ------- ------- -------- --------
Operating income (loss) (1,369) (1,197) (1,039) (263) 1,798
Interest expense, net (1,026) (1,519) (1,776) (2,010) (1,813)
Other expense - - 4 - -
------- ------- ------- -------- --------
Net loss $(2,395) $(2,716) $(2,811) $ (2,273) $ (15)
======= ======= ======= ======== ========
Distributions to partners $ 7,281 $ 6,163 $ 821 $ - $ -
======== ======= ======= ======= ========
PER UNIT OF LIMITED PARTNERSHIP INTEREST:
Net loss $ (32.98) $(37.41) $(38.71) $(31.30) $ (0.21)
======== ======= ======= ======= ========
Distributions $100.28 $ 84.86 $ 11.31 $ - $ -
======== ======= ======= ======= ========
OTHER OPERATING DATA
Net cash provided by operating
activities $5,822 $ 6,169 $ 6,090 $ 6,486 $ 6,747
EBITDA(1) 6,573 7,207 7,885 8,263 9,510
EBITDA to revenues 45.3% 42.9% 45.4% 45.0% 48.0%
Total debt to EBITDA 2.7x 3.1x 2.9x 3.3x 2.6x
Capital expenditures $5,115 $ 3,889 $ 3,982 $ 5,713 $ 3,033
</TABLE>
<TABLE>
<CAPTION>
As of December 31,
------------------------------------------------------------------------
BALANCE SHEET DATA 1992 1993 1994 1995 1996
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total assets $67,936 $63,807 $60,060 $62,959 $59,334
Total long-term debt 18,000 22,300 22,500 27,000 24,300
Total liabilities 22,344 27,062 26,939 32,111 28,501
Partners' equity 45,592 36,745 33,121 30,848 30,833
</TABLE>
- -----------------
(1) Operating income before depreciation and amortization. The
Partnership measures its financial performance by its EBITDA, among other
items. Based on its experience in the cable television industry, the
Partnership believes that EBITDA and related measures of cash flow serve as
important financial analysis tools for measuring and comparing cable television
companies in several areas, such as liquidity, operating performance and
leverage. This is evidenced by the covenants in the primary debt instruments of
the Partnership, in which EBITDA-derived calculations are used as a measure of
financial performance. EBITDA should not be considered by the reader as an
alternative to net income as an indicator of the Partnership's financial
performance or as an alternative to cash flows as a measure of liquidity.
-29-
<PAGE> 30
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
On February 8, 1996, President Clinton signed into law the
1996 Telecom Act. This statute substantially changed the competitive and
regulatory environment for telecommunications providers by significantly
amending the Communications Act, including certain of the rate regulation
provisions previously imposed by the 1992 Cable Act. Compliance with those
rate regulations has had a negative impact on the Partnership's revenues and
cash flow. However, in accordance with the FCC's regulations, the Partnership
will be able to increase regulated service rates in the future in response to
inflation and specified historical and anticipated cost increases, although
certain costs may continue to rise at a rate in excess of that which the
Partnership will be permitted to pass on to its customers. The 1996 Telecom Act
provides that certain of the rate regulations will be phased-out altogether in
1999. Further, the regulatory environment will continue to change pending,
among other things, the outcome of legal challenges and FCC rulemaking and
enforcement activity in respect of the 1992 Cable Act and the 1996 Telecom Act.
There can be no assurance as to what, if any, future action may be taken by the
FCC, Congress or any other regulatory authority or court, or the effect thereof
on the Partnership's business. Accordingly, the Partnership's historical
financial results as described below are not necessarily indicative of future
performance. See "Legislation and Regulation" and "- Liquidity and Capital
Resources."
This Report includes certain forward looking statements
regarding, among other things, future results of operations, regulatory
requirements, competition, capital needs, the possible sale of assets by the
Partnership and general business conditions applicable to the Partnership.
Such forward looking statements involve risks and uncertainties including,
without limitation, the uncertainty of legislative and regulatory changes and
the rapid developments in the competitive environment facing cable television
operators such as the Partnership, as discussed more fully elsewhere in this
Report.
RECENT DEVELOPMENTS
As previously reported, the Partnership commenced the
Appraisal Process in August 1996 and received the results of the related
appraisals in February 1997. As of the date of this Report, the General
Partner has not made a decision as to whether or not it will further pursue the
acquisition of any Partnership assets at this time. These matters are
discussed more fully under the caption Item 13., "Certain Relationships and
Related Transactions -- Appraisal Process" and in the Partnership's Current
Reports on Form 8-K dated August 27, 1997, October 17, 1997 and February 6,
1997. Unitholders are urged to review the referenced materials carefully.
RESULTS OF OPERATIONS
1996 COMPARED TO 1995
The Partnership's revenue increased from $18.4 million to
$19.8 million, or by 8.0%, during 1996 compared to 1995. Of the $1.4 million
increase, approximately $1.2 million was due to increases in regulated service
rates implemented in the second quarter of 1995 and throughout 1996, $215,000
was due to the restructuring of The Disney Channel from a premium channel to a
tier channel on July 1, 1996, $219,000 was due to programmer incentives and
$93,000 was due to increases in advertising sales. These increases were
partially offset by revenue decreases of $264,000, primarily due to reductions
in the number of subscriptions for premium cable services. As of December 31,
1996, the Partnership had approximately 47,580 homes subscribing to cable
service and 17,510 premium service units. The decrease of 5,400 premium units
from December 31, 1995 was due in part to approximately 1,700 Disney premium
units that became tier subscriptions under the restructuring discussed above.
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<PAGE> 31
Service costs remained relatively unchanged at approximately
$6 million during 1996 compared to 1995. Service costs represent costs
directly attributable to providing cable services to customers.
General and administrative expenses increased from $2.6
million to $2.7 million, or by 4.9%, during 1996 compared with 1995. Of the
$128,000 increase, $51,000 was due to increases in insurance cost, $30,000 was
due to increases in compliance costs associated with re- regulation by the FCC
and $47,000 was due to increases in other expenses.
General Partner management fees and reimbursed expenses
remained constant as a percent of revenue at 8.0%, and increased from $1.5
million to $1.6 million during 1996 compared with 1995.
Depreciation an amortization expenses decreased from $8.5
million to $7.7 million, or by 9.5%, during 1996 compared with 1995. The
$814,000 decrease was due primarily to certain assets becoming fully amortized
in 1996.
An operating loss of $263,000 for 1995 became operating income
of $1.8 million for 1996. The $2.1 million increase in operating income during
1996 compared with 1995 was due primarily to increased revenues and decreases
in depreciation an amortization expense.
Net interest expense, including the effects of interest rate
hedging agreements, decreased from $2 million to $1.8 million, or by 9.8%,
during 1996 compared to 1995. The $197,000 decrease was due primarily to
interest income earned on higher cash balances offset by an increase in
interest expense due to higher average debt balances (because the $5.6 million
borrowed on December 29, 1995 was not outstanding during 1995). The hedging
agreements resulted in higher interest expense of $19,000 and $117,000 for the
years ended December 31, 1995 and 1996, respectively.
Due to the factors described above, the Partnership's net loss
decreased from $2.3 million to $15,000 during 1996 compared to 1995.
1995 COMPARED TO 1994
The Partnership's revenues increased from $17.4 million to
$18.4 million, or by 5.6%, during 1995 compared to 1994. Of the $981,000
increase, approximately $691,000 was due to increases in the number of
subscriptions for services, $414,000 was due to an increase in regulated
service rates implemented during April 1995, $73,000 was due to an increase in
premium service rates implemented during December 1994, $38,000 was due to
increases in advertising sales and $28,000 was due to commissions earned from
the Home Shopping Network. These increases were partially offset by rate
decreases implemented in 1994 to comply with the 1992 Cable Act, estimated by
the Partnership to be approximately $279,000. As of December 31, 1995, the
Partnership had approximately 47,960 homes subscribing to cable service and
22,920 premium service units.
Service costs increased from $5.3 million to $6 million, or by
14.4%, during 1995 compared to 1994. Service costs represent costs directly
attributable to providing cable services to customers. The $761,000 increase
in service costs was primarily related to an increase of $529,000 in
programming (including primary satellite fees), an increase of $156,000 in
property taxes, an increase of $49,000 in copyright fees and an increase of
$42,000 in franchise fees. The increase in programming expense was due to a
combination of higher rates charged by program suppliers and expanded
programming usage relating to channel line-up restructuring and retransmission
consent arrangements implemented to comply with the 1992 Cable Act.
General and administrative expenses decreased from $2.8
million to $2.6 million, or by 8.4%, during 1995 compared with 1994. The
$236,000 decrease was primarily related to decreases of $121,000 in costs
associated with marketing activities, decreases of $54,000 in costs associated
with advertising sales and decreases of $50,000 in bad debts.
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<PAGE> 32
General Partner management fees and reimbursed expenses
remained constant as a percent of revenue (8%), and increased from $1.4 million
to $1.5 million during 1995 compared with 1994.
Depreciation and amortization expenses decreased from $8.9
million to $8.5 million, or by 4.5%, during 1995 compared with 1994. The
$398,000 decrease was primarily due to the acceleration of depreciation on
certain assets retired in 1994.
Operating loss decreased from $1.0 million to $263,000, or by
74.7%, during 1995 compared with 1994. The $776,000 decrease was due primarily
to increased revenues and to decreases in costs associated with marketing
activities and in reduced depreciation and amortization expenses, partially
offset by increases in programming fees and property taxes.
Net interest expense, including the effects of interest rate
hedging agreements, increased from $1.8 million to $2 million, or by 13.2%,
during 1995 compared to 1994. The $234,000 increase was due primarily to
higher interest rates. The hedging agreements resulted in additional interest
expense of $82,000 and $19,000 for the years ended December 31, 1994 and 1995,
respectively.
Due to the factors described above, the Partnership's net loss
decreased from $2.8 million to $2.3 million during 1995 compared to 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's primary objective, having invested its net
offering proceeds in cable systems, is to distribute to its partners all
available cash flow generated from operations and proceeds from the sale of
cable systems, if any, after providing for expenses, debt service and capital
requirements relating to possible improvement and upgrade of its Systems. The
Partnership relies upon the availability of cash generated from operations and
possible borrowings to fund its ongoing capital requirements. In general, these
requirements involve expansion, improvement and upgrade of the Partnership's
existing Systems. The Partnership has encountered liquidity difficulties due
in part to the adverse effects of the 1992 Cable Act and new competitive
pressures resulting from both technological advances as well as from the 1996
Telecom Act which will require that material amounts of capital be invested in
the Partnership's Systems. As previously reported, in response to the FCC's
amended rate regulation rules, distributions to Unitholders were discontinued
subsequent to the April 15, 1994 payment in order to preserve cash resources.
The Partnership also delayed the majority of its rebuild and upgrade capital
expenditure programs that had been scheduled for 1994, 1995 and 1996 in order
to preserve liquidity. See "Legislation and Regulation."
The Partnership's access to capital remains severely
constrained primarily due to the limitations imposed by the Partnership
Agreement. This limitation on indebtedness, which is discussed below, is at
odds with the need to increase leverage and to spend approximately $35 million
to rebuild and upgrade the Partnership's Systems (of which approximately
$650,000 is mandated by franchise agreements). The Partnership spent an
aggregate of approximately $3 million in 1996 for all capital expenditures,
including approximately $220,000 to begin the upgrade of a portion of one
System, which represented the minimum level of expenditures that management
believes were necessary in 1996 to comply with franchise authority and FCC
technical requirements. As a result, the Partnership's Systems are
significantly less technically advanced than had been expected prior to the
implementation of re-regulation. The Partnership believes that the delays in
upgrading many of its systems will, under present market conditions, most
likely have an adverse affect on the value of those systems compared to systems
that have been rebuilt to a higher technical standard.
On December 29, 1995, the Partnership borrowed $5.6 million
under its Bank Credit Agreement because the revolving credit portion of that
facility was scheduled to convert to a term loan on December 31, 1995. The
Partnership's management believes that the Partnership's anticipated cash
resources and cash flow
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<PAGE> 33
from operations in 1997 will be sufficient to fund its capital expenditure
plans (as adjusted) and the required principal payments on its debt of $4.1
million scheduled for 1997.
As of December 31, 1996, the amount outstanding under the
Partnership's amended Bank Credit Agreement was $24.3 million. As discussed
above, the Partnership had no additional borrowings available to it. At
December 31, 1996, such borrowings bore interest at an average rate of 7.8%
(including the effect of interest rate swap transactions). The Bank Credit
Agreement also contains various restrictions relating to, among other things,
mergers and acquisitions, investments, capital expenditures, a change in
control and the incurrence of additional indebtedness and also requires
compliance with certain financial covenants. Management believes that the
Partnership was in compliance with all such requirements as of December 31,
1996. The Bank Credit Agreement requires principal repayments of $4.1 million
in 1997 and $5.4 million in 1998.
The Partnership Agreement provides that without the approval
of a majority of interests of limited partners, the Partnership may not incur
any borrowings unless the amount of such borrowings together with all
outstanding borrowings does not exceed 30% of the greater of the aggregate cost
or current fair market value of the Partnership's assets as determined by the
General Partner. As discussed above, in order to spend the appropriate amount
of capital to rebuild and upgrade the Partnership's systems, this provision of
the Partnership Agreement would need to be amended to significantly increase
the Partnership's leverage because the Partnership's management does not
believe that it will be able to fund future rebuild requirements entirely from
cash resources and operating cash flow.
The Partnership's management agreement with the General
Partner requires deferral of the payment of up to 50% of the management fees,
without interest, unless Adjusted Operating Cash (as defined) for such month
exceeds a 10% annualized return calculated with respect to outstanding
Partnership Units. To the extent that Adjusted Operating Cash exceeds such
amount, the General Partner may recover previously deferred fees, without
interest. In compliance with these provisions, the General Partner received
its standard management fee for 1996 and recovered $900,000 in previously
deferred management fees. The Partnership presently anticipates that Adjusted
Operating Cash in the first quarter of 1997 will exceed the 10% requirement
thereby permitting the Partnership to pay the remaining $276,000 deferred fees
to the General Partner.
The Partnership Agreement also limits borrowings incurred to
make distributions to partners to not more than 10% of Gross Proceeds from the
public offering of the Units (approximately $7.2 million). As of December 31,
1996, the Partnership had incurred an aggregate of approximately $5.4 million
in borrowings to make distributions to partners. The Partnership discontinued
distributions subsequent to the April 15, 1994 payments.
1996 VS 1995
Cash provided by operating activities increased from $6.5
million to $6.7 million, or by $261,000, for the year ended December 31, 1996
compared to 1995. The increase resulted from a decrease in the net loss of
$2.3 million, $814,000 of which resulted from a decrease in non-cash
depreciation and amortization; and from a decrease of $1.2 million in other
operating items (receivables, prepaid expenses and other assets, cable
materials, equipment and supplies, payables, accrued expenses and customer
deposits and prepayments), which includes the $900,000 decrease in deferred
management fees discussed above.
Cash used in investing activities decreased by $2.8 million
during 1996 compared to 1995, primarily due to a decrease in capital
expenditures. Cash used by financing activities increased $7.2 million because
of increased net repayment of debt of $2.7 million during 1996 compared to net
borrowings of $4.5 million during 1995.
Operating income before depreciation and amortization (EBITDA)
as a percentage of revenues increased from 45.0% to 48.0% during 1996 compared
to 1995. The increase was primarily caused by increased
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<PAGE> 34
revenues, as described above. EBITDA increased from $8.3 million to $9.5
million, or by 15.1%, during 1996 compared to 1995.
1995 VS. 1994
Cash provided by operating activities increased from $6.1
million to $6.5 million, or by $396,000, for the year ended December 31, 1995
compared to 1994. The increase resulted from an increase of $248,000 in other
operating items (receivables, prepaid assets, cable materials, equipment and
supplies, payables, accrued expenses and customer deposits and prepayments) and
a decrease of $538,000 in the net loss partially reduced by a decrease in
non-cash depreciation and amortization charges of $390,000.
Cash used in investing activities increased by $1.9 million
during 1995 compared to 1994, due to a $1.7 million increase in capital
expenditures and a $132,000 increase in intangible assets. Cash provided by
financing activities increased $6 million due to a $4.3 million increase in net
borrowings and the absence of any distributions paid to partners in 1995 versus
the $1.7 million paid in 1994.
Operating income before depreciation and amortization (EBITDA)
as a percentage of revenues decreased from 45.4% to 45.0% during 1995 compared
to 1994. The decrease was primarily caused by increases in programming costs
and other expenses in excess of increased revenues, as described above. EBITDA
increased from $7.9 million to $8.3 million during 1995 compared to 1994.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995, the FASB issued Statement No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of, which requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount. In such cases, impairment losses are to be
recorded, based on estimated fair value, which would generally approximate
discounted cash flows. Statement 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The Partnership adopted
Statement 121 in the first quarter of 1996, the effects of which were not
material.
INFLATION
Certain of the Partnership's expenses, such as those for wages
and benefits, equipment repair and replacement, and billing and marketing
generally increase with inflation. However, the Partnership does not believe
that its financial results have been, or will be, adversely affected by
inflation in a material way, provided that it is able to increase its service
rates periodically, of which there can be no assurance. See "Legislation and
Regulation."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The financial statements and related financial information
required to be filed hereunder are indexed on Page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
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<PAGE> 35
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership Agreement provides that the General Partner
shall manage the business and affairs of the Partnership. The business and
affairs of the General Partner are managed by its general partner, FHGLP. FHGI
serves as the sole general partner of FHGLP. As such, FGHI is responsible for
the management of the business and operations of the Partnership. The officers
and directors are subject to certain conflicts of interest relating to time and
services devoted to the Partnership. See Item 13., "Certain Relationships and
Related Transactions - Conflicts of Interest."
EXECUTIVE OFFICERS AND DIRECTORS
The directors and executive officers of FHGI and Falcon Cable
Group, the operating division of FHGLP, are:
<TABLE>
<CAPTION>
Name Age Position
- ----------------- --- -----------------------------------------------------------
<S> <C> <C>
Marc B. Nathanson 51 Chairman of the Board, Chief Executive Officer and Director
of FHGI
Frank J. Intiso 50 President and Chief Operating Officer
Stanley S. Itskowitch 58 Executive Vice President, General Counsel and Director of
FHGI
Michael K. Menerey 45 Chief Financial Officer and Secretary
Joe A. Johnson 52 Executive Vice President - Operations
Jon W. Lunsford 37 Vice President - Finance and Corporate Development
</TABLE>
The following sets forth certain biographical information with
respect to the directors and executive officers of FHGI and Falcon Cable Group:
MARC B. NATHANSON, 51, has been Chairman of the Board and Chief Executive
Officer of FHGI and its predecessors since 1975, and prior to September 19,
1995 also served as President. Prior to 1975, Mr. Nathanson was Vice President
of Marketing for Teleprompter Corporation, then the largest MSO in the United
States. He also held executive positions with Warner Cable and Cypress
Communications Corporation. He is a former President of the California Cable
Television Association and a member of Cable Pioneers. He is currently a
Director of the National Cable Television Association ("NCTA") and serves on
its Executive Committee. At the 1986 NCTA convention, Mr. Nathanson was
honored by being named the recipient of the Vanguard Award for outstanding
contributions to the growth and development of the cable television industry.
Mr. Nathanson is a 27-year veteran of the cable television industry. He is a
founder of the Cable Television Administration and Marketing Society ("CTAM")
and the Southern California Cable Television Association. Mr. Nathanson has
also served as Chairman of the Board, Chief Executive Officer and President of
Enstar Communications Corporation ("Enstar") since October 1988. Mr. Nathanson
is also a Director of T.V. Por Cable Nacional, S.A. de C.V. and Chairman of the
Board and Chief Executive Officer of Falcon International Communications, LLC
("FIC"), a separately capitalized affiliated company whose members and
management also include certain limited partners and management of FHGLP. Mr.
Nathanson was appointed by President Clinton and confirmed by the U.S. Senate
for a three year term on the Board of Governors of International Broadcasting
of the United States Information Agency.
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<PAGE> 36
FRANK J. INTISO, 50, was appointed President and Chief Operating Officer of
FHGI in September 1995, and between 1982 and that date held the positions of
Executive Vice President and Chief Operating Officer. Mr. Intiso is responsible
for the day-to-day operations of all cable television systems under the
management of Falcon Cable Group, and has served as President and Chief
Operating Officer of Falcon Cable Group since its inception, and has also
served as Executive Vice President and as a Director of Enstar since October
1988. Mr. Intiso has a Masters Degree in Business Administration from the
University of California, Los Angeles and is a Certified Public Accountant. He
serves as Chair of the California Cable Television Association and is on the
boards of the Cable Advertising Bureau, Cable in the Classroom, Community
Antenna Television Association and California Cable Television Association. He
is a member of the American Institute of Certified Public Accountants, the
American Marketing Association, the American Management Association and the
Southern California Cable Television Association.
STANLEY S. ITSKOWITCH, 58, has been a Director of FHGI and its predecessors
since 1975, and Senior Vice President and General Counsel from 1987 to 1990 and
has been Executive Vice President and General Counsel since February 1990. He
has been President and Chief Executive Officer of F.C. Funding, Inc. (formerly
Fallek Chemical Company), which is a marketer of chemical products, since 1980.
He is a Certified Public Accountant and a former tax partner in the New York
office of Touche Ross & Co. (now Deloitte & Touche LLP). He has a J.D. Degree
and an L.L.M. Degree in Tax from New York University School of Law. Mr.
Itskowitch has also served as Senior Vice President or Executive Vice President
and as a Director of Enstar since October 1988. Mr. Itskowitch is also
Executive Vice President and General Counsel of FIC.
MICHAEL K. MENEREY, 45, has been Chief Financial Officer and Secretary of FHGI
and its predecessors since 1984 and has been Chief Financial Officer and
Secretary of Falcon Cable Group since its inception. Mr. Menerey is a Certified
Public Accountant and is a member of the American Institute of Certified Public
Accountants and the California Society of Certified Public Accountants, and he
was formerly associated with BDO Seidman. Mr. Menerey has also served as Chief
Financial Officer, Secretary and as a Director of Enstar since October 1988.
JOE A. JOHNSON, 52, has been Executive Vice President of Operations of FHGI
since September 1995, and between January 1992 and that date was a Senior Vice
President of Falcon Cable Group. He was a Divisional Vice President of FHGI
between 1989 and 1992 and a Divisional Vice President of Falcon Cable Group
from its inception until 1992. From 1982 to 1989, he held the positions of
Vice President and Director of Operations for Sacramento Cable Television,
Group W Cable of Chicago and Warner Amex. From 1975 to 1982, Mr. Johnson held
Cable System and Regional Manager positions with Warner Amex and Teleprompter.
JON W. LUNSFORD, 37, has been Vice President - Finance and Corporate
Development of FHGI since September 1994. From 1991 to 1994, he served as
Director of Corporate Finance at Continental Cablevision, Inc. Prior to 1991,
Mr. Lunsford was a Vice President with Crestar Bank.
OTHER OFFICERS OF FALCON
The following sets forth, as of December 31, 1995, certain biographical
information with respect to additional members of the management of Falcon
Cable Group:
LYNNE A. BUENING, 43, has been Vice President of Programming of Falcon Cable
Group since November 1993. From 1989 to 1993, she served as Director of
Programming for Viacom Cable, a division of Viacom International Inc. Prior to
that, Ms. Buening held programming and marketing positions in the cable,
broadcast and newspaper industries.
OVANDO COWLES, 43, has been Vice President of Advertising Sales and Production
of Falcon Cable Group since January 1992. From 1988 to 1991, he served as a
Director of Advertising Sales and Production at Cencom Cable Television in
Pasadena, California. He was an Advertising Sales Account Executive at Choice
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<PAGE> 37
Television from 1985 to 1988. From 1983 to 1985, Mr. Cowles served in various
sales and advertising positions.
ABEL CRESPO, 37, has been Controller of Falcon Cable Group since January 1997.
Mr. Crespo joined Falcon in December 1984 and has held various accounting
positions during that time, most recently that of Senior Assistant Controller.
Mr. Crespo holds a Bachelor of Science degree in Business Administration from
California State University, Los Angeles.
HOWARD J. GAN, 50, has been Vice President of Regulatory Affairs of FHGI and
its predecessors since 1988 and Vice President of Regulatory Affairs of Falcon
Cable Group since its inception. He was General Counsel at Malarkey-Taylor
Associates, a Washington, D.C.-based telecommunications consulting firm, from
1986 to 1988. Mr. Gan was Vice President and General Counsel at the Cable
Television Information Center from 1978 to 1983. In addition, he was an
attorney and an acting Branch Chief of the Federal Communications Commission's
Cable Television Bureau from 1975 to 1978.
R.W. ("SKIP") HARRIS, 49, has been Vice President of Marketing of Falcon Cable
Group since June 1991. He is a member of the CTAM Premium Television Committee.
Mr. Harris was National Director of Affiliate Marketing for the Disney Channel
from 1985 to 1991. He was also a sales manager, regional marketing manager and
director of marketing for Cox Cable Communications from 1978 to 1985.
JOAN SCULLY, 61, has been Vice President of Human Resources of FHGI and its
predecessors since May 1988 and Vice President of Human Resources Falcon Cable
Group since its inception. From 1987 to May 1988, she was self-employed as a
Management Consultant to cable and transportation companies. She served as
Director of Human Resources of a Los Angeles based cable company from 1985
through 1987. Prior to that time, she served as a human resource executive in
the entertainment and aerospace industries. Ms. Scully holds a Masters Degree
in Human Resources Management from Pepperdine University.
MICHAEL D. SINGPIEL, 49, was appointed Vice President of Operations of Falcon
Cable Group in March 1996. Mr. Singpiel joined Falcon in October 1992 as
Divisional Vice President of Falcon's Eastern Division. From 1990 to 1992, Mr.
Singpiel was Vice President of C-Tec Cable Systems in Michigan. Mr. Singpiel
held various positions with Comcast in New Jersey and Michigan from 1980 to
1990.
RAYMOND J. TYNDALL, 49, has been Vice President of Engineering of Falcon Cable
Group since October 1989. From 1975 to September 1989, he held various
technical positions with Choice TV and its predecessors. From 1967 to 1975, he
held various technical positions with Sammons Communications. He is a certified
National Association of Radio and Television Engineering ("NARTE") engineer in
lightwave, microwave, satellite and broadband.
In addition, Falcon Cable Group has six Divisional Vice
Presidents who are based in the field. They are Ron L. Hall, Michael E. Kemph,
Nicholas A. Nocchi, Larry L. Ott, Robert S. Smith and Victor A. Wible.
ADVISORY COMMITTEE AND CONFLICTS COMMITTEE
The General Partner has formed an eight member Advisory
Committee, members of which are non-employees. Members of the Advisory
Committee are appointed by the General Partner and can be removed only by a
vote of a majority of the Advisory Committee. Members meet periodically to
review the operations of the Partnership and to advise management. The
unaffiliated members of the Advisory Committee constitute the Conflicts
Committee and may be called upon from time to time to review activities,
policies and practices of the Partnership dealing with all matters about which
conflicts of interest may arise.
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<PAGE> 38
The following individuals have been appointed to the Advisory
Committee:
Marc B. Nathanson. Mr. Nathanson has been Chairman of the
Board and Chief Executive Officer of FHGI or its predecessors since 1975, and
prior to September 19, 1995 also served as President.
Frank J. Intiso. Mr. Intiso was appointed President and Chief
Operating Officer of FHGI in 1995 and between 1982 and that date he held the
positions of Executive Vice President and Chief Operating Officer of FHGI or
its predecessors.
Burt I. Harris. Mr. Harris is President and Chief Executive
Officer of Harriscope Corporation, which controls the ownership and operations
of KWHY-TV, Los Angeles, California. He is a former President and Chairman of
Harris Cable Corporation and a former Vice- Chairman of Warner Cable. He has
been a member of the National Cable Television Association (NCTA) for over 25
years and was Chairman of the NCTA from 1976 to 1977. In 1979, he was
presented with "The Vanguard Award," the highest recognition of an individual
in the cable television industry. He is also a director of various corporations
and, prior to its dissolution in August 1996, was also a member of the Advisory
Committee for Falcon Cable Systems Company.
Henry Winkler. Mr. Winkler is a principal of Winkler/Daniels
Productions, as well as an actor and a director. Mr. Winkler earned popular
and critical acclaim for his portrayal of "The Fonz" on ABC-TV's "Happy Days"
for ten seasons (1974-84). Since 1979, he has been involved with several
different entities, including Winkler/Daniels, which produces feature films and
television programming, including the hit series "Sightings." Additionally,
Mr. Winkler has been honorary chairman of United Friends of the Children and
national chairman of the annual Toys for Tots campaign. He holds a Bachelor of
Arts degree from Emerson College and a Master of Fine Arts degree from the Yale
School of Drama.
Peter L. S. Currie. Mr. Currie is Senior Vice President and
Chief Financial Officer of Netscape Communications Corporation. Prior to
joining Netscape, Mr. Currie served as Executive Vice President and Chief
Financial Officer of McCaw Cellular Communications, a leading provider of
wireless communications services. Before that, he was a principal in the
Investment Banking Division of Morgan Stanley & Co., Incorporated.
Mark E. Buchman. Mr. Buchman, a business consultant, was
President and Chief Executive Officer of Liberty Bank, Honolulu, Hawaii, until
July 1994. Previously he was President and Chief Executive Officer of the Bank
of Los Angeles. Mr. Buchman was appointed President and Chief Executive
Officer of the Government National Mortgage Association by President Reagan and
served in this capacity from 1988 to 1989. Mr. Buchman served as Executive Vice
President/Division Manager, Corporate Banking for Union Bank from 1982 to 1988.
Mr. Buchman was associated with Manufacturers Hanover Bank for twenty years,
the majority of which he spent in the International Division in the
Asian/Pacific area. While at Manufacturers Hanover, Mr. Buchman's positions
included serving as the bank's Far Eastern Representative in Tokyo and the
Asian Banking Group's Senior Vice President and Division Manager. Mr. Buchman
is a graduate of the University of Pennsylvania and completed the Advanced
Management Program at the Harvard Graduate School of Business Administration.
John K. Van de Kamp. Mr. Van de Kamp is of counsel in the Los
Angeles office of the Law Firm of Dewey Ballantine and is a member of the
California Bar. He is also President of the Thoroughbred Owners of California.
From 1983 to 1991, Mr. Van de Kamp served as the California Attorney General.
From 1975 to 1983, Mr. Van de Kamp served as Los Angeles County District
Attorney. From 1971 to 1975, Mr. Van de Kamp served as first Federal Public
Defender, Central District of California, Los Angeles. In 1970, Mr. Van de
Kamp served as Special Assistant to the President's Commission on Campus Unrest
(the Scranton Commission). From 1966 to 1967, Mr. Van de Kamp served as United
States Attorney, Central District of California, Los Angeles. From 1960 to
1966, Mr. Van de Kamp served as Assistant United States Attorney, Chief of the
Criminal Division, Chief Assistant U.S. Attorney, Los Angeles. Mr. Van de Kamp
is a graduate of Dartmouth College. Mr. Van de Kamp received a J. D. degree
from the Stanford University School of Law.
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Ned S. Robertson. Mr. Robertson has been an attorney since
1971 and is currently a partner in the law firm of Aronberg Goldgehn Davis &
Garmisa in Chicago, Illinois. Mr. Robertson received a bachelor of arts degree
from Hobart College in 1967, majoring in political science, and his Juris
doctorate from IIT Chicago-Kent College of Law in 1971. He has published
several articles on estate planning and family business issues and has lectured
on these subjects. He is a past chairman of the Medical Research Institute
Council, an organization that raised substantial funds for research at Michael
Reese Hospital and Medical Center, Chicago, Illinois. Mr. Robertson is a
member of the Illinois State Bar Association, the Chicago Bar Association and
the Chicago Estate Planning Council. He is also Chairman of Division 1 of the
Trust Law Committee of the Chicago Bar Association and a member of the
Franchise Advisory Board to the Illinois Attorney General. Mr. Robertson's law
firm has provided legal counsel to affiliates of Falcon.
The Partnership Agreement provides that members of the
Advisory Committee will not be liable to the Partnership or the Limited
Partners for certain acts or omissions. See Item 13., "Certain Relationships
and Related Transactions-Fiduciary Responsibility and Indemnification of the
General Partner." Non-employee members of the Advisory Committee are paid
$5,000 per annum, plus reimbursement of expenses.
ITEM 11. EXECUTIVE COMPENSATION
The following summarizes compensation, fees and distributions
that may or will be paid by the Partnership to the General Partner and FHGLP.
For more detailed information, see the Partnership Agreement.
MANAGEMENT FEE
FHGLP, pursuant to the Partnership Agreement, manages all
aspects of daily operations of the Partnership's systems, including
engineering, maintenance, programming, advertising, marketing and sales
programs, preparation of financial reports, budgets and reports to governmental
and regulatory agencies and liaison with federal, state and local government
officials. FHGLP is entitled to receive a management fee (the "Management
Fee") equal to 5% of the Partnership's Gross Operating Revenues. "Gross
Operating Revenues" means the total revenues derived by the Partnership but
does not include interest income or Available Sale Proceeds. However, during
any month commencing after 18 months from the initial closing of the sale of
Units, up to 50% of the Management Fee will not be paid currently unless
Adjusted Operating Cash for the month exceeds the Subordination Amount for that
month. "Adjusted Operating Cash" means for any month (i) the sum of gross
revenues for such month, (ii) less the sum of all expenses of the Partnership
for such month (other than depreciation and amortization expenses, the
Management Fee and interest expense) calculated in accordance with generally
accepted accounting principles, (iii) less, for any month beginning with the
first full calendar month commencing 42 months after the initial closing of the
sale of Units, interest accrued by the General Partner for such month for all
interest on borrowings of the Partnership and (iv) less 50% of the Management
Fee attributable to such month.
"Subordination Amount" means for any month, a 10% annualized
return, calculated with respect to Units in each month by determining 0.833% of
the Adjusted Capital Contribution attributable to each Unit on the last day of
such month, but calculated only with respect to Units issued and outstanding
for more than 12 months. To the extent Adjusted Operating Cash for any month
exceeds the Subordination Amount for that month, FHGLP will be entitled to
recover deferred Management Fees, if any. In addition, if Payback is achieved
(which is not presently expected), then the Partnership may pay the unpaid
balance of Management Fees for all prior periods. If Payback is not achieved,
the Partnership will not be required to pay the unpaid Management Fees. For
the year ended December 31, 1996, the management fees and reimbursed expenses
totaled $1.6 million, all of which was paid currently in cash in accordance
with the Partnership Agreement. In addition, in accordance with the
Partnership Agreement the Partnership also paid $900,000 of fees to the General
Partner that had been deferred in prior years to give effect to the amount of
Adjusted Operating Cash realized.
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PARTICIPATION IN DISTRIBUTIONS
The General Partner is entitled to share in distributions
from, and profits and losses in, the Partnership. See Item 5, "Market for
Registrant's Common Equity and Related Stockholder Matters."
DISPOSITION FEES AND EXPENSES
A disposition fee equal to 1% of the sale price received by
the Partnership for the sale of cable systems to unaffiliated third parties is
payable to FHGLP provided that no such fee shall be paid unless and until the
Limited Partners have received a return of their total capital contributions
and a cumulative (but not compounded) six percent annual return on their
Adjusted Capital Contributions. The Partnership will reimburse the General
Partner and FHGLP for certain disposition expenses whether or not a cable
system is, in fact, disposed of and regardless of the limit on General Partner
Expenses, except that certain expenses of the General Partner itself may be
subject to limitations on reimbursement. In case of cable systems disposed of
by the Partnership in exchange for other cable systems and cash, the
disposition fee will be paid only with respect to the cash (or cash equivalents
such as promissory notes) portion of the sale price. No disposition fee will
be paid on sales of cable systems to the General Partner or any of its
affiliates.
ACQUISITION FEES AND EXPENSES
An acquisition fee equal to 1% of the purchase price paid to
sellers of cable systems acquired by the Partnership from unaffiliated third
parties is payable to FHGLP. The Partnership will reimburse the General
Partner and FHGLP for acquisition expenses incurred in connection with the
investigation and analysis of acquisitions whether or not a cable system is, in
fact, acquired and regardless of any limit on General Partner Expenses. No
acquisition fee will be paid with respect to acquisitions made with reinvested
Available Sale Proceeds. "Available Sales Proceeds" means all cash receipts of
the Partnership, net of any repayments of outstanding indebtedness, from any
sale or refinancing of partnership assets less such amounts deemed necessary by
the General Partner for payments of or reserves for any expenses,
contingencies, obligations or capital expenditures of the Partnership and less
any proceeds reinvested pursuant to the terms of the Partnership Agreement. In
the case of cable systems acquired by the Partnership in exchange for other
cable systems and cash, the acquisition fee will be paid only with respect to
the cash (or cash equivalents such as Partnership promissory notes) portion of
the purchase price.
GENERAL PARTNER EXPENSES AND MANAGEMENT EXPENSES
The Partnership will reimburse the General Partner and FHGLP
for certain direct and indirect expenses incurred on behalf of the Partnership
in connection with the administration of the Partnership and management of the
Partnership's cable systems in an amount up to 3% of Gross Operating Revenues.
The foregoing cumulative limitation on General Partner Expenses and Management
Expenses does not apply to Acquisition Expenses or Disposition Expenses. The
expenses subject to reimbursement include all direct and indirect expenses
(including legal and accounting fees, overhead and travel and communication
expenses) incurred by FHGLP in connection with the management of the cable
systems of the Partnership, or any successor manager of such systems.
"Acquisition Expenses" means expenses, including any brokerage fees or
commissions, legal fees or expenses, the cost of any credit reports,
appraisals, consulting fees or miscellaneous expenses (including travel and
communications expenses) incurred by the General Partner or FHGLP in connection
with services rendered in acquiring cable systems, whether or not acquired,
pursuant to the Partnership Agreement or the Management Agreement.
"Disposition Expenses" means any brokerage fees or commissions, legal fees or
expenses, the cost of any credit reports, appraisals, consulting fees or
miscellaneous expenses (including travel and communications expenses) incurred
by the General Partner or FHGLP in connection with services rendered in
disposing of or refinancing cable systems pursuant to the Partnership
Agreement. General Partner Expenses and Management Expenses reimbursed by the
Partnership will be usual and customary expenses for services provided.
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<PAGE> 41
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 3, 1997, the common stock of FHGI was owned as
follows: 78.5% by Falcon Cable Trust, a grantor trust of which Marc B.
Nathanson is trustee and he and members of his family are beneficiaries; 20% by
Greg A. Nathanson; and 1.5% by Stanley S. Itskowitch. In 1989, FHGI issued to
Hellman & Friedman Capital Partners, A California Limited Partnership ("H&F"),
a $1,293,357 convertible debenture due 1999 convertible under certain
circumstances into ten percent of the common stock of FHGI and entitling H&F to
elect one director to the board of directors of FHGI. H&F elected Marc B.
Nathanson pursuant to such right. In 1991 FHGI issued to Hellman & Friedman
Capital Partners II, A California Limited Partnership ("H&FII"), additional
convertible debentures due 1999 in the aggregate amount of $2,006,198
convertible under certain circumstances into approximately 6.3% of the common
stock of FHGI and entitling H&FII to elect one director to the board of
directors of FHGI. As of March 3, 1997, H&FII had not exercised this right.
FHGLP also held 12.1% of the interests in the General Partner, and Falcon Cable
Trust, Frank Intiso and H&FII held 58.9%, 12.1% and 16.3% of the General
Partner, respectively. Such interests entitle the holders thereof to an
allocable share of cash distributions and profits and losses of the General
Partner in proportion to their ownership. Greg A. Nathanson is Marc B.
Nathanson's brother.
As of March 3, 1997, Marc B. Nathanson and members of his
family owned, directly or indirectly, outstanding partnership interests
(comprising both general partner interests and limited partner interests)
aggregating approximately 2.58% of Falcon Video Communications and representing
0.46% of the Partnership. In accordance with the respective partnership
agreements of these partnerships, after the return of capital to and the
receipt of certain preferred returns by the limited partners of such
partnerships, FHGLP and certain of its officers and directors had rights to
future profits greater than their ownership interests of capital in such
partnerships.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN TRANSACTIONS
FHGLP and its affiliates, including Marc B. Nathanson and
other members of the senior management team, currently own varying interests in
and operate additional cable television systems, currently manage additional
cable television systems for the accounts of others, and, subject to the terms
of the Partnership Agreement, may form, jointly or separately, other limited
partnerships or entities to acquire, develop and operate other cable television
systems. The current management activities of FHGLP's senior management are
primarily on behalf of certain affiliated cable television partnerships, for
which FHGLP receives management fees. As a result of such relationships,
however, conflicts of interest may arise at various stages with respect to the
allocation of time, personnel and other resources of FHGLP and such other
affiliates and members of senior management.
FHGLP has leased certain office space for its corporate
financial center (located in Pasadena, California) from a partnership owned by
Marc B. Nathanson and his wife. The lease commenced on October 1, 1990 and has
been extended through September 30, 2005. The rent is currently approximately
$33,000 per month and is indexed for inflation. The terms of the current lease
have been negotiated on an arm's length basis. It is expected that any future
modifications to the leasing agreement will be approved by the members of the
Board of Representatives of FHGLP other than Marc B. Nathanson.
APPRAISAL PROCESS
As previously disclosed in prior filings with the Commission,
the Partnership may, in the sole discretion of its General Partner, sell
individual cable Systems and may also sell all or substantially all of the
Partnership's assets to the General Partner or its affiliates, which include
FHGLP. Any such sale would be
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subject to certain terms and conditions set forth in the Partnership Agreement
and summarized below and in prior filings with the Commission. The Partnership
has stated in its prior filings with the Commission that the General Partner
and its affiliates may consider and otherwise investigate the exercise of the
purchase rights provided to them under the Partnership Agreement from time to
time at their discretion.
The Partnership Agreement provides that any sale of
Partnership assets to the General Partner or any of its affiliates must be made
in cash pursuant to the "Appraisal Process." "Appraisal Process" is defined in
the Partnership Agreement as an appraisal undertaken by three independent
nationally recognized experts in the cable television field to determine the
fair market value of the cable systems to be appraised. One such appraiser
must be appointed by the General Partner, one by the Partnership's Conflicts
Committee and the third by the first two appraisers acting jointly. The
Partnership Agreement specifies that the Conflicts Committee be comprised of
the independent members of the Advisory Committee (i.e., the members of the
Advisory Committee that are not affiliates of, or otherwise have certain
material business or professional relationships with, the General Partner or
its affiliates). The appraised value pursuant to the Appraisal Process will be
deemed to be the median of the three appraised values and, if any appraised
value is expressed as a range, then in calculating the median, the mean amount
of the range of such appraised value shall be used. No appraisals arising in
affiliated transactions may be conducted at the Partnership's expense.
Appraisers selected pursuant to the Appraisal Process may not have any interest
in, nor any material business or professional relationship with, the
Partnership, the General Partner or any of its affiliates. For the purposes of
determining whether or not the business or professional relationship or joint
investment is material, the gross revenue derived by the appraiser from the
Partnership, the General Partner or any affiliate shall not exceed 5% of the
annual gross revenue derived by the appraiser from all sources. Except under
certain circumstances, sales of assets by the Partnership to the General
Partner or its affiliates prior to January 1, 1997 would have required an
affirmative vote of a majority of limited partner interests outstanding and not
owned by the General Partner or its affiliates. No such vote is required or
will be sought in the future.
If the limited partners propose to sell Partnership assets
without the approval of the General Partner, the General Partner has a right of
first refusal to purchase such assets on the same terms and conditions as
agreed to by the prospective purchaser. The General Partner also has a right to
purchase Partnership assets without a vote of the limited partners if the
General Partner is removed without cause.
Though the General Partner is not required to purchase the
Partnership's cable systems, it or one of its affiliates may determine to do so
subject to the foregoing restrictions. Limited partners will not be entitled
to share in any profits of the General Partner or its affiliates from the
operation or sale of any cable systems subsequent to the sale of such systems
to the General Partner or any of its affiliates.
As previously disclosed, in a meeting held in Los Angeles on
August 27, 1996, the General Partner formally advised the Partnership's
Advisory Committee and Conflicts Committee that it desired to explore on a
preliminary basis the possibility of exercising the purchase rights contained
in the Partnership Agreement and summarized above. Accordingly, the General
Partner requested that the Appraisal Process be commenced and that, in
compliance therewith, the Conflicts Committee select an independent nationally
recognized expert in the cable television field to determine the fair market
value of each of the Partnership's cable Systems. Pursuant to the Partnership
Agreement, the sole obligation of the Conflicts Committee in connection with
the Appraisal Process is to select one of the three appraisers. The Conflicts
Committee selected Arthur Andersen, LLP; the General Partner selected Kane
Reece Associates, Inc.; and those two appraisers selected Communications Equity
Associates (the "Appraisers").
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, other than Arthur Andersen LLP, has from time to time
provided valuation services to the Partnership and its affiliates for which
they have received customary compensation.
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On February 6, 1997, each of the Appraisers delivered
summaries of the results of their appraisals (the "Appraisals"), and
subsequently delivered their reports to the Partnership. The reports are filed
as exhibits to this Annual Report on Form 10-K. These Appraisals address the
value of the appraised Partnership assets and do not give effect to any debt or
other liabilities of the Partnership. As noted elsewhere in the Report, the
Partnership has significant amounts of debt outstanding under its Bank Credit
Agreement. Based solely upon the Appraisals, as of December 31, 1996, the
Partnership understands the appraised values of the five cable Systems owned by
the Partnership to be as follows (dollars in thousands):
<TABLE>
<CAPTION>
Communications
Equity
Kane Reece Arthur Associates, Inc.
----------------
Associates, Inc. Andersen LLP (MEDIAN)
---------------- ------------ --------
<S> <C> <C> <C>
Redmond, OR $ 7,680 $ 5,882 $ 6,200
Burke County, NC 20,570 17,685 19,000
Somerset, KY 33,590 30,277 31,000
Centreville, MD 23,980 20,445 23,000
California City, CA 3,500 2,791 2,800
---------
Total $82,000
=======
</TABLE>
As noted above, the Appraisal Process dictates that the
appraised value of an asset to be appraised shall be the median Appraisal for
such asset.
The reports related to each Appraisal 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. The General Partner
is under no obligation to exercise its purchase right in full or in part, nor
can there be any assurance that the Partnership would otherwise be able to sell
all or any portion of its assets at prices consistent with the Appraisals.
Actual sales in the marketplace could be at valuations materially above or
below those reflected by the Appraisals. Such Appraisals should accordingly
not be assumed to be a representation as to the implied value of limited
partnership interests in the Partnership, nor as to the proceeds that might be
realized by the Partnership in connection with a sale or other disposition of
all or any portion of the assets of the Partnership, whether to the General
Partner, an affiliate or otherwise.
The Appraisals, by their respective terms, are based upon
numerous sources of information including data supplied by the General Partner,
which included certain projections regarding 1997 operating results for the
Partnership prepared in the ordinary course of its business. The Partnership
does not as a matter of course make public any forecasts as to its future
financial performance. The 1997 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 1997 projections were provided
to the Appraisers solely for the purposes of their Appraisals. NONE OF THE
GENERAL PARTNER, THE PARTNERSHIP, ANY AFFILIATE OR ANY PARTY TO WHOM THE
PROJECTIONS WERE PROVIDED ASSUMES ANY RESPONSIBILITY FOR THE VALIDITY,
REASONABLENESS, ACCURACY OR COMPLETENESS OF THE 1997 PROJECTIONS. While
presented with numerical specificity, the 1997 projections were 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 uncertainties and contingencies, many of which are
beyond the Partnership's control, and, therefore, such 1997 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
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1997 projections. The Partnership is not under any obligation to update the
1997 projections at any future time.
Based upon the aggregate of the median Appraisals of the
Partnership's cable Systems (the "Aggregate Appraised Valuation") and assuming
a hypothetical liquidation of the Partnership on December 31, 1996 involving
the sale of those Systems on that date for an amount equal to the Aggregate
Appraised Valuation, the estimated cash distribution to unitholders would have
been approximately $851 per limited partnership unit (the "Hypothetical
Estimated Per Unit Distribution") (based upon 71,879 units outstanding). The
Hypothetical Estimated Per Unit Distribution was calculated assuming net
liabilities on the balance sheet of the Partnership, excluding property, plant
and equipment and intangible assets ("Net Liabilities"), of approximately $20.2
million (as of December 31, 1996). The Hypothetical Estimated Per Unit
Distribution assumes that the Net Liabilities as of December 31, 1996 represent
the only payments, other than certain reserved expenses, that would have been
required to be made by the Partnership prior to the distribution of cash to the
unitholders. This assumption will likely prove to be invalid. Specifically,
this method assumes all of the cable systems are sold in a single transaction.
If the Partnership sells the assets over time in separate transactions, for
example, it could incur significant transaction costs and there would be a
significant delay in the distribution of funds to limited partners. Further,
even if sold in a single transaction to the General Partner, the transfer of
the related franchises would require certain approvals of local franchise
authorities that may require a significant period of time to be obtained.
Accordingly, 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 December 31, 1996 or any
date thereafter. In the event any of the Partnership's cable systems are sold,
the actual timing and amount of any related distribution to partners cannot be
predicted at this time.
The General Partner has made no decision whether to purchase
any or all of the Partnership's five cable television Systems. Any decision by
the General Partner will, as permitted by the Partnership Agreement, be made on
a System-by-System basis. Any decision by the General Partner or its
affiliates to acquire any of the Partnership's Systems will further be subject
to, among other things, (i) the availability of the necessary financing on
terms acceptable to the acquiring affiliate; (ii) the relative attractiveness
of available alternative and investment opportunities; (iii) the receipt of any
necessary regulatory approvals and consents; and (iv) other future developments
relating to the Partnership and the cable television industry, general economic
conditions and other future developments.
Although the foregoing reflects activities which the General
Partner and certain of its affiliates are currently exploring with respect to
the Partnership, the foregoing is subject to change at any time. Accordingly,
there can be no assurance that the sale of the cable television Systems of the
Partnership in accordance with the rights of the General Partner and its
affiliates under the terms of the Partnership Agreement as described above or
otherwise will be pursued, or if pursued, when and if any of them will be
successfully consummated. The foregoing description of the Appraisal Process
and the resulting appraisal values is qualified by reference to the more
complete information and the related qualifications provided or referred to in
the Partnership's Current Reports on Form 8-K dated August 27, 1996, October
17, 1996 and February 6, 1997, and the full text of the Partnership Agreement
and related Appraisals filed as exhibits hereto.
Forward-looking statements in this Report including, in
particular, the statements made above under the caption "Appraisal Process,"
are made pursuant to the safe harbor provisions of Section 21E of the
Securities Exchange Act of 1934, as amended. Investors are cautioned that such
forward-looking statements involve risks and uncertainties including, without
limitation, the effects of legislative and regulatory changes; the potential of
increased levels of competition for the Partnership; technological changes; the
Partnership's dependence upon third-party programming; the potential exercise
of the purchase right as described above; the absence of Unitholder
participation in the governance and management of the Partnership; limitations
on borrowings by the Partnership contained in the Partnership Agreement; the
management fees payable to the General Partner; the exoneration and
indemnification provisions contained in the Partnership Agreement
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<PAGE> 45
relating to the General Partner and other; potential conflicts of interest
involving that General Partner and its affiliates; the potential liability of
Unitholders to creditors of the partnership to the extent of any distribution
made to such Unitholder if, immediately after such distribution (whether or not
the Partnership continues to exist), the remaining assets of the Partnership
are not sufficient to pay its then outstanding liabilities of the Partnership;
and other risks detailed from time to time in the Partnership's periodic
reports filed with the Commission.
CONFLICTS OF INTEREST
In March 1993, FHGLP, a new entity, assumed the management
services operations of FHGI. Effective March 29, 1993, FHGLP began receiving
management fees and reimbursed expenses which had previously been paid by the
Partnership, as well as certain other affiliated entities, to FHGI. The
management of FHGLP is substantially the same as that of FHGI.
FHGLP also manages domestic and international cable operations
owned by it as well as the operations of the Partnership, Falcon Video
Communications and, through its management of the operation of Falcon
Cablevision (a subsidiary of FHGLP), the partnerships of which Enstar
Communications Corporation is the corporate general partner. On September 30,
1988, Falcon Cablevision acquired all of the outstanding stock of Enstar
Communications Corporation. Certain members of management of the General
Partner have also been involved in the management of other cable ventures,
including recent international cable ventures that FHGLP has entered into or
been associated with. FHGLP contemplates entering into other cable ventures,
including ventures similar to the Partnership.
These affiliations subject FHGI, FHGLP and the General Partner
and their management and affiliates to certain conflicts of interest. Such
conflicts of interest relate to the time and services management will devote to
the Partnership's affairs and to the acquisition and disposition of cable
television systems. Management or its affiliates may establish and manage other
entities which could impose additional conflicts of interest. Conflicts of
interest involving acquisitions and dispositions of cable television systems
could adversely affect Unitholders. For instance, the economic interests of
management in other affiliated partnerships are different from those in the
Partnership and this may create conflicts relating to which acquisition or
disposition opportunities are preserved for which partnerships.
The Partnership has entered into a management agreement with
FHGLP and may enter into future agreements, including joint ventures and
agreements relating to programming services with the General Partner, FHGLP or
their respective affiliates. Thus, a conflict of interest could arise among
the General Partner, FHGLP or their respective affiliates and the Partnership.
Although any such agreements will not be negotiated at arm's length, the
General Partner will cause the terms of all such transactions among the
Partnership and the General Partner, FHGLP and their respective affiliates to
be no less favorable to the Partnership than those which could be obtained by
the Partnership from independent third parties.
Substantial fees are payable to the General Partner and FHGLP
in connection with the Partnership. See Item 11., "Executive Compensation."
The Partnership may also enter into joint ventures with FHGLP
or its affiliates, provided that (i) such joint venturer has substantially
identical investment objectives as the Partnership, (ii) there are no duplicate
fees, (iii) the compensation to the sponsor of such joint venturer is
substantially identical, (iv) each joint venturer has a right of first refusal
as to the other's interest in the joint venture and (v) the investment of each
joint venturer is on substantially the same terms and conditions.
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<PAGE> 46
FIDUCIARY RESPONSIBILITY AND INDEMNIFICATION OF THE GENERAL PARTNER
A general partner is accountable to a limited partnership as a
fiduciary and consequently must exercise good faith and integrity in handling
partnership affairs. Where the question has arisen, some courts have held that
a limited partner may institute legal action on his own behalf and on behalf of
all other similarly situated limited partners (a class action) to recover
damages for a breach of fiduciary duty by a general partner, or on behalf of
the partnership (a partnership derivative action) to recover damages from third
parties. Section 15701 of the California Corporations Code provides that any
limited partner may bring a class action on behalf of all or a class of limited
partners to enforce any claim common to those limited partners against a
limited partnership or any or all of its general partners, without regard to
the number of those limited partners, and such action shall be governed by the
law governing class actions generally.
Section 15702 of the California Corporations Code also allows
a partner to maintain a partnership derivative action if certain conditions are
met. Certain cases decided by federal courts have recognized the right of a
limited partner to bring such actions under the Securities and Exchange
Commission's Rule 10b-5 for recovery of damages resulting from a breach of
fiduciary duty by a general partner involving fraud, deception or manipulation
in connection with the limited partner's purchase or sale of partnership Units.
The Partnership Agreement provides that the General Partner
and its affiliates will not be liable to the Partnership or its limited
partners for, and shall be indemnified by the Partnership for any act or
omission of the General Partner or its officers, directors or affiliates in
good faith on behalf of the Partnership and in a manner reasonably believed by
such Person to be within the scope of the authority granted to the General
Partner by the Partnership Agreement and in the best interests of the
Partnership, except for acts or omissions constituting negligence, misconduct
or breach of fiduciary duty. Therefore, limited partners will have a more
limited right of action than they would have absent the limitations in the
Partnership Agreement. In addition, the Partnership Agreement provides that
the members of the Advisory Committee who are not affiliated with the General
Partner will not be liable to the Partnership or its limited partners, and
shall be indemnified by the Partnership for any liability they incur on account
of, any act performed or omitted by such indemnitee in good faith and if the
indemnitee's conduct did not amount to gross negligence or fraud. Affiliated
members will be subject to the same liability and indemnification standards as
other affiliates of the General Partner. In addition, the Partnership
maintains insurance on behalf of the General Partner, members of the Advisory
Committee and such other persons as the General Partner shall determine against
any liability that may be asserted against or expense that may be incurred by
such person and against which the Partnership would be entitled to indemnify
such person pursuant to the Partnership Agreement. To the extent that the
exculpatory provisions purport to include indemnification for liabilities
arising under the Securities Act of 1933, it is the opinion of the Securities
and Exchange Commission that such indemnification is contrary to public policy
and therefore unenforceable.
The foregoing summary describes in general terms the remedies
available under state and federal law to limited partners for breach of
fiduciary duty by a general partner and is based on statutes, rules and
decisions as of the date of this Report on Form 10-K. As this is a rapidly
developing and changing area of the law, limited partners who believe that a
breach of fiduciary duty by the General Partner has occurred should consult
their own counsel as to the evaluation of the status of the law at such time.
-46-
<PAGE> 47
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements
Reference is made to the Index to Financial
Statements and Schedules on page F-1.
(a) 2. Financial Statement Schedules
Reference is made to the Index to Financial
Statements and Schedules on page F-1.
(a) 3. Exhibits
Reference is made to the Index to Exhibits
on Page E-1.
(b) Reports on Form 8-K
1. October 17, 1996 (Selection of Appraisers)
2. October 24, 1996 (JJJ Group Tender)
-47-
<PAGE> 48
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized this 25th
day of March 1997.
FALCON CLASSIC CABLE INCOME
PROPERTIES, L.P.
By Falcon Classic Cable Investors, L.P.
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
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on the 25th day of March 1997.
<TABLE>
<CAPTION>
Signature Title
- --------- -----
<S> <C>
Director of Falcon Holding Group, Inc.
and Chief Executive Officer of the Registrant
/s/ Marc B. Nathanson (Principal Executive Officer)
- -----------------------------
Marc B. Nathanson
Chief Financial Officer and
Secretary of the Registrant
/s/ Michael K. Menerey (Principal Financial and Accounting Officer)
- -----------------------------
Michael K. Menerey
/s/ Stanley S. Itskowitch Director of Falcon Holding Group, Inc.
- -----------------------------
Stanley S. Itskowitch
</TABLE>
-48-
<PAGE> 49
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors F-2
Balance Sheets - December 31, 1995 and 1996 F-3
Financial Statements for each of the three years
in the period ended December 31, 1996:
Statements of Operations F-4
Statements of Partners' Equity F-5
Statements of Cash Flows F-6
Notes to Financial Statements F-7
Schedule II - Valuation and Qualifying Accounts F-17
</TABLE>
All other schedules have been omitted because they are either not required,
not applicable or the information has otherwise been supplied.
F-1
<PAGE> 50
REPORT OF INDEPENDENT AUDITORS
Partners
Falcon Classic Cable Income Properties, L.P.
We have audited the accompanying balance sheets of Falcon
Classic Cable Income Properties, L.P. (a California limited partnership) as of
December 31, 1995 and 1996, and the related statements of operations, partners'
equity, and cash flows for each of the three years in the period ended December
31, 1996. Our audits also included the financial statement schedule listed in
the index at Item 14(a)2. These financial statements and schedule are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of Falcon
Classic Cable Income Properties, L.P. at December 31, 1995 and 1996, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the information set forth
therein.
/s/ ERNST & YOUNG LLP
Los Angeles, California
February 21, 1997
F-2
<PAGE> 51
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
BALANCE SHEETS
============================================
<TABLE>
<CAPTION>
December 31,
---------------------
1995 1996
------- -------
(Dollars in Thousands)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $6,137 $7,126
Receivables, less allowance of $40,000
and $31,000 for possible losses 657 660
Prepaid expenses and other 713 463
Cable materials, equipment and supplies 740 1,053
Property, plant and equipment, less accumulated
depreciation and amortization 31,986 30,655
Franchise cost and goodwill, less accumulated
amortization of $12,358,000 and $15,029,000 20,056 17,409
Customer lists and other intangible costs, less
accumulated amortization of $5,928,000 and $2,684,000 2,670 1,968
------- -------
$62,959 $59,334
======= =======
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
LIABILITIES:
Notes payable $27,000 $24,300
Accounts payable 499 542
Accrued expenses 3,062 2,509
Payable to general partner 1,401 1,006
Customer deposits and prepayments 149 144
------- -------
TOTAL LIABILITIES 32,111 28,501
------- -------
COMMITMENTS AND CONTINGENCIES
PARTNERS' EQUITY:
General partner 401 401
Limited partners 30,669 30,654
Notes receivable from general partner (222) (222)
------- -------
TOTAL PARTNERS' EQUITY 30,848 30,833
------- -------
$62,959 $59,334
======= =======
</TABLE>
See accompanying
notes to financial statements.
F-3
<PAGE> 52
FALCON CLASSIC INCOME PROPERTIES, L.P.
STATEMENTS OF OPERATIONS
--------------------------------------
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------
1994 1995 1996
-------- -------- --------
(Dollars in thousands, except net
loss per limited partnership units)
<S> <C> <C> <C>
REVENUES $17,382 $18,363 $19,826
-------- -------- --------
EXPENSES:
Service costs 5,281 6,042 6,013
General and administrative expenses 2,825 2,589 2,717
Management fees and reimbursed expenses 1,391 1,469 1,586
Depreciation and amortization 8,924 8,526 7,712
-------- -------- --------
Total expenses 18,421 18,626 18,028
-------- -------- --------
Operating income (loss) (1,039) (263) 1,798
OTHER INCOME (EXPENSE)
Interest income 20 41 314
Interest expense (1,796) (2,051) (2,127)
Other income 4 - -
-------- -------- --------
NET LOSS $(2,811) $(2,273) $ (15)
======== ======== ========
NET LOSS PER LIMITED
PARTNERSHIP UNIT $(38.71) $(31.30) $ (0.21)
======== ======== ========
WEIGHTED AVERAGE LIMITED
PARTNERSHIP UNITS OUTSTANDING
DURING PERIOD 71,879 71,879 $71,879
======== ======== ========
</TABLE>
See accompanying
notes to financial statements.
F-4
<PAGE> 53
FALCON CLASSIC INCOME PROPERTIES, L.P.
STATEMENTS OF PARTNERS' EQUITY
--------------------------------------
<TABLE>
<CAPTION>
Notes
Receivable
from
General Limited General
Partner Partners Partner Total
-------------------------------------------------------------------------------
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C>
PARTNERS' EQUITY,
January 1, 1994, $ 460 $ 36,515 $ (230) $ 36,745
Payments on notes - - 8 8
Distributions to partners (8) (813) - (821)
Net loss for year (28) (2,783) - (2,811)
----------- ------------ ------------- ------------
PARTNERS' EQUITY,
December 31, 1994 424 32,919 (222) 33,121
Net loss for year (23) (2,250) - (2,273)
----------- ------------ ------------- ------------
PARTNERS' EQUITY,
December 31, 1995 401 30,669 (222) 30,848
Net loss for year - (15) - (15)
----------- ------------ ------------- ------------
PARTNERS' EQUITY,
December 31, 1996 $ 401 $ 30,654 $ (222) $ 30,833
=========== ============ ============= ============
</TABLE>
See accompanying
notes to financial statements.
F-5
<PAGE> 54
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
STATEMENTS OF CASH FLOWS
---------------------------------------------
<TABLE>
<CAPTION>
Year ended in December 31,
----------------------------------------------
1994 1995 1996
----------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (2,811) $ (2,273) $ (15)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 8,924 8,526 7,712
Gain on retirement of assets (4) - -
Provision for losses on receivables 281 234 171
Amortization of deferred loan cost - 4 27
Increase (decrease) from changes in:
Receivables (667) (98) (175)
Prepaid expenses and other assets (159) (254) 250
Cable materials, equipment and supplies - (324) (313)
Accounts payable and other liabilities 526 671 (910)
--------- ---------- ------------
Net cash provided by operating activities $ 6,090 $ 6,486 $ 6,747
--------- ---------- ------------
Cash flows from investing activities:
Capital expenditures (3,982) (5,713) (3,033)
Increase in intangible assets (35) (167) (25)
--------- ---------- ------------
Net cash used in investing activities $ (4,017) $ (5,880) $ (3,058)
--------- ---------- ------------
Cash flows from financing activities:
Repayments of notes payable $ (1,300) $ (18,000) $ (2,700)
Borrowings under notes payable 1,500 22,500 -
Distributions to partners (1,671) - -
Capital contributions 8 - -
--------- ---------- ------------
Net cash provided by (used in) financing activities (1,463) 4,500 (2,700)
--------- ---------- ------------
Net increase in cash and cash equivalents 610 5,106 989
Cash and cash equivalents, at beginning of year 421 1,031 6,137
--------- ---------- ------------
Cash and cash equivalents, at end of year $ 1,031 $ 6,137 $ 7,126
========= ========== ============
</TABLE>
See accompanying
notes to financial statements.
F-6
<PAGE> 55
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES
Falcon Classic Cable Income Properties, L.P. (the "Partnership")
was formed in 1989 to acquire, own, operate and otherwise invest principally in
existing cable television systems in suburban and rural areas located in
California, Kentucky, Maryland, North Carolina and Oregon. The General Partner
of the Partnership is Falcon Classic Cable Investors, L.P., a California limited
partnership ("General Partner"). The general partner of the General Partner is
Falcon Holding Group, L.P., a Delaware limited partnership ("FHGLP"). The
general partner of FHGLP is Falcon Holding Group, Inc., a California corporation
("FHGI").
The financial statements do not give effect to any assets that
the partners may have outside their interest in the Partnership, nor to any
obligations, including income taxes, of the partners.
CASH EQUIVALENTS
For purposes of the statements of cash flows, the Partnership
considers all highly liquid debt instruments purchased with an initial maturity
of three months or less to be cash equivalents. Cash equivalents at December
31, 1996 include $6,000,000 of short-term investments in commercial paper.
PROPERTY, PLANT, EQUIPMENT AND DEPRECIATION AND AMORTIZATION
Property, plant and equipment are stated at cost. Direct costs
associated with installations in homes not previously served by cable are
capitalized as part of the distribution system, and reconnects are expensed as
incurred. For financial reporting, depreciation and amortization is computed
using the straight-line method over the following estimated useful lives:
CABLE TELEVISION SYSTEMS:
Headend buildings and equipment 7-16 years
Trunk and distribution 5-15 years
Microwave equipment 7-15 years
OTHER:
Furniture and office equipment 5-7 years
Vehicles and construction equipment 3-10 years
Leasehold improvements Life of lease
Buildings 15 years
FRANCHISE COST AND GOODWILL
The excess of cost over the fair value of tangible assets and
customer lists of cable television systems acquired represents the cost of
franchises and goodwill. In addition, franchise cost includes capitalized costs
incurred in obtaining new franchises. These costs (primarily legal fees) are
direct and incremental to the acquisition of the franchise and are amortized
using the straight-line method over the lives of the franchises, ranging up to
12 years. Costs relating to unsuccessful franchise applications are charged to
expense when it is determined that the efforts to obtain the franchise will not
be successful.
F-7
<PAGE> 56
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
--------------------------------------------
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
CUSTOMER LISTS AND OTHER INTANGIBLE COSTS
Customer lists and other intangible costs include customer
lists and organization costs which are amortized using the straight-line method
over five years and covenants not to compete which are amortized over the life
of the covenant.
DEFERRED LOAN COSTS
Costs related to borrowings are capitalized and amortized to
interest expense over the life of the related loan.
RECOVERABILITY OF ASSETS
The Partnership assesses on an on-going basis the
recoverability of intangible assets, including goodwill, and capitalized plant
assets based on estimates of future undiscounted cash flows compared to net
book value. If the future undiscounted cash flow estimate were less than net
book value, net book value would then be reduced to estimated fair value, which
generally approximates discounted cash flows. The Partnership also evaluates
the amortization periods of assets, including goodwill and other intangible
assets, to determine whether events or circumstances warrant revised estimates
of useful lives.
REVENUE RECOGNITION
Revenues from cable services are recognized as the services
are provided.
DERIVATIVE FINANCIAL INSTRUMENTS
As part of the Partnership's management of financial market
risk, the Partnership enters into various transactions that involve contracts
and financial instruments with off-balance-sheet risk, including interest rate
swap and interest rate cap agreements. The Partnership enters into these
agreements in order to manage the interest-rate sensitivity associated with its
variable-rate indebtedness. The differential to be paid or received in
connection with interest rate swap and interest rate cap agreements is
recognized as interest rates change and is charged or credited to interest
expense over the life of the agreements. Gains or losses for early termination
of those contracts are recognized as an adjustment to interest expense over the
remaining portion of the original life of the terminated contract.
INCOME TAXES
The Partnership pays no income taxes as an entity. All of the
income, gains, losses, deductions and credits of the Partnership are passed
through to the partners. The basis in the Partnership's assets and liabilities
differs for financial and tax reporting purposes. At December 31, 1996, the
book basis of the Partnership's net assets exceeds its tax basis by $19.1
million.
F-8
<PAGE> 57
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
------------------------------------------
NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (CONCLUDED)
EARNINGS AND LOSSES PER LIMITED PARTNERSHIP UNIT
Earnings and losses are allocated 99% to the limited partners
and one percent to the General Partner. Earnings and losses per limited
partnership Unit is based on the weighted average limited partnership Units
outstanding during the period.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
NOTE 2 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of:
<TABLE>
<CAPTION>
December 31,
----------------------------
1995 1996
----------------------------
(Dollars in Thousands)
<S> <C> <C>
Cable television systems $ 44,871 $ 47,158
Furniture and equipment 973 1,033
Vehicles 654 746
Land, buildings and improvements 845 846
---------- --------
47,343 49,783
Less accumulated depreciation
and amortization (15,357) (19,128)
---------- --------
$ 31,986 $ 30,655
========== ========
</TABLE>
F-9
<PAGE> 58
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
-------------------------------------------
NOTE 3 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate
the fair value of each class of financial instruments for which it is
practicable to estimate that value:
Cash and Cash Equivalents
The carrying amount approximates fair value due to the short
maturity of those instruments.
Notes Payable
The carrying amount approximates fair value due to the variable
rate nature of the notes payable.
Interest Rate Hedging Agreements
The fair value of interest rate hedging agreements is estimated
by obtaining quotes from brokers as to the amount either party would be required
to pay or receive in order to terminate the agreement.
The following table depicts the fair value of each class of
financial instruments for which it is practicable to estimate that value as of
December 31:
<TABLE>
<CAPTION>
1995 1996
-----------------------------------------------------------------------
Carrying Fair Carrying Fair
Value (1) Value Value (1) Value
-----------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 6,137 $ 6,137 $ 7,126 $ 7,126
Note Payable (Note 4) (2) $ 27,000 $ 27,000 $ 24,300 $ 24,300
</TABLE>
<TABLE>
<CAPTION>
Notional Fair Notional Fair
Amount Value(4) Amount(3) Value(4)
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest Rate Hedging Agreements
(Note 4):
Interest rate swaps $ 20,000 $ (347) $ 20,000 $ (36)
Interest rate caps 5,000 - - -
- ----------------
</TABLE>
(1) Carrying amounts represent cost basis.
(2) Due to the variable rate nature of the indebtedness, the fair value is
assumed to approximate the carrying value.
(3) The amount on which the interest was computed in 1995 was $15 million for
swaps and $5 million for caps. The amount in 1996 was $20 million for
swaps.
(4) The amount that the Partnership estimates it would receive (pay) to
terminate the hedging agreements. This amount is not recognized in the
financial statements.
F-10
<PAGE> 59
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
-------------------------------------------
NOTE 4 - NOTES PAYABLE
In September 1992, the Partnership entered into a $34 million
credit agreement with four banks (the "Bank Credit Agreement"). The Bank
Credit Agreement provides for annual interest rates ranging from prime plus
0.5% to prime plus 2.5% or LIBOR plus 2.25% to LIBOR plus 4.25%. At December
31, 1996, the weighted average interest on the outstanding balance (including
the effects of interest rate swap transactions) was 7.8% per annum.
On April 10, 1995, the Partnership executed an amendment to
the Bank Credit Agreement (the "Amendment") which, among other things, reduced
the total facility from $34 million to $29 million. On December 31, 1995, the
outstanding principal balance of $27 million converted to a term loan with
required quarterly payments commencing March 31, 1996 through June 30, 2000,
the maturity date of the term loan.
The present scheduled repayments of the term loan are as
follows: $4.1 million in 1997; $5.4 million in 1998; $6.8 million in 1999 and
$8 million thereafter.
The Bank Credit Agreement also contains restrictions relating
to, among other things, additional borrowings, guarantees, mergers and
distributions to partners. The debt is collateralized by a security interest
in substantially all of the assets of the Partnership. Management believes
that the Partnership was in compliance with such covenants at December 31,
1996.
The Partnership Agreement provides that without the approval
of a majority of interests of limited partners, the Partnership may not incur
any borrowings unless the amount of such borrowings together with all
outstanding borrowings does not exceed 30% of the greater of the aggregate cost
or current fair market value of the Partnership's assets as determined by the
General Partner. The Partnership Agreement also limits borrowings incurred to
fund distributions to partners to not more than 10% of Gross Proceeds from the
public offering of the Units (approximately $7.2 million). As of December 31,
1996, the Partnership had incurred an aggregate of approximately $5.4 million
in borrowings to make distributions to partners.
The Partnership utilizes interest rate hedging agreements to
establish long-term fixed interest rates on a portion of its variable rate debt
in order to manage the interest rate sensitivity on its borrowings. At December
31, 1996, the Partnership participated in interest rate swap contracts with
aggregate notional principal of $20 million under which the Partnership pays
interest at fixed rates ranging from 5.75% to 6.51% (weighted average rate of
6.12%), and receives interest at variable LIBOR-based rates. These contracts
expire in 1997, 1998 and 1999.
The hedging agreements resulted in additional interest expense
of $82,000, $19,000 and $117,000 for the years ended December 31, 1994, 1995
and 1996, respectively. The Partnership does not believe that it has any
significant risk of exposure to non-performance by any of its counterparties.
NOTE 5 - NOTES RECEIVABLE FROM GENERAL PARTNER
In accordance with the Partnership's Limited Partnership
Agreement, capital contributions of the General Partner were contributed
one-half in cash and one-half in non-interest bearing notes payable on demand.
Additionally, according to the Limited Partnership Agreement, a minimum of 50%
of all distributions received by the General Partner are to be returned to the
Partnership to reduce the notes receivable balance.
F-11
<PAGE> 60
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
-------------------------------------------
NOTE 6 - MANAGEMENT COMPENSATION
The Partnership is obligated to pay FHGLP a 5% management fee
based on the gross operating revenues of the Partnership. In addition, FHGLP
is entitled to reimbursement from the Partnership for certain expenses relating
to the performance of management functions as described in the management
agreement. Such reimbursable expenses are limited to 3% of gross operating
revenues. Management fees and reimbursed expenses amounted to approximately
$1.4 million, $1.5 million and $1.6 million for the years ended December 31,
1994, 1995 and 1996, respectively.
Beginning in 1991, up to 50% of management fees have not been
paid currently unless adjusted operating cash, as defined, for a particular
month exceeded a 10% annualized return, calculated with respect to outstanding
partnership Units. To the extent that adjusted operating cash for any month
exceeds the 10% annualized return, FHGLP may recover previously deferred fees,
without interest. In compliance with these provisions, FHGLP received its
standard management fee for 1996 and recovered $900,000 in previously deferred
management fees. As a result, at December 31, 1995 and 1996, deferred
management fees amounted to $1.2 million and $276,000, respectively. At
December 31, 1996, the Partnership's management anticipates that adjusted
operating cash in the first quarter of 1997 will exceed the 10% requirement,
thereby permitting the Partnership to pay the remaining deferred fees to FHGLP.
In March 1993, FHGLP assumed the operations of FHGI. As
successor to the management service operations of FHGI, FHGLP is due management
fees and reimbursed expenses which had previously been payable to FHGI.
NOTE 7 - PARTNERSHIP MATTERS
The Partnership sold Units of limited partnership interest
during 1989 and 1990 resulting in an aggregate of 71,879 Units sold with the
Partnership receiving net proceeds amounting to approximately $62.7 million
(net of $9.2 million offering costs).
Distributions are based on the Partnership's definition of
cash available for distributions. All partners admitted to the Partnership for
a period of one year received distributions from available Partnership funds
yielding at least a 10% annual rate of return on their original investment
through June 1993, after which they received a 7% annual rate of return on
their original investment, until the Partnership discontinued distributions
subsequent to the April 15, 1994 payment.
Income and losses of the Partnership are allocated 99% to the
limited partners and one percent to the General Partner. Cash Available for
Distributions, as defined in the Partnership agreement, are allocated 99% to
the limited partners and one percent to the General Partner. Distributions of
Other Distributable Funds (as defined) are allocated 99% to limited partners
who own Units which have been issued and outstanding for at least one year and
one percent to the General Partner. Such distributions to limited partners
will be made pro-rata based on the number of such Units held by each limited
partner. The limited partners will receive 99% and the General Partner will
receive one percent of distributions of Available Sale Proceeds (as defined)
until the limited partners have received Payback. After the limited partners
have received Payback, the limited partners will receive 75% and the General
Partner will receive 25% of Available Sale Proceeds.
F-12
<PAGE> 61
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
-------------------------------------------
NOTE 7 - PARTNERSHIP MATTERS (CONTINUED)
APPRAISAL PROCESS
The Partnership may, in the sole discretion of its General
Partner, sell individual cable systems and may also sell all or substantially
all of the Partnership's assets to the General Partner or its affiliates, which
include FHGLP. Any such sale would be subject to certain terms and conditions
set forth in the Partnership Agreement and summarized below.
The Partnership Agreement provides that any sale of Partnership
assets to the General Partner or any of its affiliates must be made in cash
pursuant to the "Appraisal Process." "Appraisal Process" is defined in the
Partnership Agreement as an appraisal undertaken by three independent nationally
recognized experts in the cable television field to determine the fair market
value of the cable systems to be appraised. One such appraiser must be
appointed by the General Partner, one by the Partnership's Conflicts Committee
and the third by the first two appraisers acting jointly. The appraised value
pursuant to the Appraisal Process will be deemed to be the median of the three
appraised values. No appraisals arising in affiliated transactions may be
conducted at the Partnership's expense. Except under certain circumstances,
sales of assets by the Partnership to the General Partner or its affiliates
prior to January 1, 1997 would have required an affirmative vote of a majority
of limited partner interests outstanding and not owned by the General Partner or
its affiliates. No such vote is required or will be sought in the future.
In a meeting held in Los Angeles on August 27, 1996, the
General Partner formally advised the Partnership's Advisory Committee and
Conflicts Committee that it desired to explore on a preliminary basis the
possibility of exercising the purchase rights contained in the Partnership
Agreement and summarized above. Accordingly, the General Partner requested
that the Appraisal Process be commenced and that, in compliance therewith, the
Conflicts Committee select an independent nationally recognized expert in the
cable television field to determine the fair market value of each of the
Partnership's cable systems. The Conflicts Committee selected Arthur Andersen,
LLP; the General Partner selected Kane Reece Associates, Inc.; and those two
appraisers selected Communications Equity Associates (the "Appraisers").
On February 6, 1997, each of the Appraisers delivered
summaries of the results of their appraisals (the "Appraisals"), and
subsequently delivered their reports to the Partnership. These Appraisals
address the value of the appraised Partnership assets and do not give effect to
any debt or other liabilities of the Partnership. Based solely upon the
Appraisals, as of December 31, 1996, the Partnership understands the appraised
values of the five cable systems owned by the Partnership to be as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Communications
Equity
Associates, Inc.
Kane Reece Arthur ----------------
Associates, Inc. Andersen LLP (MEDIAN)
---------------- ------------ --------
<S> <C> <C> <C>
Redmond, OR $ 7,680 $ 5,882 $ 6,200
Burke County, NC 20,570 17,685 19,000
Somerset, KY 33,590 30,277 31,000
Centreville, MD 23,980 20,445 23,000
California City, CA 3,500 2,791 2,800
---------
Total $82,000
=======
</TABLE>
F-13
<PAGE> 62
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
-------------------------------------------
NOTE 7 - PARTNERSHIP MATTERS (CONCLUDED)
As noted above, the Appraisal Process dictates that the
appraised value of an asset to be appraised shall be the median Appraisal for
such asset.
The General Partner has made no decision whether to purchase any
or all of the Partnership's five cable television Systems. Any decision by the
General Partner will, as permitted by the Partnership Agreement, be made on a
system-by-system basis. Any decision by the General Partner or its affiliates
to acquire any of the Partnership's systems will further be subject to, among
other things, (i) the availability of the necessary financing on terms
acceptable to the acquiring affiliate; (ii) the relative attractiveness of
available alternative and investment opportunities; (iii) the receipt of any
necessary regulatory approvals and consents; and (iv) other future developments
relating to the Partnership and the cable television industry, general economic
conditions and other future developments. Although the foregoing reflects
activities which the General Partner and certain of its affiliates are
currently exploring with respect to the Partnership, the foregoing is subject
to change at any time. Accordingly, there can be no assurance that the sale of
the cable television Systems of the Partnership in accordance with the rights
of the General Partner and its affiliates under the terms of the Partnership
Agreement as described above or otherwise will be pursued, or if pursued, when
and if any of them will be successfully consummated.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Partnership leases office space and equipment under
operating leases expiring at various dates through the year 2008. Pole
attachment fees are excluded from the following schedule since those contracts
may be canceled with notice. Future minimum rentals for operating leases at
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Year Total
---- -----
(Dollars in Thousands)
<S> <C>
1997 $ 75
1998 70
1999 70
2000 58
2001 40
Thereafter 119
------
$ 432
======
</TABLE>
In most cases, management expects that, in the normal course
of business, these leases will be renewed or replaced by other leases. Rent
expense for the years ended December 31, 1994, 1995 and 1996 for all facilities
amounted to $83,000, $86,000 and $91,000, respectively.
In addition, the Partnership rents line space on utility poles
in some of the franchise areas it serves. These rentals amounted to $265,000,
$290,000 and $341,000 for the years ended December 31, 1994, 1995 and 1996,
respectively. Generally such pole rental agreements are short-term, but the
Partnership expects such rentals to continue in the future.
F-14
<PAGE> 63
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
-------------------------------------------
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONCLUDED)
Other commitments include approximately $650,000 at December
31, 1996 to upgrade certain portions of the Burke County, North Carolina cable
system over the next five years as required by the applicable franchise
agreements. However, provided it has the necessary liquidity, the Partnership
intends to rebuild the entire Burke County system during the next five years at
an estimated total cost of approximately $10 million. As discussed in Note 4,
the Partnership Agreement limits the Partnership's ability to increase its
borrowings. While the Partnership believes that anticipated cash flow from
operations will be sufficient to fund its minimum capital expenditure plans in
1997, the Partnership's management does not believe that the Partnership will
be able to fund its future rebuild plans entirely from operating cash flow.
The Partnership is subject to regulation by various federal,
state and local government entities. The Cable Television Consumer Protection
and Competition Act of 1992 (the "1992 Cable Act"), provides for, among other
things, federal and local regulation of rates charged for basic cable service,
cable programming services and equipment and installation services. Regulations
issued in 1993 and significantly amended in 1994 by the Federal Communications
Commission (the "FCC") have resulted in changes in the rates charged for the
Partnership's cable services. The Partnership believes that compliance with the
1992 Cable Act has had a negative impact on its operations and cash flow. It
also presently believes than any potential future liabilities for refund claims
or other related actions would not be material. The Telecommunications Act of
1996 (the "1996 Telecom Act") was signed into law on February 8, 1996. This
statute contains a significant overhaul of the federal regulatory structure. As
it pertains to cable television, the 1996 Telecom Act, among other things, (i)
ends the regulation of certain nonbasic programming services in 1999; (ii)
expands the definition of effective competition, the existence of which
displaces rate regulation; (iii) eliminates the restriction against the
ownership and operation of cable systems by telephone companies within their
local exchange service areas; and (iv) liberalizes certain of the FCC's
cross-ownership restrictions. The FCC is in the process of conducting a number
of additional rulemaking proceedings in order to implement many of the
provisions of the 1996 Telecom Act.
The Partnership has various contracts to obtain basic and
premium programming for its systems from program suppliers whose compensation
is generally based on a fixed fee per customer or a percentage of the gross
receipts for the particular service. Some program suppliers provide volume
discount pricing structures or offer marketing support to the Partnership. The
Partnership's programming contracts are generally for a fixed period of time
and are subject to negotiated renewal. The Partnership does not have long-term
programming contracts for the supply of a substantial amount of its
programming. Accordingly, no assurance can be given that the Partnership's
programming costs will not increase substantially or that other materially
adverse terms will not be added to the Partnership's programming contracts.
Management believes, however, that the Partnership's relations with its
programming suppliers generally are good.
NOTE 9 - EMPLOYEE BENEFIT PLANS
The Partnership maintains a Key Executive Equity Program (the
"Program") for certain key employees designated by the Partnership.
Participants become vested over six years from the date of admission into the
Program. Under the terms of the Program, participants derive benefits, as
defined, in the Program based on achieving a specified operating margin
percentage in conjunction with a specific percentage increase in cash flow in
relation to the immediately preceding year. The effect of certain events and
transactions, such as system
F-15
<PAGE> 64
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONCLUDED)
-------------------------------------------
NOTE 9 - EMPLOYEE BENEFIT PLANS (CONCLUDED)
acquisitions and dispositions, are adjusted on a pro forma basis in the
determination of benefits. There were no expenses incurred in 1994, 1995 and
1996. On February 14, 1995, the Board of Representatives of the General
Partner approved the termination of the Program. All current participants will
continue to vest in their contributions, but there will be no new participants
or future contributions.
The Partnership also has a cash or deferred profit sharing
plan (the "Profit Sharing Plan") covering substantially all of its employees.
The Profit Sharing Plan provides that each participant may elect to make a
contribution in an amount up to 15% of the participant's annual compensation
which otherwise would have been payable to the participant as salary. The
Partnership's contribution to the Profit Sharing Plan, as determined by
management, is discretionary but may not exceed 15% of the annual aggregate
compensation (as defined) paid to all participating employees. There were no
contributions charged against operations of the Partnership for the Profit
Sharing Plan in 1994, 1995 or 1996.
NOTE 10 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
During the years ended December 31, 1994, 1995 and 1996, the
Partnership paid cash interest amounting to $1.7 million, $2.1 million and $2.2
million, respectively.
F-16
<PAGE> 65
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions
Balance at charged to Balance at
beginning costs and end of
Description of period expenses Deductions(a) period
----------- ---------- ---------- ------------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Allowance for possible
losses on receivables
Year ended December 31,
1994 $ 48 $ 281 $ (302) $ 27
1995 $ 27 $ 234 $ (221) $ 40
1996 $ 40 $ 171 $ (180) $ 31
</TABLE>
(a) Write-off uncollectible accounts
F-17
<PAGE> 66
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
3.1 Certificate of Limited Partnership of the Registrant filed with
the California Secretary of State on February 17, 1989.(1)
3.2 Agreement of Limited Partnership of the Registrant dated as of
February 21, 1989.(1)
3.3 Certificate of Limited Partnership of Falcon Classic Cable
Investors, L.P. filed with the California Secretary of State on
February 21, 1989.(1)
3.4 Agreement of Limited Partnership of Falcon Classic Cable
Investors, L.P. dated as of February 17, 1989 among Falcon
Holding Group, Inc., Marc B. Nathanson, Stanley S. Itskowitch,
Frank J. Intiso, and Michael K. Menerey.(1)
3.5 Articles of Incorporation of Falcon Holding Group, Inc.(1)
3.6 Bylaws of Falcon Holding Group, Inc.(1)
3.7 Amended and Restated Agreement of Limited Partnership of the
Registrant dated as of April 14, 1989.(1)
3.8 Amended and Restated Agreement of Limited Partnership of Falcon
Classic Cable Investors, L.P. dated as of April 1989 among Falcon
Holding Group, Inc., Marc B. Nathanson, Stanley S. Itskowitch,
Frank J. Intiso, and Michael K. Menerey.(1)
3.9 Amended and Restated Agreement of Limited Partnership of the
Registrant dated as of May 11, 1989.(1)
3.10 Amended and Restated Agreement of Limited Partnership of Falcon
Classic Cable Investors, L.P. dated as of May 10, 1989 among
Falcon Holding Group, Inc., Marc B. Nathanson, Stanley S.
Itskowitch, Frank J. Intiso, and Michael K. Menerey.(1)
3.11 Amended and Restated Agreement of Limited Partnership of the
Registrant dated as of May 15, 1989.(1)
3.12 First Amendment to Amended and Restated Agreement of Limited
Partnership of the Registrant dated as of July 24, 1989(3)
4.1 Subscription Documents(1)
10.1 Management Agreement between the Registrant and Falcon Holding
Group, Inc. dated as of May 15, 1989.(1)
10.2 Asset Purchase and Sale Agreement dated as of July 14, 1989 by
and among Jack Kent Cooke Incorporated, Cooke Media Group Inc.,
Cooke Cablevision of Cottage Grove, Inc., Cooke Cablevision,
Inc., and Pacific Telatronics, Inc., on one part, and Falcon
Holding Group, Inc., on another part.(1)
10.3 Assignment and Assumption of Purchase Agreement dated October 12,
1989 by and between Falcon Holding Group, Inc. and the
Registrant.(1)
10.4 Assignment and Assumption of Purchase Agreement dated October 12,
1989 by and between Falcon Holding Group, Inc. and the
Registrant.(1)
</TABLE>
E-1
<PAGE> 67
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
10.5 Ordinance No. 568 of the City of Redmond, Oregon, granting a
non-exclusive franchise to McCaw Communications of Redmond to
operate and maintain a cable communications system within the
City limits of Redmond, Oregon passed and adopted by the City
Council on November 21, 1989.(3)
10.6 Ordinance No. 600 of the City of Redmond, Oregon dated November
8, 1984, approving the transfer and assignment of the rights to
construct, operate and maintain a community antenna television
system in the City of Redmond, Oregon.(3)
10.7 Ordinance No. 87-05 of the City of Redmond, Oregon dated February
24, 1987, approving the transfer and assignment of the rights to
construct, operate and maintain a community antenna television
system in the City of Redmond, Oregon.(3)
10.8 Ordinance No. 89-15 of the City of Redmond, Oregon dated November
21, 1989, approving the transfer and assignment to operate a
cable television system in the City of Redmond, Oregon.(3)
10.9 Franchise Ordinance and related documents thereto granting a
non-exclusive community antenna television franchise for Burke
County, North Carolina.(7)
10.10 Assignment of Cable Television Franchise for Laurel County,
Kentucky.(7)
10.11 Franchise Ordinance and related documents thereto granting a
non-exclusive community antenna television franchise for Pulaski
County, Kentucky, dated June 6, 1979.(7)
10.12 Franchise Ordinance and related documents thereto granting a
non-exclusive community antenna television franchise for Pulaski
County, Kentucky, dated October 26, 1988.(7)
10.13 Franchise Ordinance and related documents thereto granting a
non-exclusive community antenna television franchise for the City
of Somerset, Kentucky.(7)
10.14 Franchise Ordinance and related documents thereto granting a
non-exclusive community antenna television franchise for Queen
Anne's County, Maryland.(7)
10.15 Franchise Ordinance and related documents thereto granting a
non-exclusive community antenna television franchise for Talbot
County, Maryland.(7)
10.16 Asset Purchase Agreement dated as of July 20, 1991 by and between
Burke Cable Company Ltd. and the Registrant.(4)
10.17 Asset Purchase Agreement dated as of April 24, 1991 by and
between Cumberland Valley Cable TV Company and the Registrant.(5)
10.18 Asset Purchase Agreement dated as of May 1, 1991 by and between
Simmons Communications Company, LP and the Registrant.(6)
10.19 Asset Purchase Agreement dated as of September 20, 1991 by and
between CABLE TV FUND XII-BCB VENTURE and the Registrant.(8)
10.20 Ordinance No. 7-70-71 of the City of California City granting to
Desert Video, Inc. a franchise to construct, operate and maintain
a cable television system. Passed and adopted January 31,
1974.(8)
10.21 Resolution No. 4-86-1208 of the Council of the City of California
City approving the transfer of a CATV Franchise from Antelope
Valley Cablevision to Jones Intercable, Inc. Passed, approved
and adopted April 1, 1986.(8)
10.22 Ordinance No. 86-373 of the City of California City approved of
the transfer of the above cable television franchise from Desert
Video, Inc. to Jones Intercable, Inc. a Colorado Corporation.
Passed and adopted May 6, 1986.(8)
</TABLE>
E-2
<PAGE> 68
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
10.23 Resolution No. 3-88-1301 of the City of California City approved
of the transfer of the above the above cable television franchise
from Jones Intercable, Inc., a Colorado Corporation, to Cable TV
Fund 12-BCD Venture. Passed and adopted March 15, 1988.(8)
10.24 Resolution No. 3-92-1463 of the City of California City granting
the transfer of the above cable company franchise from Cable TV
Fund 12-BCD Venture to Falcon Classic Cable Income Properties,
L.P. Passed and approved March 3, 1992.(8)
10.25 Credit Agreement by and among Falcon Classic Cable Income
Properties, L.P., The Bank of California, N.A., as Agent, Societe
Generale, NationsBank of Texas, N.A., The Connecticut National
Bank, N.A. and The Bank of California, N.A., as banks dated as of
September 10, 1992.(10)
10.26 Bill of Sale and Assignment whereby Falcon Holding Group, Inc.
assigned its interest in the Classic Management Agreement to
Falcon Holding Group, L.P. (10)
10.27 First amendment to the Credit Agreement by and among Falcon
Classic Cable Income Properties, L.P., The Bank of California,
N.A., as Agent, Societe Generale, NationsBank of Texas, N.A., The
Connecticut National Bank, N.A. and The Bank of California, N.A.,
as banks, dated as of April 10, 1995.(12)
10.28 Franchise Ordinance No. 450.2 and related documents granting
non-exclusive franchises to erect, construct, maintain and
operate community antenna television service facilities in Laurel
County, Kentucky. (12)
10.29 Franchise Agreement between the Town of Valdese, North Carolina,
and Falcon Classic Cable Income Properties, L.P., dated June 5,
1995.(14)
10.30 Fair Market Valuation Report for Falcon Classic Cable Income
Properties, L.P., as of December 31, 1996, dated February 20,
1997, prepared by Arthur Andersen LLP.
10.31 Valuation Analysis for Falcon Classic Cable Income Properties,
L.P., as of December 31, 1996, dated March 3, 1997, prepared by
Communications Equity Associates.
10.32 Fair Market Valuation Report for Falcon Classic Cable Income
Properties, L.P., as of December 31, 1996, dated March 10, 1997,
prepared by Kane Reece Assocates, Inc.
21.1 Subsidiaries: None
28.1 Prospectus Supplement dated November 6, 1989 to the Registrant's
Prospectus dated May 15, 1989.(2)
28.2 Prospectus Supplement dated April 17, 1990 to the Registrant's
Prospectus dated May 15, 1989 and the Prospectus Supplement dated
November 6, 1989.(3)
99.1 Memorandum to Unitholders dated August 13, 1993 relating to
distribution policy of the Partnership.(9)
99.2 Memorandum to Unitholders dated April 29, 1994 relating to
distribution policy of the Partnership.(11)
99.3 Memorandum to Unitholders dated October 24, 1996 relating to JJJ
tender offer.(15)
</TABLE>
E-3
<PAGE> 69
FOOTNOTE REFERENCES
(1) Incorporated by reference to the exhibits to the Registrant's
Registration Statement on Form S-1, Registration No. 33-27215.
(2) Incorporated by reference to the exhibits to the Registrant's Annual
Report on Form 10-K, File No. 0-18266 for the fiscal year ended
December 31, 1989.
(3) Incorporated by reference to the exhibits to the Registrant's Annual
Report on Form 10-K, File No. 0-18266 for the fiscal year ended
December 31, 1990.
(4) Incorporated by reference to the exhibits to the Registrant's Current
Report on Form 8-K, File No. 0-18266 dated March 21, 1991.
(5) Incorporated by reference to the exhibits to the Registrant's Current
Report on Form 8-K, File No. 0-18266 dated May 2, 1991.
(6) Incorporated by reference to the exhibits to the Registrant's Current
Report on Form 8-K, File No. 0-18266 dated October 3, 1991.
(7) Incorporated by reference to the exhibits to the Registrant's Annual
Report on Form 10-K, File No. 0-18266 for the fiscal year ended
December 31, 1991.
(8) Incorporated by reference to the exhibits to the Registrant's Annual
Report on Form 10-K, File No. 0-18266 for the fiscal year ended
December 31, 1992.
(9) Incorporated by reference to the exhibits to the Registrant's Quarterly
Report on Form 10-Q, File No. 0-18266 for the quarter ended June 30,
1993.
(10) Incorporated by reference to the exhibits to the Registrant's Annual
Report on Form 10-K, File No. 0-18266 for the fiscal year ended
December 31, 1993.
(11) Incorporated by reference to the exhibits to the Registrant's Current
Report on Form 8-K, File No. 0-18266 dated April 29, 1994.
(12) Incorporated by reference to the exhibits to the Registrant's Annual
Report on Form 10-K, File No. 0-18266 for the fiscal year ended
December 31, 1994.
(13) Incorporated by reference to the exhibits to the Registrant's Quarterly
Report on Form 10-Q, File No. 0-18266 for the quarter ended June 30,
1995.
(14) Incorporated by reference to the exhibits to the Registrant's Annual
Report on Form 10-K, File No. 0-18266 for the fiscal year ended
December 31, 1995.
(15) Incorporated by reference to the exhibits to the Registrant's Current
Report on Form 8-K, File No. 0-18266 dated October 24, 1996.
E-4
<PAGE> 1
EXHIBIT 10.30
ARTHUR ANDERSEN LLP
FAIR MARKET VALUATION REPORT:
FALCON CLASSIC CABLE INCOME PROPERTIES
BURKE, NC
CALIFORNIA CITY, CA
CENTREVILLE, MD
REDMOND, OR
SOMERSET, KY
February 20, 1997
<PAGE> 2
[ARTHUR ANDERSEN LETTERHEAD]
February 20, 1997
Mr. Burt Harris
Harriscope Corporation
Conflicts Committee of Falcon Classic Cable Income Properties, L.P.
10960 Wilshire Boulevard
Los Angeles, CA 90024
Dear Mr. Harris:
You retained Arthur Andersen LLP to render an opinion as to the fair market
value of the cable television systems owned by Falcon Classic Cable Income
Properties, LP ("Classic") as of December 31, 1996. Classic offers cable service
in five areas: Burke County, NC, California City, CA, Centreville, MD, Redmond,
OR, and Somerset, KY. The scope of our engagement was to value each cluster of
cable television systems operating as a single going concern. The purpose of our
report is to assist in a possible partnership buyout involving Falcon Holdings
Group L.P. (or its affiliates) and Classic's partners. We were not engaged to
make specific purchase, sale or lending recommendations. This report is not a
fairness opinion.
The Burke County, NC system serves the towns of Connelly Springs, Drexel, Glen
Alpine, Rutherford College and Valdese, as well as certain unincorporated areas
of Burke County, NC. The California City, CA system serves California City as
well as certain unincorporated areas of Kern County, CA. The Centreville, MD
system serves the towns of Barclay, Betterton, Centreville, Chestertown, Church
Hill, Millington, Oxford, Queenstown, Rock Hall, St. Michaels, Sudlersville,
Templeville and Trappe as well as certain unincorporated areas of Kent, Talbot
and Queen Anne's Counties. The Redmond, OR system serves Redmond and certain
unincorporated areas of Deschutes County, OR. The Somerset, KY systems serve the
cities of Burnside, Columbia, Eubank, Ferguson, McKinney and Somerset, as well
as certain unincorporated areas of Adair, Pulaski, Laurel and Lincoln Counties.
For purposes of this report, fair market value is defined as the amount at which
the subject properties would change hands, in a free and clear arm's length
transaction, between a willing buyer and willing seller when neither is acting
under any compulsion to complete the transaction, and when both have reasonable
knowledge of the relevant facts. No consideration is given to minority holdings
or ownership interests. This concept of value is supported by numerous court
decisions dealing with fair market value. Further, it is assumed that all assets
will remain in place and be employed in the delivery of cable television to
subscribers, which is assumed to be the highest and best use of those assets.
<PAGE> 3
[LOGO - ARTHUR ANDERSEN]
Mr. Burt Harris
Page 2
February 20, 1997
Our investigation included interviews with management, a review of financial and
other documents, and an on-site review of a representative portion of the cable
systems and the areas served. We relied upon the information provided by
management as accurately representing the financial, technical and operational
status of the companies.
Based on our investigation and analysis as described in the report, and subject
to the assumptions and limiting conditions specified in this report, it is our
opinion that the fair market value of the subject properties, free and clear of
all liens and encumbrances, as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Burke County, NC Cluster $17,685,000
California City, CA Cluster $2,791,000
Centreville, MD Cluster $20,445,000
Redmond, OR Cluster $5,882,000
Somerset, KY Cluster $30,277,000
-----------
Total $77,080,000
-----------
</TABLE>
Very truly yours,
/S/Arthur Andersen LLP
ARTHUR ANDERSEN LLP
<PAGE> 4
[LOGO - ARTHUR ANDERSEN]
FAIR MARKET VALUATION REPORT:
FALCON CLASSIC CABLE INCOME PROPERTIES
BURKE, NC
CALIFORNIA CITY, CA
CENTREVILLE, MD
REDMOND, OR
SOMERSET, KY
.
As of December 31, 1996
Prepared For:
Conflicts Committee of Falcon Classic Cable Income Properties, L.P.
Prepared By:
Arthur Andersen LLP
Washington, D.C.
February 20, 1997
Copyright 1997-All Rights Reserved
Arthur Andersen LLP
<PAGE> 5
[LOGO - ARTHUR ANDERSEN]
FAIR MARKET VALUATION REPORT:
FALCON CLASSIC CABLE INCOME PROPERTIES
BURKE, NC
CALIFORNIA CITY, CA
CENTREVILLE, MD
REDMOND, OR
SOMERSET, KY
TABLE OF CONTENTS
A. EXECUTIVE SUMMARY........................................................1
1. Introduction and Purpose of Report..............................1
2. Fair Market Value Conclusion....................................2
B. ECONOMIC PERSPECTIVE.....................................................3
1. The U.S. Economy................................................3
a. General Overview.......................................3
b. Implications for the Cable Television Industry.........6
2. Industry Overview...............................................6
a. History................................................6
b. Future.................................................9
C. PROPERTY DESCRIPTION.....................................................11
1. Operating Market................................................11
2. Physical Plant..................................................12
3. Operations Review...............................................15
4. Homes Passed and Subscribers....................................16
5. Franchise Agreements............................................18
6. Channel Line-Up and Rate Card...................................20
7. Financial History...............................................21
8. Management......................................................22
D. VALUATION METHODOLOGY....................................................23
1. Purpose.........................................................23
2. Definition of Fair Market Value.................................23
3. Three Approaches to Value.......................................24
4. Overall Valuation Procedure.....................................24
5. Operating Income Capitalization Method..........................26
6. Discounted Cash Flow Methodology................................26
7. Residual Value..................................................28
8. Analysis of Future Projections..................................29
9. Comparable Sales Methodology....................................30
E. CONCLUSIONS..............................................................32
F. GENERAL ASSUMPTIONS AND LIMITING CONDITIONS..............................33
G. CERTIFICATION............................................................36
<PAGE> 6
[LOGO - ARTHUR ANDERSEN]
EXHIBITS
A. Cable Television Miles, Homes and Subscribers
B. Service Rates
C. Revenue, Expenses, Operating Income
D. Capital Expenditures
E. Discounted Cash Flow Valuation
F. Valuation Matrix
ADDENDUM 1 Channel Line-Ups and Rate Cards
ADDENDUM 2 Capital Asset Pricing Model & Weighted Average Cost of Capital
ADDENDUM 3 Financial History
ADDENDUM 4 Demographics
<PAGE> 7
[LOGO - ARTHUR ANDERSEN]
FAIR MARKET VALUATION REPORT:
FALCON CLASSIC CABLE INCOME PROPERTIES
BURKE, NC
CALIFORNIA CITY, CA
CENTREVILLE, MD
REDMOND, OR
SOMERSET, KY
A. EXECUTIVE SUMMARY
1. Introduction and Purpose of Report
You retained Arthur Andersen LLP to render an opinion as to the fair
market value of the cable television systems owned by Falcon Classic
Cable Income Properties, LP ("Classic") as of December 31, 1996.
Classic offers cable service in five areas: Burke County, NC,
California City, CA, Centreville, MD, Redmond, OR, and Somerset, KY.
The scope of our engagement was to value each cluster of cable
television systems operating as a single going concern. The purpose
of our report is to assist in a possible partnership buyout
involving Falcon Holdings Group L.P. (or its affiliates) and
Classic's partners. We were not engaged to make specific purchase,
sale or lending recommendations. This report is not a fairness
opinion.
The Burke County, NC system serves the towns of Connelly Springs,
Drexel, Glen Alpine, Rutherford College and Valdese, as well as
certain unincorporated areas of Burke County, NC. The California
City, CA system serves California City as well as certain
unincorporated areas of Kern County, CA. The Centreville, MD system
serves the towns of Barclay, Betterton, Centreville, Chestertown,
Church Hill, Millington, Oxford, Queenstown, Rock Hall, St.
Michaels, Sudlersville, Templeville and Trappe as well as certain
unincorporated areas of Kent, Talbot and Queen Anne's Counties. The
Redmond, OR system serves Redmond and certain unincorporated areas
of Deschutes County, OR. The Somerset, KY systems serve the cities
of Burnside, Columbia,
1
<PAGE> 8
[LOGO - ARTHUR ANDERSEN]
Eubank, Ferguson, McKinney and Somerset, as well as certain
unincorporated areas of Adair, Pulaski, Laurel and Lincoln Counties.
For purposes of this report, fair market value is defined as the
amount at which the subject properties would change hands, in a free
and clear arm's length transaction, between a willing buyer and
willing seller when neither is acting under any compulsion to
complete the transaction, and when both have reasonable knowledge of
the relevant facts. No consideration is given to minority holdings
or ownership interests. This concept of value is supported by
numerous court decisions dealing with fair market value. Further, it
is assumed that all assets will remain in place and be employed in
the delivery of cable television to subscribers, which is assumed to
be the highest and best use of those assets.
As of the valuation date, the Burke County system passed 18,986
homes and served 10,516 customers via 731.1 miles of cable
television plant. The California City system passed 2,858 homes and
served 1,922 customers via 90.1 miles of cable television plant. The
Centreville system passed 23,857 homes and served 12,325 customers
via 649.8 miles of cable television plant. The Redmond system passed
7,252 homes and served 3,516 customers via 170 miles of cable
television plant. The Somerset system passed 22,060 homes and served
19,296 customers via 834.5 miles of cable television plant.
2. Fair Market Value Conclusion
Our opinion of the fair market value is based on information and
data supplied by the System's management, our on-site inspection of
representative portions of the Systems and the areas served and
cable television industry information. Based on our analysis and
investigation of the Systems, it is our opinion that the fair market
value of the subject properties as of December 31, 1996 is as
follows:
<TABLE>
<S> <C>
Burke County, NC Cluster $17,685,000
California City, CA Cluster $2,791,000
Centreville, MD Cluster $20,445,000
Redmond, OR Cluster $5,882,000
Somerset, KY Cluster $30,277,000
</TABLE>
2
<PAGE> 9
[LOGO - ARTHUR ANDERSEN]
B. ECONOMIC PERSPECTIVE
1. The U.S. Economy
a. General Overview
Economic growth accelerated in the first half of 1996.
According to preliminary estimates, real gross domestic
product increased at an annual rate of 3.4 percent in the
first two quarters compared to 2.0 percent in 1995. On a
quarterly basis, Gross Domestic Product ("GDP") increased 0.5
percent during the first quarter and 1.2 percent during the
second quarter. The substantial growth in the second quarter
of 1996 was widespread, with the largest increases in personal
consumption expenditures and in government.
During the second quarter of 1996, consumption expenditures
grew by an annual rate of 3.4 percent. The largest increase
was in durable goods, which increased at an annual rate of
11.3 percent. Spending on durables offset some weakening in
spending on nondurable goods, as the growth rate of
nondurables fell to an annual growth rate of 1.6 percent in
the second quarter versus 3.6 percent for the first quarter of
1996.
An increase in government expenditures and investment was
another major factor in the increase of the economic growth
rate. National defense expenditures and investment increased
at an annual rate of 7.6 percent in the first half of 1996
compared to a decline throughout 1995. Additionally, state and
local expenditures and investment increased at an annual rate
of 6.6 percent during the second quarter of 1996.
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Inflation remained low, but increased compared to 1995. The
consumer price index for urban consumers ("CPI-U") increased
by 3.5 percent, seasonally adjusted annual rate, in the first
seven months of 1996, compared with a 2.5 percent increase for
all of 1995. The increase in the CPI-U during the first seven
months of 1996 was due to an acceleration in both food and
energy costs. The food index rose at an annual rate of 4.1
percent for the first seven months after rising 2.1 percent in
all of 1995. Energy costs increased at a 9.6 percent annual
rate after declining in 1995. Petroleum prices led the
increase with an annual rate of 15.7 percent for the first
seven months of 1996. Core inflation, as measured by the CPI-U
excluding food and energy, increased at an annual rate of 3.0
percent in the first seven months of 1996.
The unemployment rate remained relatively steady in the first
seven months of 1996, closing in July at 5.4 percent. The rate
had fluctuated in a narrow band around 5.6 percent during
1995, as increases in the number of jobs fully absorbed
increases in the labor force. An acceleration in total
employment throughout 1996 had increased the labor force by
1.9 million for the first seven months of 1996. Total
employment grew by only 400,000 during all of 1995.
Income growth during the first two quarters of 1996 increased
slightly compared to 1995. Personal income increased 1.6
percent in the second quarter of 1996 compared to average
quarterly increases of 1.25 percent for the previous four
quarters. The largest sector responsible for this increase was
manufacturing, which increased 2.6 percent in the second
quarter compared to a 1.7 percent increase from the first
quarter of 1995 to the first quarter of 1996.
FINANCIAL MARKETS
The prime rate, the rate which major commercial banks charge
their best customers, fluctuated from a low of 6 percent in
1993 to a high of 12.04 percent in 1984. The prime rate, which
is considered a key economic and financial
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barometer, averaged 8.29 percent in the first half of 1996 and
stood at 8.25 percent as of the valuation date.
A visible mechanism utilized by the Federal Reserve Bank to
increase capital expenditures during the most recent recession
was a dramatic decrease in the discount rate. The discount
rate in 1984 was 8.8 percent, and declined throughout the
decade to a low of 3.0 percent during 1993. During the first
seven months of 1996, yields on three-month Treasury bills
ranged from 5.02 percent in January to 5.17 percent in July.
During the same period, yields on Moody's AAA corporate bonds
ranged from 6.8 percent in January to a low of 7.65 percent in
July.
FUTURE OUTLOOK
Most of the available evidence supports the conventional
wisdom that the economy's productive capacity is expanding
approximately 2.3 percent annually. Growth in the productivity
of American workers seems to have increased slightly in recent
years, to about 1.25 percent annually. Overall, the growth of
the economy appears to be nearly what it has been for the last
two decades, with productivity trends offsetting workforce
population declines.
Advance estimates for the GDP indicate that the economy is
continuing to expand. Since the Federal Reserve can be
expected to continue influencing economic growth and inflation
through adjustments in the federal funds rate, analysts expect
a 2.5 percent growth in the U.S. economy for all of 1996.
In addition, long-run projections suggest that if the Clinton
Administration's current policy proposals are enacted and the
anticipated slowdowns in Medicare and Medicaid spending
persist, the deficit should improve over the next ten years.
After the year 2000, the amount of the deficit is expected to
remain stable, but become a smaller percentage of GDP as GDP
increases are realized. Over the longer run, changing
demographics will put upward pressure on the deficit as the
baby-boom generation retires. Social Security and Federal
medical spending are expected to increase as more of the
population reaches the age of 65.
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b. Implications for the Cable Television Industry
Traditionally, the cable television industry has been
relatively recession-proof. Although cable television is an
optional service, during periods of economic downturns, when
unemployment rises and household income declines, it is
generally considered an entertainment bargain. For a modest
amount of money per month, a family can purchase many hours of
in-home entertainment. As a consequence, the decline in
customers taking the basic service is minimal. Similarly,
little or no decline is seen in revenues associated with the
basic service. Subscribers are more likely to drop premium
services, or elect to watch fewer pay-per-view offerings, when
the economy turns down. Thus premium and pay-per-view revenues
may decline or show less pronounced growth. Conversely, cable
customers generally subscribe more frequently to premium
services and watch more elective pay-per-view offerings when
unemployment decreases and household income rises.
2. Industry Overview
a. History
Cable television was born of necessity. In rural America,
during the late 1940s and early 1950s, the first cable
television systems were constructed to allow clear reception
of broadcast television signals. These rural communities were
either too far away from broadcast stations to receive
viewable signals, or were surrounded by mountains or other
terrain conditions not conducive to good reception. The first
systems were of simple design. An antennae, usually a
household rooftop unit, was placed on top of the signal
blocking obstruction and from there wires were run into the
community to the homes. While these early systems generally
provided no more than 6 to 12 channels, they did provide clear
pictures.
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From the late 1950s through the early 1970s construction of
cable television systems continued at a moderate pace. Systems
were being constructed in more densely populated areas with
more channels (12 to 24) and new programming services were
being introduced. These new services were imported by way of
microwave. However, mid-way through this period, the Federal
Communications Commission ("FCC") placed restrictions on the
importation of distant broadcast signals. The effect of these
restrictions was to slow or stop construction of systems in
major markets.
The FCC eased distant signal importation restrictions in 1972.
This allowed operators to introduce more varied programming
and to expand into larger markets. The beginning of cable
television, as it is thought of today, began in 1974-1975 with
the introduction of satellite delivered television
programming. The efficiency of the delivery system, and the
variety of programming that would soon become available helped
move systems beyond 24 channels to 36 channels and more. The
period between 1972 and 1984 saw the rapid development and
expansion of cable television throughout all markets.
In 1984 the Cable Communications Policy Act was approved by
Congress. Viewed in hindsight, the most controversial feature
of the act was the removal of price controls on programming
services to the subscriber. The release of price controls was
phased in over 1985 and 1986 with all controls coming off in
1987. Between 1987 and 1991 the cost of basic programming to
the subscriber rose dramatically. Cable operators argued that
the increases were a result of an artificially restricted
market and prices were now reaching equilibrium as program
offerings increased and technical facilities were improved.
Consumer advocates argued that cable operators were taking
advantage of an unrestricted situation in which the operators
held unregulated monopolies.
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In response to recent history, Congress proposed several
re-regulation bills over a period of three years. Finally, on
October 5, 1992, the House and Senate enacted into law the
controversial Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act") over the veto
of President Bush. Many of the provisions of the new law took
effect 60 days after passage of the bill, on December 4, 1992,
but a number of key provisions took effect on dates ranging
from 120 days to 18 months from the date of passage. Among the
most critical issues affected by the 1992 Cable Act are direct
rate regulation, "must-carry," and re-transmission consent.
Provisions of the new law relating to direct rate regulation
allow most local franchising authorities to take steps to
ensure that basic service rates are reasonable, i.e., not
greater than would be the case if the system was subject to
effective competition. The FCC is required to establish and
adopt regulations to be followed by the local authorities who
choose to regulate. Rates may be regulated on other, non-basic
services only in cases of "bad actor" complaints.
In April 1993, the FCC announced preliminary guidelines for
rate regulation which are based on benchmarks derived from a
national price survey of systems subject to competition. The
FCC expected most systems would be required to roll back rates
approximately ten percent or more. Operators may elect to
prove the reasonableness of their rates by means of a cost of
service showing. The long expected rules for the cost of
service showing were announced by the FCC by February, 1994.
At the same time, the FCC revised benchmark rates and issued
new methodology for operators to use in determining which
benchmark rates apply to their systems. The FCC expects the
new benchmarks will result in an additional rollback of rates
for regulated services in the average magnitude of about 7
percent . The new rules also are intended to encourage the
development of new, unregulated services.
Under the 1992 Cable Act broadcasters are given broad "must
carry" and channel position rights. Requirements are
established for cable television operators to carry local
television stations. Prior to enactment of the new law, cable
systems were not required to carry broadcast stations.
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Cable operators also did not have to request permission to use
broadcast signals prior to enactment of the 1992 Cable Act,
nor did they have to pay a carriage fee to the broadcasters.
As a result of the re-transmission consent provisions of the
1992 law, cable systems are barred from retransmitting
broadcast signals without a station's consent. The cable
operator must negotiate with local broadcasters to obtain
their consent for retransmission. As a result of the
negotiation process, the cable operator might be charged a fee
for carriage of the broadcaster's signals. It is important to
remember that much of the viewing on cable television is still
done on the three major broadcast networks.
b. Future
Despite re-regulation, cable operators' total revenues
continue to increase. Subscribers increased 4 percent to 63
million in 1995, basic service revenues expanded 11 percent,
premium service revenue grew 6 percent, and advertising
revenue rose 16 percent.
There are some difficulties in projecting cable revenues more
than five years out because of inevitable technological
changes on the horizon (such as interactive media). It is
anticipated that growth will not pass into the double digits
in the 1990's as in the 1980's. However, cable household
penetration should reach 70% and advertising revenues should
increase in the near future. Overall, total cable revenues are
expected to increase 5 to 7 percent per year over the next 5
years, until certain technological change alters the
competitive situation.
The future also holds the potential for competition. The two
primary sources of competition are widely considered to be the
regional bell operating companies ("RBOCs") and direct
broadcast satellites.
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The economics of competition and the possible reconstruction
of entire subscriber networks represents an investment that
may not be economically feasible for the RBOCs. Recent
developments in copper transmission technology, specifically,
asymmetrical digital subscriber lines, have given the RBOCs
some hope of using their existing subscriber networks to
transmit full motion video. Many analysts view the RBOCs as
possible joint venture candidates or purchasers of cable
systems. Indeed, a number of actions support this view,
including US West's investment in Time Warner, Bell Atlantic's
bid to acquire Tele-Communications, Inc., Southwestern Bell's
acquisition of Hauser Communications, USWest's acquisition of
Continental Cable and rumors of discussions between other
RBOCs and large cable operators.
The other source of competition is from direct broadcast
satellites ("DBS"). DBS is a high power satellite which
broadcasts programs directly to the subscriber's home
utilizing an 18" receive dish. Several companies now offer the
service. The first commercial launch was in December of 1993.
Initially, DBS was widely viewed as a complementary service to
cable. However, in many areas DBS has eroded cable subscriber
bases. Technological restrictions prevent DBS from offering as
many local channels as cable, and the enormous expense of the
venture has kept the price to the subscriber in line with that
of cable. Further, DBS is fighting for market share against an
already well established cable service infrastructure. As of
this writing, all DBS providers serve approximately 4,400,000
subscribers.
In February of 1996, President Clinton signed into law the
Telecommunications Act of 1996. Among the numerous provisions,
the Act deregulates small cable systems of under 50,000
subscribers, and allows for the entry of cable companies into
the telephone industry. Additionally, it lifts the barriers
for entry into the cable television industry for local
exchange carriers (LEC's) as well as other entities. Most
analysts expect numerous legal challenges to the Act.
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C. PROPERTY DESCRIPTION
1. Operating Market
Falcon Classic Cable Income Properties, LP offers cable service in
five areas: Burke County, NC, California City, CA, Centreville MD,
Redmond, OR, and Somerset KY. The Burke County, NC system serves the
towns of Connelly Springs, Drexel, Glen Alpine, Rutherford College
and Valdese, as well as certain unincorporated areas of Burke
County, NC. The California City, CA system serves California City as
well as certain unincorporated areas of Kern County, CA. The
Centreville, MD system serves the towns of Barclay, Betterton,
Centreville, Chestertown, Church Hill, Millington, Oxford,
Queenstown, Rock Hall, St. Michaels, Sudlersville, Templeville and
Trappe as well as certain unincorporated areas of Kent, Talbot and
Queen Anne's Counties. The Redmond, OR system serves Redmond and
certain unincorporated areas of Deschutes County, OR. The Somerset,
KY systems serve the cities of Burnside, Columbia, Eubank, Ferguson,
McKinney and Somerset, as well as certain unincorporated areas of
Adair, Pulaski, Laurel and Lincoln Counties.
Residents in the areas served by the Burke County, North Carolina
system are employed in industries that include textiles, poultry
processing, building materials and structural products, timber
processing and furniture manufacturing. Major employers include
Lowe's Companies, Gardner Mirror, Carolina Mirror and ITT
Corporation.
Residents in the areas served by the California City, California
system generally commute to the Los Angeles area for employment.
Residents in the areas served by the Centreville, Maryland system
rely heavily upon the Chesapeake Bay for their economy. This
industry includes commercial fishing, crabbing and processing.
Portions of the area's workforce are also employed in the farming
and tourism industries. Additionally, a number of area residents
commute to Annapolis, Baltimore and Washington, D.C.
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Residents in the areas served by the Redmond, Oregon system are
employed in a variety of industries such as timber, tourism, trade,
service and agriculture. Major employers include Eagle Crest Resort
and the Redmond Airport.
Residents in the areas served by the Somerset, Kentucky system are
employed in industries such as glassware, dairy, gas and oil and
forestry. Major employers include General Electric, Southern Belle
Dairy and Palm Beach Clothing.
The data presented in Addendum 4, taken from Sales and Marketing
Management's Demographics USA 1996, shows the January 1, 1996,
population, households, median age and average household effective
buying income ("EBI") for the counties in which the entire service
area is located. If available, projections for January 1, 2001, also
are included for each category along with the compounded annual
change for the five year period.
The average annual rate of growth for each category represents a
general indicator of overall growth levels in the areas in which the
Systems operate. The growth of the area as a whole may not be
indicative of the level of growth expected and achievable in the
Systems due to a variety of reasons, including (a) the lag between
statistical reporting and the current state of affairs, (b) the fact
that certain portions of a particular county may experience robust
growth while other areas face slow or even negative growth, and (c)
the cable system may be preparing to offer the cable service in
areas previously unserved by the cable.
As of the valuation date, reception of off-air signals to service
area residents without the cable television service was poor to
excellent depending on which areas of the Systems. The main sources
of competition for the cable service were MMDS, DBS, satellite
dishes and video rental stores.
2. Physical Plant
Burke County, North Carolina
The Burke, North Carolina plant included one headend located on High
Peak Mountain. As of the valuation date, the System included 468.7
miles of aerial plant and 262.4 miles of underground plant. Plant
bandwidth capacity was at 330 MHz.
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The distribution plant contained .860 and .750-inch trunk and
.500-inch feeder cable. Additionally, the system utilized fiber
optic cable to shorten cascades. The majority of the active
electronics consisted of Magnavox and Scientific Atlanta trunk
amplifiers and line extenders. Subscriber drops consisted of RG-6
messengered cable. The longest trunk cascade was 20 amplifiers and
the longest line extender cascade was 4 line extenders.
Manufacturers of the headend electronics included General
Instruments, Avantek, Olson, Catel, Cadco and Scientific Atlanta.
Fiber optic electronics were manufactured by Scientific Atlanta and
Synchronous. Off-air signals were received via antennas mounted on a
100-foot self-supporting tower located at the headend. Satellite
signals were received by earth stations ranging in size from 2.8 to
7.0 meters.
Pay and tier security was accomplished through addressability.
Converters in the field consisted of Scientific Atlanta 8550 and
8580 addressable models.
California City, California
The California City, California plant included one headend located
in the town of North Edwards. As of the valuation date, the System
included 79 miles of aerial plant and 11.1 miles of underground
plant. Plant bandwidth capacity was at 330 MHz.
The distribution plant contained .750-inch trunk and .500-inch
feeder cable. Active electronics consisted of Magnavox trunk
amplifiers and line extenders. The longest trunk cascade was 16
amplifiers and the longest line extender cascade was 3 line
extenders.
Manufacturers of headend electronics included Scientific Atlanta,
M/A-Com, Standard Communications and Jerrold. Off-air signals were
received via antennas mounted on a 250-foot tower. Satellite signals
were received by earth stations ranging in size from 4.2 to 5.0
meters in diameter.
Pay and tier security was accomplished through a combination of the
use of traps and addressability. Converters in the field consisted
of Jerrold DPV7 addressable models.
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Centreville, Maryland
The Centreville, Maryland plant included one headend located in the
town of Wye Mills. As of the valuation date, the System included
460.2 miles of aerial plant and 189.60 miles of underground plant.
Plant bandwidth capacity was at 450 MHz.
The distribution plant contained .750-inch trunk and .500 and
.412-inch feeder cable. Additionally, the signal was microwaved from
the headend to two sites in Talbot County, two sites in Queen Anne
County and two sites in Kent County. Fiber was utilized throughout
the system both from the headend and from microwave receive sites.
Active electronics consisted of Magnavox trunk amplifiers and line
extenders. Subscriber drops consisted of RG-6, RG-59, and RG-11
cable. The longest trunk run was 19 amplifiers and the longest line
extender cascade was 5 line extenders.
Manufacturers of headend electronics included Scientific Atlanta,
General Instruments, Drake, Cadco, M/A-Com and Olson. Fiber optic
electronics were manufactured by Antec and Phillips. Off-air signals
were received via antennas mounted on a 300-foot guyed tower at the
headend. Satellite signals were received by earth stations ranging
in size from 2.8 to 5.0 meters in diameter.
Pay and tier security was accomplished through the use of traps.
Converters in the field consisted of Jerrold DRZ-3 models.
Redmond, Oregon
The Redmond, Oregon plant included one headend located in the town
of Redmond. As of the valuation date, the System included 116 miles
of aerial plant and 54 miles of underground plant. Plant bandwidth
capacity was at 270 MHz.
The distribution plant contained .750 and .500-inch trunk and .500
and .412-inch feeder cable. Active electronics consisted of Magnavox
and Century trunk amplifiers and line extenders. Subscriber drops
consisted of RG-6, RG-59, and RG-11 cable. The longest trunk cascade
was 32 amplifiers and the longest line extender cascade was 5 line
extenders.
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Manufacturers of the headend electronics included General
Instruments, Pico and Scientific Atlanta. Satellite signals were
received by earth stations manufactured by Comtech and Scientific
Atlanta.
Pay security was accomplished through the combination of traps and
addressability. Converters in the field were manufactured by
Jerrold.
Somerset, Kentucky
The Somerset, Kentucky plant included five headends located in the
towns of Burnside, Columbia, Eubank, London, and McKinney. As of the
valuation date, the Systems included 816.5 miles of aerial plant and
18 miles of underground plant. Plant bandwidth capacity ranged from
270 to 400 MHz.
The distribution plant contained .860, .750 and .500-inch trunk and
.500 and .412-inch feeder cable. Active electronics consisted of
Scientific Atlanta, Tocom, Sylvania and Jerrold trunk amplifiers and
line extenders. Subscriber drops consisted of RG-6 and RG-59 cable.
The longest trunk run was 33 amplifiers and the longest line
extender cascade was 8 line extenders.
Manufacturers of headend electronics included General Instruments,
Scientific Atlanta, Microdyne, Blonder Tongue, Triple Crown, Catel
and Olson. Fiber optic electronics were manufactured by Antec and
Scientific Atlanta. Off-air signals were received via antennas
mounted on towers either at the headend or near the headend on a
mountaintop site. Satellite signals were received by earth stations
ranging in size from 3.0 to 5.0 meters in diameter.
Pay security was accomplished through a combination of traps and
addressability. Converters in the field consisted of Scientific
Atlanta 8501, 8510, 8511, and 8600 non-addressable and addressable
models.
3. Operations Review
The Burke County, California City, Centreville, and Redmond systems
each conducted operations from one centrally located business
office. The Somerset systems had three business offices located at
strategic points throughout the service areas.
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Our visual inspection of the Systems included on-site inspections of
the Burke County, NC system, the Centreville, MD system and the
Somerset, KY systems. These systems represented nearly 90% of the
subscribers within the five areas. Numerous new build areas were
observed throughout the Systems. Our inspection of the active
distribution plant showed the cable and strand to be in fair to good
condition with very little signs of broken lashing wire.
The headends observed during the on-site observations appeared to be
very well organized and well maintained. Headend electronics
consisted of a mixed batch of low to high quality brand name
equipment and appeared to be in fair to excellent condition in each
of the Systems.
4. Homes Passed and Subscribers
Systems management's best estimate of the number of homes passed and
subscribers as of the valuation date is as follows:
<TABLE>
<CAPTION>
Burke County, North Carolina Penetration
- ---------------------------- -----------
<S> <C> <C>
Homes Passed: 18,986 N/A
Basic Subscribers: 10,516 55.4%
Expanded Basic: 9,097 86.5%
Pay Units: 4,840 46.0%
Converters: 15,346 145.9%
Remotes: 10,922 103.8%
</TABLE>
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<TABLE>
<CAPTION>
California City, California Penetration
- --------------------------- -----------
<S> <C> <C>
Homes Passed: 2,858 N/A
Basic Subscribers: 1,922 67.2%
Expanded Basic: 1,820 94.7%
Pay Units: 839 43.7%
Converters: 931 48.4%
Remotes: 802 41.7%
Centreville, Maryland Penetration
- --------------------- -----------
Homes Passed: 23,857 N/A
Basic Subscribers: 12,325 51.7%
Expanded Basic: 11,863 96.3%
Pay Units: 7,440 60.4%
Converters: 1,838 14.9%
Remotes: 681 5.5%
Redmond, Oregon Penetration
- --------------- -----------
Homes Passed: 7,252 N/A
Basic Subscribers: 3,516 48.5%
Expanded Basic: 2,847 81.0%
Pay Units: 777 22.1%
Converters: 1,050 29.9%
Remotes: 933 24.7%
Somerset, Kentucky Penetration
- ------------------ -----------
Homes Passed: 22,060 N/A
Basic Subscribers: 19,296 87.5%
Expanded Basic: 18,823 97.5%
Pay Units: 3,914 20.3%
Converters: 5,119 26.5%
Remotes: 4,622 24.0%
</TABLE>
Management's estimate of homes passed were drawn from System
information and based on a combination of billing records, previous
audits and the System's maps.
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5. Franchise Agreements
The following chart details the active franchises and agreements for
the Systems and provides term expiration.
<TABLE>
<CAPTION>
Franchise Area Expiration Date
-------------- ---------------
Burke County, North Carolina
- ----------------------------
<S> <C>
Burke County June 3, 1998
Connelly Springs October 7, 1999
Drexel February 2, 2005
Glen Alpine October 31, 1998
Rutherford College October 10, 2001
Valdese June 20, 2007
California City, California
- ---------------------------
California City April 1, 2001
Centreville, Maryland
- ---------------------
Barclay March 13, 2009
Betterton June 13, 2004
Centreville October 7, 1997
Chestertown March 29, 1998
Church Hill February 2, 2009
Kent County May 17, 2003
Millington February 21, 2004
Oxford August 27, 2006
Queen Anne's County September 1, 1997
Queenstown June 16, 1998
Rock Hall December 26, 2001
St. Michaels December 31, 1996
Sudlersville September 22, 2008
Talbot County May 29, 2006
Templeville May 3, 2008
Trappe September 23, 2006
</TABLE>
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<TABLE>
<CAPTION>
Franchise Area Expiration Date
-------------- ---------------
Redmond, Oregon
- ---------------
Redmond February 23, 2002
Somerset, Kentucky
- ------------------
<S> <C>
Adair County May 8, 2005
Burnside June 2, 2000
Columbia August 27, 2011
Eubank September 6, 1998
Ferguson November 7, 2008
Laurel County May 27, 2009
Lincoln County (a) April 5, 1998
Lincoln County (b) May 5, 2007
Pulaski County (a) June 1, 1999
Pulaski County (b) October 26, 2008
Somerset December 31, 1996
</TABLE>
The weighted average remaining life per basic subscriber of the
franchises for the Burke County System is 2.08 years. The weighted
average remaining life per basic subscriber of the franchises for
the California City System is 4.25 years. The weighted average
remaining life per basic subscriber of the franchises for the
Centreville System is 3.36 years. The weighted average remaining
life per basic subscriber of the franchises for the Redmond System
is 5.15 years. The weighted average remaining life per basic
subscriber of the franchises for the Somerset System is 6.24 years.
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6. Channel Line-Up and Rate Card
As of the valuation date, the following average rates were charged
to subscribers.
<TABLE>
<CAPTION>
Burke County, North Carolina
- ----------------------------
<S> <C>
Basic: $16.96
Expanded Basic: 6.20
Pay: 7.51
Converters: 2.50
Remotes: 0.03
Installation: 45.00
Reconnect: 45.00
California City, California
- ---------------------------
Basic: $15.77
Expanded Basic: 6.00
Pay: 8.14
Converters: 4.46
Remotes: 0.34
Installation: 45.00
Reconnect: 45.00
Centreville, Maryland
- ---------------------
Basic: $20.60
Expanded Basic: 3.52
Pay: 8.54
Converters: 1.99
Remotes: .68
Installation: 45.00
Reconnect: 45.00
Redmond, Oregon
- ---------------
Basic: $22.23
Expanded Basic: 2.05
Pay: 6.16
Converters: 2.57
Remotes: 0.22
Installation: 45.00
Reconnect: 45.00
</TABLE>
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<TABLE>
<CAPTION>
Somerset, Kentucky
- ------------------
<S> <C>
Basic: 19.24
Expanded Basic: 2.37
Pay: 8.71
Converters: 1.58
Remotes: 0.33
Installation: 45.00
Reconnect: 45.00
</TABLE>
Detailed channel line-up and rate information is included in
Addendum 1.
7. Financial History
For purposes of our investigation, we were furnished for review
financial statements for each of the Systems for the years ending
December 31, 1993, 1994, 1995 and 1996. We have accepted such
information, without audit or investigation on our part, as
correctly reflecting the business and financial operations and
conditions it was purported to reflect but made such adjustments as
we deemed appropriate for valuation purposes.
Recent financial operating history is discussed below, and summary
income statements, including notations pertaining to adjustments,
are presented in Addendum 3.
In the Burke County system, total revenues for the twelve months
ended December, 1996 were $5,077,787 and operating expenses totaled
$2,023,543, resulting in operating income of $3,054,244 and an
operating margin of 60.15%. This represents an increase in operating
income of 3.5% over the previous year from $2,951,419 reported for
the year ended December 31, 1995.
In the California City system, total revenues for the twelve months
ended December, 1996 were $753,244 and operating expenses totaled
$318,288, resulting in operating income of $434,956 and an operating
margin of 57.74%. This represents an increase in operating income of
5.2% over the previous year from $413,393 reported for the year
ended December 31, 1995.
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In the Centreville system, total revenues for the twelve months
ended December, 1996 were $5,342,637 and operating expenses totaled
$2,623,275, resulting in operating income of $2,719,362 and an
operating margin of 50.90%. This represents an increase in operating
income of 31% over the previous year from $2,075,645 reported for
the year ended December 31, 1995.
In the Redmond system, total revenues for the twelve months ended
December, 1996 were $1,561,593 and operating expenses totaled
$632,632, resulting in operating income of $928,961 and an operating
margin of 59.49%. This represents an increase in operating income of
5% over the previous year from $885,188 reported for the year ended
December 31, 1995.
In the Somerset systems, total revenues for the twelve months ended
December, 1996 were $7,090,865 and operating expenses totaled
$3,102,395, resulting in operating income of $3,988,470 and an
operating margin of 56.25%. This represents an increase in operating
income of 16.1% over the previous year from $3,436,148 reported for
the year ended December 31, 1995.
8. Management
Our representative met and interviewed several members of management
during the on-site review of the Systems. The management team in
place at the time of the valuation was comprised of professionals in
the cable television industry and demonstrated substantial knowledge
about all aspects of the Systems' operation.
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D. VALUATION METHODOLOGY
1. Purpose
We were engaged to render an opinion as to the fair market value of
the cable television systems owned by Falcon Classic Cable Income
Properties, LP ("Classic" or the "Systems") as of December 31, 1996.
Classic offers cable service in five areas: Burke County, NC,
California City, CA, Centreville, MD, Redmond, OR and Somerset, KY.
The scope of our engagement was to value each cluster of cable
television systems operating as a single going concern. The purpose
of our report is to assist in a possible partnership buyout
involving Falcon Holdings Group L.P. (or its affiliates) and
Classic's partners. We were not engaged to make specific purchase,
sale or lending recommendations. This report is not a fairness
opinion.
The Burke County, NC system serves the towns of Connelly Springs,
Drexel, Glen Alpine, Rutherford College and Valdese, as well as
certain unincorporated areas of Burke County, NC. The California
City, CA system serves California City as well as certain
unincorporated areas of Kern County, CA. The Centreville, MD system
serves the towns of Barclay, Betterton, Centreville, Chestertown,
Church Hill, Millington, Oxford, Queenstown, Rock Hall, St.
Michaels, Sudlersville, Templeville and Trappe as well as certain
unincorporated areas of Kent, Talbot and Queen Anne's Counties. The
Redmond, OR system serves Redmond and certain unincorporated areas
of Deschutes County, OR. The Somerset, KY systems serve the cities
of Burnside, Columbia, Eubank, Ferguson, McKinney and Somerset, as
well as certain unincorporated areas of Adair, Pulaski, Laurel and
Lincoln Counties.
2. Definition of Fair Market Value
For purposes of this report, fair market value is defined as the
estimated cash or cash equivalent price at which the subject
properties would change hands between a willing buyer and a willing
seller, in an arm's length transaction, in which both buyer and
seller have been informed of all relevant facts and neither is under
compulsion to complete the transaction. This concept of value is
supported by numerous court decisions dealing
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with fair market value. Further, it is assumed that all assets will
remain in place and be employed in the delivery of cable television
signals to subscribers, which is assumed to be the highest and best
use of those assets.
3. Three Approaches to Value
Traditionally, the development of a fair market value opinion is
based on the consideration of three basic approaches to value: the
Cost Approach, the Market Approach and the Income Approach. The cost
approach measures the value of an asset by the cost to reconstruct
or replace it with another of like utility. The income approach
measures the value of an asset by the present value of its future
economic benefits. The market approach measures the value of an
asset through an analysis of recent sales or offerings of comparable
property. Value indications derived through one or more of these
approaches are then analyzed in order to formulate an objective
opinion as to the market value of the Systems under valuation.
We considered these three generally accepted valuation methods in
determining the Systems' fair market value. In considering the
income approach, two methodologies were used: an operating income
capitalization method and a discounted cash flow calculation. The
capitalization method is presented in part D-5 of this report, and
the discounted cash flow methodology is described in sections D-6
through D-8. We considered the market approach as presented in part
D-9 of the report. The cost approach was considered but not used
because it does not adequately capture the value attributable to the
continued operation of the business.
4. Overall Valuation Procedure
We employed the following steps in determining the fair market value
of the Systems:
a. Performed an on-site inspection of a representative portion of
the Systems' headends, earth stations, towers, antennas,
distribution plant, customer service and technical offices to
determine technical and/or physical condition.
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b. Performed an on-site review of a representative portion of the
Systems' service area to confirm economic and demographic data
and information collected from the Systems' management, local
governmental jurisdictions and independent sources.
c. Examined financial statements and other information.
d. Examined historic subscriber records and monthly reports.
e. Reviewed historic service rate records.
f. Reviewed franchises and other agreements.
g. Interviewed management and staff on a variety of financial,
operational, technical, marketing and programming issues.
h. Applied the most likely changes, in our opinion, in operations
and finance that a reasonable, prudent, "outside" buyer would
institute.
i. Applied or considered an operating income capitalization
method, a discounted cash flow method and a comparable sales
methodology.
j. Derived an estimated fair market value which considered the
results of the various valuation methods, giving greater
weight to the discounted cash flow and projected income
capitalization methods, since they reflect future factors, as
well as past and current, affecting overall systems value.
We conducted an on-site inspection of a representative portion of
the cable systems to determine physical condition and satisfactory
function of fixed assets currently in place.
We assessed the reasonableness of management's 1997 budget regarding
homes, subscribers, miles, rates, revenues, operating expenses, and
capital expenditures. We used essentially the same estimates for
future growth in miles and homes in our analysis in the assumption
that a typical outside buyer would plan to achieve the same level of
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growth. The annual capital expenditure assumptions for both new
construction, rebuilds and ongoing maintenance used in our analysis
are similar to or slightly less than those projected by management.
5. Operating Income Capitalization Method
We considered three variations of the operating income
capitalization method. In the first variation, we applied a baseline
multiplier to the Systems' adjusted 1996 12-month operating income
based on historical financial information presented in Addendum 3.
The baseline multiplier was derived from a variety of cable industry
data including public and private transactions, public stock data,
industry trends and other information. The second variation of this
method utilized a slightly lower multiplier applied to the Systems'
current operating income. Current operating income is defined as the
annualized estimate of the Systems' current monthly operating income
based on the number of subscribers and the service rates charged on
the date of the valuation. A lower multiplier was used to recognize
the risk and uncertainty of using operating income estimated by
annualization rather than historic data. We applied an even lower
multiplier to the Systems' estimated future operating income in the
third variation of the operating income capitalization method. We
used the lower multiple to recognize the greater risk and
uncertainty of using future estimates of operating income rather
than historic achievements. The results of the three income
capitalization methods are presented in Exhibits F.
6. Discounted Cash Flow Methodology
The discounted cash flow methodology measured the net present value
of the Systems' estimated future pre-tax operating income, less
capital expenditures, plus the residual value of the Systems. This
methodology relied on estimates of future operating income which
were derived from data supplied by the Systems' management and
certain assumptions based on experience and professional judgment.
The revenue estimates were based on data provided by management
regarding homes passed, subscribers, special services, rates, and
penetration levels. The expense estimates, based on many of the same
factors as the revenue estimates, also were overlaid with inflation
factors specific to the expense categories. In all cases, our work
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was based on management's 1997 budget and our experience with
comparable cable systems. Capital expenditures were based on
anticipated new miles of plant, plant rebuild, converter
replacement, system upgrades, and other expense factors that
generally vary from system to system.
A residual value was added to the operating income stream in the
final year of the period analyzed. The residual value was discounted
to the present at the same rate as the operating income. The
residual analysis estimated the present value of the Systems at the
end of the horizon period. We calculated the residual as a multiple
of operating income in the final year of the operating income
analysis. The residual multiple was lower than the multiple used in
the operating income capitalization method to account for the
uncertainty of regulation, competition and technological changes.
An important component of the discounted cash flow methodology is
the selection of the discount rate for overall capital or total
investment. We combined two basic components, i.e., the anticipated
return on investors' equity and the cost of debt, to create the
discount rate. As the equity return rate, we used the expected rate
of return available on alternative investment opportunities with
comparable risk. The equity return rate was developed using the
capital asset pricing model ("CAPM"), as outlined in Addendum 2.
CAPM, which is part of a larger theory known as the capital market
theory, is based on the fact that investors in risky assets require
an additional return above the risk free market rate as compensation
for investing in the particular asset.
In determining the risk component of the equity portion of capital
we analyzed the systematic and unsystematic risks associated with
the subject properties. Systematic risk is a measure of the
uncertainty of future returns due to the sensitivity of the return
on the subject investment to movements in the return for the market
as a whole. Systematic risk is measured in CAPM by a factor called
beta. Beta is a function of the relationship between the return on
an individual security and the return on the market as measured by
the return on a standard market index. Unsystematic risk is a
measurement of the risk directly related to the characteristics of a
specific industry, the cable system itself, community/municipal
relationships, competition, regulation, and management ability.
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The discount rate was determined by combining the cost of equity (as
determined above) and the cost of debt in weighted proportions
(weighted average cost of capital) that would have been typical for
the Systems, or a comparable system, and which were representative
of the industry as of the valuation date (see Addendum 2). The cost
of debt was based on the benchmark prime lending rate as listed in
The Wall Street Journal. The prime lending rate is one customarily
used as a basis for the cable television industry. Points over prime
were assigned to the debt structure based on the anticipated risk
involved in the loan and prevailing bank industry standards. The
discounted cash flow model is presented in Exhibits E.
7. Residual Value
The residual value of the cable property represents the best
estimate, as of the valuation date, of the fair market value of the
property in the final year considered in our analysis. The residual
is calculated via a valuation multiplier similar to the multipliers
used in the operating income capitalization method. Once calculated,
the residual value is added to the operating income stream. The
premise upon which the use of a residual value is based is the fact
that significant value will be returned to the owner of a property
at the end of its holding period. Alternatively, the owner will
continue to hold the property and realize operating profit well into
the future. The residual multiplier captures both aspects of value.
For most well operated cable television systems the residual
multiplier is the same, given the same valuation date. However, a
number of factors can be cause for adjustment to the multiplier. For
instance, a cable system without a likely prospect for franchise
renewal would have little or no value at the end of the franchise
term. In this example, a lower than average, or possibly zero
multiplier would be used. If, for instance, a system had a
significant number of years remaining on the current franchise plus
a renewal already assured it might garner a higher than average
multiplier. Franchise life, terms and conditions represent only a
single consideration that is made when determining the multiplier.
Other significant considerations include rate regulation,
competition, expanded services, market maturity, and operating
trends.
Based on the aforementioned considerations, we have selected a
residual multiple of 8.5 (eight and one half) for the Somerset
system, (eight) for the Centreville system, 7.5
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(seven and one half) for the Burke County system, and 7 (seven) for
the Redmond and California City systems. The residual multiple is
applied to operating income in the final year of our operating
income analysis. As a result, the residual value of the property is
calculated to be $30,052,136 for the Burke County system, $3,800,438
for the California City system, $36,593,516 for the Centreville
system, $9,001,414 for the Redmond system and $48,434,673 for the
Somerset system, as shown in Exhibits E.
8. Analysis of Future Projections
A key factor in determining the fair market value of a cable
television property is the ability to accurately assess the Systems'
future operating characteristics and the resulting operating income
and cash flow. Operating income and cash flow are the primary
drivers of overall fair market value.
Operating analyses generally take into consideration a number of
system specific characteristics as well as industry characteristics.
System specific considerations include homes passed and homes
growth, subscriber penetration (all services) and system maturity,
economic and demographic composition of the market, marketing and
administration, and programming. We examine the historic growth and
composition of all these areas as well as management's forecast of
growth. Industry characteristics include subscriber trends for the
various programming services, program ratings and offerings,
marketing trends, and industry developed consumer mandates for
service and accessibility.
Additionally, a great deal of attention is given to the age,
condition and functionality of the Systems' physical plant as this
impacts the estimate of future capital expenditures. We rely on
management's best estimate of planned capital expenses for near term
projections (generally five years). We corroborate management's
forecast with our observations of the Systems' physical plant.
Adjustments are then made to management estimates, when deemed
necessary.
We considered all of these factors when analyzing the operational
and financial future of the Systems. The major items that we
analyzed included homes passed, miles of plant, basic subscribers,
pay service units (HBO, Showtime, etc.), additional outlets (more
than one television in a home with service), and remote control or
converter units.
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Additionally, we analyzed future rates (for all services) that might
be charged to the subscribers, revenue by specific category (basic,
pay, pay-per-view, advertising, etc.), expenses by category
(programming, operations, etc.) and capital expenditures. We
considered in our analyses regulations in effect at the time of the
valuation or likely to take effect soon after the valuation date. We
then used the results of our detailed analyses in determining the
value of the properties as a whole. Our calculations also were
based, in part, on the historical financial and operational
performance of the Systems and other systems of similar
configuration. The operating horizon period was determined by the
weighted average remaining life of the franchises.
The analysis pertaining to the Systems' future operations as
described above is presented in Exhibits A, B, C, and D.
9. Comparable Sales Methodology
We utilized a market approach, or comparable sales method, in
analyzing the subject properties. Under this method, sales of
properties of similar size and construction were compared to the
subject properties. It should be noted that the market approach is
the least reliable of the valuation methodologies considered.
Because detailed financial, technical and operating information is
not generally available regarding cable television transactions, it
is impossible to relate these prices to the operating performance of
any particular property or to make a direct comparison with the
subject properties. This method is used to generally validate the
overall market and to confirm the range of values developed with the
economic methods as reasonable.
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<TABLE>
<CAPTION>
Recent Transactions/
Announced Sales Price Price/Subscriber Multiple(1)
--------------- ----- ---------------- ---------
<S> <C> <C> <C>
Kern Valley, CA $11,000,000 $1,571 8.8
Loudon City, TN $1,700,000 $1,164 7.0
IL and IA $9,400,000 $1,237 7.5
Las Vegas, NV $7,100,000 $1,309 8.3
Genoa, NE $1,700,000 $1,296 8.9
Burke County $17,685,000 $1,682(2) 6.2
California City $2,791,000 $1,452(3) 7.2
Centreville $20,445,000 $1,659(4) 7.3
Redmond $5,882,000 $1,673(5) 7.1
Somerset $30,277,000 $1,569(6) 8.1
</TABLE>
(1) Multiple of next year's projected operating income.
(2) $1,682 per beginning subscriber; $1,690 per
average year 1 subscriber.
(3) $1,452 per beginning subscriber; $1,433 per
average year 1 subscriber.
(4) $1,659 per beginning subscriber; $1,633 per
average year 1 subscriber.
(5) $1,673 per beginning subscriber; $1,514 per
average year 1 subscriber.
(6) $1,569 per beginning subscriber; $1,566 per
average year 1 subscriber.
Although the range of values presented above is too wide from which
to derive any conclusive supporting evidence, the values of Burke,
California City, Centreville, Redmond, and Somerset at $17,685,000,
$2,791,000, $20,455,000, $5,882,000 and $30,277,000, respectively,
appear to be reasonable.
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E. CONCLUSIONS
Based on our analysis and investigation of the Systems, and its service
areas, it is our opinion that the fair market value of the subject
properties, as a going concern, free and clear of all liens and
encumbrances, as of December 31, 1996, is $17,685,000 for Burke County,
$2,791,000 for California City, $20,455,000 for Centreville, $5,882,000
for Redmond and $30,277,000 for Somerset. Our opinion is based on
information and data supplied by the Systems' management, our on-site
inspection of the Systems and the areas served and cable television
industry information. This valuation is expressly subject to the General
Assumptions and Limiting Conditions as defined in this report.
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F. GENERAL ASSUMPTIONS AND LIMITING CONDITIONS
This appraisal report is subject to the following general assumptions and
limiting conditions:
1. No investigation has been made of, and no responsibility is
assumed for, the legal description of the properties being valued
or legal matters, including title or encumbrances. Title to the
properties is assumed to be good and marketable unless otherwise
stated. The properties are assumed to be free and clear of any
liens, easements or encumbrances unless otherwise stated.
2. Information furnished by others, upon which all or portions of
this report is based, is believed to be reliable, but has not
been verified in all cases. No warranty is given as to the
accuracy of such information.
3. This report has been made only for the purpose stated and shall
not be used for any other purpose. Neither this report nor any
portions thereof (including without limitation any conclusions as
to value, the identity of Arthur Andersen LLP or any individuals
signing or associated with this report, or the professional
associations or organizations with which they affiliated) shall
be disseminated to third parties except federal and state taxing
authorities by any means without the prior written consent and
approval of Arthur Andersen LLP.
4. Neither Arthur Andersen LLP nor any individuals signing or
associated with this report shall be required by reason of this
report to give further consultation, to provide testimony, or
appear in court or other legal proceedings unless specific
arrangements therefor have been made.
5. This appraisal has been made in conformance with, and is subject
to, the requirements of the Principles of Appraisal Practice and
Code of Ethics of the American Society of Appraisers and the
Uniform Standards of Professional Appraisal Practice of The
Appraisal Foundation.
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6. No responsibility is taken for changes in market conditions and
no obligation is assumed to revise this report to reflect events
or conditions which occur subsequent to the valuation date
hereof.
7. The date of value to which the conclusions and opinions expressed
in this report apply is set forth in this opinion letter. Our
value opinion is based on the purchasing power of the United
States' dollar as of this date.
8. It is assumed that all required licenses, certificates of
occupancy, consents, or other legislative or administrative
authority from any local, state, or national government or
private entity or organization have been, or can readily be,
obtained or renewed for any use on which the value estimates
provided in this report are based.
9. Full compliance with all applicable federal, state and local
zoning use, environmental and similar laws and regulations is
assumed, unless otherwise stated.
10. Responsible ownership and competent property management are
assumed.
11. The opinion of value is predicated on the financial structure
prevailing as of the date of this valuation.
12. We were not engaged nor are we qualified to detect the existence
of toxic or hazardous material or the presence of radio frequency
radiation which may or may not be present on or near the
properties of the appraised entity (the "Company"). The presence
of radio frequency radiation or potentially toxic or hazardous
substances such as asbestos, urea-formaldehyde foam insulation,
industrial wastes, etc. may affect the value of the Company. The
value estimates herein are predicted on the assumption that there
is no such radiation or material on, in, or near the Company's
properties that would cause a loss in value. No responsibility is
assumed for any such conditions or for any expertise or
engineering knowledge required to discover them. Falcon Classic
Cable Income Properties, L.P., Falcon Cable TV, Falcon Holdings
Group, L.P. should retain an expert in this field if further
information is desired.
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13.a. Falcon Classic Cable Income Properties, L.P., Falcon Cable TV,
Falcon Holdings Group, L.P. shall indemnify and hold harmless
Arthur Andersen LLP, its affiliates, partners, agents and
employees from and against any losses, claims, damages or
liabilities (or actions in respect thereof) that may be asserted
by Conflicts Committee of Falcon Classic Cable Income Properties,
L.P., or any person or entity who may receive our report, except
to the extent of any losses, claims, damages or liabilities (or
actions in respect thereof) arising by reason of gross negligence
or willful misconduct of Arthur Andersen LLP in preparing the
report, and will reimburse Arthur Andersen LLP for all expenses
(including counsel fees) as they are incurred by Arthur Andersen
LLP in connection with investigating, preparing or defending any
such action or claim.
b. In any circumstance in which the foregoing indemnification is
held by a court to be unavailable to Arthur Andersen LLP, Falcon
Classic Cable Income Properties, L.P., Falcon Cable TV, Falcon
Holdings Group, L.P. and Arthur Andersen LLP shall contribute to
any aggregate losses, claims, damages or liabilities (including
the related fees and expenses) to which Falcon Classic Cable
Income Properties, L.P., Falcon Cable TV, Falcon Holdings Group,
L.P. and Arthur Andersen LLP may be subject in such proportion
that Arthur Andersen LLP shall be responsible only for that
portion represented by the percentage that the fees paid to
Arthur Andersen LLP for the portion of its services or work
product giving rise to the liabilities bears to the value of the
transaction giving rise to such liability.
14. This report is not a fairness opinion.
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G. CERTIFICATION
The undersigned hereby certifies that we have no present or contemplated
future interest in the properties that are the subject of this report and
have no personal interest or bias with respect to the parties involved;
neither our employment nor our compensation in connection with this report
is in any way contingent upon the conclusions reached or values estimated;
the values and conclusions contained herein, limited only by the reported
assumptions and limiting conditions, reflect our personal, unbiased
professional judgment; this appraisal has been prepared in conformance
with the "Uniform Standards of Professional Appraisal Practice"; no person
other than the undersigned or those acknowledged in this report prepared
the analysis, values or conclusions set forth in this report; and to the
best of our knowledge and belief, the statements of fact contained in this
report are true and correct.
/S/Anthony P. Kern
--------------------------
Anthony P. Kern
Contributing Analysts:
John F. Lisciandro
Vance L. Wilson
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EXHIBITS
A. Cable Television Miles, Homes and Subscribers
B. Service Rates
C. Revenue, Expenses, Operating Income
D. Capital Expenditures
E. Discounted Cash Flow Valuation
F. Valuation Matrix
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EXHIBIT A-1
- ---------------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
BURKE COUNTY, NC
AS OF DECEMBER 31, 1996
- ---------------------------------------------------
- ---------------------------------------------------
CABLE TELEVISION MILES, HOMES PASSED, SUBSCRIBERS
- ---------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
BEGINNING MILES 731.1
NEW MILES 8.0 8.0 8.0 8.0 8.0 8.0 8.0
TOTAL 739.1 747.1 755.1 763.1 771.1 779.1 787.1
PERCENT GROWTH 1.09% 1.08% 1.07% 1.06% 1.05% 1.04% 1.03%
BEGINNING HOMES 18,986
NEW HOMES 150 150 150 150 150 150 150
AVERAGE HOMES 19,061 19,211 19,361 19,511 19,661 19,811 19,961
TOTAL 19,136 19,286 19,436 19,586 19,736 19,886 20,036
PERCENT GROWTH 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8%
NEW BUILD DENSITY 19 19 19 19 19 19 19
AVERAGE DENSITY 26 26 26 26 26 26 25
BEGINNING BASIC 10,516 10,408 10,393 10,377 10,750 11,030 11,213
NEW BASIC (108) (15) (16) 374 280 183 85
AVERAGE BASIC 10,462 10,400 10,385 10,563 10,890 11,122 11,256
TOTAL 10,408 10,393 10,377 10,750 11,030 11,213 11,298
PENETRATION 54.4% 53.9% 53.4% 54.9% 55.9% 56.4% 56.4%
EXPANDED BASIC 9,097 8,951 8,939 8,924 9,246 9,487 9,644
NEW EXPANDED (146) (13) (14) 322 241 158 73
AVERAGE EXPANDED 9,024 8,945 8,931 9,085 9,366 9,565 9,681
TOTAL 8,951 8,939 8,924 9,246 9,487 9,644 9,717
PENETRATION 86.0% 86.0% 86.0% 86.0% 86.0% 86.0% 86.0%
BEGINNING PAY 4,840 4,686 4,627 4,620 4,787 4,911 4,993
NEW PAY (154) (59) (7) 166 125 82 38
AVERAGE PAY 4,763 4,657 4,624 4,703 4,849 4,952 5,012
TOTAL 4,686 4,627 4,620 4,787 4,911 4,993 5,030
PENETRATION 45.0% 44.5% 44.5% 44.5% 44.5% 44.5% 44.5%
BEGINNING CONVERTERS 15,346 15,188 15,166 15,142 15,688 16,096 16,364
NEW CONVERTERS (158) (22) (24) 546 408 267 123
AVERAGE CONVERTERS 15,267 15,177 15,154 15,415 15,892 16,230 16,425
TOTAL 15,188 15,166 15,142 15,688 16,096 16,364 16,487
PENETRATION 145.9% 145.9% 145.9% 145.9% 145.9% 145.9% 145.9%
BEGINNING REMOTES 10,922 10,810 10,794 10,777 11,165 11,456 11,646
NEW REMOTES (112) (15) (17) 388 290 190 88
AVERAGE REMOTES 10,866 10,802 10,786 10,971 11,311 11,551 11,690
TOTAL 10,810 10,794 10,777 11,165 11,456 11,646 11,734
PENETRATION 103.9% 103.9% 103.9% 103.9% 103.9% 103.9% 103.9%
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 45
EXHIBIT A-2
- -------------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
CALIFORNIA CITY, CALIFORNIA
AS OF DECEMBER 31, 1996
- -------------------------------------------------
- -------------------------------------------------
CABLE TELEVISION MILES, HOMES PASSED, SUBSCRIBERS
- -------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
BEGINNING MILES 90.1
NEW MILES 2.0 1.0 1.0 1.0 1.0 1.0 1.0
TOTAL 92.1 93.1 94.1 95.1 96.1 97.1 98.1
PERCENT GROWTH 2.22% 1.09% 1.07% 1.06% 1.05% 1.04% 1.03%
BEGINNING HOMES 2,858
NEW HOMES 80 40 40 40 40 40 40
AVERAGE HOMES 2,898 2,958 2,998 3,038 3,078 3,118 3,158
TOTAL 2,938 2,978 3,018 3,058 3,098 3,138 3,178
PERCENT GROWTH 2.8% 1.4% 1.3% 1.3% 1.3% 1.3% 1.3%
NEW BUILD DENSITY 40 40 40 40 40 40 40
AVERAGE DENSITY 32 32 32 32 32 32 32
BEGINNING BASIC 1,922 1,973 2,000 2,027 2,053 2,080 2,107
NEW BASIC 51 27 27 27 27 27 27
AVERAGE BASIC 1,947 1,986 2,013 2,040 2,067 2,094 2,121
TOTAL 1,973 2,000 2,027 2,053 2,080 2,107 2,134
PENETRATION 67.1% 67.1% 67.1% 67.1% 67.1% 67.1% 67.1%
EXPANDED BASIC 1,820 1,866 1,892 1,917 1,942 1,968 1,993
NEW EXPANDED 46 25 25 25 25 25 25
AVERAGE EXPANDED 1,843 1,879 1,904 1,930 1,955 1,981 2,006
TOTAL 1,866 1,892 1,917 1,942 1,968 1,993 2,019
PENETRATION 94.6% 94.6% 94.6% 94.6% 94.6% 94.6% 94.6%
BEGINNING PAY 839 851 863 875 886 898 909
NEW PAY 12 12 12 12 12 12 12
AVERAGE PAY 845 857 869 880 892 903 915
TOTAL 851 863 875 886 898 909 921
PENETRATION 43.2% 43.2% 43.2% 43.2% 43.2% 43.2% 43.2%
BEGINNING CONVERTERS 931 956 969 982 995 1,008 1,021
NEW CONVERTERS 25 13 13 13 13 13 13
AVERAGE CONVERTERS 943 962 975 988 1,001 1,014 1,027
TOTAL 956 969 982 995 1,008 1,021 1,034
PENETRATION 48.4% 48.4% 48.4% 48.4% 48.4% 48.4% 48.4%
BEGINNING REMOTES 802 823 834 846 857 868 879
NEW REMOTES 21 11 11 11 11 11 11
AVERAGE REMOTES 813 829 840 851 862 874 885
TOTAL 823 834 846 857 868 879 890
PENETRATION 41.7% 41.7% 41.7% 41.7% 41.7% 41.7% 41.7%
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 46
EXHIBIT A-3
- ---------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
CENTREVILLE, MARYLAND
AS OF DECEMBER 31, 1996
- ---------------------------------------------
- ---------------------------------------------
CABLE TELEVISION MILES, HOMES PASSED, SUBSCRIBERS
- ---------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
BEGINNING MILES 649.8
NEW MILES 5.0 5.0 5.0 5.0 5.0 5.0 5.0
TOTAL 654.8 659.8 664.8 669.8 674.8 679.8 684.8
PERCENT GROWTH 0.77% 0.76% 0.76% 0.75% 0.75% 0.74% 0.74%
BEGINNING HOMES 23,857
NEW HOMES 300 300 300 300 300 300 300
AVERAGE HOMES 24,007 24,307 24,607 24,907 25,207 25,507 25,807
TOTAL 24,157 24,457 24,757 25,057 25,357 25,657 25,957
PERCENT GROWTH 1.3% 1.2% 1.2% 1.2% 1.2% 1.2% 1.2%
NEW BUILD DENSITY 60 60 60 60 60 60 60
AVERAGE DENSITY 37 37 37 37 38 38 38
BEGINNING BASIC 12,325 12,722 13,002 13,409 13,822 14,621 15,051
NEW BASIC 397 280 407 413 799 430 306
AVERAGE BASIC 12,523 12,862 13,205 13,615 14,222 14,836 15,204
TOTAL 12,722 13,002 13,409 13,822 14,621 15,051 15,357
PENETRATION 52.7% 53.2% 54.2% 55.2% 57.7% 58.7% 59.2%
EXPANDED BASIC 11,863 12,245 12,514 12,906 13,304 14,073 14,487
NEW EXPANDED 382 270 392 398 769 413 294
AVERAGE EXPANDED 12,054 12,380 12,710 13,105 13,689 14,280 14,634
TOTAL 12,245 12,514 12,906 13,304 14,073 14,487 14,781
PENETRATION 96.3% 96.3% 96.3% 96.3% 96.3% 96.3% 96.3%
BEGINNING PAY 7,440 7,552 7,719 7,960 8,205 8,680 8,935
NEW PAY 112 166 242 245 475 255 182
AVERAGE PAY 7,496 7,635 7,839 8,083 8,443 8,807 9,026
TOTAL 7,552 7,719 7,960 8,205 8,680 8,935 9,117
PENETRATION 59.4% 59.4% 59.4% 59.4% 59.4% 59.4% 59.4%
BEGINNING CONVERTERS 1,838 1,897 1,939 2,000 2,061 2,180 2,245
NEW CONVERTERS 59 42 61 62 119 64 46
AVERAGE CONVERTERS 1,868 1,918 1,969 2,030 2,121 2,212 2,267
TOTAL 1,897 1,939 2,000 2,061 2,180 2,245 2,290
PENETRATION 14.9% 14.9% 14.9% 14.9% 14.9% 14.9% 14.9%
BEGINNING REMOTES 681 703 718 741 764 808 832
NEW REMOTES 22 15 22 23 44 24 17
AVERAGE REMOTES 692 711 730 752 786 820 840
TOTAL 703 718 741 764 808 832 849
PENETRATION 5.5% 5.5% 5.5% 5.5% 5.5% 5.5% 5.5%
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 47
EXHIBIT A-4
- --------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
REDMOND, OREGON
AS OF DECEMBER 31, 1996
- --------------------------------------
- --------------------------------------
CABLE TELEVISION MILES, HOMES PASSED, SUBSCRIBERS
- --------------------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
BEGINNING MILES 170.0
NEW MILES 29.0 6.0 6.0 6.0 6.0 6.0 6.0
TOTAL 199.0 205.0 211.0 217.0 223.0 229.0 235.0
PERCENT GROWTH 17.06% 3.02% 2.93% 2.84% 2.76% 2.69% 2.62%
BEGINNING HOMES 7,252
NEW HOMES 2,310 300 300 300 300 300 300
AVERAGE HOMES 8,407 9,712 10,012 10,312 10,612 10,912 11,212
TOTAL 9,562 9,862 10,162 10,462 10,762 11,062 11,362
PERCENT GROWTH 31.9% 3.1% 3.0% 3.0% 2.9% 2.8% 2.7%
NEW BUILD DENSITY 80 50 50 50 50 50 50
AVERAGE DENSITY 48 48 48 48 48 48 48
BEGINNING BASIC 3,516 4,253 4,190 4,216 4,288 4,411 4,534
NEW BASIC 737 (64) 26 72 123 123 123
AVERAGE BASIC 3,885 4,222 4,203 4,252 4,349 4,472 4,595
TOTAL 4,253 4,190 4,216 4,288 4,411 4,534 4,657
PENETRATION 44.5% 42.5% 41.5% 41.0% 41.0% 41.0% 41.0%
EXPANDED BASIC 2,847 3,380 3,288 3,287 3,343 3,439 3,535
NEW EXPANDED 533 (93) (1) 56 96 96 96
AVERAGE EXPANDED 3,114 3,334 3,287 3,315 3,391 3,487 3,583
TOTAL 3,380 3,288 3,287 3,343 3,439 3,535 3,631
PENETRATION 79.5% 78.5% 78.0% 78.0% 78.0% 78.0% 78.0%
BEGINNING PAY 777 897 863 868 883 909 934
NEW PAY 120 (34) 5 15 25 25 25
AVERAGE PAY 837 880 866 876 896 921 947
TOTAL 897 863 868 883 909 934 959
PENETRATION 21.1% 20.6% 20.6% 20.6% 20.6% 20.6% 20.6%
BEGINNING CONVERTERS 1,050 1,270 1,251 1,259 1,280 1,317 1,354
NEW CONVERTERS 220 (19) 8 22 37 37 37
AVERAGE CONVERTERS 1,160 1,261 1,255 1,270 1,299 1,336 1,372
TOTAL 1,270 1,251 1,259 1,280 1,317 1,354 1,391
PENETRATION 29.9% 29.9% 29.9% 29.9% 29.9% 29.9% 29.9%
BEGINNING REMOTES 870 1,052 1,037 1,043 1,061 1,091 1,122
NEW REMOTES 182 (16) 6 18 30 30 30
AVERAGE REMOTES 961 1,045 1,040 1,052 1,076 1,107 1,137
TOTAL 1,052 1,037 1,043 1,061 1,091 1,122 1,152
PENETRATION 24.7% 24.7% 24.7% 24.7% 24.7% 24.7% 24.7%
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 48
EXHIBIT A-5
- ------------------------------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SOMERSET, KY
AS OF DECEMBER 31, 1996
- ------------------------------------------------------------------
- ------------------------------------------------------------------
CABLE TELEVISION MILES, HOMES PASSED, SUBSCRIBERS
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
BEGINNING MILES 834.5
NEW MILES 1.9 8.5 8.5 8.5 8.5 8.5 8.5
TOTAL 836.4 844.9 853.4 861.9 870.4 878.9 887.5
PERCENT GROWTH 0.23% 1.02% 1.01% 1.00% 0.99% 0.98% 0.97%
BEGINNING HOMES 22,060
NEW HOMES 50 225 225 225 225 225 225
AVERAGE HOMES 22,085 22,223 22,448 22,673 22,898 23,123 23,348
TOTAL 22,110 22,335 22,560 22,785 23,010 23,235 23,460
PERCENT GROWTH 0.2% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
NEW BUILD DENSITY 26 26 26 26 26 26 26
AVERAGE DENSITY 26 26 26 26 26 26 26
BEGINNING BASIC 19,296 19,384 19,626 19,869 20,135 20,449 20,696
NEW BASIC 88 242 243 267 314 246 200
AVERAGE BASIC 19,340 19,505 19,747 20,002 20,292 20,572 20,796
TOTAL 19,384 19,626 19,869 20,135 20,449 20,696 20,896
PENETRATION 87.7% 87.9% 88.1% 88.4% 88.9% 89.1% 89.1%
EXPANDED BASIC 18,823 18,870 19,106 19,342 19,601 19,907 20,147
NEW EXPANDED 47 236 236 259 306 240 195
AVERAGE EXPANDED 18,847 18,988 19,224 19,472 19,754 20,027 20,244
TOTAL 18,870 19,106 19,342 19,601 19,907 20,147 20,342
PENETRATION 97.3% 97.3% 97.3% 97.3% 97.3% 97.3% 97.3%
BEGINNING PAY 3,914 3,874 3,922 3,971 4,084 4,209 4,281
NEW PAY (40) 48 49 114 125 71 41
AVERAGE PAY 3,894 3,898 3,946 4,027 4,147 4,245 4,301
TOTAL 3,874 3,922 3,971 4,084 4,209 4,281 4,322
PENETRATION 20.0% 20.0% 20.0% 20.3% 20.6% 20.7% 20.7%
BEGINNING CONVERTERS 5,119 5,142 5,207 5,271 7,355 8,492 9,629
NEW CONVERTERS 23 64 64 2,084 1,137 1,137 1,138
AVERAGE CONVERTERS 5,131 5,174 5,239 6,313 7,924 9,061 10,198
TOTAL 5,142 5,207 5,271 7,355 8,492 9,629 10,767
PENETRATION 26.5% 26.5% 26.5% 36.5% 41.5% 46.5% 51.5%
BEGINNING REMOTES 4,622 4,643 4,701 4,759 6,837 7,966 9,096
NEW REMOTES 21 58 58 2077 1129 1131 1133
AVERAGE REMOTES 4,633 4,672 4,730 5,798 7,401 8,531 9,663
TOTAL 4,643 4,701 4,759 6,837 7,966 9,096 10,229
PENETRATION 24.0% 24.0% 24.0% 34.0% 39.0% 44.0% 49.0%
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 49
EXHIBIT B-1
- ------------------------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
BURKE COUNTY, NC
AS OF DECEMBER 31, 1996
- ------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------
SERVICE RATES
- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CURRENT RATES
BASIC (AVG.) $16.96
EXPANDED BASIC (AVG.) $6.20
PAY (AVG) $7.51
CONVERTERS $2.50
REMOTES $0.03
INSTALLATION $45.00
RECONNECT $45.00
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ----
RATE INCREASES
BASIC 0.0% 4.0% 4.0% 4.0% 6.0% 4.0% 4.0%
EXPANDED BASIC 0.0% 4.0% 4.0% 4.0% 6.0% 4.0% 4.0%
PAY 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
CONVERTERS 0.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
REMOTES 0.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
INSTALLATION 0.0% 4.0% 0.0% 4.0% 0.0% 4.0% 0.0%
RECONNECT 0.0% 4.0% 0.0% 4.0% 0.0% 4.0% 0.0%
AVERAGE RATES
BASIC $16.96 $17.64 $18.35 $19.08 $20.23 $21.04 $21.88
EXPANDED BASIC $6.20 $6.45 $6.70 $6.97 $7.39 $7.69 $7.99
PAY $7.51 $7.51 $7.51 $7.51 $7.51 $7.51 $7.51
CONVERTERS $2.50 $2.60 $2.70 $2.81 $2.92 $3.04 $3.16
REMOTES $0.03 $0.03 $0.03 $0.04 $0.04 $0.04 $0.04
INSTALLATION $45.00 $46.80 $46.80 $48.67 $48.67 $50.62 $50.62
RECONNECT $45.00 $46.80 $46.80 $48.67 $48.67 $50.62 $50.62
BASIC CHURN RATE (EST) 36% 36% 36% 36% 36% 36% 36%
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 50
EXHIBIT B-2
- -------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
CALIFORNIA CITY, CALIFORNIA
AS OF DECEMBER 31, 1996
- -------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------
SERVICE RATES
- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CURRENT RATES
BASIC (AVG.) $15.77
EXPANDED BASIC (AVG.) $6.00
PAY (AVG.) $8.14
CONVERTERS $4.46
REMOTES $0.34
INSTALLATION $45.00
RECONNECT $45.00
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ----
RATE INCREASES
BASIC 0.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
EXPANDED BASIC 0.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
PAY 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
CONVERTERS 0.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
REMOTES 0.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
INSTALLATION 0.0% 4.0% 0.0% 4.0% 0.0% 4.0% 0.0%
RECONNECT 0.0% 4.0% 0.0% 4.0% 0.0% 4.0% 0.0%
AVERAGE RATES
BASIC $15.77 $16.40 $17.05 $17.74 $18.45 $19.18 $19.95
EXPANDED BASIC $6.00 $6.24 $6.49 $6.75 $7.02 $7.30 $7.60
PAY $8.14 $8.14 $8.14 $8.14 $8.14 $8.14 $8.14
CONVERTERS $4.46 $4.64 $4.83 $5.02 $5.22 $5.43 $5.65
REMOTES $0.34 $0.35 $0.37 $0.38 $0.40 $0.41 $0.43
INSTALLATION $45.00 $46.80 $46.80 $48.67 $48.67 $50.62 $50.62
RECONNECT $45.00 $46.80 $46.80 $48.67 $48.67 $50.62 $50.62
BASIC CHURN RATE (EST) 24% 24% 24% 24% 24% 24% 24%
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 51
EXHIBIT B-3
- -------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
CENTREVILLE, MARYLAND
AS OF DECEMBER 31, 1996
- -------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------
SERVICE RATES
- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CURRENT RATES
BASIC (AVG.) $20.60
EXPANDED BASIC (AVG.) $3.52
PAY (AVG.) $8.54
CONVERTERS $1.99
REMOTES $0.68
INSTALLATION $45.00
RECONNECT $45.00
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ----
RATE INCREASES
BASIC 0.0% 4.0% 4.0% 5.0% 7.0% 4.0% 4.0%
EXPANDED BASIC 0.0% 4.0% 4.0% 5.0% 7.0% 4.0% 4.0%
PAY 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
CONVERTERS 0.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
REMOTES 0.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
INSTALLATION 0.0% 4.0% 0.0% 4.0% 0.0% 4.0% 0.0%
RECONNECT 0.0% 4.0% 0.0% 4.0% 0.0% 4.0% 0.0%
AVERAGE RATES
BASIC $20.60 $21.43 $22.29 $23.40 $25.04 $26.04 $27.08
EXPANDED BASIC $3.52 $3.67 $3.81 $4.00 $4.28 $4.45 $4.63
PAY $8.54 $8.54 $8.54 $8.54 $8.54 $8.54 $8.54
CONVERTERS $1.99 $2.07 $2.16 $2.24 $2.33 $2.43 $2.52
REMOTES $0.68 $0.71 $0.73 $0.76 $0.79 $0.83 $0.86
INSTALLATION $45.00 $46.80 $46.80 $48.67 $48.67 $50.62 $50.62
RECONNECT $45.00 $46.80 $46.80 $48.67 $48.67 $50.62 $50.62
BASIC CHURN RATE (EST) 32% 32% 32% 32% 32% 32% 32%
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 52
EXHIBIT B-4
- -------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
REDMOND, OREGON
AS OF DECEMBER 31, 1996
- -------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------
SERVICE RATES
- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CURRENT RATES
BASIC (AVG.) $22.23
EXPANDED BASIC (AVG.) $2.05
PAY (AVG.) $6.16
CONVERTERS $2.57
REMOTES $0.22
INSTALLATION $45.00
RECONNECT $45.00
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ----
RATE INCREASES
BASIC 0.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
EXPANDED BASIC 0.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
PAY 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
CONVERTERS 0.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
REMOTES 0.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
INSTALLATION 0.0% 4.0% 0.0% 4.0% 0.0% 4.0% 0.0%
RECONNECT 0.0% 4.0% 0.0% 4.0% 0.0% 4.0% 0.0%
AVERAGE RATES
BASIC $22.23 $23.12 $24.04 $25.00 $26.00 $27.04 $28.12
EXPANDED BASIC $2.05 $2.14 $2.22 $2.31 $2.40 $2.50 $2.60
PAY $6.16 $6.16 $6.16 $6.16 $6.16 $6.16 $6.16
CONVERTERS $2.57 $2.67 $2.78 $2.89 $3.00 $3.13 $3.25
REMOTES $0.22 $0.23 $0.24 $0.25 $0.26 $0.27 $0.28
INSTALLATION $45.00 $46.80 $46.80 $48.67 $48.67 $50.62 $50.62
RECONNECT $45.00 $46.80 $46.80 $48.67 $48.67 $50.62 $50.62
BASIC CHURN RATE (EST) 31% 31% 31% 31% 31% 31% 31%
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 53
EXHIBIT B-5
- -------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SOMERSET, KY
AS OF DECEMBER 31, 1996
- -------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------
SERVICE RATES
- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CURRENT RATES
BASIC (AVG.) $19.24
EXPANDED BASIC (AVG.) $2.37
PAY (AVG.) $8.71
CONVERTERS $1.58
REMOTES $0.33
INSTALLATION $45.00
RECONNECT $45.00
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ---- ----
RATE INCREASES
BASIC 0.0% 4.0% 4.0% 4.0% 7.0% 4.0% 4.0%
EXPANDED BASIC 0.0% 4.0% 4.0% 4.0% 7.0% 4.0% 4.0%
PAY 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
CONVERTERS 0.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
REMOTES 0.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
INSTALLATION 0.0% 4.0% 0.0% 4.0% 0.0% 4.0% 0.0%
RECONNECT 0.0% 4.0% 0.0% 4.0% 0.0% 4.0% 0.0%
AVERAGE RATES
BASIC $19.24 $20.01 $20.81 $21.64 $23.16 $24.08 $25.05
EXPANDED BASIC $2.37 $2.46 $2.56 $2.66 $2.85 $2.96 $3.08
PAY $8.71 $8.71 $8.71 $8.71 $8.71 $8.71 $8.71
CONVERTERS $1.58 $1.65 $1.71 $1.78 $1.85 $1.93 $2.00
REMOTES $0.33 $0.35 $0.36 $0.38 $0.39 $0.41 $0.42
INSTALLATION $45.00 $46.80 $46.80 $48.67 $48.67 $50.62 $50.62
RECONNECT $45.00 $46.80 $46.80 $48.67 $48.67 $50.62 $50.62
BASIC CHURN RATE (EST) 26% 26% 26% 26% 26% 26% 26%
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 54
EXHIBIT C-1
- ------------------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
BURKE COUNTY, NC
AS OF DECEMBER 31, 1996
- ------------------------------------------------------
- ------------------------------------------------------
REVENUE, EXPENSE, OPERATING INCOME
- ------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000
----------- ----------- ----------- -----------
REVENUE
<S> <C> <C> <C> <C>
BASIC $ 2,129,647 $ 2,201,800 $ 2,286,438 $ 2,418,828
EXPANDED BASIC 671,189 691,908 718,505 760,108
PAY 429,170 419,594 416,623 423,795
CONVERTERS 457,592 473,095 491,281 519,728
REMOTES 4,155 4,295 4,460 4,719
INSTALLATIONS 4,708 4,867 4,860 18,197
RECONNECT 84,741 87,612 87,481 92,546
ADDITIONAL TIER 988,460 1,027,999 1,069,119 1,111,883
ADVERTISING 175,000 201,250 231,438 277,725
PAY PER VIEW 110,000 115,500 121,275 133,403
MISCELLANEOUS 212,296 219,573 228,122 241,959
----------- ----------- ----------- -----------
TOTAL $ 5,266,958 $ 5,447,493 $ 5,659,602 $ 6,002,891
REVENUE GROWTH 0 3.31% 3.75% 5.72%
REVENUE PER SUB./MONTH $ 41.95 $ 43.65 $ 45.42 $ 47.36
EXPENSES
TECHNICAL & OPERATIONS 1,003,124 1,039,779 1,079,648 1,129,499
GENERAL & ADMINISTRATIVE 487,195 500,191 515,451 539,743
SALES & MARKETING 95,157 103,364 112,879 127,738
PROGRAMMING 841,520 852,083 869,333 907,390
----------- ----------- ----------- -----------
TOTAL EXPENSE $ 2,426,995 $ 2,495,417 $ 2,577,311 $ 2,704,371
OPERATING INCOME $ 2,839,963 $ 2,952,076 $ 3,082,291 $ 3,298,520
OPERATING MARGIN 53.9% 54.2% 54.5% 54.9 %
OPERTAING INCOME GROWTH 0 3.80% 4.22% 6.56%
OPERATING INCOME/SUB./MONTH $ 22.62 $ 23.65 $ 24.73 $ 26.02
YEAR ENDING DECEMBER 31, 2001 2002 2003 TOTAL
----------- ----------- ----------- -----------
REVENUE
BASIC $ 2,643,275 $ 2,807,437 $ 2,954,892 $17,442,318
EXPANDED BASIC 830,640 882,227 928,564 5,483,141
PAY 436,905 446,192 451,565 3,023,844
CONVERTERS 557,238 591,845 622,931 3,713,710
REMOTES 5,059 5,373 5,656 33,717
INSTALLATIONS 13,613 9,277 4,281 59,804
RECONNECT 95,409 101,334 102,555 651,678
ADDITIONAL TIER 1,156,359 1,202,613 1,250,717 7,807,150
ADVERTISING 347,156 373,193 391,853 1,997,614
PAY PER VIEW 146,743 157,748 165,636 950,305
MISCELLANEOUS 261,761 276,244 288,903 1,728,858
----------- ----------- ----------- -----------
TOTAL $ 6,494,157 $ 6,853,484 $ 7,167,554 $42,892,138
REVENUE GROWTH 7.56% 5.24% 4.38%
REVENUE PER SUB./MONTH $ 49.69 $ 51.35 $ 53.07
EXPENSES
TECHNICAL & OPERATIONS 1,189,540 1,244,034 1,296,342 $ 7,981,965
GENERAL & ADMINISTRATIVE 572,314 600,444 625,154 3,840,493
SALES & MARKETING 149,682 159,606 167,135 915,562
PROGRAMMING 989,323 1,035,074 1,071,970 6,566,693
----------- ----------- ----------- -----------
TOTAL EXPENSE $ 2,900,859 $ 3,039,158 $ 3,160,602 $19,304,713
OPERATING INCOME $ 3,593,298 $ 3,814,326 $ 4,006,951 $23,587,425
OPERATING MARGIN 55.3% 55.7% 55.9%
OPERTAING INCOME GROWTH 8.20% 5.79% 4.81%
OPERATING INCOME/SUB./MONTH $ 27.50 $ 28.58 $ 29.67
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 55
EXHIBIT C-2
- --------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
CALIFORNIA CITY, CALIFORNIA
AS OF DECEMBER 31, 1996
- --------------------------------------------
- --------------------------------------------
REVENUE, EXPENSE, OPERATING INCOME
- --------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUE
BASIC $ 368,460 $ 390,845 $ 411,975 $ 434,171
EXPANDED BASIC 132,776 140,769 148,379 156,373
PAY 82,514 83,682 84,814 85,946
CONVERTERS 50,520 53,589 56,486 59,529
REMOTES 3,307 3,508 3,698 3,897
INSTALLATIONS 2,289 1,257 1,257 1,307
RECONNECT 14,912 15,818 16,032 16,895
ADDITIONAL TIER 62,494 65,878 69,434 73,168
ADVERTISING 0 0 0 0
FCC USER FEE PASS THROUGH 995 1,055 1,112 1,172
MISCELLANEOUS 35,913 37,820 39,659 41,623
---------- ---------- ---------- ----------
TOTAL $ 754,179 $ 794,221 $ 832,846 $ 874,082
REVENUE GROWTH 0 5.04% 4.64% 4.72%
REVENUE PER SUB./MONTH $ 32.27 $ 33.32 $ 34.48 $ 35.71
EXPENSES
TECHNICAL & OPERATIONS 129,495 135,213 140,972 146,981
GENERAL & ADMINISTRATIVE 84,317 88,017 91,527 95,182
SALES & MARKETING 16,465 17,297 18,057 18,847
PROGRAMMING 138,272 143,761 148,803 154,023
---------- ---------- ---------- ----------
TOTAL EXPENSE $ 368,549 $ 384,288 $ 399,359 $ 415,034
OPERATING INCOME $ 385,630 $ 409,933 $ 433,487 $ 459,048
OPERATING MARGIN 51.1% 51.6% 52.0% 52.5%
OPERATING INCOME GROWTH 0 5.93% 5.43% 5.57%
OPERATING INCOME/SUB./MONTH $ 16.50 $ 17.20 $ 17.94 $ 18.75
YEAR ENDING DECEMBER 31, 2001 2002 2003 TOTAL
---------- ---------- ---------- ----------
REVENUE
BASIC $ 457,483 $ 481,965 $ 507,674 $3,052,572
EXPANDED BASIC 164,770 173,587 182,847 1,099,501
PAY 87,077 88,209 89,340 601,583
CONVERTERS 62,726 66,083 69,607 418,540
REMOTES 4,106 4,326 4,557 27,399
INSTALLATIONS 1,307 1,360 1,360 10,137
RECONNECT 17,118 18,034 18,265 117,073
ADDITIONAL TIER 77,090 81,209 85,534 514,807
ADVERTISING 0 0 0 0
FCC USER FEE PASS THROUGH 1,235 1,301 1,371 8,242
MISCELLANEOUS 43,646 45,804 48,028 292,493
---------- ---------- ---------- ----------
TOTAL $ 916,557 $ 961,877 $1,008,582 $6,142,345
REVENUE GROWTH 4.63% 4.71% 4.63%
REVENUE PER SUB./MONTH $ 36.95 $ 38.28 $ 39.63
EXPENSES
TECHNICAL & OPERATIONS 153,211 159,711 166,450 $1,032,031
GENERAL & ADMINISTRATIVE 98,968 102,911 106,993 667,915
SALES & MARKETING 19,668 20,521 21,408 132,264
PROGRAMMING 159,427 165,020 170,811 1,080,118
---------- ---------- ---------- ----------
TOTAL EXPENSE $ 431,273 $ 448,163 $ 465,663 $2,912,329
OPERATING INCOME $ 485,284 $ 513,714 $ 542,920 $3,230,016
OPERATING MARGIN 52.9% 53.4% 53.8%
OPERATING INCOME GROWTH 5.41% 5.53% 5.38%
OPERATING INCOME/SUB./MONTH $ 19.57 $ 20.45 $ 21.34
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 56
EXHIBIT C-3
- --------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
CENTREVILLE, MARYLAND
AS OF DECEMBER 31, 1996
- --------------------------------------------
- --------------------------------------------
REVENUE, EXPENSE, OPERATING INCOME
- --------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE
BASIC $ 3,096,364 $ 3,307,238 $ 3,531,431 $ 3,823,145
EXPANDED BASIC 509,840 544,562 581,477 629,510
PAY 768,518 782,797 803,713 828,670
CONVERTERS 44,700 47,744 50,980 54,666
REMOTES 5,633 6,017 6,425 6,889
INSTALLATIONS 17,845 13,117 19,050 20,104
RECONNECT 53,966 57,642 59,182 63,460
ADDITIONAL TIER 771,011 811,809 854,638 908,244
ADVERTISING 140,000 154,000 169,400 186,340
FRANCHISE PASS THROUGH 117,662 125,675 134,194 145,279
MISCELLANEOUS 298,379 315,932 335,367 359,981
----------- ----------- ----------- -----------
TOTAL $ 5,823,918 $ 6,166,532 $ 6,545,857 $ 7,026,289
REVENUE GROWTH 0 5.56% 5.79% 6.84%
REVENUE PER SUB./MONTH $ 38.75 $ 39.95 $ 41.31 $ 43.00
EXPENSES
TECHNICAL & OPERATIONS 1,197,944 1,252,330 1,310,016 1,374,835
GENERAL & ADMINISTRATIVE 410,748 432,759 456,072 482,920
SALES & MARKETING 177,010 186,807 196,759 212,479
PROGRAMMING 1,231,498 1,287,019 1,348,501 1,447,919
----------- ----------- ----------- -----------
TOTAL EXPENSE $ 3,017,200 $ 3,158,916 $ 3,311,348 $ 3,518,153
OPERATING INCOME $ 2,806,718 $ 3,007,617 $ 3,234,510 $ 3,508,136
OPERATING MARGIN 48.2% 48.8% 49.4% 49.9%
OPERATING INCOME GROWTH 0 6.68% 7.01% 7.80%
OPERATING INCOME/SUB./MONTH $ 18.68 $ 19.49 $ 20.41 $ 21.47
YEAR ENDING DECEMBER 31, 2001 2002 2003 TOTAL
----------- ----------- ----------- -----------
REVENUE
BASIC $ 4,272,908 $ 4,635,832 $ 4,940,744 $27,607,661
EXPANDED BASIC 703,567 763,325 813,531 4,545,814
PAY 865,567 902,966 925,343 5,877,573
CONVERTERS 59,384 64,428 68,666 390,568
REMOTES 7,484 8,119 8,653 49,220
INSTALLATIONS 38,909 21,744 15,478 146,247
RECONNECT 66,286 71,916 73,698 446,150
ADDITIONAL TIER 992,648 1,044,568 1,099,053 6,481,971
ADVERTISING 204,974 225,471 242,382 1,322,567
FRANCHISE PASS THROUGH 162,371 176,162 187,748 1,049,091
MISCELLANEOUS 398,201 427,385 452,266 2,587,510
----------- ----------- ----------- -----------
TOTAL $ 7,772,298 $ 8,341,915 $ 8,827,562 $50,504,372
REVENUE GROWTH 9.60% 6.83% 5.50%
REVENUE PER SUB./MONTH $ 45.54 $ 46.86 $ 48.38
EXPENSES
TECHNICAL & OPERATIONS 1,456,425 1,532,216 1,601,974 $ 9,725,741
GENERAL & ADMINISTRATIVE 518,524 553,812 582,879 3,437,714
SALES & MARKETING 244,390 250,737 262,115 1,530,297
PROGRAMMING 1,618,577 1,725,068 1,806,404 10,464,988
----------- ----------- ----------- -----------
TOTAL EXPENSE $ 3,837,916 $ 4,061,834 $ 4,253,372 $25,158,739
OPERATING INCOME $ 3,934,382 $ 4,280,081 $ 4,574,189 $25,345,633
OPERATING MARGIN 50.6% 51.3% 51.8%
OPERATING INCOME GROWTH 10.83% 8.08% 6.43%
OPERATING INCOME/SUB./MONTH $ 23.05 $ 24.04 $ 25.07
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 57
EXHIBIT C-4
- --------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
REDMOND, OREGON
AS OF DECEMBER 31, 1996
- --------------------------------------------
- --------------------------------------------
REVENUE, EXPENSE, OPERATING INCOME
- --------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000
<S> <C> <C> <C> <C>
REVENUE
BASIC $ 1,036,152 $ 1,171,036 $ 1,212,402 $ 1,275,595
EXPANDED BASIC 76,710 85,425 87,598 91,870
PAY 61,857 65,036 63,961 64,707
CONVERTERS 35,758 40,413 41,841 44,021
REMOTES 2,546 2,877 2,979 3,134
INSTALLATIONS 8,297 1,976 1,967 2,069
RECONNECT 8,038 9,085 9,044 9,515
ADDITIONAL TIER 301,290 324,739 348,002 372,607
ADVERTISING 70,000 73,500 77,175 81,034
FCC USER FEE PASS THROUGH 2,072 2,342 2,425 2,551
MISCELLANEOUS 80,136 88,821 92,370 97,355
----------- ----------- ----------- -----------
TOTAL $ 1,682,856 $ 1,865,250 $ 1,939,763 $ 2,044,458
REVENUE GROWTH 0 9.78% 3.84% 5.12%
REVENUE PER SUB./MONTH $ 36.10 $ 36.82 $ 38.46 $ 40.07
EXPENSES
TECHNICAL & OPERATIONS 296,082 321,208 336,230 354,236
GENERAL & ADMINISTRATIVE 224,348 245,971 252,943 263,286
SALES & MARKETING 125,315 135,900 140,977 147,454
PROGRAMMING 212,954 235,609 239,801 248,602
----------- ----------- ----------- -----------
TOTAL EXPENSE $ 858,699 $ 938,687 $ 969,951 $ 1,013,578
OPERATING INCOME $ 824,157 $ 926,563 $ 969,812 $ 1,030,880
OPERATING MARGIN 49.0% 49.7% 50.0% 50.4%
OPERTAING INCOME GROWTH 0 11.05% 4.46% 5.92%
OPERATING INCOME/SUB./MONTH $ 17.68 $ 18.29 $ 19.23 $ 20.21
YEAR ENDING DECEMBER 31, 2001 2002 2003 TOTAL
----------- ----------- -----------
REVENUE
BASIC $ 1,357,055 $ 1,451,236 $ 1,550,780 $ 9,054,256
EXPANDED BASIC 97,737 104,520 111,689 655,547
PAY 66,191 68,062 69,934 459,748
CONVERTERS 46,833 50,083 53,518 312,467
REMOTES 3,334 3,565 3,810 22,245
INSTALLATIONS 4,488 4,668 4,668 28,132
RECONNECT 9,733 10,409 10,695 66,520
ADDITIONAL TIER 398,623 426,125 455,188 2,626,575
ADVERTISING 85,085 89,340 93,807 569,941
FCC USER FEE PASS THROUGH 2,714 2,902 3,102 18,109
MISCELLANEOUS 103,590 110,545 117,859 690,677
----------- ----------- ----------- -----------
TOTAL $ 2,175,384 $ 2,321,455 $ 2,475,049 $14,504,216
REVENUE GROWTH 6.02% 6.29% 6.21%
REVENUE PER SUB./MONTH $ 41.68 $ 43.26 $ 44.89
EXPENSES
TECHNICAL & OPERATIONS 374,801 397,166 420,556 $ 2,500,279
GENERAL & ADMINISTRATIVE 276,384 291,258 306,789 1,860,979
SALES & MARKETING 155,097 163,568 172,438 1,040,749
PROGRAMMING 260,634 274,704 289,350 1,761,653
----------- ----------- ----------- -----------
TOTAL EXPENSE $ 1,066,915 $ 1,126,696 $ 1,189,133 $ 7,163,660
OPERATING INCOME $ 1,108,469 $ 1,194,759 $ 1,285,916 $ 7,340,556
OPERATING MARGIN 51.0% 51.5% 52.0%
OPERTAING INCOME GROWTH 7.00% 7.22% 7.09%
OPERATING INCOME/SUB./MONTH $ 21.24 $ 22.26 $ 23.32
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 58
EXHIBIT C-5
- --------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SOMERSET, KY
AS OF DECEMBER 31, 1996
- --------------------------------------------
- --------------------------------------------
REVENUE, EXPENSE, OPERATING INCOME
- --------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE
BASIC $ 4,465,358 $ 4,683,579 $ 4,931,450 $ 5,194,851
EXPANDED BASIC 534,919 560,486 590,149 621,671
PAY 406,842 407,262 412,323 420,796
CONVERTERS 97,518 102,283 107,697 134,974
REMOTES 18,570 19,478 20,509 26,144
INSTALLATIONS 3,958 11,322 11,364 12,972
RECONNECT 100,394 105,300 106,609 112,303
ADDITIONAL TIER 1,199,773 1,260,462 1,324,086 1,390,783
ADVERTISING 385,000 442,750 487,025 535,728
PAY PER VIEW 12,000 13,200 19,800 29,700
MISCELLANEOUS 270,912 285,230 300,413 317,997
----------- ----------- ----------- -----------
TOTAL $ 7,495,245 $ 7,891,352 $ 8,311,425 $ 8,797,917
REVENUE GROWTH 0 5.02% 5.05% 5.53%
REVENUE PER SUB./MONTH $ 32.30 $ 33.72 $ 35.07 $ 36.65
EXPENSES
TECHNICAL & OPERATIONS 1,672,516 1,743,696 1,819,082 1,899,684
GENERAL & ADMINISTRATIVE 637,808 663,156 691,353 721,641
SALES & MARKETING 264,171 291,758 314,502 339,302
PROGRAMMING 1,201,237 1,239,936 1,289,726 1,345,591
----------- ----------- ----------- -----------
TOTAL EXPENSE $ 3,775,732 $ 3,938,547 $ 4,114,663 $ 4,306,218
OPERATING INCOME $ 3,719,513 $ 3,952,805 $ 4,196,762 $ 4,491,700
OPERATING MARGIN 49.6% 50.1% 50.5% 51.1%
OPERATING INCOME GROWTH 0 5.90% 5.81% 6.57%
OPERATING INCOME/SUB./MONTH $ 16.03 $ 16.89 $ 17.71 $ 18.71
YEAR ENDING DECEMBER 31, 2001 2002 2003 TOTAL
----------- ----------- -----------
REVENUE
BASIC $ 5,639,136 $ 5,945,670 $ 6,250,651 $37,110,694
EXPANDED BASIC 674,838 711,522 748,019 4,441,604
PAY 433,265 443,527 449,424 2,973,439
CONVERTERS 176,186 209,529 245,269 1,073,456
REMOTES 34,708 41,607 49,012 210,026
INSTALLATIONS 15,277 12,474 10,144 77,512
RECONNECT 113,933 120,126 121,430 780,096
ADDITIONAL TIER 1,502,833 1,578,230 1,657,253 9,913,421
ADVERTISING 575,907 604,702 634,938 3,666,050
PAY PER VIEW 103,950 166,320 216,216 561,186
MISCELLANEOUS 347,626 368,764 389,338 2,280,281
----------- ----------- ----------- -----------
TOTAL $ 9,617,660 $10,202,471 $10,771,694 $63,087,764
REVENUE GROWTH 8.52% 5.73% 5.28%
REVENUE PER SUB./MONTH $ 39.50 $ 41.33 $ 43.16
EXPENSES
TECHNICAL & OPERATIONS 1,995,945 2,084,512 2,174,136 $13,389,572
GENERAL & ADMINISTRATIVE 758,533 792,716 826,171 5,091,378
SALES & MARKETING 361,073 378,387 396,130 2,345,324
PROGRAMMING 1,499,642 1,593,786 1,677,059 9,846,978
----------- ----------- ----------- -----------
TOTAL EXPENSE $ 4,615,192 $ 4,849,402 $ 5,073,497 $30,673,252
OPERATING INCOME $ 5,002,468 $ 5,353,069 $ 5,698,197 $32,414,512
OPERATING MARGIN 52.0% 52.5% 52.9%
OPERATING INCOME GROWTH 10.21% 6.55% 6.06%
OPERATING INCOME/SUB./MONTH $ 20.54 $ 21.68 $ 22.83
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 59
EXHIBIT D-1
- ------------------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
BURKE COUNTY, NC
AS OF DECEMBER 31, 1996
- ------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------
CAPITAL EXPENDITURES
- ------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000 2001 2002 2003
---------- ---------- ---------- ---------- -------- -------- --------
CAPITAL ASSUMPTIONS
NEW PLANT MILES 8.0 8.0 8.0 8.0 8.0 8.0 8.0
PLANT-AERIAL $16,000 $16,480 $16,974 $17,484 $18,008 $18,548 $19,105
PLANT-U/G $28,000 $28,840 $29,705 $30,596 $31,514 $32,460 $33,433
AERIAL PERCENTAGE 20% 20% 20% 20% 20% 20% 20%
UNDERGROUND PERCENTAGE 80% 80% 80% 80% 80% 80% 80%
AVERAGE COST PER CONVERTER $110 $113 $117 $120 $124 $128 $131
CONVERTER USE PERCENTAGE 89% 89% 89% 89% 89% 89% 89%
CONVERTER REPLACEMENT PERCENTAGE 3% 4% 5% 5% 6% 6% 6%
INSTALLATION COST/SUBSCRIBER $80 $82 $85 $87 $90 $93 $96
MISCELLANEOUS EXPENSE/SUBSCRIBER $40 $20 $21 $21 $22 $23 $23
INFLATION 0% 3% 3% 3% 3% 3% 3%
ANNUAL EXPENSE PROJECTION TOTAL
NEW PLANT - AERIAL $25,600 $26,368 $27,159 $27,974 $28,813 $29,677 $30,568 $196,159
NEW PLANT - UNDERGROUND 179,200 184,576 190,113 195,817 201,691 207,742 213,974 1,373,113
PLANT REBUILD AND UPGRADE 450,000 2,400,000 3,000,000 4,200,000 0 0 0 10,050,000
NEW CONVERTER EXPENSE 0 0 0 65,580 50,532 34,103 16,212 166,428
CONVERTER REPLACEMENT EXPENSE 50,642 68,832 88,495 91,006 116,537 123,155 128,958 667,624
INSTALLATION EXPENSE 8,369 8,570 8,814 32,683 25,184 16,996 8,080 108,696
MISCELLANEOUS CAPITAL EXPENSE 418,474 208,006 213,925 224,136 238,001 250,352 260,968 1,813,862
---------- ---------- ---------- ---------- -------- -------- -------- -----------
TOTAL $1,132,286 $2,896,352 $3,528,506 $4,837,196 $660,758 $662,026 $658,759 $14,375,882
PERCENT OF REVENUE 21.5% 53.2% 62.3% 80.6% 10.2% 9.7% 9.2%
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 60
EXHIBIT D-2
- -----------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
CALIFORNIA CITY, CALIFORNIA
AS OF DECEMBER 31, 1996
- -----------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------
CAPITAL EXPENDITURES
- -----------------------------------------------
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000 2001 2002 2003
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CAPITAL ASSUMPTIONS
NEW PLANT MILES 2.0 1.0 1.0 1.0 1.0 1.0 1.0
PLANT-AERIAL $ 16,000 $ 16,480 $ 16,974 $ 17,484 $ 18,008 $ 18,548 $ 19,105
PLANT-U/G $ 28,100 $ 28,943 $ 29,811 $ 30,706 $ 31,627 $ 32,576 $ 33,553
AERIAL PERCENTAGE 50% 50% 50% 50% 50% 50% 50%
UNDERGROUND PERCENTAGE 50% 50% 50% 50% 50% 50% 50%
AVERAGE COST PER CONVERTER $ 85 $ 88 $ 90 $ 93 $ 96 $ 99 $ 101
CONVERTER USE PERCENTAGE 26% 26% 26% 26% 26% 26% 26%
CONVERTER REPLACEMENT PERCENTAGE 10% 10% 10% 10% 10% 8% 6%
INSTALLATION COST/SUBSCRIBER $ 70 $ 72 $ 74 $ 76 $ 79 $ 81 $ 84
MISCELLANEOUS EXPENSE/SUBSCRIBER $ 50 $ 45 $ 46 $ 48 $ 49 $ 51 $ 52
INFLATION 0% 3% 3% 3% 3% 3% 3%
ANNUAL EXPENSE PROJECTION TOTAL
NEW PLANT - AERIAL $ 16,000 $ 8,240 $ 8,487 $ 8,742 $ 9,004 $ 9,274 $ 9,552 $ 69,300
NEW PLANT - UNDERGROUND 28,100 14,472 14,906 15,353 15,813 16,288 16,776 121,708
PLANT REBUILD AND UPGRADE 0 0 0 0 0 0 0 0
NEW CONVERTER EXPENSE 2,094 1,139 1,173 1,208 1,245 1,282 1,321 9,462
CONVERTER REPLACEMENT EXPENSE 7,914 8,367 8,735 9,118 9,516 7,944 6,216 57,808
INSTALLATION EXPENSE 3,560 1,937 1,995 2,055 2,116 2,180 2,245 16,087
MISCELLANEOUS CAPITAL EXPENSE 97,372 89,383 93,310 97,391 101,634 106,043 110,626 695,758
-------- -------- -------- -------- -------- -------- -------- --------
TOTAL $155,040 $123,537 $128,605 $133,867 $139,328 $143,010 $146,736 $970,122
PERCENT OF REVENUE 20.6% 15.6% 15.4% 15.3% 15.2% 14.9% 14.5%
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 61
EXHIBIT D-3
- -----------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
CENTREVILLE, MARYLAND
AS OF DECEMBER 31, 1996
- -----------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------
CAPITAL EXPENDITURES
- -----------------------------------------------
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000 2001 2002 2003
---------- ---------- ---------- ---------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CAPITAL ASSUMPTIONS
NEW PLANT MILES 5.0 5.0 5.0 5.0 5.0 5.0 5.0
PLANT-AERIAL $ 16,000 $ 16,480 $ 16,974 $ 17,484 $ 18,008 $ 18,548 $ 19,105
PLANT-U/G $ 28,100 $ 28,943 $ 29,811 $ 30,706 $ 31,627 $ 32,576 $ 33,553
AERIAL PERCENTAGE 0% 0% 0% 0% 0% 0% 0%
UNDERGROUND PERCENTAGE 100% 100% 100% 100% 100% 100% 100%
AVERAGE COST PER CONVERTER $ 60 $ 62 $ 64 $ 65 $ 67 $ 69 $ 72
CONVERTER USE PERCENTAGE 9% 9% 9% 9% 9% 9% 9%
CONVERTER REPLACEMENT PERCENTAGE 10% 10% 10% 10% 10% 10% 10%
INSTALLATION COST/SUBSCRIBER $ 85 $ 88 $ 90 $ 93 $ 96 $ 99 $ 101
MISCELLANEOUS EXPENSE/SUBSCRIBER $ 25 $ 15 $ 15 $ 16 $ 16 $ 17 $ 17
INFLATION 0% 3% 3% 3% 3% 3% 3%
ANNUAL EXPENSE PROJECTION TOTAL
NEW PLANT - AERIAL $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
NEW PLANT - UNDERGROUND 140,500 144,715 149,056 153,528 158,134 162,878 167,764 1,076,576
PLANT REBUILD AND UPGRADE 1,375,000 2,500,000 4,500,000 3,000,000 0 0 0 11,375,000
NEW CONVERTER EXPENSE 3,542 2,578 3,857 4,031 8,036 4,448 3,261 29,753
CONVERTER REPLACEMENT EXPENSE 11,008 11,703 12,320 13,087 13,895 15,139 16,051 93,203
INSTALLATION EXPENSE 33,707 24,538 36,707 38,365 76,478 42,328 31,034 283,157
MISCELLANEOUS CAPITAL EXPENSE 313,082 192,925 204,023 216,669 233,106 250,473 264,380 1,674,658
---------- ---------- ---------- ---------- --------- -------- -------- -----------
TOTAL $1,876,839 $2,876,460 $4,905,963 $3,425,680 $ 489,649 $475,265 $482,491 $14,532,347
PERCENT OF REVENUE 32.2% 46.6% 74.9% 48.8% 6.3% 5.7% 5.5%
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 62
EXHIBIT D-4
- -----------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
REDMOND, OREGON
AS OF DECEMBER 31, 1996
- -----------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------
CAPITAL EXPENDITURES
- -----------------------------------------------
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000 2001 2002 2003
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CAPITAL ASSUMPTIONS
NEW PLANT MILES 29.0 6.0 6.0 6.0 6.0 6.0 6.0
PLANT-AERIAL $16,000 $16,480 $16,974 $17,484 $18,008 $18,548 $19,105
PLANT-U/G $28,100 $28,943 $29,811 $30,706 $31,627 $32,576 $33,553
AERIAL PERCENTAGE 20% 20% 20% 20% 20% 20% 20%
UNDERGROUND PERCENTAGE 80% 80% 80% 80% 80% 80% 80%
AVERAGE COST PER CONVERTER $110 $113 $117 $120 $124 $128 $131
CONVERTER USE PERCENTAGE 16% 16% 16% 16% 16% 16% 16%
CONVERTER REPLACEMENT PERCENTAGE 15% 10% 10% 10% 10% 10% 10%
INSTALLATION COST/SUBSCRIBER $60 $62 $64 $66 $68 $70 $72
MISCELLANEOUS EXPENSE/SUBSCRIBER $40 $20 $21 $21 $22 $23 $23
INFLATION 0% 3% 3% 3% 3% 3% 3%
ANNUAL EXPENSE PROJECTION TOTAL
NEW PLANT - AERIAL $92,800 $19,776 $20,369 $20,980 $21,610 $22,258 $22,926 $220,719
NEW PLANT - UNDERGROUND 651,920 138,926 143,094 147,387 151,809 156,363 161,054 1,550,553
PLANT REBUILD AND UPGRADE 0 0 0 0 0 0 0 0
NEW CONVERTER EXPENSE 24,226 0 900 2,590 4,546 4,682 4,823 41,766
CONVERTER REPLACEMENT EXPENSE 17,325 14,392 14,601 15,132 15,853 16,796 17,783 111,882
INSTALLATION EXPENSE 44,249 2,609 1,644 4,730 8,303 8,552 8,808 78,895
MISCELLANEOUS CAPITAL EXPENSE 155,390 84,432 86,574 90,210 95,048 100,667 106,538 718,859
-------- -------- -------- -------- -------- -------- -------- ----------
TOTAL $985,910 $260,135 $267,183 $281,029 $297,168 $309,319 $321,931 $2,722,674
PERCENT OF REVENUE 58.6% 13.9% 13.8% 13.7% 13.7% 13.3% 13.0%
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 63
EXHIBIT D-5
- -----------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SOMERSET, KY
AS OF DECEMBER 31, 1996
- -----------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------
CAPITAL EXPENDITURES
- -----------------------------------------------
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000 2001 2002 2003
-------- ---------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CAPITAL ASSUMPTIONS
NEW PLANT MILES 1.9 8.5 8.5 8.5 8.5 8.5 8.5
PLANT-AERIAL $18,500 $19,055 $19,627 $20,215 $20,822 $21,447 $22,090
PLANT-U/G $21,500 $22,145 $22,809 $23,494 $24,198 $24,924 $25,672
AERIAL PERCENTAGE 25% 25% 25% 25% 25% 25% 25%
UNDERGROUND PERCENTAGE 75% 75% 75% 75% 75% 75% 75%
AVERAGE COST PER CONVERTER $65 $67 $69 $90 $92 $95 $98
CONVERTER USE PERCENTAGE 21% 21% 21% 31% 36% 41% 46%
CONVERTER REPLACEMENT PERCENTAGE 8% 8% 8% 8% 8% 8% 8%
INSTALLATION COST/SUBSCRIBER $60 $62 $64 $66 $68 $70 $72
MISCELLANEOUS EXPENSE/SUBSCRIBER $15 $10 $10 $11 $11 $11 $12
INFLATION 0% 3% 3% 3% 3% 3% 3%
ANNUAL EXPENSE PROJECTION TOTAL
NEW PLANT - AERIAL $8,748 $40,546 $41,763 $43,016 $44,306 $45,635 $47,004 $271,019
NEW PLANT - UNDERGROUND 30,499 141,364 145,605 149,974 154,473 159,107 163,880 944,903
PLANT REBUILD AND UPGRADE 500,000 1,000,000 2,000,000 6,500,000 0 0 0 10,000,000
NEW CONVERTER EXPENSE 1,517 4,297 4,442 186,843 104,996 108,146 111,481 521,722
CONVERTER REPLACEMENT EXPENSE 26,619 27,542 28,723 37,801 54,331 64,613 75,463 315,092
INSTALLATION EXPENSE 5,277 14,951 15,457 17,474 21,197 17,141 14,358 105,854
MISCELLANEOUS CAPITAL EXPENSE 290,100 195,049 203,397 212,201 221,738 231,543 241,080 1,595,108
-------- ---------- ---------- ---------- -------- -------- -------- -----------
TOTAL $862,760 $1,423,751 $2,439,387 $7,147,308 $601,041 $626,185 $653,266 $13,753,698
PERCENT OF REVENUE 11.5% 18.0% 29.3% 81.2% 6.2% 6.1% 6.1%
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 64
EXHIBIT E-1
- ----------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
BURKE COUNTY, NC
AS OF DECEMBER 31, 1996
- ----------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------
DISCOUNTED CASH FLOW VALUATION
- ----------------------------------------------
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000 2001 2002 2003 TOTAL
--------- --------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE $5,266,958 $5,447,493 $5,659,602 $6,002,891 $6,494,157 $6,853,484 $7,167,554 $42,892,138
EXPENSES 2,426,995 2,495,417 2,577,311 2,704,371 2,900,859 3,039,158 3,160,602 19,304,713
--------- --------- --------- --------- --------- --------- --------- ----------
OPERATING INCOME $2,839,963 $2,952,076 $3,082,291 $3,298,520 $3,593,298 $3,814,326 $4,006,951 $23,587,425
LESS:
CAPITAL EXPENDITURES 1,132,286 2,896,352 3,528,506 4,837,196 660,758 662,026 658,759 14,375,882
PLUS:
RESIDUAL VALUE 0 0 0 0 0 0 30,052,136 30,052,136
FREE CASH FLOW 1,707,677 55,724 (446,215) (1,538,676) 2,932,541 3,152,300 33,400,328 39,263,679
DISCOUNT RATE 15.03%
DISCOUNTED CASH FLOW VALUE $15,706,719
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 65
EXHIBIT E-2
- --------------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
CALIFORNIA CITY, CALIFORNIA
AS OF DECEMBER 31, 1996
- --------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------
DISCOUNTED CASH FLOW VALUATION
- --------------------------------------------------
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000 2001 2002 2003 TOTAL
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE $ 754,179 $ 794,221 $ 832,846 $ 874,082 $ 916,557 $ 961,877 $1,008,582 $6,142,345
EXPENSES 368,549 384,288 399,359 415,034 431,273 448,163 465,663 2,912,329
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
OPERATING INCOME $ 385,630 $ 409,933 $ 433,487 $ 459,048 $ 485,284 $ 513,714 $ 542,920 $3,230,016
LESS:
CAPITAL EXPENDITURES 155,040 123,537 128,605 133,867 139,328 143,010 146,736 970,122
PLUS:
RESIDUAL VALUE 0 0 0 0 0 0 3,800,438 3,800,438
FREE CASH FLOW 230,590 286,396 304,882 325,182 345,956 370,703 4,196,622 6,060,332
DISCOUNT RATE 15.03%
DISCOUNTED CASH FLOW VALUE $2,709,780
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 66
EXHIBIT E-3
- -------------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
CENTREVILLE, MARYLAND
AS OF DECEMBER 31, 1996
- -------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------
DISCOUNTED CASH FLOW VALUATION
- -------------------------------------------------
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000 2001 2002 2003 TOTAL
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE $5,823,918 $6,166,532 $6,545,857 $7,026,289 $7,772,298 $8,341,915 $8,827,562 $50,504,372
EXPENSES 3,017,200 3,158,916 3,311,348 3,518,153 3,837,916 4,061,834 4,253,372 25,158,739
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
OPERATING INCOME $2,806,718 $3,007,617 $3,234,510 $3,508,136 $3,934,382 $4,280,081 $4,574,189 $25,345,633
LESS:
CAPITAL EXPENDITURES 1,876,839 2,876,460 4,905,963 3,425,680 489,649 475,265 482,491 14,532,347
PLUS:
RESIDUAL VALUE 0 0 0 0 0 0 36,593,516 36,593,516
FREE CASH FLOW 929,878 131,157 (1,671,453) 82,455 3,444,733 3,804,816 40,685,214 47,406,801
DISCOUNT RATE 14.23%
DISCOUNTED CASH FLOW VALUE $19,359,143
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 67
EXHIBIT E-4
- ------------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
REDMOND, OREGON
AS OF DECEMBER 31, 1996
- ------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------
DISCOUNTED CASH FLOW VALUATION
- ------------------------------------------------
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000 2001 2002 2003 TOTAL
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE $1,682,856 $1,865,250 $1,939,763 $2,044,458 $2,175,384 $2,321,455 $2,475,049 $14,504,216
EXPENSES 858,699 938,687 969,951 1,013,578 1,066,915 1,126,696 1,189,133 7,163,660
---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
OPERATING INCOME $824,157 $926,563 $969,812 $1,030,880 $1,108,469 $1,194,759 $1,285,916 $7,340,556
LESS:
CAPITAL EXPENDITURES 985,910 260,135 267,183 281,029 297,168 309,319 321,931 2,722,674
PLUS:
RESIDUAL VALUE 0 0 0 0 0 0 9,001,414 9,001,414
FREE CASH FLOW (161,752) 666,428 702,629 749,851 811,301 885,440 9,965,398 13,619,295
DISCOUNT RATE 15.03%
DISCOUNTED CASH FLOW VALUE $5,778,109
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 68
EXHIBIT E-5
- ------------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SOMERSET, KY
AS OF DECEMBER 31, 1996
- ------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------
DISCOUNTED CASH FLOW VALUATION
- ------------------------------------------------
YEAR ENDING DECEMBER 31, 1997 1998 1999 2000 2001 2002 2003 TOTAL
---------- ---------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUE $7,495,245 $7,891,352 $8,311,425 $8,797,917 $9,617,660 $10,202,471 $10,771,694 $63,087,764
EXPENSES 3,775,732 3,938,547 4,114,663 4,306,218 4,615,192 4,849,402 5,073,497 30,673,252
---------- ---------- ---------- ---------- ---------- ----------- ----------- -----------
OPERATING INCOME $3,719,513 $3,952,805 $4,196,762 $4,491,700 $5,002,468 $5,353,069 $5,698,197 $32,414,512
LESS:
CAPITAL EXPENDITURES 862,760 1,423,751 2,439,387 7,147,308 601,041 626,185 653,266 13,753,698
PLUS:
RESIDUAL VALUE 0 0 0 0 0 0 48,434,673 48,434,673
FREE CASH FLOW 2,856,753 2,529,055 1,757,374 (2,655,608) 4,401,427 4,726,883 53,479,604 67,095,488
DISCOUNT RATE 14.23%
DISCOUNTED CASH FLOW VALUE $29,525,152
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 69
EXHIBIT F-1
- -------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
BURKE COUNTY, NC
AS OF DECEMBER 31, 1996
- -------------------------------------------
- -------------------------------------------
VALUATION MATRIX
- -------------------------------------------
VALUATION MATRIX
<TABLE>
<CAPTION>
MULTIPLE OF PAST YEAR'S OPERATING INCOME
<S> <C> <C>
1996 ADJUSTED REVENUE $5,077,787
1996 ADJUSTED EXPENSES 2,260,515
1996 ADJUSTED OPERATING INCOME $2,817,272
VALUATION MULTIPLE 8.5
ESTIMATED FAIR MARKET VALUE - $23,946,812
===========
MULTIPLE OF CURRENT OPERATING INCOME
REVENUE $5,292,721
IMPUTED EXPENSES 2,419,832
---------
OPERATING INCOME 2,872,889
VALUATION MULTIPLE 8.00
ESTIMATED FAIR MARKET VALUE - $22,983,111
===========
MULTIPLE OF PROJECTED OPERATING INCOME
PROJECTED REVENUE $5,266,958
PROJECTED EXPENSES 2,426,995
-----------
PROJECTED OPERATING INCOME $2,839,963
VALUATION MULTIPLE 7.50
ESTIMATED FAIR MARKET VALUE - $21,299,720
===========
PRE-TAX DISCOUNTED CASH FLOW VALUATION
DISCOUNT RATE 15.0%
ESTIMATED FAIR MARKET VALUE - $15,706,719
===========
</TABLE>
<TABLE>
<CAPTION>
VALUE SUMMARY WEIGHTING
<S> <C> <C>
PAST YEAR'S METHOD $23,946,812 5%
CURRENT METHOD $22,983,111 10%
PROJECTED METHOD $21,299,720 15%
DISCOUNTED CASH FLOW METHOD $15,706,719 70%
------------ ---
ESTIMATED FAIR MARKET VALUE $17,685,000 100%
============ ====
</TABLE>
<TABLE>
<CAPTION>
INFORMATIONAL ITEMS
LOW HIGH
<S> <C> <C>
VALUE RANGE $15,706,719 $23,946,812
AVERAGE $19,826,766
</TABLE>
<TABLE>
<CAPTION>
PAST YEAR'S CURRENT YEAR'S NEXT YEAR'S
<S> <C> <C> <C>
MULTIPLE OF CASH FLOW 6.28 6.16 6.23
VALUE PER BEGINNING YEAR 1 SUBSCRIBER $1,682
VALUE PER AVERAGE YEAR 1 SUBSCRIBER $1,690
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 70
EXHIBIT F-2
- ----------------------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
CALIFORNIA CITY, CALIFORNIA
AS OF DECEMBER 31, 1996
- -------------------------------------------
- -------------------------------------------
VALUATION MATRIX
- -------------------------------------------
VALUATION MATRIX
<TABLE>
<CAPTION>
MULTIPLE OF PAST YEAR'S OPERATING INCOME
<S> <C> <C>
1996 ADJUSTED REVENUE $753,244
1996 ADJUSTED EXPENSES 334,515
-------
1996 ADJUSTED OPERATING INCOME $418,729
VALUATION MULTIPLE 8.0
ESTIMATED FAIR MARKET VALUE - $3,349,832
==========
MULTIPLE OF CURRENT OPERATING INCOME
REVENUE $746,398
IMPUTED EXPENSES 317,145
-------
OPERATING INCOME 429,254
VALUATION MULTIPLE 7.50
ESTIMATED FAIR MARKET VALUE - $3,219,402
==========
MULTIPLE OF PROJECTED OPERATING INCOME
PROJECTED REVENUE $754,179
PROJECTED EXPENSES 368,549
-------
PROJECTED OPERATING INCOME $385,630
VALUATION MULTIPLE 7.00
ESTIMATED FAIR MARKET VALUE - $2,699,409
==========
PRE-TAX DISCOUNTED CASH FLOW VALUATION
DISCOUNT RATE 15.0%
ESTIMATED FAIR MARKET VALUE - $2,709,780
==========
</TABLE>
<TABLE>
<CAPTION>
VALUE SUMMARY WEIGHTING
<S> <C> <C>
PAST YEAR'S METHOD $3,349,832 5%
CURRENT METHOD $3,219,402 10%
PROJECTED METHOD $2,699,409 15%
DISCOUNTED CASH FLOW METHOD $2,709,780 70%
----------- ---
ESTIMATED FAIR MARKET VALUE $2,791,000 100%
=========== ====
</TABLE>
<TABLE>
<CAPTION>
INFORMATIONAL ITEMS
LOW HIGH
<S> <C> <C>
VALUE RANGE $2,699,409 $3,349,832
AVERAGE $3,024,620
</TABLE>
<TABLE>
<CAPTION>
PAST YEAR'S CURRENT YEAR'S NEXT YEAR'S
<S> <C> <C> <C>
MULTIPLE OF CASH FLOW 6.67 6.50 7.24
VALUE PER BEGINNING YEAR 1 SUBSCRIBER $1,452
VALUE PER AVERAGE YEAR 1 SUBSCRIBER $1,433
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 71
EXHIBIT F-3
- ----------------------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
CENTREVILLE, MARYLAND
AS OF DECEMBER 31, 1996
- -------------------------------------------
- -------------------------------------------
VALUATION MATRIX
- -------------------------------------------
<TABLE>
<CAPTION>
VALUATION MATRIX
MULTIPLE OF PAST YEAR'S OPERATING INCOME
<S> <C> <C>
1996 ADJUSTED REVENUE $5,342,637
1996 ADJUSTED EXPENSES 2,847,160
---------
1996 ADJUSTED OPERATING INCOME $2,495,477
VALUATION MULTIPLE 9.0
ESTIMATED FAIR MARKET VALUE - $22,459,293
===========
MULTIPLE OF CURRENT OPERATING INCOME
REVENUE $5,760,275
IMPUTED EXPENSES 2,933,132
---------
OPERATING INCOME 2,827,143
VALUATION MULTIPLE 8.50
ESTIMATED FAIR MARKET VALUE - $24,030,716
===========
MULTIPLE OF PROJECTED OPERATING INCOME
PROJECTED REVENUE $5,823,918
PROJECTED EXPENSES 3,017,200
-----------
PROJECTED OPERATING INCOME $2,806,718
VALUATION MULTIPLE 8.00
ESTIMATED FAIR MARKET VALUE - $22,453,742
===========
PRE-TAX DISCOUNTED CASH FLOW VALUATION
DISCOUNT RATE 14.2%
ESTIMATED FAIR MARKET VALUE - $19,359,143
===========
</TABLE>
<TABLE>
<CAPTION>
VALUE SUMMARY WEIGHTING
<S> <C> <C>
PAST YEAR'S METHOD $22,459,293 5%
CURRENT METHOD $24,030,716 10%
PROJECTED METHOD $22,453,742 15%
DISCOUNTED CASH FLOW METHOD $19,359,143 70%
------------ ---
ESTIMATED FAIR MARKET VALUE $20,445,000 100%
============ ====
</TABLE>
<TABLE>
<CAPTION>
INFORMATIONAL ITEMS
LOW HIGH
<S> <C> <C>
VALUE RANGE $19,359,143 $24,030,716
AVERAGE $21,694,930
</TABLE>
<TABLE>
<CAPTION>
PAST YEAR'S CURRENT YEAR'S NEXT YEAR'S
<S> <C> <C> <C>
MULTIPLE OF CASH FLOW 8.19 7.23 7.28
VALUE PER BEGINNING YEAR 1 SUBSCRIBER $1,659
VALUE PER AVERAGE YEAR 1 SUBSCRIBER $1,633
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 72
EXHIBIT F-4
- -------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
REDMOND, OREGON
AS OF DECEMBER 31, 1996
- -------------------------------------------
- -------------------------------------------
VALUATION MATRIX
- -------------------------------------------
VALUATION MATRIX
<TABLE>
<CAPTION>
MULTIPLE OF PAST YEAR'S OPERATING INCOME
<S> <C> <C>
1996 ADJUSTED REVENUE $1,561,593
1996 ADJUSTED EXPENSES 721,472
----------
1996 ADJUSTED OPERATING INCOME $840,121
VALUATION MULTIPLE 8.0
ESTIMATED FAIR MARKET VALUE - $6,720,968
==========
MULTIPLE OF CURRENT OPERATING INCOME
REVENUE $1,569,849
IMPUTED EXPENSES 722,445
----------
OPERATING INCOME 847,405
VALUATION MULTIPLE 7.50
ESTIMATED FAIR MARKET VALUE - $6,355,535
==========
MULTIPLE OF PROJECTED OPERATING INCOME
PROJECTED REVENUE $1,682,856
PROJECTED EXPENSES 858,699
----------
PROJECTED OPERATING INCOME $824,157
VALUATION MULTIPLE 7.00
ESTIMATED FAIR MARKET VALUE - $5,769,101
==========
PRE-TAX DISCOUNTED CASH FLOW VALUATION
DISCOUNT RATE 15.0%
ESTIMATED FAIR MARKET VALUE - $5,778,109
==========
</TABLE>
<TABLE>
VALUE SUMMARY WEIGHTING
<S> <C> <C>
PAST YEAR'S METHOD $6,720,968 5%
CURRENT METHOD $6,355,535 10%
PROJECTED METHOD $5,769,101 15%
DISCOUNTED CASH FLOW METHOD $5,778,109 70%
---------- ---
ESTIMATED FAIR MARKET VALUE $5,882,000 100%
---------- ----
</TABLE>
<TABLE>
<CAPTION>
INFORMATIONAL ITEMS
LOW HIGH
<S> <C> <C>
VALUE RANGE $5,769,101 $6,720,968
AVERAGE $6,245,034
</TABLE>
<TABLE>
<CAPTION>
PAST YEAR'S CURRENT YEAR'S NEXT YEAR'S
<S> <C> <C> <C>
MULTIPLE OF CASH FLOW 7.00 6.94 7.14
VALUE PER BEGINNING YEAR 1 SUBSCRIBER $1,673
VALUE PER AVERAGE YEAR 1 SUBSCRIBER $1,514
</TABLE>
<PAGE> 73
EXHIBIT F-5
- -------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SOMERSET, KY
AS OF DECEMBER 31, 1996
- -------------------------------------------
- -------------------------------------------
VALUATION MATRIX
- -------------------------------------------
VALUATION MATRIX
<TABLE>
<CAPTION>
MULTIPLE OF PAST YEAR'S OPERATING INCOME
<S> <C> <C>
1996 ADJUSTED REVENUE $7,090,865
1996 ADJUSTED EXPENSES 3,401,985
----------
1996 ADJUSTED OPERATING INCOME $3,688,880
VALUATION MULTIPLE 9.5
ESTIMATED FAIR MARKET VALUE - $35,044,360
===========
MULTIPLE OF CURRENT OPERATING INCOME
REVENUE $7,486,266
IMPUTED EXPENSES 4,025,365
---------
OPERATING INCOME 3,460,901
VALUATION MULTIPLE 9.00
ESTIMATED FAIR MARKET VALUE - $31,148,107
===========
MULTIPLE OF PROJECTED OPERATING INCOME
PROJECTED REVENUE $7,495,245
PROJECTED EXPENSES 3,775,732
----------
PROJECTED OPERATING INCOME $3,719,513
VALUATION MULTIPLE 8.50
ESTIMATED FAIR MARKET VALUE - $31,615,860
===========
PRE-TAX DISCOUNTED CASH FLOW VALUATION
DISCOUNT RATE 14.2%
ESTIMATED FAIR MARKET VALUE - $29,525,152
===========
</TABLE>
<TABLE>
<CAPTION>
VALUE SUMMARY WEIGHTING
<S> <C> <C>
PAST YEAR'S METHOD $35,044,360 5%
CURRENT METHOD $31,148,107 10%
PROJECTED METHOD $31,615,860 15%
DISCOUNTED CASH FLOW METHOD $29,525,152 70%
------------ ---
ESTIMATED FAIR MARKET VALUE $30,277,000 100%
============ ====
</TABLE>
<TABLE>
<CAPTION>
INFORMATIONAL ITEMS
LOW HIGH
<S> <C> <C>
VALUE RANGE $29,525,152 $35,044,360
AVERAGE $32,284,756
</TABLE>
<TABLE>
PAST YEAR'S CURRENT YEAR'S NEXT YEAR'S
<S> <C> <C> <C>
MULTIPLE OF CASH FLOW 8.21 8.75 8.14
VALUE PER BEGINNING YEAR 1 SUBSCRIBER $1,569
VALUE PER AVERAGE YEAR 1 SUBSCRIBER $1,566
ARTHUR ANDERSEN LLP
</TABLE>
<PAGE> 74
[LOGO - ARTHUR ANDERSEN LLP]
ADDENDUM 1 Channel Line-Ups and Rate Cards
<PAGE> 75
FALCON CABLE TV - BURKE COUNTY, NC (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 LOCAL - COMMUNITY ACCESS/PEG
3 WBTV 3-CBS CHARLOTTE, NC
4 WYFF-TV 4-NBC GREENVILLE, SC
5 WUNE-TV 17-PBS LINVILLE, NC
6 WCNC-TV 36-NBC CHARLOTTE,NC
7 WSPA-TV 7-CBS SPARTANBURG, SC
8 QVC
9 WSOC-TV 9-ABC CHARLOTTE, NC
10 WCCB 18-FOX CHARLOTTE, NC
11 WHKY-TV 14-IND HICKORY, NC
12 MTV
13 WLOS 13-ABC ASHEVILLE, NC
14 WJZY 46-IND/UPN BELMONT, NC
15 C-SPAN
* 16 REQUEST - PAY PER VIEW
* 17 HBO
* 18 CINEMAX
* 19 THE MOVIE CHANNEL
* 20 SHOWTIME
* 21 ENCORE
+ 22 THE DISNEY CHANNEL
23 NICKELODEON
= 24 WTBS 17-IND ATLANTA, GA
+ 25 THE NASHVILLE NETWORK
+ 26 THE DISCOVERY CHANNEL
+ 27 THE FAMILY CHANNEL
+ 28 COUNTRY MUSIC TV
+ 29 THE WEATHER CHANNEL
+ 30 TNT
= 31 THE LEARNING CHANNEL
= 32 CNN
= 33 CNN HEADLINE NEWS
34 NOSTALGIA
= 35 ESPN
36 PREVUE GUIDE
37 CNBC
38 COMEDY CENTRAL
38 VH-1
39 LIFETIME
= 40 SPORTSOUTH NETWORK
41 NEW INSPIRATIONAL NETWORK
= 42 USA NETWORK
43 WHNS 21-FOX ASHEVILLE, NC
44 WFVT-TV 55-IND ROCK HILL, SC
RATES___________________________________________________________________________
BASIC $17.54
TIER (=) 6.36
SATELLITE PACKAGE 1 (+) 10.44
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.03
ADDRESSABLE CONVERTER 2.51
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 10.00
LOST/STOLEN CONVERTER EQUIP 250.00
DAMAGED CONVERTER EQUIPMENT 105.00
DISCONNECT HOLD FEE 2.00
UPGRADE 2.00
NON PAY RECONNECT FEE 15.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
ENCORE 5.95
PAY PER VIEW MOVIE 3.95
________________________________________________________________________________
All Broadcast TV stations can only be received via cable through a converter
box, which is available at the low rate listed above.
The above rates may not include applicable taxes, fees and assessments. Any
such amounts will be itemized on your bill.
<PAGE> 76
FALCON CABLE TV - CHURCH HILL, MD (Effective: 10/1/96)
CHANNEL LINE-UP ---------------------------------------------------------------
2 WMAR-TV 2-ABC BALTIMORE, MD
3 LOCAL-COMMUNITY ACCESS/PEG
4 QVC
5 WTTG 5-FOX WASHINGTON, DC
*6 CINEMAX
7 WJLA-TV 7-ABC WASHINGTON, DC
8 ESPN
9 WUSA 9-CBS WASHINGTON, DC
10 WBFF 45-FOX BALTIMORE, MD
11 WBAL-TV 11-NBC BALTIMORE, MD
12 WETA-TV 26-PBS WASHINGTON, DC
12 MOR MUSIC TV
13 WJZ-TV 13-CBS BALTIMORE, MD
14 WNUV-TV 54-IND/UPN BALTIMORE, MD
*15 SHOWTIME
16 WBOC-TV 16-CBS SALISBURY, MD
17 HOME TEAM SPORTS
18 WDCA 20-IND/UPN WASHINGTON, DC
19 LOCAL - COMMUNITY ACCESS/PEG
* 20 HBO
* 21 THE MOVIE CHANNEL
22 WMPT 22-PBS ANNAPOLIS, MD
+ 23 THE DISCOVERY CHANNEL
+ 24 THE FAMILY CHANNEL
+ 25 WTBS 17-IND ATLANTA, GA
26 WHSW-TV 24-HSN BALTIMORE, MD
27 CNN
= 28 USA NETWORK
= 29 ARTS & ENTERTAINMENT
= 30 SCI-FI CHANNEL
= 31 THE WEATHER CHANNEL
= 32 THE NASHVILLE NETWORK
33 NICKLEODEON
34 TNT
35 LIFETIME
36 FX
37 C-SPAN
38 CNN HEADLINE NEWS
39 AMERICAN MOVIE CLASSICS
40 TRINITY BROADCAST NETWORK
41 THE LEARNING CHANNEL
42 CNBC
43 COUNTRY MUSIC TV
+ 44 THE DISNEY CHANNEL
45 BLACK ENTERTAINMENT TV
46 BRAVO
47 E!-ENTERTAINMENT TV
48 MTV
49 HOME & GARDEN TV
50 VH-1
+ 51 ESPN 2
= 52 TV FOOD NETWORK
RATES___________________________________________________________________________
BASIC $20.44
TIER (=) 3.42
SATELLITE PACKAGE 1 (+) 5.72
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.69
NON-ADDRESSABLE CONVERTER 2.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 20.00
LOST/STOLEN CONVERTER EQUIP 200.00
DAMAGED CONVERTER EQUIPMENT 200.00
LOST/STOLEN REMOTE 15.00
DAMAGED REMOTE 15.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
SEGA CHANNEL 12.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and assessments and do
not include franchise fees of 5% of your total bill. Any such amounts will be
itemized on your bill.
<PAGE> 77
FALCON CABLE TV - Kent County, ND (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 WMAR-TV 2-ABC BALTIMORE, MD
3 LOCAL - COMMUNITY ACCESS/PEG
4 QVC
5 WTTG 5-FOX WASHINGTON, DC
* 6 CINEMAX
7 WJLA-TV 7-ABC WASHINGTON, DC
8 ESPN
9 WUSA 9-CBS WASHINGTON DC
10 WBFF 45-FOX BALTIMORE, MD
11 WBAL-TV 11-NBC BALTIMORE, MD
12 WETA-TV 26-PBS WASHINGTON, DC
12 MOR MUSIC TV
13 WJZ-TV 13-CBS BALTIMORE, MD
14 WNUV-TV 54-IND/UPN BALTIMORE, MD
* 15 SHOWTIME
16 WBOC-TV 16-CBS SALISBURY, MD
17 HOME TEAM SPORTS
18 WDCA 20-IND/UPN WASHINGTON, DC
19 LOCAL - COMMUNITY ACCESS/PEG
* 20 HBO
* 21 THE MOVIE CHANNEL
22 WMPT 22-PBS ANNAPOLIS, MD
+ 23 THE DISCOVERY CHANNEL
+ 24 THE FAMILY CHANNEL
+ 25 WTBS 17-IND ATLANTA, GA
26 WHSW-TV 24-HSN BALTIMORE, MD
27 CNN
= 28 USA NETWORK
= 29 ARTS & ENTERTAINMENT
= 30 SCI-FI CHANNEL
= 31 THE WEATHER CHANNEL
= 32 THE NASHVILLE NETWORK
33 NICKELODEON
34 TNT
35 LIFETIME
36 FX
37 C-SPAN
38 CNN HEADLINE NEWS
39 AMERICAN MOVIE CLASSICS
40 TRINITY BROADCAST NETWORK
41 THE LEARNING CHANNEL
42 CNBC
43 COUNTRY MUSIC TV
+ 44 THE DISNEY CHANNEL
45 BLACK ENTERTAINMENT TV
46 BRAVO
47 E! - ENTERTAINMENT TV
48 MTV
49 HOME & GARDEN TV
50 VH-1
+ 51 ESPN 2
= 52 TV FOOD NETWORK
RATES___________________________________________________________________________
BASIC $20.63
TIER (=) 3.48
SATELLITE PACKAGE 1 (+) 5.72
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.69
NON-ADDRESSABLE CONVERTER 2.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 20.00
LOST/STOLEN CONVERTER EQUIP 200.00
DAMAGED CONVERTER EQUIPMENT 200.00
LOST/STOLEN REMOTE 15.00
DAMAGED REMOTE 15.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
SEGA CHANNEL 12.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and assessments and do
not include franchise fees of 3% of your basic rate. Any such amounts will be
itemized on your bill.
<PAGE> 78
FALCON CABLE TV - CONNELLY SPRINGS, NC (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 LOCAL - COMMUNITY ACCESS/PEG
3 WBTV 3-CBS CHARLOTTE, NC
4 WYFF-TV 4-NBC GREENVILLE, SC
5 WUNE-TV 17-PBS LINVILLE, NC
6 WCNC-TV 36-NBC CHARLOTTE, NC
7 WSPA-TV 7-CBS SPARTANBURG, SC
8 QVC
9 WSOC-TV 9-ABC CHARLOTTE, NC
10 WCCB 18-FOX CHARLOTTE, NC
11 WHKY-TV 14-IND HICKORY, NC
12 MTV
13 WLOS 13-ABC ASHEVILLE, NC
14 WJZY 46-IND/UPN BELMONT, NC
15 C-SPAN
* 16 REQUEST - PAY PER VIEW
* 17 HBO
* 18 CINEMAX
* 19 THE MOVIE CHANNEL
* 20 SHOWTIME
* 21 ENCORE
+ 22 THE DISNEY CHANNEL
23 NICKELODEON
= 24 WTBS 17-IND ATLANTA, GA
+ 25 THE NASHVILLE NETWORK
+ 26 THE DISCOVERY CHANNEL
+ 27 THE FAMILY CHANNEL
+ 28 COUNTRY MUSIC TV
+ 29 THE WEATHER CHANNEL
+ 30 TNT
= 31 THE LEARNING CHANNEL
= 32 CNN
= 33 CNN HEADLINE NEWS
34 NOSTALGIA
= 35 ESPN
36 PREVUE GUIDE
37 CNBC
38 COMEDY CENTRAL
38 VH-1
39 LIFETIME
= 40 SPORTSOUTH NETWORK
41 NEW INSPIRATIONAL NETWORK
= 42 USA NETWORK
43 WHNS 21-FOX ASHEVILLE, NC
44 WFVT-TV 55-IND ROCK HILL, SC
RATES___________________________________________________________________________
BASIC $17.37
TIER (=) 6.31
SATELLITE PACKAGE 1 (+) 10.44
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.03
ADDRESSABLE CONVERTER 2.51
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 10.00
LOST/STOLEN CONVERTER EQUIP 250.00
DAMAGED CONVERTER EQUIPMENT 105.00
DISCONNECT HOLD FEE 2.00
UPGRADE 2.00
NON PAY RECONNECT FEE 15.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
ENCORE 5.95
PAY PER VIEW MOVIE 3.95
________________________________________________________________________________
All Broadcast TV stations can only be received via cable through a
converter box, which is available at the low rate listed above.
The above rates may not include applicable taxes, fees and
assessments. Any such amounts will be itemized on your bill.
<PAGE> 79
FALCON CABLE TV - DREXEL, NC (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 LOCAL - COMMUNITY ACCESS/PEG
3 WBTV 3-CBS CHARLOTTE, NC
4 WYFF-TV 4-NBC GREENVILLE, SC
5 WUNE-TV 17-PBS LINVILLE, NC
6 WCNC-TV 36-NBC CHARLOTTE, NC
7 WSPA-TV 7-CBS SPARTANBURG, SC
8 QVC
9 WSOC-TV 9-ABC CHARLOTTE, NC
10 WCCB 18-FOX CHARLOTTE, NC
11 WHKY-TV 14-IND HICKORY, NC
12 MTV
13 WLOS 13-ABC ASHEVILLE, NC
14 WJZY 46-IND/UPN BELMONT, NC
15 C-SPAN
* 16 REQUEST - PAY PER VIEW
* 17 HBO
* 18 CINEMAX
* 19 THE MOVIE CHANNEL
* 20 SHOWTIME
* 21 ENCORE
+ 22 THE DISNEY CHANNEL
23 NICKELODEON
= 24 WTBS 17-IND ATLANTA, GA
+ 25 THE NASHVILLE NETWORK
+ 26 THE DISCOVERY CHANNEL
+ 27 THE FAMILY CHANNEL
+ 28 COUNTRY MUSIC TV
+ 29 THE WEATHER CHANNEL
+ 30 TNT
= 31 THE LEARNING CHANNEL
= 32 CNN
= 33 CNN HEADLINE NEWS
34 NOSTALGIA
= 35 ESPN
36 PREVUE GUIDE
37 CNBC
38 COMEDY CENTRAL
38 VH-1
39 LIFETIME
= 40 SPORTSOUTH NETWORK
41 NEW INSPIRATIONAL NETWORK
= 42 USA NETWORK
43 WHNS 21-FOX ASHEVILLE, NC
44 WFVT-TV 55-IND ROCK HILL, SC
RATES___________________________________________________________________________
BASIC $17.26
TIER (=) 6.50
SATELLITE PACKAGE 1 (+) 10.45
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.03
ADDRESSABLE CONVERTER 2.51
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 10.00
LOST/STOLEN CONVERTER EQUIP 250.00
DAMAGED CONVERTER EQUIPMENT 105.00
DISCONNECT HOLD FEE 2.00
UPGRADE 2.00
NON PAY RECONNECT FEE 15.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
ENCORE 5.95
PAY PER VIEW MOVIE 3.95
________________________________________________________________________________
All Broadcast TV stations can only be received via cable through a
converter box, which is available at the low rate listed above.
The above rates may not include applicable taxes, fees and
assessments. Any such amounts will be itemized on your bill.
<PAGE> 80
FALCON CABLE TV - GLEN ALPINE, NC (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 LOCAL - COMMUNITY ACCESS/PEG
3 WBTV 3-CBS CHARLOTTE, NC
4 WYFF-TV 4-NBC GREENVILLE, SC
5 WUNE-TV 17-PBS LINVILLE, NC
6 WCNC-TV 36-NBC CHARLOTTE,NC
7 WSPA-TV 7-CBS SPARTANBURG, SC
8 QVC
9 WSOC-TV 9-ABC CHARLOTTE, NC
10 WCCB 18-FOX CHARLOTTE, NC
11 WHKY-TV 14-IND HICKORY, NC
12 MTV
13 WLOS 13-ABC ASHEVILLE, NC
14 WJZY 46-IND/UPN BELMONT, NC
15 C-SPAN
* 16 REQUEST - PAY PER VIEW
* 17 HBO
* 18 CINEMAX
* 19 THE MOVIE CHANNEL
* 20 SHOWTIME
* 21 ENCORE
+ 22 THE DISNEY CHANNEL
23 NICKELODEON
= 24 WTBS 17-IN ATLANTA, GA
+ 25 THE NASHVILLE NETWORK
+ 26 THE DISCOVERY CHANNEL
+ 27 THE FAMILY CHANNEL
+ 28 COUNTRY MUSIC TV
+ 29 THE WEATHER CHANNEL
+ 30 TNT
= 31 THE LEARNING CHANNEL
= 32 CNN
= 33 CNN HEADLINE NEWS
34 NOSTALGIA
= 35 ESPN
36 PREVUE GUIDE
37 CNBC
38 COMEDY CENTRAL
38 VH-1
39 LIFETIME
= 40 SPORTSOUTH NETWORK
41 NEW INSPIRATIONAL NETWORK
= 42 USA NETWORK
43 WHNS 21-FOX ASHEVILLE, NC
44 WFVT-TV 55-IND ROCK HILL, SC
RATES___________________________________________________________________________
BASIC $17.18
TIER (=) 6.36
SATELLITE PACKAGE 1 (+) 10.44
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.03
ADDRESSABLE CONVERTER 2.51
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 10.00
LOST/STOLEN CONVERTER EQUIP 250.00
DAMAGED CONVERTER EQUIPMENT 105.00
DISCONNECT HOLD FEE 2.00
UPGRADE 2.00
NON PAY RECONNECT FEE 15.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
ENCORE 5.95
PAY PER VIEW MOVIE 3.95
________________________________________________________________________________
All Broadcast TV stations can only be received via cable through a converter
box, which is available at the low rate listed above.
The above rates may not include applicable taxes, fees and assessments. Any
such amounts will be itemized on your bill.
<PAGE> 81
FALCON CABLE TV - RUTHERFORD COLLEGE, NC (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 LOCAL - COMMUNITY ACCESS/PEG
3 WBTV 3-CBS CHARLOTTE, NC
4 WYFF-TV 4-NBC GREENVILLE, SC
5 WUNE-TV 17-PBS LINVILLE, NC
6 WCNC-TV 36-NBC CHARLOTTE,NC
7 WSPA-TV 7-CBS SPARTANBURG, SC
8 QVC
9 WSOC-TV 9-ABC CHARLOTTE, NC
10 WCCB 18-FOX CHARLOTTE, NC
11 WHKY-TV 14-IND HICKORY, NC
12 MTV
13 WLOS 13-ABC ASHEVILLE, NC
14 WJZY 46-IND/UPN BELMONT, NC
15 C-SPAN
* 16 REQUEST - PAY PER VIEW
* 17 HBO
* 18 CINEMAX
* 19 THE MOVIE CHANNEL
* 20 SHOWTIME
* 21 ENCORE
+ 22 THE DISNEY CHANNEL
23 NICKELODEON
= 24 WTBS 17-IN ATLANTA, GA
+ 25 THE NASHVILLE NETWORK
+ 26 THE DISCOVERY CHANNEL
+ 27 THE FAMILY CHANNEL
+ 28 COUNTRY MUSIC TV
+ 29 THE WEATHER CHANNEL
+ 30 TNT
= 31 THE LEARNING CHANNEL
= 32 CNN
= 33 CNN HEADLINE NEWS
34 NOSTALGIA
= 35 ESPN
36 PREVUE GUIDE
37 CNBC
38 COMEDY CENTRAL
38 VH-1
39 LIFETIME
= 40 SPORTSOUTH NETWORK
41 NEW INSPIRATIONAL NETWORK
= 42 USA NETWORK
43 WHNS 21-FOX ASHEVILLE, NC
44 WFVT-TV 55-IND ROCK HILL, SC
RATES___________________________________________________________________________
BASIC $17.59
TIER (=) 6.52
SATELLITE PACKAGE 1 (+) 10.45
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.03
ADDRESSABLE CONVERTER 2.51
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 10.00
LOST/STOLEN CONVERTER EQUIP 250.00
DAMAGED CONVERTER EQUIPMENT 105.00
DISCONNECT HOLD FEE 2.00
UPGRADE 2.00
NON PAY RECONNECT FEE 15.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
ENCORE 5.95
PAY PER VIEW MOVIE 3.95
________________________________________________________________________________
All Broadcast TV stations can only be received via cable through a converter
box, which is available at the low rate listed above.
The above rates may not include applicable taxes, fees and assessments. Any
such amounts will be itemized on your bill.
<PAGE> 82
FALCON CABLE TV - VALDESE COUNTY, NC (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 LOCAL - COMMUNITY ACCESS/PEG
3 WBTV 3-CBS CHARLOTTE, NC
4 WYFF-TV 4-NBC GREENVILLE, SC
5 WUNE-TV 17-PBS LINVILLE, NC
6 WCNC-TV 36-NBC CHARLOTTE, NC
7 WSPA-TV 7-CBS SPARTANBURG, SC
8 QVC
9 WSOC-TV 9-ABC CHARLOTTE, NC
10 WCCB 18-FOX CHARLOTTE, NC
11 WHKY-TV 14-IND HICKORY, NC
12 MTV
13 WLOS 13-ABC ASHEVILLE, NC
14 WJZY 46-IND/UPN BELMONT, NC
15 C-SPAN
* 16 REQUEST - PAY PER VIEW
* 17 HBO
* 18 CINEMAX
* 19 THE MOVIE CHANNEL
* 20 SHOWTIME
* 21 ENCORE
+ 22 THE DISNEY CHANNEL
23 NICKELODEON
= 24 WTBS 17-IND ATLANTA, GA
+ 25 THE NASHVILLE NETWORK
+ 26 THE DISCOVERY CHANNEL
+ 27 THE FAMILY CHANNEL
+ 28 COUNTRY MUSIC TV
+ 29 THE WEATHER CHANNEL
+ 30 TNT
= 31 THE LEARNING CHANNEL
= 32 CNN
= 33 CNN HEADLINE NEWS
34 NOSTALGIA
= 35 ESPN
36 PREVUE GUIDE
37 CNBC
38 COMEDY CENTRAL
38 VH-1
39 LIFETIME
= 40 SPORTSOUTH NETWORK
41 NEW INSPIRATIONAL NETWORK
= 42 USA NETWORK
43 WHNS 21-FOX ASHEVILLE, NC
44 WFVT-TV 55-IND ROCK HILL, SC
RATES___________________________________________________________________________
BASIC $17.14
TIER (=) 6.34
SATELLITE PACKAGE 1(+) 10.44
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.03
ADDRESSABLE CONVERTER 2.51
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 10.00
LOST/STOLEN CONVERTER EQUIP 250.00
DAMAGED CONVERTER EQUIPMENT 105.00
DISCONNECT HOLD FEE 2.00
UPGRADE 2.00
NON PAY RECONNECT FEE 15.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
ENCORE 5.95
PAY PER VIEW MOVIE 3.95
________________________________________________________________________________
All Broadcast TV stations can only be received via cable through a
converter box, which is available at the low rate listed above.
The above rates may not include applicable taxes, fees and
assessments. Any such amounts will be itemized on your bill.
<PAGE> 83
FALCON CABLE TV - BARCLAY, MD (Effective: 10/1/96)
CHANNEL LINE-UP ---------------------------------------------------------------
2 WMAR-TV 2-ABC BALTIMORE, MD
3 LOCAL-COMMUNITY ACCESS/PEG
4 QVC
5 WTTV 5-FOX WASHINGTON, DC
* 6 CINEMAX
7 WJLA-TV 7-ABC WASHINGTON, DC
8 ESPN
9 WUSA 9-CBS WASHINGTON, DC
10 WBFF 45-FOX BALTIMORE, MD
11 WBAL-TV 11-NBC BALTIMORE, MD
12 WETA-TV 26-PBS WASHINGTON, DC
12 MOR MUSIC TV
13 WJZ-TV 13-CBS BALTIMORE, MD
14 WNUV-TV 54-IND/UPN BALTIMORE, MD
* 15 SHOWTIME
16 WBOC-TV 16-CBS SALISBURY, MD
17 HOME TEAM SPORTS
18 WDCA 20-IND/UPN WASHINGTON, DC
19 LOCAL - COMMUNITY ACCESS/PEG
* 20 HBO
* 21 THE MOVIE CHANNEL
22 WMPT 22-PBS ANNAPOLIS, MD
+ 23 THE DISCOVERY CHANNEL
+ 24 THE FAMILY CHANNEL
+ 25 WTBS 17-IND ATLANTA, GA
26 WHSW-TV 24-HSN BALTIMORE, MD
27 CNN
= 28 USA NETWORK
= 29 ARTS & ENTERTAINMENT
= 30 SCI-FI CHANNEL
= 31 THE WEATHER CHANNEL
= 32 THE NASHVILLE NETWORK
33 NICKLEODEON
34 TNT
35 LIFETIME
36 FX
37 C-SPAN
38 CNN HEADLINE NEWS
39 AMERICAN MOVIE CLASSICS
40 TRINITY BROADCAST NETWORK
41 THE LEARNING CHANNEL
42 CNBC
43 COUNTRY MUSIC TV
+ 44 THE DISNEY CHANNEL
45 BLACK ENTERTAINMENT TV
46 BRAVO
47 E!-ENTERTAINMENT TV
48 MTV
49 HOME & GARDEN TV
50 VH-1
+ 51 ESPN 2
= 52 TV FOOD NETWORK
RATES___________________________________________________________________________
BASIC $20.86
TIER (=) 3.55
SATELLITE PACKAGE 1 (+) 5.72
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At cost
REMOTE 0.69
NON-ADDRESSABLE CONVERTER 2.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 20.00
LOST/STOLEN CONVERTER EQUIP 200.00
DAMAGED CONVERTER EQUIPMENT 200.00
LOST/STOLEN REMOTE 15.00
DAMAGED REMOTE 15.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
SEGA CHANNEL 12.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and
assessments. Any such amounts will be itemized on your bill.
<PAGE> 84
FALCON CABLE TV - BETTERTON, MD (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 WMAR-TV 2-ABC BALTIMORE, MD
3 LOCAL - COMMUNITY ACCESS/PEG
4 QVC
5 WTTG 5-FOX WASHINGTON, DC
* 6 CINEMAX
7 WJLA-TV 7-ABC WASHINGTON, DC
8 ESPN
9 WUSA 9-CBS WASHINGTON, DC
10 WBFF 45-FOX BALTIMORE, MD
11 WBAL-TV 11-NBC BALTIMORE, MD
12 WETA-TV 26-PBS WASHINGTON, DC
12 MOR MUSIC TV
13 WJZ-TV 13-CBS BALTIMORE, MD
14 WNUV-TV 54-IND/UPN BALTIMORE, MD
* 15 SHOWTIME
16 WBOC-TV 16-CBS SALISBURY, MD
17 HOME TEAM SPORTS
18 WDCA 20-IND/UPN WASHINGTON, DC
19 LOCAL - COMMUNITY ACCESS/PEG
* 20 HBO
* 21 THE MOVIE CHANNEL
22 WMPT 22-PBS ANNAPOLIS, MD
+ 23 THE DISCOVERY CHANNEL
+ 24 THE FAMILY CHANNEL
+ 25 WTBS 17-IND ATLANTA, GA
26 WHSW-TV 24-HSN BALTIMORE, MD
27 CNN
= 28 USA NETWORK
= 29 ARTS & ENTERTAINMENT
= 30 SCI-FI CHANNEL
= 31 THE WEATHER CHANNEL
= 32 THE NASHVILLE NETWORK
33 NICKELODEON
34 TNT
35 LIFETIME
36 FX
37 C-SPAN
38 CNN HEADLINE NEWS
39 AMERICAN MOVIE CLASSICS
40 TRINITY BROADCAST NETWORK
41 THE LEARNING CHANNEL
42 CNBC
43 COUNTRY MUSIC TV
+ 44 THE DISNEY CHANNEL
45 BLACK ENTERTAINMENT TV
46 BRAVO
47 E! - ENTERTAINMENT TV
48 MTV
49 HOME & GARDEN TV
50 VH-1
+ 51 ESPN 2
= 52 TV FOOD NETWORK
RATES___________________________________________________________________________
BASIC $20.80
TIER (=) 3.89
SATELLITE PACKAGE 1 (+) 5.72
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.69
NON-ADDRESSABLE CONVERTER 2.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 20.00
LOST/STOLEN CONVERTER EQUIP 200.00
DAMAGED CONVERTER EQUIPMENT 200.00
LOST/STOLEN REMOTE 15.00
DAMAGED REMOTE 15.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
SEGA CHANNEL 12.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can
only be received via cable through a converter box, unless you have
a cable-ready TV set. Converter boxes are available for rent at the
low rate listed above.
The above rates may not include applicable taxes, fees and assessments
and do not include franchise fees of 3% of your total bill. Any
such amounts will be itemized on your bill.
<PAGE> 85
FALCON CABLE TV - CENTREVILLE, MD (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 WMAR-TV 2-ABC BALTIMORE, MD
3 LOCAL - COMMUNITY ACCESS/PEG
4 QVC
5 WTTG 5-FOX WASHINGTON, DC
* 6 CINEMAX
7 WJLA-TV 7-ABC WASHINGTON, DC
8 ESPN
9 WUSA 9-CBS WASHINGTON, DC
10 WBFF 45-FOX BALTIMORE, MD
11 WBAL-TV 11-NBC BALTIMORE, MD
12 WETA-TV 26-PBS WASHINGTON, DC
12 MOR MUSIC TV
13 WJZ-TV 13-CBS BALTIMORE, MD
14 WNUV-TV 54-IND/UPN BALTIMORE, MD
* 15 SHOWTIME
16 WBOC-TV 16-CBS SALISBURY, MD
17 HOME TEAM SPORTS
18 WDCA 20-IND/UPN WASHINGTON, DC
19 LOCAL - COMMUNITY ACCESS/PEG
* 20 HBO
* 21 THE MOVIE CHANNEL
22 WMPT 22-PBS ANNAPOLIS, MD
+ 23 THE DISCOVERY CHANNEL
+ 24 THE FAMILY CHANNEL
+ 25 WTBS 17-IND ATLANTA, GA
26 WHSW-TV 24-HSN BALTIMORE, MD
27 CNN
= 28 USA NETWORK
= 29 ARTS & ENTERTAINMENT
= 30 SCI-FI CHANNEL
= 31 THE WEATHER CHANNEL
= 32 THE NASHVILLE NETWORK
33 NICKELODEON
34 TNT
35 LIFETIME
36 FX
37 C-SPAN
38 CNN HEADLINE NEWS
39 AMERICAN MOVIE CLASSICS
40 TRINITY BROADCASTING NETWORK
41 THE LEARNING CHANNEL
42 CNBC
43 COUNTRY MUSIC TV
+ 44 THE DISNEY CHANNEL
45 BLACK ENTERTAINMENT TV
46 BRAVO
47 E! - ENTERTAINMENT TV
48 MTV
49 HOME & GARDEN TV
50 VH-1
+ 51 ESPN 2
= 52 TV FOOD NETWORK
RATES___________________________________________________________________________
BASIC $20.32
TIER (=) 3.77
SATELLITE PACKAGE 1 (+) 5.72
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.69
NON-ADDRESSABLE CONVERTER 2.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 20.00
LOST/STOLEN CONVERTER EQUIP 200.00
DAMAGED CONVERTER EQUIPMENT 200.00
LOST/STOLEN REMOTE 15.00
DAMAGED REMOTE 15.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
SEGA CHANNEL 12.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and
assessments and do not include franchise fees of 3% of your total bill. Any
such amounts will be itemized on your bill.
<PAGE> 86
FALCON CABLE TV - CHESTERTOWN, MD (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 WMAR-TV 2-ABC BALTIMORE, MD
3 LOCAL-COMMUNITY ACCESS/PEG
4 QVC
5 WTTG 5-FOX WASHINGTON, DC
* 6 CINEMAX
7 WJLA-TV 7-ABC WASHINGTON, DC
8 ESPN
9 WUSA 9-CBS WASHINGTON, DC
10 WBFF 45-FOX BALTIMORE, MD
11 WBAL-TV 11-NBC BALTIMORE, MD
12 WETA-TV 26-PBS WASHINGTON, DC
12 MOR MUSIC TV
13 WJZ-TV 13-CBS BALTIMORE, MD
14 WNUV-TV 54-IND/UPN BALTIMORE, MD
* 15 SHOWTIME
16 WBOC-TV 16-CBS SALISBURY, MD
17 HOME TEAM SPORTS
18 WDCA 20-IND/UPN WASHINGTON, DC
19 LOCAL-COMMUNITY ACCESS/PEG
* 20 HBO
* 21 THE MOVIE CHANNEL
22 WMPT 22-PBS ANNAPOLIS, MD
+ 23 THE DISCOVERY CHANNEL
+ 24 THE FAMILY CHANNEL
+ 25 WTBS 17-IND ATLANTA, GA
26 WHSW-TV 24-HSN BALTIMORE, MD
27 CNN
= 28 USA NETWORK
= 29 ARTS & ENTERTAINMENT
= 30 SCI-FI CHANNEL
= 31 THE WEATHER CHANNEL
= 32 THE NASHVILLE NETWORK
33 NICKELODEON
34 TNT
35 LIFETIME
36 FX
37 C-SPAN
38 CNN HEADLINE NEWS
39 AMERICAN MOVIE CLASSICS
40 TRINITY BROADCAST NETWORK
41 THE LEARNING CHANNEL
42 CNBC
43 COUNTRY MUSIC TV
+ 44 THE DISNEY CHANNEL
45 BLACK ENTERTAINMENT TV
46 BRAVO
47 E!-ENTERTAINMENT TV
48 MTV
49 HOME & GARDEN TV
50 VH-1
+ 51 ESPN 2
= 52 TV FOOD NETWORK
RATES___________________________________________________________________________
BASIC $21.08
TIER (=) 2.91
SATELLITE PACKAGE 1 (+) 5.72
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.69
NON-ADDRESSABLE CONVERTER 2.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 20.00
LOST/STOLEN CONVERTER EQUIP 200.00
DAMAGED CONVERTER EQUIPMENT 200.00
LOST/STOLEN REMOTE 15.00
DAMAGED REMOTE 15.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
SEGA CHANNEL 12.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and assessments and do
not include franchise fees of 4% of your total bill. Any such amounts will be
itemized on your bill.
<PAGE> 87
FALCON CABLE TV - MILLINGTON, MD (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 WMAR-TV 2-ABC BALTIMORE, MD
3 LOCAL-COMMUNITY ACCESS/PEG
4 QVC
5 WTTV 5-FOX WASHINGTON, DC
* 6 CINEMAX
7 WJLA-TV 7-ABC WASHINGTON, DC
8 ESPN
9 WUSA 9-CBS WASHINGTON, DC
10 WBFF 45-FOX BALTIMORE, MD
11 WBAL-TV 11-NBC BALTIMORE, MD
12 WETA-TV 26-PBS WASHINGTON, DC
12 MOR MUSIC TV
13 WJZ-TV 13-CBS BALTIMORE, MD
14 WNUV-TV 54-IND/UPN BALTIMORE, MD
* 15 SHOWTIME
16 WBOC-TV 16-CBS SALISBURY, MD
17 HOME TEAM SPORTS
18 WDCA 20-IND/UPN WASHINGTON, DC
19 LOCAL - COMMUNITY ACCESS/PEG
* 20 HBO
* 21 THE MOVIE CHANNEL
22 WMPT 22-PBS ANNAPOLIS, MD
+ 23 THE DISCOVERY CHANNEL
+ 24 THE FAMILY CHANNEL
+ 25 WTBS 17-IND ATLANTA, GA
26 WHSW-TV 24-HSN BALTIMORE, MD
27 CNN
= 28 USA NETWORK
= 29 ARTS & ENTERTAINMENT
= 30 SCI-FI CHANNEL
= 31 THE WEATHER CHANNEL
= 32 THE NASHVILLE NETWORK
33 NICKELODEON
34 TNT
35 LIFETIME
36 FX
37 C-SPAN
38 CNN HEADLINE NEWS
39 AMERICAN MOVIE CLASSICS
40 TRINITY BROADCAST NETWORK
41 THE LEARNING CHANNEL
42 CNBC
43 COUNTRY MUSIC TV
+ 44 THE DISNEY CHANNEL
45 BLACK ENTERTAINMENT TV
46 BRAVO
47 E!-ENTERTAINMENT TV
48 MTV
49 HOME & GARDEN TV
50 VH-1
+ 51 ESPN 2
= 52 TV FOOD NETWORK
RATES___________________________________________________________________________
BASIC $20.90
TIER (=) 3.25
SATELLITE PACKAGE 1 (+) 5.72
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.69
NON-ADDRESSABLE CONVERTER 2.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 20.00
LOST/STOLEN CONVERTER EQUIP 200.00
DAMAGED CONVERTER EQUIPMENT 200.00
LOST/STOLEN REMOTE 15.00
DAMAGED REMOTE 15.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
SEGA CHANNEL 12.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and assessments and do
not include franchise fees of 4% of your total bill. Any such amounts will be
itemized on your bill.
<PAGE> 88
FALCON CABLE TV - TRAPPE, MD (Effective 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 WMAR-TV 2-ABC BALTIMORE, MD
3 LOCAL-COMMUNITY ACCESS/PEG
4 QVC
5 WTTG 5-FOX WASHINGTON, DC
* 6 CINEMAX
7 WJLA-TV 7-ABC WASHINGTON, DC
8 ESPN
9 WUSA 9-CBS WASHINGTON, DC
10 WBFF 45-FOX BALTIMORE, MD
11 WBAL-TV 11-NBC BALTIMORE, MD
12 WETA-TV 26-PBS WASHINGTON, DC
12 MOR MUSIC TV
13 WJZ-TV 13-CBS BALTIMORE, MD
14 WNUV-TV 54-IND/UPN BALTIMORE, MD
* 15 SHOWTIME
16 WBOC-TV 16-CBS SALISBURY, MD
17 HOME TEAM SPORTS
18 WDCA 20-IND/UPN WASHINGTON, DC
19 LOCAL - COMMUNITY ACCESS/PEG
* 20 HBO
* 21 THE MOVIE CHANNEL
22 WMPT 22-PBS ANNAPOLIS, MD
+ 23 THE DISCOVERY CHANNEL
+ 24 THE FAMILY CHANNEL
+ 25 WTBS 17-IND ATLANTA, GA
26 WHSW-TV 24-HSN BALTIMORE, MD
27 CNN
= 28 USA NETWORK
= 29 ARTS & ENTERTAINMENT
= 30 SCI-FI CHANNEL
= 31 THE WEATHER CHANNEL
= 32 THE NASHVILLE NETWORK
33 NICKELODEON
34 TNT
35 LIFETIME
36 FX
37 C-SPAN
38 CNN HEADLINE NEWS
39 AMERICAN MOVIE CLASSICS
40 TRINITY BROADCAST NETWORK
41 THE LEARNING CHANNEL
42 CNBC
43 COUNTRY MUSIC TV
+ 44 THE DISNEY CHANNEL
45 BLACK ENTERTAINMENT TV
46 BRAVO
47 E!-ENTERTAINMENT TV
48 MTV
49 HOME & GARDEN TV
50 VH-1
+ 51 ESPN 2
= 52 TV FOOD NETWORK
RATES___________________________________________________________________________
BASIC $20.08
TIER (=) 4.07
SATELLITE PACKAGE 1 (+) 5.72
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) at cost
REMOTE 0.69
NON-ADDRESSABLE CONVERTER 2.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 20.00
LOST/STOLEN CONVERTER EQUIP 200.00
DAMAGED CONVERTER EQUIPMENT 200.00
LOST/STOLEN REMOTE 15.00
DAMAGED REMOTE 15.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
SEGA CHANNEL 12.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and assessments. Any
such amounts will be itemized on your bill.
<PAGE> 89
FALCON CABLE TV - OXFORD, MD (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 WMAR-TV 2-ABC BALTIMORE, MD
3 LOCAL-COMMUNITY ACCESS/PEG
4 QVC
5 WTTG 5-FOX WASHINGTON, DC
* 6 CINEMAX
7 WJLA-TV 7-ABC WASHINGTON, DC
8 ESPN
9 WUSA 9-CBS WASHINGTON, DC
10 WBFF 45-FOX BALTIMORE, MD
11 WBAL-TV 11-NBC BALTIMORE, MD
12 WETA-TV 26-PBS WASHINGTON, DC
12 MOR MUSIC TV
13 WJZ-TV 13-CBS BALTIMORE, MD
14 WNUV-TV 54-IND/UPN BALTIMORE, MD
* 15 SHOWTIME
16 WBOC-TV 16-CBS SALISBURY, MD
17 HOME TEAM SPORTS
18 WDCA 20-IND/UPN WASHINGTON, DC
19 LOCAL - COMMUNITY ACCESS/PEG
* 20 HBO
* 21 THE MOVIE CHANNEL
22 WMPT 22-PBS ANNAPOLIS, MD
+ 23 THE DISCOVERY CHANNEL
+ 24 THE FAMILY CHANNEL
+ 25 WTBS 17-IND ATLANTA, GA
26 WHSW-TV-HSN BALTIMORE, MD
27 CNN
= 28 USA NETWORK
= 29 ARTS & ENTERTAINMENT
= 30 SCI-FI CHANNEL
= 31 THE WEATHER CHANNEL
= 32 THE NASHVILLE NETWORK
33 NICKELODEON
34 TNT
35 LIFETIME
36 FX
37 C-SPAN
38 CNN HEADLINE NEWS
39 AMERICAN MOVIE CLASSICS
40 TRINITY BROADCAST NETWORK
41 THE LEARNING CHANNEL
42 CNBC
43 COUNTRY MUSIC TV
+ 44 THE DISNEY CHANNEL
45 BLACK ENTERTAINMENT TV
46 BRAVO
47 E!-ENTERTAINMENT TV
48 MTV
49 HOME & GARDEN TV
50 VH-1
+ 51 ESPN 2
= 52 TV FOOD NETWORK
RATES___________________________________________________________________________
BASIC $20.12
TIER (=) 4.26
SATELLITE PACKAGE 1 (+) 5.72
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.69
NON-ADDRESSABLE CONVERTER 2.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 20.00
LOST/STOLEN CONVERTER EQUIP 200.00
DAMAGED CONVERTER EQUIPMENT 200.00
LOST/STOLEN REMOTE 15.00
DAMAGED REMOTE 15.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
SEGA CHANNEL 12.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 are available for
rent can only be received via cable through a converter box, unless you have a
cable-ready TV set converter boxes at the low rate listed above.
The above rates may not include applicable taxes, fees and
assessments. Any such amounts will be itemized on your bill.
<PAGE> 90
FALCON CABLE TV - QUEEN ANNE'S COUNTY, MD (Effective: 10/1/96)
CHANNEL LINE-UP ---------------------------------------------------------------
2 WMAR-TV 2-ABC BALTIMORE, MD
3 LOCAL-COMMUNITY ACCESS/PEG
4 QVC
5 WTTG 5-FOX WASHINGTON, DC
* 6 CINEMAX
7 WJLA-TV 7-ABC WASHINGTON, DC
8 ESPN
9 WUSA 9-CBS WASHINGTON, DC
10 WBFF 45-FOX BALTIMORE, MD
11 WBAL-TV 11-NBC BALTIMORE, MD
12 WETA-TV 26-PBS WASHINGTON, DC
12 MOR MUSIC TV
13 WJZ-TV 13-CBS BALTIMORE, MD
14 WNUV-TV 54-IND/UPN BALTIMORE, MD
* 15 SHOWTIME
16 WBOC-TV 16-CBS SALISBURY, MD
17 HOME TEAM SPORTS
18 WDCA 20-IND/UPN WASHINGTON, DC
19 LOCAL - COMMUNITY ACCESS/PEG
* 20 HBO
* 21 THE MOVIE CHANNEL
22 WMPT 22-PBS ANNAPOLIS, MD
+ 23 THE DISCOVERY CHANNEL
+ 24 THE FAMILY CHANNEL
+ 25 WTBS 17-IND ATLANTA, GA
26 WHSW-TV 24-HSN BALTIMORE, MD
27 CNN
= 28 USA NETWORK
= 29 ARTS & ENTERTAINMENT
= 30 SCI-FI CHANNEL
= 31 THE WEATHER CHANNEL
= 32 THE NASHVILLE NETWORK
33 NICKELODEON
34 TNT
35 LIFETIME
36 FX
37 C-SPAN
38 CNN HEADLINE NEWS
39 AMERICAN MOVIE CLASSICS
40 TRINITY BROADCAST NETWORK
41 THE LEARNING CHANNEL
42 CNBC
43 COUNTRY MUSIC TV
+ 44 THE DISNEY CHANNEL
45 BLACK ENTERTAINMENT TV
46 BRAVO
47 E! - ENTERTAINMENT TV
48 MTV
49 HOME & GARDEN TV
50 VH-1
+ 51 ESPN 2
= 52 TV FOOD NETWORK
RATES___________________________________________________________________________
BASIC $20.31
TIER (=) 3.72
SATELLITE PACKAGE 1 (+) 5.72
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.69
NON-ADDRESSABLE CONVERTER 2.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 20.00
LOST/STOLEN CONVERTER EQUIP 200.00
DAMAGED CONVERTER EQUIPMENT 200.00
LOST/STOLEN REMOTE 15.00
DAMAGED REMOTE 15.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
SEGA CHANNEL 12.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and
assessments and do not include franchise fees of 3% of your total bill. Any
such amounts will be itemized on your bill.
<PAGE> 91
FALCON CABLE TV - QUEENSTOWN, MD (Effective: 10/1/96)
CHANNEL LINE-UP ---------------------------------------------------------------
2 WMAR-TV 2-ABC BALTIMORE, MD
3 LOCAL-COMMUNITY ACCESS/PEG
4 QVC
5 WTTG 5-FOX WASHINGTON, DC
* 6 CINEMAX
7 WJLA-TV 7-ABC WASHINGTON, DC
8 ESPN
9 WUSA 9-CBS WASHINGTON, DC
10 WBFF 45-FOX BALTIMORE, MD
11 WBAL-TV 11-NBC BALTIMORE, MD
12 WETA-TV 26-PBS WASHINGTON, DC
12 MOR MUSIC TV
13 WJZ-TV 13-CBS BALTIMORE, MD
14 WNUV-TV 54-IND/UPN BALTIMORE, MD
* 15 SHOWTIME
16 WBOC-TV 16-CBS SALISBURY, MD
17 HOME TEAM SPORTS
18 WDCA 20-IND/UPN WASHINGTON, DC
19 LOCAL - COMMUNITY ACCESS/PEG
* 20 HBO
* 21 THE MOVIE CHANNEL
22 WMPT 22-PBS ANNAPOLIS, MD
+ 23 THE DISCOVERY CHANNEL
+ 24 THE FAMILY CHANNEL
+ 25 WTBS 17-IND ATLANTA, GA
26 WHSW-TV 24-HSN BALTIMORE, MD
27 CNN
= 28 USA NETWORK
= 29 ARTS & ENTERTAINMENT
= 30 SCI-FI CHANNEL
= 31 THE WEATHER CHANNEL
= 32 THE NASHVILLE NETWORK
33 NICKELODEON
34 TNT
35 LIFETIME
36 FX
37 C-SPAN
38 CNN HEADLINE NEWS
39 AMERICAN MOVIE CLASSICS
40 TRINITY BROADCAST NETWORK
41 THE LEARNING CHANNEL
42 CNBC
43 COUNTRY MUSIC TV
+ 44 THE DISNEY CHANNEL
45 BLACK ENTERTAINMENT TV
46 BRAVO
47 E! - ENTERTAINMENT TV
48 MTV
49 HOME & GARDEN TV
50 VH-1
+ 51 ESPN 2
= 52 TV FOOD NETWORK
RATES___________________________________________________________________________
BASIC $20.67
TIER (=) 3.33
SATELLITE PACKAGE 1 (+) 5.72
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.69
NON-ADDRESSABLE CONVERTER 2.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 20.00
LOST/STOLEN CONVERTER EQUIP 200.00
DAMAGED CONVERTER EQUIPMENT 200.00
LOST/STOLEN REMOTE 15.00
DAMAGED REMOTE 15.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
SEGA CHANNEL 12.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and
assessments and do not include franchise fees of 3% of your total bill. Any
such amounts will be itemized on your bill.
<PAGE> 92
FALCON CABLE TV - ROCK HALL, MD (Effective: 10/1/96)
CHANNEL LINE-UP ---------------------------------------------------------------
2 WMAR-TV 2-ABC BALTIMORE, MD
3 LOCAL-COMMUNITY ACCESS/PEG
4 QVC
5 WTTG 5-FOX WASHINGTON, DC
* 6 CINEMAX
7 WJLA-TV 7-ABC WASHINGTON, DC
8 ESPN
9 WUSA 9-CBS WASHINGTON, DC
10 WBFF 45-FOX BALTIMORE, MD
11 WBAL-TV 11-NBC BALTIMORE, MD
12 WETA-TV 26-PBS WASHINGTON, DC
12 MOR MUSIC TV
13 WJZ-TV 13-CBS BALTIMORE, MD
14 WNUV-TV 54-IND/UPN BALTIMORE, MD
* 15 SHOWTIME
16 WBOC-TV 16-CBS SALISBURY, MD
17 HOME TEAM SPORTS
18 WDCA 20-IND/UPN WASHINGTON, DC
19 LOCAL - COMMUNITY ACCESS/PEG
* 20 HBO
* 21 THE MOVIE CHANNEL
22 WMPT 22-PBS ANNAPOLIS, MD
+ 23 THE DISCOVERY CHANNEL
+ 24 THE FAMILY CHANNEL
+ 25 WTBS 17-IND ATLANTA, GA
26 WHSW-TV 24-HSN BALTIMORE, MD
27 CNN
= 28 USA NETWORK
= 29 ARTS & ENTERTAINMENT
= 30 SCI-FI CHANNEL
= 31 THE WEATHER CHANNEL
= 32 THE NASHVILLE NETWORK
33 NICKELODEON
34 TNT
35 LIFETIME
36 FX
37 C-SPAN
38 CNN HEADLINE NEWS
39 AMERICAN MOVIE CLASSICS
40 TRINITY BROADCAST NETWORK
41 THE LEARNING CHANNEL
42 CNBC
43 COUNTRY MUSIC TV
+ 44 THE DISNEY CHANNEL
45 BLACK ENTERTAINMENT TV
46 BRAVO
47 E! - ENTERTAINMENT TV
48 MTV
49 HOME & GARDEN TV
50 VH-1
+ 51 ESPN 2
= 52 TV FOOD NETWORK
RATES___________________________________________________________________________
BASIC $20.35
TIER (=) 3.82
SATELLITE PACKAGE 1 (+) 5.72
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.69
NON-ADDRESSABLE CONVERTER 2.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 20.00
LOST/STOLEN CONVERTER EQUIP 200.00
DAMAGED CONVERTER EQUIPMENT 200.00
LOST/STOLEN REMOTE 15.00
DAMAGED REMOTE 15.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
SEGA CHANNEL 12.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and
assessments and do not include franchise fees of 5% of your basic rate. Any
such amounts will be itemized on your bill.
<PAGE> 93
FALCON CABLE TV - ST. MICHAELS, MD (Effective: 10/1/96)
CHANNEL LINE-UP ---------------------------------------------------------------
2 WMAR-TV 2-ABC BALTIMORE, MD
3 LOCAL-COMMUNITY ACCESS/PEG
4 QVC
5 WTTG 5-FOX WASHINGTON, DC
* 6 CINEMAX
7 WJLA-TV 7-ABC WASHINGTON, DC
8 ESPN
9 WUSA 9-CBS WASHINGTON, DC
10 WBFF 45-FOX BALTIMORE, MD
11 WBAL-TV 11-NBC BALTIMORE, MD
12 WETA-TV 26-PBS WASHINGTON, DC
12 MOR MUSIC TV
13 WJZ-TV 13-CBS BALTIMORE, MD
14 WNUV-TV 54-IND/UPN BALTIMORE, MD
* 15 SHOWTIME
16 WBOC-TV 16-CBS SALISBURY, MD
17 HOME TEAM SPORTS
18 WDCA 20-IND/UPN WASHINGTON, DC
19 LOCAL - COMMUNITY ACCESS/PEG
* 20 HBO
* 21 THE MOVIE CHANNEL
22 WMPT 22-PBS ANNAPOLIS, MD
+ 23 THE DISCOVERY CHANNEL
+ 24 THE FAMILY CHANNEL
+ 25 WTBS 17-IND ATLANTA, GA
26 WHSW-TV 24-HSN BALTIMORE, MD
27 CNN
= 28 USA NETWORK
= 29 ARTS & ENTERTAINMENT
= 30 SCI-FI CHANNEL
= 31 THE WEATHER CHANNEL
= 32 THE NASHVILLE NETWORK
33 NICKELODEON
34 TNT
35 LIFETIME
36 FX
37 C-SPAN
38 CNN HEADLINE NEWS
39 AMERICAN MOVIE CLASSICS
40 TRINITY BROADCAST NETWORK
41 THE LEARNING CHANNEL
42 CNBC
43 COUNTRY MUSIC TV
+ 44 THE DISNEY CHANNEL
45 BLACK ENTERTAINMENT TV
46 BRAVO
47 E! - ENTERTAINMENT TV
48 MTV
49 HOME & GARDEN TV
50 VH-1
+ 51 ESPN 2
= 52 TV FOOD NETWORK
RATES___________________________________________________________________________
BASIC $20.84
TIER (=) 3.36
SATELLITE PACKAGE 1 (+) 5.72
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.69
NON-ADDRESSABLE CONVERTER 2.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 20.00
LOST/STOLEN CONVERTER EQUIP 200.00
DAMAGED CONVERTER EQUIPMENT 200.00
LOST/STOLEN REMOTE 15.00
DAMAGED REMOTE 15.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
SEGA CHANNEL 12.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and
assessments and do not include franchise fees of 3% of your total bill. Any
such amounts will be itemized on your bill.
<PAGE> 94
FALCON CABLE TV - SUDLERSVILLE, MD (Effective: 10/1/96)
CHANNEL LINE-UP ---------------------------------------------------------------
2 WMAR-TV 2-ABC BALTIMORE, MD
3 LOCAL-COMMUNITY ACCESS/PEG
4 QVC
5 WTTG 5-FOX WASHINGTON, DC
* 6 CINEMAX
7 WJLA-TV 7-ABC WASHINGTON, DC
8 ESPN
9 WUSA 9-CBS WASHINGTON, DC
10 WBFF 45-FOX BALTIMORE, MD
11 WBAL-TV 11-NBC BALTIMORE, MD
12 WETA-TV 26-PBS WASHINGTON, DC
12 MOR MUSIC TV
13 WJZ-TV 13-CBS BALTIMORE, MD
14 WNUV-TV 54-IND/UPN BALTIMORE, MD
* 15 SHOWTIME
16 WBOC-TV 16-CBS SALISBURY, MD
17 HOME TEAM SPORTS
18 WDCA 20-IND/UPN WASHINGTON, DC
19 LOCAL - COMMUNITY ACCESS/PEG
* 20 HBO
* 21 THE MOVIE CHANNEL
22 WMPT 22-PBS ANNAPOLIS, MD
+ 23 THE DISCOVERY CHANNEL
+ 24 THE FAMILY CHANNEL
+ 25 WTBS 17-IND ATLANTA, GA
26 WHSW-TV 24-HSN BALTIMORE, MD
27 CNN
= 28 USA NETWORK
= 29 ARTS & ENTERTAINMENT
= 30 SCI-FI CHANNEL
= 31 THE WEATHER CHANNEL
= 32 THE NASHVILLE NETWORK
33 NICKELODEON
34 TNT
35 LIFETIME
36 FX
37 C-SPAN
38 CNN HEADLINE NEWS
39 AMERICAN MOVIE CLASSICS
40 TRINITY BROADCAST NETWORK
41 THE LEARNING CHANNEL
42 CNBC
43 COUNTRY MUSIC TV
+ 44 THE DISNEY CHANNEL
45 BLACK ENTERTAINMENT TV
46 BRAVO
47 E! - ENTERTAINMENT TV
48 MTV
49 HOME & GARDEN TV
50 VH-1
+ 51 ESPN 2
= 52 TV FOOD NETWORK
RATES___________________________________________________________________________
BASIC $20.66
TIER (=) 3.58
SATELLITE PACKAGE 1 (+) 5.72
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.69
NON-ADDRESSABLE CONVERTER 2.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 20.00
LOST/STOLEN CONVERTER EQUIP 200.00
DAMAGED CONVERTER EQUIPMENT 200.00
LOST/STOLEN REMOTE 15.00
DAMAGED REMOTE 15.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
SEGA CHANNEL 12.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and assessments and do
not include franchise fees of 3% of your total bill. Any such amounts will be
itemized on your bill.
<PAGE> 95
FALCON CABLE TV - TALBOT COUNTY, MD (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 WMAR-TV 2-ABC BALTIMORE, MD
3 LOCAL-COMMUNITY ACCESS/PEG
4 QVC
5 WTTG 5-FOX WASHINGTON, DC
* 6 CINEMAX
7 WJLA-TV 7-ABC WASHINGTON, DC
8 ESPN
9 WUSA 9-CBS WASHINGTON, DC
10 WBFF 45-FOX BALTIMORE, MD
11 WBAL-TV 11-NBC BALTIMORE, MD
12 WETA-TV 26-PBS WASHINGTON, DC
12 MOR MUSIC TV
13 WJZ-TV 13-CBS BALTIMORE, MD
14 WNUV-TV 54-IND/UPN BALTIMORE, MD
* 15 SHOWTIME
16 WBOC-TV 16-CBS SALISBURY, MD
17 HOME TEAM SPORTS
18 WDCA 20-IND/UPN WASHINGTON, DC
19 LOCAL - COMMUNITY ACCESS/PEG
* 20 HBO
* 21 THE MOVIE CHANNEL
22 WMPT 22-PBS ANNAPOLIS, MD
+ 23 THE DISCOVERY CHANNEL
+ 24 THE FAMILY CHANNEL
+ 25 WTBS 17-IND ATLANTA, GA
26 WHSW-TV-HSN BALTIMORE, MD
27 CNN
= 28 USA NETWORK
= 29 ARTS & ENTERTAINMENT
= 30 SCI-FI CHANNEL
= 31 THE WEATHER CHANNEL
= 32 THE NASHVILLE NETWORK
33 NICKELODEON
34 TNT
35 LIFETIME
36 FX
37 C-SPAN
38 CNN HEADLINE NEWS
39 AMERICAN MOVIE CLASSICS
40 TRINITY BROADCAST NETWORK
41 THE LEARNING CHANNEL
42 CNBC
43 COUNTRY MUSIC TV
+ 44 THE DISNEY CHANNEL
45 BLACK ENTERTAINMENT TV
46 BRAVO
47 E!-ENTERTAINMENT TV
48 MTV
49 HOME & GARDEN TV
50 VH-1
+ 51 ESPN 2
= 52 TV FOOD NETWORK
RATES___________________________________________________________________________
BASIC $21.78
TIER (=) 3.66
SATELLITE PACKAGE 1 (+) 5.72
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.69
NON-ADDRESSABLE CONVERTER 2.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 20.00
LOST/STOLEN CONVERTER EQUIP 200.00
DAMAGED CONVERTER EQUIPMENT 200.00
LOST/STOLEN REMOTE 15.00
DAMAGED REMOTE 15.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
SEGA CHANNEL 12.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and
assessments. Any such amounts will be itemized on your bill.
<PAGE> 96
FALCON CABLE TV - TEMPLEVILLE, MD (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 WMAR-TV 2-ABC BALTIMORE, MD
3 LOCAL-COMMUNITY ACCESS/PEG
4 QVC
5 WTTV 5-FOX WASHINGTON, DC
6 CINEMAX
7 WJLA-TV 7-ABC WASHINGTON, DC
8 ESPN
9 WUSA 9-CBS WASHINGTON, DC
10 WBFF 45-FOX BALTIMORE, MD
11 WBAL-TV 11-NBC BALTIMORE, MD
12 WETA-TV 26-PBS WASHINGTON, DC
12 MOR MUSIC TV
13 WJZ-TV 13-CBS BALTIMORE, MD
14 WNUV-TV 54-IND/UPN BALTIMORE, MD
* 15 SHOWTIME
16 WBOC-TV 16-CBS SALISBURY, MD
17 HOME TEAM SPORTS
18 WDCA 20-IND/UPN WASHINGTON, DC
19 LOCAL - COMMUNITY ACCESS/PEG
* 20 HBO
* 21 THE MOVIE CHANNEL
22 WMPT 22-PBS ANNAPOLIS, MD
+ 23 THE DISCOVERY CHANNEL
+ 24 THE FAMILY CHANNEL
+ 25 WTBS 17-IND ATLANTA, GA
26 WHSW-TV-HSN BALTIMORE, MD
27 CNN
= 28 USA NETWORK
= 29 ARTS & ENTERTAINMENT
= 30 SCI-FI CHANNEL
= 31 THE WEATHER CHANNEL
= 32 THE NASHVILLE NETWORK
33 NICKELODEON
34 TNT
35 LIFETIME
36 FX
37 C-SPAN
38 CNN HEADLINE NEWS
39 AMERICAN MOVIE CLASSICS
40 TRINITY BROADCAST NETWORK
41 THE LEARNING CHANNEL
42 CNBC
43 COUNTRY MUSIC TV
+ 44 THE DISNEY CHANNEL
45 BLACK ENTERTAINMENT TV
46 BRAVO
47 E!-ENTERTAINMENT TV
48 MTV
49 HOME & GARDEN TV
50 VH-1
+ 51 ESPN 2
= 52 TV FOOD NETWORK
RATES___________________________________________________________________________
BASIC $21.05
TIER (=) 3.04
SATELLITE PACKAGE 1 (+) 5.72
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.69
NON-ADDRESSABLE CONVERTER 2.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 20.00
LOST/STOLEN CONVERTER EQUIP 200.00
DAMAGED CONVERTER EQUIPMENT 200.00
LOST/STOLEN REMOTE 15.00
DAMAGED REMOTE 15.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
SEGA CHANNEL 12.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and
assessments. Any such amounts will be itemized on your bill.
<PAGE> 97
FALCON CABLE TV - CALIFORNIA CITY, CA (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 KCBS-TV 2-CBS LOS ANGELES, CA
3 ARTS & ENTERTAINMENT
4 KNBC 4-NBC LOS ANGELES, CA
5 KTLA 5-IND/WBN 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/UPN LOS ANGELES, CA
14 QVC
15 KERO-TV 23-CBS/ABC BAKERSFIELD, CA
16 WTBS 17-IND ATLANTA, GA
17 C-SPAN
+ 18 CNN
19 THE WEATHER CHANNEL
19 LOCAL - GOVERNMENT ACCESS
+ 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 KBAK-TV 29-ABC/CBS BAKERSFIELD, CA
* 37 SHOWTIME
* 38 THE MOVIE CHANNEL
+ 39 THE DISNEY CHANNEL
+ 40 USA NETWORK
41 HOME SHOPPING NETWORK
+ 42 TV FOOD NETWORK
RATES___________________________________________________________________________
BASIC $15.80
TIER (=) 6.00
SATELLITE PACKAGE 1(+) 6.70
BASIC ON ADDITIONAL OUTLET 0.00
ADDL SATELLITE PACKAGE 50% of 1st
Outlet
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.34
ADDRESSABLE CONVERTER 4.49
NON-ADDRESSABLE CONVERTER 2.04
RADIO SERVICE 1.95
VIDEO CONTROL CENTER 0.89
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 25.00
CONVERTER EQUIPMENT DEPOSIT 25.00
LOST/STOLEN CONVERTER EQUIP 250.00
FIELD COLLECTION 15.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
PREMIUM ON ADDL OUTLET 5.20
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and
assessments. Any such amounts will be itemized on your bill.
<PAGE> 98
FALCON CABLE TV - REDMOND, OR (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 KATU 2-ABC PORTLAND, OR
3 BLAZERCABLE
3 LOCAL - GOVERNMENT ACCESS
4 QVC
5 KTVZ 21-NBC BEND, OR
6 KOIN 6-CBS PORTLAND, OR
7 KOAB-TV 3-PBS BEND, OR
8 THE DISCOVERY CHANNEL
9 KEZI 9-ABC EUGENE, OR
10 ESPN
11 ARTS & ENTERTAINMENT
12 KPTV 12-IND/UPN PORTLAND, OR
13 KPDX 49-FOX VANCOUVER, WA
14 NOSTALGIA
15 THE WEATHER CHANNEL
16 LIFETIME
17 NICKELODEON
18 BRAVO
* 19 SHOWTIME
* 20 HBO
* 21 THE MOVIE CHANNEL
* 22 ENCORE
+ 23 THE NASHVILLE NETWORK
+ 24 WTBS 17-IND ATLANTA, GA
+ 25 TNT
+ 26 CNN
+ 27 THE FAMILY CHANNEL
+ 28 THE DISNEY CHANNEL
= 29 USA NETWORK
= 30 SCI-FI CHANNEL
= 31 VH-1
60 COMEDY CENTRAL
61 HOME & GARDEN TV
RATES___________________________________________________________________________
BASIC $22.66
TIER (=) 2.08
SATELLITE PACKAGE 1 (+) 7.83
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.22
ADDRESSABLE CONVERTER 3.72
NON-ADDRESSABLE CONVERTER 1.49
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
LOST/STOLEN CONVERTER EQUIP 150.00
PREMIUM SERVICES (*)------------------------------------------------------------
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
ENCORE 5.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and assessments. Any
such amounts will be itemized on your bill.
<PAGE> 99
FALCON CABLE TV - DESCHUTES COUNTY, OR (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 KATU 2-ABC PORTLAND, OR
3 BLAZERCABLE
3 LOCAL - GOVERNMENT ACCESS
4 QVC
5 KTVZ 21-NBC BEND, OR
6 KOIN 6-CBS PORTLAND, OR
7 KOAB-TV 3-PBS BEND, OR
8 THE DISCOVERY CHANNEL
9 KEZI 9-ABC EUGENE, OR
10 ESPN
11 ARTS & ENTERTAINMENT
12 KPTV 12-IND/UPN PORTLAND, OR
13 KPDX 49-FOX VANCOUVER, WA
14 NOSTALGIA
15 THE WEATHER CHANNEL
16 LIFETIME
17 NICKELODEON
18 BRAVO
* 19 SHOWTIME
* 20 HBO
* 21 THE MOVIE CHANNEL
* 22 ENCORE
+ 23 THE NASHVILLE NETWORK
+ 24 WTBS 17-IND ATLANTA, GA
+ 25 TNT
+ 26 CNN
+ 27 THE FAMILY CHANNEL
+ 28 THE DISNEY CHANNEL
= 29 USA NETWORK
= 30 SCI-FI CHANNEL
= 31 VH-1
60 COMEDY CENTRAL
61 HOME & GARDEN TV
RATES___________________________________________________________________________
BASIC $22.97
TIER (=) 2.09
SATELLITE PACKAGE 1 (+) 7.83
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.22
ADDRESSABLE CONVERTER 3.72
NON-ADDRESSABLE CONVERTER 1.49
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
LOST/STOLEN CONVERTER EQUIP 150.00
PREMIUM SERVICES (*)------------------------------------------------------------
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
ENCORE 5.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can
only be received via cable through a converter box, unless you have
a cable-ready TV set. Converter boxes are available for rent at the
low rate listed above.
The above rates may not include applicable taxes, fees and assessments.
Any such amounts will be itemized on your bill.
<PAGE> 100
FALCON CABLE TV - ADAIR COUNTY, KY (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 WKSO-TV 29-PBS SOMERSET, KY
3 WTBS 17-IND ATLANTA, GA
4 ESPN
5 WLEX-TV 18-NBC LEXINGTON, KY
6 WKYT-TV 27-CBS LEXINGTON, KY
7 WDKY-TV 56-FOX DANVILLE, KY
8 LOCAL-COMMUNITY ACCESS/PEG
9 WDRB-TV 41-FOX LOUISVILLE, KY
10 WLKY-TV 32-CBS LOUISVILLE, KY
11 WHAS-TV 11-ABC LOUISVILLE, KY
12 WGRB 34-FOX CAMPBELLSVILLE, KY
13 WBKO 13-ABC BOWLING GREEN, KY
* 14 HBO
* 15 CINEMAX
16 WGN-TV
* 17 SHOWTIME
* 18 THE MOVIE CHANNEL
19 QVC
20 ARTS & ENTERTAINMENT
21 WNBC 4-NBC NEW YORK, NY
22 WWOR-TV
23 CNN
= 24 THE DISNEY CHANNEL
= 25 ESPN 2
= 26 USA NETWORK
= 27 THE FAMILY CHANNEL
= 28 THE WEATHER CHANNEL
= 29 TNT
= 30 THE NASHVILLE NETWORK
31 THE DISCOVERY CHANNEL
32 CNN HEADLINE NEWS
33 COUNTRY MUSIC TV
34 VH-1
35 SCI-FI CHANNEL
36 MTV
37 C-SPAN
38 FX
39 HOME SHOPPING NETWORK
40 NICKELODEON
RATES___________________________________________________________________________
BASIC $18.94
TIER (=) 5.48
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.87
NON-ADDRESSABLE CONVERTER 1.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 10.00
LOST/STOLEN CONVERTER EQUIP 200.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready
TV set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and assessments. Any
such amounts will be itemized on your bill.
<PAGE> 101
FALCON CABLE TV - COLUMBIA, KY (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 WKSO-TV 29-PBS SOMERSET, KY
3 WTBS 17-IND ATLANTA, GA
4 ESPN
5 WLEX-TV 18-NBC LEXINGTON, KY
6 WKYT-TV 27-CBS LEXINGTON, KY
7 WDKY-TV 56-FOX DANVILLE, KY
8 LOCAL - COMMUNITY ACCESS/PEG
9 WDRB-TV 41-FOX LOUISVILLE, KY
10 WLKY-TV 32-CBS LOUISVILLE, KY
11 WHAS-TV 11-ABC LOUISVILLE, KY
12 WGRB 34-FOX CAMPBELLSVILLE, KY
13 WBKO 13-ABC BOWLING GREEN, KY
* 14 HBO
* 15 CINEMAX
16 WGN-TV
* 17 SHOWTIME
* 18 THE MOVIE CHANNEL
19 QVC
20 ARTS & ENTERTAINMENT
21 WNBC 4-NBC NEW YORK, NY
22 WWOR-TV
23 CNN
= 24 THE DISNEY CHANNEL
= 25 ESPN 2
= 26 USA NETWORK
= 27 THE FAMILY CHANNEL
= 28 THE WEATHER CHANNEL
= 29 TNT
= 30 THE NASHVILLE NETWORK
31 THE DISCOVERY CHANNEL
32 CNN HEADLINE NEWS
33 COUNTRY MUSIC TV
34 VH-1
35 SCI-FI CHANNEL
36 MTV
37 C-SPAN
38 FX
39 HOME SHOPPING NETWORK
40 NICKELODEON
RATES___________________________________________________________________________
BASIC $18.54
TIER (=) 5.85
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.87
NON-ADDRESSABLE CONVERTER 1.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 10.00
LOST/STOLEN CONVERTER EQUIP 200.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
SHOWTIME 10.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and assessments. Any
such amounts will be itemized on your bill.
<PAGE> 102
FALCON CABLE TV - EUBANK, KY (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 WKSO-TV 29-PBS SOMERSET, KY
3 NICKELODEON
4 ARTS & ENTERTAINMENT
5 WLEX-TV 18-NBC LEXINGTON, KY
6 WTVQ-TV 36-ABC LEXINGTON, KY
7 WKYT-TV 27-CBS LEXINGTON, KY
8 WDKY-TV 56-FOX DANVILLE, KY
9 WGRB 34-FOX CAMPBELLSVILLE, KY
10 C-SPAN
11 CNN
12 TNT
+ 13 THE DISNEY CHANNEL
* 14 HBO
* 15 CINEMAX
* 16 THE MOVIE CHANNEL
17 ESPN
18 THE NASHVILLE NETWORK
19 QVC
20 NEW INSPIRATIONAL NETWORK
21 MTV
22 COUNTRY MUSIC TV
+ 23 WTBS 17-IND ATLANTA, GA
+ 24 WWOR-TV
+ 25 WGN-TV
+ 26 THE HISTORY CHANNEL
= 27 USA NETWORK
= 28 SCI-FI CHANNEL
= 29 THE FAMILY CHANNEL
= 30 THE WEATHER CHANNEL
31 CNN HEADLINE NEWS
32 E! - ENTERTAINMENT TV
33 TRINITY BROADCAST NETWORK
34 HOME SHOPPING NETWORK
35 VH-1
RATES___________________________________________________________________________
BASIC $20.49
TIER (=) 3.54
SATELLITE PACKAGE 1 (+) 5.88
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.87
NON-ADDRESSABLE CONVERTER 1.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 10.00
LOST/STOLEN CONVERTER EQUIP 200.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the rate listed above.
The above rates may not include applicable taxes, fees and assessments. Any
such amounts will be itemized on your bill.
<PAGE> 103
FALCON CABLE TV - LINCOLN COUNTY (EUBANK), KY (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 WKSO-TV 29-PBS SOMERSET, KY
3 NICKELODEON
4 ARTS & ENTERTAINMENT
5 WLEX-TV 18-NBC LEXINGTON, KY
6 WTVQ-TV 36-ABC LEXINGTON, KY
7 WKYT-TV 27-CBS LEXINGTON, KY
8 WDKY-TV 56-FOX DANVILLE, KY
9 WGRB 34-FOX CAMPBELLSVILLE, KY
10 C-SPAN
11 CNN
12 TNT
+ 13 THE DISNEY CHANNEL
* 14 HBO
* 15 CINEMAX
* 16 THE MOVIE CHANNEL
17 ESPN
18 THE NASHVILLE NETWORK
19 QVC
20 NEW INSPIRATIONAL NETWORK
21 MTV
22 COUNTRY MUSIC TV
+ 23 WTBS 17-IND ATLANTA, GA
+ 24 WWOR-TV
+ 25 WGN-TV
+ 26 THE HISTORY CHANNEL
= 27 USA NETWORK
= 28 SCI-FI CHANNEL
= 29 THE FAMILY CHANNEL
= 30 THE WEATHER CHANNEL
31 CNN HEADLINE NEWS
32 E! - ENTERTAINMENT TV
33 TRINITY BROADCAST NETWORK
34 HOME SHOPPING NETWORK
35 VH-1
RATES___________________________________________________________________________
BASIC $20.38
TIER (=) 3.53
SATELLITE PACKAGE 1 (+) 5.88
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.87
NON-ADDRESSABLE CONVERTER 1.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 10.00
LOST/STOLEN CONVERTER EQUIP 200.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the rate listed above.
The above rates may not include applicable taxes, fees and assessments. Any
such amounts will be itemized on your bill.
<PAGE> 104
FALCON CABLE TV - PULASKI COUNTY (NORTH), KY (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 WKSO-TV 29-PBS SOMERSET, KY
3 NICKELODEON
4 ARTS & ENTERTAINMENT
5 WLEX-TV 18-NBC LEXINGTON, KY
6 WTVQ-TV 36-ABC LEXINGTON, KY
7 WKYT-TV 27-CBS LEXINGTON, KY
8 WDKY-TV 56-FOX DANVILLE, KY
9 WGRB 34-FOX CAMPBELLSVILLE, KY
10 C-SPAN
11 CNN
12 TNT
+ 13 THE DISNEY CHANNEL
* 14 HBO
* 15 CINEMAX
* 16 THE MOVIE CHANNEL
17 ESPN
18 THE NASHVILLE NETWORK
19 QVC
20 NEW INSPIRATIONAL NETWORK
21 MTV
22 COUNTRY MUSIC TV
+ 23 WTBS 17-IND ATLANTA, GA
+ 24 WWOR-TV
+ 25 WGN-TV
+ 26 THE HISTORY CHANNEL
= 27 USA NETWORK
= 28 SCI-FI CHANNEL
= 29 THE FAMILY CHANNEL
= 30 THE WEATHER CHANNEL
31 CNN HEADLINE NEWS
32 E!-ENTERTAINMENT TV
33 TRINITY BROADCAST NETWORK
34 HOME SHOPPING NETWORK
35 VH-1
RATES___________________________________________________________________________
BASIC $20.28
TIER (=) 3.57
SATELLITE PACKAGE 1 (+) 5.88
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.87
NON-ADDRESSABLE CONVERTER 1.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 10.00
LOST/STOLEN CONVERTER EQUIP 200.00
PREMIUM SERVICES (*)------------------------------------------------------------
CINEMAX 10.95
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and assessments. Any
such amounts will be itemized on your bill.
<PAGE> 105
FALCON CABLE TV - LINCOLN COUNTY (MCKINNEY), KY (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 WKSO-TV 29-PBS SOMERSET, KY
3 CNN HEADLINE NEWS
4 THE NASHVILLE NETWORK
5 WLEX-TV 18-NBC LEXINGTON, KY
6 WTVQ-TV 36-ABC LEXINGTON, KY
7 WKYT-TV 27-CBS LEXINGTON, KY
8 WDRB-TV 41-FOX LOUISVILLE, KY
9 WGRB 34-FOX CAMPBELLSVILLE, KY
10 WDKY-TV 56-FOX DANVILLE, KY
11 CNN
12 NEW INSPIRATIONAL NETWORK
13 ESPN
* 14 HBO
15 E! - ENTERTAINMENT TV
+ 16 THE DISNEY CHANNEL
+ 17 WTBS 17-IND ATLANTA, GA
+ 18 WGN-TV
+ 19 WWOR-TV
= 20 THE FAMILY CHANNEL
= 21 USA NETWORK
= 22 SCI-FI CHANNEL
23 NICKELODEON
24 COUNTRY MUSIC TV
25 C-SPAN
26 MTV
RATES___________________________________________________________________________
BASIC $20.05
TIER (=) 1.96
SATELLITE PACKAGE 1 (+) 4.88
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.87
NON-ADDRESSABLE CONVERTER 1.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 10.00
LOST/STOLEN CONVERTER EQUIP 200.00
PREMIUM SERVICES (*)------------------------------------------------------------
THE DISNEY CHANNEL 10.95
HBO 11.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and assessments. Any
such amounts will be itemized on your bill.
<PAGE> 106
FALCON CABLE TV - LAUREL COUNTY, KY (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 WTVQ-TV 36-ABC LEXINGTON, KY
3 WLEX-TV 18-NBC LEXINGTON, KY
4 WTBS 17-IND ATLANTA, GA
5 WKYT-TV 27-CBS LEXINGTON, KY
6 WKSO-TV 29-PBS SOMERSET, KY
* 7 THE MOVIE CHANNEL
8 THE DISCOVERY CHANNEL
9 CNN
10 WYMT-TV 57-CBS HAZARD,KY
11 WWOR-TV
12 WDKY-TV 56-FOX DANVILLE, KY
13 WGN-TV
14 NICKELODEON
15 COUNTRY MUSIC TV
= 16 USA NETWORK
= 17 THE FAMILY CHANNEL
= 18 SCI-FI CHANNEL
= 20 THE NASHVILLE NETWORK
21 ESPN
22 MTV
23 VH-1
24 QVC
25 FX
RATES___________________________________________________________________________
BASIC $18.32
TIER (=) 3.45
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.87
NON-ADDRESSABLE CONVERTER 1.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 10.00
LOST/STOLEN CONVERTER EQUIP 200.00
PREMIUM SERVICES (*)------------------------------------------------------------
THE MOVIE CHANNEL 10.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and assessments. Any
such amounts will be itemized on your bill.
<PAGE> 107
FALCON CABLE TV - CLAY COUNTY, KY (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 WTVQ-TV 36-ABC LEXINGTON, KY
3 WLEX-TV 18-NBC LEXINGTON, KY
4 WTBS 17-IND ATLANTA, GA
5 WKYT-TV 27-CBS LEXINGTON, KY
6 WKSO-TV 29-PBS SOMERSET, KY
* 7 THE MOVIE CHANNEL
8 THE DISCOVERY CHANNEL
9 CNN
10 WYMT-TV 57-CBS HAZARD,KY
11 WWOR-TV
12 WDKY-TV 56-FOX DANVILLE, KY
13 WGN-TV
14 NICKELODEON
15 COUNTRY MUSIC TV
= 16 USA NETWORK
= 17 THE FAMILY CHANNEL
= 18 SCI-FI CHANNEL
= 20 THE NASHVILLE NETWORK
21 ESPN
22 MTV
23 VH-1
24 QVC
25 FX
RATES___________________________________________________________________________
BASIC $18.20
TIER (=) 3.71
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.87
NON-ADDRESSABLE CONVERTER 1.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 10.00
LOST/STOLEN CONVERTER EQUIP 200.00
PREMIUM SERVICES (*)------------------------------------------------------------
THE MOVIE CHANNEL 10.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and assessments. Any
such amounts will be itemized on your bill.
<PAGE> 108
FALCON CABLE TV - PULASKI COUNTY (NORTH), KY (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 WKSO-TV 29-PBS SOMERSET, KY
3 QVC
4 CNN
5 WLEX-TV 18-NBC LEXINGTON, KY
6 WTVQ-TV 36-ABC LEXINGTON, KY
7 WKYT-TV 27-CBS LEXINGTON, KY
8 LOCAL - COMMUNITY ACCES/PEG
9 WKXT-TV 8-CBS KNOXVILLE, TN
10 WBIR-TV 10-NBC KNOXVILLE, TN
11 ARTS & ENTERTAINMENT
12 WDKY-TV 56-FOX DANVILLE, KY
13 ESPN
* 14 HBO
* 15 PPV SPECIAL EVENTS
* 16 THE MOVIE CHANNEL
17 CNN HEADLINE NEWS
18 VH-1
= 19 SCI-FI CHANNEL
= 20 USA NETWORK
= 21 THE WEATHER CHANNEL
= 22 TNT
+ 23 NICKELODEON
+ 24 THE NASHVILLE NETWORK
+ 25 WTBS 17-IND ATLANTA, GA
+ 26 WGN-TV
+ 27 WWOR-TV
+ 28 THE FAMILY CHANNEL
+ 29 ESPN 2
+ 30 THE DISNEY CHANNEL
31 SPORTSCHANNEL CINCINNATTI
32 MTV
33 COUNTRY MUSIC TV
34 E! - ENTERTAINMENT TV
35 C-SPAN
36 FX
37 HOME SHOPPING NETWORK
38 TRINITY BROADCAST NETWORK
+ 39 NEWSTALK TELEVISION
RATES___________________________________________________________________________
BASIC $19.83
TIER (=) 1.72
SATELLITE PACKAGE 1 (+) 7.40
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.22
ADDRESSABLE CONVERTER 2.46
NON-ADDRESSABLE CONVERTER 1.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 10.00
LOST/STOLEN CONVERTER EQUIP 200.00
PREMIUM SERVICES (*)------------------------------------------------------------
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
PAY PER VIEW MOVIE 3.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can
only be received via cable through a converter box, unless you have
a cable-ready TV set. Converter boxes are available for rent at the
low rate listed above.
The above rates may not include applicable taxes, fees and assessments.
Any such amounts will be itemized on your bill.
<PAGE> 109
FALCON CABLE TV - SCIENCE HILL, KY (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 WKSO-TV 29-PBS SOMERSET, KY
3 QVC
4 CNN
5 WLEX-TV 18-NBC LEXINGTON, KY
6 WTVQ-TV 36-ABC LEXINGTON, KY
7 WKYT-TV 27-CBS LEXINGTON, KY
8 LOCAL - COMMUNITY ACCESS/PEG
9 WKXT-TV 8-CBS KNOXVILLE, TN
10 WBIR-TV 10-NBC KNOXVILLE, TN
11 ARTS & ENTERTAINMENT
12 WDKY-TV 56-FOX DANVILLE, KY
13 ESPN
* 14 HBO
* 15 PPV SPECIAL EVENTS
* 16 THE MOVIE CHANNEL
17 CNN HEADLINE NEWS
18 VH-1
= 19 SCI-FI CHANNEL
= 20 USA NETWORK
= 21 THE WEATHER CHANNEL
= 22 TNT
+ 23 NICKELODEON
+ 24 THE NASHVILLE NETWORK
+ 25 WTBS 17-IND ATLANTA, GA
+ 26 WGN-TV
+ 27 WWOR-TV
+ 28 THE FAMILY CHANNEL
+ 29 ESPN 2
+ 30 THE DISNEY CHANNEL
31 SPORTSCHANNEL CINCINNATI
32 MTV
33 COUNTRY MUSIC TV
34 E! - ENTERTAINMENT TV
35 C-SPAN
36 FX
37 HOME SHOPPING NETWORK
38 TRINITY BROADCAST NETWORK
+ 39 NEWSTALK TELEVISION
RATES___________________________________________________________________________
BASIC $19.58
TIER (=) 1.76
SATELLITE PACKAGE 1 (+) 7.40
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.22
ADDRESSABLE CONVERTER 2.46
NON-ADDRESSABLE CONVERTER 1.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 10.00
LOST/STOLEN CONVERTER EQUIP 200.00
PREMIUM SERVICES (*)------------------------------------------------------------
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
PAY PER VIEW MOVIE 3.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and assessments. Any
such amounts will be itemized on your bill.
<PAGE> 110
FALCON CABLE TV - SOMERSET, KY (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 WKSO-TV 29-PBS SOMERSET, KY
3 QVC
4 CNN
5 WLEX-TV 18-NBC LEXINGTON, KY
6 WTVQ-TV 36-ABC LEXINGTON, KY
7 WKYT-TV 27-CBS LEXINGTON, KY
8 LOCAL - COMMUNITY ACCESS/PEG
9 WKXT-TV 8-CBS KNOXVILLE, TN
10 WBIR-TV 10-NBC KNOXVILLE, TN
11 ARTS & ENTERTAINMENT
12 WDKY-TV 56-FOX DANVILLE, KY
13 ESPN
* 14 HBO
* 15 PPV SPECIAL EVENTS
* 16 THE MOVIE CHANNEL
17 CNN HEADLINE NEWS
18 VH-1
= 19 SCI-FI CHANNEL
= 20 USA NETWORK
= 21 THE WEATHER CHANNEL
= 22 TNT
+ 23 NICKELODEON
+ 24 THE NASHVILLE NETWORK
+ 25 WTBS 17-IND ATLANTA, GA
+ 26 WGN-TV
+ 27 WWOR-TV
+ 28 THE FAMILY CHANNEL
+ 29 ESPN 2
+ 30 THE DISNEY CHANNEL
31 SPORTSCHANNEL CINCINNATI
32 MTV
33 COUNTRY MUSIC TV
34 E! - ENTERTAINMENT TV
35 C-SPAN
36 FX
37 HOME SHOPPING NETWORK
38 TRINITY BROADCAST NETWORK
+ 39 NEWSTALK TELEVISION
RATES___________________________________________________________________________
BASIC $19.65
TIER (=) 1.72
SATELLITE PACKAGE 1 (+) 7.40
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.22
ADDRESSABLE CONVERTER 2.46
NON-ADDRESSABLE CONVERTER 1.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 10.00
LOST/STOLEN CONVERTER EQUIP 200.00
PREMIUM SERVICES (*)------------------------------------------------------------
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
PAY PER VIEW MOVIE 3.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and assessments. Any
such amounts will be itemized on your bill.
<PAGE> 111
FALCON CABLE TV - BURNSIDE, KY (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 WKSO-TV 29-PBS SOMERSET, KY
3 QVC
4 CNN
5 WLEX-TV 18-NBC LEXINGTON, KY
6 WTVQ-TV 36-ABC LEXINGTON, KY
7 WKYT-TV 27-CBS LEXINGTON, KY
8 LOCAL - COMMUNITY ACCESS/PEG
9 WKXT-TV 8-CBS KNOXVILLE, TN
10 WBIR-TV 10-NBC KNOXVILLE, TN
11 ARTS & ENTERTAINMENT
12 WDKY-TV 56-FOX DANVILLE, KY
13 ESPN
* 14 HBO
* 15 PPV SPECIAL EVENTS
* 16 THE MOVIE CHANNEL
17 CNN HEADLINE NEWS
18 VH-1
= 19 SCI-FI CHANNEL
= 20 USA NETWORK
= 21 THE WEATHER CHANNEL
= 22 TNT
+ 23 NICKELODEON
+ 24 THE NASHVILLE NETWORK
+ 25 WTBS 17-IND ATLANTA, GA
+ 26 WGN-TV
+ 27 WWOR-TV
+ 28 THE FAMILY CHANNEL
+ 29 ESPN 2
+ 30 THE DISNEY CHANNEL
31 SPORTSCHANNEL CINCINNATI
32 MTV
33 COUNTRY MUSIC TV
34 E! - ENTERTAINMENT TV
35 C-SPAN
36 FX
37 HOME SHOPPING NETWORK
38 TRINITY BROADCAST NETWORK
+ 39 NEWSTALK TELEVISION
RATES___________________________________________________________________________
BASIC $19.70
TIER (=) 1.50
SATELLITE PACKAGE 1 (+) 7.40
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.22
ADDRESSABLE CONVERTER 2.46
NON-ADDRESSABLE CONVERTER 1.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 10.00
LOST/STOLEN CONVERTER EQUIP 200.00
PREMIUM SERVICES (*)------------------------------------------------------------
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
PAY PER VIEW MOVIE 3.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and assessments. Any
such amounts will be itemized on your bill.
<PAGE> 112
FALCON CABLE TV - FERGUSON, KY (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 WKSO-TV 29-PBS SOMERSET, KY
3 QVC
4 CNN
5 WLEX-TV 18-NBC LEXINGTON, KY
6 WTVQ-TV 36-ABC LEXINGTON, KY
7 WKYT-TV 27-CBS LEXINGTON, KY
8 LOCAL - COMMUNITY ACCESS/PEG
9 WKXT-TV 8-CBS KNOXVILLE, TN
10 WBIR-TV 10-NBC KNOXVILLE, TN
11 ARTS & ENTERTAINMENT
12 WDKY-TV 56-FOX DANVILLE, KY
13 ESPN
* 14 HBO
* 15 PPV SPECIAL EVENTS
* 16 THE MOVIE CHANNEL
17 CNN HEADLINE NEWS
18 VH-1
= 19 SCI-FI CHANNEL
= 20 USA NETWORK
= 21 THE WEATHER CHANNEL
= 22 TNT
+ 23 NICKELODEON
+ 24 THE NASHVILLE NETWORK
+ 25 WTBS 17-IND ATLANTA, GA
+ 26 WGN-TV
+ 27 WWOR-TV
+ 28 THE FAMILY CHANNEL
+ 29 ESPN 2
+ 30 THE DISNEY CHANNEL
31 SPORTSCHANNEL CINCINNATI
32 MTV
33 COUNTRY MUSIC TV
34 E! - ENTERTAINMENT TV
35 C-SPAN
36 FX
37 HOME SHOPPING NETWORK
38 TRINITY BROADCAST NETWORK
+ 39 NEWSTALK TELEVISION
RATES___________________________________________________________________________
BASIC $19.51
TIER (=) 1.41
SATELLITE PACKAGE 1 (+) 7.40
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.22
ADDRESSABLE CONVERTER 2.46
NON-ADDRESSABLE CONVERTER 1.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 10.00
LOST/STOLEN CONVERTER EQUIP 200.00
PREMIUM SERVICES (*)------------------------------------------------------------
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
PAY PER VIEW MOVIE 3.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and assessments and do
not include franchise fees of 3% of your total bill. Any such amounts will be
itemized on your bill.
<PAGE> 113
FALCON CABLE TV - PULASKI COUNTY (BURNSIDE), KY (Effective: 10/1/96)
CHANNEL LINE-UP________________________________________________________________
2 WKSO-TV 29-PBS SOMERSET, KY
3 QVC
4 CNN
5 WLEX-TV 18-NBC LEXINGTON, KY
6 WTVQ-TV 36-ABC LEXINGTON, KY
7 WKYT-TV 27-CBS LEXINGTON, KY
8 LOCAL - COMMUNITY ACCESS/PEG
9 WKXT-TV 8-CBS KNOXVILLE, TN
10 WBIR-TV 10-NBC KNOXVILLE, TN
11 ARTS & ENTERTAINMENT
12 WDKY-TV 56-FOX DANVILLE, KY
13 ESPN
* 14 HBO
* 15 PPV SPECIAL EVENTS
* 16 THE MOVIE CHANNEL
17 CNN HEADLINE NEWS
18 VH-1
= 19 SCI-FI CHANNEL
= 20 USA NETWORK
= 21 THE WEATHER CHANNEL
= 22 TNT
+ 23 NICKELODEON
+ 24 THE NASHVILLE NETWORK
+ 25 WTBS 17-IND ATLANTA, GA
+ 26 WGN-TV
+ 27 WWOR-TV
+ 28 THE FAMILY CHANNEL
+ 29 ESPN 2
+ 30 THE DISNEY CHANNEL
31 SPORTSCHANNEL CINCINNATI
32 MTV
33 COUNTRY MUSIC TV
34 E! - ENTERTAINMENT TV
35 C-SPAN
36 FX
37 HOME SHOPPING NETWORK
38 TRINITY BROADCAST NETWORK
+ 39 NEWSTALK TELEVISION
RATES___________________________________________________________________________
BASIC $19.85
TIER (=) 1.41
SATELLITE PACKAGE 1 (+) 7.40
BASIC ON ADDITIONAL OUTLET 0.00
INSTALLATION/SERVICE (per hr.) 45.00
INSTALL MATERIALS (if any) At Cost
REMOTE 0.22
ADDRESSABLE CONVERTER 2.46
NON-ADDRESSABLE CONVERTER 1.00
RADIO SERVICE 1.95
WIRE MAINTENANCE AGREEMENT 1.50
CABLE PROGRAM GUIDE 1.75
LATE PAYMENT FEE 5.00
RETURNED CHECK FEE 10.00
LOST/STOLEN CONVERTER EQUIP 200.00
PREMIUM SERVICES (*)------------------------------------------------------------
THE DISNEY CHANNEL 10.95
HBO 11.95
THE MOVIE CHANNEL 10.95
PAY PER VIEW MOVIE 3.95
________________________________________________________________________________
All Broadcast TV stations carried on a channel higher than 13 can only be
received via cable through a converter box, unless you have a cable-ready TV
set. Converter boxes are available for rent at the low rate listed above.
The above rates may not include applicable taxes, fees and assessments and do
not include franchise fees of 3% of your total bill. Any such amounts will be
itemized on your bill.
<PAGE> 114
[LOGO - ARTHUR ANDERSEN LLP]
ADDENDUM 2 Capital Asset Pricing Model & Weighted Average Cost of Capital
<PAGE> 115
- --------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
BURKE COUNTY, NC
AS OF DECEMBER 31, 1996
- --------------------------------------------
- --------------------------------------------
DEVELOPMENT OF VALUATION DISCOUNT RATE
- --------------------------------------------
<TABLE>
<CAPTION>
DEVELOPMENT OF EQUITY RATE DEVELOPMENT OF DEBT RATE
<S> <C> <C> <C>
Risk Free Rate 6.85% Borrowing Rate 9.75%
Market Return 11.40% Tax Rate (NA - Pre-tax) 0.00%
Market Premium 4.55%
Beta 0.90
Co. Specific Risk 12.00%
Equity Return Rate 22.95% Debt Rate 9.75%
</TABLE>
WEIGHTED AVERAGE COST OF CAPITAL CALCULATION
<TABLE>
<CAPTION>
WEIGHTED
RATIO RATE RATE
<S> <C> <C> <C>
Debt 60.00% 9.75% 5.85%
Equity 40.00% 22.95% 9.18%
100.00%
</TABLE>
WEIGHTED AVERAGE COST OF CAPITAL 15.03%
-----
PRELIMINARY & TENTATIVE - FOR DISCUSSION PURPOSES ONLY ARTHUR ANDERSEN LLP
- ------------------------------------------------------
<PAGE> 116
- --------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
CALIFORNIA CITY, CALIFORNIA
AS OF DECEMBER 31, 1996
- --------------------------------------------
- --------------------------------------------
DEVELOPMENT OF VALUATION DISCOUNT RATE
- --------------------------------------------
<TABLE>
<CAPTION>
DEVELOPMENT OF EQUITY RATE DEVELOPMENT OF DEBT RATE
<S> <C> <C> <C>
Risk Free Rate 6.85% Borrowing Rate 9.75%
Market Return 11.40% Tax Rate (NA-Pre-tax) 0.00%
Market Premium 4.55%
Beta 0.90
Co. Specific Risk 12.00%
Equity Return Rate 22.95% Debt Rate 9.75%
</TABLE>
WEIGHTED AVERAGE COST OF CAPITAL CALCULATION
<TABLE>
<CAPTION>
WEIGHTED
RATIO RATE RATE
<S> <C> <C> <C>
Debt 60.00% 9.75% 5.85%
Equity 40.00% 22.95% 9.18%
100.00%
</TABLE>
WEIGHTED AVERAGE COST OF CAPITAL 15.03%
-----
PRELIMINARY & TENTATIVE - FOR DISCUSSION PURPOSES ONLY ARTHUR ANDERSEN LLP
- ------------------------------------------------------
<PAGE> 117
- --------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
CENTREVILLE, MARYLAND
AS OF DECEMBER 31, 1996
- --------------------------------------------
- --------------------------------------------
DEVELOPMENT OF VALUATION DISCOUNT RATE
- --------------------------------------------
<TABLE>
<CAPTION>
DEVELOPMENT OF EQUITY RATE DEVELOPMENT OF DEBT RATE
<S> <C> <C> <C>
Risk Free Rate 6.85% Borrowing Rate 9.75%
Market Return 11.40% Tax Rate (NA-Pre-tax) 0.00%
Market Premium 4.55%
Beta 0.90
Co. Specific Risk 10.00%
Equity Return Rate 20.95% Debt Rate 9.75%
</TABLE>
WEIGHTED AVERAGE COST OF CAPITAL CALCULATION
<TABLE>
<CAPTION>
WEIGHTED
RATIO RATE RATE
<S> <C> <C> <C>
Debt 60.00% 9.75% 5.85%
Equity 40.00% 20.95% 8.38%
100.00%
</TABLE>
WEIGHTED AVERAGE COST OF CAPITAL 14.23%
-----
PRELIMINARY & TENTATIVE - FOR DISCUSSION PURPOSES ONLY ARTHUR ANDERSEN LLP
- ------------------------------------------------------
<PAGE> 118
- --------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
REDMOND, OREGON
AS OF DECEMBER 31, 1996
- --------------------------------------------
- --------------------------------------------
DEVELOPMENT OF VALUATION DISCOUNT RATE
- --------------------------------------------
<TABLE>
<CAPTION>
DEVELOPMENT OF EQUITY RATE DEVELOPMENT OF DEBT RATE
<S> <C> <C> <C>
Risk Free Rate 6.85% Borrowing Rate 9.75%
Market Return 11.40% Tax Rate (NA-Pre-tax) 0.00%
Market Premium 4.55%
Beta 0.90
Co. Specific Risk 12.00%
Equity Return Rate 22.95% Debt Rate 9.75%
</TABLE>
WEIGHTED AVERAGE COST OF CAPITAL CALCULATION
<TABLE>
<CAPTION>
WEIGHTED
RATIO RATE RATE
<S> <C> <C> <C>
Debt 60.00% 9.75% 5.85%
Equity 40.00% 22.95% 9.18%
100.00%
</TABLE>
WEIGHTED AVERAGE COST OF CAPITAL 15.03%
-----
PRELIMINARY & TENTATIVE - FOR DISCUSSION PURPOSES ONLY ARTHUR ANDERSEN LLP
- ------------------------------------------------------
<PAGE> 119
- --------------------------------------------
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SOMERSET, KY
AS OF DECEMBER 31, 1996
- --------------------------------------------
- --------------------------------------------
DEVELOPMENT OF VALUATION DISCOUNT RATE
- --------------------------------------------
<TABLE>
<CAPTION>
DEVELOPMENT OF EQUITY RATE DEVELOPMENT OF DEBT RATE
<S> <C> <C> <C>
Risk Free Rate 6.85% Borrowing Rate 9.75%
Market Return 11.40% Tax Rate (NA-Pre-tax) 0.00%
Market Premium 4.55%
Beta 0.90
Co. Specific Risk 10.00%
Equity Return Rate 20.95% Debt Rate 9.75%
</TABLE>
WEIGHTED AVERAGE COST OF CAPITAL CALCULATION
<TABLE>
<CAPTION>
WEIGHTED
RATIO RATE RATE
<S> <C> <C> <C>
Debt 60.00% 9.75% 5.85%
Equity 40.00% 20.95% 8.38%
100.00%
</TABLE>
WEIGHTED AVERAGE COST OF CAPITAL 14.23%
-----
PRELIMINARY & TENTATIVE - FOR DISCUSSION PURPOSES ONLY ARTHUR ANDERSEN LLP
- ------------------------------------------------------
<PAGE> 120
[LOGO - ARTHUR ANDERSEN LLP]
ADDENDUM 3 Financial History
<PAGE> 121
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SYSTEM LOCATION: BURKE, NC
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
ONE MONTH ONE MONTH THREE MONTHS THREE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING ENDING 12/31/96 ENDING ENDING 12/31/96 ENDING ENDING
12/31/96 ANNUALIZED 12/31/96 ANNUALIZED 12/31/96 12/31/95
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Primary - First Outlet $178,389 $2,140,668 $532,529 $2,130,116 $2,042,600 $2,040,107
Primary Commercial $710 $8,520 $2,130 $8,520 $8,520 $8,752
Expanded Tier $0 $0 $0 $0 $0 $0
AG Tier $0 $0 $0 $0 $0 $0
AJ Tier $0 $0 $0 $0 $0 $0
AL Tier $56,384 $676,608 $162,080 $648,320 $574,897 $406,998
Radio Services $2,883 $34,596 $8,871 $35,484 $39,156 $47,713
Pay Cable First Outlet $35,588 $427,056 $105,105 $420,420 $495,343 $583,725
Ala Carte $0 $0 $0 $0 $0 $0
New Product Tier 1 $81,726 $980,712 $246,567 $986,268 $892,061 $948,060
Mini Pay $754 $9,048 $2,349 $9,396 $10,339 $12,990
Pay Per View $7,256 $87,072 $27,881 $111,524 $103,952 $117,381
Primary Additional Outlet $0 $0 $0 $0 $0 $0
Remote Control $348 $4,176 $982 $3,928 $4,148 $4,049
Converter Rental $38,330 $459,960 $115,280 $461,120 $472,318 $488,851
Maintenance Contracts $5,705 $68,460 $17,374 $69,496 $68,243 $62,257
New Customer Pay Installs $0 $0 $0 $0 $0 $5
New Customer Basic Installs $992 $11,904 $5,602 $22,408 $17,625 $28,145
Installation Materials Charge $45 $540 $388 $1,552 $1,095 $400
Installs Non New Customers $3,314 $39,768 $11,168 $44,672 $68,262 $72,044
Classified Ads $157 $1,884 $1,780 $7,120 $4,631 $4,578
Ad Insertion Sales $16,008 $192,096 $44,506 $178,024 $130,958 $93,171
Ad Sales Other $0 $0 $0 $0 $0 $0
Production & Location Origination $297 $3,564 $773 $3,092 $773 $0
Other Late Charges $4,370 $52,440 $13,135 $52,540 $57,190 $63,319
Other Rent ($275) ($3,300) $275 $1,100 $2,695 $3,025
Other Copyright Pass Through $0 $0 $0 $0 $0 $0
Other Miscellaneous $0 $0 $0 $0 $5 $40
FCC User Fees Pass Through $429 $5,148 $1,288 $5,152 $5,259 $5,100
Other Programmers $35 $420 $15,970 $63,880 $16,482 $0
QVC Monthly Commission $943 $11,316 $4,453 $17,812 $16,730 $15,131
QVC Carriage Payment $0 $0 $3,138 $12,552 $12,150 $14,020
HSN Monthly Commission $240 $2,880 $683 $2,732 $9,597 $0
Guides $1,747 $20,964 $5,477 $21,908 $22,758 $26,072
-------- ---------- ---------- ---------- ---------- ----------
Total Revenues $436,375 $5,236,500 $1,329,784 $5,319,136 $5,077,787 $5,045,933
</TABLE>
<TABLE>
<CAPTION>
---------------
----------------------------- ADJUSTED
TWELVE MONTHS TWELVE MONTHS ONE MONTH
ENDING ENDING ENDING 12/31/96
12/31/94 12/31/93 ANNUALIZED
----------------------------- ---------------
<S> <C> <C> <C>
REVENUES
Primary - First Outlet $2,064,907 $2,092,282 $2,140,668
Primary Commercial $5,349 $4,275 $8,520
Expanded Tier $0 $0 $0
AG Tier $0 $471,849 $0
AJ Tier $0 $512,290 $0
Al Tier $159,998 $861 $676,608
Radio Services $58,903 $24,419 $34,596
Pay Cable First Outlet $589,479 $539,269 $427,056
Ala Carte $1,127,729 $292,192 $0
New Product Tier 1 $0 $0 $980,712
Mini Pay $18,230 $34,771 $9,048
Pay Per View $124,007 $99,986 $87,072
Primary Additional Outlet $0 $226,545 $0
Remote Control $4,158 $280,149 $4,176
Converter Rental $489,185 $119,585 $459,960
Maintenance Contracts $47,496 $0 $68,460
New Customer Pay Installs $5 $2,045 $0
New Customer Basic Installs $50,357 $63,122 $11,904
Installation Materials Charge $0 $0 $540
Installs Non New Customers $81,141 $91,838 $39,768
Classified Ads $6,560 $1,260 $1,884
Ad Insertion Sales $111,734 $54,651 $192,096
Ad Sales Other $0 $59 $0
Production & Location Origination $340 $1,013 $3,564
Other Late Charges $68,172 $51,488 $52,440
Other Rent $3,250 $1,300 $0
Other Copyright Pass Through $0 $54,187 $0
Other Miscellaneous $10 $1,770 $0
FCC User Fees Pass Through $120 $0 $5,148
Other Programmers $0 $0 $420
QVC Monthly Commission $19,432 $12,899 $11,316
QVC Carriage Payment $14,020 $14,018 $0
HSN Monthly Commission $0 $0 $2,880
Guides $35,416 $55,022 $20,964
---------- ---------- ----------
Total Revenues $5,079,998 $5,103,145 $5,239,800
</TABLE>
<PAGE> 122
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SYSTEM LOCATION: BURKE, NC
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
ONE MONTH ONE MONTH THREE MONTHS THREE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING ENDING 12/31/96 ENDING ENDING 12/31/96 ENDING ENDING
12/31/96 ANNUALIZED 12/31/96 ANNUALIZED 12/31/96 12/31/95
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EXPENSES
Technical Salary - Supervisor $0 $0 $0 $0 $0 $0
Technical Salary - Technician $10,403 $124,836 $31,038 $124,152 $117,953 $126,035
Technical Salary - Dispatcher $1,185 $14,220 $3,691 $14,764 $12,477 $14,695
Technical Salary - Installers $4,103 $49,236 $11,623 $46,492 $43,935 $38,074
Overtime/Standby $2,018 $24,216 $5,847 $23,388 $32,158 $47,599
Payroll Taxes $1,135 $13,620 $3,988 $15,952 $15,329 $17,992
Group Insurance $1,020 $12,240 $4,544 $18,176 $22,443 $18,424
Other Benefits ($7,906) ($94,872) ($6,214) ($24,856) $1,400 $11,514
Tech. Allocated Personnel Expense $1,451 $17,412 $3,504 $14,016 $17,104 $8,566
Tech. Allocated P/R Benefit $325 $3,900 $737 $2,948 $3,927 $2,080
Rent - Headend $0 $0 $0 $0 $0 $0
Rent - Poles and Ducts $14,014 $168,168 $42,042 $168,168 $133,373 $77,997
R & M Plant $0 $0 $15 $60 $445 $1,336
R & M Other $2,847 $34,164 $5,233 $20,932 $11,194 $3,062
Material and Reconnect $1,758 $21,096 $6,625 $26,500 $18,197 $8,006
Vehicle - Gas & Oil $3,569 $42,828 $7,866 $31,464 $21,596 $23,575
Vehicle - Service $726 $8,712 $2,182 $8,728 $8,676 $9,952
T & E System Travel $0 $0 $0 $0 $127 $222
T & E System Non-Travel $0 $0 $0 $0 $0 $0
Dues & Subscriptions $0 $0 $143 $572 $1,408 $1,659
Education $0 $0 $0 $0 $0 $223
System Power Costs $5,632 $67,584 $17,453 $69,812 $67,968 $64,859
Recruiting $0 $0 $0 $0 $50 $44
Loss on Converters $58 $696 $174 $696 $696 $1,200
Property Taxes ($6,569) ($78,828) ($329) ($1,316) $24,952 $35,328
Uniforms $1,063 $12,756 $1,847 $7,388 $5,735 $4,217
Small Tool and Safety $0 $0 $58 $232 $684 $1,131
Capital Labor & OH Construction ($7,386) ($88,632) ($27,202) ($108,808) ($185,451) ($99,477)
Capital Labor & OH Customer ($644) ($7,728) ($2,958) ($11,832) ($42,463) ($43,123)
Production & L.O. Personnel Costs $0 $0 $0 $0 $0 $0
Production & L.O. Other Expenses $0 $0 $0 $0 $0 $0
Ad Sales Payroll Taxes $0 $0 $0 $0 $19 $346
Ad Sales Group Insurance $0 $0 $0 $0 $0 ($142)
Ad Sales Alloc. Personnel Expense $1,264 $15,168 $3,523 $14,092 $14,251 $12,975
Ad Sales Alloc. P/R Benefit $437 $5,244 $1,407 $5,628 $5,660 $4,348
Employee Commissions $0 $0 $0 $0 $226 $3,941
Other Ad Sale Expenses $1,271 $15,252 $4,130 $16,520 $15,287 $16,625
</TABLE>
<TABLE>
<CAPTION>
---------------
----------------------------- ADJUSTED
TWELVE MONTHS TWELVE MONTHS ONE MONTH
ENDING ENDING ENDING 12/31/96
12/31/94 12/31/93 ANNUALIZED
----------------------------- ---------------
<S> <C> <C> <C>
EXPENSES
Technical Salary - Supervisor $31,691 $30,472 $0
Technical Salary - Technician $129,889 $124,671 $124,836
Technical Salary - Dispatcher $14,150 $13,374 $14,220
Technical Salary - Installers $39,774 $45,100 $49,236
Overtime/Standby $29,759 $26,787 $24,216
Payroll Taxes $22,200 $22,756 $13,620
Group Insurance $11,796 $28,523 $12,240
Other Benefits $16,443 $16,248 $0
Tech. Allocated Personnel Expense $0 $0 $17,412
Tech. Allocated P/R Benefit $0 $0 $3,900
Rent - Headend $0 $0 $0
Rent - Poles and Ducts $75,962 $69,918 $168,168
R & M Plant $1,879 $292 $0
R & M Other $4,274 $2,556 $34,164
Material and Reconnect $5,436 $3,000 $21,096
Vehicle - Gas & Oil $19,603 $19,713 $42,828
Vehicle - Service $11,954 $6,720 $8,712
T & E System Travel $1,150 $2,138 $0
T & E System Non-Travel $0 $194 $0
Dues & Subscriptions $1,148 $1,913 $0
Education $0 $217 $0
System Power Costs $67,552 $67,490 $67,584
Recruiting $149 $0 $0
Loss on Converters $1,200 $1,200 $696
Property Taxes $48,689 $45,600 $25,000
Uniforms $4,481 $4,238 $12,756
Small Tool and Safety $1,665 $1,342 $0
Capital Labor & OH Construction ($50,080) ($60,659) $0
Capital Labor & OH Customer ($55,017) ($43,436) $0
Production & L.O. Personnel Costs $17,224 $0 $0
Production & L.O. Other Expenses $911 $1,719 $0
Ad Sales Payroll Taxes $2,281 $2,760 $0
Ad Sales Group Insurance $484 $4,863 $0
Ad Sales Alloc. Personnel Expense $13,444 $7,918 $15,168
Ad Sales Alloc. P/R Benefit $4,844 $2,736 $5,244
Employee Commissions $28,252 $12,134 $0
Other Ad Sale Expenses $21,875 $31,647 $15,252
</TABLE>
<PAGE> 123
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SYSTEM LOCATION: BURKE, NC
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
ONE MONTH ONE MONTH THREE MONTHS THREE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING ENDING 12/31/96 ENDING ENDING 12/31/96 ENDING ENDING
12/31/96 ANNUALIZED 12/31/96 ANNUALIZED 12/31/96 12/31/95
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Marketing Salary & Benefits $0 $0 $0 $0 $0 $0
Marketing Employee Commissions $441 $5,292 $711 $2,844 $844 $221
Marketing Expenses $6,514 $78,168 $5,421 $21,684 $36,286 $46,009
Dues and Subscriptions $41 $492 $131 $524 $331 $1,333
Pay Per View Expenses $1,259 $15,108 $4,552 $18,208 $20,113 $24,242
Video Game Expenses $0 $0 $0 $0 $0 $0
Miscellaneous Marketing Expenses $3,240 $38,880 $7,322 $29,288 $12,144 $6,649
G & A Salary - Supervisor $0 $0 $0 $0 $0 $23,366
G & A Salary - CSR $6,917 $83,004 $20,771 $83,084 $84,179 $69,180
G & A Overtime/Standby $538 $6,456 $1,217 $4,868 $8,984 $5,390
G & A Payroll Taxes $530 $6,360 $1,768 $7,072 $8,051 $8,451
G & A Group Insurance $472 $5,664 $2,621 $10,484 $13,489 $15,133
G & A Other Benefits ($906) ($10,872) ($2,718) ($10,872) ($10,872) ($2,489)
Contract Labor $0 $0 $48 $192 $3,648 $224
G & A Allocated Personnel Expense $3,596 $43,152 $11,181 $44,724 $40,231 $15,263
G & A Allocated P/R Benefit $1,882 $22,584 $3,690 $14,760 $10,148 $3,400
Rent - Office $0 $0 $0 $0 $0 $0
R & M - Office $618 $7,416 $1,760 $7,040 $8,365 $6,080
Office Supplies $467 $5,604 $1,287 $5,148 $6,257 $5,979
Xerox & Printing $89 $1,068 $574 $2,296 $3,080 $1,938
Vehicle - Gas & Oil $0 $0 $36 $144 $208 $128
T & E System Travel $0 $0 $146 $584 $921 $373
T & E System Non-Travel $0 $0 $17 $68 $400 $13
Dues and Subscriptions $148 $1,776 $314 $1,256 $384 $635
Conventions - Travel $0 $0 $0 $0 $198 $13
Education $7 $84 $6 $24 $635 $2,254
Recruiting $0 $0 $0 $0 $27 $0
Insurance $7,511 $90,132 $14,973 $59,892 $113,877 $90,917
Legal $450 $5,400 $4,850 $19,400 $10,983 $8,858
Audit & Taxes $762 $9,144 $2,285 $9,140 $11,406 $15,709
Association - Dues $305 $3,660 $917 $3,668 $3,803 $4,691
Association - Lobbying $68 $816 $203 $812 $837 $886
Political Contribution $0 $0 $0 $0 $0 $0
Donations/Public Relations $261 $3,132 $499 $1,996 $1,186 $4,291
Customer Billing $4,896 $58,752 $15,069 $60,276 $62,072 $66,402
Postage & Messengers $3,995 $47,940 $12,592 $50,368 $52,083 $50,460
Utilities $357 $4,284 $1,187 $4,748 $5,901 $5,960
Telephone $1,705 $20,460 $4,073 $16,292 $16,787 $16,187
Tax & Licenses $94 $1,128 $303 $1,212 $1,838 $392
</TABLE>
<TABLE>
<CAPTION>
---------------
----------------------------- ADJUSTED
TWELVE MONTHS TWELVE MONTHS ONE MONTH
ENDING ENDING ENDING 12/31/96
12/31/94 12/31/93 ANNUALIZED
----------------------------- ---------------
<S> <C> <C> <C>
Marketing Salary & Benefits $0 $29 $0
Marketing Employee Commissions $2,619 $3,878 $5,292
Marketing Expenses $80,112 $38,090 $78,168
Dues and Subscriptions $573 $2,575 $492
Pay Per View Expenses $22,329 $15,732 $15,108
Video Game Expenses $0 $0 $0
Miscellaneous Marketing Expenses $5,592 $6,250 $38,880
G & A Salary - Supervisor $67,016 $64,061 $0
G & A Salary - CSR $63,316 $57,121 $83,004
G & A Overtime/Standby $5,032 $4,570 $6,456
G & A Payroll Taxes $12,962 $12,545 $6,360
G & A Group Insurance $11,280 $26,291 $5,664
G & A Other Benefits $3,057 $27,720 ($10,872)
Contract Labor $0 $0 $0
G & A Allocated Personnel Expense ($19,531) $0 $43,152
G & A Allocated P/R Benefit ($2,469) $0 $22,584
Rent - Office $0 $4,208 $0
R & M - Office $4,067 $5,858 $7,416
Office Supplies $6,935 $5,235 $5,604
Xerox & Printing $3,027 $3,855 $1,068
Vehicle - Gas & Oil $718 $524 $0
T & E System Travel $5,040 $801 $0
T & E System Non-Travel $0 $1,099 $0
Dues and Subscriptions $687 $508 $1,776
Conventions - Travel $75 $1,452 $0
Education $1,782 $715 $84
Recruiting $95 $0 $0
Insurance $95,757 $80,960 $90,132
Legal $9,400 $6,400 $5,400
Audit & Taxes $25,084 $31,758 $9,144
Association - Dues $5,375 $5,804 $3,660
Association - Lobbying $920 $0 $816
Political Contribution $100 $29 $0
Donations/Public Relations $4,826 $3,900 $3,132
Customer Billing $69,564 $66,873 $58,752
Postage & Messengers $52,996 $49,570 $47,940
Utilities $7,664 $6,535 $4,284
Telephone $16,972 $17,628 $20,460
Tax & Licenses $263 $1,169 $1,128
</TABLE>
<PAGE> 124
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SYSTEM LOCATION: BURKE, NC
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
ONE MONTH ONE MONTH THREE MONTHS THREE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING ENDING 12/31/96 ENDING ENDING 12/31/96 ENDING ENDING
12/31/96 ANNUALIZED 12/31/96 ANNUALIZED 12/31/96 12/31/95
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
FCC User Fees $473 $5,676 $1,417 $5,668 $5,904 $5,491
Reregulation Costs $4 $48 $3,505 $14,020 $9,886 $16,240
CATV Franchise $6,894 $82,728 $15,692 $62,768 $45,484 $69,124
Copyright Fees $14,819 $177,828 $33,726 $134,904 $120,035 $91,053
BMI License Fees $0 $0 ($567) ($2,268) $3,917 $0
ASCAP License Fees $649 $7,788 $1,948 $7,792 $5,009 $0
Bad Debt Expense $4,368 $52,416 $8,625 $34,500 $54,212 $68,861
Cap. Labor & OH Other ($186) ($2,232) ($745) ($2,980) ($9,058) ($13,263)
G & A Miscellaneous Expense $602 $7,224 $1,723 $6,892 $2,501 $2,321
Primary Satellite Fees $44,245 $530,940 $133,476 $533,904 $533,833 $497,181
Program Guides $1,360 $16,320 $5,860 $23,440 $21,264 $20,904
Pay TV Fees $19,041 $228,492 $50,929 $203,716 $273,126 $370,035
Pay Per View Fees $4,557 $54,684 $16,038 $64,152 $59,250 $54,746
-------- ---------- -------- ---------- ---------- ----------
Total Expenses $174,857 $2,098,284 $510,400 $2,041,600 $2,023,543 $2,094,514
Operating Income $261,518 $3,138,216 $819,384 $3,277,536 $3,054,244 $2,951,419
Operating Margin 59.93% 59.93% 61.62% 61.62% 60.15% 58.49%
</TABLE>
<TABLE>
<CAPTION>
---------------
----------------------------- ADJUSTED
TWELVE MONTHS TWELVE MONTHS ONE MONTH
ENDING ENDING ENDING 12/31/96
12/31/94 12/31/93 ANNUALIZED
----------------------------- ---------------
<S> <C> <C> <C>
FCC User Fees $4,164 $0 $5,676
Reregulation Costs $17,935 $13,149 $48
CATV Franchise $73,527 $106,468 $82,728
Copyright Fees $40,746 $144,292 $177,828
BMI License Fees $0 $0 $0
ASCAP License Fees $0 $0 $7,788
Bad Debt Expense $72,445 $84,451 $52,416
Cap. Labor & OH Other ($16,753) ($14,562) $0
G & A Miscellaneous Expense $3,230 $2,921 $7,224
Primary Satellite Fees $436,931 $457,835 $530,940
Program Guides $22,404 $23,984 $16,320
Pay TV Fees $381,017 $354,187 $228,492
Pay Per View Fees $68,247 $60,329 $54,684
---------- ---------- ----------
Total Expenses $2,192,190 $2,280,941 $2,395,576
Operating Income $2,887,808 $2,822,204 $2,844,224
Operating Margin 56.85% 55.30% 54.28%
</TABLE>
<PAGE> 125
SYSTEM LOCATION: BURKE, NC
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
ADJUSTED ADJUSTED ADJUSTED ADJUSTED ADJUSTED
THREE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING 12/31/96 ENDING ENDING ENDING ENDING
ANNUALIZED 12/31/96 12/31/95 12/31/94 12/31/93
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES
Primary - First Outlet $2,130,116 $2,042,600 $2,040,107 $2,064,907 $2,092,282
Primary Commercial $8,520 $8,520 $8,752 $5,349 $4,275
Expanded Tier $0 $0 $0 $0 $0
AG Tier $0 $0 $0 $0 $471,849
AJ Tier $0 $0 $0 $0 $512,290
AL Tier $648,320 $574,897 $406,998 $159,998 $861
Radio Services $35,484 $39,156 $47,713 $58,903 $24,419
Pay Cable First Outlet $420,420 $495,343 $583,725 $589,479 $539,269
Ala Carte $0 $0 $0 $1,127,729 $292,192
New Product Tier 1 $986,268 $892,061 $948,060 $0 $0
Mini Pay $9,396 $10,339 $12,990 $18,230 $34,771
Pay Per View $111,524 $103,952 $117,381 $124,007 $99,986
Primary Additional Outlet $0 $0 $0 $0 $226,545
Remote Control $3,928 $4,148 $4,049 $4,158 $280,149
Converter Rental $461,120 $472,318 $488,851 $489,185 $119,585
Maintenance Contracts $69,496 $68,243 $62,257 $47,496 $0
New Customer Pay Installs $0 $0 $5 $5 $2,045
New Customer Basic Installs $22,408 $17,625 $28,145 $50,357 $63,122
Installation Materials Charge $1,552 $1,095 $400 $0 $0
Installs Non New Customers $44,672 $68,262 $72,044 $81,141 $91,838
Classified Ads $7,120 $4,631 $4,578 $6,560 $1,260
Ad Insertion Sales $178,024 $130,958 $93,171 $111,734 $54,651
Ad Sales Other $0 $0 $0 $0 $59
Production & Location Origination $3,092 $773 $0 $340 $1,013
Other Late Charges $52,540 $57,190 $63,319 $68,172 $51,488
Other Rent $1,100 $2,695 $3,025 $3,250 $1,300
Other Copyright Pass Through $0 $0 $0 $0 $54,187
Other Miscellaneous $0 $5 $40 $10 $1,770
FCC User Fees Pass Through $5,152 $5,259 $5,100 $120 $0
Other Programmers $63,880 $16,482 $0 $0 $0
QVC Monthly Commission $17,812 $16,730 $15,131 $19,432 $12,899
QVC Carriage Payment $12,552 $12,150 $14,020 $14,020 $14,018
HSN Monthly Commission $2,732 $9,597 $0 $0 $0
Guides $21,908 $22,758 $26,072 $35,416 $55,022
---------- ---------- ---------- ---------- ----------
Total Revenues $5,319,136 $5,077,787 $5,045,933 $5,079,998 $5,103,145
</TABLE>
<PAGE> 126
SYSTEM LOCATION: BURKE, NC
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
ADJUSTED ADJUSTED ADJUSTED ADJUSTED ADJUSTED
THREE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING 12/31/96 ENDING ENDING ENDING ENDING
ANNUALIZED 12/31/96 12/31/95 12/31/94 12/31/93
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EXPENSES
Technical Salary - Supervisor $0 $0 $0 $31,691 $30,472
Technical Salary - Technician $124,152 $117,953 $126,035 $129,889 $124,671
Technical Salary - Dispatcher $14,764 $12,477 $14,695 $14,150 $13,374
Technical Salary - Installers $46,492 $43,935 $38,074 $39,774 $45,100
Overtime/Standby $23,388 $32,158 $47,599 $29,759 $26,787
Payroll Taxes $15,952 $15,329 $17,992 $22,200 $22,756
Group Insurance $18,176 $22,443 $18,424 $11,796 $28,523
Other Benefits $0 $1,400 $11,514 $16,443 $16,248
Tech. Allocated Personnel Expense $14,016 $17,104 $8,566 $0 $0
Tech. Allocated P/R Benefit $2,948 $3,927 $2,080 $0 $0
Rent - Headend $0 $0 $0 $0 $0
Rent - Poles and Ducts $168,168 $133,373 $77,997 $75,962 $69,918
R & M Plant $60 $445 $1,336 $1,879 $292
R & M Other $20,932 $11,194 $3,062 $4,274 $2,556
Material and Reconnect $26,500 $18,197 $8,006 $5,436 $3,000
Vehicle - Gas & Oil $31,464 $21,596 $23,575 $19,603 $19,713
Vehicle - Service $8,728 $8,676 $9,952 $11,954 $6,720
T & E System Travel $0 $127 $222 $1,150 $2,138
T & E System Non-Travel $0 $0 $0 $0 $194
Dues & Subscriptions $572 $1,408 $1,659 $1,148 $1,913
Education $0 $0 $223 $0 $217
System Power Costs $69,812 $67,968 $64,859 $67,552 $67,490
Recruiting $0 $50 $44 $149 $0
Loss on Converters $696 $696 $1,200 $1,200 $1,200
Property Taxes $25,000 $24,952 $35,328 $48,689 $45,600
Uniforms $7,388 $5,735 $4,217 $4,481 $4,238
Small Tool and Safety $232 $684 $1,131 $1,665 $1,342
Capital Labor & OH Construction $0 $0 $0 $0 $0
Capital Labor & OH Customer $0 $0 $0 $0 $0
Production & L.O. Personnel Costs $0 $0 $0 $17,224 $0
Production & L.O. Other Expenses $0 $0 $0 $911 $1,719
Ad Sales Payroll Taxes $0 $19 $346 $2,281 $2,760
Ad Sales Group Insurance $0 $0 $0 $484 $4,863
Ad Sales Alloc. Personnel Expense $14,092 $14,251 $12,975 $13,444 $7,918
Ad Sales Alloc. P/R Benefit $5,628 $5,660 $4,348 $4,844 $2,736
Employee Commissions $0 $226 $3,941 $28,252 $12,134
Other Ad Sale Expenses $16,520 $15,287 $16,625 $21,875 $31,647
</TABLE>
<PAGE> 127
SYSTEM LOCATION: BURKE, NC
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
ADJUSTED ADJUSTED ADJUSTED ADJUSTED ADJUSTED
THREE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING 12/31/96 ENDING ENDING ENDING ENDING
ANNUALIZED 12/31/96 12/31/95 12/31/94 12/31/93
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Marketing Salary & Benefits $0 $0 $0 $0 $29
Marketing Employee Commissions $2,844 $844 $221 $2,619 $3,878
Marketing Expenses $21,684 $36,286 $46,009 $80,112 $38,090
Dues and Subscriptions $524 $331 $1,333 $573 $2,575
Pay Per View Expenses $18,208 $20,113 $24,242 $22,329 $15,732
Video Game Expenses $0 $0 $0 $0 $0
Miscellaneous Marketing Expenses $29,288 $12,144 $6,649 $5,592 $6,250
G & A Salary - Supervisor $0 $0 $23,366 $67,016 $64,061
G & A Salary - CSR $83,084 $84,179 $69,180 $63,316 $57,121
G & A Overtime/Standby $4,868 $8,984 $5,390 $5,032 $4,570
G & A Payroll Taxes $7,072 $8,051 $8,451 $12,962 $12,545
G & A Group Insurance $10,484 $13,489 $15,133 $11,280 $26,291
G & A Other Benefits ($10,872) ($10,872) ($2,489) $3,057 $27,720
Contract Labor $192 $3,648 $224 $0 $0
G & A Allocated Personnel Expense $44,724 $40,231 $15,263 ($19,531) $0
G & A Allocated P/R Benefit $14,760 $10,148 $3,400 ($2,469) $0
Rent - Office $0 $0 $0 $0 $4,208
R & M - Office $7,040 $8,365 $6,080 $4,067 $5,858
Office Supplies $5,148 $6,257 $5,979 $6,935 $5,235
Xerox & Printing $2,296 $3,080 $1,938 $3,027 $3,855
Vehicle - Gas & Oil $144 $208 $128 $718 $524
T & E System Travel $584 $921 $373 $5,040 $801
T & E System Non-Travel $68 $400 $13 $0 $1,099
Dues and Subscriptions $1,256 $384 $635 $687 $508
Conventions - Travel $0 $198 $13 $75 $1,452
Education $24 $635 $2,254 $1,782 $715
Recruiting $0 $27 $0 $95 $0
Insurance $59,892 $113,877 $90,917 $95,757 $80,960
Legal $19,400 $10,983 $8,858 $9,400 $6,400
Audit & Taxes $9,140 $11,406 $15,709 $25,084 $31,758
Association - Dues $3,668 $3,803 $4,691 $5,375 $5,804
Association - Lobbying $812 $837 $886 $920 $0
Political Contribution $0 $0 $0 $100 $29
Donations/Public Relations $1,996 $1,186 $4,291 $4,826 $3,900
Customer Billing $60,276 $62,072 $66,402 $69,564 $66,873
Postage & Messengers $50,368 $52,083 $50,460 $52,996 $49,570
Utilities $4,748 $5,901 $5,960 $7,664 $6,535
Telephone $16,292 $16,787 $16,187 $16,972 $17,628
Tax & Licenses $1,212 $1,838 $392 $263 $1,169
</TABLE>
<PAGE> 128
SYSTEM LOCATION: BURKE, NC
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
ADJUSTED ADJUSTED ADJUSTED ADJUSTED ADJUSTED
THREE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING 12/31/96 ENDING ENDING ENDING ENDING
ANNUALIZED 12/31/96 12/31/95 12/31/94 12/31/93
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FCC User Fees $5,668 $5,904 $5,491 $4,164 $0
Reregulation Costs $14,020 $9,886 $16,240 $17,935 $13,149
CATV Franchise $62,768 $45,484 $69,124 $73,527 $106,468
Copyright Fees $134,904 $120,035 $91,053 $40,746 $144,292
BMI License Fees $0 $3,917 $0 $0 $0
ASCAP License Fees $7,792 $5,009 $0 $0 $0
Bad Debt Expense $34,500 $54,212 $68,861 $72,445 $84,451
Cap. Labor & OH Other $0 $0 $0 $0 $0
G & A Miscellaneous Expense $6,892 $2,501 $2,321 $3,230 $2,921
Primary Satellite Fees $533,904 $533,833 $497,181 $436,931 $457,835
Program Guides $23,440 $21,264 $20,904 $22,404 $23,984
Pay TV Fees $203,716 $273,126 $370,035 $381,017 $354,187
Pay Per View Fees $64,152 $59,250 $54,746 $68,247 $60,329
-------- -------- -------- -------- -------
Total Expenses $2,218,660 $2,260,515 $2,250,519 $2,314,040 $2,399,598
Operating Income $3,100,476 $2,817,272 $2,795,414 $2,765,958 $2,703,547
Operating Margin 58.29% 55.48% 55.40% 54.45% 52.98%
</TABLE>
<PAGE> 129
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SYSTEM LOCATION: CALIFORNIA CITY
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
ONE MONTH ONE MONTH THREE MONTHS THREE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING ENDING 12/31/96 ENDING ENDING 12/31/96 ENDING ENDING
12/31/96 ANNUALIZED 12/31/96 ANNUALIZED 12/31/96 12/31/95
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Primary First Outlet $30,304 $363,648 $90,303 $361,212 $351,579 $361,745
Primary Commercial $1,082 $12,984 $3,246 $12,984 $12,984 $5,244
Expanded Tier $0 $0 $0 $0 $0 $0
AG Tier $0 $0 $0 $0 $0 $0
AL Tier $10,926 $131,112 $32,871 $131,484 $136,376 $145,695
Radio Services $501 $6,012 $1,509 $6,036 $6,423 $7,683
Pay Cable First Outlet $6,553 $78,636 $19,861 $79,444 $90,571 $103,443
Pay Cable Additional Outlet $273 $3,276 $827 $3,308 $3,889 $4,328
Ala Carte $0 $0 $0 $0 $0 $0
New Product Tier 1 $5,066 $60,792 $15,171 $60,684 $51,265 $40,814
Primary Additional Outlet $0 $0 $0 $0 $0 $0
Remote Control $272 $3,264 $817 $3,268 $3,515 $3,622
Converter Rental $4,155 $49,860 $12,570 $50,280 $54,098 $55,694
Maintenance Contracts $355 $4,260 $1,099 $4,396 $4,679 $4,286
New Customer Basic Installs $0 $0 $0 $0 $2,425 $14,401
Installation Materials Charge $7 $84 $7 $28 $12 $249
Installs - Non New Customers $1,445 $17,340 $3,730 $14,920 $14,443 $10,272
Guides $67 $804 $247 $988 $752 $0
Other Late Charges $575 $6,900 $2,065 $8,260 $8,695 $7,930
Other Miscellaneous $0 $0 $0 $0 $0 $0
FCC User Fees Pass Through $79 $948 $241 $964 $991 $985
Ad Sales Other $0 $0 $0 $0 $0 $0
Other Programmers $6 $72 $2,988 $11,952 $3,432 $0
QVC Monthly Commission $224 $2,688 $650 $2,600 $3,064 $6,129
HSN Monthly Commission $170 $2,040 $486 $1,944 $2,222 $1,933
HSN Carriage Payment $152 $1,824 $457 $1,828 $1,829 $1,829
------- -------- -------- -------- -------- --------
Total Revenues $62,212 $746,544 $189,145 $756,580 $753,244 $776,282
EXPENSES
Technical Allocated Personnel Expense $858 $10,296 $3,883 $15,532 $7,650 $10,773
Technical Allocated P/R Benefit $268 $3,216 $1,189 $4,756 $7,448 $6,757
Technical Allocated Department Expense $335 $4,020 $1,398 $5,592 $14,934 $22,749
Rent - Headend $494 $5,928 $2,928 $11,712 $5,928 $5,800
Rent - Poles and Ducts $1,169 $14,028 $3,401 $13,604 $10,495 $8,000
R & M Plant $0 $0 $0 $0 $1,735 $0
</TABLE>
<TABLE>
<CAPTION>
--------------
------------------------------ ADJUSTED
TWELVE MONTHS TWELVE MONTHS ONE MONTH
ENDING ENDING ENDING 12/31/96
12/31/94 12/31/93 ANNUALIZED
------------------------------ ---------------
<S> <C> <C> <C>
REVENUES
Primary First Outlet $417,802 $349,297 $363,648
Primary Commercial $5,244 $7,988 $12,984
Expanded Tier $0 $0 $0
AG Tier $0 $19,353 $0
AL Tier $80,045 ($27) $131,112
Radio Services $9,082 $3,756 $6,012
Pay Cable First Outlet $91,449 $83,463 $78,636
Pay Cable Additional Outlet $4,464 $4,066 $3,276
Ala Carte $35,580 $65,132 $0
New Product Tier 1 $0 $0 $60,792
Primary Additional Outlet $0 $21,440 $0
Remote Control $3,419 $17,133 $3,264
Converter Rental $57,579 $20,434 $49,860
Maintenance Contracts $1,788 $0 $4,260
New Customer Basic Installs $19,922 $11,333 $0
Installation Materials Charge $0 $0 $84
Installs - Non New Customers $6,687 $7,047 $17,340
Guides $0 $3 $804
Other Late Charges $7,110 $7,900 $6,900
Other Miscellaneous $0 $47 $0
FCC User Fees Pass Through $12 $0 $948
Ad Sales Other $0 $9 $0
Other Programmers $0 $0 $72
QVC Monthly Commission $0 $0 $2,688
HSN Monthly Commission $0 $0 $2,040
HSN Carriage Payment $0 $0 $1,824
-------- -------- --------
Total Revenues $740,183 $618,374 $746,544
EXPENSES
Technical Allocated Personnel Expense $37,783 $35,695 $10,296
Technical Allocated P/R Benefit $9,279 $9,378 $3,216
Technical Allocated Department Expense $12,079 $7,598 $4,020
Rent - Headend $5,800 $2,366 $5,928
Rent - Poles and Ducts $6,775 $5,794 $14,028
R & M Plant $0 $0 $0
</TABLE>
<PAGE> 130
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SYSTEM LOCATION: CALIFORNIA CITY
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
ONE MONTH ONE MONTH THREE MONTHS THREE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING ENDING 12/31/96 ENDING ENDING 12/31/96 ENDING ENDING
12/31/96 ANNUALIZED 12/31/96 ANNUALIZED 12/31/96 12/31/95
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
R & M Other $175 $2,100 $174 $696 $829 $1,644
Material and Reconnect $1,011 $12,132 $2,137 $8,548 $10,030 $6,546
Vehicle - Gas & Oil $1 $12 $21 $84 $41 $68
Vehicle - Service $0 $0 $2 $8 $6 $159
T & E System Travel $0 $0 $0 $0 $39 $4
T & E System Non-Travel $58 $696 $258 $1,032 $321 $0
System Power Costs $1,256 $15,072 $3,590 $14,360 $14,559 $15,088
Property Taxes $1,113 $13,356 $3,340 $13,360 $13,980 $13,274
Small Tool and Safety $0 $0 $0 $0 $0 $359
Capital Labor & OH Construction ($1,126) ($13,512) ($7,098) ($28,392) ($15,030) ($15,418)
Capital Labor & OH Customer $0 $0 $0 $0 $0 ($3,091)
Production & LO Alloc. Personnel Benefit $0 $0 $0 $0 $76 $0
Production & LO Alloc. P/R Benefit $0 $0 $0 $0 $17 $0
Ad Sales $0 $0 $0 $0 $0 $0
Marketing Employee Commissions $0 $0 $0 $0 $0 $0
Marketing Expenses $838 $10,056 $1,528 $6,112 $5,131 $10,013
Dues and Subscriptions $8 $96 $26 $104 $91 $201
Pay Per View Expenses $11 $132 $35 $140 $136 $38
Miscellaneous Marketing Expenses ($210) ($2,520) $60 $240 $833 $1,425
G & A Allocated Personnel Expense $478 $5,736 $1,432 $5,728 $4,961 $9,255
G & A Allocated P/R Expense $532 $6,384 $802 $3,208 $2,355 $2,086
G & A Allocated Department Expense $1,221 $14,652 $3,844 $15,376 $19,852 $25,265
R & M - Office $0 $0 $2 $8 $319 $444
Office Supplies $0 $0 $0 $0 $99 $93
Xerox & Printing $0 $0 $0 $0 $0 $375
T & E System Travel $0 $0 $0 $0 $0 $70
T & E System Non-Travel $0 $0 $28 $112 $118 $0
Dues and Subscriptions $0 $0 $66 $264 $429 $189
Conventions - Travel $0 $0 $0 $0 $0 $0
Insurance $801 $9,612 $2,528 $10,112 $9,976 $9,381
Legal $131 $1,572 $393 $1,572 $1,572 $1,301
Audit & Taxes $762 $9,144 $2,285 $9,140 $14,539 $2,764
Association - Dues $115 $1,380 $213 $852 $804 $1,174
Association - Lobbying $11 $132 $33 $132 $158 $228
Political Contribution $63 $756 $62 $248 $125 $425
Donations/Public Relations ($24) ($288) $23 $92 $276 $274
Customer Billing $1,716 $20,592 $5,220 $20,880 $19,645 $21,873
Postage & Messengers $766 $9,192 $2,163 $8,652 $8,451 $9,423
Telephone $0 $0 $1 $4 $4 $5
</TABLE>
<TABLE>
<CAPTION>
---------------
------------------------------ ADJUSTED
TWELVE MONTHS TWELVE MONTHS ONE MONTH
ENDING ENDING ENDING 12/31/96
12/31/94 12/31/93 ANNUALIZED
------------------------------ ---------------
<S> <C> <C> <C>
R & M Other $845 $3,313 $2,100
Material and Reconnect $2,511 $0 $12,132
Vehicle - Gas & Oil $68 $96 $12
Vehicle - Service $151 $73 $0
T & E System Travel $0 $0 $0
T & E System Non-Travel $0 $0 $696
System Power Costs $11,654 $10,888 $15,072
Property Taxes $9,659 $6,980 $13,356
Small Tool and Safety $0 $102 $0
Capital Labor & OH Construction ($30,323) ($29,683) $0
Capital Labor & OH Customer ($13,116) ($16,816) $0
Production & LO Alloc. Personnel Benefit $0 $0 $0
Production & LO Alloc. P/R Benefit $0 $0 $0
Ad Sales $0 $0 $0
Marketing Employee Commissions $328 $0 $0
Marketing Expenses $12,919 ($772) $10,056
Dues and Subscriptions $144 $365 $96
Pay Per View Expenses $0 $0 $132
Miscellaneous Marketing Expenses $2,453 $5,716 $1,000
G & A Allocated Personnel Expense $22,790 $20,988 $5,736
G & A Allocated P/R Expense $7,705 $2,998 $6,384
G & A Allocated Department Expense $21,013 $23,533 $14,652
R & M - Office $154 $99 $0
Office Supplies $111 $378 $0
Xerox & Printing $0 $412 $0
T & E System Travel $10 $0 $0
T & E System Non-Travel $0 $40 $0
Dues and Subscriptions $123 $201 $0
Conventions - Travel $0 $0 $0
Insurance $8,071 $6,446 $9,612
Legal $1,573 $1,260 $1,572
Audit & Taxes $4,330 $1,079 $9,144
Association - Dues $1,234 $906 $1,380
Association - Lobbying $153 $0 $132
Political Contribution $278 $0 $756
Donations/Public Relations $227 $2,996 $0
Customer Billing $20,697 $19,485 $20,592
Postage & Messengers $8,187 $6,836 $9,192
Telephone $357 $749 $0
</TABLE>
<PAGE> 131
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SYSTEM LOCATION: CALIFORNIA CITY
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
ONE MONTH ONE MONTH THREE MONTHS THREE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING ENDING 12/31/96 ENDING ENDING 12/31/96 ENDING ENDING
12/31/96 ANNUALIZED 12/31/96 ANNUALIZED 12/31/96 12/31/95
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tax & Licenses $0 $0 $0 $0 $340 $20
FCC User Fees $85 $1,020 $159 $636 $1,112 $1,007
Reregulation Costs $0 $0 $1,032 $4,128 $1,674 $520
CATV Franchise $30 $360 $208 $832 $1,596 $15,249
Copyright Fees $174 $2,088 $515 $2,060 $2,477 $1,630
ASCAP License Fees $103 $1,236 $309 $1,236 $795 $0
Bad Debt Expense $573 $6,876 ($2,648) ($10,592) $2,526 $10,706
Cap. Labor & OH Other $0 $0 ($399) ($1,596) ($1,197) ($12,534)
G & A Miscellaneous Expense $48 $576 $67 $268 $177 $171
Primary Satellite Fees $7,979 $95,748 $24,127 $96,508 $97,000 $110,042
Program Guides $254 $3,048 $580 $2,320 $2,199 $2,769
Pay TV Fees $2,914 $34,968 $7,489 $29,956 $46,657 $64,295
------- -------- -------- -------- -------- --------
Total Expenses $24,991 $299,892 $67,406 $269,624 $318,288 $362,889
Operating Income $37,221 $446,652 $121,739 $486,956 $434,956 $413,393
Operating Margin 59.83% 59.83% 64.36% 64.36% 57.74% 53.25%
</TABLE>
<TABLE>
<CAPTION>
--------------
------------------------------ ADJUSTED
TWELVE MONTHS TWELVE MONTHS ONE MONTH
ENDING ENDING ENDING 12/31/96
12/31/94 12/31/93 ANNUALIZED
------------------------------ ---------------
<S> <C> <C> <C>
Tax & Licenses $20 $111 $0
FCC User Fees $739 $0 $1,020
Reregulation Costs $2,932 $5,782 $0
CATV Franchise $14,627 $12,422 $360
Copyright Fees $3,365 $2,502 $2,088
ASCAP License Fees $0 $0 $1,236
Bad Debt Expense $6,658 $21,430 $6,876
Cap. Labor & OH Other ($12,204) ($33,161) $0
G & A Miscellaneous Expense $451 $130 $576
Primary Satellite Fees $100,086 $80,667 $95,748
Program Guides $2,618 $2,413 $3,048
Pay TV Fees $61,038 $52,887 $34,968
-------- -------- --------
Total Expenses $346,352 $274,682 $317,212
Operating Income $393,831 $343,692 $429,332
Operating Margin 53.21% 55.58% 57.51%
</TABLE>
<PAGE> 132
SYSTEM LOCATION: CALIFORNIA CITY
<TABLE>
<CAPTION>
--------------------------------------------- -----------------------------
ADJUSTED ADJUSTED ADJUSTED ADJUSTED ADJUSTED
THREE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING 12/31/96 ENDING ENDING ENDING ENDING
ANNUALIZED 12/31/96 12/31/95 12/31/94 12/31/93
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES
Primary First Outlet $361,212 $351,579 $361,745 $417,802 $349,297
Primary Commercial $12,984 $12,984 $5,244 $5,244 $7,988
Expanded Tier $0 $0 $0 $0 $0
AG Tier $0 $0 $0 $0 $19,353
AL Tier $131,484 $136,376 $145,695 $80,045 ($27)
Radio Services $6,036 $6,423 $7,683 $9,082 $3,756
Pay Cable First Outlet $79,444 $90,571 $103,443 $91,449 $83,463
Pay Cable Additional Outlet $3,308 $3,889 $4,328 $4,464 $4,066
Ala Carte $0 $0 $0 $35,580 $65,132
New Product Tier 1 $60,684 $51,265 $40,814 $0 $0
Primary Additional Outlet $0 $0 $0 $0 $21,440
Remote Control $3,268 $3,515 $3,622 $3,419 $17,133
Converter Rental $50,280 $54,098 $55,694 $57,579 $20,434
Maintenance Contracts $4,396 $4,679 $4,286 $1,788 $0
New Customer Basic Installs $0 $2,425 $14,401 $19,922 $11,333
Installation Materials Charge $28 $12 $249 $0 $0
Installs - Non New Customers $14,920 $14,443 $10,272 $6,687 $7,047
Guides $988 $752 $0 $0 $3
Other Late Charges $8,260 $8,695 $7,930 $7,110 $7,900
Other Miscellaneous $0 $0 $0 $0 $47
FCC User Fees Pass Through $964 $991 $985 $12 $0
Ad Sales Other $0 $0 $0 $0 $9
Other Programmers $11,952 $3,432 $0 $0 $0
QVC Monthly Commission $2,600 $3,064 $6,129 $0 $0
HSN Monthly Commission $1,944 $2,222 $1,933 $0 $0
HSN Carriage Payment $1,828 $1,829 $1,829 $0 $0
-------- -------- -------- -------- --------
Total Revenues $756,580 $753,244 $776,282 $740,183 $618,374
EXPENSES
Technical Allocated Personnel Expense $15,532 $7,650 $10,773 $37,783 $35,695
Technical Allocated P/R Benefit $4,756 $7,448 $6,757 $9,279 $9,378
Technical Allocated Department Expense $5,592 $14,934 $22,749 $12,079 $7,598
Rent - Headend $11,712 $5,928 $5,800 $5,800 $2,366
Rent - Poles and Ducts $13,604 $10,495 $8,000 $6,775 $5,794
R & M Plant $0 $1,735 $0 $0 $0
</TABLE>
<PAGE> 133
SYSTEM LOCATION: CALIFORNIA CITY
<TABLE>
<CAPTION>
--------------------------------------------- -----------------------------
ADJUSTED ADJUSTED ADJUSTED ADJUSTED ADJUSTED
THREE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING 12/31/96 ENDING ENDING ENDING ENDING
ANNUALIZED 12/31/96 12/31/95 12/31/94 12/31/93
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
R & M Other $696 $829 $1,644 $845 $3,313
Material and Reconnect $8,548 $10,030 $6,546 $2,511 $0
Vehicle - Gas & Oil $84 $41 $68 $68 $96
Vehicle - Service $8 $6 $159 $151 $73
T & E System Travel $0 $39 $4 $0 $0
T & E System Non-Travel $1,032 $321 $0 $0 $0
System Power Costs $14,360 $14,559 $15,088 $11,654 $10,888
Property Taxes $13,360 $13,980 $13,274 $9,659 $6,980
Small Tool and Safety $0 $0 $359 $0 $102
Capital Labor & OH Construction $0 $0 $0 $0 $0
Capital Labor & OH Customer $0 $0 $0 $0 $0
Production & LO Alloc. Personnel Benefit $0 $76 $0 $0 $0
Production & LO Alloc. P/R Benefit $0 $17 $0 $0 $0
Ad Sales $0 $0 $0 $0 $0
Marketing Employee Commissions $0 $0 $0 $328 $0
Marketing Expenses $6,112 $5,131 $10,013 $12,919 $0
Dues and Subscriptions $104 $91 $201 $144 $365
Pay Per View Expenses $140 $136 $38 $0 $0
Miscellaneous Marketing Expenses $240 $833 $1,425 $2,453 $5,716
G & A Allocated Personnel Expense $5,728 $4,961 $9,255 $22,790 $20,988
G & A Allocated P/R Expense $3,208 $2,355 $2,086 $7,705 $2,998
G & A Allocated Department Expense $15,376 $19,852 $25,265 $21,013 $23,533
R & M - Office $8 $319 $444 $154 $99
Office Supplies $0 $99 $93 $111 $378
Xerox & Printing $0 $0 $375 $0 $412
T & E System Travel $0 $0 $70 $10 $0
T & E System Non-Travel $112 $118 $0 $0 $40
Dues and Subscriptions $264 $429 $189 $123 $201
Conventions - Travel $0 $0 $0 $0 $0
Insurance $10,112 $9,976 $9,381 $8,071 $6,446
Legal $1,572 $1,572 $1,301 $1,573 $1,260
Audit & Taxes $9,140 $14,539 $2,764 $4,330 $1,079
Association - Dues $852 $804 $1,174 $1,234 $906
Association - Lobbying $132 $158 $228 $153 $0
Political Contribution $248 $125 $425 $278 $0
Donations/Public Relations $92 $276 $274 $227 $2,996
Customer Billing $20,880 $19,645 $21,873 $20,697 $19,485
Postage & Messengers $8,652 $8,451 $9,423 $8,187 $6,836
Telephone $4 $4 $5 $357 $749
</TABLE>
<PAGE> 134
SYSTEM LOCATION: CALIFORNIA CITY
<TABLE>
<CAPTION>
--------------------------------------------- -----------------------------
ADJUSTED ADJUSTED ADJUSTED ADJUSTED ADJUSTED
THREE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING 12/31/96 ENDING ENDING ENDING ENDING
ANNUALIZED 12/31/96 12/31/95 12/31/94 12/31/93
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Tax & Licenses $0 $340 $20 $20 $111
FCC User Fees $636 $1,112 $1,007 $739 $0
Reregulation Costs $4,128 $1,674 $520 $2,932 $5,782
CATV Franchise $832 $1,596 $15,249 $14,627 $12,422
Copyright Fees $2,060 $2,477 $1,630 $3,365 $2,502
ASCAP License Fees $1,236 $795 $0 $0 $0
Bad Debt Expense $3,000 $2,526 $10,706 $6,658 $21,430
Cap. Labor & OH Other $0 $0 $0 $0 $0
G & A Miscellaneous Expense $268 $177 $171 $451 $130
Primary Satellite Fees $96,508 $97,000 $110,042 $100,086 $80,667
Program Guides $2,320 $2,199 $2,769 $2,618 $2,413
Pay TV Fees $29,956 $46,657 $64,295 $61,038 $52,887
-------- -------- -------- -------- --------
Total Expenses $313,204 $334,515 $393,932 $401,995 $355,114
Operating Income $443,376 $418,729 $382,350 $338,188 $263,260
Operating Margin 58.60% 55.59% 49.25% 45.69% 42.57%
</TABLE>
<PAGE> 135
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SYSTEM LOCATION: CENTREVILLE, MD
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
ONE MONTH ONE MONTH THREE MONTHS THREE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING ENDING 12/31/96 ENDING ENDING 12/31/96 ENDING ENDING
12/31/96 ANNUALIZED 12/31/96 ANNUALIZED 12/31/96 12/31/95
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Primary First Outlet $246,374 $2,956,488 $737,776 $2,951,104 $2,754,855 $2,478,829
Primary Commercial $7,571 $90,852 $22,580 $90,320 $79,007 $53,512
Expanded Tier $0 $0 $0 $0 $0 $0
AG Tier $0 $0 $0 $0 $0 $0
AJ Tier $0 $0 $0 $0 $0 $0
AL Tier $41,814 $501,768 $125,325 $501,300 $424,950 $340,506
Radio Services $2,088 $25,056 $6,408 $25,632 $28,104 $33,305
Pay Cable First Outlet $62,372 $748,464 $190,678 $762,712 $845,121 $931,201
Ala Carte $0 $0 $0 $0 $0 $0
New Product Tier 1 $63,453 $761,436 $192,101 $768,404 $580,639 $361,832
Commercial Pay $1,192 $14,304 $3,578 $14,312 $14,665 $13,779
Video $3,085 $37,020 $9,674 $38,696 $41,088 $5,414
Primary Additional Outlet $0 $0 $0 $0 $0 $0
Remote Control $462 $5,544 $1,391 $5,564 $5,704 $6,215
Converter Rental $3,666 $43,992 $11,197 $44,788 $34,794 $25,258
Maintenance Contracts $3,504 $42,048 $10,833 $43,332 $39,325 $31,186
New Customer Pay Installs $0 $0 $300 $1,200 $300 $0
New Customer Basic Installs $470 $5,640 $1,930 $7,720 $7,307 $15,003
Installation Materials Charge $0 $0 $0 $0 $8 $1
Installs - Non New Customers $2,020 $24,240 $9,258 $37,032 $47,807 $28,795
Other Late Charges $7,058 $84,696 $20,331 $81,324 $74,032 $64,609
Other Rent $1,922 $23,064 $5,758 $23,032 $23,455 $14,778
Other Franchise Pass Thru $9,090 $109,080 $27,707 $110,828 $104,885 $101,381
Other Miscellaneous $0 $0 $0 $0 $0 $25
FCC User Fees Pass Through $509 $6,108 $1,528 $6,112 $6,036 $5,454
Video Game Activation $0 $0 $0 $0 $0 $0
Other Programmers $42 $504 $18,419 $73,676 $24,709 $0
QVC Monthly Commission $1,133 $13,596 $3,642 $14,568 $13,209 $9,020
QVC Carriage Payment $0 $0 $5,478 $21,912 $31,486 $0
HSN Monthly Commission $1,601 $19,212 $5,407 $21,628 $22,193 $18,635
HSN Carriage Payment $173 $2,076 $519 $2,076 $2,076 $2,076
Ad Insertion Sales $13,313 $159,756 $35,084 $140,336 $122,640 $113,707
Ad Sales Other $0 $0 $0 $0 $0 $0
Interconnect Services $0 $0 $0 $0 $0 $0
Production & Local Origination $0 $0 $200 $800 $400 $675
Guides $1,851 $22,212 $5,254 $21,016 $13,842 $8,799
------- -------- ------- -------- -------- -------
Total Revenues $474,763 $5,697,156 $1,452,356 $5,809,424 $5,342,637 $4,663,995
</TABLE>
<TABLE>
<CAPTION>
---------------
----------------------------- ADJUSTED
TWELVE MONTHS TWELVE MONTHS ONE MONTH
ENDING ENDING ENDING 12/31/96
12/31/94 12/31/93 ANNUALIZED
----------------------------- ---------------
<C> <C> <C>
REVENUES
Primary First Outlet $2,377,380 $1,913,174 $2,956,488
Primary Commercial $38,888 $36,739 $90,852
Expanded Tier $0 $0 $0
AG Tier $0 $306,438 $0
AJ Tier $0 $177,195 $0
AL Tier $129,308 $0 $501,768
Radio Services $39,699 $12,573 $25,056
Pay Cable First Outlet $805,144 $805,207 $748,464
Ala Carte $290,512 $70,058 $0
New Product Tier 1 $0 $0 $761,436
Commercial Pay $13,779 $13,008 $14,304
Video $0 $0 $37,020
Primary Additional Outlet ($52) $125,547 $0
Remote Control $5,173 $16,434 $5,544
Converter Rental $25,948 $7,688 $43,992
Maintenance Contracts $18,646 $0 $42,048
New Customer Pay Installs $0 $240 $0
New Customer Basic Installs $20,729 $41,595 $5,640
Installation Materials Charge $0
Installs - Non New Customers $16,487 $16,692 $24,240
Other Late Charges $72,245 $67,845 $84,696
Other Rent $12,784 $2,780 $23,064
Other Franchise Pass Thru $95,659 $93,775 $109,080
Other Miscellaneous $0 $0 $0
FCC User Fees Pass Through $155 $0 $6,108
Video Game Activation $0 $0 $0
Other Programmers $0 $0 $504
QVC Monthly Commission $8,406 $9,676 $13,596
QVC Carriage Payment ($10,190) $10,190 $0
HSN Monthly Commission $0 $0 $19,212
HSN Carriage Payment $867 $0 $2,076
Ad Insertion Sales $83,674 $31,494 $159,756
Ad Sales Other $0 $49 $0
Interconnect Services $3,150 $0 $0
Production & Local Origination $0 $0 $0
Guides $8,841 $8,623 $22,212
---------- ---------- ----------
Total Revenues $4,057,232 $3,767,020 $5,697,156
</TABLE>
<PAGE> 136
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SYSTEM LOCATION: CENTREVILLE, MD
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
ONE MONTH ONE MONTH THREE MONTHS THREE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING ENDING 12/31/96 ENDING ENDING 12/31/96 ENDING ENDING
12/31/96 ANNUALIZED 12/31/96 ANNUALIZED 12/31/96 12/31/95
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EXPENSES
Technical Salary - Supervisor $2,924 $35,088 $8,773 $35,092 $35,091 $33,746
Technical Salary - Technician $8,157 $97,884 $24,416 $97,664 $97,848 $94,041
Technical Salary - Dispatcher $0 $0 $1,259 $5,036 $9,221 $11,147
Technical Salary - Installers $1,962 $23,544 $4,302 $17,208 $20,736 $21,926
Overtime/Standby $5,097 $61,164 $12,764 $51,056 $50,078 $53,793
Payroll Taxes $1,339 $16,068 $4,311 $17,244 $19,034 $18,612
Group Insurance $3,581 $42,972 $6,089 $24,356 $20,855 $14,432
Other Benefits ($2,541) ($30,492) ($699) ($2,796) $7,590 $7,536
Rent - Headend $1,475 $17,700 $4,791 $19,164 $20,665 $19,894
Rent - Poles and Ducts $9,733 $116,796 $29,199 $116,796 $116,796 $107,707
R & M Plant $1,202 $14,424 $3,918 $15,672 $9,086 $4,383
R & M Other $1,391 $16,692 $2,582 $10,328 $13,569 $12,310
Material and Reconnect $3,951 $47,412 $10,000 $40,000 $35,973 $28,849
Vehicle - Gas & Oil $2,165 $25,980 $6,357 $25,428 $27,790 $25,169
Vehicle - Service $2,612 $31,344 $3,022 $12,088 $14,473 $12,420
T & E System Travel $0 $0 $0 $0 $38 $518
T & E System Non-Travel $0 $0 $0 $0 $0 $107
Dues & Subscriptions $331 $3,972 $668 $2,672 $3,532 $4,997
Education $0 $0 $0 $0 $109 $411
System Power Costs $7,760 $93,120 $27,322 $109,288 $96,548 $93,635
Recruiting $0 $0 $0 $0 $0 $399
Loss on Converters $100 $1,200 $300 $1,200 $1,200 $1,200
Property Taxes ($19,763) ($237,156) ($19,289) ($77,156) ($17,116) $504
Uniforms $180 $2,160 $825 $3,300 $3,475 $3,354
Small Tool and Safety $1,273 $15,276 $1,511 $6,044 $3,936 $4,635
Capital Labor & OH Construction ($15,198) ($182,376) ($38,708) ($154,832) ($143,194) ($103,364)
Capital Labor & OH Customer ($15,006) ($180,072) ($24,400) ($97,600) ($52,954) ($24,007)
Ad Sales Payroll Taxes $117 $1,404 $475 $1,900 $1,847 $1,584
Ad Sales Group Insurance $573 $6,876 $1,037 $4,148 $3,265 $3,956
Ad Sales Alloc. Personnel Benefit $1,484 $17,808 $4,137 $16,548 $16,021 $13,189
Ad Sales Alloc. P/R Benefit $513 $6,156 $1,653 $6,612 $6,364 $4,464
Employee Commissions $1,605 $19,260 $6,482 $25,928 $22,735 $18,879
Other Ad Sale Expenses $2,123 $25,476 $10,729 $42,916 $29,349 $22,107
Marketing Salary & Benefits ($1,211) ($14,532) ($87) ($348) $6,680 $6,801
Marketing Employee Commissions $1,215 $14,580 $2,006 $8,024 $18,612 $82,475
Marketing Expenses $5,322 $63,864 $25,790 $103,160 $56,104 $41,331
Dues and Subscriptions $46 $552 $149 $596 $508 $1,060
Pay Per View Expenses $0 $0 $9 $36 $13 $201
Video Game Expenses $0 $0 $0 $0 $5,914 $7,475
</TABLE>
<TABLE>
<CAPTION>
---------------
----------------------------- ADJUSTED
TWELVE MONTHS TWELVE MONTHS ONE MONTH
ENDING ENDING ENDING 12/31/96
12/31/94 12/31/93 ANNUALIZED
----------------------------- ---------------
<S> <C> <C> <C>
EXPENSES
Technical Salary - Supervisor $32,448 $31,200 $35,088
Technical Salary - Technician $77,899 $78,628 $97,884
Technical Salary - Dispatcher $10,645 $12,237 $0
Technical Salary - Installers $30,390 $25,459 $23,544
Overtime/Standby $64,383 $36,401 $61,164
Payroll Taxes $18,606 $16,313 $16,068
Group Insurance $12,160 $25,863 $42,972
Other Benefits $11,842 $12,660 $7,500
Rent - Headend $20,311 $20,487 $17,700
Rent - Poles and Ducts $76,445 $64,016 $116,796
R & M Plant $1,964 $1,247 $14,424
R & M Other $5,191 $3,057 $16,692
Material and Reconnect $9,122 $2,400 $47,412
Vehicle - Gas & Oil $21,566 $21,639 $25,980
Vehicle - Service $11,358 $6,024 $31,344
T & E System Travel $210 $566 $0
T & E System Non-Travel $347 $284 $0
Dues & Subscriptions $3,611 $2,563 $3,972
Education $225 $96 $0
System Power Costs $81,087 $74,920 $93,120
Recruiting $143 $274 $0
Loss on Converters $1,200 $1,200 $1,200
Property Taxes ($84,426) $49,901 $0
Uniforms $3,177 $2,933 $2,160
Small Tool and Safety $3,397 $2,485 $15,276
Capital Labor & OH Construction ($100,780) ($58,994) $0
Capital Labor & OH Customer ($8,868) ($18,371) $0
Ad Sales Payroll Taxes $1,603 $1,486 $1,404
Ad Sales Group Insurance $2,681 $2,675 $6,876
Ad Sales Alloc. Personnel Benefit $10,740 $5,958 $17,808
Ad Sales Alloc. P/R Benefit $3,855 $2,060 $6,156
Employee Commissions $17,641 $17,382 $19,260
Other Ad Sale Expenses $28,710 $20,338 $25,476
Marketing Salary & Benefits $554 $20 $7,000
Marketing Employee Commissions $7,814 $2,200 $14,580
Marketing Expenses $162,690 $140,606 $63,864
Dues and Subscriptions $545 $2,029 $552
Pay Per View Expenses $236 $0 $0
Video Game Expenses $0 $0 $0
</TABLE>
<PAGE> 137
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SYSTEM LOCATION: CENTREVILLE, MD
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
ONE MONTH ONE MONTH THREE MONTHS THREE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING ENDING 12/31/96 ENDING ENDING 12/31/96 ENDING ENDING
12/31/96 ANNUALIZED 12/31/96 ANNUALIZED 12/31/96 12/31/95
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Miscellaneous Marketing Expenses $2,250 $27,000 $8,130 $32,520 $13,956 $9,544
G & A Salary - Supervisor $3,562 $42,744 $10,686 $42,744 $53,014 $58,858
G & A Salary - CSR $3,348 $40,176 $9,880 $39,520 $48,667 $51,810
G & A Overtime/Standby $264 $3,168 $1,064 $4,256 $2,173 $3,877
G & A Payroll Taxes $563 $6,756 $1,985 $7,940 $9,251 $10,460
G & A Group Insurance $1,202 $14,424 $2,244 $8,976 $8,517 $9,155
G & A Other Benefits ($2,722) ($32,664) ($3,376) ($13,504) $429 $10,326
G & A Allocated Personnel Expense $0 $0 $0 $0 $1,834 $0
G & A Allocated P/R Expense $0 $0 $0 $0 $371 $0
Rent - Office $2,084 $25,008 $6,241 $24,964 $24,446 $18,607
R & M - Office $385 $4,620 $2,588 $10,352 $8,770 $8,339
Office Supplies $508 $6,096 $1,515 $6,060 $9,714 $9,103
Xerox & Printing $22 $264 $21 $84 $2,113 $3,385
Vehicle - Gas & Oil $50 $600 $119 $476 $1,046 $1,085
T & E System Travel $268 $3,216 $550 $2,200 $2,032 $873
T & E System Non-Travel $0 $0 $12 $48 $513 $618
Dues and Subscriptions $118 $1,416 $266 $1,064 $1,909 $717
Conventions - Travel $0 $0 $0 $0 $55 $13
Education $7 $84 $17 $68 $3,507 $2,693
Recruiting $0 $0 $0 $0 $941 $233
Insurance $6,811 $81,732 $21,726 $86,904 $155,888 $82,303
Legal $4,311 $51,732 $9,639 $38,556 $16,389 $7,599
Audit & Taxes $762 $9,144 $2,285 $9,140 $11,744 $14,311
Association - Dues $337 $4,044 $1,009 $4,036 $4,156 $4,467
Association - Lobbying $75 $900 $224 $896 $878 $794
Political Contribution $0 $0 $0 $0 $0 $0
Donations/Public Relations ($63) ($756) $301 $1,204 $1,967 $1,810
Customer Billing $4,093 $49,116 $13,411 $53,644 $63,687 $68,758
Postage & Messengers $5,543 $66,516 $15,356 $61,424 $59,685 $54,234
Utilities $897 $10,764 $2,712 $10,848 $9,580 $7,995
Telephone $2,132 $25,584 $11,736 $46,944 $47,138 $41,672
Tax & Licenses $73 $876 $221 $884 $1,219 $548
FCC User Fees $577 $6,924 $1,732 $6,928 $6,686 $5,709
Reregulation Costs $1 $12 $5,438 $21,752 $14,035 $3,876
CATV Franchise $15,157 $181,884 $33,549 $134,196 $112,159 $118,639
Copyright Fees $4,885 $58,620 $23,200 $92,800 $107,032 $85,156
BMI License Fees $0 $0 ($383) ($1,532) $3,254 $0
ASCAP License Fees $656 $7,872 $1,968 $7,872 $5,062 $0
Bad Debt Expense $6,877 $82,524 $8,569 $34,276 $33,754 $56,738
Cap. Labor & OH Other $0 $0 $0 $0 ($10,621) ($19,977)
G & A Miscellaneous Expense $1,456 $17,472 $2,111 $8,444 $3,792 $4,727
</TABLE>
<TABLE>
<CAPTION>
---------------
----------------------------- ADJUSTED
TWELVE MONTHS TWELVE MONTHS ONE MONTH
ENDING ENDING ENDING 12/31/96
12/31/94 12/31/93 ANNUALIZED
----------------------------- ---------------
<S> <C> <C> <C>
Miscellaneous Marketing Expenses $5,639 $4,203 $27,000
G & A Salary - Supervisor $59,683 $54,074 $42,744
G & A Salary - CSR $45,096 $41,565 $40,176
G & A Overtime/Standby $2,439 $898 $3,168
G & A Payroll Taxes $10,488 $8,513 $6,756
G & A Group Insurance $6,643 $8,242 $14,424
G & A Other Benefits ($38,690) $8,592 $0
G & A Allocated Personnel Expense $0 $0 $0
G & A Allocated P/R Expense $0 $0 $0
Rent - Office $16,800 $14,600 $25,008
R & M - Office $6,894 $5,955 $4,620
Office Supplies $6,420 $5,289 $6,096
Xerox & Printing $5,119 $6,327 $264
Vehicle - Gas & Oil $1,882 $839 $600
T & E System Travel $1,576 $1,841 $3,216
T & E System Non-Travel $550 $490 $0
Dues and Subscriptions $766 $686 $1,416
Conventions - Travel $600 $2,115 $0
Education $785 $905 $84
Recruiting $64 $0 $0
Insurance $56,394 $67,186 $81,732
Legal $9,000 $21,250 $51,732
Audit & Taxes $22,254 $24,001 $9,144
Association - Dues $4,867 $4,347 $4,044
Association - Lobbying $720 $0 $900
Political Contribution $50 $0 $0
Donations/Public Relations $2,672 $2,462 $0
Customer Billing $60,389 $55,869 $49,116
Postage & Messengers $51,889 $46,479 $66,516
Utilities $7,294 $7,245 $10,764
Telephone $45,588 $39,583 $25,584
Tax & Licenses $655 $66 $876
FCC User Fees $3,734 $0 $6,924
Reregulation Costs $16,274 $11,202 $12
CATV Franchise $102,244 $129,731 $181,884
Copyright Fees $88,307 $79,921 $58,620
BMI License Fees $0 $0 $0
ASCAP License Fees $0 $0 $7,872
Bad Debt Expense $76,907 $92,197 $82,524
Cap. Labor & OH Other ($13,367) ($18,934) $0
G & A Miscellaneous Expense $4,914 $3,834 $17,472
</TABLE>
<PAGE> 138
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SYSTEM LOCATION: CENTREVILLE, MD
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
ONE MONTH ONE MONTH THREE MONTHS THREE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING ENDING 12/31/96 ENDING ENDING 12/31/96 ENDING ENDING
12/31/96 ANNUALIZED 12/31/96 ANNUALIZED 12/31/96 12/31/95
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Primary Satellite Fees $68,195 $818,340 $205,446 $821,784 $775,456 $661,699
Program Guides $1,115 $13,380 $2,383 $9,532 $8,628 $9,484
Pay TV Fees $32,463 $389,556 $93,428 $373,712 $420,459 $524,646
Video Game Fees $1,243 $14,916 $3,854 $15,416 $16,199 $1,590
-------- ---------- -------- ---------- ---------- ----------
Total Expenses $184,017 $2,208,204 $623,550 $2,494,200 $2,623,275 $2,588,350
Operating Income $290,746 $3,488,952 $828,806 $3,315,224 $2,719,362 $2,075,645
Operating Margin 61.24% 61.24% 57.07% 57.07% 50.90% 44.50%
</TABLE>
<TABLE>
<CAPTION>
---------------
----------------------------- ADJUSTED
TWELVE MONTHS TWELVE MONTHS ONE MONTH
ENDING ENDING ENDING 12/31/96
12/31/94 12/31/93 ANNUALIZED
----------------------------- ---------------
<S> <C> <C> <C>
Primary Satellite Fees $478,562 $434,114 $818,340
Program Guides $10,392 $11,463 $13,380
Pay TV Fees $444,068 $455,873 $389,556
Video Game Fees $0 $0 $14,916
---------- ---------- ----------
Total Expenses $2,147,283 $2,243,265 $2,900,752
Operating Income $1,909,949 $1,523,755 $2,796,404
Operating Margin 47.08% 40.45% 49.08%
</TABLE>
<PAGE> 139
SYSTEM LOCATION: CENTREVILLE, MD
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
ADJUSTED ADJUSTED ADJUSTED ADJUSTED ADJUSTED
THREE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING 12/31/96 ENDING ENDING ENDING ENDING
ANNUALIZED 12/31/96 12/31/95 12/31/94 12/31/93
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES
Primary First Outlet $2,951,104 $2,754,855 $2,478,829 $2,377,380 $1,913,174
Primary Commercial $90,320 $79,007 $53,512 $38,888 $36,739
Expanded Tier $0 $0 $0 $0 $0
AG Tier $0 $0 $0 $0 $306,438
AJ Tier $0 $0 $0 $0 $177,195
AL Tier $501,300 $424,950 $340,506 $129,308 $0
Radio Services $25,632 $28,104 $33,305 $39,699 $12,573
Pay Cable First Outlet $762,712 $845,121 $931,201 $805,144 $805,207
Ala Carte $0 $0 $0 $290,512 $70,058
New Product Tier 1 $768,404 $580,639 $361,832 $0 $0
Commercial Pay $14,312 $14,665 $13,779 $13,779 $13,008
Video $38,696 $41,088 $5,414 $0 $0
Primary Additional Outlet $0 $0 $0 ($52) $125,547
Remote Control $5,564 $5,704 $6,215 $5,173 $16,434
Converter Rental $44,788 $34,794 $25,258 $25,948 $7,688
Maintenance Contracts $43,332 $39,325 $31,186 $18,646 $0
New Customer Pay Installs $1,200 $300 $0 $0 $240
New Customer Basic Installs $7,720 $7,307 $15,003 $20,729 $41,595
Installation Materials Charge $0 $8 $1 $0 $0
Installs - Non New Customers $37,032 $47,807 $28,795 $16,487 $16,692
Other Late Charges $81,324 $74,032 $64,609 $72,245 $67,845
Other Rent $23,032 $23,455 $14,778 $12,784 $2,780
Other Franchise Pass Thru $110,828 $104,885 $101,381 $95,659 $93,775
Other Miscellaneous $0 $0 $25 $0 $0
FCC User Fees Pass Through $6,112 $6,036 $5,454 $155 $0
Video Game Activation $0 $0 $0 $0 $0
Other Programmers $73,676 $24,709 $0 $0 $0
QVC Monthly Commission $14,568 $13,209 $9,020 $8,406 $9,676
QVC Carriage Payment $21,912 $31,486 $0 $0 $0
HSN Monthly Commission $21,628 $22,193 $18,635 $0 $0
HSN Carriage Payment $2,076 $2,076 $2,076 $867 $0
Ad Insertion Sales $140,336 $122,640 $113,707 $83,674 $31,494
Ad Sales Other $0 $0 $0 $0 $49
Interconnect Services $0 $0 $0 $3,150 $0
Production & Local Origination $800 $400 $675 $0 $0
Guides $21,016 $13,842 $8,799 $8,841 $8,623
-------- -------- ------- ------- ------
Total Revenues $5,809,424 $5,342,637 $4,663,995 $4,067,422 $3,756,830
</TABLE>
<PAGE> 140
SYSTEM LOCATION: CENTREVILLE, MD
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
ADJUSTED ADJUSTED ADJUSTED ADJUSTED ADJUSTED
THREE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING 12/31/96 ENDING ENDING ENDING ENDING
ANNUALIZED 12/31/96 12/31/95 12/31/94 12/31/93
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EXPENSES
Technical Salary - Supervisor $35,092 $35,091 $33,746 $32,448 $31,200
Technical Salary - Technician $97,664 $97,848 $94,041 $77,899 $78,628
Technical Salary - Dispatcher $5,036 $9,221 $11,147 $10,645 $12,237
Technical Salary - Installers $17,208 $20,736 $21,926 $30,390 $25,459
Overtime/Standby $51,056 $50,078 $53,793 $64,383 $36,401
Payroll Taxes $17,244 $19,034 $18,612 $18,606 $16,313
Group Insurance $24,356 $20,855 $14,432 $12,160 $25,863
Other Benefits $7,500 $7,590 $7,536 $11,842 $12,660
Rent - Headend $19,164 $20,665 $19,894 $20,311 $20,487
Rent - Poles and Ducts $116,796 $116,796 $107,707 $76,445 $64,016
R & M Plant $15,672 $9,086 $4,383 $1,964 $1,247
R & M Other $10,328 $13,569 $12,310 $5,191 $3,057
Material and Reconnect $40,000 $35,973 $28,849 $9,122 $2,400
Vehicle - Gas & Oil $25,428 $27,790 $25,169 $21,566 $21,639
Vehicle - Service $12,088 $14,473 $12,420 $11,358 $6,024
T & E System Travel $0 $38 $518 $210 $566
T & E System Non-Travel $0 $0 $107 $347 $284
Dues & Subscriptions $2,672 $3,532 $4,997 $3,611 $2,563
Education $0 $109 $411 $225 $96
System Power Costs $109,288 $96,548 $93,635 $81,087 $74,920
Recruiting $0 $0 $399 $143 $274
Loss on Converters $1,200 $1,200 $1,200 $1,200 $1,200
Property Taxes $0 $0 $504 $0 $49,901
Uniforms $3,300 $3,475 $3,354 $3,177 $2,933
Small Tool and Safety $6,044 $3,936 $4,635 $3,397 $2,485
Capital Labor & OH Construction $0 $0 $0 $0 $0
Capital Labor & OH Customer $0 $0 $0 $0 $0
Ad Sales Payroll Taxes $1,900 $1,847 $1,584 $1,603 $1,486
Ad Sales Group Insurance $4,148 $3,265 $3,956 $2,681 $2,675
Ad Sales Alloc. Personnel Benefit $16,548 $16,021 $13,189 $10,740 $5,958
Ad Sales Alloc. P/R Benefit $6,612 $6,364 $4,464 $3,855 $2,060
Employee Commissions $25,928 $22,735 $18,879 $17,641 $17,382
Other Ad Sale Expenses $42,916 $29,349 $22,107 $28,710 $20,338
Marketing Salary & Benefits $7,000 $6,680 $6,801 $554 $20
Marketing Employee Commissions $8,024 $18,612 $82,475 $7,814 $2,200
Marketing Expenses $103,160 $56,104 $41,331 $162,690 $140,606
Dues and Subscriptions $596 $508 $1,060 $545 $2,029
Pay Per View Expenses $36 $13 $201 $236 $0
Video Game Expenses $0 $5,914 $7,475 $0 $0
</TABLE>
<PAGE> 141
SYSTEM LOCATION: CENTREVILLE, MD
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
ADJUSTED ADJUSTED ADJUSTED ADJUSTED ADJUSTED
THREE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING 12/31/96 ENDING ENDING ENDING ENDING
ANNUALIZED 12/31/96 12/31/95 12/31/94 12/31/93
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Miscellaneous Marketing Expenses $32,520 $13,956 $9,544 $5,639 $4,203
G & A Salary - Supervisor $42,744 $53,014 $58,858 $59,683 $54,074
G & A Salary - CSR $39,520 $48,667 $51,810 $45,096 $41,565
G & A Overtime/Standby $4,256 $2,173 $3,877 $2,439 $898
G & A Payroll Taxes $7,940 $9,251 $10,460 $10,488 $8,513
G & A Group Insurance $8,976 $8,517 $9,155 $6,643 $8,242
G & A Other Benefits $0 $429 $10,326 $0 $8,592
G & A Allocated Personnel Expense $0 $1,834 $0 $0 $0
G & A Allocated P/R Expense $0 $371 $0 $0 $0
Rent - Office $24,964 $24,446 $18,607 $16,800 $14,600
R & M - Office $10,352 $8,770 $8,339 $6,894 $5,955
Office Supplies $6,060 $9,714 $9,103 $6,420 $5,289
Xerox & Printing $84 $2,113 $3,385 $5,119 $6,327
Vehicle - Gas & Oil $476 $1,046 $1,085 $1,882 $839
T & E System Travel $2,200 $2,032 $873 $1,576 $1,841
T & E System Non-Travel $48 $513 $618 $550 $490
Dues and Subscriptions $1,064 $1,909 $717 $766 $686
Conventions - Travel $0 $55 $13 $600 $2,115
Education $68 $3,507 $2,693 $785 $905
Recruiting $0 $941 $233 $64 $0
Insurance $86,904 $155,888 $82,303 $56,394 $67,186
Legal $38,556 $16,389 $7,599 $9,000 $21,250
Audit & Taxes $9,140 $11,744 $14,311 $22,254 $24,001
Association - Dues $4,036 $4,156 $4,467 $4,867 $4,347
Association - Lobbying $896 $878 $794 $720 $0
Political Contribution $0 $0 $0 $50 $0
Donations/Public Relations $1,204 $1,967 $1,810 $2,672 $2,462
Customer Billing $53,644 $63,687 $68,758 $60,389 $55,869
Postage & Messengers $61,424 $59,685 $54,234 $51,889 $46,479
Utilities $10,848 $9,580 $7,995 $7,294 $7,245
Telephone $46,944 $47,138 $41,672 $45,588 $39,583
Tax & Licenses $884 $1,219 $548 $655 $66
FCC User Fees $6,928 $6,686 $5,709 $3,734 $0
Reregulation Costs $21,752 $14,035 $3,876 $16,274 $11,202
CATV Franchise $134,196 $112,159 $118,639 $102,244 $129,731
Copyright Fees $92,800 $107,032 $85,156 $88,307 $79,921
BMI License Fees $0 $3,254 $0 $0 $0
ASCAP License Fees $7,872 $5,062 $0 $0 $0
Bad Debt Expense $34,276 $33,754 $56,738 $76,907 $92,197
Cap. Labor & OH Other $0 $0 $0 $0 $0
G & A Miscellaneous Expense $8,444 $3,792 $4,727 $4,914 $3,834
</TABLE>
<PAGE> 142
SYSTEM LOCATION: CENTREVILLE, MD
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
ADJUSTED ADJUSTED ADJUSTED ADJUSTED ADJUSTED
THREE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING 12/31/96 ENDING ENDING ENDING ENDING
ANNUALIZED 12/31/96 12/31/95 12/31/94 12/31/93
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Primary Satellite Fees $821,784 $775,456 $661,699 $478,562 $434,114
Program Guides $9,532 $8,628 $9,484 $10,392 $11,463
Pay TV Fees $373,712 $420,459 $524,646 $444,068 $455,873
Video Game Fees $15,416 $16,199 $1,590 $0 $0
-------- -------- ------- --- --
Total Expenses $2,856,468 $2,847,160 $2,735,698 $2,393,414 $2,339,564
Operating Income $2,952,956 $2,495,477 $1,928,297 $1,674,008 $1,417,266
Operating Margin 50.83% 46.71% 41.34% 41.16% 37.73%
</TABLE>
<PAGE> 143
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SYSTEM LOCATION: REDMOND, OR
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
ONE MONTH ONE MONTH THREE MONTHS THREE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING ENDING 12/31/96 ENDING ENDING 12/31/96 ENDING ENDING
12/31/96 ANNUALIZED 12/31/96 ANNUALIZED 12/31/96 12/31/95
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Primary-1st Outlet $78,150 $937,800 $233,216 $932,864 $922,548 $932,155
Primary Commercial $5,332 $63,984 $15,505 $62,020 $69,928 $74,523
AG Tier $0 $0 $0 $0 $0 $0
AJ Tier $0 $0 $0 $0 $0 $0
AL Tier $5,845 $70,140 $17,491 $69,964 $69,638 $74,131
Radio Services $627 $7,524 $1,919 $7,676 $8,730 $11,473
Pay Cable 1st Outlet $4,597 $55,164 $14,539 $58,156 $71,992 $99,639
New Product Tier 1 $22,825 $273,900 $68,678 $274,712 $245,465 $219,116
Pay Cable Add'l Outlet $0 $0 $0 $0 $0 $0
Ala Carte $0 $0 $0 $0 $0 $0
Commercial Pay $0 $0 $0 $0 $0 $0
Mini Pay $187 $2,244 $546 $2,184 $2,529 $2,371
Primary Additional Outlet $0 $0 $0 $0 $0 $0
Remote Control $192 $2,304 $588 $2,352 $2,535 $2,868
Converter Rental $2,697 $32,364 $8,066 $32,264 $35,576 $39,429
Maintenance Contracts $511 $6,132 $1,587 $6,348 $7,002 $7,842
New Customer Pay Installs $0 $0 $0 $0 $0 $9
New Customer Basic Installs $535 $6,420 $2,575 $10,300 $5,607 $5,334
Installs Non New Customers $152 $1,824 $448 $1,792 $8,008 $9,167
Classified Ads $10 $120 $15 $60 $150 $1,100
Ad Insertion Sales $11,803 $141,636 $20,378 $81,512 $66,601 $67,548
Ad Sales Other $0 $0 $0 $0 $0 $0
Production and Loc. Origination ($5,360) ($64,320) ($200) ($800) $489 $760
Other Late Charges $780 $9,360 $2,930 $11,720 $13,540 $13,990
Other Copyright Pass Thru $0 $0 $0 $0 $0 $0
Other Miscellaneous $525 $6,300 $1,575 $6,300 $6,300 $5,897
FCC User Fees Pass Through $147 $1,764 $436 $1,744 $1,822 $1,841
Other - Programmers $0 $0 $5,594 $22,376 $6,386 $0
QVC Monthly Commission $657 $7,884 $2,084 $8,336 $7,529 $6,633
QVC Carriage Payment $654 $7,848 $1,308 $5,232 $6,965 $1,204
Other Networks Monthly Comm. $0 $0 $0 $0 $0 $20
Guides $271 $3,252 $848 $3,392 $2,253 $3
-------- ---------- -------- ---------- ---------- ----------
Total Revenues $131,137 $1,573,644 $400,126 $1,600,504 $1,561,593 $1,577,053
</TABLE>
<TABLE>
<CAPTION>
-------------------------------
TWELVE MONTHS TWELVE MONTHS
ENDING ENDING
12/31/94 12/31/93
-------------------------------
<S> <C> <C>
REVENUES
Primary-1st Outlet $1,015,166 $924,178
Primary Commercial $65,937 $45,745
AG Tier $0 $159,727
AJ Tier $0 $166,375
AL Tier $32,963 $0
Radio Services $15,045 $11,067
Pay Cable 1st Outlet $92,242 $117,344
New Product Tier 1 $0 $0
Pay Cable Add'l Outlet ($19) $0
Ala Carte $212,349 $43,578
Commercial Pay $0 $17,545
Mini Pay $2,746 $4,336
Primary Additional Outlet $7 $44,916
Remote Control $2,995 $20,722
Converter Rental $45,270 $21,765
Maintenance Contracts $4,809 $0
New Customer Pay Installs $49 $139
New Customer Basic Installs $5,511 $6,837
Installs Non New Customers $13,227 $11,317
Classified Ads $912 $9,941
Ad Insertion Sales $73,634 $12,173
Ad Sales Other $0 $21
Production and Loc. Origination $4,320 $0
Other Late Charges $14,685 $14,925
Other Copyright Pass Thru $0 $12,451
Other Miscellaneous $6,300 $7,834
FCC User Fees Pass Through $98 $0
Other - Programmers $0 $0
QVC Monthly Commission $6,522 $7,028
QVC Carriage Payment $1,204 $1,204
Other Networks Monthly Comm. $0 $0
Guides $0 $0
---------- ----------
Total Revenues $1,615,972 $1,661,168
</TABLE>
<PAGE> 144
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SYSTEM LOCATION: REDMOND, OR
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
ONE MONTH ONE MONTH THREE MONTHS THREE MONTHS TWELVE MONTHS
ENDING ENDING 12/31/96 ENDING ENDING 12/31/96 ENDING
12/31/96 ANNUALIZED 12/31/96 ANNUALIZED 12/31/96
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EXPENSES
Technical Salary - Supervisor $2,721 $32,652 $8,162 $32,648 $32,971
Technical Salary - Technician $1,684 $20,208 $5,011 $20,044 $20,180
Technical Salary - Dispatcher $0 $0 $0 $0 $0
Technical Salary - Installers $1,560 $18,720 $4,680 $18,720 $17,658
Overtime/Standby $1,133 $13,596 $4,865 $19,460 $12,805
Payroll Taxes $495 $5,940 $2,526 $10,104 $8,129
Group Insurance $504 $6,048 $1,762 $7,048 $7,475
Other Benefits ($4,643) ($55,716) ($3,615) ($14,460) $1,011
Contract Labor $0 $0 $160 $640 $160
Allocated Department Expense $0 $0 $496 $1,984 $496
Rent - Headend $0 $0 ($160) ($640) $0
Rent - Poles and Ducts ($3,437) ($41,244) ($311) ($1,244) $13,566
R & M Plant $220 $2,640 $529 $2,116 $1,629
R & M Converter $0 $0 $0 $0 $0
R & M Other $55 $660 $55 $220 $671
Material and Reconnect $448 $5,376 $1,239 $4,956 $7,459
Vehicle - Gas & Oil $471 $5,652 $1,889 $7,556 $6,895
Vehicle - Service $200 $2,400 $473 $1,892 $2,176
T & E System Travel $0 $0 $0 $0 $41
T & E System Non-Travel $0 $0 $0 $0 $15
Dues & Subscriptions $0 $0 $0 $0 $42
Education $0 $0 $0 $0 $61
System Power Costs $1,253 $15,036 $3,132 $12,528 $12,085
Recruiting $0 $0 $0 $0 $42
Loss on Converters $75 $900 $225 $900 $900
Property Taxes ($8,294) ($99,528) ($6,300) ($25,200) $429
Uniforms $322 $3,864 $645 $2,580 $1,906
Small Tool and Safety $101 $1,212 $160 $640 $385
Capital Labor & OH Construction ($7,349) ($88,188) ($21,816) ($87,264) ($63,520)
Capital Labor & OH Customer ($1,093) ($13,116) ($4,695) ($18,780) ($18,795)
Production and Local Origination
Allocated $541 $6,492 $777 $3,108 $1,966
P and L Allocated P/R Benefit ($3) ($36) $79 $316 $450
P and L Other Expense $144 $1,728 $478 $1,912 $1,541
Ad Sales Payroll Taxes $136 $1,632 $687 $2,748 $2,250
Ad Sales Group Insurance ($215) ($2,580) $339 $1,356 $2,063
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------
TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING ENDING ENDING
12/31/95 12/31/94 12/31/93
-------------------------------------------------
<S> <C> <C> <C>
EXPENSES
Technical Salary - Supervisor $31,888 $0 $0
Technical Salary - Technician $20,563 $51,573 $48,776
Technical Salary - Dispatcher $0 $0 $0
Technical Salary - Installers $14,674 $17,424 $17,264
Overtime/Standby $6,535 $10,460 $14,538
Payroll Taxes $6,399 $6,689 $7,401
Group Insurance $6,999 $2,865 $8,152
Other Benefits $3,240 $4,116 $4,956
Contract Labor $260 $0 $0
Allocated Department Expense $27 $0 $0
Rent - Headend $0 $0 $0
Rent - Poles and Ducts $17,546 $8,902 $16,819
R & M Plant $916 $986 $2,234
R & M Converter $0 $0 $61
R & M Other $540 $561 $695
Material and Reconnect $5,898 $1,309 $0
Vehicle - Gas & Oil $6,606 $6,157 $6,874
Vehicle - Service $1,991 $3,461 $2,379
T & E System Travel $76 $203 $152
T & E System Non-Travel $0 $0 $83
Dues & Subscriptions $80 $0 $45
Education $234 $0 $0
System Power Costs $10,772 $11,245 $10,733
Recruiting $287 $0 $0
Loss on Converters $900 $900 $900
Property Taxes $13,710 $14,013 $14,081
Uniforms $1,280 $1,271 $1,336
Small Tool and Safety $522 $120 $723
Capital Labor & OH Construction ($12,184) ($12,346) ($15,878)
Capital Labor & OH Customer ($24,215) ($32,947) ($20,441)
Production and Local Origination
Allocated $947 $0 $654
P and L Allocated P/R Benefit $270 $0 $86
P and L Other Expense $292 $0 $0
Ad Sales Payroll Taxes $1,053 $1,089 $763
Ad Sales Group Insurance $1,291 $2,095 $299
</TABLE>
<PAGE> 145
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SYSTEM LOCATION: REDMOND, OR
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
ONE MONTH ONE MONTH THREE MONTHS THREE MONTHS TWELVE MONTHS
ENDING ENDING 12/31/96 ENDING ENDING 12/31/96 ENDING
12/31/96 ANNUALIZED 12/31/96 ANNUALIZED 12/31/96
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ad Sales Alloc. Personnel Benefit $394 $4,728 $1,192 $4,768 $5,189
Ad Sales Alloc. P/R Benefit $63 $756 $258 $1,032 $1,351
Employee Commissions $1,800 $21,600 $6,300 $25,200 $23,451
Other Ad Sale Expenses $1,730 $20,760 $3,780 $15,120 $17,912
Marketing Payroll Taxes $84 $1,008 $181 $724 $181
Allocated P/R Benefit $0 $0 $0 $0 $0
Marketing Employee Commissions $949 $11,388 $1,933 $7,732 $2,127
Marketing Expenses $1,791 $21,492 $6,997 $27,988 $41,591
Dues and Subscriptions $14 $168 $30 $120 $154
Rebates $0 $0 $0 $0 $0
Pay Per View Expenses $0 $0 $2 $8 $9
Video Game Expenses $0 $0 $0 $0 $0
Miscellaneous Marketing Expenses $1,556 $18,672 $4,096 $16,384 $5,433
G & A Salary - Supervisor $2,947 $35,364 $8,842 $35,368 $35,368
G & A Salary - CSR $2,999 $35,988 $9,195 $36,780 $34,892
G & A Overtime/Standby $0 $0 $0 $0 $0
G & A Payroll Taxes $561 $6,732 $2,222 $8,888 $7,232
G & A Group Insurance $276 $3,312 $1,055 $4,220 $4,405
G & A Other Benefits ($3,414) ($40,968) ($2,658) ($10,632) $744
G & A Contract Labor $0 $0 $0 $0 $0
G & A Allocated Personnel Expense $0 $0 $0 $0 $0
G & A Allocated Department Expense $0 $0 $0 $0 $1,276
Rent - Office $0 $0 $0 $0 $0
R & M - Office $547 $6,564 $1,387 $5,548 $6,215
Office Supplies $48 $576 $917 $3,668 $3,477
Xerox & Printing $124 $1,488 $386 $1,544 $697
Vehicle - Gas & Oil $0 $0 $40 $160 $367
T & E System Travel $20 $240 $447 $1,788 $582
T & E System Non-Travel $0 $0 $0 $0 $22
Dues and Subscriptions $113 $1,356 $365 $1,460 $1,807
Conventions - Travel $0 $0 $0 $0 $200
Education $7 $84 $6 $24 $550
Recruiting $0 $0 $0 $0 $0
Insurance $3,170 $38,040 $8,379 $33,516 $7,860
Legal $500 $6,000 $1,519 $6,076 $6,019
Audit & Taxes $762 $9,144 $2,285 $9,140 $13,154
Association - Dues $184 $2,208 $551 $2,204 $2,299
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------
TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING ENDING ENDING
12/31/95 12/31/94 12/31/93
-------------------------------------------------
<S> <C> <C> <C>
Ad Sales Alloc. Personnel Benefit $4,895 $4,549 $3,161
Ad Sales Alloc. P/R Benefit $1,320 $1,240 $821
Employee Commissions $12,715 $13,072 $7,286
Other Ad Sale Expenses $12,671 $14,157 $10,449
Marketing Payroll Taxes $0 $0 $722
Allocated P/R Benefit $0 $0 $10
Marketing Employee Commissions $644 $503 $8,750
Marketing Expenses $31,634 $35,140 $16,153
Dues and Subscriptions $455 $226 $1,028
Rebates $0 ($603) $0
Pay Per View Expenses $84 $35 $0
Video Game Expenses $0 $0 $0
Miscellaneous Marketing Expenses $2,914 $4,463 $4,760
G & A Salary - Supervisor $34,008 $28,621 $51,916
G & A Salary - CSR $35,386 $25,245 $19,032
G & A Overtime/Standby $119 $0 $0
G & A Payroll Taxes $6,242 $5,019 $7,444
G & A Group Insurance $4,101 ($636) $7,340
G & A Other Benefits ($4,286) $11,892 $23,112
G & A Contract Labor $40 $9,448 $1,775
G & A Allocated Personnel Expense $0 $0 $0
G & A Allocated Department Expense $479 $0 $0
Rent - Office $0 $0 $0
R & M - Office $6,015 $5,578 $5,125
Office Supplies $2,416 $1,944 $2,072
Xerox & Printing $1,607 $1,671 $2,278
Vehicle - Gas & Oil $427 $515 $1,099
T & E System Travel $404 $335 $911
T & E System Non-Travel $1,674 $0 $208
Dues and Subscriptions $2,238 $1,470 $2,769
Conventions - Travel $676 $620 $2,221
Education $248 $851 $545
Recruiting $8 $0 $0
Insurance $26,414 $45,772 $32,315
Legal $3,266 $6,000 $5,304
Audit & Taxes $8,511 $8,954 $10,844
Association - Dues $1,961 $2,440 $3,327
</TABLE>
<PAGE> 146
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SYSTEM LOCATION: REDMOND, OR
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
ONE MONTH ONE MONTH THREE MONTHS THREE MONTHS TWELVE MONTHS
ENDING ENDING 12/31/96 ENDING ENDING 12/31/96 ENDING
12/31/96 ANNUALIZED 12/31/96 ANNUALIZED 12/31/96
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Association - Lobbying $50 $600 $151 $604 $623
Political Contribution $0 $0 $0 $0 $0
Donations/Public Relations ($129) ($1,548) $663 $2,652 $3,754
Customer Billing $1,617 $19,404 $5,765 $23,060 $21,933
Postage & Messengers $1,533 $18,396 $4,608 $18,432 $18,757
Utilities $334 $4,008 $1,016 $4,064 $4,703
Telephone $664 $7,968 $2,197 $8,788 $8,582
Tax & Licenses $60 $720 $429 $1,716 $1,584
FCC User Fees $160 $1,920 $480 $1,920 $2,051
Reregulation Costs $0 $0 $1,931 $7,724 $4,167
CATV Franchise $1,295 $15,540 $3,757 $15,028 $15,186
Copyright Fees $1,996 $23,952 $5,872 $23,488 $24,743
BMI License Fees $0 $0 ($42) ($168) $1,216
ASCAP License Fees $291 $3,492 $873 $3,492 $2,244
Bad Debt Expense $2,031 $24,372 $5,627 $22,508 $20,654
Cap. Labor & OH Other ($380) ($4,560) ($1,267) ($5,068) ($6,525)
G & A Miscellaneous Expense $471 $5,652 $709 $2,836 $807
Primary Satellite Fees $13,005 $156,060 $37,226 $148,904 $147,138
Program Guides $659 $7,908 $2,306 $9,224 $6,777
Pay TV Fees $4,372 $52,464 $12,211 $48,844 $54,532
Video Game Fees $0 $0 $0 $0 $0
Pay Per View Fees $0 $0 $0 $0 $0
------- ---------- -------- ---------- --------
Total Expenses $32,283 $387,396 $145,691 $582,764 $632,632
Operating Income $98,854 $1,186,248 $254,435 $1,017,740 $928,961
Operating Margin 75.38% 75.38% 63.59% 63.59% 59.49%
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------
TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING ENDING ENDING
12/31/95 12/31/94 12/31/93
-------------------------------------------------
<S> <C> <C> <C>
Association - Lobbying $315 $429 $0
Political Contribution $0 $0 $0
Donations/Public Relations $3,215 $3,161 $2,786
Customer Billing $24,870 $25,987 $24,510
Postage & Messengers $19,538 $18,465 $19,239
Utilities $3,931 $4,275 $3,746
Telephone $8,653 $9,565 $7,412
Tax & Licenses $1,021 $375 $326
FCC User Fees $2,002 $1,820 $0
Reregulation Costs $1,321 $6,987 $8,026
CATV Franchise $19,447 $20,851 $25,970
Copyright Fees $20,334 $21,299 $22,096
BMI License Fees $0 $0 $0
ASCAP License Fees $0 $0 $0
Bad Debt Expense $21,437 $20,372 $19,263
Cap. Labor & OH Other ($4,704) ($1,142) ($3,152)
G & A Miscellaneous Expense $1,912 $684 $530
Primary Satellite Fees $166,294 $145,095 $152,834
Program Guides $4,829 $4,115 $4,312
Pay TV Fees $78,767 $72,138 $84,799
Video Game Fees $0 $0 $0
Pay Per View Fees $0 $0 $0
-------- -------- --------
Total Expenses $691,865 $683,143 $729,159
Operating Income $885,188 $932,829 $932,009
Operating Margin 56.13% 57.73% 56.11%
</TABLE>
<PAGE> 147
SYSTEM LOCATION: REDMOND, OR
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
ADJUSTED ADJUSTED ADJUSTED ADJUSTED ADJUSTED ADJUSTED
ONE MONTH THREE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING 12/31/96 ENDING 12/31/96 ENDING ENDING ENDING ENDING
ANNUALIZED ANNUALIZED 12/31/96 12/31/95 12/31/94 12/31/93
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Primary-1st Outlet $937,800 $932,864 $922,548 $932,155 $1,015,166 $924,178
Primary Commercial $63,984 $62,020 $69,928 $74,523 $65,937 $45,745
AG Tier $0 $0 $0 $0 $0 $159,727
AJ Tier $0 $0 $0 $0 $0 $166,375
AL Tier $70,140 $69,964 $69,638 $74,131 $32,963 $0
Radio Services $7,524 $7,676 $8,730 $11,473 $15,045 $11,067
Pay Cable 1st Outlet $55,164 $58,156 $71,992 $99,639 $92,242 $117,344
New Product Tier 1 $273,900 $274,712 $245,465 $219,116 $0 $0
Pay Cable Add'l Outlet $0 $0 $0 $0 ($19) $0
Ala Carte $0 $0 $0 $0 $212,349 $43,578
Commercial Pay $0 $0 $0 $0 $0 $17,545
Mini Pay $2,244 $2,184 $2,529 $2,371 $2,746 $4,336
Primary Additional Outlet $0 $0 $0 $0 $7 $44,916
Remote Control $2,304 $2,352 $2,535 $2,868 $2,995 $20,722
Converter Rental $32,364 $32,264 $35,576 $39,429 $45,270 $21,765
Maintenance Contracts $6,132 $6,348 $7,002 $7,842 $4,809 $0
New Customer Pay Installs $0 $0 $0 $9 $49 $139
New Customer Basic Installs $6,420 $10,300 $5,607 $5,334 $5,511 $6,837
Installs Non New Customers $1,824 $1,792 $8,008 $9,167 $13,227 $11,317
Classified Ads $120 $60 $150 $1,100 $912 $9,941
Ad Insertion Sales $141,636 $81,512 $66,601 $67,548 $73,634 $12,173
Ad Sales Other $0 $0 $0 $0 $0 $21
Production and Loc. Origination $0 $0 $489 $760 $4,320 $0
Other Late Charges $9,360 $11,720 $13,540 $13,990 $14,685 $14,925
Other Copyright Pass Thru $0 $0 $0 $0 $0 $12,451
Other Miscellaneous $6,300 $6,300 $6,300 $5,897 $6,300 $7,834
FCC User Fees Pass Through $1,764 $1,744 $1,822 $1,841 $98 $0
Other - Programmers $0 $22,376 $6,386 $0 $0 $0
QVC Monthly Commission $7,884 $8,336 $7,529 $6,633 $6,522 $7,028
QVC Carriage Payment $7,848 $5,232 $6,965 $1,204 $1,204 $1,204
Other Networks Monthly Comm. $0 $0 $0 $20 $0 $0
Guides $3,252 $3,392 $2,253 $3 $0 $0
---------- ---------- ---------- ---------- ---------- ----------
Total Revenues $1,637,964 $1,601,304 $1,561,593 $1,577,053 $1,615,972 $1,661,168
</TABLE>
<PAGE> 148
SYSTEM LOCATION: REDMOND, OR
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
ADJUSTED ADJUSTED ADJUSTED ADJUSTED ADJUSTED ADJUSTED
ONE MONTH THREE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING 12/31/96 ENDING 12/31/96 ENDING ENDING ENDING ENDING
ANNUALIZED ANNUALIZED 12/31/96 12/31/95 12/31/94 12/31/93
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EXPENSES
Technical Salary - Supervisor $32,652 $32,648 $32,971 $31,888 $0 $0
Technical Salary - Technician $20,208 $20,044 $20,180 $20,563 $51,573 $48,776
Technical Salary - Dispatcher $0 $0 $0 $0 $0 $0
Technical Salary - Installers $18,720 $18,720 $17,658 $14,674 $17,424 $17,264
Overtime/Standby $13,596 $19,460 $12,805 $6,535 $10,460 $14,538
Payroll Taxes $5,940 $10,104 $8,129 $6,399 $6,689 $7,401
Group Insurance $6,048 $7,048 $7,475 $6,999 $2,865 $8,152
Other Benefits $0 $0 $1,011 $3,240 $4,116 $4,956
Contract Labor $0 $640 $160 $260 $0 $0
Allocated Department Expense $0 $1,984 $496 $27 $0 $0
Rent - Headend $0 $0 $0 $0 $0 $0
Rent - Poles and Ducts $14,000 $14,000 $13,566 $17,546 $8,902 $16,819
R & M Plant $2,640 $2,116 $1,629 $916 $986 $2,234
R & M Converter $0 $0 $0 $0 $0 $61
R & M Other $660 $220 $671 $540 $561 $695
Material and Reconnect $5,376 $4,956 $7,459 $5,898 $1,309 $0
Vehicle - Gas & Oil $5,652 $7,556 $6,895 $6,606 $6,157 $6,874
Vehicle - Service $2,400 $1,892 $2,176 $1,991 $3,461 $2,379
T & E System Travel $0 $0 $41 $76 $203 $152
T & E System Non-Travel $0 $0 $15 $0 $0 $83
Dues & Subscriptions $0 $0 $42 $80 $0 $45
Education $0 $0 $61 $234 $0 $0
System Power Costs $15,036 $12,528 $12,085 $10,772 $11,245 $10,733
Recruiting $0 $0 $42 $287 $0 $0
Loss on Converters $900 $900 $900 $900 $900 $900
Property Taxes $0 $0 $429 $13,710 $14,013 $14,081
Uniforms $3,864 $2,580 $1,906 $1,280 $1,271 $1,336
Small Tool and Safety $1,212 $640 $385 $522 $120 $723
Capital Labor & OH Construction $0 $0 $0 $0 $0 $0
Capital Labor & OH Customer $0 $0 $0 $0 $0 $0
Production and Local Origination
Allocated $6,492 $3,108 $1,966 $947 $0 $654
P and L Allocated P/R Benefit ($36) $316 $450 $270 $0 $86
P and L Other Expense $1,728 $1,912 $1,541 $292 $0 $0
Ad Sales Payroll Taxes $1,632 $2,748 $2,250 $1,053 $1,089 $763
Ad Sales Group Insurance $2,000 $1,356 $2,063 $1,291 $2,095 $299
</TABLE>
<PAGE> 149
SYSTEM LOCATION: REDMOND, OR
<TABLE>
<CAPTION>
------------------------------------------------------
ADJUSTED ADJUSTED ADJUSTED
ONE MONTH THREE MONTHS TWELVE MONTHS
ENDING 12/31/96 ENDING 12/31/96 ENDING
ANNUALIZED ANNUALIZED 12/31/96
------------------------------------------------------
<S> <C> <C> <C>
Ad Sales Alloc. Personnel Benefit $4,728 $4,768 $5,189
Ad Sales Alloc. P/R Benefit $756 $1,032 $1,351
Employee Commissions $21,600 $25,200 $23,451
Other Ad Sale Expenses $20,760 $15,120 $17,912
Marketing Payroll Taxes $1,008 $724 $181
Allocated P/R Benefit $0 $0 $0
Marketing Employee Commissions $11,388 $7,732 $2,127
Marketing Expenses $21,492 $27,988 $41,591
Dues and Subscriptions $168 $120 $154
Rebates $0 $0 $0
Pay Per View Expenses $0 $8 $9
Video Game Expenses $0 $0 $0
Miscellaneous Marketing Expenses $18,672 $16,384 $5,433
G & A Salary - Supervisor $35,364 $35,368 $35,368
G & A Salary - CSR $35,988 $36,780 $34,892
G & A Overtime/Standby $0 $0 $0
G & A Payroll Taxes $6,732 $8,888 $7,232
G & A Group Insurance $3,312 $4,220 $4,405
G & A Other Benefits $0 $0 $744
G & A Contract Labor $0 $0 $0
G & A Allocated Personnel Expense $0 $0 $0
G & A Allocated Department Expense $0 $0 $1,276
Rent - Office $0 $0 $0
R & M - Office $6,564 $5,548 $6,215
Office Supplies $576 $3,668 $3,477
Xerox & Printing $1,488 $1,544 $697
Vehicle - Gas & Oil $0 $160 $367
T & E System Travel $240 $1,788 $582
T & E System Non-Travel $0 $0 $22
Dues and Subscriptions $1,356 $1,460 $1,807
Conventions - Travel $0 $0 $200
Education $84 $24 $550
Recruiting $0 $0 $0
Insurance $38,040 $33,516 $7,860
Legal $6,000 $6,076 $6,019
Audit & Taxes $9,144 $9,140 $13,154
Association - Dues $2,208 $2,204 $2,299
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------
ADJUSTED ADJUSTED ADJUSTED
TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING ENDING ENDING
12/31/95 12/31/94 12/31/93
---------------------------------------------------
<S> <C> <C> <C>
Ad Sales Alloc. Personnel Benefit $4,895 $4,549 $3,161
Ad Sales Alloc. P/R Benefit $1,320 $1,240 $821
Employee Commissions $12,715 $13,072 $7,286
Other Ad Sale Expenses $12,671 $14,157 $10,449
Marketing Payroll Taxes $0 $0 $722
Allocated P/R Benefit $0 $0 $10
Marketing Employee Commissions $644 $503 $8,750
Marketing Expenses $31,634 $35,140 $16,153
Dues and Subscriptions $455 $226 $1,028
Rebates $0 ($603) $0
Pay Per View Expenses $84 $35 $0
Video Game Expenses $0 $0 $0
Miscellaneous Marketing Expenses $2,914 $4,463 $4,760
G & A Salary - Supervisor $34,008 $28,621 $51,916
G & A Salary - CSR $35,386 $25,245 $19,032
G & A Overtime/Standby $119 $0 $0
G & A Payroll Taxes $6,242 $5,019 $7,444
G & A Group Insurance $4,101 $0 $7,340
G & A Other Benefits $0 $11,892 $23,112
G & A Contract Labor $40 $9,448 $1,775
G & A Allocated Personnel Expense $0 $0 $0
G & A Allocated Department Expense $479 $0 $0
Rent - Office $0 $0 $0
R & M - Office $6,015 $5,578 $5,125
Office Supplies $2,416 $1,944 $2,072
Xerox & Printing $1,607 $1,671 $2,278
Vehicle - Gas & Oil $427 $515 $1,099
T & E System Travel $404 $335 $911
T & E System Non-Travel $1,674 $0 $208
Dues and Subscriptions $2,238 $1,470 $2,769
Conventions - Travel $676 $620 $2,221
Education $248 $851 $545
Recruiting $8 $0 $0
Insurance $26,414 $45,772 $32,315
Legal $3,266 $6,000 $5,304
Audit & Taxes $8,511 $8,954 $10,844
Association - Dues $1,961 $2,440 $3,327
</TABLE>
<PAGE> 150
SYSTEM LOCATION: REDMOND, OR
<TABLE>
<CAPTION>
-----------------------------------------------------
ADJUSTED ADJUSTED ADJUSTED
ONE MONTH THREE MONTHS TWELVE MONTHS
ENDING 12/31/96 ENDING 12/31/96 ENDING
ANNUALIZED ANNUALIZED 12/31/96
-----------------------------------------------------
<S> <C> <C> <C>
Association - Lobbying $600 $604 $623
Political Contribution $0 $0 $0
Donations/Public Relations $3,000 $2,652 $3,754
Customer Billing $19,404 $23,060 $21,933
Postage & Messengers $18,396 $18,432 $18,757
Utilities $4,008 $4,064 $4,703
Telephone $7,968 $8,788 $8,582
Tax & Licenses $720 $1,716 $1,584
FCC User Fees $1,920 $1,920 $2,051
Reregulation Costs $0 $7,724 $4,167
CATV Franchise $15,540 $15,028 $15,186
Copyright Fees $23,952 $23,488 $24,743
BMI License Fees $0 $0 $1,216
ASCAP License Fees $3,492 $3,492 $2,244
Bad Debt Expense $24,372 $22,508 $20,654
Cap. Labor & OH Other $0 $0 $0
G & A Miscellaneous Expense $5,652 $2,836 $807
Primary Satellite Fees $156,060 $148,904 $147,138
Program Guides $7,908 $9,224 $6,777
Pay TV Fees $52,464 $48,844 $54,532
Video Game Fees $0 $0 $0
Pay Per View Fees $0 $0 $0
--- --- ---
Total Expenses $753,844 $760,220 $721,472
Operating Income $884,120 $841,084 $840,121
Operating Margin 53.98% 52.52% 53.80%
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------
ADJUSTED ADJUSTED ADJUSTED
TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING ENDING ENDING
12/31/95 12/31/94 12/31/93
----------------------------------------------------
<S> <C> <C> <C>
Association - Lobbying $315 $429 $0
Political Contribution $0 $0 $0
Donations/Public Relations $3,215 $3,161 $2,786
Customer Billing $24,870 $25,987 $24,510
Postage & Messengers $19,538 $18,465 $19,239
Utilities $3,931 $4,275 $3,746
Telephone $8,653 $9,565 $7,412
Tax & Licenses $1,021 $375 $326
FCC User Fees $2,002 $1,820 $0
Reregulation Costs $1,321 $6,987 $8,026
CATV Franchise $19,447 $20,851 $25,970
Copyright Fees $20,334 $21,299 $22,096
BMI License Fees $0 $0 $0
ASCAP License Fees $0 $0 $0
Bad Debt Expense $21,437 $20,372 $19,263
Cap. Labor & OH Other $0 $0 $0
G & A Miscellaneous Expense $1,912 $684 $530
Primary Satellite Fees $166,294 $145,095 $152,834
Program Guides $4,829 $4,115 $4,312
Pay TV Fees $78,767 $72,138 $84,799
Video Game Fees $0 $0 $0
Pay Per View Fees $0 $0 $0
--- --- --
Total Expenses $737,254 $730,214 $768,630
Operating Income $839,799 $885,758 $892,538
Operating Margin 53.25% 54.81% 53.73%
</TABLE>
<PAGE> 151
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SYSTEM LOCATION: SOMERSET, KY
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
ONE MONTH ONE MONTH THREE MONTHS THREE MONTHS TWELVE MONTHS
ENDING ENDING 12/31/96 ENDING ENDING 12/31/96 ENDING
12/31/96 ANNUALIZED 12/31/96 ANNUALIZED 12/31/96
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES
Primary - First Outlet $365,957 $4,391,484 $1,081,892 $4,327,568 $4,085,262
Primary Commercial $5,310 $63,720 $17,526 $70,104 $73,145
Expanded Tier $0 $0 $0 $0 $0
A-G Tier $6 $72 $21 $84 $83
A-J Tier $15 $180 $48 $192 $149
A-L Tier $44,521 $534,252 $131,572 $526,288 $474,908
Radio Services $5 $60 $17 $68 $102
Pay Cable First Outlet $32,923 $395,076 $98,341 $393,364 $440,217
Pay Cable Additional Outlet $299 $3,588 $867 $3,468 $4,085
Ala Carte $0 $0 $0 $0 $0
New Product Tier 1 $99,755 $1,197,060 $296,279 $1,185,116 $1,005,944
Commercial Pay $857 $10,284 $4,080 $16,320 $20,604
Pay Per View $623 $7,476 $3,560 $14,240 $11,912
Primary Additional Outlet $0 $0 $0 $0 $0
Remote Control $1,544 $18,528 $4,624 $18,496 $28,564
Converter Rental $8,108 $97,296 $23,900 $95,600 $83,054
Maintenance Contracts $3,264 $39,168 $9,959 $39,836 $41,057
New Customer Pay Installs $0 $0 $0 $0 $0
New Customer Basic Installs $910 $10,920 $4,257 $17,028 $24,787
Installation Materials Charge $0 $0 ($10) ($40) $5
Installs - Non New Customers $4,083 $48,996 $15,801 $63,204 $88,319
Guide Revenue $406 $4,872 $1,263 $5,052 $3,762
Other - Late Charges $6,590 $79,080 $18,325 $73,300 $70,610
Other - Rent $1,164 $13,968 $2,400 $9,600 $9,600
Other - Franchise Pass Through $2,061 $24,732 $6,146 $24,584 $22,934
Other - Miscellaneous $0 $0 $660 $2,640 $905
FCC User Fees Pass Through $780 $9,360 $2,346 $9,384 $9,413
Other - Programmers $45,922 $551,064 $163,871 $655,484 $168,073
QVC Monthly Commission $1,943 $23,316 $6,898 $27,592 $26,495
QVC Carriage Payment $0 $0 $3,103 $12,412 $12,307
HSN Monthly Commission $707 $8,484 ($8,332) ($33,328) $10,667
HSN Carriage Payment $2,234 $26,808 $17,748 $70,992 $28,827
Classifed Ads $6,770 $81,240 $21,790 $87,160 $101,632
Ad Insertion Sales $28,650 $343,800 $72,005 $288,020 $198,116
Ad Sales Other $0 $0 $0 $0 $0
Production & Local Origination $8,453 $101,436 $17,325 $69,300 $45,327
------- --------- -------- -------- -------
Total Revenues $673,860 $8,086,320 $2,018,282 $8,073,128 $7,090,865
</TABLE>
SYSTEM LOCATION: SOMERSET, KY
<TABLE>
<CAPTION>
--------------
-------------------------------------------- ADJUSTED
TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS ONE MONTH
ENDING ENDING ENDING ENDING 12/31/96
12/31/95 12/31/94 12/31/93 ANNUALIZED
-------------------------------------------- --------------
<S> <C> <C> <C> <C>
REVENUES
Primary - First Outlet $3,780,392 $3,827,585 $3,171,423 $4,391,484
Primary Commercial $69,778 $68,505 $67,614 $63,720
Expanded Tier $0 $0 $0 $0
A-G Tier $60 $23,815 $457,868 $72
A-J Tier $74 $23,544 $815,239 $180
A-L Tier $412,199 $165,567 $0 $534,252
Radio Services $98 $0 $0 $60
Pay Cable First Outlet $466,915 $390,766 $354,268 $395,076
Pay Cable Additional Outlet $6,672 $8,484 $7,591 $3,588
Ala Carte $0 $717,997 $173,276 $0
New Product Tier 1 $813,889 $0 $0 $1,197,060
Commercial Pay $32,976 $12,816 $12,567 $10,284
Pay Per View $6,818 $7,417 $6,523 $7,476
Primary Additional Outlet $0 $1,470 $40,225 $0
Remote Control $44,680 $42,696 $50,444 $18,528
Converter Rental $49,650 $48,193 $14,060 $97,296
Maintenance Contracts $37,671 $21,269 $0 $39,168
New Customer Pay Installs $78 $78 $275 $0
New Customer Basic Installs $33,786 $53,663 $65,766 $10,920
Installation Materials Charge $301 $0 $0 $0
Installs - Non New Customers $92,532 $83,947 $78,466 $48,996
Guide Revenue $8 $0 $0 $4,872
Other - Late Charges $67,905 $85,715 $73,700 $79,080
Other - Rent $8,960 $9,498 $10,407 $13,968
Other - Franchise Pass Through $5,519 $0 $0 $24,732
Other - Miscellaneous $33 $382 $1,403 $0
FCC User Fees Pass Through $8,848 $455 $0 $9,360
Other - Programmers $0 $0 $0 $551,064
QVC Monthly Commission $25,290 $23,479 $23,297 $23,316
QVC Carriage Payment $14,516 $14,516 $14,515 $0
HSN Monthly Commission $7,489 $0 $0 $8,484
HSN Carriage Payment $14,772 $0 $0 $26,808
Classifed Ads $91,439 $71,510 $60,097 $81,240
Ad Insertion Sales $183,458 $171,423 $127,342 $343,800
Ad Sales Other $0 $0 $91 $0
Production & Local Origination $22,396 $13,511 $9,175 $101,436
-------- -------- ------- --------
Total Revenues $6,299,202 $5,888,301 $5,635,632 $8,086,320
</TABLE>
<PAGE> 152
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SYSTEM LOCATION: SOMERSET, KY
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
ONE MONTH ONE MONTH THREE MONTHS THREE MONTHS TWELVE MONTHS
ENDING ENDING 12/31/96 ENDING ENDING 12/31/96 ENDING
12/31/96 ANNUALIZED 12/31/96 ANNUALIZED 12/31/96
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EXPENSES
Technical Salary - Supervisor $5,576 $66,912 $16,729 $66,916 $66,916
Technical Salary - Technician $35,569 $426,828 $109,714 $438,856 $428,056
Technical Salary - Dispatcher $0 $0 $0 $0 $0
Technical Salary - Installers $13,103 $157,236 $38,269 $153,076 $148,029
Overtime/Standby $18,599 $223,188 $60,220 $240,880 $158,241
Payroll Taxes $4,992 $59,904 $17,547 $70,188 $66,258
Group Insurance $5,467 $65,604 $16,982 $67,928 $69,287
Other Benefits ($23,842) ($286,104) ($17,070) ($68,280) $13,404
Allocated Personnel Expense ($41,600) ($499,200) ($122,898) ($491,592) ($449,977)
Allocated P/R Benefit $7,278 $87,336 ($10,058) ($40,232) ($87,450)
Allocated Department Expense $0 $0 $92 $368 $92
Rent - Headend $2,800 $33,600 $8,400 $33,600 $34,100
Rent - Poles and Ducts ($10,459) ($125,508) $3,603 $14,412 $67,017
R & M Plant $564 $6,768 $4,063 $16,252 $15,538
R & M Converter $867 $10,404 $4,351 $17,404 $18,647
R & M Other $484 $5,808 $3,354 $13,416 $6,072
Material and Reconnect $818 $9,816 $2,903 $11,612 $9,544
Vehicle - Gas & Oil $1,756 $21,072 $7,568 $30,272 $28,896
Vehicle - Service $652 $7,824 $2,743 $10,972 $14,128
Leased Vehicles $0 $0 $0 $0 $0
T & E System Travel $0 $0 $0 $0 $0
T & E System Non-Travel $141 $1,692 $483 $1,932 $578
Dues & Subscriptions $9 $108 $28 $112 $203
Education $0 $0 $0 $0 $409
System Power Costs $5,581 $66,972 $18,295 $73,180 $68,318
Recruiting $0 $0 $0 $0 $0
Loss on Converters $150 $1,800 $450 $1,800 $1,800
Property Taxes $87,028 $1,044,336 $137,789 $551,156 $364,690
Uniforms $738 $8,856 $1,915 $7,660 $7,304
Small Tool and Safety $0 $0 $0 $0 $800
Capital Labor & OH Construction ($24,618) ($295,416) ($94,369) ($377,476) ($206,921)
Capital Labor & OH Customer ($6,293) ($75,516) ($24,657) ($98,628) ($81,887)
P & L Salary - Producer Assistant $1,908 $22,896 $5,716 $22,864 $22,738
Payroll Taxes $159 $1,908 $544 $2,176 $1,899
Group Insurance $98 $1,176 $347 $1,388 $1,500
Other Benefits $190 $2,280 $664 $2,656 $1,744
Employee Commissions $0 $0 $0 $0 $0
P & L Other Expenses $808 $9,696 $2,860 $11,440 $6,113
Ad Sales Salary Supervisor $451 $5,412 $1,353 $5,412 $5,412
</TABLE>
<TABLE>
<CAPTION>
--------------
-------------------------------------------- ADJUSTED
TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS ONE MONTH
ENDING ENDING ENDING ENDING 12/31/96
12/31/95 12/31/94 12/31/93 ANNUALIZED
-------------------------------------------- --------------
<S> <C> <C> <C> <C>
EXPENSES
Technical Salary - Supervisor $64,342 $61,868 $59,488 $66,912
Technical Salary - Technician $405,137 $394,220 $395,567 $426,828
Technical Salary - Dispatcher $0 $0 $0 $0
Technical Salary - Installers $132,929 $114,762 $124,670 $157,236
Overtime/Standby $125,429 $133,982 $101,432 $223,188
Payroll Taxes $61,895 $59,987 $55,772 $59,904
Group Insurance $53,433 $30,569 $98,650 $65,604
Other Benefits $25,668 $37,410 $44,592 $15,000
Allocated Personnel Expense ($405,626) ($408,422) ($390,803) ($499,200)
Allocated P/R Benefit ($84,926) ($76,166) ($122,091) $87,336
Allocated Department Expense $0 $0 ($433) $0
Rent - Headend $34,900 $33,600 $33,600 $33,600
Rent - Poles and Ducts $78,490 $97,371 $53,318 $60,000
R & M Plant $10,113 $5,916 $4,751 $6,768
R & M Converter $14,051 $4,852 $1,581 $10,404
R & M Other $6,202 $4,084 $2,138 $5,808
Material and Reconnect $9,481 $7,208 $4,800 $9,816
Vehicle - Gas & Oil $22,128 $22,015 $21,404 $21,072
Vehicle - Service $17,710 $16,800 $7,986 $7,824
Leased Vehicles $0 $0 $13,384 $0
T & E System Travel $58 $0 $150 $0
T & E System Non-Travel $0 $63 $78 $1,692
Dues & Subscriptions $522 $925 $586 $108
Education $132 $497 $506 $0
System Power Costs $72,792 $77,598 $62,774 $66,972
Recruiting $0 $0 $0 $0
Loss on Converters $1,800 $1,800 $1,800 $1,800
Property Taxes $264,900 $184,185 $309,246 $1,044,336
Uniforms $6,791 $5,435 $6,621 $8,856
Small Tool and Safety $400 $156 $169 $0
Capital Labor & OH Construction ($156,243) ($95,119) ($68,332) $0
Capital Labor & OH Customer ($77,658) ($49,598) ($86,936) $0
P & L Salary - Producer Assistant $22,198 $20,016 $15,600 $22,896
Payroll Taxes $1,886 $1,669 $1,227 $1,908
Group Insurance $1,240 $1,571 $1,993 $1,176
Other Benefits $1,488 $1,512 $1,230 $2,280
Employee Commissions $2,320 $25 $0 $0
P & L Other Expenses $568 $0 $0 $9,696
Ad Sales Salary Supervisor $5,412 $20,810 $20,290 $5,412
</TABLE>
<PAGE> 153
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SYSTEM LOCATION: SOMERSET, KY
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
ONE MONTH ONE MONTH THREE MONTHS THREE MONTHS TWELVE MONTHS
ENDING ENDING 12/31/96 ENDING ENDING 12/31/96 ENDING
12/31/96 ANNUALIZED 12/31/96 ANNUALIZED 12/31/96
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ad Sales Payroll Taxes $535 $6,420 $1,845 $7,380 $7,630
Ad Sales Group Insurance $532 $6,384 $1,698 $6,792 $7,730
Ad Sales Other Benefits ($22) ($264) $34 $136 $286
Ad Sales Alloc. Personnel Benefit $958 $11,496 $3,023 $12,092 $11,163
Ad Sales Alloc. P/R Benefit $937 $11,244 ($485) ($1,940) ($6,535)
Employee Commissions $1,904 $22,848 $5,428 $21,712 $25,626
Other Ad Sale Expenses ($12,225) ($146,700) ($6,420) ($25,680) $13,751
Marketing Payroll Taxes $0 $0 $0 $0 $0
Marketing Salary & Benefits $0 $0 $0 $0 $0
Marketing Allocated P/R Benefit $0 $0 $0 $0 $0
Marketing Employee Commissions $526 $6,312 $526 $2,104 $978
Marketing Expenses $3,180 $38,160 $31,522 $126,088 $88,866
Dues and Subscriptions $73 $876 $238 $952 $727
Rebates $0 $0 $0 $0 $0
Pay Per View Expenses $30 $360 $158 $632 $3,346
Video Game Expenses $0 $0 $0 $0 $0
Miscellaneous Marketing Expenses $770 $9,240 $3,830 $15,320 $8,772
G & A Salary - Supervisor $5,319 $63,828 $9,414 $37,656 $42,579
G & A Salary - CSR $20,044 $240,528 $61,422 $245,688 $238,058
G & A Overtime/Standby $1,144 $13,728 $2,905 $11,620 $8,125
G & A Payroll Taxes $4,411 $52,932 $8,484 $33,936 $28,519
G & A Group Insurance $2,575 $30,900 $8,181 $32,724 $34,834
G & A Other Benefits ($8,930) ($107,160) ($6,790) ($27,160) $2,840
G & A Contract Labor $0 $0 $0 $0 $0
G & A Allocated Personnel Expense ($14,510) ($174,120) ($38,089) ($152,356) ($152,428)
G & A Allocated P/R Expense ($20) ($240) ($6,033) ($24,132) ($37,524)
Allocated Department Expense ($5,723) ($68,676) ($17,100) ($68,400) ($38,441)
Rent - Office $525 $6,300 $1,575 $6,300 $6,300
R & M - Office $755 $9,060 $2,573 $10,292 $11,845
Office Supplies $732 $8,784 $1,764 $7,056 $8,291
Xerox & Printing $0 $0 $1,113 $4,452 $5,224
Vehicle - Gas & Oil $299 $3,588 $498 $1,992 $2,322
T & E System Travel $1,318 $15,816 $2,154 $8,616 $5,803
T & E System Non-Travel $180 $2,160 $269 $1,076 $386
Dues and Subscriptions $21 $252 $81 $324 $1,442
Conventions - Travel $0 $0 $0 $0 $310
Conventions - Non Travel $0 $0 $0 $0 $0
Education $943 $11,316 $1,153 $4,612 $3,691
Recruiting $0 $0 $0 $0 $21
Insurance $18,028 $216,336 $51,355 $205,420 $137,803
Legal $1,050 $12,600 $6,421 $25,684 $15,871
</TABLE>
<TABLE>
<CAPTION>
--------------
-------------------------------------------- ADJUSTED
TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS ONE MONTH
ENDING ENDING ENDING ENDING 12/31/96
12/31/95 12/31/94 12/31/93 ANNUALIZED
-------------------------------------------- --------------
<S> <C> <C> <C> <C>
Ad Sales Payroll Taxes $7,577 $7,271 $4,587 $6,420
Ad Sales Group Insurance $5,863 $3,813 $7,225 $6,384
Ad Sales Other Benefits $336 $1,334 $1,824 $0
Ad Sales Alloc. Personnel Benefit $15,788 ($23,115) ($1,733) $11,496
Ad Sales Alloc. P/R Benefit ($666) ($1,626) $552 $11,244
Employee Commissions $44,203 $74,049 $37,482 $22,848
Other Ad Sale Expenses $21,732 $23,572 $16,294 $10,000
Marketing Payroll Taxes $0 $0 $0 $0
Marketing Salary & Benefits $0 $0 $0 $0
Marketing Allocated P/R Benefit $0 $0 $43 $0
Marketing Employee Commissions $314 $1,718 $8,039 $6,312
Marketing Expenses $48,533 $95,148 $44,100 $38,160
Dues and Subscriptions $2,002 $1,071 $4,022 $876
Rebates $0 ($2,316) $0 $0
Pay Per View Expenses $1,594 $1,259 $8,552 $360
Video Game Expenses $0 $0 $0 $0
Miscellaneous Marketing Expenses $7,778 $14,530 $9,203 $9,240
G & A Salary - Supervisor $76,266 $73,332 $70,512 $63,828
G & A Salary - CSR $219,595 $210,635 $219,528 $240,528
G & A Overtime/Standby $4,440 $4,369 $3,662 $13,728
G & A Payroll Taxes $26,888 $25,899 $24,930 $52,932
G & A Group Insurance $24,036 $13,087 $42,772 $30,900
G & A Other Benefits $6,897 ($172) $32,992 $0
G & A Contract Labor $1,538 $644 $0 $0
G & A Allocated Personnel Expense ($166,526) ($166,962) ($164,094) ($174,120)
G & A Allocated P/R Expense ($34,543) ($33,445) ($51,431) ($240)
Allocated Department Expense ($62,558) ($70,956) ($66,737) ($68,676)
Rent - Office $6,300 $6,200 $5,700 $6,300
R & M - Office $9,379 $10,703 $13,365 $9,060
Office Supplies $9,775 $10,288 $7,292 $8,784
Xerox & Printing $4,344 $4,396 $4,273 $0
Vehicle - Gas & Oil $1,613 $1,585 $1,209 $3,588
T & E System Travel $542 $251 $1,490 $15,816
T & E System Non-Travel $984 $951 $672 $2,160
Dues and Subscriptions $1,380 $890 $1,164 $252
Conventions - Travel $13 $650 $484 $0
Conventions - Non Travel $28 $0 $0 $0
Education $3,889 $2,096 $2,613 $11,316
Recruiting $0 $0 $0 $0
Insurance $165,149 $162,277 $175,848 $216,336
Legal $12,263 $12,000 $7,000 $12,600
</TABLE>
<PAGE> 154
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SYSTEM LOCATION: SOMERSET, KY
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
ONE MONTH ONE MONTH THREE MONTHS THREE MONTHS TWELVE MONTHS
ENDING ENDING 12/31/96 ENDING ENDING 12/31/96 ENDING
12/31/96 ANNUALIZED 12/31/96 ANNUALIZED 12/31/96
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Audit & Taxes $762 $9,144 $2,285 $9,140 $9,010
Association - Dues $1,162 $13,944 $3,391 $13,564 $13,832
Association - Lobbying $186 $2,232 $651 $2,604 $2,271
Political Contribution $0 $0 $100 $400 $100
Donations/Public Relations $163 $1,956 $1,184 $4,736 $7,848
Customer Billing $7,148 $85,776 $21,250 $85,000 $85,197
Postage & Messengers $7,090 $85,080 $21,110 $84,440 $85,890
Utilities $988 $11,856 $3,375 $13,500 $13,060
Telephone $3,567 $42,804 $10,112 $40,448 $32,119
Tax & Licenses $97 $1,164 $291 $1,164 $1,563
FCC User Fees $886 $10,632 $2,658 $10,632 $10,619
Reregulation Costs $0 $0 $13,232 $52,928 $30,024
CATV Franchise $10,626 $127,512 $39,927 $159,708 $164,256
Copyright Fees $7,722 $92,664 $22,881 $91,524 $98,852
BMI License Fees $0 $0 ($448) ($1,792) $4,526
ASCAP License Fees $1,094 $13,128 $3,284 $13,136 $8,445
Bad Debt Expense $9,255 $111,060 $7,646 $30,584 $51,395
Cap. Labor & OH Other ($1,812) ($21,744) ($4,813) ($19,252) ($10,782)
G & A Miscellaneous Expense $3,287 $39,444 $6,623 $26,492 $10,069
Primary Satellite Fees $81,022 $972,264 $244,728 $978,912 $925,578
Program Guides $331 $3,972 $1,087 $4,348 $10,712
Pay TV Fees $18,758 $225,096 $55,151 $220,604 $251,372
Pay Per View Fees $384 $4,608 $2,067 $8,268 $6,730
Video Game Fees $0 $0 $0 $0 $0
--- --- --- --- --
Total Expenses $267,049 $3,204,588 $788,449 $3,153,796 $3,102,395
Operating Income $406,811 $4,881,732 $1,229,833 $4,919,332 $3,988,470
Operating Margin 60.37% 60.37% 60.93% 60.93% 56.25%
</TABLE>
<TABLE>
<CAPTION>
--------------
-------------------------------------------- ADJUSTED
TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS ONE MONTH
ENDING ENDING ENDING ENDING 12/31/96
12/31/95 12/31/94 12/31/93 ANNUALIZED
-------------------------------------------- --------------
<S> <C> <C> <C> <C>
Audit & Taxes $25,604 $39,812 $16,246 $9,144
Association - Dues $6,574 $7,318 $7,312 $13,944
Association - Lobbying $1,212 $1,202 $0 $2,232
Political Contribution $0 $0 $0 $0
Donations/Public Relations $6,135 $5,021 $4,256 $1,956
Customer Billing $95,517 $98,893 $88,898 $85,776
Postage & Messengers $83,629 $78,104 $77,033 $85,080
Utilities $12,222 $11,663 $11,281 $11,856
Telephone $27,776 $27,991 $28,860 $42,804
Tax & Licenses $1,437 $270 $753 $1,164
FCC User Fees $8,678 $7,257 $0 $10,632
Reregulation Costs $7,841 $25,519 $13,010 $0
CATV Franchise $179,949 $148,978 $160,945 $127,512
Copyright Fees $78,077 $73,468 $63,629 $92,664
BMI License Fees $0 $0 $0 $0
ASCAP License Fees $0 $0 $0 $13,128
Bad Debt Expense $65,460 $96,890 $69,142 $111,060
Cap. Labor & OH Other ($32,458) ($15,411) ($5,946) $0
G & A Miscellaneous Expense $9,182 $7,050 $7,250 $39,444
Primary Satellite Fees $803,806 $657,702 $649,739 $972,264
Program Guides $20,788 $16,367 $13,018 $3,972
Pay TV Fees $275,154 $234,780 $218,302 $225,096
Pay Per View Fees ($237) $4,149 $3,914 $4,608
Video Game Fees $0 $0 $0 $0
--- --- --- ---
Total Expenses $2,863,054 $2,704,050 $2,677,884 $4,348,000
Operating Income $3,436,148 $3,184,251 $2,957,748 $3,738,320
Operating Margin 54.55% 54.08% 52.48% 46.23%
</TABLE>
<PAGE> 155
SYSTEM LOCATION: SOMERSET, KY
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
ADJUSTED ADJUSTED ADJUSTED ADJUSTED ADJUSTED
THREE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING 12/31/96 ENDING ENDING ENDING ENDING
ANNUALIZED 12/31/96 12/31/95 12/31/94 12/31/93
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES
Primary - First Outlet $4,327,568 $4,085,262 $3,780,392 $3,827,585 $3,171,423
Primary Commercial $70,104 $73,145 $69,778 $68,505 $67,614
Expanded Tier $0 $0 $0 $0 $0
A-G Tier $84 $83 $60 $23,815 $457,868
A-J Tier $192 $149 $74 $23,544 $815,239
A-L Tier $526,288 $474,908 $412,199 $165,567 $0
Radio Services $68 $102 $98 $0 $0
Pay Cable First Outlet $393,364 $440,217 $466,915 $390,766 $354,268
Pay Cable Additional Outlet $3,468 $4,085 $6,672 $8,484 $7,591
Ala Carte $0 $0 $0 $717,997 $173,276
New Product Tier 1 $1,185,116 $1,005,944 $813,889 $0 $0
Commercial Pay $16,320 $20,604 $32,976 $12,816 $12,567
Pay Per View $14,240 $11,912 $6,818 $7,417 $6,523
Primary Additional Outlet $0 $0 $0 $1,470 $40,225
Remote Control $18,496 $28,564 $44,680 $42,696 $50,444
Converter Rental $95,600 $83,054 $49,650 $48,193 $14,060
Maintenance Contracts $39,836 $41,057 $37,671 $21,269 $0
New Customer Pay Installs $0 $0 $78 $78 $275
New Customer Basic Installs $17,028 $24,787 $33,786 $53,663 $65,766
Installation Materials Charge ($40) $5 $301 $0 $0
Installs - Non New Customers $63,204 $88,319 $92,532 $83,947 $78,466
Guide Revenue $5,052 $3,762 $8 $0 $0
Other - Late Charges $73,300 $70,610 $67,905 $85,715 $73,700
Other - Rent $9,600 $9,600 $8,960 $9,498 $10,407
Other - Franchise Pass Through $24,584 $22,934 $5,519 $0 $0
Other - Miscellaneous $2,640 $905 $33 $382 $1,403
FCC User Fees Pass Through $9,384 $9,413 $8,848 $455 $0
Other - Programmers $655,484 $168,073 $0 $0 $0
QVC Monthly Commission $27,592 $26,495 $25,290 $23,479 $23,297
QVC Carriage Payment $12,412 $12,307 $14,516 $14,516 $14,515
HSN Monthly Commission $10,000 $10,667 $7,489 $0 $0
HSN Carriage Payment $70,992 $28,827 $14,772 $0 $0
Classifed Ads $87,160 $101,632 $91,439 $71,510 $60,097
Ad Insertion Sales $288,020 $198,116 $183,458 $171,423 $127,342
Ad Sales Other $0 $0 $0 $0 $91
Production & Local Origination $69,300 $45,327 $22,396 $13,511 $9,175
-------- -------- -------- -------- -------
Total Revenues $8,116,456 $7,090,865 $6,299,202 $5,888,301 $5,635,632
</TABLE>
<PAGE> 156
SYSTEM LOCATION: SOMERSET, KY
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
ADJUSTED ADJUSTED ADJUSTED ADJUSTED ADJUSTED
THREE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING 12/31/96 ENDING ENDING ENDING ENDING
ANNUALIZED 12/31/96 12/31/95 12/31/94 12/31/93
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EXPENSES
Technical Salary - Supervisor $66,916 $66,916 $64,342 $61,868 $59,488
Technical Salary - Technician $438,856 $428,056 $405,137 $394,220 $395,567
Technical Salary - Dispatcher $0 $0 $0 $0 $0
Technical Salary - Installers $153,076 $148,029 $132,929 $114,762 $124,670
Overtime/Standby $240,880 $158,241 $125,429 $133,982 $101,432
Payroll Taxes $70,188 $66,258 $61,895 $59,987 $55,772
Group Insurance $67,928 $69,287 $53,433 $30,569 $98,650
Other Benefits $15,000 $13,404 $25,668 $37,410 $44,592
Allocated Personnel Expense ($491,592) ($449,977) ($405,626) ($408,422) ($390,803)
Allocated P/R Benefit ($40,232) ($87,450) ($84,926) ($76,166) ($122,091)
Allocated Department Expense $368 $92 $0 $0 ($433)
Rent - Headend $33,600 $34,100 $34,900 $33,600 $33,600
Rent - Poles and Ducts $14,412 $67,017 $78,490 $97,371 $53,318
R & M Plant $16,252 $15,538 $10,113 $5,916 $4,751
R & M Converter $17,404 $18,647 $14,051 $4,852 $1,581
R & M Other $13,416 $6,072 $6,202 $4,084 $2,138
Material and Reconnect $11,612 $9,544 $9,481 $7,208 $4,800
Vehicle - Gas & Oil $30,272 $28,896 $22,128 $22,015 $21,404
Vehicle - Service $10,972 $14,128 $17,710 $16,800 $7,986
Leased Vehicles $0 $0 $0 $0 $13,384
T & E System Travel $0 $0 $58 $0 $150
T & E System Non-Travel $1,932 $578 $0 $63 $78
Dues & Subscriptions $112 $203 $522 $925 $586
Education $0 $409 $132 $497 $506
System Power Costs $73,180 $68,318 $72,792 $77,598 $62,774
Recruiting $0 $0 $0 $0 $0
Loss on Converters $1,800 $1,800 $1,800 $1,800 $1,800
Property Taxes $551,156 $364,690 $264,900 $184,185 $309,246
Uniforms $7,660 $7,304 $6,791 $5,435 $6,621
Small Tool and Safety $0 $800 $400 $156 $169
Capital Labor & OH Construction $0 $0 $0 $0 $0
Capital Labor & OH Customer $0 $0 $0 $0 $0
P&L Salary - Producer Assistant $22,864 $22,738 $22,198 $20,016 $15,600
Payroll Taxes $2,176 $1,899 $1,886 $1,669 $1,227
Group Insurance $1,388 $1,500 $1,240 $1,571 $1,993
Other Benefits $2,656 $1,744 $1,488 $1,512 $1,230
Employee Commissions $0 $0 $2,320 $25 $0
P&L, Other expenses $11,440 $6,113 $568 $0 $0
Ad Sales Salary Supervisor $5,412 $5,412 $5,412 $20,810 $20,290
Ad Sales Payroll Taxes $7,380 $7,630 $7,577 $7,271 $4,587
Ad Sales Group Insurance $6,792 $7,730 $5,863 $3,813 $7,225
Ad Sales Other Benefits $136 $286 $336 $1,334 $1,824
Ad Sales Alloc. Personnel Benefit $12,092 $11,163 $15,788 ($23,115) ($1,733)
Ad Sales Alloc. P/R Benefit ($1,940) ($6,535) ($666) ($1,626) $552
Employee Commissions $21,712 $25,626 $44,203 $74,049 $37,482
Other Ad Sale Expenses $10,000 $13,751 $21,732 $23,572 $16,294
Marketing Payroll Taxes $0 $0 $0 $0 $0
Marketing Salary & Benefits $0 $0 $0 $0 $0
Marketing Allocated P/R Benefit $0 $0 $0 $0 $43
Marketing Employee Commissions $2,104 $978 $314 $1,718 $8,039
Marketing Expenses $126,088 $88,866 $48,533 $95,148 $44,100
Dues and Subscriptions $952 $727 $2,002 $1,071 $4,022
Rebates $0 $0 $0 ($2,316) $0
Pay Per View Expenses $632 $3,346 $1,594 $1,259 $8,552
Video Game Expenses $0 $0 $0 $0 $0
Miscellaneous Marketing Expenses $15,320 $8,772 $7,778 $14,530 $9,203
G&A Salary - Supervisor $37,656 $42,579 $76,266 $73,332 $70,512
G&A Salary - CSR $245,688 $238,058 $219,595 $210,635 $219,528
G&A Overtime/Standby $11,620 $8,125 $4,440 $4,369 $3,662
G&A Payroll Taxes $33,936 $28,519 $26,888 $25,899 $24,930
G&A Group Insurance $32,724 $34,834 $24,036 $13,087 $42,772
G&A Other Benefits $0 $2,840 $6,897 $0 $32,992
G&A Contract Labor $0 $0 $1,538 $644 $0
G&A Allocated Personnel Expense ($152,356) ($152,428) ($166,526) ($166,962) ($164,094)
G&A Allocated P/R Expense ($24,132) ($37,524) ($34,543) ($33,445) ($51,431)
Allocated Department Expense ($68,400) ($38,441) ($62,558) ($70,956) ($66,737)
Rent - Office $6,300 $6,300 $6,300 $6,200 $5,700
R&M - Office $10,292 $11,845 $9,379 $10,703 $13,365
Office Supplies $7,056 $8,291 $9,775 $10,288 $7,292
Xerox & Printing $4,452 $5,224 $4,344 $4,396 $4,273
Vehicle - Gas & Oil $1,992 $2,322 $1,613 $1,585 $1,209
T&E System Travel $8,616 $5,803 $542 $251 $1,490
T&E System Non-Travel $1,076 $386 $984 $951 $672
Dues and Subscriptions $324 $1,442 $1,380 $890 $1,164
Conventions - Travel $0 $310 $13 $650 $484
Conventions - Non Travel $0 $0 $28 $0 $0
Education $4,612 $3,691 $3,889 $2,096 $2,613
Recruiting $0 $21 $0 $0 $0
Insurance $205,420 $137,803 $165,149 $162,277 $175,848
Legal $25,684 $15,871 $12,263 $12,000 $7,000
</TABLE>
<PAGE> 157
SYSTEM LOCATION: SOMERSET, KY
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
ADJUSTED ADJUSTED ADJUSTED ADJUSTED ADJUSTED
THREE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDING 12/31/96 ENDING ENDING ENDING ENDING
ANNUALIZED 12/31/96 12/31/95 12/31/94 12/31/93
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Audit & Taxes $9,140 $9,010 $25,604 $39,812 $16,246
Association - Dues $13,564 $13,832 $6,574 $7,318 $7,312
Association - Lobbying $2,604 $2,271 $1,212 $1,202 $0
Political Contribution $400 $100 $0 $0 $0
Donations/Public Relations $4,736 $7,848 $6,135 $5,021 $4,256
Customer Billing $85,000 $85,197 $95,517 $98,893 $88,898
Postage & Messengers $84,440 $85,890 $83,629 $78,104 $77,033
Utilities $13,500 $13,060 $12,222 $11,663 $11,281
Telephone $40,448 $32,119 $27,776 $27,991 $28,860
Tax & Licenses $1,164 $1,563 $1,437 $270 $753
FCC User Fees $10,632 $10,619 $8,678 $7,257 $0
Reregulation Costs $52,928 $30,024 $7,841 $25,519 $13,010
CATV Franchise $159,708 $164,256 $179,949 $148,978 $160,945
Copyright Fees $91,524 $98,852 $78,077 $73,468 $63,629
BMI License Fees $0 $4,526 $0 $0 $0
ASCAP License Fees $13,136 $8,445 $0 $0 $0
Bad Debt Expense $30,584 $51,395 $65,460 $96,890 $69,142
Cap. Labor & OH Other $0 $0 $0 $0 $0
G & A Miscellaneous Expense $26,492 $10,069 $9,182 $7,050 $7,250
Primary Satellite Fees $978,912 $925,578 $803,806 $657,702 $649,739
Program Guides $4,348 $10,712 $20,788 $16,367 $13,018
Pay TV Fees $220,604 $251,372 $275,154 $234,780 $218,302
Pay Per View Fees $8,268 $6,730 ($237) $4,149 $3,914
Video Game Fees $0 $0 $0 $0 $0
--- --- --- --- ---
Total Expenses $3,797,064 $3,401,985 $3,129,413 $2,864,350 $2,839,098
Operating Income $4,319,392 $3,688,880 $3,169,789 $3,023,951 $2,796,534
Operating Margin 53.22% 52.02% 50.32% 51.36% 49.62%
</TABLE>
<PAGE> 158
[LOGO - ARTHUR ANDERSEN LLP]
ADDENDUM 4 Demographics
<PAGE> 159
SERVICE AREA DEMOGRAPHICS
<TABLE>
<CAPTION>
ANNUAL
1/1/96 1/1/01 CHANGE
------ ------ -------
<S> <C> <C> <C>
BURKE COUNTY, NC
POPULATION 81,000 85,500 1.09%
HOUSEHOLDS 31,200 33,200 1.25%
MEDIAN AGE 37.1 N/A
AVERAGE HOUSEHOLD EBI $32,427 $38,191 3.33%
STATE OF NORTH CAROLINA
POPULATION 7,527,800 7,845,900 0.83%
HOUSEHOLDS 2,775,800 3,056,700 1.95%
MEDIAN AGE 33.5 N/A
AVERAGE HOUSEHOLD EBI $36,360 $43,414 3.61%
KERN COUNTY, CALIFORNIA
POPULATION 627,900 674,300 1.44%
HOUSEHOLDS 203,400 218,200 1.41%
MEDIAN AGE 30.9 N/A
AVERAGE HOUSEHOLD EBI $35,099 $38,197 1.71%
STATE OF CALIFORNIA
POPULATION 32,362,300 33,276,700 0.56%
HOUSEHOLDS 10,898,600 11,190,500 0.53%
MEDIAN AGE 32.9 N/A
AVERAGE HOUSEHOLD EBI $43,427 $46,677 1.45%
KENT COUNTY, MARYLAND
POPULATION 18,900 19,400 0.52%
HOUSEHOLDS 7,300 7,800 1.33%
MEDIAN AGE 38.5 N/A
AVERAGE HOUSEHOLD EBI $37,878 $40,407 1.30%
QUEEN ANNE'S COUNTY, MARYLAND
POPULATION 36,700 38,800 1.12%
HOUSEHOLDS 13,700 14,800 1.56%
MEDIAN AGE 37.1 N/A
AVERAGE HOUSEHOLD EBI $43,959 $47,376 1.51%
TALBOT COUNTY, MARYLAND
POPULATION 32,600 34,500 1.14%
HOUSEHOLDS 13,500 14,500 1.44%
MEDIAN AGE 41.1 N/A
AVERAGE HOUSEHOLD EBI $45,806 $54,151 3.40%
</TABLE>
<PAGE> 160
<TABLE>
<S> <C> <C> <C>
STATE OF MARYLAND
POPULATION 5,072,900 5,299,500 0.88%
HOUSEHOLDS 1,859,100 1,964,800 1.11%
MEDIAN AGE 35.0 N/A
AVERAGE HOUSEHOLD EBI $46,295 $51,496 2.15%
TOTAL SERVICE AREA -
STATE OF MARYLAND
POPULATION 88,200 92,700 1.00%
HOUSEHOLDS 34,500 37,100 1.46%
DESCHUTES COUNTY, OREGON
POPULATION 95,600 110,900 3.01%
HOUSEHOLDS 37,500 44,000 3.25%
MEDIAN AGE 37.3 N/A
AVERAGE HOUSEHOLD EBI $34,515 $39,764 2.87%
STATE OF OREGON
POPULATION 3,166,800 3,431,000 1.62%
HOUSEHOLDS 1,227,300 1,342,200 1.81%
MEDIAN AGE 38.7 N/A
AVERAGE HOUSEHOLD EBI $25,986 $31,884 4.18%
ADAIR COUNTY, KENTUCKY
POPULATION 16,300 17,300 1.20%
HOUSEHOLDS 6,300 6,800 1.54%
MEDIAN AGE 36.9 N/A
AVERAGE HOUSEHOLD EBI $25,986 $31,884 4.18%
PULASKI COUNTY, KENTUCKY
POPULATION 55,000 59,900 1.72%
HOUSEHOLDS 21,100 23,400 2.09%
MEDIAN AGE 37.0 N/A
AVERAGE HOUSEHOLD EBI $27,746 $34,345 4.36%
LAUREL COUNTY, KENTUCKY
POPULATION 48,600 53,000 1.75%
HOUSEHOLDS 17,600 19,600 2.18%
MEDIAN AGE 34.2 N/A
AVERAGE HOUSEHOLD EBI $27,345 $32,701 3.64%
</TABLE>
<PAGE> 161
<TABLE>
<S> <C> <C> <C>
LINCOLN COUNTY, KENTUCKY
POPULATION 21,700 23,200 1.35%
HOUSEHOLDS 8,100 8,600 1.21%
MEDIAN AGE 35.7 N/A
AVERAGE HOUSEHOLD EBI $27,595 $36,183 5.57%
TOTAL SERVICE AREA -
STATE OF KENTUCKY
POPULATION 141,600 153,400 1.61%
HOUSEHOLDS 53,100 58,400 1.92%
STATE OF KENTUCKY
POPULATION 3,876,100 4,020,000 0.73%
HOUSEHOLDS 1,457,000 1,537,200 1.08%
MEDIAN AGE 34.7 N/A
AVERAGE HOUSEHOLD EBI $33,594 $41,428 4.28%
UNITED STATES
POPULATION 264,900,090 276,107,000 0.83%
HOUSEHOLDS 97,647,400 102,813,100 1.04%
MEDIAN AGE 34.8 N/A
AVERAGE HOUSEHOLD EBI $40,598 $47,002 2.97%
TOTAL SERVICE AREA -
ENTIRE SYSTEM
POPULATION 40,924,400 42,239,400 0.63%
HOUSEHOLDS 14,034,100 14,638,100 0.85%
</TABLE>
<PAGE> 1
EXHIBIT 10.31
FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P.
VALUATION ANALYSIS
AS OF
DECEMBER 31, 1996
[LOG0]
COMMUNICATIONS
EQUITY
ASSOCIATES
(C) 1997 BY CEA
MARCH 3, 1997
1235 WESTLAKES DRIVE SUITE 245 - BERWYN, PENNSYLVANIA 19312 -
(610) 251-0650 - (610) 251-9180
<PAGE> 2
[LOG0]
COMMUNICATIONS
EQUITY
ASSOCIATES
VIA FEDERAL EXPRESS
March 3, 1997
PERSONAL AND CONFIDENTIAL
Mr. Michael K. Menerey
Chief Financial Officer
Falcon Holdings Group, L.P.
474 South Raymond Avenue
Suite 200
Pasadena, CA 91105
Dear Mr. Menerey:
Communications Equity Associates, Inc. ("CEA") is pleased to submit the
results of our valuation analysis of the cable television system assets (the
"Cable Systems") owned by Falcon Classic Cable Income Properties, L.P. ("Falcon
Classic" or the "Partnership"), as of December 31, 1996. It is our understanding
that the asset values determined by this analysis will be used by you as part of
the Appraisal Process, as defined in the Falcon Classic Partnership Agreement
dated May 15, 1989, as amended. CEA hereby expresses no opinion as to the value
of the Falcon Classic Partnership Units, nor does CEA hereby express an opinion
as to the fairness of any transaction involving the Cable Systems or the Falcon
Classic Partnership Units.
We hereby express our opinion of the fair market value of the assets of
the Cable Systems, free and clear of all liens, liabilities and encumbrances.
Fair market value is hereby defined as the cash price at which the assets of the
Cable Systems would sell in a normal market from a willing seller to a willing
buyer, allowing a reasonable time to find a purchaser, with both parties having
reasonable knowledge of relevant facts about the Cable Systems, and with neither
party under any compulsion to buy or to sell.
We have performed valuation analyses, as of December 31, 1996, of five
separate cable systems, respectively located in Burke County, North Carolina;
Redmond, Oregon; California City, California; Centreville, Maryland; and
Somerset, Kentucky. The results of these analyses are summarized below:
<PAGE> 3
Mr. Michael K. Menerey
March 3, 1997
Page Two
<TABLE>
<CAPTION>
FAIR MARKET VALUE
CABLE SYSTEM AS OF 12/31/96
------------ --------------
<S> <C>
BURKE COUNTY, NC $19,000,000
REDMOND, OR 6,200,000
CALIFORNIA CITY, CA 2,800,000
CENTREVILLE, MD 23,000,000
SOMERSET, KY 31,000,000
</TABLE>
These valuations are intended solely for your use for the purpose stated
above, and are not intended for general publication or circulation. Since these
value indications are the result of certain specific assumptions, and since
these assumptions may not be relevant for other purposes, these values should
not be used for any other purpose. We specifically prohibit the use of these
results in assessing the fairness of any transactions involving the Falcon
Classic Partnership Units, and our value conclusions stated above should in no
way be construed as an opinion as to the value of the Partnership Units.
Since we have not undertaken an analysis of the debt of the Partnership,
we can make no representations as to whether the fair salable value of the
Partnership's assets exceeds its debt, whether the Partnership will be able to
meet its debt obligations as they come due, or whether the Partnership is
properly capitalized. We can similarly make no representations as to the
solvency of the Partnership.
In making this analysis, CEA relied substantially on financial and
operational information provided by the Partnership and system personnel. CEA
did not independently verify this information and can therefore accept no
responsibility as to its accuracy. As part of this analysis, CEA physically
toured only the Cable Systems located in North Carolina, Kentucky and Maryland.
A list of limiting conditions is attached to this letter.
<PAGE> 4
Mr. Michael K. Menerey
March 3, 1997
Page Three
CEA is independent of the Partnership, and CEA's fee for performing this
analysis was in no way contingent upon the results of this analysis. Neither CEA
nor any of its employees involved in the preparation of this analysis have a
present or contemplated direct or indirect interest in the Partnership or in the
property herein analyzed. To the best of CEA's knowledge and belief, all
statements contained in this letter are true and correct, and no important
information has been knowingly withheld. This valuation was developed and this
letter has been prepared in conformity with the Uniform Standards of
Professional Appraisal Practice.
Respectfully submitted,
/s/ COMMUNICATIONS EQUITY ASSOCIATES, INC.
Communications Equity Associates, Inc.
/cea
Attachment
<PAGE> 5
LIMITING CONDITIONS
1. CEA offers no opinions on either the potential effect of current or future
FCC regulations on the cash flow of the Cable Systems, or on the
Partnership's strategy in dealing with these regulations. The value
conclusions derived herein were based on the assumption that the current
rates of the Cable Systems are in compliance with current FCC regulations,
and that no future refund liability is associated with the Cable Systems.
2. This valuation is based on CEA's assessment of market conditions as of the
date of this report, and assumes that market, regulatory and other conditions
remain static. Changes in the economy as well as additional rule-making by
the FCC could have a material effect on the values herein derived.
3. CEA cannot guarantee that a buyer could be found for the Cable Systems at the
prices herein determined, or at any rational price.
4. As part of this analysis, CEA relied substantially on financial and
operational information provided by the Partnership. CEA did not
independently verify this information and can therefore accept no
responsibility as to its accuracy.
5. CEA specifically prohibits the use of these value conclusions in all matters
related to the fairness of any transactions involving the Falcon Classic
Partnership Units.
6. CEA specifically prohibits the use of these value conclusions in all matters
related to the solvency of the Partnership. Since we have not undertaken an
analysis of the debt of the Partnership, we can make no representations as to
whether the fair salable value of the Partnership's assets exceeds its debt,
whether the Partnership will be able to meet its debt obligations as they
come due, or whether the Partnership is reasonably capitalized.
7. CEA did not conduct a detailed technical evaluation of the Cable Systems, but
instead relied on information provided by the Partnership and its employees
in assessing the technical condition of the Cable Systems.
8. CEA has assumed that the Cable Systems, as currently operated, are in
material compliance with all franchise, regulatory, and FCC requirements. CEA
did not independently verify compliance with these requirements.
9. The franchises for the Cable Systems expire at various points in the future,
and there is no assurance that any franchise will be renewed, or that any
will be renewed with reasonable provisions. The non-renewal of any franchise
or violations of franchise requirements could have a material detrimental
effect on the value of the Cable Systems.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
1. OVERVIEW OF ANALYSIS
o Background and Description of Analysis...................... 1
o Definitions of Value........................................ 1
o Description of Valuation Methodologies...................... 1
2. BURKE COUNTY, NORTH CAROLINA
o System Overview............................................. 4
System Description....................................... 4
Home and Subscriber Growth............................... 4
Financial Summary........................................ 4
o Valuation................................................... 5
Discounted Cash Flow Approaches.......................... 5
Cash Flow Multiple and Adjusted
Cash Flow Multiple Approaches......................... 16
Subscriber Multiple Approach............................. 17
Rebuild Cash Flow Multiple Approach...................... 17
o Value Conclusions........................................... 18
3. REDMOND, OREGON
o System Overview............................................. 19
System Description....................................... 19
Home and Subscriber Growth............................... 19
Financial Summary........................................ 19
o Valuation................................................... 20
Discounted Cash Flow Approaches.......................... 20
Cash Flow Multiple and Adjusted
Cash Flow Multiple Approaches......................... 31
Subscriber Multiple Approach............................. 32
Rebuild Cash Flow Multiple Approach...................... 32
o Value Conclusions........................................... 33
</TABLE>
<PAGE> 7
<TABLE>
<S> <C> <C>
4. CALIFORNIA CITY, CA
o System Overview............................................. 34
System Description....................................... 34
Home and Subscriber Growth............................... 34
Financial Summary........................................ 34
o Valuation................................................... 35
Discounted Cash Flow Approaches.......................... 35
Cash Flow Multiple and Adjusted
Cash Flow Multiple Approaches......................... 46
Subscriber Multiple Approach............................. 47
Rebuild Cash Flow Multiple Approach...................... 47
o Value Conclusions........................................... 48
5. CENTREVILLE, MD
o System Overview............................................. 49
System Description....................................... 49
Home and Subscriber Growth............................... 49
Financial Summary........................................ 49
o Valuation................................................... 50
Discounted Cash Flow Approaches.......................... 50
Cash Flow Multiple and Adjusted
Cash Flow Multiple Approaches......................... 61
Subscriber Multiple Approach............................. 62
Rebuild Cash Flow Multiple Approach...................... 62
o Value Conclusions........................................... 63
6. SOMERSET, KY
o System Overview............................................. 64
System Description....................................... 64
Home and Subscriber Growth............................... 64
Financial Summary........................................ 64
o Valuation................................................... 65
Discounted Cash Flow Approaches.......................... 65
Cash Flow Multiple and Adjusted
Cash Flow Multiple Approaches......................... 76
Subscriber Multiple Approach............................. 77
Rebuild Cash Flow Multiple Approach...................... 77
o Value Conclusions........................................... 78
</TABLE>
<PAGE> 8
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
OVERVIEW OF ANALYSIS
BACKGROUND AND DESCRIPTION OF ANALYSIS
CEA has been retained by the Partnership to determine the fair market
value of the assets of the Cable Systems as of December 31, 1996. It is CEA's
understanding that the asset values determined by this analysis will be used by
the Partnership as part of the Appraisal Process, as defined in the Falcon
Classic Partnership Agreement dated May 15, 1989, as amended. CEA hereby
expresses no opinion as to the value of the Falcon Classic Partnership Units,
nor does CEA hereby express an opinion as to the fairness of any transaction
involving the Cable Systems or the Falcon Classic Partnership Units.
CEA physically toured only the North Carolina, Kentucky and Maryland Cable
Systems as part of this analysis. CEA has not conducted a technical analysis of
the cable plant, and has therefore relied on assertions made by Cable System
management regarding the technical performance of the cable plant.
DEFINITION OF FAIR MARKET VALUE
"FAIR MARKET VALUE" is hereby defined as the cash price at which the
assets of the Cable Systems would sell in a normal market from a willing seller
to a willing buyer, allowing a reasonable time to find a purchaser, with both
parties having reasonable knowledge of relevant facts about the Cable Systems,
and with neither party under any compulsion to buy or to sell.
DESCRIPTION OF VALUATION METHODOLOGIES
CEA used variations of two valuation methods in determining the fair
market value of the Cable Systems. These two methods, the discounted cash flow
approach and the market approach, are discussed below.
DISCOUNTED CASH FLOW APPROACH
In the discounted cash flow ("DCF") approach, the value of an asset
is determined by calculating the total present value of the future cash
flows generated by the asset. The critical variables to be derived in a
discounted cash flow analysis are: (1) the projection of the relevant cash
flow stream, (2) the appropriate discount rate for the asset, and (3) the
terminal value of the asset at the end of a given projection period. In
the case of cable television systems, the value of a system is usually
calculated as the present value of the free cash flow (operating cash flow
less capital expenditures) of the system, using a weighted average cost of
debt and equity capital as the discount rate, with a terminal value based
on a multiple of operating cash flow.
1
<PAGE> 9
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
In conducting each of the Cable System valuations, CEA performed two
variations of the discounted cash flow approach, as follows:
1. The first variation of the DCF approach (the "Rebuild DCF
Approach") was conducted under the assumption that the Cable
System would be rebuilt to current state-of-the-art technical
standards.
2. The second variation of the DCF approach (the "No Rebuild DCF
Approach") was conducted under the assumption that the Cable
System would continue to operate without a significant technical
rebuild.
MARKET APPROACH
In the market approach, the value of an asset is determined based on
a comparison with market transactions involving comparable assets. In
order to facilitate this comparison, the respective purchase prices of the
comparable assets are expressed as ratios based on a relevant operating
statistic, typically earnings or cash flow. In the case of cable
television systems, the purchase price of a system is usually expressed as
either a multiple of the operating cash flow of the system, or as a price
per basic subscriber served by the system. The appropriate multiple is
then applied to the operating cash flow or the number of subscribers of
the subject system in order to determine its value.
In conducting each of the Cable System valuations, CEA performed
four variations of the market approach, as follows:
1. In the first variation of the market approach (the "Cash Flow
Multiple Approach"), CEA determined and applied the appropriate
multiple of the Cable System's actual 1996 operating cash flow in
determining value.
2. In the second variation of the market approach (the "Adjusted
Cash Flow Multiple Approach"), CEA determined and applied the
appropriate multiple of the Cable System's adjusted 1996
operating cash flow in determining value, with the Cable System's
cash flow adjusted to a normalized, industry-average 50% cash
flow margin.
3. In the third variation of the market approach (the "Subscriber
Multiple Approach"), CEA multiplied the number of basic
subscribers in each Cable System as of December 31, 1996 by
$1,800. Based on CEA's recent experience in the cable system
transaction market, it is CEA's opinion that $1,800 is the
current overall average per-subscriber price at which typical
cable systems could reasonably be expected to sell.
2
<PAGE> 10
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
4. In the fourth variation of the market approach (the "Rebuild Cash
Flow Multiple Approach"), CEA determined the value of each Cable
System by multiplying the actual 1996 operating cash flow of each
Cable System by 10.5, and then subtracting the estimated cost to
rebuild each Cable System. Based on CEA's recent experience in
the cable system transaction market, it is CEA's opinion that a
typical fully-rebuilt, state-of-the-art cable system could
reasonably be expected to sell, on average, for approximately
10.5 times operating cash flow.
The application of each of these approaches and the derivation of the
relevant variables of each approach are discussed in subsequent sections of this
report.
3
<PAGE> 11
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
BURKE COUNTY, NC
SYSTEM OVERVIEW -- BURKE COUNTY, NC
SYSTEM DESCRIPTION
The Partnership owns the Cable System that serves Burke County,
North Carolina, as well as the North Carolina towns of Valdese, Drexel,
Glen Alpine, Rutherford College, and Connelly Springs. As of December 31,
1996, the Cable System passed nearly 20,000 homes with 731 miles of plant,
and served 10,516 basic subscribers from one headend. Relevant subscriber
statistics as of December 31, 1996 are displayed in the following table.
<TABLE>
<CAPTION>
Homes Basic Basic Pay Pay
As of 12/31/96 Passed Subscribers Penetration Units Penetration
-------------- ------ ----------- ----------- ----- -----------
<S> <C> <C> <C> <C> <C>
Burke County, NC 18,986 10,516 55.4% 4,840 46.0%
</TABLE>
The Cable System operates at 330 MHz, 43-channel capacity, and
offers 43 channels of programming.
HOME AND SUBSCRIBER GROWTH
During the past few years, the Cable System has experienced some
home growth, while basic subscribers have declined due to competition in
certain overbuilt areas of the Cable System. The Company's home and
subscriber growth history is displayed below.
<TABLE>
<CAPTION>
1994 1995 1996 CAGR 94-96
---- ---- ---- ----------
<S> <C> <C> <C> <C>
Homes Passed 18,525 18,745 18,986 1.2%
Basic Subscribers 11,124 10,908 10,516 -2.8%
</TABLE>
FINANCIAL SUMMARY
For the year ended December 31, 1996, the Burke County, NC Cable
System generated total revenue of $5,077,796 and operating cash flow of
$3,054,154, resulting in a 60.1% operating cash flow margin.
4
<PAGE> 12
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
VALUATION -- BURKE COUNTY, NC
DISCOUNTED CASH FLOW APPROACHES
Financial projections, including all assumptions regarding
operations and future capital expenditures, relating to the Rebuild DCF
Approach and to the No Rebuild DCF Approach are displayed on the following
ten pages. These projections were prepared by CEA based on certain
information provided by the Partnership, including, but not limited to,
the Partnership's 1997 budget for the Cable System.
The discount rate used in this analysis was derived using a weighted
average cost of capital. Based on CEA's recent experience in the cable
system transaction market, it is CEA's opinion that equity investors in
cable systems would likely require a 25 percent return in order to justify
the equity investment. Additionally, based on CEA's recent experience in
raising debt financing for cable operators, a lender would likely charge
an interest rate of approximately 10 percent and would likely be willing
to lend up to 50 percent of asset value at that rate. Thus, the likely
weighted average cost of capital for the subject Cable System can be
calculated as follows:
<TABLE>
<S> <C> <C> <C>
50 percent debt at a rate of 10% = .50 x 10% = 5.0%
50 percent equity at a rate of 25% = .50 x 25% = 12.5%
Total Cost of Capital = 17.5%
</TABLE>
The terminal value of the Cable System was calculated as the price
at which the cable assets might sell at the end of the ten-year projection
period, based on a multiple of the operating cash flow of the Cable System
at that time. The cash flow multiple used reflects the expected growth of
cash flow in the Cable System after year ten, as well as the return on
debt and equity capital that would likely be required by investors at that
time given the expected risk of the investment at that time.
Based on the calculations displayed on the following pages, the
discounted cash flow approaches indicate fair market values for the Cable
System as follows:
<TABLE>
<S> <C>
Rebuild DCF Approach $ 17,181,984
No Rebuild DCF Approach $ 20,100,147
</TABLE>
5
<PAGE> 13
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
BURKE COUNTY, NC
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
REVENUE ASSUMPTIONS: 1994 1995 1996 1997 1998 1999 2000
- -------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
HOMES PASSED:
Beginning 18,198 18,525 18,745 18,986 19,135 19,326 19,520
Ending 18,525 18,745 18,986 19,135 19,326 19,520 19,715
Change 327 220 241 149 191 193 195
% Change 1.8% 1.2% 1.7% 0.8% 1.0% 1.0% 1.0%
Average 18,362 18,635 18,866 19,061 19,231 19,423 19,617
BASIC SUBSCRIBERS:
Beginning 11,179 11,124 10,908 10,516 10,760 10,867 11,366
Ending 11,124 10,908 10,516 10,760 10,867 11,366 11,874
Change -55 -216 -392 244 108 499 508
% Change -0.5% -1.9% -4.8% 2.3% 1.0% 4.6% 4.5%
Average 11,152 11,016 10,712 10,638 10,813 11,117 11,620
Ending Penetration 60.0% 58.2% 55.4% 56.2% 56.2% 58.2% 60.2%
Monthly Basic Rev/Sub $28.78 $29.48 $31.08 $34.92 $35.97 $37.77 $39.65
% Change 2.4% 5.4% 12.4% 3.0% 5.0% 5.0%
PAY + MINI-PAY UNITS:
Beginning 8,257 8,987 7,226 4,840 4,664 4,711 4,927
Ending 8,967 7,226 4,840 4,664 4,711 4,927 5,147
Change 730 -1,761 -2,386 -176 47 216 220
% Change 8.8% -19.6% -44.0% -3.6% 1.0% 4.6% 4.5%
Average 8,622 8,107 6,033 4,752 4,688 4,819 5,037
Ending Penetration 80.8% 66.2% 46.0% 43.4% 43.4% 43.4% 43.4%
Monthly Pay Rev/Unit $5.87 $6.13 $6.98 $6.99 $6.99 $6.99 $6.99
% Change 4.4% 13.9% 0.1% 0.0% 0.0% 0.0%
PPV REVENUE PER SUB $0.93 $0.89 $0.81 $1.01 $1.06 $1.27 $1.53
% Change -4.2% -8.9% 24.8% 5.0% 20.0% 20.0%
ADVERTISING REVENUE PER SUB $0.89 $0.74 $1.06 $1.20 $1.26 $1.38 $1.52
% Change -16.6% 43.5% 12.8% 5.0% 10.0% 10.0%
OTHER REVENUE PER SUB $2.83 $2.58 $2.67 $2.53 $2.65 $2.92 $3.21
% Change -9.1% 3.7% -5.4% 5.0% 10.0% 10.0%
TOTAL REVENUE PER SUB $37.96 $38.17 $39.50 $42.78 $43.97 $46.37 $48.94
% Change 0.6% 3.5% 8.3% 2.8% 5.5% 5.5%
</TABLE>
<TABLE>
<CAPTION>
REVENUE ASSUMPTIONS: 2001 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
HOMES PASSED:
Beginning 19,715 19,912 20,111 20,312 20,515 20,721
Ending 19,912 20,111 20,312 20,515 20,721 20,928
Change 197 199 201 203 205 207
% Change 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
Average 19,813 20,012 20,212 20,414 20,618 20,824
BASIC SUBSCRIBERS:
Beginning 11,874 12,391 12,917 13,453 13,998 14,552
Ending 12,391 12,917 13,453 13,998 14,552 15,116
Change 517 526 535 545 554 564
% Change 4.4% 4.2% 4.1% 4.0% 4.0% 3.9%
Average 12,133 12,654 13,185 13,725 14,275 14,834
Ending Penetration 62.2% 64.2% 66.2% 68.2% 70.2% 72.2%
Monthly Basic Rev/Sub $41.64 $43.72 $45.90 $48.20 $50.61 $53.14
% Change 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
PAY + MINI-PAY UNITS:
Beginning 5,147 5,372 5,600 5,832 6,068 6,308
Ending 5,372 5,600 5,832 6,068 6,308 6,553
Change 224 228 232 236 240 245
% Change 4.4% 4.2% 4.1% 4.0% 4.0% 3.9%
Average 5,260 5,486 5,716 5,950 6,188 6,431
Ending Penetration 43.4% 43.4% 43.4% 43.4% 43.4% 43.4%
Monthly Pay Rev/Unit $6.99 $6.99 $6.99 $6.99 $6.99 $6.99
% Change 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
PPV REVENUE PER SUB $1.83 $2.20 $2.64 $3.16 $3.80 $4.55
% Change 20.0% 20.0% 20.0% 20.0% 20.0% 20.0%
ADVERTISING REVENUE PER SUB $1.67 $1.84 $2.02 $2.23 $2.45 $2.69
% Change 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
OTHER REVENUE PER SUB $3.53 $3.89 $4.28 $4.70 $5.17 $5.69
% Change 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
TOTAL REVENUE PER SUB $51.70 $54.67 $57.87 $61.32 $65.06 $69.11
% Change 5.6% 5.7% 5.8% 6.0% 6.1% 6.2%
</TABLE>
<PAGE> 14
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
BURKE COUNTY, NC
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
EXPENSE ASSUMPTIONS: 1994 1995 1996 1997 1998 1999 2000
- -------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
BASIC PROGRAMMING
PER SUB $3.27 $3.76 $4.15 $4.86 $5.05 $5.56 $6.11
% Change 15.2% 10.4% 17.0% 4.0% 10.0% 10.0%
PAY/MINI-PAY PROG.
PER UNIT $3.68 $3.80 $3.77 $4.66 $4.80 $4.94 $5.09
% Change 3.3% -0.8% 23.5% 3.0% 3.0% 3.0%
PPV PROGRAMMING/PPV
REVENUE 55.0% 46.6% 57.0% 53.0% 53.0% 53.0% 53.0%
PROGRAMMING GUIDE
COST PER SUB $0.17 $0.16 $0.17 $0.08 $0.09 $0.09 $0.09
% Change -5.5% 4.6% -50.0% 4.0% 4.0% 4.0%
FRANCHISE, ACCESS
FEES/REVENUE 2.3% 3.3% 3.4% 3.2% 3.2% 3.2% 3.2%
BAD DEBT EXPENSES/
REVENUE 1.4% 1.4% 1.1% 1.3% 1.3% 1.3% 1.3%
TECHNICAL EXP.
GROWTH -13.9% -11.0% -7.8% 4.0% 4.0% 4.0%
PRODUCTION/LO
EXPENSE GROWTH -99.0% -100.0% 4.0% 4.0% 4.0% 4.0%
GEN & ADMIN
EXPENSE GROWTH -6.8% 10.8% 6.0% 4.0% 4.0% 4.0%
MARKETING EXP/
REVENUE 2.2% 1.6% 1.4% 1.5% 1.5% 1.5% 1.5%
AD SALES EXP/AD
REVENUE 60.0% 38.8% 26.0% 17.3% 17.3% 17.3% 17.3%
</TABLE>
<TABLE>
<CAPTION>
EXPENSE ASSUMPTIONS: 2001 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
BASIC PROGRAMMING
PER SUB $6.73 $7.40 $8.14 $8.95 $9.85 $10.83
% Change 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
PAY/MINI-PAY PROG.
PER UNIT $5.24 $5.40 $5.56 $5.73 $5.90 $6.08
% Change 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
PPV PROGRAMMING/PPV
REVENUE 53.0% 53.0% 53.0% 53.0% 53.0% 53.0%
PROGRAMMING GUIDE
COST PER SUB $0.10 $0.10 $0.10 $0.11 $0.11 $0.12
% Change 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
FRANCHISE, ACCESS
FEES/REVENUE 3.2% 3.2% 3.2% 3.2% 3.2% 3.2%
BAD DEBT EXPENSES/
REVENUE 1.3% 1.3% 1.3% 1.3% 1.3% 1.3%
TECHNICAL EXP.
GROWTH 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
PRODUCTION/LO
EXPENSE GROWTH 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
GEN & ADMIN
EXPENSE GROWTH 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
MARKETING EXP/
REVENUE 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
AD SALES EXP/AD
REVENUE 17.3% 17.3% 17.3% 17.3% 17.3% 17.3%
</TABLE>
7
<PAGE> 15
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
BURKE COUNTY, NC
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
CAPITAL EXPENDITURES: 1994 1995 1996 1997 1998 1999 2000 2001
- -------------------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MILES OF PLANT:
Beginning 708.49 723.89 726.78 731.12 739.10 746.49 753.96 761.50
Ending 723.89 726.78 731.12 739.10 746.49 753.96 761.50 769.11
Change 15.40 2.89 4.34 7.98 7.39 7.46 7.54 7.61
Average 716.19 725.34 728.95 735.11 742.80 750.22 757.73 756.30
Homes/Mile 25.6 25.8 26.0 25.9 25.9 25.9 25.9 25.9
CONVERTERS:
Beginning 15,950 16,269 15,938 15,346 15,414 15,568 16,283 17,011
Ending 16,269 15,938 15,346 15,414 15,568 16,283 17,011 17,752
Change 319 (331) (592) 68 154 715 728 741
Average 6,110 16,104 15,642 15,380 15,491 15,926 16,647 17,381
Ending
Penetration 145.9% 144.7% 143.3% 143.3% 143.3% 143.3% 143.3% 143.3%
REBUILD CAPITAL:
UG Miles, % Rebuilt 262.4 74.0% based on numbers provided by Falon
Aerial Miles, %
Rebuilt 468.7 74.0% based on numbers provided by Falcon
Total Rebuild Costs:
Plant Rebuild
Cost/UG Mile $22,500 2,184,730 2,184,730 11,858,293
Plant Rebuild
Cost/Aerial Mile $16,500 2,861,352 2,861,352
Other Non-Plant
Rebuild Costs 17.5% 883,064 883,064
TRUNK & DISTRIBUTION/
NEW MILE
(3-Year average) $30,721 $52,100 $54,184 $56,351 $58,605 $60,950
MAKE-READY/MILE $6.74 $361.64 $20.26 $10.17 $10.58 $11.00 $11.44 $11.90
CONV & CUST EQUIP/
NEW CONVERTER $281.81 $ - $ - $855.00 $200.00 $208.00 $216.32 $224.97
CUST. CONNECT
COSTS/SUB $14.34 $12.97 $23.86 $14.50 $15.08 $15.68 $16.31 $16.96
OTHER TECHNICAL
CAPITAL/SUB $7.35 $3.90 $2.29 $12.50 $5.00 $5.20 $5.41 $5.62
OTHER CAPITAL/
SUB $3.80 $1.24 $0.87 $1.00 $1.04 $1.08 $1.12 $1.17
</TABLE>
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
MILES OF PLANT:
Beginning 769.11 776.80 784.57 792.42 800.34
Ending 776.80 784.57 792.42 800.34 808.34
Change 7.69 7.77 7.85 7.92 8.00
Average 772.96 780.69 788.49 796.38 804.34
Homes/Mile 25.9 25.9 25.9 25.9 25.9
CONVERTERS:
Beginning 17,752 18,505 19,272 20,053 20,847
Ending 18,505 19,272 20,053 20,847 21,655
Change 754 767 781 794 808
Average 18,129 18,889 19,663 20,450 21,251
Ending
Penetration 143.3% 143.3% 143.3% 143.3% 143.3%
REBUILD CAPITAL:
UG Miles, % Rebuilt
Aerial Miles, %
Rebuilt
Plant Rebuild
Cost/UG Mile
Plant Rebuild
Cost/Aerial Mile
Oher Non-Plant
Rebuild Costs
TRUNK & DISTRIBUTION/
NEW MILE
(3-Year average) $63,388 $65,923 $68,560 $71,302 $74,155
MAKE-READY/MILE $12.37 $12.87 $13.38 $13.92 $14.48
CONV & CUST EQUIP/
NEW CONVERTER $233.97 $243.33 $253.06 $263.19 $273.71
CUST. CONNECT
COSTS/SUB $17.64 $18.35 $19.08 $19.84 $20.64
OTHER TECHNICAL
CAPITAL/SUB $5.85 $6.08 $6.33 $6.58 $6.84
OTHER CAPITAL/
SUB $1.22 $1.27 $1.32 $1.37 $1.42
</TABLE>
8
<PAGE> 16
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
BURKE COUNTY, NC
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
BUDGET PROJECTED:
ACTUAL ACTUAL ACTUAL ---------- ----------
CASH FLOW PROJECTIONS 1994 1995 1996 1997 1998 1999 2000
- --------------------- --------- --------- --------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE:
Basic & Equipment
Revenue 3,851,328 3,896,819 3,994,545 4,457,585 4,667,108 5,037,928 5,529,417
Pay and Mini-Pay
Revenue 607,709 596,715 505,682 398,720 393,306 404,339 422,653
PPV Revenue 124,007 117,381 103,952 128,782 137,453 169,571 212,702
Advertising Revenue 118,635 97,750 136,363 152,752 163,038 184,372 211,995
Other Revenue 378,328 337,278 337,254 322,738 344,469 389,545 447,908
--------- --------- --------- ---------- ---------- --------- ---------
Total Revenue 5,080,007 5,045,943 5,077,796 5,460,578 5,705,375 6,185,756 6,824,675
% Growth -0.7% 0.6% 7.5% 4.5% 8.4% 10.3%
EXPENSES:
Basic Programming
Costs 436,931 497,181 533,833 620,259 655,719 741,524 852,621
Pay Programming
Costs 381,017 370,035 273,126 265,697 269,952 285,850 307,761
PPV Programming
Costs 68,247 54,746 59,250 68,254 72,850 89,873 112,732
Program Guide
Costs 22,404 20,904 21,264 10,558 11,162 11,934 12,974
Franchise & License
Fees 118,437 165,668 171,423 177,196 185,139 200,728 221,461
Bad Debt Expense 72,445 68,861 54,212 71,697 74,912 81,219 89,608
Technical Expenses 435,746 375,189 333,914 308,036 320,357 333,171 346,498
Production/LO
Expenses 18,135 186 0 - - - -
Gen. & Admin
Expenses 456,423 425,383 471,360 499,642 519,627 540,412 562,029
Marketing Expenses 111,226 78,452 69,718 83,547 87,292 94,642 104,418
Advertising Sales
Expenses 71,179 37,908 35,442 26,426 28,206 31,896 36,675
--------- --------- --------- ---------- ---------- --------- ---------
Total Expenses 2,192,190 2,094,513 2,023,542 2,131,313 2,225,216 2,411,250 2,646,776
OPERATING CASH FLOW 2,887,817 2,951,430 3,054,254 3,329,265 3,480,159 3,774,506 4,177,899
% Margin 56.8% 58.5% 60.1% 61.0% 61.0% 61.0% 61.2%
% Growth 2.2% 3.5% 9.0% 4.5% 8.5% 10.7%
CAPITAL EXPENDITURES:
Rebuild/Upgrade
Costs - - - 5,929,147 5,929,147 - -
Trunk &
Distribution Costs 250,180 242,159 202,880 415,758 400,474 420,658 441,859
Make-Ready 4,827 262,308 14,772 7,476 7,856 8,252 8,668
Fiber Costs - Plant
and Headend - 894,758 6,607 - - - -
Converters &
Customer Equipment 80,898 147,127 23,493 58,344 30,828 148,712 157,417
Customer Connect
Costs 159,918 142,876 255,602 154,248 163,067 174,346 189,533
Other Technical
Capital 81,966 42,919 24,541 132,973 54,067 57,807 62,842
Other Capital 42,395 13,663 9,329 364,638 11,246 12,024 13,071
--------- --------- --------- ---------- ---------- --------- ---------
Total Capital
Expenditures 629,184 1,745,810 537,224 7,062,584 6,596,685 821,799 873,390
NET CASH FLOW 2,258,633 1,205,620 2,517,030 (3,733,319) (3,116,526) 2,952,707 3,304,509
% Growth -16.5% -194.7% 11.9%
</TABLE>
<TABLE>
<CAPTION>
REVENUE ASSUMPTIONS: 2001 2002 2003 2004 2005 2006
- ----------------------- --------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Basic & Equipment
Revenue 6,061,936 6,638,651 7,262,960 7,938,512 8,669,220 9,459,288
Pay and Mini-Pay
Revenue 441,292 460,263 479,568 499,213 519,204 539,544
PPV Revenue 266,499 333,546 417,043 520,953 650,177 810,778
Advertising Revenue 243,479 279,340 320,163 366,606 419,415 479,430
Other Revenue 514,427 590,196 676,446 774,572 886,148 1,012,950
--------- --------- --------- ---------- ---------- ----------
Total Revenue 7,527,634 8,301,995 9,156,180 10,099,856 11,144,164 12,301,991
% Growth 10.3% 10.3% 10.3% 10.3% 10.3% 10.4%
EXPENSES:
Basic Programming
Costs 979,245 1,123,474 1,287,657 1,474,447 1,686,838 1,928,214
Pay Programming
Costs 330,974 355,558 381,586 409,134 438,283 469,116
PPV Programming
Costs 141,244 176,779 221,033 276,105 344,594 429,712
Program Guide
Costs 14,088 15,281 16,559 17,927 19,390 20,956
Franchise & License
Fees 244,272 269,400 297,118 327,740 361,628 399,200
Bad Debt Expense 98,838 109,005 120,221 132,611 146,323 161,525
Technical Expenses 360,358 374,772 389,763 405,354 421,568 438,431
Production/LO
Expenses - - - - - -
Gen. & Admin
Expenses 584,510 607,890 632,206 657,494 683,794 711,146
Marketing Expenses 115,173 127,021 140,090 154,528 170,506 188,220
Advertising Sales
Expenses 42,122 48,326 55,388 63,423 72,559 82,941
--------- --------- --------- --------- --------- ---------
Total Expenses 2,910,823 3,207,506 3,541,620 3,918,762 4,345,482 4,829,462
OPERATING CASH FLOW 4,616,811 5,094,489 5,614,560 6,181,094 6,798,682 7,472,529
% Margin 61.3% 61.4% 61.3% 61.2% 61.0% 60.7%
% Growth 10.5% 10.3% 10.2% 10.1% 10.0% 9.9%
CAPITAL EXPENDITURES:
Rebuild/Upgrade
Costs - - - - - -
Trunk &
Distribution Costs 464,129 487,521 512,092 537,901 537,011 593,488
Make-Ready 9,105 9,564 10,046 10,552 11,084 11,643
Fiber Costs - Plant
and Headend - - - - - -
Converters &
Customer Equipment 166,621 176,354 186,644 197,524 209,026 221,186
Customer Connect
Costs 205,807 223,240 241,908 261,891 283,273 306,145
Other Technical
Capital 68,238 74,019 80,208 86,834 93,923 101,507
Other Capital 14,194 15,396 16,683 18,061 19,536 21,113
--------- --------- --------- --------- --------- ---------
Total Capital
Expenditures 928,094 986,094 1,047,582 1,112,764 1,181,854 1,255,083
NET CASH FLOW 3,688,717 4,108,395 4,566,978 5,068,330 5,616.827 6,217,446
% Growth 11.6% 11.4% 11.2% 11.0% 10.8% 10.7%
</TABLE>
9
<PAGE> 17
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
BURKE COUNTY, NC
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
PV OF CASH FLOWS: 1994 1995 1996 1997 1998 1999 2000
- ----------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PROJECTED NET CASH FLOW -3,733,319 -3,116,526 2,952,707 3,304,509
Value of Assets in
Year 10 assuming
OCG multiple of 70
Discount Rate 17.5%
PV OF CASH FLOW
STREAM 17,181,984
5.6 TIMES RUNNING RATE CASH FLOW
5.2 TIMES PROJECTED CASH FLOW
$1,634 PER SUBSCRIBER
</TABLE>
<TABLE>
<CAPTION>
REVENUE ASSUMPTIONS: 2001 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PROJECTED NET CASH FLOW 3,688,717 4,108,395 4,566,978 5,068,330 5,616,827 6,217,446
Value of Assets in
Year 10 assuming
OCG multiple of 52,307,705
Discount Rate
</TABLE>
10
<PAGE> 18
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
BURKE COUNTY, NC
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
REVENUE ASSUMPTIONS: 1994 1995 1996 1997 1998 1999 2000
- -------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
HOMES PASSED:
Beginning 18,198 18,525 18,745 18,986 19,135 19,326 19,520
Ending 18,525 18,745 18,986 19,135 19,326 19,520 19,715
Change 327 220 241 149 191 193 195
% Change 1.8% 1.2% 1.7% 0.8% 1.0% 1.0% 1.0%
Average 18,362 18,635 18,866 19,061 19,231 19,423 19,617
BASIC SUBSCRIBERS:
Beginning 11,179 11,124 10,908 10,516 10,760 10,867 10,976
Ending 11,124 10,908 10,516 10,760 10,867 10,976 11,086
Change -55 -216 -392 244 108 109 110
% Change -0.5% -1.9% -4.8% 2.3% 1.0% 1.0% 1.0%
Average 11,152 11,016 10,712 10,638 10,813 10,922 11,031
Ending Penetration 60.0% 58.2% 55.4% 56.2% 56.2% 56.2% 56.2%
Monthly Basic
Rev/Sub $28.78 $29.48 $31.08 $34.92 $35.97 $37.05 $38.16
% Change 2.4% 5.4% 12.4% 3.0% 3.0% 3.0%
PAY + MINI-PAY UNITS:
Beginning 8,257 8,987 7,226 4,840 4,664 4,711 4,758
Ending 8,987 7,226 4,840 4,664 4,711 4,758 4,806
Change 730 -1,761 -2,386 -176 47 47 48
% Change 8.8% -19.6% -44.0% -3.6% 1.0% 1.0% 1.0%
Average 8,622 8,107 6,033 4,752 4,688 4,734 4,782
Ending Penetration 80.8% 66.2% 46.0% 43.4% 43.4% 43.4% 43.4%
Monthly Pay
Rev/Unit $5.87 $6.13 $6.98 $6.99 $6.99 $6.99 $6.99
% Change 4.4% 13.9% 0.1% 0.0% 0.0% 0.0%
PPV REVENUE PER SUB $0.93 $0.89 $0.81 $1.01 $1.06 $1.11 $1.17
% Change -4.2% -8.9% 24.8% 5.0% 5.0% 5.0%
ADVERTISING REVENUE
PER SUB $0.89 $0.74 $1.06 $1.20 $1.26 $1.32 $1.39
% Change -16.6% 43.5% 12.8% 5.0% 5.0% 5.0%
OTHER REVENUE PER SUB $2.83 $2.58 $2.67 $2.53 $2.65 $2.79 $2.93
% Change -9.1% 3.7% -5.4% 5.0% 5.0% 5.0%
TOTAL REVENUE PER SUB $37.96 $38.17 $39.50 $42.78 $43.97 $45.30 $46.67
% Change 0.6% 3.5% 8.3% 2.8% 3.0% 3.0%
</TABLE>
<TABLE>
<CAPTION>
REVENUE ASSUMPTIONS: 2001 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
HOMES PASSED:
Beginning 19,715 19,912 20,111 20,312 20,515 20,721
Ending 19,912 20,111 20,312 20,515 20,721 20,928
Change 197 199 201 203 205 207
% Change 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
Average 19,813 20,012 20,212 20,414 20,618 20,824
BASIC SUBSCRIBERS:
Beginning 11,086 11,197 11,308 11,422 11,536 11,651
Ending 11,197 11,308 11,422 11,536 11,651 11,768
Change 111 112 113 114 115 117
% Change 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
Average 11,141 11,252 11,365 11,479 11,593 11,709
Ending Penetration 56.2% 56.2% 56.2% 56.2% 56.2% 56.2%
Monthly Basic
Rev/Sub $39.30 $40.48 $41.70 $42.95 $44.23 $45.56
% Change 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
PAY + MINI-PAY UNITS:
Beginning 4,806 4,854 4,902 4,951 5,001 5,051
Ending 4,854 4,902 4,951 5,001 5,051 5,101
Change 48 49 49 50 50 51
% Change 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
Average 4,830 4,878 4,927 4,976 5,026 5,076
Ending Penetration 43.4% 43.4% 43.4% 43.4% 43.4% 43.4%
Monthly Pay
Rev/Unit $6.99 $6.99 $6.99 $6.99 $6.99 $6.99
% Change 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
PPV REVENUE PER SUB $1.23 $1.29 $1.35 $1.42 $1.49 $1.57
% Change 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
ADVERTISING REVENUE
PER SUB $1.45 $1.53 $1.60 $1.68 $1.77 $1.86
% Change 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
OTHER REVENUE PER SUB $3.07 $3.23 $3.39 $3.56 $3.74 $3.92
% Change 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
TOTAL REVENUE PER SUB $48.09 $49.55 $51.07 $52.64 $54.26 $55.94
% Change 3.0% 3.1% 3.1% 3.1% 3.1% 3.1%
</TABLE>
11
<PAGE> 19
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
BURKE COUNTY, NC
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
EXPENSE ASSUMPTIONS: 1994 1995 1996 1997 1998 1999 2000
- -------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
BASIC PROGRAMMING
PER SUB $3.27 $3.76 $4.15 $4.86 $5.05 $5.26 $5.47
% Change 15.2% 10.4% 17.0% 4.0% 4.0% 4.0%
PAY/MINI-PAY PROG.
PER UNIT $3.68 $3.80 $3.77 $4.66 $4.80 $4.94 $5.09
% Change 3.3% -0.8% 23.5% 3.0% 3.0% 3.0%
PPV PROGRAMMING/
PPV REVENUE 55.0% 46.6% 57.0% 53.0% 53.0% 53.0% 53.0%
PROGRAM GUIDE COST
PER SUB $0.17 $0.16 $0.17 $0.08 $0.09 $0.09 $0.09
% Change -5.5% 4.6% -50.0% 4.0% 4.0% 4.0%
FRANCHISE, ACCESS
FEES/REVENUE 2.3% 3.3% 3.4% 3.2% 3.2% 3.2% 3.2%
BAD DEBT EXPENSE/
REVENUE 1.4% 1.4% 1.1% 1.3% 1.3% 1.3% 1.3%
TECHNICAL EXP.
GROWTH -13.9% -11.0% -7.8% 4.0% 4.0% 4.0%
PRODUCTION/LO EXPENSE
GROWTH -99.0% -100.0% 4.0% 4.0% 4.0% 4.0%
GEN. & ADMIN.
EXPENSE GROWTH -6.8% 10.8% 6.0% 4.0% 4.0% 4.0%
MARKETING EXP/
REVENUE 2.2% 1.6% 1.4% 1.5% 1.5% 1.5% 1.5%
AD SALES EXP/
AD REVENUE 60.0% 38.8% 26.0% 17.3% 17.3% 17.3% 17.3%
</TABLE>
<TABLE>
<CAPTION>
EXPENSE ASSUMPTIONS: 2001 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
BASIC PROGRAMMING
PER SUB $5.68 $5.91 $6.15 $6.39 $6.65 $6.92
% Change 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
PAY/MINI-PAY PROG.
PER UNIT $5.24 $5.40 $5.56 $5.73 $5.90 $6.08
% Change 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
PPV PROGRAMMING/
PPV REVENUE 53.0% 53.0% 53.0% 53.0% 53.0% 53.0%
PROGRAM GUIDE COST
PER SUB $0.10 $0.10 $0.10 $0.11 $0.11 $0.12
% Change 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
FRANCHISE, ACCESS
FEES/REVENUE 3.2% 3.2% 3.2% 3.2% 3.2% 3.2%
BAD DEBT EXPENSE/
REVENUE 1.3% 1.3% 1.3% 1.3% 1.3% 1.3%
TECHNICAL EXP.
GROWTH 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
PRODUCTION/LO
EXPENSE GROWTH 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
GEN. & ADMIN.
EXPENSE GROWTH 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
MARKETING EXP/
REVENUE 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
AD SALES EXP/
AD REVENUE 17.3% 17.3% 17.3% 17.3% 17.3% 17.3%
</TABLE>
12
<PAGE> 20
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
BURKE COUNTY, NC
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
CAPITAL ACTUAL ACTUAL ACTUAL ------- -------
EXPENDITURES: 1994 1995 1996 1997 1998 1999 2000
- ---------------- ------ ------ ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
MILES OF PLANT:
Beginning 708.49 723.89 726.78 731.12 739.10 746.49 753.96
Ending 723.89 726.78 731.12 739.10 746.49 753.96 761.50
Change 15.40 2.89 4.34 7.98 7.39 7.46 7.54
Average 716.19 725.34 728.95 735.11 742.80 750.22 757.73
Homes/Mile 25.6 25.8 26.0 25.9 25.9 25.9 25.9
CONVERTERS:
Beginning 15,950 16,269 15,938 15,346 15,414 15,568 15,724
Ending 16,269 15,938 15,346 15,414 15,568 15,724 15,881
Change 319 (331) (592) 68 154 156 157
Average 16,110 16,104 15,642 15,380 15,491 15,646 15,803
Ending
Penetration 145.9% 144.7% 143.3% 143.3% 143.3% 143.3% 143.3%
- --------------------------------------------------------------------------------
REBUILD CAPITAL:
UG Miles,
% Rebuilt 262.4 74.0%
Aerial Miles,
% Rebuilt 468.7 74.0%
TOTAL REBUILD COSTS:
Plant Rebuild Cost
/UG Mile $ - 0 0 0
Plant Rebuild Cost
/Aerial Mile $ - 0 0 0
Other Non-Plant
Rebuild Costs 17.5% 0 0 0
- --------------------------------------------------------------------------------
TRUNK & DISTRIBUTION/
NEW MILE
(3-Year average) $30,721 $52,100 $54,184 $56,351 $58,605
MAKE-READY/MILE $ 6.74 $361.64 $ 20.26 $ 10.17 $ 10.58 $ 11.00 $ 11.44
CONV. & CUST.
EQUIP/NEW
CONVERTER $281.81 $ - $ - $855.00 $200.00 $208.00 $216.32
CUST. CONNECT
COSTS/SUB $14.34 $12.97 $23.86 $14.50 $15.08 $15.68 $16.31
OTHER TECHNICAL
CAPITAL/SUB $7.35 $3.90 $2.29 $12.50 $5.00 $5.20 $5.41
OTHER CAPITAL/
SUB $3.80 $1.24 $0.87 $1.00 $1.04 $1.08 $1.12
</TABLE>
<TABLE>
<CAPTION>
CAPITAL
EXPENDITURES: 2001 2002 2003 2004 2005 2006
- ---------------- ------ ------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
MILES OF PLANT:
Beginning 761.50 769.11 776.80 784.57 792.42 800.34
Ending 769.11 776.80 784.57 792.42 800.34 808.34
Change 7.61 7.69 7.77 7.85 7.92 8.00
Average 765.30 772.96 780.69 788.49 796.38 804.34
Homes/Mile 25.9 25.9 25.9 25.9 25.9 25.9
CONVERTERS:
Beginning 15,881 16,040 16,201 16,363 16,526 16,691
Ending 16,040 16,201 16,363 16,526 16,691 16,858
Change 159 160 162 164 165 167
Average 15,961 16,120 16,282 16,444 16,609 16,775
Ending
Penetration 143.3% 143.3% 143.3% 143.3% 143.3% 143.3%
- ------------------------------------------------------------------------
REBUILD CAPITAL:
UG Miles,
% Rebuilt
Aerial Miles,
% Rebuilt
TOTAL REBUILD COSTS:
0
Plant Rebuild Cost
/UG Mile
Plant Rebuild Cost
/Aerial Mile
TRUNK & DISTRIBUTION/
NEW MILE
(3-Year average) $60,950 $63,388 $65,923 $68,560 $71,302 $74,155
MAKE-READY/MILE $11.90 $12.37 $12.87 $13.38 $13.92 $14.48
CONV. & CUST.
EQUIP/NEW
CONVERTER $224.97 $233.97 $243.33 $253.06 $263.19 $273.71
CUST. CONNECT
COSTS/SUB $16.96 $17.64 $18.35 $19.08 $19.84 $20.64
OTHER TECHNICAL
CAPITAL/SUB $5.62 $5.85 $6.08 $6.33 $6.58 $6.84
OTHER CAPITAL/
SUB $1.17 $1.22 $1.27 $1.32 $1.37 $1.42
</TABLE>
13
<PAGE> 21
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
BURKE COUNTY, NC
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
BUDGET PROJECTED:
ACTUAL ACTUAL ACTUAL --------- ---------
CASH FLOW PROJECTIONS: 1994 1995 1996 1997 1998 1999 2000
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE:
Basic & Equipment Revenue 3,851,328 3,896,819 3,994,545 4,457,585 4,667,108 4,855,193 5,050,857
Pay and Mini-Pay Revenue 607,709 596,715 505,682 398,720 393,306 397,239 401,212
PPV Revenue 124,007 117,381 103,952 128,782 137,453 145,769 154,588
Advertising Revenue 118,635 97,750 136,363 152,752 163,038 172,901 183,362
Other Revenue 378,328 337,278 337,254 322,738 344,469 365,310 387,411
--------- --------- --------- --------- --------- --------- ---------
Total Revenue 5,080,007 5,045,943 5,077,796 5,460,578 5,705,375 5,936,413 6,177,430
% Growth -0.7% 0.6% 7.5% 4.5% 4.0% 4.1%
EXPENSES:
Basic Programming Costs 436,931 497,181 533,833 620,259 655,719 688,767 723,481
Pay Programming Costs 381,017 370,035 273,126 265,697 269,952 280,831 292,149
PPV Programming Costs 68,247 54,746 59,250 68,254 72,850 77,258 81,932
Program Guide Costs 22,404 20,904 21,264 10,558 11,162 11,725 12,315
Franchise & License Fees 118,437 165,668 171,423 177,196 185,139 192,637 200,458
Bad Debt Expense 72,445 68,861 54,212 71,697 74,912 77,945 81,110
Technical Expenses 435,746 375,189 333,914 308,036 320,357 333,171 346,498
Production/LO Expenses 18,135 186 0 - - - -
Gen. & Admin. Expenses 456,423 425,383 471,360 499,642 519,627 540,412 562,029
Marketing Expenses 111,226 78,452 69,718 83,547 87,292 90,827 94,515
Advertising Sales Expenses 71,179 37,908 35,442 26,426 28,206 29,912 31,722
--------- --------- --------- --------- --------- --------- ---------
Total Expenses 2,192,190 2,094,513 2,023,542 2,131,313 2,225,216 2,323,485 2,426,207
OPERATING CASH FLOW 2,887,817 2,951,430 3,054,254 3,329,265 3,480,159 3,612,928 3,751,223
% Margin 56.8% 58.5% 60.1% 61.0% 61.0% 60.9% 60.7%
% Growth 2.2% 3.5% 9.0% 4.5% 3.8% 3.8%
CAPITAL EXPENDITURES:
Rebuild/Upgrade Costs - - - - - - -
Trunk & Distribution Costs 250,180 242,159 202,880 415,758 400,474 420,658 441,859
Make-Ready 4,827 262,308 14,772 7,476 7,856 8,252 8,668
Fiber Costs-Plant & Headend - 894,758 6,607 - - - -
Converters & Customer Equipment 89,898 147,127 23,493 58,344 30,828 32,382 34,014
Customer Connect Costs 159,918 142,876 255,602 154,248 163,067 171,285 179,918
Other Technical Capital 81,966 42,919 24,541 132,973 54,067 56,792 59,654
Other Capital 42,395 13,663 9,329 364,638 11,246 11,813 12,408
--------- --------- --------- --------- --------- --------- ---------
Total Capital Expenditures 629,184 1,745,810 537,224 1,133,437 667,538 701,182 736,522
NET CASH FLOW 2,258,633 1,205,620 2,517,030 2,195,828 2,812,620 2,911,745 3,014,701
% Growth 28.1% 3.5% 3.5%
</TABLE>
<TABLE>
<CAPTION>
CASH FLOW PROJECTIONS: 2001 2002 2003 2004 2005 2006
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Basic & Equipment Revenue 5,254,407 5,466,159 5,686,445 5,915,609 6,154,008 6,402,015
Pay and Mini-Pay Revenue 405,224 409,276 413,369 417,503 421,678 425,894
PPV Revenue 163,941 173,859 184,378 195,533 207,363 219,908
Advertising Revenue 194,455 206,220 218,696 231,927 245,959 260,839
Other Revenue 410,849 435,706 462,066 490,021 519,667 551,107
--------- --------- --------- --------- --------- ---------
Total Revenue 6,428,876 6,691,220 6,964,954 7,250,593 7,548,674 7,859,763
% Growth 4.1% 4.1% 4.1% 4.1% 4.1% 4.1%
EXPENSES:
Basic Programming Costs 759,944 798,245 838,477 880,736 925,125 971,752
Pay Programming Costs 303,922 316,170 328,912 342,167 355,956 370,301
PPV Programming Costs 86,889 92,146 97,720 103,632 109,902 116,551
Program Guide Costs 12,936 13,588 14,273 14,992 15,748 16,542
Franchise & License Fees 208,617 217,130 226,013 235,282 244,954 255,049
Bad Debt Expense 84,411 87,856 91,450 95,200 99,114 103,199
Technical Expenses 360,358 374,772 389,763 405,354 421,568 438,431
Production/LO Expenses - - - - - -
Gen. & Admin. Expenses 584,510 607,890 632,206 657,494 683,794 711,146
Marketing Expenses 98,362 102,376 106,564 110,934 115,495 120,254
Advertising Sales Expenses 33,641 35,676 37,834 40,123 42,551 45,125
--------- --------- --------- --------- --------- ---------
Total Expenses 2,533,590 2,645,850 2,763,212 2,885,916 3,014,208 3,148,350
OPERATING CASH FLOW 3,895,286 4,045,371 4,201,742 4,364,677 4,534,466 4,711,413
% Margin 60.6% 60.5% 60.3% 60.2% 60.1% 59.9%
% Growth 3.8% 3.9% 3.9% 3.9% 3.9% 3.9%
CAPITAL EXPENDITURES:
Rebuild/Upgrade Costs - - - - - -
Trunk & Distribution Costs 464,129 487,521 512,092 537,901 565,011 593,488
Make-Ready 9,105 9,564 10,046 10,552 11,084 11,643
Fiber Costs-Plant & Headend - - - - - -
Converters & Customer Equipment 35,729 37,529 39,421 41,408 43,495 45,687
Customer Connect Costs 188,986 198,511 208,516 219,025 230,064 241,659
Other Technical Capital 62,661 65,819 69,136 72,621 76,281 80,126
Other Capital 13,033 13,690 14,380 15,105 15,866 16,666
--------- --------- --------- --------- --------- ---------
Total Capital Expenditures 773,643 812,634 853,591 896,612 941,801 989,268
NET CASH FLOW 3,121,643 3,232,736 3,348,151 3,468,065 3,592,665 3,722,145
% Growth 3.5% 3.6% 3.6% 3.6% 3.6% 3.6%
</TABLE>
14
<PAGE> 22
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
BURKE COUNTY, NC
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL --------- ---------
PV OF CASH FLOWS 1994 1995 1996 1997 1998 1999 2000
- ---------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PROJECTED NET
CASH FLOW 2,195,828 2,812,620 2,911,745 3,014,701
Value of Assets
in Year 10
assuming OCF
multiple of 7.0
Discount Rate 17.5%
PV OF CASH
FLOW STREAM 20,100,147
6.6 TIMES RUNNING RATE CASH FLOW
6.0 TIMES PROJECTED CASH FLOW
$1,911 PER SUBSCRIBER
</TABLE>
<TABLE>
<CAPTION>
PV OF CASH FLOWS 2001 2002 2003 2004 2005 2006
- ---------------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
PROJECTED NET
CASH FLOW 3,121,643 3,232,736 3,348,151 3,468,065 3,592,665 3,722,145
Value of Assets
in Year 10
assuming OCF
multiple of 32,979,893
Discount Rate
</TABLE>
15
<PAGE> 23
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
CASH FLOW MULTIPLE AND ADJUSTED CASH FLOW MULTIPLE APPROACHES
As discussed previously, the Cable System generated revenue of
$5,077,796 and operating cash flow of $3,054,254 in 1996, for an actual
operating cash flow margin of 60.1%.
The current operating cash flow multiples indicated by the market
range from 6 to 11 times, based on transactions which have been announced
in recent months. In order to determine the respective appropriate cash
flow multiples to apply to the cash flow and to the adjusted cash flow of
the Cable System, the following factors must be considered:
o The Cable System has experienced a decline in basic subscribers due
to competition in overbuilt areas as well as the technical inability
of the system to add channels and new services commensurate with
recent rate increases.
o The cable plant needs to be rebuilt, as the 330 MHz plant has no
room to add the programming needed to keep up with competition.
Partnership management has estimated that a rebuild would cost in
excess of $11,000,000.
o The current rates of the Cable System are relatively high given the
level of service provided in each system, and the presence of direct
competition in the overbuilt portion of the service area.
o The operating cash flow margin approximates 60 percent, a very high
level by industry standards, leaving little perceived potential for
improvement by a buyer. A typical buyer would likely discount this
margin in determining the potential cash flow that such a buyer
would be able to consistently generate from this Cable System.
Based on these factors, as well as on CEA's recent experience in the cable
system transaction market, it is CEA's opinion that the following cash
flow multiples are appropriate in valuing the Cable System:
<TABLE>
<S> <C>
Operating Cash Flow Multiple 6.5
Adjusted Operating Cash Flow Multiple 7.0
</TABLE>
Applying these multiples respectively to the actual operating cash
flow and to the adjusted operating cash flow of the Cable System yields
the following calculations:
<TABLE>
<S> <C>
Cash Flow Multiple Approach:
---------------------------
Actual Operating Cash Flow $ 3,054,254
Operating Cash Flow Multiple x 6.5
------------
Value Indication $ 19,852,651
</TABLE>
16
<PAGE> 24
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
<TABLE>
<S> <C>
Adjusted Cash Flow Multiple Approach:
Actual Revenue $ 5,077,796
Adjusted Margin x 50%
-----------
Adjusted Operating Cash Flow $ 2,538,898
Operating Cash Flow Multiple x 7.0
-----------
Value Indication $17,772,286
</TABLE>
SUBSCRIBER MULTIPLE APPROACH
Based on CEA's recent experience in the cable system transaction
market, it is CEA's opinion that a buyer would expect the typical cable
system to generate just over $33.00 per month in total revenue, operate at
a 50% cash flow margin, and be valued at approximately 9 times this
operating cash flow. Based on these parameters, a buyer would be willing
to pay approximately $1,800 per subscriber for this typical cable system.
Applying this per-subscriber value to the subject Cable System results in
the following calculation:
<TABLE>
<S> <C>
Basic Subscribers 10,516
Per Subscriber Multiple x $ 1,800
-----------
Value Indication $18,928,800
</TABLE>
REBUILD CASH FLOW MULTIPLE APPROACH
Based on CEA's recent experience in the cable system transaction
market, it is CEA's opinion that a typical fully-rebuilt, state-of-the-art
cable system could reasonably be expected to sell, on average, for
approximately 10.5 times operating cash flow. For cable systems in need of
rebuild, a buyer would likely be willing to pay approximately 10.5 times
operating cash flow less the cost of the rebuild. Therefore, to estimate
the value of the Cable System using the Rebuild Cash Flow Multiple
Approach, CEA multiplied 1996 operating cash flow by 10.5 and subtracted
the estimated cost to rebuild the Cable System, as follows:
<TABLE>
<S> <C>
1996 Operating Cash Flow $ 3,054,254
Rebuild Operating Cash Flow Multiple x 10.5
------------
Value of System After Rebuild 32,069,667
less: Cost of Rebuild (11,449,000)
------------
Value Indication $ 20,620,667
</TABLE>
17
<PAGE> 25
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
VALUE CONCLUSIONS -- BURKE COUNTY, NC
CEA used two variations of the discounted cash flow approach, and four
variations of the market approach to determine six indications of the value of
the Cable System. These value indications are summarized as follows:
<TABLE>
<S> <C>
Rebuild DCF Approach $ 17,181,984
No Rebuild DCF Approach $ 20,100,147
Cash Flow Multiple Approach $ 19,852,651
Adjusted Cash Flow Multiple Approach $ 17,772,286
Subscriber Multiple Approach $ 18,982,800
Rebuild Cash Flow Multiple Approach $ 20,620,667
VALUE CONCLUSION $ 19,000,000
</TABLE>
Therefore, based on this analysis, it is CEA's opinion that, as of
December 31, 1996, the fair market value of the Burke County, NC Cable System is
$19,000,000.
18
<PAGE> 26
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
REDMOND, OR
SYSTEM OVERVIEW -- REDMOND, OR
SYSTEM DESCRIPTION
The Partnership owns the Cable System that serves Redmond, Oregon,
as well as portions of Deschutes County, Oregon. As of December 31, 1996,
the Cable System passed 7,252 homes with 170 miles of plant, and served
3,516 basic subscribers from one headend. Relevant subscriber statistics
as of December 31, 1996 are displayed in the following table.
<TABLE>
<CAPTION>
Homes Basic Basic Pay Pay
As of 12/31/96 Passed Subscribers Penetration Units Penetration
-------------- ------ ----------- ----------- ----- -----------
<S> <C> <C> <C> <C> <C>
Redmond, OR 7,252 3,516 48.5% 777 22.1%
</TABLE>
The Cable System operates at 270 MHz, 32-channel capacity, and
offers 32 channels of programming.
HOME AND SUBSCRIBER GROWTH
During the past few years, the Cable System has experienced strong
home growth, but basic subscribers have declined due to competition from
an MMDS operator in nearby Bend, Oregon. The Company's home and subscriber
growth history is displayed below.
<TABLE>
<CAPTION>
1994 1995 1996 CAGR 94-96
---- ---- ---- ----------
<S> <C> <C> <C> <C>
Homes Passed 6,487 6,681 7,252 5.7%
Basic Subscribers 4,062 3,833 3,516 -7.0%
</TABLE>
FINANCIAL SUMMARY
For the year ended December 31, 1996, the Redmond, OR Cable System
generated total revenue of $1,561,601 and operating cash flow of $928,970,
resulting in a 59.5% operating cash flow margin.
19
<PAGE> 27
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
VALUATION -- REDMOND, OR
DISCOUNTED CASH FLOW APPROACHES
Financial projections, including all assumptions regarding
operations and future capital expenditures, relating to the Rebuild DCF
Approach and to the No Rebuild DCF Approach are displayed on the following
ten pages. These projections were prepared by CEA based on certain
information provided by the Partnership, including, but not limited to,
the Partnership's 1997 budget for the Cable System.
The discount rate used in this analysis was derived using a weighted
average cost of capital. Based on CEA's recent experience in the cable
system transaction market, it is CEA's opinion that equity investors in
cable systems would likely require a 25 percent return in order to justify
the equity investment. Additionally, based on CEA's recent experience in
raising debt financing for cable operators, a lender would likely charge
an interest rate of approximately 10 percent and would likely be willing
to lend up to 50 percent of asset value at that rate. Thus, the likely
weighted average cost of capital for the subject Cable System can be
calculated as follows:
<TABLE>
<S> <C> <C> <C>
50 percent debt at a rate of 10% = .50 x 10% = 5.0%
50 percent equity at a rate of 25% = .50 x 25% = 12.5%
Total Cost of Capital = 17.5%
</TABLE>
The terminal value of the Cable System was calculated as the price
at which the cable assets might sell at the end of the ten-year projection
period, based on a multiple of the operating cash flow of the Cable System
at that time. The cash flow multiple used reflects the expected growth of
cash flow in the Cable System after year ten, as well as the return on
debt and equity capital that would likely be required by investors at that
time given the expected risk of the investment at that time.
Based on the calculations displayed on the following pages, the
discounted cash flow approaches indicate fair market values for the Cable
System as follows:
<TABLE>
<S> <C>
Rebuild DCF Approach $6,132,648
No Rebuild DCF Approach $6,218,514
</TABLE>
20
<PAGE> 28
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
REDMOND, OR
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
REVENUE ASSUMPTIONS: 1994 1995 1996 1997 1998 1999 2000
- -------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
HOMES PASSED:
Beginning 6,171 6,487 6,681 7,252 9,562 9,896 10,243
Ending 6,487 6,681 7,252 9,562 9,896 10,243 10,601
Change 316 194 571 2,310 335 346 358
% Change 5.1% 3.0% 11.4% 31.9% 3.5% 3.5% 3.5%
Average 6,329 6,584 6,967 8,407 9,729 10,070 10,422
BASIC SUBSCRIBERS:
Beginning 4,046 4,062 3,833 3,516 4,614 4,775 5,147
Ending 4,062 3,833 3,516 4,614 4,775 5,147 5,539
Change 16 -229 -317 1,098 161 372 392
% Change 0.4% -5.6% -11.0% 31.2% 3.5% 7.8% 7.6%
Average 4,054 3,948 3,675 4,065 4,694 4,961 5,343
Ending Penetration 62.6% 57.4% 48.5% 48.3% 48.3% 50.3% 52.3%
Monthly Basic Rev/Sub $28.26 $28.33 $30.52 $30.64 $31.56 $33.14 $34.79
% Change 0.3% 7.7% 0.4% 3.0% 5.0% 5.0%
PAY + MINI-PAY UNITS:
Beginning 1,130 1,336 1,043 777 946 979 1,055
Ending 1,336 1,043 777 946 979 1,055 1,136
Change 206 -293 -266 169 33 76 80
% Change 18.2% -21.9% -34.0% 21.7% 3.5% 7.8% 7.6%
Average 1,233 1,190 910 861 962 1,017 1,095
Ending Penetration 32.9% 27.2% 22.1% 20.5% 20.5% 20.5% 20.5%
Monthly Pay Rev/Unit $6.42 $7.15 $6.82 $5.60 $5.60 $5.60 $5.60
% Change 11.3% -4.5% -18.0% 0.0% 0.0% 0.0%
PPV REVENUE PER SUB $ - $ - $ - $ - $ - $ - $ -
% Change 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
ADVERTISING REVENUE
PER SUB $1.62 $1.47 $1.52 $1.41 $1.48 $1.63 $1.79
% Change -9.6% 4.1% -7.5% 5.0% 10.0% 10.0%
OTHER REVENUE PER SUB $1.38 $1.38 $1.76 $1.34 $1.41 $1.55 $1.71
% Change -0.4% 27.5% -23.5% 5.0% 10.0% 10.0%
TOTAL REVENUE PER SUB $33.22 $33.29 $35.42 $34.58 $35.60 $37.47 $39.44
% Change 0.2% 6.4% -2.4% 2.9% 5.2% 5.3%
</TABLE>
<TABLE>
<CAPTION>
REVENUE ASSUMPTIONS: 2001 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
HOMES PASSED:
Beginning 10,601 10,972 11,356 11,754 12,165 12,591
Ending 10,972 11,356 11,754 12,165 12,591 13,032
Change 371 384 397 411 426 441
% Change 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%
Average 10,787 11,164 11,555 11,960 12,378 12,811
BASIC SUBSCRIBERS:
Beginning 5,539 5,952 6,388 6,847 7,330 7,838
Ending 5,952 6,388 6,847 7,330 7,838 8,373
Change 413 435 459 483 508 535
% Change 7.5% 7.3% 7.2% 7.1% 6.9% 6.8%
Average 5,746 6,170 6,617 7,088 7,584 8,105
Ending Penetration 54.3% 56.3% 58.3% 60.3% 62.3% 64.3%
Monthly Basic Rev/Sub $36.53 $38.36 $40.28 $42.29 $44.41 $46.63
% Change 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
PAY + MINI-PAY UNITS:
Beginning 1,136 1,220 1,310 1,404 1,503 1,607
Ending 1,220 1,310 1,404 1,503 1,607 1,716
Change 85 89 94 99 104 110
% Change 7.5% 7.3% 7.2% 7.1% 6.9% 6.8%
Average 1,178 1,265 1,357 1,453 1,555 1,662
Ending Penetration 20.5% 20.5% 20.5% 20.5% 20.5% 20.5%
Monthly Pay Rev/Unit $5.60 $5.60 $5.60 $5.60 $5.60 $5.60
% Change 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
PPV REVENUE PER SUB $ - $ - $ - $ - $ - $ -
% Change 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
ADVERTISING REVENUE
PER SUB $1.97 $2.17 $2.39 $2.62 $2.89 $3.17
% Change 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
OTHER REVENUE PER SUB $1.88 $2.07 $2.27 $2.50 $2.75 $3.03
% Change 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
TOTAL REVENUE PER SUB $41.53 $43.74 $46.09 $48.57 $51.19 $53.98
% Change 5.3% 5.3% 5.4% 5.4% 5.4% 5.4%
</TABLE>
21
<PAGE> 29
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
REDMOND, OR
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
EXPENSE ASSUMPTIONS: 1994 1995 1996 1997 1998 1999 2000
- -------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
BASIC PROGRAMMING
PER SUB $2.98 $3.51 $3.34 $4.34 $4.51 $4.96 $5.46
% Change 17.7% -4.9% 30.0% 4.0% 10.0% 10.0%
PAY/MINI-PAY PROG.
PER UNIT $4.88 $5.52 $4.99 $4.69 $4.83 $4.98 $5.13
% Change 13.2% -9.5% -6.0% 3.0% 3.0% 3.0%
PPV PROGRAMMING/
PPV REVENUE 0.0% 0.0% 0.0% 55.0% 55.0% 55.0% 55.0%
PROGRAM GUIDE COST
PER SUB $0.08 $0.10 $0.15 $0.04 $0.04 $0.04 $0.04
% Change 20.5% 50.8% -75.0% 4.0% 4.0% 4.0%
FRANCHISE, ACCESS FEES/
REVENUE 2.7% 2.6% 2.7% 2.7% 2.7% 2.7% 2.7%
BAD DEBT EXPENSE/REVENUE 1.3% 1.4% 1.3% 1.5% 1.5% 1.5% 1.5%
TECHNICAL EXP. GROWTH 19.2% -42.1% 87.0% 4.0% 4.0% 4.0%
PRODUCTION/LO EXPENSE
GROWTH #DIV/01 162.3% 17.5% 4.0% 4.0% 4.0%
GEN. & ADMIN. EXPENSE
GROWTH -14.5% -1.6% 16.5% 4.0% 4.0% 4.0%
MARKETING EXP./REVENUE 2.5% 2.3% 3.2% 2.2% 2.2% 2.2% 2.2%
AD SALES EXP./AD REVENUE 45.9% 48.9% 77.7% 66.0% 66.0% 66.0% 66.0%
</TABLE>
<TABLE>
<CAPTION>
EXPENSE ASSUMPTIONS: 2001 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
BASIC PROGRAMMING
PER SUB $6.00 $6.61 $7.27 $7.99 $8.79 $9.67
% Change 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
PAY/MINI-PAY PROG.
PER UNIT $5.28 $5.44 $5.61 $5.77 $5.95 $6.12
% Change 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
PPV PROGRAMMING/
PPV REVENUE 55.0% 55.0% 55.0% 55.0% 55.0% 55.0%
PROGRAM GUIDE COST
PER SUB $0.04 $0.05 $0.05 $0.05 $0.05 $0.05
% Change 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
FRANCHISE, ACCESS FEES/
REVENUE 2.7% 2.7% 2.7% 2.7% 2.7% 2.7%
BAD DEBT EXPENSE/REVENUE 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
TECHNICAL EXP. GROWTH 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
PRODUCTION/LO EXPENSE
GROWTH 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
GEN. & ADMIN. EXPENSE
GROWTH 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
MARKETING EXP./REVENUE 2.2% 2.2% 2.2% 2.2% 2.2% 2.2%
AD SALES EXP./AD REVENUE 66.0% 66.0% 66.0% 66.0% 66.0% 66.0%
</TABLE>
22
<PAGE> 30
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
REDMOND, OR
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
CAPITAL EXPENDITURES: 1994 1995 1996 1997 1998 1999 2000
- -------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
MILES OF PLANT:
Beginning 136.43 136.43 162.00 170.00 198.90 205.86 213.07
Ending 136.43 162.00 170.00 198.90 205.86 213.07 220.52
Change - 25.57 8.00 28.90 6.96 7.21 7.46
Average 136.43 149.22 166.00 184.45 202.38 209.46 216.80
Homes/Mile 47.5 41.2 42.7 48.1 48.1 48.1 48.1
CONVERTERS:
Beginning 1,792 1,479 1,238 1,050 1,384 1,433 1,544
Ending 1,479 1,238 1,050 1,384 1,433 1,544 1,662
Change (313) (241) (188) 334 48 112 118
Average 1,636 1,359 1,144 1,217 1,408 1,488 1,603
Ending Penetration 36.5% 31.4% 28.6% 30.0% 30.0% 30.0% 30.0%
REBUILD CAPITAL:
UG Miles 54.00
Aerial Miles 116.00
Cost/UG Mile $22,500
Cost/Aerial Mile $15,500
Other Rebuild Costs $527,275
TRUNK & DISTRIBUTION/
NEW MILE $25,056 $27,500 $28,600 $29,744 $30,934
(3-YEAR AVERAGE)
MAKE-READY/MILE $15.51 $ - $201.66 $38.00 $39.52 $41.10 $42.74
CONV. & CUST. EQUIP./
NEW CONVERTER $160.00 $166.00 $173.06 $179.98
CUST. CONNECT COSTS/SUB $12.44 $18.14 $29.16 $18.00 $18.72 $19.47 $20.25
OTHER TECHNICAL CAPITAL/
SUB $6.24 $4.65 $16.82 $16.00 $16.64 $17.31 $18.00
OTHER CAPITAL/SUB $5.07 $2.34 $6.57 $1.50 $1.56 $1.62 $1.69
</TABLE>
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES: 2001 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
MILES OF PLANT:
Beginning 220.52 228.24 236.23 244.50 253.06 253.06
Ending 228.24 236.23 244.50 253.06 261.91 271.08
Change 7.72 7.99 8.27 8.56 8.86 9.17
Average 224.38 232.24 240.36 248.78 257.48 266.50
Homes/Mile 48.1 48.1 48.1 48.1 48.1 48.1
CONVERTERS:
Beginning 1,662 1,786 1,916 2,054 2,199 2,351
Ending 1,786 1,916 2,054 2,199 2,351 2,512
Change 124 131 138 145 153 160
Average 1,724 1,851 1,985 2,126 2,275 2,432
Ending Penetration 30.0% 30.0% 30.0% 30.0% 30.0% 30.0%
TRUNK & DISTRIBUTION/
NEW MILE $32,171 $33,458 $34,796 $36,188 $37,636 $39,141
(3-YEAR AVERAGE)
MAKE-READY/MILE $44.45 $46.23 $48.08 $50.01 $52.01 $54.09
CONV. & CUST. EQUIP./
NEW CONVERTER $187.18 $194.66 $202.45 $210.55 $218.97 $227.73
CUST. CONNECT COSTS/SUB $21.06 $21.90 $22.78 $23.69 $24.63 $25.62
OTHER TECHNICAL CAPITAL/
SUB $18.72 $19.47 $20.25 $21.05 $21.90 $22.77
OTHER CAPITAL/SUB $1.75 $1.82 $1.90 $1.97 $2.05 $2.13
</TABLE>
23
<PAGE> 31
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
REDMOND, OR
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
CASH FLOW PROJECTIONS: 1994 1995 1996 1997 1998 1999 2000
- ---------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE:
Basic & Equipment Revenue 1,374,689 1,342,223 1,345,692 1,494,575 1,777,821 1,972,778 2,230,949
Pay and Mini-Pay Revenue 94,969 102,010 74,521 57,843 64,621 68,293 73,553
PPV Revenue - - - - - - -
Advertising Revenue 78,866 69,408 67,240 68,803 83,432 96,989 114,905
Other Revenue 67,456 63,419 74,148 65,577 79,519 92,441 109,516
--------- --------- --------- --------- --------- --------- ---------
Total Revenue 1,615,980 1,577,060 1,561,601 1,686,797 2,005,393 2,230,501 2,528,923
% Growth -2.4% -1.0% 8.0% 18.9% 11.2% 13.4%
EXPENSES:
Basic Programming Costs 145,095 166,294 147,138 211,596 254,140 295,438 350,011
Pay Programming Costs 72,138 78,767 54,532 48,522 55,834 60,777 67,421
PPV Programming Cost (2,151) - - - - - -
Program Guide Costs 4,115 4,829 6,777 1,874 2,251 2,474 2,771
Franchise & License Fees 43,970 41,783 41,980 45,346 53,910 59,962 67,984
Bad Debt Expense 20,372 21,437 20,654 24,459 29,078 32,342 36,669
Technical Expense 96,960 115,544 66,871 125,049 130,051 135,253 140,663
Production/LO Expenses - 1,509 3,958 4,651 4,837 5,030 5,231
Gen. & Admin. Expenses 224,524 192,025 189,009 220,195 229,003 238,163 247,690
Marketing Expenses 39,764 35,730 49,495 36,266 43,116 47,956 54,372
Advertising Sales Expenses 36,201 33,944 52,217 45,410 55,065 64,013 75,837
--------- --------- --------- --------- --------- --------- ---------
Total Expenses 680,988 691,862 632,631 763,367 857,285 941,408 1,048,650
OPERATING CASH FLOW 934,992 885,198 928,970 923,431 1,148,108 1,289,093 1,480,273
% Margin 57.9% 56.1% 59.5% 54.7% 57.3% 57.8% 58.5%
% Growth -5.3% 4.9% -0.6% 24.3% 12.3% 14.8%
CAPITAL EXPENDITURES:
Rebuild/Upgrade Costs - - - 1,170,138 1,770,138 - -
Trunk & Distribution Costs 107,285 109,527 624,303 794,750 199,099 214,310 230,683
Make-Ready 2,116 - 33,475 7,009 7,998 8,609 9,267
Fiber Costs-Plant and Headend - - - - - - -
Converters & Customer
Equipment 10,261 10,125 5,630 53,450 8,061 19,312 21,175
Customer Connect Costs 50,448 71,594 107,162 73,166 87,877 96,585 108,185
Other Technical Capital 25,306 18,344 61,803 65,036 78,113 85,853 96,164
Other Capital 20,558 9,233 24,135 6,097 7,323 8,049 9,015
--------- --------- --------- --------- --------- --------- ---------
Total Capital Expenditures 215,974 218,823 856,508 2,769,647 2,158,608 432,718 474,489
NET CASH FLOW 719,018 666,375 72,462 (1,846,216) (1,010,501) 856,375 1,005,784
% Growth -45.3% -184.7% 17.4%
</TABLE>
<TABLE>
<CAPTION>
CASH FLOW PROJECTIONS: 2001 2002 2003 2004 2005 2006
- ---------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Basic & Equipment Revenue 2,519,066 2,840,382 3,198,489 3,597,353 4,041,348 4,535,305
Pay and Mini-Pay Revenue 79,097 84,939 91,093 97,574 104,397 111,578
PPV Revenue - - - - - -
Advertising Revenue 135,923 160,558 189,410 223,175 262,659 308,799
Other Revenue 129,549 153,029 180,528 212,709 250,342 294,318
--------- --------- --------- --------- --------- ---------
Total Revenue 2,863,634 3,238,908 3,659,521 4,130,811 4,658,746 5,250,000
% Growth 13.2% 13.1% 13.0% 12.9% 12.8% 12.7%
EXPENSES:
Basic Programming Costs 414,033 489,075 576,961 679,811 800,083 940,629
Pay Programming Costs 74,678 82,600 91,242 100,666 110,936 122,124
PPV Programming Cost - - - - - -
Program Guide Costs 3,099 3,461 3,861 4,301 4,786 5,319
Franchise & License Fees 76,982 87,070 98,378 111,047 125,240 141,134
Bad Debt Expense 41,523 46,964 53,063 59,897 67,552 76,125
Technical Expense 146,289 152,141 158,227 164,556 171,138 177,983
Production/LO Expenses 5,441 5,658 5,885 6,120 6,365 6,619
Gen. & Admin. Expenses 257,598 267,901 278,618 289,762 301,353 313,407
Marketing Expenses 61,568 69,637 78,680 88,812 100,163 112,875
Advertising Sales Expenses 89,709 105,968 125,011 147,295 173,355 203,807
--------- --------- --------- --------- --------- ---------
Total Expenses 1,170,920 1,310,476 1,469,924 1,652,267 1,860,969 2,100,023
OPERATING CASH FLOW 1,692,714 1,928,432 2,189,597 2,478,544 2,797,777 3,149,976
% Margin 59.1% 59.5% 59.8% 60.0% 60.1% 60.0%
% Growth 14.4% 13.9% 13.5% 13.2% 12.9% 12.6%
CAPITAL EXPENDITURES:
Rebuild/Upgrade Costs - - - - - -
Trunk & Distribution Costs 248,308 267,278 287,698 309,678 333,338 358,805
Make-Ready 9,975 10,737 11,557 12,440 13,391 14,414
Fiber Costs-Plant and Headend - - - - - -
Converters & Customer
Equipment 23,209 25,431 27,857 30,505 33,394 36,548
Customer Connect Costs 120,993 135,126 150,714 167,894 186,819 207,657
Other Technical Capital 107,549 120,112 133,968 149,239 166,062 184,584
Other Capital 10,083 11,261 12,559 13,991 15,568 17,305
--------- --------- --------- --------- --------- ---------
Total Capital Expenditures 520,116 569,945 624,353 683,747 748,572 819,312
NET CASH FLOW 1,172,598 1,358,486 1,565,244 1,794,796 2,049,204 2,330,664
% Growth 16.6% 15.9% 15.2% 14.7% 14.2% 13.7%
</TABLE>
24
<PAGE> 32
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
REDMOND, OR
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
PV OF CASH FLOWS: 1994 1995 1996 1997 1998 1999 2000
- ----------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
PROJECTED NET CASH FLOW -1,846,216 -1,010,501 856,375 1,005,784
Value of Assets in Year 10
assuming OCF multiple of 7.0
Discount Rate 17.5%
------------------------------------------------------------
PV OF CASH FLOW STREAM 6,132,648
6.6 times trailing cash flow
6.6 times projected cash flow
$1,744 per subscriber
</TABLE>
<TABLE>
<CAPTION>
CASH FLOW PROJECTIONS: 2001 2002 2003 2004 2005 2006
- ---------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PROJECTED NET CASH FLOW 1,172,598 1,358,486 1,565,244 1,794,796 2,049,204 2,330,664
Value of Assets in Year 10
assuming OCF multiple of 22,049,835
Discount Rate
</TABLE>
25
<PAGE> 33
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
REDMOND, OR
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
REVENUE ASSUMPTIONS: 1994 1995 1996 1997 1998 1999 2000
- -------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
HOMES PASSED:
Beginning 6,171 6,487 6,681 7,252 9,562 9,896 10,243
Ending 6,487 6,681 7,252 9,562 9,896 10,243 10,601
Change 316 194 571 2,310 335 346 358
% Change 5.1% 3.0% 11.4% 31.9% 3.5% 3.5% 3.5%
Average 6,329 6,584 6,967 8,407 9,729 10,070 10,422
BASIC SUBSCRIBERS:
Beginning 4,046 4,062 3,833 3,516 4,614 4,775 4,942
Ending 4,062 3,833 3,516 4,614 4,775 4,942 5,115
Change 16 -229 -317 1,098 161 167 173
% Change 0.4% -5.6% -11.0% 31.2% 3.5% 3.5% 3.5%
Average 4,054 3,948 3,675 4,065 4,694 4,859 5,029
Ending Penetration 62.6% 57.4% 48.5% 48.3% 48.3% 48.3% 48.3%
Monthly Basic
Rev/Sub $28.26 $28.33 $30.52 $30.64 $31.56 $32.51 $33.48
% Change 0.3% 7.7% 0.4% 3.0% 3.0% 3.0%
PAY + MINI-PAY UNITS:
Beginning 1,130 1,336 1,043 777 946 979 1,013
Ending 1,336 1,043 777 946 979 1,013 1,049
Change 206 -293 -266 169 33 34 35
% Change 18.2% -21.9% -34.0% 21.7% 3.5% 3.5% 3.5%
Average 1,233 1,190 910 861 962 996 1,031
Ending Penetration 32.9% 27.2% 22.1% 20.5% 20.5% 20.5% 20.5%
Monthly Pay
Rev/Unit $6.42 $7.15 $6.82 $5.60 $5.60 $5.60 $5.60
% Change 11.3% -4.5% -18.0% 0.0% 0.0% 0.0%
PPV REVENUE PER SUB $- $- $- $- $- $- $-
% Change 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
ADVERTISING REVENUE
PER SUB $1.62 $1.47 $1.52 $1.41 $1.48 $1.56 $1.63
% Change -9.6% 4.1% -7.5% 5.0% 5.0% 5.0%
OTHER REVENUE PER SUB $1.38 $1.38 $1.76 $1.34 $1.41 $1.48 $1.56
% Change -0.4% 27.5% -23.5% 5.0% 5.0% 5.0%
TOTAL REVENUE PER SUB $33.22 $33.29 $35.42 $34.58 $35.60 $36.69 $37.82
% Change 0.2% 6.4% -2.4% 2.9% 3.1% 3.1%
</TABLE>
<TABLE>
<CAPTION>
REVENUE ASSUMPTIONS: 2001 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
HOMES PASSED:
Beginning 10,601 10,972 11,356 11,754 12,165 12,591
Ending 10,972 11,356 11,754 12,165 12,591 13,032
Change 371 384 397 411 426 441
% Change 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%
Average 10,787 11,164 11,555 11,960 12,378 12,811
BASIC SUBSCRIBERS:
Beginning 5,115 5,294 5,479 5,671 5,870 6,075
Ending 5,294 5,479 5,671 5,870 6,075 6,288
Change 179 185 192 198 205 213
% Change 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%
Average 5,205 5,387 5,575 5,770 5,972 6,181
Ending Penetration 48.3% 48.3% 48.3% 48.3% 48.3% 48.3%
Monthly Basic
Rev/Sub $34.49 $35.52 $36.59 $37.68 $38.81 $39.98
% Change 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
PAY + MINI-PAY UNITS:
Beginning 1,049 1,085 1,123 1,163 1,203 1,245
Ending 1,085 1,123 1,163 1,203 1,245 1,289
Change 37 38 39 41 42 44
% Change 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%
Average 1,067 1,104 1,143 1,183 1,224 1,267
Ending Penetration 20.5% 20.5% 20.5% 20.5% 20.5% 20.5%
Monthly Pay
Rev/Unit $5.60 $5.60 $5.60 $5.60 $5.60 $5.60
% Change 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
PPV REVENUE PER SUB $- $- $- $- $- $-
% Change 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
ADVERTISING REVENUE
PER SUB $1.71 $1.80 $1.89 $1.98 $2.08 $2.19
% Change 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
OTHER REVENUE PER SUB $1.63 $1.72 $1.80 $1.89 $1.99 $2.09
% Change 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
TOTAL REVENUE PER SUB $38.98 $40.18 $41.43 $42.71 $44.03 $45.40
% Change 3.1% 3.1% 3.1% 3.1% 3.1% 3.1%
</TABLE>
26
<PAGE> 34
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
REDMOND, OR
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
EXPENSE ASSUMPTIONS: 1994 1995 1996 1997 1998 1999 2000
- -------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
BASIC PROGRAMMING
PER SUB $2.98 $3.51 $3.34 $4.34 $4.51 $4.69 $4.88
% Change 17.7% -4.9% 30.0% 4.0% 4.0% 4.0%
PAY/MINI-PAY PROG.
PER UNIT $4.88 $5.52 $4.99 $4.69 $4.83 $4.98 $5.13
% Change 13.2% -9.5% -6.0% 3.0% 3.0% 3.0%
PPV PROGRAMMING/
PPV REVENUE 0.0% 0.0% 0.0% 55.0% 55.0% 55.0% 55.0%
PROGRAM GUIDE COST
PER SUB $0.08 $0.10 $0.15 $0.04 $0.04 $0.04 $0.04
% Change 20.5% 50.8% -75.0% 4.0% 4.0% 4.0%
FRANCHISE, ACCESS
FEES/REVENUE 2.7% 2.6% 2.7% 2.7% 2.7% 2.7% 2.7%
BAD DEBT EXPENSE/
REVENUE 1.3% 1.4% 1.3% 1.5% 1.5% 1.5% 1.5%
TECHNICAL EXP.
GROWTH 19.2% -42.1% 87.0% 4.0% 4.0% 4.0%
PRODUCTION/LO
EXPENSE GROWTH #DIV/01 162.3% 17.5% 4.0% 4.0% 4.0%
GEN & ADMIN
EXPENSE GROWTH -14.5% -1.6% 16.5% 4.0% 4.0% 4.0%
MARKETING EXP/
REVENUE 2.5% 2.3% 3.2% 2.2% 2.2% 2.2% 2.2%
AD SALES EXP/
AD REVENUE 45.9% 48.9% 77.7% 66.0% 66.0% 66.0% 66.0%
</TABLE>
<TABLE>
<CAPTION>
EXPENSE ASSUMPTIONS: 2001 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
BASIC PROGRAMMING
PER SUB $5.07 $5.28 $5.49 $5.71 $5.94 $6.17
% Change 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
PAY/MINI-PAY PROG.
PER UNIT $5.28 $5.44 $5.61 $5.77 $5.95 $6.12
% Change 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
PPV PROGRAMMING/
PPV REVENUE 55.0% 55.0% 55.0% 55.0% 55.0% 55.0%
PROGRAM GUIDE COST
PER SUB $0.04 $0.05 $0.05 $0.05 $0.05 $0.05
% Change 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
FRANCHISE, ACCESS
FEES/REVENUE 2.7% 2.7% 2.7% 2.7% 2.7% 2.7%
BAD DEBT EXPENSE/
REVENUE 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
TECHNICAL EXP.
GROWTH 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
PRODUCTION/LO
EXPENSE GROWTH 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
GEN & ADMIN
EXPENSE GROWTH 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
MARKETING EXP/
REVENUE 2.2% 2.2% 2.2% 2.2% 2.2% 2.2%
AD SALES EXP/
AD REVENUE 66.0% 66.0% 66.0% 66.0% 66.0% 66.0%
</TABLE>
27
<PAGE> 35
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
REDMOND, OR
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
CAPITAL EXPENDITURES: 1994 1995 1996 1997 1998 1999 2000
- --------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
MILES OF PLANT:
Beginning 136.43 136.43 162.00 170.00 198.90 205.86 213.07
Ending 136.43 162.00 170.00 198.90 205.86 213.07 220.52
Change - 25.57 8.00 28.90 6.96 7.21 7.46
Average 136.43 149.22 166.00 184.45 202.38 209.46 216.80
Homes/Mile 47.5 41.2 42.7 48.1 48.1 48.1 48.1
CONVERTERS:
Beginning 1,792 1,479 1,238 1,050 1,384 1,433 1,483
Ending 1,479 1,238 1,050 1,384 1,433 1,483 1,535
Change (313) (241) (188) 334 48 50 52
Average 1,636 1,359 1,144 1,217 1,408 1,458 1,509
Ending Penetration 36.5% 31.4% 28.6% 30.0% 30.0% 30.0% 30.0%
REBUILD CAPITAL:
UG Miles 54.00
Aerial Miles 116.00
Cost/UG Mile $ -
Cost/Aerial Mile $ -
Other Rebuild Costs $ -
TRUNK & DISTRIBUTION/
NEW MILE $25,056 $27,500 $28,600 $29,744 $30,934
(3-Year average)
MAKE-READY/MILE $15.51 $ - $201.66 $38.00 $39.52 $41.10 $42.74
CONV & CUST EQUIP/
NEW CONVERTER $160.00 $166.40 $173.06 $179.98
CUST. CONNECT
COSTS/SUB $12.44 $18.14 $29.16 $18.00 $18.72 $19.47 $20.25
OTHER TECHNICAL
CAPITAL/SUB $6.24 $4.65 $16.82 $16.00 $16.64 $17.31 $18.00
OTHER CAPITAL/SUB $5.07 $2.34 $6.57 $1.50 $1.56 $1.62 $1.69
</TABLE>
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES: 2001 2002 2003 2004 2005 2006
- --------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
MILES OF PLANT:
Beginning 220.52 228.24 236.23 244.50 253.06 261.91
Ending 228.24 236.23 244.50 253.06 261.91 271.08
Change 7.72 7.99 8.27 8.56 8.86 9.17
Average 224.38 232.24 240.36 248.78 257.48 266.50
Homes/Mile 48.1 48.1 48.1 48.1 48.1 48.1
CONVERTERS:
Beginning 1,535 1,588 1,644 1,701 1,761 1,823
Ending 1,588 1,644 1,701 1,761 1,823 1,886
Change 54 56 58 60 62 64
Average 1,561 1,616 1,673 1,731 1,792 1,854
Ending Penetration 30.0% 30.0% 30.0% 30.0% 30.0% 30.0%
TRUNK & DISTRIBUTION/
NEW MILE $32,171 $33,458 $34,796 $36,188 $37,636 $39,141
(3-Year average)
MAKE-READY/MILE $44.45 $46.23 $48.08 $50.01 $52.01 $54.09
CONV & CUST EQUIP/
NEW CONVERTER $187.18 $194.66 $202.45 $210.55 $218.97 $227.73
CUST. CONNECT
COSTS/SUB $21.06 $21.90 $22.78 $23.69 $24.63 $25.62
OTHER TECHNICAL
CAPITAL/SUB $18.72 $19.47 $20.25 $21.05 $21.90 $22.77
OTHER CAPITAL/SUB $1.75 $1.82 $1.90 $1.97 $2.05 $2.13
</TABLE>
28
<PAGE> 36
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
REDMOND, OR
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL --------- ---------
CASH FLOW PROJECTIONS: 1994 1995 1996 1997 1998 1999 2000
- ---------------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE:
Basic & Equipment
Revenue 1,374,689 1,342,223 1,345,692 1,494,575 1,777,821 1,895,246 2,020,427
Pay and Mini-Pay
Revenue 94,969 102,010 74,521 57,843 64,621 66,883 69,224
PPV Revenue - - - - - - -
Advertising Revenue 78,866 69,408 67,240 68,803 83,432 90,669 98,535
Other Revenue 67,456 63,419 74,148 65,577 79,519 86,417 93,914
---------------------------------------------------------------------------
Total Revenue 1,615,980 1,577,060 1,561,601 1,686,797 2,005,393 2,139,215 2,282,100
% Growth -2.4% -1.0% 8.0% 18.9% 6.7% 6.7%
EXPENSES:
Basic Programming
Costs 145,095 166,294 147,138 211,596 254,140 273,556 294,456
Pay Programming
Costs 72,138 78,767 54,532 48,522 55,834 59,522 63,453
PPV Programming
Cost (2,151) - - - - - -
Program Guide
Costs 4,115 4,829 6,777 1,874 2,251 2,423 2,608
Franchise & License
Fees 43,970 41,783 41,980 45,346 53,910 57,508 61,349
Bad Debt Expense 20,372 21,437 20,654 24,459 29,078 31,019 33,090
Technical Expenses 96,960 115,544 66,871 125,049 130,051 135,253 140,663
Production/LO
Expenses - 1,509 3,958 4,651 4,837 5,030 5,231
Gen. & Admin
Expenses 224,524 192,025 189,009 220,195 229,003 238,163 247,690
Marketing Expenses 39,764 35,730 49,495 36,266 43,116 45,993 49,065
Advertising Sales
Expenses 36,201 33,944 52,217 45,410 55,065 59,842 65,033
---------------------------------------------------------------------------
Total Expenses 680,988 691,862 632,631 763,367 857,285 908,309 962,639
OPERATING CASH FLOW 934,992 885,198 928,970 923,431 1,148,108 1,230,907 1,319,461
% Margin 57.9% 56.1% 59.5% 54.7% 57.3% 57.5% 57.8%
% Growth -5.3% 4.9% -0.6% 24.3% 7.2% 7.2%
CAPITAL EXPENDITURES:
Rebuild/Upgrade Costs - - - - - - -
Trunk & Distribution
Costs 107,285 109,527 624,303 794,750 199,099 214,310 230,683
Make-Ready 2,116 - 33,475 7,009 7,998 8,609 9,267
Fiber Costs - Plant
and Headend - - - - - - -
Converters and
Customer Equipment 10,261 10,125 5,630 53,450 8,061 8,677 9,340
Customer Connect
Costs 50,448 71,594 107,162 73,166 87,877 94,591 101,818
Other Technical
Capital 25,306 18,344 61,803 65,036 78,113 84,081 90,505
Other Capital 20,558 9,233 24,135 6,097 7,323 7,883 8,485
---------------------------------------------------------------------------
Total Capital
Expenditures 215,974 218,823 856,508 999,509 388,471 418,150 450,097
NET CASH FLOW 719,018 666,375 72,462 (76,078) 759,637 812,757 869,364
% Growth -1098.5% 7.0% 7.0%
</TABLE>
<TABLE>
<CAPTION>
CASH FLOW PROJECTIONS: 2001 2002 2003 2004 2005 2006
- ---------------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Basic & Equipment
Revenue 2,153,876 2,296,140 2,447,800 2,609,477 2,781,833 2,965,573
Pay and Mini-Pay
Revenue 71,647 74,154 76,750 79,436 82,216 85,094
PPV Revenue - - - - - -
Advertising Revenue 107,083 116,372 126,467 137,438 149,361 162,318
Other Revenue 102,061 110,915 120,537 130,993 142,357 154,706
----------------------------------------------------------------
Total Revenue 2,434,667 2,597,581 2,771,553 2,957,344 3,155,767 3,367,691
% Growth 6.7% 6.7% 6.7% 6.7% 6.7% 6.7%
EXPENSES:
Basic Programming
Costs 316,952 341,168 367,233 395,289 425,489 457,997
Pay Programming
Costs 67,644 72,112 76,875 81,953 87,366 93,136
PPV Programming
Cost - - - - - -
Program Guide
Costs 2,807 3,022 3,253 3,501 3,769 4,057
Franchise & License
Fees 65,450 69,830 74,507 79,501 84,835 90,533
Bad Debt Expense 35,303 37,665 40,188 42,881 45,759 48,832
Technical Expenses 146,289 152,141 158,227 164,556 171,138 177,983
Production/LO
Expenses 5,441 5,658 5,885 6,120 6,365 6,619
Gen. & Admin
Expenses 257,598 267,901 278,168 289,762 301,353 313,407
Marketing Expenses 52,345 55,848 59,588 63,583 67,849 72,405
Advertising Sales
Expenses 70,675 76,806 83,468 90,709 98,578 107,130
----------------------------------------------------------------
Total Expenses 1,020,505 1,082,151 1,147,841 1,217,856 1,292,501 1,372,099
OPERATING CASH FLOW 1,414,162 1,515,430 1,623,713 1,739,488 1,863,266 1,995,592
% Margin 58.1% 58.3% 58.6% 58.8% 59.0% 59.3%
% Growth 7.2% 7.2% 7.1% 7.1% 7.1% 7.1%
CAPITAL EXPENDITURES:
Rebuild/Upgrade Costs - - - - - -
Trunk & Distribution
Costs 248,308 267,278 287,698 309,678 333,338 358,805
Make-Ready 9,975 10,737 11,557 12,440 13,391 14,414
Fiber Costs - Plant
and Headend - - - - - -
Converters and
Customer Equipment 10,053 10,821 11,648 12,538 13,496 14,527
Customer Connect
Costs 109,596 117,970 126,983 136,684 147,127 158,367
Other Technical
Capital 97,419 104,862 112,873 121,497 130,779 140,771
Other Capital 9,133 9,831 10,582 11,390 12,261 13,197
----------------------------------------------------------------
Total Capital
Expenditures 484,484 521,499 561,341 604,228 650,391 700,080
NET CASH FLOW 929,678 993,932 1,062,372 1,135,261 1,212,876 1,295,512
% Growth 6.9% 6.9% 6.9% 6.9% 6.8% 6.8%
</TABLE>
29
<PAGE> 37
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
REDMOND, OR
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL --------- ---------
PV OF CASH FLOWS 1994 1995 1996 1997 1998 1999 2000
- ---------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PROJECTED NET
CASH FLOW -76,078 759,637 812,757 869,364
Value of Assets
in Year 10
assuming OCF
multiple of 7.0
Discount Rate 17.5%
PV OF CASH
FLOW STREAM 6,218,514
6.7 TIMES TRAILING CASH FLOW
6.7 TIMES PROJECTED CASH FLOW
$1,769 PER SUBSCRIBER
</TABLE>
<TABLE>
<CAPTION>
PV OF CASH FLOWS 2001 2002 2003 2004 2005 2006
- ---------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PROJECTED NET
CASH FLOW 929,678 993,932 1,062,372 1,135,261 1,212,876 1,295,512
Value of Assets
in Year 10
assuming OCF
multiple of 13,969,147
Discount Rate
</TABLE>
30
<PAGE> 38
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
CASH FLOW MULTIPLE AND ADJUSTED CASH FLOW MULTIPLE APPROACHES
As discussed previously, the Cable System generated revenue of
$1,561,601 and operating cash flow of $928,970 in 1996, for an actual
operating cash flow margin of 59.5%.
The current operating cash flow multiples indicated by the market
range from 6 to 11 times, based on transactions which have been announced
in recent months. In order to determine the respective appropriate cash
flow multiples to apply to the cash flow and to the adjusted cash flow of
the Cable System, the following factors must be considered:
o The Cable System has experienced a decline in basic subscribers due
to competition with MMDS as well as the technical inability of the
system to add channels and new services commensurate with recent
rate increases. However, home growth in the system has been strong.
o The cable plant needs to be rebuilt, as the 270 MHz plant has no
room to add the programming needed to keep up with competition.
o The current rates of the Cable System are relatively high given the
level of service provided in each system, and the presence of
competition.
o The operating cash flow margin approximates 60 percent, a very high
level by industry standards, leaving little perceived potential for
improvement by a buyer. A typical buyer would likely discount this
margin in determining the potential cash flow that such a buyer
would be able to consistently generate from this Cable System.
Based on these factors, as well as on CEA's recent experience in the cable
system transaction market, it is CEA's opinion that the following cash
flow multiples are appropriate in valuing the Cable System:
<TABLE>
<S> <C>
Operating Cash Flow Multiple 7.0
Adjusted Operating Cash Flow Multiple 8.0
</TABLE>
Applying these multiples respectively to the actual operating cash
flow and to the adjusted operating cash flow of the Cable System yields
the following calculations:
<TABLE>
<S> <C>
Cash Flow Multiple Approach:
---------------------------
Actual Operating Cash Flow $ 928,970
Operating Cash Flow Multiple x 7.0
----------
Value Indication $6,502,790
</TABLE>
31
<PAGE> 39
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
<TABLE>
<S> <C>
Adjusted Cash Flow Multiple Approach:
Actual Revenue $ 1,561,601
Adjusted Margin x 50%
------------
Adjusted Operating Cash Flow $ 780,801
Operating Cash Flow Multiple x 8.0
------------
Value Indication $ 6,246,404
</TABLE>
SUBSCRIBER MULTIPLE APPROACH
Based on CEA's recent experience in the cable system transaction
market, it is CEA's opinion that a buyer would expect the typical cable
system to generate just over $33.00 per month in total revenue, operate at
a 50% cash flow margin, and be valued at approximately 9 times this
operating cash flow. Based on these parameters, a buyer would be willing
to pay approximately $1,800 per subscriber for this typical cable system.
Applying this per-subscriber value to the subject Cable System results in
the following calculation:
<TABLE>
<S> <C>
Basic Subscribers 3,516
Per Subscriber Multiple x $ 1,800
--------------
Value Indication $ 6,328,800
</TABLE>
REBUILD CASH FLOW MULTIPLE APPROACH
Based on CEA's recent experience in the cable system transaction
market, it is CEA's opinion that a typical fully-rebuilt, state-of-the-art
cable system could reasonably be expected to sell, on average, for
approximately 10.5 times operating cash flow. For cable systems in need of
rebuild, a buyer would likely be willing to pay approximately 10.5 times
operating cash flow less the cost of the rebuild. Therefore, to estimate
the value of the Cable System using the Rebuild Cash Flow Multiple
Approach, CEA multiplied 1996 operating cash flow by 10.5 and subtracted
the estimated cost to rebuild the Cable System, as follows:
<TABLE>
<S> <C>
1996 Operating Cash Flow $ 928,970
Rebuild Operating Cash Flow Multiple x 10.5
-----------
Value of System After Rebuild 9,754,185
less: Estimated Cost of Rebuild (3,676,575)
-----------
Value Indication $ 6,077,610
</TABLE>
32
<PAGE> 40
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
VALUE CONCLUSIONS -- REDMOND, OR
CEA used two variations of the discounted cash flow approach, and four
variations of the market approach to determine six indications of the value of
the Cable System. These value indications are summarized as follows:
<TABLE>
<S> <C>
Rebuild DCF Approach $ 6,132,648
No Rebuild DCF Approach $ 6,218,514
Cash Flow Multiple Approach $ 6,502,790
Adjusted Cash Flow Multiple Approach $ 6,246,404
Subscriber Multiple Approach $ 6,328,800
Rebuild Cash Flow Multiple Approach $ 6,077,610
VALUE CONCLUSION $ 6,200,000
</TABLE>
Therefore, based on this analysis, it is CEA's opinion that, as of
December 31, 1996, the fair market value of the Redmond, Oregon Cable System is
$6,200,000.
33
<PAGE> 41
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
CALIFORNIA CITY, CA
SYSTEM OVERVIEW -- CALIFORNIA CITY, CA
SYSTEM DESCRIPTION
The Partnership owns the Cable System that serves the town of
California City, California. As of December 31, 1996, the Cable System
passed nearly 2,858 homes with 90 miles of plant, and served 1,922 basic
subscribers from one headend. Relevant subscriber statistics as of
December 31, 1996 are displayed in the following table.
<TABLE>
<CAPTION>
Homes Basic Basic Pay Pay
As of 12/31/96 Passed Subscribers Penetration Units Penetration
-------------- ------ ----------- ----------- ----- -----------
<S> <C> <C> <C> <C> <C>
California City, CA 2,858 1,922 67.2% 839 43.7%
</TABLE>
The Cable System operates at 330 MHz, 41-channel capacity, and
offers 41 channels of programming. The California City area does not have
its own dedicated headend and is served from an adjacent cable system in
North Edwards, California and managed jointly with that system.
HOME AND SUBSCRIBER GROWTH
During the past few years, the Cable System has experienced steady
home growth, while basic subscribers have declined. The Company's home and
subscriber growth history is displayed below.
<TABLE>
<CAPTION>
1994 1995 1996 CAGR 94-96
---- ---- ---- ----------
<S> <C> <C> <C> <C>
Homes Passed 2,707 2,858 2,858 2.8%
Basic Subscribers 2,075 2,097 1,922 -3.8%
</TABLE>
FINANCIAL SUMMARY
For the year ended December 31, 1996, the California City, CA Cable
System generated total revenue of $753,252 and operating cash flow of
$434,967, resulting in a 57.7% operating cash flow margin.
34
<PAGE> 42
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
VALUATION -- CALIFORNIA CITY, CA
DISCOUNTED CASH FLOW APPROACHES
Financial projections, including all assumptions regarding
operations and future capital expenditures, relating to the Rebuild DCF
Approach and to the No Rebuild DCF Approach are displayed on the following
ten pages. These projections were prepared by CEA based on certain
information provided by the Partnership, including, but not limited to,
the Partnership's 1997 budget for the Cable System.
The discount rate used in this analysis was derived using a weighted
average cost of capital. Based on CEA's recent experience in the cable
system transaction market, it is CEA's opinion that equity investors in
cable systems would likely require a 25 percent return in order to justify
the equity investment. Additionally, based on CEA's recent experience in
raising debt financing for cable operators, a lender would likely charge
an interest rate of approximately 10 percent and would likely be willing
to lend up to 50 percent of asset value at that rate. Thus, the likely
weighted average cost of capital for the subject Cable System can be
calculated as follows:
<TABLE>
<S> <C> <C> <C>
50 percent debt at a rate of 10% = .50 x 10% = 5.0%
50 percent equity at a rate of 25% = .50 x 25% = 12.5%
Total Cost of Capital = 17.5%
</TABLE>
The terminal value of the Cable System was calculated as the price
at which the cable assets might sell at the end of the ten-year projection
period, based on a multiple of the operating cash flow of the Cable System
at that time. The cash flow multiple used reflects the expected growth of
cash flow in the Cable System after year ten, as well as the return on
debt and equity capital that would likely be required by investors at that
time given the expected risk of the investment at that time.
Based on the calculations displayed on the following pages, the
discounted cash flow approaches indicate fair market values for the Cable
System as follows:
<TABLE>
<S> <C>
Rebuild DCF Approach $2,237,514
No Rebuild DCF Approach $2,900,933
</TABLE>
35
<PAGE> 43
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
CALIFORNIA CITY, CALIFORNIA
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
REVENUE ASSUMPTIONS: 1994 1995 1996 1997 1998 1999 2000
- -------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
HOMES PASSED:
Beginning 2,500 2,707 2,858 2,858 2,938 3,056 3,178
Ending 2,707 2,858 2,858 2,938 3,056 3,178 3,305
Change 207 151 0 80 118 122 127
% Change 8.3% 5.6% 0.0% 2.8% 4.0% 4.0% 4.0%
Average 2,604 2,783 2,858 2,898 2,997 3,117 3,241
BASIC SUBSCRIBERS:
Beginning 1,933 2,075 2,097 1,922 1,974 2,069 2,215
Ending 2,075 2,097 1,922 1,974 2,069 2,215 2,370
Change 142 22 -175 52 94 146 155
% Change 7.3% 1.1% -11.1% 2.7% 4.8% 7.1% 7.0%
Average 2,004 2,086 2,010 1,948 2,021 2,142 2,292
Ending Penetration 76.7% 73.4% 67.2% 67.2% 67.7% 69.7% 71.7%
Monthly Basic Rev/
Sub $24.94 $24.48 $25.29 $26.87 $27.94 $29.34 $30.81
% Change -1.8% 3.3% 6.3% 4.0% 5.0% 5.0%
PAY + MINI-PAY UNITS:
Beginning 952 1,288 1,180 839 862 903 967
Ending 1,288 1,180 839 862 903 967 1,034
Change 336 -108 -341 23 41 64 68
% Change 35.3% -8.4% -38.5% 2.7% 4.8% 7.1% 7.0%
Average 1,120 1,234 1,010 850 882 935 1,001
Ending Penetration 62.1% 56.3% 43.7% 43.7% 43.7% 43.7% 43.7%
Monthly Pay Rev/
Unit $7.14 $7.28 $7.80 $7.64 $7.64 $7.64 $7.64
% Change 2.0% 7.1% -2.0% 0.0% 0.0% 0.0%
PPV REVENUE PER SUB $- $- $- $- $- $- $-
% Change 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
ADVERTISING REVENUE
PER SUB $- $- $- $- $- $- $-
% Change 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
OTHER REVENUE PER SUB $1.79 $2.21 $2.12 $1.98 $2.08 $2.49 $2.99
% Change 23.6% -4.1% -6.8% 5.0% 20.0% 20.0%
TOTAL REVENUE PER SUB $30.78 $31.01 $31.24 $32.18 $33.36 $35.17 $37.14
% Change 0.8% 0.7% 3.0% 3.6% 5.4% 5.6%
</TABLE>
<TABLE>
<CAPTION>
REVENUE ASSUMPTIONS: 2001 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
HOMES PASSED:
Beginning 3,305 3,437 3,575 3,718 3,866 4,021
Ending 3,437 3,575 3,718 3,866 4,021 4,182
Change 132 137 143 149 155 161
% Change 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Average 3,371 3,506 3,646 3,792 3,944 4,101
BASIC SUBSCRIBERS:
Beginning 2,370 2,533 2,706 2,889 3,081 3,285
Ending 2,533 2,706 2,889 3,081 3,285 3,500
Change 164 173 183 193 204 215
% Change 6.9% 6.8% 6.7% 6.7% 6.6% 6.5%
Average 2,451 2,620 2,797 2,985 3,183 3,393
Ending Penetration 73.7% 75.7% 77.7% 79.7% 81.7% 83.7%
Monthly Basic Rev/
Sub $32.35 $33.97 $35.66 $37.45 $39.32 $41.29
% Change 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
PAY + MINI-PAY UNITS:
Beginning 1,034 1,106 1,181 1,261 1,345 1,434
Ending 1,106 1,181 1,261 1,345 1,434 1,528
Change 71 75 80 84 89 94
% Change 6.9% 6.8% 6.7% 6.7% 6.6% 6.5%
Average 1,070 1,143 1,221 1,303 1,390 1,481
Ending Penetration 43.7% 43.7% 43.7% 43.7% 43.7% 43.7%
Monthly Pay Rev/
Unit $7.64 $7.64 $7.64 $7.64 $7.64 $7.64
% Change 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
PPV REVENUE PER SUB $- $- $- $- $- $-
% Change 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
ADVERTISING REVENUE
PER SUB $- $- $- $- $- $-
% Change 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
OTHER REVENUE PER SUB $3.59 $4.31 $5.17 $6.20 $7.45 $8.93
% Change 20.0% 20.0% 20.0% 20.0% 20.0% 20.0%
TOTAL REVENUE PER SUB $39.28 $41.61 $44.17 $46.99 $50.10 $53.56
% Change 5.8% 5.9% 6.2% 6.4% 6.6% 6.9%
</TABLE>
36
<PAGE> 44
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
CALIFORNIA CITY, CALIFORNIA
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
EXPENSE ASSUMPTIONS: 1994 1995 1996 1997 1998 1999 2000
- -------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
BASIC PROGRAMMING
PER SUB $4.16 $4.40 $4.02 $5.05 $5.25 $5.78 $6.35
% Change 5.6% -8.5% 25.5% 4.0% 10.0% 10.0%
PAY/MIN-PAY PROG.
PER UNIT $4.54 $4.34 $3.85 $5.89 $6.06 $6.24 $6.43
% Change -4.4% -11.3% 52.8% 3.0% 3.0% 3.0%
PPV PROGRAMMING/PPV
REVENUE 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
PROGRAM GUIDE COST
PER SUB $0.11 $0.11 $0.09 $0.02 $0.02 $0.02 $0.03
% Change 1.6% -17.6% -75.0% 4.0% 4.0% 4.0%
FRANCHISE, ACCESS FEES/
REVENUE 2.5% 2.3% 0.7% 0.7% 0.7% 0.7% 0.7%
BAD DEBT EXPENSE/
REVENUE 0.9% 1.4% 0.3% 1.5% 1.5% 1.5% 1.5%
TECHNICAL EXP. GROWTH 36.8% 0.3% -27.5% 4.0% 4.0% 4.0%
PRODUCTION/LO EXPENSE
GROWTH 0.0% 0.0% -100.0% 0.0% 0.0% 0.0%
GEN & ADMIN EXPENSE
GROWTH -17.5% 17.4% -0.1% 4.0% 4.0% 4.0%
MARKETING EXP/REVENUE 2.1% 1.5% 0.8% 2.2% 2.2% 2.2% 2.2%
AD SALES EXP/AD
REVENUE 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
</TABLE>
<TABLE>
<CAPTION>
EXPENSE ASSUMPTIONS: 2001 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
BASIC PROGRAMMING
PER SUB $6.99 $7.69 $8.46 $9.30 $10.23 $11.25
% Change 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
PAY/MINI-PAY PROG.
PER UNIT $6.62 $6.82 $7.03 $7.24 $7.46 $7.68
% Change 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
PPV PROGRAMMING/PPV
REVENUE 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
PROGRAM GUIDE COST
PER SUB $0.03 $0.03 $0.03 $0.03 $0.03 $0.03
% Change 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
FRANCHISE ACCESS FEES/
REVENUE 0.7% 0.7% 0.7% 0.7% 0.7% 0.7%
BAD DEBT EXPENSE/
REVENUE 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
TECHNICAL EXP. GROWTH 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
PRODUCTION/LO EXPENSE
GROWTH 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
GEN & ADMIN EXPENSE
GROWTH 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
MARKETING EXP/REVENUE 2.2% 2.2% 2.2% 2.2% 2.2% 2.2%
AD SALES EXP/AD
REVENUE 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
</TABLE>
37
<PAGE> 45
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
CALIFORNIA CITY, CALIFORNIA
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
CAPITAL EXPENDITURES: 1994 1995 1996 1997 1998 1999 2000
- -------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
MILES OF PLANT:
Beginning 59.57 85.21 90.12 90.12 92.10 95.78 99.62
Ending 85.21 90.12 90.12 92.10 95.78 99.62 103.60
Change 25.64 4.91 - 1.98 3.68 3.83 3.98
Average 72.39 87.67 90.12 91.11 93.94 97.70 101.61
Homes/Mile 31.8 31.7 31.7 31.9 31.9 31.9 31.9
CONVERTERS:
Beginning 1,160 1,011 1,007 931 958 1,003 1,074
Ending 1,011 1,007 931 958 1,003 1,074 1,149
Change (149) (4) (76) 27 46 71 75
Average 1,086 1,009 969 944 980 1,039 1,112
Ending Penetration 50.4% 48.3% 46.3% 48.5% 48.5% 48.5% 48.5%
REBUILD CAPITAL:
UG Miles 11.1
Aerial Miles 79.0
Cost/UG Mile $22,500
Cost/Aerial Mile $16,500
Other Rebuild Costs $271,877
TRUNK & DISTRIBUTION/
NEW MILE
(3 Year average) $14,059 $28,000 $29,120 $30,285 $31,496
MAKE-READY/MILE $73.31 $104.69 $- $22.00 $22.88 $23.80 $24.75
CONV & CUST EQUIP/
NEW CONVERTER $- $- $- $509.00 $529.36 $550.53 $572.56
CUST. CONNECT COSTS/
SUB $48.79 $30.69 $20.72 $16.50 $17.16 $17.85 $18.56
OTHER TECHNICAL
CAPITAL/SUB $1.89 $- $1.47 $22.75 $2.00 $2.08 $2.16
OTHER CAPITAL/SUB $0.35 $2.01 $0.17 $0.90 $0.94 $0.97 $1.01
</TABLE>
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES: 2001 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
MILES OF PLANT:
Beginning 103.60 107.74 112.05 116.54 121.20 126.05
Ending 107.74 112.05 116.54 121.20 126.05 131.09
Change 4.14 4.31 4.48 4.66 4.85 5.04
Average 105.67 109.90 114.29 118.87 123.62 128.57
Homes/Mile 31.9 31.9 31.9 31.9 31.9 31.9
CONVERTERS:
Beginning 1,149 1,229 1,312 1,401 1,494 1,593
Ending 1,229 1,312 1,401 1,494 1,593 1,698
Change 79 84 89 94 99 104
Average 1,189 1,270 1,357 1,448 1,544 1,645
Ending Penetration 48.5% 48.5% 48.5% 48.5% 48.5% 48.5%
TRUNK & DISTRIBUTION/
NEW MILE
(3 Year average) $32,756 $34,066 $35,429 $36,846 $38,320 $39,853
MAKE-READY/MILE $25.74 $26.77 $27.84 $28.95 $30.11 $31.31
CONV & CUST EQUIP/
NEW CONVERTER $595.46 $619.28 $644.05 $669.81 $696.60 $724.47
CUST. CONNECT COSTS/
SUB $19.30 $20.07 $20.88 $21.71 $22.58 $23.48
OTHER TECHNICAL
CAPITAL/SUB $2.25 $2.34 $2.43 $2.53 $2.63 $2.74
OTHER CAPITAL/SUB $1.05 $1.09 $1.14 $1.18 $1.23 $1.28
</TABLE>
38
<PAGE> 46
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
CALIFORNIA CITY, CALIFORNIA
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
CASH FLOW PROJECTIONS: 1994 1995 1996 1997 1998 1999 2000
- --------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE:
Basic & Equipment
Revenue 599,671 612,815 609,818 628,159 677,866 754,108 847,452
Pay and Mini-Pay
Revenue 95,913 107,771 94,460 77,984 80,918 85,733 91,757
PPV Revenue - - - - - - -
Advertising Revenue - - - - - - -
Other Revenue 44,605 55,702 48,974 46,265 50,406 64,087 82,308
Total Revenue 740,189 776,288 753,252 752,408 809,190 903,927 1,021,517
% Growth 4.9% -3.0% -0.1% 7.5% 11.7% 13.0%
EXPENSES:
Basic Programming
Costs 100,086 110,042 97,000 118,020 127,359 148,430 174,746
Pay Programming
Costs 61,038 64,295 46,657 60,058 64,187 70,046 77,218
PPV Programming
Cost - - - - - - -
Program Guide Costs 2,618 2,769 2,199 533 575 634 705
Franchise & License
Fees 18,731 17,886 5,185 5,267 5,664 6,327 7,151
Bad Debt Expense 6,658 10,706 2,526 11,286 12,138 13,559 15,323
Technical Expenses 53,165 72,712 72,964 52,899 55,015 57,215 59,504
Production/LO
Expenses - - 93 - - - -
Gen & Admin Expenses 88,214 72,804 85,471 85,386 88,801 92,353 96,047
Marketing Expenses 15,844 11,676 6,190 16,177 17,398 19,434 21,963
Advertising Sales
Expenses - - - - - - -
Total Expenses 346,354 362,890 318,285 349,625 371,137 408,000 452,657
OPERATING CASH FLOW 393,835 413,398 434,967 402,783 438,053 495,927 568,860
% Margin 53.2% 53.3% 57.7% 53.5% 54.1% 54.9% 55.7%
% Growth 5.0% 5.2% -7.4% 8.8% 13.2% 14.7%
CAPITAL EXPENDITURES:
Rebuild/Upgrade Costs - - - 912,728 912,728 - -
Trunk & Distribution
Costs 259,428 159,556 10,516 55,440 107,278 116,032 125,500
Make-Ready 5,307 9,178 - 2,004 2,149 2,325 2,514
Fiber Costs - Plant
and Headend - - - - - - -
Converters and Customer
Equipment 1 - 301 13,519 24,198 39,063 42,957
Customer Connect Costs 97,775 64,022 41,637 32,145 34,689 38,223 42,545
Other Technical Capital 3,793 - 2,950 44,321 4,043 4,455 4,959
Other Capital 707 4,200 347 1,753 1,892 2,085 2,321
Total Capital
Expenditures 367,011 236,956 55,751 1,061,911 1,086,978 202,182 220,795
NET CASH FLOW 26,824 176,442 379,216 (659,129) (648,925) 293,745 348,065
% Growth -273.8% -1.5% -145.3% 18.5%
</TABLE>
<TABLE>
<CAPTION>
CASH FLOW PROJECTIONS: 2001 2002 2003 2004 2005 2006
- --------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Basic & Equipment
Revenue 951,589 1,067,715 1,197,153 1,341,371 1,501,992 1,680,814
Pay and Mini-Pay 98,126 104,858 111,971 119,485 127,422 135,802
Revenue
PPV Revenue - - - - - -
Advertising Revenue - - - - - -
Other Revenue 105,625 135,446 173,561 222,251 284,416 363,746
Total Revenue 1,155,340 1,308,018 1,482,685 1,683,107 1,913,830 2,180,362
% Growth 13.1% 13.2% 13.4% 13.5% 13.7% 13.9%
EXPENSES:
Basic Programming
Costs 205,563 241,632 283,826 333,162 390,821 458,177
Pay Programming
Costs 85,055 93,616 102,966 113,173 124,311 136,461
PPV Programming
Cost - - - - - -
Program Guide Costs 785 872 968 1,075 1,192 1,321
Franchise & License
Fees 8,087 9,156 10,379 11,782 13,397 15,263
Bad Debt Expense 17,330 19,620 22,240 25,247 28,707 32,705
Technical Expenses 61,884 64,360 66,934 69,611 72,396 75,292
Production/LO
Expenses - - - - - -
Gen & Admin Expenses 99,889 103,885 108,040 112,362 116,856 121,530
Marketing Expenses 24,840 28,122 31,878 36,187 41,147 46,878
Advertising Sales
Expenses - - - - - -
Total Expenses 503,433 561,264 627,232 702,597 788,826 887,626
OPERATING CASH FLOW 651,907 746,754 855,453 980,510 1,125,003 1,292,736
% Margin 56.4% 57.1% 57.7% 58.3% 58.8% 59.3%
% Growth 14.6% 14.5% 14.6% 14.6% 14.7% 14.9%
CAPITAL EXPENDITURES:
Rebuild/Upgrade Costs - - - - - -
Trunk & Distribution
Costs 135,741 146,817 158,798 171,756 185,771 200,930
Make-Ready 2,720 2,942 3,182 3,441 3,722 4,026
Fiber Costs - Plant
and Headend - - - - - -
Converters and Customer
Equipment 47,226 51,905 57,034 62,654 68,811 75,557
Customer Connect Costs 47,318 52,586 58,400 64,812 71,882 79,674
Other Technical Capital 5,515 6,129 6,807 7,554 8,378 9,286
Other Capital 2,581 2,868 3,185 3,535 3,921 4,346
Total Capital
Expenditures 241,100 263,248 287,405 313,752 342,485 373,818
NET CASH FLOW 410,807 483,506 568,048 666,758 782,518 918,918
% Growth 18.0% 17.7% 17.5% 17.4% 17.4% 17.4%
</TABLE>
39
<PAGE> 47
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
CALIFORNIA CITY, CALIFORNIA
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL --------- ---------
PV OF CASH FLOWS 1994 1995 1996 1997 1998 1999 2000
- ---------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PROJECTED NET
CASH FLOW -659,129 -648,925 293,745 348,065
Value of Assets
in Year 10
assuming OCF
multiple of 7.0
Discount Rate 17.5%
PV OF CASH
FLOW STREAM 2,237,514
5.1 TIMES RUNNING RATE CASH FLOW
5.6 TIMES PROJECTED CASH FLOW
$1,164 PER SUBSCRIBER
</TABLE>
<TABLE>
<CAPTION>
PV OF CASH FLOWS 2001 2002 2003 2004 2005 2006
- ---------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PROJECTED NET
CASH FLOW 410,807 483,506 568,048 666,758 782,518 918,918
Value of Assets
in Year 10
assuming OCF
multiple of 9,049,150
Discount Rate
</TABLE>
40
<PAGE> 48
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
CALIFORNIA CITY, CALIFORNIA
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
REVENUE ASSUMPTIONS: 1994 1995 1996 1997 1998 1999 2000
- -------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
HOMES PASSED:
Beginning 2,500 2,707 2,858 2,858 2,938 3,056 3,178
Ending 2,707 2,858 2,858 2,938 3,056 3,178 3,305
Change 207 151 0 80 118 122 127
% Change 8.3% 5.6% 0.0% 2.8% 4.0% 4.0% 4.0%
Average 2,604 2,783 2,858 2,898 2,997 3,117 3,241
BASIC SUBSCRIBERS:
Beginning 1,933 2,075 2,097 1,922 1,974 2,069 2,167
Ending 2,075 2,097 1,922 1,974 2,069 2,167 2,270
Change 142 22 -175 52 94 99 103
% Change 7.3% 1.1% -11.1% 2.7% 4.8% 4.8% 4.8%
Average 2,004 2,086 2,010 1,948 2,021 2,118 2,219
Ending Penetration 76.7% 73.4% 67.2% 67.2% 67.7% 68.2% 68.7%
Monthly Basic Rev/Sub $24.94 $24.48 $25.29 $26.87 $27.94 $29.06 $30.22
% Change -1.8% 3.3% 6.3% 4.0% 4.0% 4.0%
PAY + MINI-PAY UNITS:
Beginning 952 1,288 1,180 839 862 903 946
Ending 1,288 1,180 839 862 903 946 991
Change 336 -108 -341 23 41 43 45
% Change 35.3% -8.4% -38.5% 2.7% 4.8% 4.8% 4.8%
Average 1,120 1,234 1,010 850 882 925 969
Ending Penetration 62.1% 56.3% 43.7% 43.7% 43.7% 43.7% 43.7%
Monthly Pay Rev/Unit $7.14 $7.28 $7.80 $7.64 $7.64 $7.64 $7.64
% Change 2.0% 7.1% -2.0% 0.0% 0.0% 0.0%
PPV REVENUE PER SUB $- $- $- $- $- $- $-
% Change 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
ADVERTISING REVENUE
PER SUB $- $- $- $- $- $- $-
% Change 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
OTHER REVENUE PER SUB $1.79 $2.21 $2.12 $1.98 $2.08 $2.18 $2.29
% Change 23.6% -4.1% -6.8% 5.0% 5.0% 5.0%
TOTAL REVENUE PER SUB $30.78 $31.01 $31.24 $32.18 $33.36 $34.58 $35.85
% Change 0.8% 0.7% 3.0% 3.6% 3.7% 3.7%
</TABLE>
<TABLE>
<CAPTION>
REVENUE ASSUMPTIONS: 2001 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
HOMES PASSED:
Beginning 3,305 3,437 3,575 3,718 3,866 4,021
Ending 3,437 3,575 3,718 3,866 4,021 4,182
Change 132 137 143 149 155 161
% Change 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
Average 3,371 3,506 3,646 3,792 3,944 4,101
BASIC SUBSCRIBERS:
Beginning 2,270 2,378 2,491 2,610 2,733 2,863
Ending 2,378 2,491 2,610 2,733 2,863 2,998
Change 108 113 118 124 129 135
% Change 4.8% 4.8% 4.7% 4.7% 4.7% 4.7%
Average 2,324 2,435 2,551 2,672 2,798 2,931
Ending Penetration 69.2% 69.7% 70.2% 70.7% 71.2% 71.7%
Monthly Basic Rev/Sub $31.43 $32.69 $34.00 $35.36 $36.77 $38.24
% Change 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
PAY + MINI-PAY UNITS:
Beginning 991 1,038 1,088 1,139 1,193 1,250
Ending 1,038 1,088 1,139 1,193 1,250 1,309
Change 47 49 52 54 57 59
% Change 4.8% 4.8% 4.7% 4.7% 4.7% 4.7%
Average 1,015 1,063 1,113 1,166 1,221 1,279
Ending Penetration 43.7% 43.7% 43.7% 43.7% 43.7% 43.7%
Monthly Pay Rev/Unit $7.64 $7.64 $7.64 $7.64 $7.64 $7.64
% Change 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
PPV REVENUE PER SUB $- $- $- $- $- $-
% Change 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
ADVERTISING REVENUE
PER SUB $- $- $- $- $- $-
% Change 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
OTHER REVENUE PER SUB $2.41 $2.53 $2.65 $2.78 $2.92 $3.07
% Change 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
TOTAL REVENUE PER SUB $37.17 $38.55 $39.99 $41.48 $43.03 $44.65
% Change 3.7% 3.7% 3.7% 3.7% 3.7% 3.8%
</TABLE>
41
<PAGE> 49
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
CALIFORNIA CITY, CALIFORNIA
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
EXPENSE ASSUMPTIONS: 1994 1995 1996 1997 1998 1999 2000
- -------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
BASIC PROGRAMMING
PER SUB $4.16 $4.40 $4.02 $5.05 $5.25 $5.46 $5.68
% Change 5.6% -8.5% 25.5% 4.0% 4.0% 4.0%
PAY/MINI-PAY PROG.
PER UNIT $4.54 $4.34 $3.85 $5.89 $6.06 $6.24 $6.43
% Change -4.4% -11.3% 52.8% 3.0% 3.0% 3.0%
PPV PROGRAMMING/
PPV REVENUE 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
PROGRAM GUIDE COST
PER SUB $0.11 $0.11 $0.09 $0.02 $0.02 $0.02 $0.03
% Change 1.6% -17.6% -75.0% 4.0% 4.0% 4.0%
FRANCHISE, ACCESS FEES/
REVENUE 2.5% 2.3% 0.7% 0.7% 0.7% 0.7% 0.7%
BAD DEBT EXPENSE/
REVENUE 0.9% 1.4% 0.3% 1.5% 1.5% 1.5% 1.5%
TECHNICAL EXP. GROWTH 36.8% 0.3% -27.5% 4.0% 4.0% 4.0%
PRODUCTION/LO EXPENSE
GROWTH 0.0% 0.0% -100.0% 0.0% 0.0% 0.0%
GEN & ADMIN EXPENSE
GROWTH -17.5% 17.4% -0.1% 4.0% 4.0% 4.0%
MARKETING EXP/REVENUE 2.1% 1.5% 0.8% 2.2% 2.2% 2.2% 2.2%
AD SALES EXP/AD REVENUE 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
</TABLE>
<TABLE>
<CAPTION>
EXPENSE ASSUMPTIONS: 2001 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
BASIC PROGRAMMING
PER SUB $5.91 $6.14 $6.39 $6.64 $6.91 $7.19
% Change 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
PAY/MINI-PAY PROG.
PER UNIT $6.62 $6.82 $7.03 $7.24 $7.46 $7.68
% Change 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
PPV PROGRAMMING/
PPV REVENUE 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
PROGRAM GUIDE COST
PER SUB $0.03 $0.03 $0.03 $0.03 $0.03 $0.03
% Change 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
FRANCHISE, ACCESS FEES/
REVENUE 0.7% 0.7% 0.7% 0.7% 0.7% 0.7%
BAD DEBT EXPENSE/
REVENUE 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
TECHNICAL EXP. GROWTH 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
PRODUCTION/LO EXPENSE
GROWTH 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
GEN & ADMIN EXPENSE
GROWTH 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
MARKETING EXP/REVENUE 2.2% 2.2% 2.2% 2.2% 2.2% 2.2%
AD SALES EXP/AD REVENUE 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
</TABLE>
42
<PAGE> 50
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
CALIFORNIA CITY, CALIFORNIA
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
CAPITAL EXPENDITURES: 1994 1995 1996 1997 1998 1999 2000
- --------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
MILES OF PLANT:
Beginning 59.57 85.21 90.12 90.12 92.10 95.78 99.62
Ending 85.21 90.12 90.12 92.10 95.78 99.62 103.60
Change 25.64 4.91 - 1.98 3.68 3.83 3.98
Average 72.39 87.67 90.12 91.11 93.94 97.70 101.61
Homes/Mile 31.8 31.7 31.7 31.9 31.9 31.9 31.9
CONVERTERS:
Beginning 1,160 1,011 1,007 931 958 1,003 1,051
Ending 1,011 1,007 931 958 1,003 1,051 1,101
Change (149) (4) (76) 27 46 48 50
Average 1,086 1,009 969 944 980 1,027 1,076
Ending Penetration 50.4% 48.3% 46.3% 48.5% 48.5% 48.5% 48.5%
REBUILD CAPITAL:
UG Miles 11.1
Aerial Miles 79.0
Cost/UG Mile $ -
Cost/Aerial Mile $ -
Other Rebuild Costs $ -
TRUNK & DISTRIBUTION/
NEW MILE $14,059 $28,000 $29,120 $30,285 $31,496
(3-Year average)
MAKE-READY/MILE $ 73.31 $104.69 $ - $ 22.00 $ 22.88 $ 23.80 $ 24.75
CONV & CUST EQUIP/
NEW CONVERTER $ - $ - $ - $509.00 $529.36 $550.53 $572.56
CUST. CONNECT
COSTS/SUB $ 48.79 $ 30.69 $ 20.72 $ 16.50 $ 17.16 $ 17.85 $ 18.56
OTHER TECHNICAL
CAPITAL/SUB $ 1.89 $ - $ 1.47 $ 22.75 $ 2.00 $ 2.08 $ 2.16
OTHER CAPITAL/SUB $ 0.35 $ 2.01 $ 0.17 $ 0.90 $ 0.94 $ 0.97 $ 1.01
</TABLE>
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES: 2001 2002 2003 2004 2005 2006
- --------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
MILES OF PLANT:
Beginning 103.60 107.74 112.05 116.54 121.20 126.05
Ending 107.74 112.05 116.54 121.20 126.05 131.09
Change 4.14 4.31 4.48 4.66 4.85 5.04
Average 105.67 109.90 114.29 118.87 123.62 128.57
Homes/Mile 31.9 31.9 31.9 31.9 31.9 31.9
CONVERTERS:
Beginning 1,101 1,154 1,208 1,266 1,326 1,388
Ending 1,154 1,208 1,266 1,326 1,388 1,454
Change 52 55 57 60 63 66
Average 1,127 1,181 1,237 1,296 1,357 1,421
Ending Penetration 48.5% 48.5% 48.5% 48.5% 48.5% 48.5%
REBUILD CAPITAL:
UG Miles
Aerial Miles
Cost/UG Mile
Cost/Aerial Mile
Other Rebuild Costs
TRUNK & DISTRIBUTION/
NEW MILE $32,756 $34,066 $35,429 $36,846 $38,320 $39,853
(3-Year average)
MAKE-READY/MILE $25.74 $26.77 $27.84 $28.95 $30.11 $31.31
CONV & CUST EQUIP/
NEW CONVERTER $596.46 $619.28 $644.05 $669.81 $696.60 $724.47
CUST. CONNECT
COSTS/SUB $19.30 $20.07 $20.88 $21.71 $22.58 $23.48
OTHER TECHNICAL
CAPITAL/SUB $ 2.25 $ 2.34 $ 2.43 $ 2.53 $ 2.63 $ 2.74
OTHER CAPITAL/SUB $ 1.05 $ 1.09 $ 1.14 $ 1.18 $ 1.23 $ 1.28
</TABLE>
43
<PAGE> 51
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
CALIFORNIA CITY, CALIFORNIA
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
CASH FLOW PROJECTIONS: 1994 1995 1996 1997 1998 1999 2000
- ---------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE:
Basic & Equipment
Revenue 599,671 612,815 609,818 628,159 677,866 738,614 804,763
Pay and Mini-Pay
Revenue 95,913 107,771 94,460 77,984 80,918 84,779 88,818
PPV Revenue - - - - - - -
Advertising Revenue - - - - - - -
Other Revenue 44,605 55,702 48,974 46,265 50,406 55,452 60,999
---------------------------------------------------------------------
Total Revenue 740,189 776,288 753,252 752,408 809,190 878,844 954,580
% Growth 4.9% -3.0% -0.1% 7.5% 8.6% 8.6%
EXPENSES:
Basic Programming
Costs 100,086 110,042 97,000 118,020 127,359 138,773 151,201
Pay Programming
Costs 61,038 64,295 46,657 60,058 64,187 69,267 74,745
PPV Programming
Costs - - - - - - -
Program Guide Costs 2,618 2,769 2,199 533 575 627 683
Franchise & License
Fees 18,731 17,886 5,185 5,267 5,664 6,152 6,682
Bad Debt Expense 6,658 10,706 2,526 11,286 12,138 13,183 14,319
Technical Expenses 53,165 72,712 72,964 52,899 55,015 57,215 59,504
Production/LO
Expenses - - 93 - - - -
Gen. & Admin
Expenses 88,214 72,804 85,471 85,386 88,801 92,353 96,047
Marketing Expenses 15,844 11,676 6,190 16,177 17,398 18,895 20,523
Advertising Sales
Expenses - - - - - - -
---------------------------------------------------------------------
Total Expenses 346,354 362,890 318,285 349,625 371,137 396,464 423,704
OPERATING CASH FLOW 393,835 413,398 434,967 402,783 438,053 482,380 530,876
% Margin 53.2% 53.3% 57.7% 53.5% 54.1% 54.9% 55.6%
% Growth 5.0% 5.2% -7.4% 8.8% 10.1% 10.1%
CAPITAL EXPENDITURES:
Rebuild/Upgrade
Costs - - - - - - -
Trunk & Distribution
Costs 259,428 159,556 10,516 55,440 107,278 116,032 125,500
Make-Ready 5,307 9,178 - 2,004 2,149 2,325 2,514
Fiber Costs - Plant
and Headend - - - - - - -
Converters & Customer
Equipment 1 - 301 13,519 24,198 26,336 28,661
Customer Connect
Costs 97,775 64,022 41,637 32,145 34,689 37,797 41,182
Other Technical
Capital 3,793 - 2,950 44,321 4,043 4,405 4,800
Other Capital 707 4,200 347 1,753 1,892 2,062 2,246
---------------------------------------------------------------------
Total Capital
Expenditures 367,011 236,956 55,751 149,183 174,249 188,957 204,904
NET CASH FLOW 26,824 176,442 379,216 253,600 263,804 293,423 325,972
% Growth -33.1% 4.0% 11.2% 11.1%
</TABLE>
<TABLE>
<CAPTION>
CASH FLOW PROJECTIONS: 2001 2002 2003 2004 2005 2006
- ---------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Basic & Equipment
Revenue 876,789 955,212 1,040,595 1,133,552 1,234,750 1,344,917
Pay and Mini-Pay
Revenue 93,046 97,469 102,098 106,941 112,008 117,309
PPV Revenue - - - - - -
Advertising Revenue - - - - - -
Other Revenue 67,097 73,802 81,172 89,273 98,178 107,966
-----------------------------------------------------------
Total Revenue 1,036,932 1,126,483 1,223,864 1,329,765 1,444,936 1,570,192
% Growth 8.6% 8.6% 8.6% 8.7% 8.7% 8.7%
EXPENSES:
Basic Programming
Costs 164,733 179,468 195,509 212,974 231,988 252,686
Pay Programming
Costs 80,651 87,020 93,887 101,291 109,273 117,878
PPV Programming
Costs - - - - - -
Program Guide Costs 744 810 883 962 1,048 1,141
Franchise & License
Fees 7,259 7,885 8,567 9,308 10,115 10,991
Bad Debt Expense 15,554 16,897 18,358 19,946 21,674 23,553
Technical Expenses 61,884 64,360 66,934 69,611 72,396 75,292
Production/LO
Expenses - - - - - -
Gen. & Admin
Expenses 99,889 103,885 108,040 112,362 116,856 121,530
Marketing Expenses 22,294 24,219 26,313 28,590 31,066 33,759
Advertising Sales
Expenses - - - - - -
-----------------------------------------------------------
Total Expenses 453,008 484,544 518,492 555,045 594,415 636,830
OPERATING CASH FLOW 583,924 641,938 705,373 774,721 850,521 933,361
% Margin 56.3% 57.0% 57.6% 58.3% 58.9% 59.4%
% Growth 10.0% 9.9% 9.9% 9.8% 9.8% 9.7%
CAPITAL EXPENDITURES:
Rebuild/Upgrade
Costs - - - - - -
Trunk & Distribution
Costs 135,741 146,817 158,798 171,756 185,771 200,930
Make-Ready 2,720 2,942 3,182 3,441 3,722 4,026
Fiber Costs - Plant
and Headend - - - - - -
Converters & Customer
Equipment 31,191 33,943 36,936 40,191 43,732 47,583
Customer Connect
Costs 44,868 48,881 53,251 58,007 63,186 68,824
Other Technical
Capital 5,229 5,697 6,206 6,761 7,364 8,021
Other Capital 2,447 2,666 2,905 3,164 3,447 3,754
-----------------------------------------------------------
Total Capital
Expenditures 222,197 240,946 261,277 283,320 307,222 333,138
NET CASH FLOW 361,727 400,992 444,096 491,400 543,299 600,223
% Growth 11.0% 10.9% 10.7% 10.7% 10.6% 10.5%
</TABLE>
44
<PAGE> 52
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
CALIFORNIA CITY, CALIFORNIA
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
PV OF CASH FLOWS 1994 1995 1996 1997 1998 1999 2000
- ---------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
PROJECTED NET
CASH FLOW 253,600 263,804 293,423 325,972
Value of Assets in
Year 10 assuming
OCF multiple of 7.0
Discount rate 17.5%
PV OF CASH FLOW
STREAM 2,900,933
6.7 TIMES RUNNING RATE CASH FLOW
7.2 TIMES PROJECTED CASH FLOW
$1,509 PER SUBSCRIBER
</TABLE>
<TABLE>
<CAPTION>
REVENUE ASSUMPTIONS: 2001 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PROJECTED NET
CASH FLOW 361,727 400,992 444,096 491,400 543,299 600,223
Value of Assets in
Year 10 assuming
OCF multiple of 6,633,528
Discount rate
</TABLE>
45
<PAGE> 53
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
CASH FLOW MULTIPLE AND ADJUSTED CASH FLOW MULTIPLE APPROACHES
As discussed previously, the Cable System generated revenue of
$753,252 and operating cash flow of $434,967 in 1996, for an actual
operating cash flow margin of 57.7%.
The current operating cash flow multiples indicated by the market
range from 6 to 11 times, based on transactions which have been announced
in recent months. In order to determine the respective appropriate cash
flow multiples to apply to the cash flow and to the adjusted cash flow of
the Cable System, the following factors must be considered:
o The Cable System has experienced a decline in basic subscribers due
in part to technical inability of the system to add channels and new
services commensurate with recent rate increases.
o The cable plant needs to be rebuilt, as the 330 MHz plant has no
room to add the programming needed to keep up with competition.
Additionally, a buyer of the Cable System would need to build a
headend to serve The Cable Systems' subscribers, which are currently
served from the headend of an adjacent cable system.
o The current rates of the Cable System are relatively high given the
level of service provided in each system, and the presence of direct
competition in the overbuilt portion of the service area.
o The operating cash flow margin approximates 58 percent, a very high
level by industry standards, leaving little perceived potential for
improvement by a buyer. A typical buyer would likely discount this
margin in determining the potential cash flow that such a buyer
would be able to consistently generate from this Cable System.
Based on these factors, as well as on CEA's recent experience in the cable
system transaction market, it is CEA's opinion that the following cash
flow multiples are appropriate in valuing the Cable System:
<TABLE>
<S> <C>
Operating Cash Flow Multiple 7.0
Adjusted Operating Cash Flow Multiple 7.5
</TABLE>
Applying these multiples respectively to the actual operating cash
flow and to the adjusted operating cash flow of the Cable System yields
the following calculations:
<TABLE>
<S> <C>
Cash Flow Multiple Approach:
---------------------------
Actual Operating Cash Flow $ 434,967
Operating Cash Flow Multiple x 7.0
-----------
Value Indication $ 3,044,769
</TABLE>
46
<PAGE> 54
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
<TABLE>
<S> <C>
Adjusted Cash Flow Multiple Approach:
Actual Revenue $ 753,252
Adjusted Margin x 50%
-----------
Adjusted Operating Cash Flow $ 376,626
Operating Cash Flow Multiple x 7.5
-----------
Value Indication $2,824,695
</TABLE>
SUBSCRIBER MULTIPLE APPROACH
Based on CEA's recent experience in the cable system transaction
market, it is CEA's opinion that a buyer would expect the typical cable
system to generate just over $33.00 per month in total revenue, operate at
a 50% cash flow margin, and be valued at approximately 9 times this
operating cash flow. Based on these parameters, a buyer would be willing
to pay approximately $1,800 per subscriber for this typical cable system.
Applying this per-subscriber value to the subject Cable System results in
the following calculation:
<TABLE>
<S> <C>
Basic Subscribers 1,922
Per Subscriber Multiple x $ 1,800
--------------
Value Indication $ 3,459,600
</TABLE>
REBUILD CASH FLOW MULTIPLE APPROACH
Based on CEA's recent experience in the cable system transaction
market, it is CEA's opinion that a typical fully-rebuilt, state-of-the-art
cable system could reasonably be expected to sell, on average, for
approximately 10.5 times operating cash flow. For cable systems in need of
rebuild, a buyer would likely be willing to pay approximately 10.5 times
operating cash flow less the cost of the rebuild. Therefore, to estimate
the value of the Cable System using the Rebuild Cash Flow Multiple
Approach, CEA multiplied 1996 operating cash flow by 10.5 and subtracted
the estimated cost to rebuild the Cable System, as follows:
<TABLE>
<S> <C>
1996 Operating Cash Flow $ 434,967
Rebuild Operating Cash Flow Multiple x 10.5
------------
Value of System After Rebuild 4,567,154
less: Cost of Rebuild (1,825,457)
------------
Value Indication $ 2,741,697
</TABLE>
47
<PAGE> 55
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
VALUE CONCLUSIONS -- CALIFORNIA CITY, CA
CEA used two variations of the discounted cash flow approach, and four
variations of the market approach to determine six indications of the value of
the Cable System. These value indications are summarized as follows:
<TABLE>
<S> <C>
Rebuild DCF Approach $2,237,514
No Rebuild DCF Approach $2,900,933
Cash Flow Multiple Approach $3,044,769
Adjusted Cash Flow Multiple Approach $2,824,695
Subscriber Multiple Approach $3,459,600
Rebuild Cash Flow Multiple Approach $2,741,697
VALUE CONCLUSION $2,800,000
</TABLE>
Therefore, based on this analysis, it is CEA's opinion that, as of
December 31, 1996, the fair market value of the California City, CA Cable System
is $2,800,000.
48
<PAGE> 56
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
CENTREVILLE, MD
SYSTEM OVERVIEW -- CENTREVILLE, MD
SYSTEM DESCRIPTION
The Partnership owns the Cable System that serves Centreville,
Maryland, as well as various towns in the Maryland Counties of Queen
Anne's, Kent, and Talbot, all located on the Eastern Shore of the
Chesapeake Bay. As of December 31, 1996, the Cable System passed 23,857
homes with 650 miles of plant, and served 12,325 basic subscribers from
one headend and six microwave receive sites. Relevant subscriber
statistics as of December 31, 1996 are displayed in the following table.
<TABLE>
<CAPTION>
Homes Basic Basic Pay Pay
As of 12/31/96 Passed Subscribers Penetration Units Penetration
-------------- ------ ----------- ----------- ----- -----------
<S> <C> <C> <C> <C> <C>
Centreville, MD 23,857 12,325 51.7% 7,440 60.4%
</TABLE>
The Cable System operates at 450 MHz, 62-channel capacity, and
offers 51 channels of programming.
HOME AND SUBSCRIBER GROWTH
During the past few years, the Cable System has experienced some
home growth and strong growth in basic subscribers as basic penetration
rose from 47% in 1994 to nearly 52% in 1996. The Company's home and
subscriber growth history is displayed below.
<TABLE>
<CAPTION>
1994 1995 1996 CAGR 94-96
---- ---- ---- ----------
<S> <C> <C> <C> <C>
Homes Passed 23,383 23,497 23,857 1.0%
Basic Subscribers 11,001 11,893 12,325 5.8%
</TABLE>
FINANCIAL SUMMARY
For the year ended December 31, 1996, the Centreville, MD Cable
System generated total revenue of $5,342,649 and operating cash flow of
$2,719,375, resulting in a 50.9% operating cash flow margin.
49
<PAGE> 57
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
VALUATION -- CENTREVILLE, MD
DISCOUNTED CASH FLOW APPROACHES
Financial projections, including all assumptions regarding
operations and future capital expenditures, relating to the Rebuild DCF
Approach and to the No Rebuild DCF Approach are displayed on the following
ten pages. These projections were prepared by CEA based on certain
information provided by the Partnership, including, but not limited to,
the Partnership's 1997 budget for the Cable System.
The discount rate used in this analysis was derived using a weighted
average cost of capital. Based on CEA's recent experience in the cable
system transaction market, it is CEA's opinion that equity investors in
cable systems would likely require a 25 percent return in order to justify
the equity investment. Additionally, based on CEA's recent experience in
raising debt financing for cable operators, a lender would likely charge
an interest rate of approximately 10 percent and would likely be willing
to lend up to 50 percent of asset value at that rate. Thus, the likely
weighted average cost of capital for the subject Cable System can be
calculated as follows:
<TABLE>
<S> <C> <C> <C>
50 percent debt at a rate of 10% = .50 x 10% = 5.0%
50 percent equity at a rate of 25% = .50 x 25% = 12.5%
Total Cost of Capital = 17.5%
</TABLE>
The terminal value of the Cable System was calculated as the price
at which the cable assets might sell at the end of the ten-year projection
period, based on a multiple of the operating cash flow of the Cable System
at that time. The cash flow multiple used reflects the expected growth of
cash flow in the Cable System after year ten, as well as the return on
debt and equity capital that would likely be required by investors at that
time given the expected risk of the investment at that time.
Based on the calculations displayed on the following pages, the
discounted cash flow approaches indicate fair market values for the Cable
System as follows:
<TABLE>
<S> <C>
Rebuild DCF Approach $18,553,636
No Rebuild DCF Approach $24,605,420
</TABLE>
50
<PAGE> 58
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
CENTREVILLE, MD
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
REVENUE ASSUMPTIONS: 1994 1995 1996 1997 1998 1999 2000
- -------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
HOMES PASSED:
Beginning 22,168 23,383 23,497 23,857 24,169 24,531 24,899
Ending 23,383 23,497 23,857 24,169 24,531 24,899 25,273
Change 1,215 114 360 312 363 368 373
% Change 5.5% 0.5% 2.0% 1.3% 1.5% 1.5% 1.5%
Average 22,776 23,440 23,677 24,013 24,350 24,715 25,086
BASIC SUBSCRIBERS:
Beginning 10,241 11,001 11,893 12,325 12,926 13,365 14,063
Ending 11,001 11,893 12,325 12,926 13,365 14,063 14,780
Change 760 892 432 601 439 698 716
% Change 7.4% 8.1% 4.8% 4.9% 3.4% 5.2% 5.1%
Average 10,621 11,447 12,109 12,625 13,145 13,714 14,421
Ending Penetration 47.0% 50.6% 51.7% 53.5% 54.5% 56.5% 58.5%
Monthly Basic Rev/Sub $22.50 $23.78 $26.70 $30.10 $31.31 $32.87 $34.52
% Change 5.7% 12.3% 12.7% 4.0% 5.0% 5.0%
PAY + MINI-PAY UNITS:
Beginning 9,003 9,250 8,643 7,440 7,292 7,540 7,934
Ending 9,250 8,643 7,440 7,292 7,540 7,934 8,338
Change 247 -607 -1,203 -148 248 394 404
% Change 2.7% -6.6% -18.6% -2.0% 3.4% 5.2% 5.1%
Average 9,127 8,947 8,042 7,366 7,416 7,737 8,136
Ending Penetration 84.1% 72.7% 60.4% 56.4% 56.4% 56.4% 56.4%
Monthly Pay Rev/Unit $7.48 $8.80 $8.91 $8.43 $8.43 $8.43 $8.43
% Change 17.7% 1.2% -5.4% 0.0% 0.0% 0.0%
SEGA REVENUE PER SUB $- $0.04 $0.28 $0.25 $0.27 $1.00 $1.20
% Change 0.0% 617.4% -10.5% 5.0% 20.0% 20.0%
ADVERTISING REVENUE
PER SUB $0.68 $0.83 $0.85 $0.91 $0.96 $1.05 $1.16
% Change 22.2% 1.7% 7.5% 5.0% 10.0% 10.0%
OTHER REVENUE PER SUB $2.15 $2.33 $2.97 $2.82 $2.97 $3.26 $3.59
% Change 8.4% 27.1% -4.8% 5.0% 10.0% 10.0%
TOTAL REVENUE PER SUB $31.83 $33.95 $36.77 $39.01 $40.25 $42.94 $45.22
% Change 6.7% 8.3% 6.1% 3.2% 6.7% 5.3%
</TABLE>
<TABLE>
<CAPTION>
REVENUE ASSUMPTIONS: 2001 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
HOMES PASSED:
Beginning 25,273 25,652 26,036 26,427 26,823 27,226
Ending 25,652 26,036 26,427 26,823 27,226 27,634
Change 379 385 391 396 402 408
% Change 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
Average 25,462 25,844 26,232 26,625 27,025 27,430
BASIC SUBSCRIBERS:
Beginning 14,780 15,514 16,268 17,040 17,832 18,644
Ending 15,514 16,268 17,040 17,832 18,644 19,477
Change 735 753 773 792 812 832
% Change 5.0% 4.9% 4.7% 4.6% 4.6% 4.5%
Average 15,147 15,891 16,654 17,436 18,238 19,061
Ending Penetration 60.5% 62.5% 64.5% 66.5% 68.5% 70.5%
Monthly Basic Rev/Sub $36.24 $38.06 $39.96 $41.96 $44.05 $46.26
% Change 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
PAY + MINI-PAY UNITS:
Beginning 8,338 8,752 9,177 9,613 10,060 10,518
Ending 8,752 9,177 9,613 10,060 10,518 10,988
Change 414 425 436 447 458 470
% Change 5.0% 4.9% 4.7% 4.6% 4.6% 4.5%
Average 8,545 8,965 9,395 9,837 10,289 10,753
Ending Penetration 56.4% 56.4% 56.4% 56.4% 56.4% 56.4%
Monthly Pay Rev/Unit $8.43 $8.43 $8.43 $8.43 $8.43 $8.43
% Change 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
SEGA REVENUE PER SUB $1.44 $1.73 $2.07 $2.07 $2.28 $2.51
% Change 20.0% 20.0% 20.0% 0.0% 10.0% 10.0%
ADVERTISING REVENUE
PER SUB $1.27 $1.40 $1.54 $1.69 $1.86 $2.05
% Change 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
OTHER REVENUE PER SUB $3.95 $4.34 $4.78 $5.25 $5.78 $6.36
% Change 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
TOTAL REVENUE PER SUB $47.66 $50.28 $53.10 $55.73 $58.73 $61.93
% Change 5.4% 5.5% 5.6% 5.0% 5.4% 5.4%
</TABLE>
51
<PAGE> 59
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
CENTREVILLE, MD
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
EXPENSE ASSUMPTIONS: 1994 1995 1996 1997 1998 1999 2000
- -------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
BASIC PROGRAMMING
PER SUB $3.75 $4.82 $5.34 $6.22 $6.47 $7.12 $7.83
% Change 28.3% 10.8% 16.6% 4.0% 10.0% 10.0%
PAY/MINI-PAY PROG.
PER UNIT $4.05 $4.89 $4.36 $4.66 $4.80 $4.95 $5.09
% Change 20.5% -10.8% 7.0% 3.0% 3.0% 3.0%
SEGA PROGRAMMING/
SEGA REVENUE 0.0% 29.4% 39.4% 38.7% 38.7% 38.7% 38.7%
PROGRAM GUIDE COST
PER SUB $0.08 $0.07 $0.06 $0.07 $0.07 $0.07 $0.08
% Change -15.3% -14.0% 13.0% 4.0% 4.0% 4.0%
FRANCHISE, ACCESS FEES/
REVENUE 4.8% 4.5% 4.2% 4.3% 4.3% 4.3% 4.3%
BAD DEBT EXPENSE/
REVENUE 1.9% 1.2% 0.6% 1.2% 1.2% 1.2% 1.2%
TECHNICAL EXP. GROWTH 47.4% -12.0% -9.6% 4.0% 4.0% 4.0%
PRODUCTION/LO EXPENSE
GROWTH 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
GEN & ADMIN EXPENSE
GROWTH 17.0% 22.4% -3.7% -3.7% -3.7% -3.7%
MARKETING EXP/REVENUE 4.4% 3.2% 1.9% 2.3% 2.3% 2.3% 2.3%
AD SALES EXP/AD REVENUE 75.1% 56.1% 64.7% 50.4% 50.4% 50.4% 50.4%
</TABLE>
<TABLE>
<CAPTION>
EXPENSE ASSUMPTIONS: 2001 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
BASIC PROGRAMMING
PER SUB $8.61 $9.47 $10.42 $11.46 $12.61 $13.87
% Change 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
PAY/MINI-PAY PROG.
PER UNIT $5.25 $5.40 $5.57 $5.73 $5.91 $6.08
% Change 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
SEGA PROGRAMMING/
SEGA REVENUE 38.7% 38.7% 38.7% 38.7% 38.7% 38.7%
PROGRAM GUIDE COST
PER SUB $0.08 $0.08 $0.08 $0.09 $0.09 $0.10
% Change 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
FRANCHISE, ACCESS FEES/
REVENUE 4.3% 4.3% 4.3% 4.3% 4.3% 4.3%
BAD DEBT EXPENSE/
REVENUE 1.2% 1.2% 1.2% 1.2% 1.2% 1.2%
TECHNICAL EXP. GROWTH 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
PRODUCTION/LO EXPENSE
GROWTH 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
GEN & ADMIN EXPENSE
GROWTH -3.7% -3.7% -3.7% -3.7% -3.7% -3.7%
MARKETING EXP/REVENUE 2.3% 2.3% 2.3% 2.3% 2.3% 2.3%
AD SALES EXP/AD REVENUE 50.4% 50.4% 50.4% 50.4% 50.4% 50.4%
</TABLE>
52
<PAGE> 60
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
CENTREVILLE, MD
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
CAPITAL EXPENDITURES: 1994 1995 1996 1997 1998 1999 2000
- --------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
MILES OF PLANT:
Beginning 578.59 630.15 635.93 649.75 654.40 664.22 674.18
Ending 630.15 635.93 649.75 654.40 664.22 674.18 684.29
Change 51.56 5.78 13.82 4.65 9.82 9.96 10.11
Average 604.37 633.04 642.84 652.08 659.31 669.20 679.24
Homes/Mile 37.1 36.9 36.7 36.9 36.9 36.9 36.9
CONVERTERS:
Beginning 1,916 1,796 1,625 1,838 1,960 2,026 2,132
Ending 1,796 1,625 1,838 1,960 2,026 2,132 2,241
Change (120) (171) 213 122 67 106 109
Average 1,856 1,711 1,732 1,899 1,993 2,079 2,186
Ending Penetration 16.9% 14.2% 15.2% 15.2% 15.2% 15.2% 15.2%
REBUILD CAPITAL:
UG Miles 189.6 95.0%
Aerial Miles 460.2 95.0%
Cost/UG Mile $22,500 2,026,350 2,026,350
Cost/Aerial Mile $16,500 3,606,426 3,606,426
Other Rebuild Costs 17.5% 985,736 985,736
-----------------------------------------------
TRUNK & DISTRIBUTION/
NEW MILE $35,580 $20,700 $25,000 $26,000 $27,040
(3-Year average)
MAKE-READY/MILE $291.78 $128.66 $2.44 $- $10.00 $10.40 $10.82
CONV & CUST EQUIP/
NEW CONVERTER $- $- $117.94 $18.50 $19.24 $20.01 $20.81
CUST. CONNECT
COSTS/SUB $28.90 $28.77 $27.38 $21.60 $22.46 $23.36 $24.30
OTHER TECHNICAL
CAPITAL/SUB $6.75 $15.15 $2.34 $13.57 $14.11 $14.68 $15.26
OTHER CAPITAL/SUB $0.51 $3.80 $0.42 $1.19 $1.24 $1.29 $1.34
</TABLE>
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES: 2001 2002 2003 2004 2005 2006
- --------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
MILES OF PLANT:
Beginning 684.29 694.56 704.97 715.55 726.28 737.18
Ending 694.56 704.97 715.55 726.28 737.18 748.23
Change 10.26 10.42 10.57 10.73 10.89 11.06
Average 689.42 699.77 710.26 720.92 731.73 742.71
Homes/Mile 36.9 36.9 36.9 36.9 36.9 36.9
CONVERTERS:
Beginning 2,241 2,352 2,466 2,583 2,703 2,826
Ending 2,352 2,466 2,583 2,703 2,826 2,953
Change 111 114 117 120 123 126
Average 2,296 2,409 2,525 2,643 2,765 2,890
Ending Penetration 15.2% 15.2% 15.2% 15.2% 15.2% 15.2%
REBUILD CAPITAL:
UG Miles
Aerial Miles
Total Rebuild Costs:
Cost/UG Mile 13,237,023
Cost/Aerial Mile
Other Rebuild Costs
- -------------------------------
TRUNK & DISTRIBUTION/
NEW MILE $28,122 $29,246 $30,416 $31,633 $32,898 $34,214
(3-Year average)
MAKE-READY/MILE $11.25 $11.70 $12.17 $12.65 $13.16 $13.69
CONV & CUST EQUIP/
NEW CONVERTER $21.64 $22.51 $23.41 $24.34 $25.32 $26.33
CUST. CONNECT
COSTS/SUB $25.27 $26.28 $27.33 $28.42 $29.56 $30.74
OTHER TECHNICAL
CAPITAL/SUB $15.87 $16.51 $17.17 $17.86 $18.57 $19.31
OTHER CAPITAL/SUB $1.39 $1.45 $1.51 $1.57 $1.63 $1.69
</TABLE>
53
<PAGE> 61
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
CENTREVILLE, MD
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
CASH FLOW PROJECTIONS: 1994 1995 1996 1997 1998 1999 2000
- ---------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE:
Basic & Equipment
Revenue 2,867,158 3,266,153 3,879,951 4,560,845 4,938,601 5,409,922 5,973,438
Pay and Mini-Pay
Revenue 818,923 944,980 859,786 745,112 750,156 782,618 822,988
Sega Revenue - 5,414 41,088 38,342 41,917 164,568 207,669
Advertising Revenue 86,824 114,382 123,040 137,908 150,766 173,019 200,138
Other Revenue 284,331 333,075 438,784 427,900 467,797 536,843 620,989
---------------------------------------------------------------------------
Total Revenue 4,057,236 4,664,004 5,342,649 5,910,106 6,349,237 7,066,969 7,825,222
% Growth 15.0% 14.6% 10.6% 7.4% 11.3% 10.7%
EXPENSES:
Basic Programming
Costs 478,562 661,699 775,456 942,329 1,020,379 1,170,986 1,354,530
Pay Programming
Costs 444,068 524,646 420,459 412,099 427,336 459,202 497,377
Sega Programming
Costs - 1,590 16,199 14,838 16,222 63,688 80,368
Program Guide Costs 10,392 9,484 8,628 10,165 11,007 11,943 13,061
Franchise & License
Fees 194,285 209,504 225,877 256,203 275,239 306,353 339,223
Bad Debt Expense 76,907 56,738 33,754 71,512 76,826 85,510 94,685
Technical Expenses 304,253 448,354 394,378 356,478 370,737 385,567 400,990
Production/LO
Expenses - - - - - - -
Gen. & Admin
Expenses 396,107 463,270 567,155 546,454 526,508 507,291 488,775
Marketing Expenses 177,479 148,887 101,787 133,155 143,048 159,219 176,302
Advertising Sales
Expenses 65,230 64,179 79,581 69,436 75,911 87,115 100,770
---------------------------------------------------------------------------
Total Expenses 2,147,283 2,588,351 2,623,274 2,812,670 2,943,213 3,236,874 3,546,080
OPERATING CASH FLOW 1,909,953 2,075,653 2,719,375 3,097,435 3,406,023 3,830,095 4,279,142
% Margin 47.1% 44.5% 50.9% 52.4% 53.6% 54.2% 54.7%
% Growth 8.7% 31.0% 13.9% 10.0% 12.5% 11.7%
CAPITAL EXPENDITURES:
Rebuild/Upgrade
Costs - - - 6,618,511 6,618,511 - -
Trunk & Distribution
Costs 1,156,410 425,285 950,145 96,255 245,400 259,044 273,447
Make-Ready 176,345 81,573 1,150 - 6,593 6,960 7,347
Fiber Costs - Plant
and Headend 37,407 830,776 16,877 - - - -
Converters & Customer
Equipment 14,761 27,946 25,122 2,248 1,281 2,119 2,260
Customer Connect
Costs 306,965 329,310 331,527 272,706 295,294 320,395 350,399
Other Technical
Capital 71,740 173,478 28,378 171,325 185,515 201,285 220,135
Other Capital 5,466 43,550 5,129 15,024 16,268 17,651 19,304
---------------------------------------------------------------------------
Total Capital 1,769,094 1,911,918 1,358,748 7,176,070 7,368,863 807,453 872,892
Expenditures
NET CASH FLOW 140,859 163,735 1,360,627 (4,078,635)(3,962,840) 3,022,642 3,406,250
% Growth -2.8% -176.3% 12.7%
</TABLE>
<TABLE>
<CAPTION>
CASH FLOW PROJECTIONS: 2001 2002 2003 2004 2005 2006
- ---------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Basic & Equipment
Revenue 6,587,668 7,256,847 7,985,544 8,778,692 9,641,617 10,580,067
Pay and Mini-Pay
Revenue 864,394 906,857 950,399 995,043 1,040,813 1,087,732
Sega Revenue 261,740 329,518 414,407 433,874 499,214 573,890
Advertising Revenue 231,228 266,846 307,624 354,282 407,636 468,613
Other Revenue 717,455 827,970 954,497 1,099,267 1,264,814 1,454,014
----------------------------------------------------------------
Total Revenue 8,662,486 9,588,037 10,612,470 11,661,158 12,854,094 14,164,316
% Growth 10.7% 10.7% 10.7% 9.9% 10.2% 10.2%
EXPENSES:
Basic Programming
Costs 1,564,946 1,806,005 2,081,991 2,397,770 2,758,869 3,171,560
Pay Programming
Costs 538,072 581,440 627,638 676,835 729,206 784,941
Sega Programming
Costs 101,293 127,523 160,376 167,909 193,196 222,095
Program Guide Costs 14,267 15,567 16,967 18,474 20,097 21,843
Franchise & License
Fees 375,519 415,641 460,051 505,511 557,225 614,023
Bad Debt Expense 104,816 116,015 128,411 141,100 155,535 171,388
Technical Expenses 417,029 433,710 451,059 469,101 487,865 507,380
Production/LO
Expenses - - - - - -
Gen. & Admin
Expenses 470,934 453,745 437,184 421,226 405,852 391,038
Marketing Expenses 195,166 216,018 239,099 262,726 289,603 319,122
Advertising Sales
Expenses 116,423 134,357 154,889 178,381 205,245 235,947
----------------------------------------------------------------
Total Expenses 3,898,457 4,300,023 4,757,663 5,239,034 5,802,692 6,439,337
OPERATING CASH FLOW 4,764,020 5,288,014 5,854,807 6,422,124 7,051,402 7,724,978
% Margin 55.0% 55.2% 55.2% 55.1% 54.9% 54.5%
% Growth 11.3% 11.0% 10.7% 9.7% 9.8% 9.6%
CAPITAL EXPENDITURES:
Rebuild/Upgrade
Costs - - - - - -
Trunk & Distribution
Costs 288,651 304,700 321,641 339,524 358,402 378,329
Make-Ready 7,755 8,186 8,641 9,122 9,629 10,164
Fiber Costs - Plant
and Headend - - - - - -
Converters & Customer
Equipment 2,411 2,571 2,742 2,923 3,117 3,323
Customer Connect
Costs 382,749 417,613 455,171 495,615 539,148 585,991
Other Technical
Capital 240,458 262,362 385,957 311,365 338,715 368,143
Other Capital 21,087 23,007 25,077 27,305 29,703 32,284
----------------------------------------------------------------
Total Capital
Expenditures 943,110 1,018,439 1,099,229 1,185,854 1,278,714 1,378,234
NET CASH FLOW 3,820,909 4,269,575 4,755,578 5,236,270 5,772,688 6,346,744
% Growth 12.2% 11.7% 11.4% 10.1% 10.2% 9.9%
</TABLE>
54
<PAGE> 62
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
CENTREVILLE, MD
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
PV OF CASH FLOWS 1994 1995 1996 1997 1998 1999 2000
- ---------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
PROJECTED NET
CASH FLOW -4,078,635 -3,962,840 3,022,642 3,406,250
Value of Assets in
Year 10 assuming
OCF multiple of 8.0
Discount Rate 17.5%
PV OF CASH FLOW
STREAM 18,553,636
6.8 TIMES RUNNING RATE CASH FLOW
6.0 TIMES PROJECTED CASH FLOW
$1,505 PER SUBSCRIBER
</TABLE>
<TABLE>
<CAPTION>
PV OF CASH FLOWS 2001 2002 2003 2004 2005 2006
- ---------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PROJECTED NET
CASH FLOW 3,820,909 4,269,575 4,755,578 5,236,270 5,772,688 6,346,744
Value of Assets in
Year 10 assuming
OCF multiple of 61,799,825
Discount Rate
</TABLE>
55
<PAGE> 63
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
CENTREVILLE, MD
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
REVENUE ASSUMPTIONS: 1994 1995 1996 1997 1998 1999 2000
- -------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
HOMES PASSED:
Beginning 22,168 23,383 23,497 23,857 24,169 24,531 24,899
Ending 23,383 23,497 23,857 24,169 24,531 24,899 25,273
Change 1,215 114 360 312 363 368 373
% Change 5.5% 0.5% 2.0% 1.3% 1.5% 1.5% 1.5%
Average 22,776 23,440 23,677 24,013 24,350 24,715 25,086
BASIC SUBSCRIBERS:
Beginning 10,241 11,001 11,893 12,325 12,926 13,365 13,814
Ending 11,001 11,893 12,325 12,926 13,365 13,814 14,274
Change 760 892 432 601 439 449 460
% Change 7.4% 8.1% 4.8% 4.9% 3.4% 3.4% 3.3%
Average 10,621 11,447 12,109 12,625 13,145 13,590 14,044
Ending Penetration 47.0% 50.6% 51.7% 53.5% 54.5% 55.5% 56.5%
Monthly Basic Rev/Sub $22.50 $23.78 $26.70 $30.10 $31.31 $32.56 $33.86
% Change 5.7% 12.3% 12.7% 4.0% 4.0% 4.0%
PAY + MINI-PAY UNITS:
Beginning 9,003 9,250 8,643 7,440 7,292 7,540 7,793
Ending 9,250 8,643 7,440 7,292 7,540 7,793 8,053
Change 247 -607 -1,203 -148 248 254 259
% Change 2.7% -6.6% -18.6% -2.0% 3.4% 3.4% 3.3%
Average 9,127 8,947 8,042 7,366 7,416 7,667 7,923
Ending Penetration 84.1% 72.7% 60.4% 56.4% 56.4% 56.4% 56.4%
Monthly Pay Rev/Unit $7.48 $8.80 $8.91 $8.43 $8.43 $8.43 $8.43
% Change 17.7% 1.2% -5.4% 0.0% 0.0% 0.0%
SEGA REVENUE PER SUB $- $0.04 $0.28 $0.25 $0.27 $0.28 $0.29
% Change 0.0% 617.4% -10.5% 5.0% 5.0% 5.0%
ADVERTISING REVENUE PER SUB $0.68 $0.83 $0.85 $0.91 $0.96 $1.00 $1.05
% Change 22.2% 1.7% 7.5% 5.0% 5.0% 5.0%
OTHER REVENUE PER SUB $2.15 $2.33 $2.97 $2.82 $2.97 $3.11 $3.27
% Change 8.4% 27.1% -4.8% 5.0% 5.0% 5.0%
TOTAL REVENUE PER SUB $31.83 $33.95 $36.77 $39.01 $40.25 $41.71 $43.23
% Change 6.7% 8.3% 6.1% 3.2% 3.6% 3.6%
</TABLE>
<TABLE>
<CAPTION>
REVENUE ASSUMPTIONS: 2001 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
HOMES PASSED:
Beginning 25,273 25,652 26,036 26,427 26,823 27,226
Ending 25,652 26,036 26,427 26,823 27,226 27,634
Change 379 385 391 396 402 408
% Change 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
Average 25,462 25,844 26,232 26,625 27,025 27,430
BASIC SUBSCRIBERS:
Beginning 14,274 14,745 15,226 15,719 16,223 16,739
Ending 14,745 15,226 15,719 16,223 16,739 17,266
Change 471 482 493 504 516 527
% Change 3.3% 3.3% 3.2% 3.2% 3.2% 3.2%
Average 14,510 14,986 15,473 15,971 16,481 17,002
Ending Penetration 57.5% 58.5% 59.5% 60.5% 61.5% 62.5%
Monthly Basic Rev/Sub $35.22 $36.63 $38.09 $39.61 $41.20 $42.85
% Change 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
PAY + MINI-PAY UNITS:
Beginning 8,053 8,318 8,590 8,868 9,152 9,443
Ending 8,318 8,590 8,868 9,152 9,443 9,741
Change 266 272 278 284 291 298
% Change 3.3% 3.3% 3.2% 3.2% 3.2% 3.2%
Average 8,186 8,454 8,729 9,010 9,298 9,592
Ending Penetration 56.4% 56.4% 56.4% 56.4% 56.4% 56.4%
Monthly Pay Rev/Unit $8.43 $8.43 $8.43 $8.43 $8.43 $8.43
% Change 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
SEGA REVENUE PER SUB $0.31 $0.32 $0.34 $0.34 $0.37 $0.41
% Change 5.0% 5.0% 5.0% 0.0% 10.0% 10.0%
ADVERTISING REVENUE PER SUB $1.11 $1.16 $1.22 $1.28 $1.34 $1.41
% Change 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
OTHER REVENUE PER SUB $3.43 $3.60 $3.78 $3.97 $4.17 $4.38
% Change 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
TOTAL REVENUE PER SUB $44.82 $46.47 $48.19 $49.96 $51.85 $53.81
% Change 3.7% 3.7% 3.7% 3.7% 3.8% 3.8%
</TABLE>
56
<PAGE> 64
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
CENTREVILLE, MD
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
EXPENSE ASSUMPTIONS: 1994 1995 1996 1997 1998 1999 2000
- -------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
BASIC PROGRAMMING
PER SUB $3.75 $4.82 $5.34 $6.22 $6.47 $6.73 $7.00
% Change 28.3% 10.8% 16.6% 4.0% 4.0% 4.0%
PAY/MIN-PAY PROG.
PER UNIT $4.05 $4.89 $4.36 $4.66 $4.80 $4.95 $5.09
% Change 20.5% -10.8% 7.0% 3.0% 3.0% 3.0%
SEGA PROGRAMMING/
SEGA REVENUE 0.0% 29.4% 39.4% 38.7% 38.7% 38.7% 38.7%
PROGRAM GUIDE COST
PER SUB $0.08 $0.07 $0.06 $0.07 $0.07 $0.07 $0.08
% Change -15.3% -14.0% 13.0% 4.0% 4.0% 4.0%
FRANCHISE ACCESS
FEES/REVENUE 4.8% 4.5% 4.2% 4.3% 4.3% 4.3% 4.3%
BAD DEBT EXPENSE/
REVENUE 1.9% 1.2% 0.6% 1.2% 1.2% 1.2% 1.2%
TECHNICAL EXP.
GROWTH 47.4% -12.0% -9.6% 4.0% 4.0% 4.0%
PRODUCTION/LO
EXPENSE GROWTH 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
GEN & ADMIN
EXPENSE GROWTH 17.0% 22.4% -3.7% -3.7% -3.7% -3.7%
MARKETING EXP/
REVENUE 4.4% 3.2% 1.9% 2.3% 2.3% 2.3% 2.3%
AD SALES EXP/
AD REVENUE 75.1% 56.1% 64.7% 50.4% 50.4% 50.4% 50.4%
</TABLE>
<TABLE>
<CAPTION>
EXPENSE ASSUMPTIONS: 2001 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
BASIC PROGRAMMING
PER SUB $7.28 $7.57 $7.87 $8.18 $8.51 $8.85
% Change 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
PAY/MIN-PAY PROG.
PER UNIT $5.25 $5.40 $5.57 $5.73 $5.91 $6.08
% Change 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
SEGA PROGRAMMING/
SEGA REVENUE 38.7% 38.7% 38.7% 38.7% 38.7% 38.7%
PROGRAM GUIDE COST
PER SUB $0.08 $0.08 $0.08 $0.09 $0.09 $0.10
% Change 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
FRANCHISE ACCESS
FEES/REVENUE 4.3% 4.3% 4.3% 4.3% 4.3% 4.3%
BAD DEBT EXPENSE/
REVENUE 1.2% 1.2% 1.2% 1.2% 1.2% 1.2%
TECHNICAL EXP.
GROWTH 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
PRODUCTION/LO
EXPENSE GROWTH 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
GEN & ADMIN
EXPENSE GROWTH -3.7% -3.7% -3.7% -3.7% -3.7% -3.7%
MARKETING EXP/
REVENUE 2.3% 2.3% 2.3% 2.3% 2.3% 2.3%
AD SALES EXP/
AD REVENUE 50.4% 50.4% 50.4% 50.4% 50.4% 50.4%
</TABLE>
57
<PAGE> 65
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
CENTREVILLE, MD
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
CAPITAL EXPENDITURES: 1994 1995 1996 1997 1998 1999 2000
- --------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
MILES OF PLANT:
Beginning 578.59 630.15 635.93 649.75 654.40 664.22 674.18
Ending 630.15 635.93 649.75 654.40 664.22 674.18 684.29
Change 51.56 5.78 13.82 4.65 9.82 9.96 10.11
Average 604.37 633.04 642.84 652.08 659.31 669.20 679.24
Homes/Mile 37.1 36.9 36.7 36.9 36.9 36.9 36.9
CONVERTERS:
Beginning 1,916 1,796 1,625 1,838 1,960 2,026 2,094
Ending 1,796 1,625 1,838 1,960 2,026 2,094 2,164
Change (120) (171) 213 122 67 68 70
Average 1,856 1,711 1,732 1,899 1,993 2,060 2,129
Ending Penetration 16.9% 14.2% 15.2% 15.2% 15.2% 15.2% 15.2%
REBUILD CAPITAL:
UG Miles 189.6
Aerial Miles 460.2
Cost/UG Mile $-
Cost/Aerial Mile $-
Other Rebuild Costs $-
TRUNK & DISTRIBUTION/
NEW MILE $35,580 $20,700 $25,000 $26,000 $27,040
(3-Year average)
MAKE-READY/MILE $291.78 $128.86 $2.44 $- $10.00 $10.40 $10.82
CONV & CUST EQUIP/
NEW CONVERTER $- $- $117.94 $18.50 $19.24 $20.01 $20.81
CUST. CONNECT
COSTS/SUB $28.90 $28.77 $27.38 $21.60 $22.46 $23.36 $24.30
OTHER TECHNICAL
CAPITAL/SUB $6.75 $15.15 $2.34 $13.57 $14.11 $14.68 $15.26
OTHER CAPITAL/SUB $0.51 $3.80 $0.42 $1.19 $1.24 $1.29 $1.34
</TABLE>
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES: 2001 2002 2003 2004 2005 2006
- --------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
MILES OF PLANT:
Beginning 684.29 694.56 704.97 715.55 726.28 737.18
Ending 694.56 704.97 715.55 726.28 737.18 748.23
Change 10.26 10.42 10.57 10.73 10.89 11.06
Average 689.42 699.77 710.26 720.92 731.73 742.71
Homes/Mile 36.9 36.9 36.9 36.9 36.9 36.9
CONVERTERS:
Beginning 2,164 2,235 2,308 2,383 2,459 2,538
Ending 2,235 2,308 2,383 2,459 2,538 2,618
Change 71 73 75 76 78 80
Average 2,200 2,272 2,346 2,421 2,498 2,578
Ending Penetration 15.2% 15.2% 15.2% 15.2% 15.2% 15.2%
TRUNK & DISTRIBUTION/
NEW MILE $28,122 $29,246 $30,416 $31,633 $32,898 $34,214
(3-Year average)
MAKE-READY/MILE $11.25 $11.70 $12.17 $12.65 $13.16 $13.69
CONV & CUST EQUIP/
NEW CONVERTER $21.64 $22.51 $23.41 $24.34 $25.32 $26.33
CUST. CONNECT
COSTS/SUB $25.27 $26.28 $27.33 $28.42 $29.56 $30.74
OTHER TECHNICAL
CAPITAL/SUB $15.87 $16.51 $17.17 $17.86 $18.57 $19.31
OTHER CAPITAL/SUB $1.39 $1.45 $1.51 $1.57 $1.63 $1.69
</TABLE>
58
<PAGE> 66
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
CENTREVILLE, MD
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL --------- ---------
CASH FLOW PROJECTIONS: 1994 1995 1996 1997 1998 1999 2000
- ---------------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE:
Basic & Equipment
Revenue 2,867,158 3,266,153 3,879,951 4,560,845 4,938,601 5,309,755 5,706,915
Pay and Mini-Pay
Revenue 818,923 944,980 859,786 745,112 750,156 775,513 801,461
Sega Revenue - 5,414 41,088 38,342 41,917 45,500 49,374
Advertising Revenue 86,824 114,382 123,040 137,908 150,766 163,655 177,587
Other Revenue 284,331 333,075 438,784 427,900 467,797 507,789 551,019
---------------------------------------------------------------------------
Total Revenue 4,057,236 4,664,004 5,342,649 5,910,106 6,349,237 6,802,213 7,286,356
% Growth 15.0% 14.6% 10.6% 7.4% 7.1% 7.1%
EXPENSES:
Basic Programming
Costs 478,562 661,699 775,456 942,329 1,020,379 1,097,064 1,179,122
Pay Programming
Costs 444,068 524,646 420,459 412,099 427,336 455,034 484,367
Sega Programming
Cost - 1,590 16,199 14,838 16,222 17,609 19,108
Program Guide
Costs 10,392 9,484 8,628 10,165 11,007 11,835 12,720
Franchise & License
Fees 194,285 209,504 225,877 256,203 275,239 294,876 315,864
Bad Debt Expense 76,907 56,738 33,754 71,512 76,826 82,307 88,165
Technical Expenses 304,253 448,354 394,378 356,478 370,737 385,567 400,990
Production/LO
Expenses - - - - - - -
Gen. & Admin
Expenses 396,107 463,270 567,155 546,454 526,508 507,291 488,775
Marketing Expenses 177,479 148,887 101,787 133,155 143,048 153,254 164,162
Advertising Sales
Expenses 65,230 64,179 79,581 69,436 75,911 82,400 89,415
---------------------------------------------------------------------------
Total Expenses 2,147,283 2,588,351 2,623,274 2,812,670 2,943,213 3,087,235 3,242,686
OPERATING CASH FLOW 1,909,953 2,075,653 2,719,375 3,097,435 3,406,023 3,714,977 4,403,670
% Margin 47.1% 44.5% 50.9% 52.4% 53.6% 54.6% 55.5%
% Growth 8.7% 31.0% 13.9% 10.0% 9.1% 8.8%
CAPITAL EXPENDITURES:
Rebuild/Upgrade Costs - - - 1,272,693 - - -
Trunk & Distribution
Costs 1,156,410 425,285 950,145 96,255 245,400 259,044 273,447
Make-Ready 176,345 81,573 1,570 - 6,593 6,960 7,347
Fiber Costs - Plant
and Headend 37,407 830,776 16,877 - - - -
Converters and
Customer Equipment 14,761 27,946 25,122 2,248 1,281 1,363 1,451
Customer Connect
Costs 306,965 329,310 331,527 272,706 295,294 317,486 341,233
Other Technical
Capital 71,740 173,478 28,378 171,325 185,515 199,458 214,377
Other Capital 5,466 43,550 5,129 15,024 16,268 17,491 18,799
---------------------------------------------------------------------------
Total Capital
Expenditures 1,769,094 1,911,918 1,358,748 1,830,252 750,352 801,802 856,654
NET CASH FLOW 140,859 163,735 1,360,627 1,267,183 2,655,672 2,913,175 3,187,016
% Growth 109.6% 9.7% 9.4%
</TABLE>
<TABLE>
<CAPTION>
CASH FLOW PROJECTIONS: 2001 2002 2003 2004 2005 2006
- ---------------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Basic & Equipment
Revenue 6,131,824 6,586,341 7,072,444 7,592,242 8,147,977 8,742,040
Pay and Mini-Pay
Revenue 828,014 855,182 882,980 911,419 940,512 970,273
Sega Revenue 53,560 58,083 62,970 64,998 73,780 83,726
Advertising Revenue 192,644 208,914 226,490 245,473 265,975 288,111
Other Revenue 597,738 648,218 702,753 761,656 825,267 893,951
----------------------------------------------------------------
Total Revenue 7,803,779 8,356,738 8,947,636 9,575,788 10,253,511 10,978,100
% Growth 7.1% 7.1% 7.1% 7.0% 7.1% 7.1%
EXPENSES:
Basic Programming
Costs 1,266,914 1,360,823 1,461,258 1,568,655 1,683,477 1,806,218
Pay Programming
Costs 515,426 548,308 583,115 619,953 658,934 700,179
Sega Programming
Cost 20,728 22,478 24,369 25,154 28,553 32,402
Program Guide
Costs 13,667 14,680 15,763 16,922 18,160 19,485
Franchise & License
Fees 338,294 362,265 387,880 415,110 444,490 475,901
Bad Debt Expense 94,426 101,117 108,266 115,867 124,067 132,835
Technical Expenses 417,029 433,710 451,059 469,101 487,865 507,380
Production/LO
Expenses - - - - - -
Gen. & Admin
Expenses 470,934 453,745 437,184 421,226 405,852 391,038
Marketing Expenses 175,819 188,277 201,590 215,742 231,012 247,337
Advertising Sales
Expenses 96,996 105,188 114,037 123,596 133,918 145,064
----------------------------------------------------------------
Total Expenses 3,410,233 3,590,591 3,784,522 3,991,327 4,216,329 4,457,837
OPERATING CASH FLOW 4,393,546 4,766,146 5,163,144 5,584,461 6,037,182 6,520,263
% Margin 56.3% 57.0% 57.7% 58.3% 58.9% 59.4%
% Growth 8.7% 8.5% 8.3% 8.2% 8.1% 8.0%
CAPITAL EXPENDITURES:
Rebuild/Upgrade Costs - - - - - -
Trunk & Distribution
Costs 288,651 304,700 321,641 339,524 358,402 378,329
Make-Ready 7,755 8,186 8,641 9,122 9,629 10,164
Fiber Costs - Plant
and Headend - - - - - -
Converters and
Customer Equipment 1,544 1,643 1,748 1,860 1,979 2,105
Customer Connect
Costs 366,640 393,817 422,882 453,963 487,192 522,712
Other Technical
Capital 230,338 247,412 265,672 285,198 306,074 328,389
Other Capital 20,199 21,696 23,298 25,010 26,841 28,798
----------------------------------------------------------------
Total Capital
Expenditures 915,127 977,454 1,043,883 1,114,677 1,190,116 1,270,498
NET CASH FLOW 3,478,419 3,788,692 4,119,231 4,469,784 4,847,066 5,249,765
% Growth 9.1% 8.9% 8.7% 8.5% 8.4% 8.3%
</TABLE>
59
<PAGE> 67
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
CENTREVILLE, MD
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL --------- ---------
PV OF CASH FLOWS 1994 1995 1996 1997 1998 1999 2000
- ---------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PROJECTED NET
CASH FLOW 1,267,183 2,655,672 2,913,175 3,187,016
Value of Assets
in Year 10
assuming OCF
multiple of 8.0
Discount Rate 17.5%
PV OF CASH
FLOW STREAM 24,605,420
9.0 TIMES TRAILING CASH FLOW
7.9 TIMES PROJECTED CASH FLOW
$1,996 PER SUBSCRIBER
</TABLE>
<TABLE>
<CAPTION>
PV OF CASH FLOWS 2001 2002 2003 2004 2005 2006
- ---------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PROJECTED NET
CASH FLOW 3,478,419 3,788,692 4,119,231 4,469,784 4,847,066 5,249,765
Value of Assets
in Year 10
assuming OCF
multiple of 52,162,104
Discount Rate
</TABLE>
60
<PAGE> 68
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
CASH FLOW MULTIPLE AND ADJUSTED CASH FLOW MULTIPLE APPROACHES
As discussed previously, the Cable System generated revenue of
$5,342,649 and operating cash flow of $2,719,375 in 1996, for an actual
operating cash flow margin of 50.9%.
The current operating cash flow multiples indicated by the market
range from 6 to 11 times, based on transactions which have been announced
in recent months. In order to determine the respective appropriate cash
flow multiples to apply to the cash flow and to the adjusted cash flow of
the Cable System, the following factors must be considered:
o The Cable System has experienced strong growth in basic subscribers
during the past few years.
o The cable plant does not need an immediate rebuild, as the 450 MHz
plant has some room to add channels. However, Partnership management
has estimated that a rebuild would cost in excess of $13,000,000.
o The current rates of the Cable System are reasonable, given the
level of service provided in each system.
o The operating cash flow margin approximates 50 percent, a normal
level by industry standards, leaving some perceived potential for
improvement by a buyer. A typical buyer would likely not adjust this
margin significantly in determining the potential cash flow that
such a buyer would be able to consistently generate from this Cable
System.
Based on these factors, as well as on CEA's recent experience in the cable
system transaction market, it is CEA's opinion that the following cash
flow multiples are appropriate in valuing the Cable System:
<TABLE>
<S> <C>
Operating Cash Flow Multiple 9.0
Adjusted Operating Cash Flow Multiple 9.0
</TABLE>
Applying these multiples respectively to the actual operating cash
flow and to the adjusted operating cash flow of the Cable System yields
the following calculations:
<TABLE>
<S> <C>
Cash Flow Multiple Approach:
Actual Operating Cash Flow $ 2,719,375
Operating Cash Flow Multiple x 9.0
------------
Value Indication $ 24,474,375
</TABLE>
61
<PAGE> 69
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
<TABLE>
<S> <C>
Adjusted Cash Flow Multiple Approach:
Actual Revenue $ 5,342,644
Adjusted Margin x 50%
------------
Adjusted Operating Cash Flow $ 2,671,325
Operating Cash Flow Multiple x 9.0
------------
Value Indication $ 24,041,921
</TABLE>
SUBSCRIBER MULTIPLE APPROACH
Based on CEA's recent experience in the cable system transaction
market, it is CEA's opinion that a buyer would expect the typical cable
system to generate just over $33.00 per month in total revenue, operate at
a 50% cash flow margin, and be valued at approximately 9 times this
operating cash flow. Based on these parameters, a buyer would be willing
to pay approximately $1,800 per subscriber for this typical cable system.
Applying this per-subscriber value to the subject Cable System results in
the following calculation:
<TABLE>
<S> <C>
Basic Subscribers 12,325
Per Subscriber Multiple x $ 1,800
-------------
Value Indication $ 22,185,000
</TABLE>
REBUILD CASH FLOW MULTIPLE APPROACH
Based on CEA's recent experience in the cable system transaction
market, it is CEA's opinion that a typical fully-rebuilt, state-of-the-art
cable system could reasonably be expected to sell, on average, for
approximately 10.5 times operating cash flow. For cable systems in need of
rebuild, a buyer would likely be willing to pay approximately 10.5 times
operating cash flow less the cost of the rebuild. Therefore, to estimate
the value of the Cable System using the Rebuild Cash Flow Multiple
Approach, CEA multiplied 1996 operating cash flow by 10.5 and subtracted
the estimated cost to rebuild the Cable System, as follows:
<TABLE>
<S> <C>
1996 Operating Cash Flow $ 2,719,375
Rebuild Operating Cash Flow Multiple x 10.5
-------------
Value of System After Rebuild 28,553,438
less: Cost of Rebuild (13,204,000)
-------------
Value Indication $ 15,349,438
</TABLE>
62
<PAGE> 70
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
VALUE CONCLUSIONS -- CENTREVILLE, MD
CEA used two variations of the discounted cash flow approach, and four
variations of the market approach to determine six indications of the value of
the Cable System. These value indications are summarized as follows:
<TABLE>
<S> <C>
Rebuild DCF Approach $18,553,636
No Rebuild DCF Approach $24,605,420
Cash Flow Multiple Approach $24,474,375
Adjusted Cash Flow Multiple Approach $24,041,921
Subscriber Multiple Approach $22,185,000
Rebuild Cash Flow Multiple Approach $15,349,438
VALUE CONCLUSION $23,000,000
</TABLE>
Therefore, based on this analysis, it is CEA's opinion that, as of
December 31, 1996, the fair market value of the Centreville, MD Cable System is
$23,000,000.
63
<PAGE> 71
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
SOMERSET, KY
SYSTEM OVERVIEW -- SOMERSET, KY
SYSTEM DESCRIPTION
The Partnership owns the Cable System that serves Somerset,
Kentucky, as well as the Kentucky towns of Burnside, Columbia, Eubank,
London, and McKinney. As of December 31, 1996, the Cable System passed
22,060 homes with 833 miles of plant, and served 19,296 basic subscribers
from five headends. Relevant subscriber statistics as of December 31, 1996
are displayed in the following table.
<TABLE>
<CAPTION>
Homes Basic Basic Pay Pay
As of 12/31/96 Passed Subscribers Penetration Units Penetration
-------------- ------ ----------- ----------- ----- -----------
<S> <C> <C> <C> <C> <C>
Somerset, KY 22,060 19,296 87.5% 3,914 20.3%
</TABLE>
The largest headend, in Burnside, operates at 300 MHz, 40-channel
capacity, offers 40 channels of programming, and serves about 14,000
subscribers. The remaining four headends operate at capacities of 270 to
400 MHz.
HOME AND SUBSCRIBER GROWTH
During the past few years, the Cable System has experienced no home
growth, but basic subscribers have increased slightly. The Company's home
and subscriber growth history is displayed below.
<TABLE>
<CAPTION>
1994 1995 1996 CAGR 94-96
---- ---- ---- ----------
<S> <C> <C> <C> <C>
Homes Passed 22,120 22,015 22,060 -0.1%
Basic Subscribers 18,650 19,226 19,296 1.7%
</TABLE>
FINANCIAL SUMMARY
For the year ended December 31, 1996, the Somerset, KY Cable System
generated total revenue of $7,090,880 and operating cash flow of
$3,988,486, resulting in a 56.2% operating cash flow margin.
64
<PAGE> 72
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
VALUATION -- SOMERSET, KY
DISCOUNTED CASH FLOW APPROACHES
Financial projections, including all assumptions regarding
operations and future capital expenditures, relating to the Rebuild DCF
Approach and to the No Rebuild DCF Approach are displayed on the following
ten pages. These projections were prepared by CEA based on certain
information provided by the Partnership, including, but not limited to,
the Partnership's 1997 budget for the Cable System.
The discount rate used in this analysis was derived using a weighted
average cost of capital. Based on CEA's recent experience in the cable
system transaction market, it is CEA's opinion that equity investors in
cable systems would likely require a 25 percent return in order to justify
the equity investment. Additionally, based on CEA's recent experience in
raising debt financing for cable operators, a lender would likely charge
an interest rate of approximately 10 percent and would likely be willing
to lend up to 50 percent of asset value at that rate. Thus, the likely
weighted average cost of capital for the subject Cable System can be
calculated as follows:
<TABLE>
<S> <C> <C> <C>
50 percent debt at a rate of 10% = .50 x 10% = 5.0%
50 percent equity at a rate of 25% = .50 x 25% = 12.5%
Total Cost of Capital = 17.5%
</TABLE>
The terminal value of the Cable System was calculated as the price
at which the cable assets might sell at the end of the ten-year projection
period, based on a multiple of the operating cash flow of the Cable System
at that time. The cash flow multiple used reflects the expected growth of
cash flow in the Cable System after year ten, as well as the return on
debt and equity capital that would likely be required by investors at that
time given the expected risk of the investment at that time.
Based on the calculations displayed on the following pages, the
discounted cash flow approaches indicate fair market values for the Cable
System as follows:
<TABLE>
<S> <C>
Rebuild DCF Approach $27,365,438
No Rebuild DCF Approach $32,577,831
</TABLE>
65
<PAGE> 73
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
SOMERSET, KY
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
REVENUE ASSUMPTIONS: 1994 1995 1996 1997 1998 1999 2000
- -------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
HOMES PASSED:
Beginning 21,577 22,120 22,015 22,060 22,060 22,391 22,727
Ending 22,120 22,015 22,060 22,060 22,391 22,727 23,068
Change 543 -105 45 0 331 336 341
% Change 2.5% -0.5% 0.3% 0.0% 1.5% 1.5% 1.5%
Average 21,849 22,068 22,038 22,060 22,225 22,559 22,897
BASIC SUBSCRIBERS:
Beginning 18,134 18,650 19,226 19,296 19,550 19,899 20,311
Ending 18,650 19,226 19,296 19,550 19,899 20,311 20,731
Change 516 576 70 254 349 412 420
% Change 2.8% 3.1% 0.5% 1.3% 1.8% 2.1% 2.1%
Average 18,392 18,938 19,261 19,423 19,724 20,105 20,521
Ending Penetration 84.3% 87.3% 87.5% 88.6% 88.9% 89.4% 89.9%
Monthly Basic
Rev/Sub $22.29 $22.75 $24.88 $27.70 $29.09 $30.83 $32.68
% Change 2.1% 9.4% 11.3% 5.0% 6.0% 6.0%
PAY + MINI-PAY UNITS:
Beginning 4,291 4,840 5,170 3,914 3,999 4,070 4,155
Ending 4,840 5,170 3,914 3,999 4,070 4,155 4,241
Change 549 330 -1,256 85 71 84 86
% Change 12.8% 6.8% -32.4% 2.2% 1.8% 2.1% 2.1%
Average 4,566 5,005 4,542 3,956 4,035 4,112 4,198
Ending Penetration 26.0% 26.9% 20.3% 20.5% 20.5% 20.5% 20.5%
Monthly Pay
Rev/Unit $7.52 $8.43 $8.53 $8.80 $8.80 $8.80 $8.80
% Change 12.1% 1.1% 3.2% 0.0% 0.0% 0.0%
PPV REVENUE PER SUB $0.03 $0.03 $0.05 $0.05 $0.05 $1.00 $1.20
% Change 0.0% 0.0% -11.0% 5.0% 20.0% 20.0%
ADVERTISING REVENUE
PER SUB $1.16 $1.31 $1.49 $1.66 $1.74 $1.92 $2.11
% Change 12.6% 14.1% 11.3% 5.0% 10.0% 10.0%
OTHER REVENUE PER SUB $1.31 $1.38 $2.24 $1.56 $1.64 $1.80 $1.98
% Change 5.2% 62.4% -30.4% 5.0% 10.0% 10.0%
TOTAL REVENUE PER SUB $26.68 $27.72 $30.68 $32.76 $34.31 $37.35 $39.77
% Change 3.9% 10.7% 6.8% 4.7% 8.8% 6.5%
</TABLE>
<TABLE>
<CAPTION>
REVENUE ASSUMPTIONS: 2001 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
HOMES PASSED:
Beginning 23,068 23,414 23,765 24,121 24,483 24,850
Ending 23,414 23,765 24,121 24,483 24,850 25,223
Change 346 351 356 362 367 373
% Change 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
Average 23,241 23,589 23,943 24,302 24,667 25,037
BASIC SUBSCRIBERS:
Beginning 20,731 21,159 21,595 22,040 22,493 22,954
Ending 21,159 21,595 22,040 22,493 22,954 23,425
Change 428 436 445 453 462 470
% Change 2.1% 2.1% 2.1% 2.1% 2.1% 2.0%
Average 20,945 21,377 21,817 22,266 22,724 23,190
Ending Penetration 90.4% 90.9% 91.4% 91.9% 92.4% 92.9%
Monthly Basic
Rev/Sub $34.64 $36.72 $38.92 $41.26 $43.73 $46.36
% Change 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%
PAY + MINI-PAY UNITS:
Beginning 4,241 4,328 4,417 4,508 4,601 4,695
Ending 4,328 4,417 4,508 4,601 4,695 4,792
Change 88 89 91 93 94 96
% Change 2.1% 2.1% 2.1% 2.1% 2.1% 2.0%
Average 4,284 4,373 4,463 4,555 4,648 4,743
Ending Penetration 20.5% 20.5% 20.5% 20.5% 20.5% 20.5%
Monthly Pay
Rev/Unit $8.80 $8.80 $8.80 $8.80 $8.80 $8.80
% Change 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
PPV REVENUE PER SUB $1.44 $1.73 $2.07 $2.49 $2.99 $3.58
% Change 20.0% 20.0% 20.0% 20.0% 20.0% 20.0%
ADVERTISING REVENUE
PER SUB $2.32 $2.55 $2.81 $3.09 $3.40 $3.74
% Change 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
OTHER REVENUE PER SUB $2.18 $2.39 $2.63 $2.90 $3.19 $3.51
% Change 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
TOTAL REVENUE PER SUB $42.38 $45.20 $48.24 $51.54 $55.11 $58.99
% Change 6.6% 6.6% 6.7% 6.8% 6.9% 7.0%
</TABLE>
66
<PAGE> 74
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
SOMERSET, KY
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
EXPENSE ASSUMPTIONS: 1994 1995 1996 1997 1998 1999 2000
- -------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
BASIC PROGRAMMING
PER SUB $2.98 $3.54 $4.00 $4.95 $5.15 $5.57 $6.01
% Change 18.7% 13.2% 23.7% 4.0% 8.0% 8.0%
PAY/MIN-PAY PROG.
PER UNIT $4.29 $4.58 $4.61 $4.98 $5.13 $5.29 $5.45
% Change 6.9% 0.7% 8.1% 3.0% 3.0% 3.0%
PPV PROGRAMMING/PPV
REVENUE 0.0% -3.5% 56.5% 52.0% 52.0% 52.0% 52.0%
PROGRAM GUIDE COST
PER SUB $0.07 $0.09 $0.05 $0.01 $0.01 $0.01 $0.01
% Change 23.3% -49.3% -77.0% 5.0% 5.0% 5.0%
FRANCHISE, ACCESS FEES/
REVENUE 3.9% 4.2% 3.9% 4.0% 4.0% 4.0% 4.0%
BAD DEBT EXPENSE/
REVENUE 1.6% 1.0% 0.7% 1.4% 1.4% 1.4% 1.4%
TECHNICAL EXP. GROWTH 2.8% 11.3% 10.9% 4.0% 4.0% 4.0%
PRODUCTION/LO EXPENSE
GROWTH 0.0% 0.0% 18.0% 4.0% 4.0% 4.0%
GEN & ADMIN EXPENSE
GROWTH 0.0% 11.3% 10.7% 4.0% 4.0% 4.0%
MARKETING EXP/REVENUE 1.9% 1.0% 1.4% 2.0% 2.0% 2.0% 2.0%
AD SALES EXP/AD
REVENUE 41.4% 33.7% 18.9% 29.5% 29.5% 29.5% 29.5%
</TABLE>
<TABLE>
<CAPTION>
EXPENSE ASSUMPTIONS: 2001 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
BASIC PROGRAMMING
PER SUB $6.49 $7.01 $7.57 $8.18 $8.83 $9.54
% Change 8.0% 8.0% 8.0% 8.0% 8.0% 8.0%
PAY/MINI-PAY PROG.
PER UNIT $5.61 $5.78 $5.95 $6.13 $6.31 $6.50
% Change 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
PPV PROGRAMMING/PPV
REVENUE 52.0% 52.0% 52.0% 52.0% 52.0% 52.0%
PROGRAM GUIDE COST
PER SUB $0.01 $0.01 $0.01 $0.01 $0.02 $0.02
% Change 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
FRANCHISE ACCESS FEES/
REVENUE 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
BAD DEBT EXPENSE/
REVENUE 1.4% 1.4% 1.4% 1.4% 1.4% 1.4%
TECHNICAL EXP. GROWTH 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
PRODUCTION/LO EXPENSE
GROWTH 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
GEN & ADMIN EXPENSE
GROWTH 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
MARKETING EXP/REVENUE 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
AD SALES EXP/AD
REVENUE 29.5% 29.5% 29.5% 29.5% 29.5% 29.5%
</TABLE>
67
<PAGE> 75
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
SOMERSET, KY
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
CAPITAL EXPENDITURES: 1994 1995 1996 1997 1998 1999 2000 2001
- -------------------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MILES OF PLANT:
Beginning 794.50 833.00 831.50 834.50 834.50 847.02 859.72 872.62
Ending 833.00 831.50 834.50 834.50 847.02 859.72 872.62 885.71
Change 38.50 (1.50) 3.00 - 12.52 12.71 12.90 13.09
Average 813.75 832.25 833.00 834.50 840.76 853.37 866.17 879.16
Homes/Mile 26.6 26.5 26.4 26.4 26.4 26.4 26.4 26.4
CONVERTERS:
Beginning 4,515 4,715 4,969 5,132 5,196 5,289 5,399 5,510
Ending 4,715 4,969 5,132 5,196 5,289 5,399 5,510 5,624
Change 200 254 163 64 93 110 112 114
Average 4,615 4,842 5,051 5,164 5,243 5,344 5,454 5,567
Ending Penetration 25.6% 26.2% 26.6% 26.6% 26.6% 26.6% 26.6% 26.6%
REBUILD CAPITAL:
UG Miles 18.00 69.5% based on numbers provided by Falcon
Aerial Miles 816.50 69.5% based on numbers provided by Falcon
Total Rebuild Costs:
Cost/UG Miles $22,500 140,738 140,738 11,332,509
Cost/Aerial Mile $16,500 4,681,607 4,681,607
Other Rebuild Costs 17.5% 843,910 843,910
TRUNK & DISTRIBUTION/
NEW MILE
(3-Year average) $21,718 $22,000 $22,880 $23,795 $24,747
MAKE-READY/MILE $163.74 $99.51 $24.01 $ - $10.00 $10.40 $10.82 $11.25
CONV & CUST EQUIP/
NEW CONVERTER $658.78 $618.14 $1,276.00 $456.00 $474.24 $493.21 $512.94 $553.46
CUST. CONNECT
COSTS/SUB $5.03 $4.04 $9.70 $7.68 $7.99 $8.31 $8.64 $8.98
OTHER TECHNICAL
CAPITAL/SUB $4.37 $4.55 $2.24 $5.90 $6.14 $6.38 $6.64 $6.90
OTHER CAPITAL/
SUB $4.75 $2.19 $0.47 $2.85 $2.96 $3.08 $3.21 $3.33
</TABLE>
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
MILES OF PLANT:
Beginning 885.71 898.99 912.48 926.17 940.06
Ending 898.99 912.48 926.17 940.06 954.16
Change 13.29 13.48 13.69 13.89 14.10
Average 892.35 905.74 919.32 933.11 947.11
Homes/Mile 26.4 26.4 26.4 26.4 26.4
CONVERTERS:
Beginning 5,624 5,740 5,858 5,979 6,101
Ending 5,740 5,858 5,979 6,101 6,226
Change 116 118 120 123 125
Average 5,682 5,799 5,918 6,040 6,164
Ending Penetration 26.6% 26.6% 26.6% 26.6% 26.6%
REBUILD CAPITAL:
UG Miles, % Rebuilt
Aerial Miles, %
Cost/UG Miles
Cost/Aerial Mile
Oher Rebuild Costs
TRUNK & DISTRIBUTION/
NEW MILE
(3-Year average) $25,737 $26,766 $27,837 $28,950 $30,109
MAKE-READY/MILE $11.70 $12.17 $12.65 $13.16 $13.69
CONV & CUST EQUIP/
CONVERTER $554.79 $576.99 $600.06 $624.07 $649.03
CUST. CONNECT
COSTS/SUB $9.34 $9.72 $10.11 $10.51 $10.93
OTHER TECHNICAL
CAPITAL/SUB $7.18 $7.47 $7.76 $8.07 $8.40
OTHER CAPITAL/
SUB $3.47 $3.61 $3.75 $3.90 $4.06
</TABLE>
68
<PAGE> 76
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
SOMERSET, KY
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
BUDGET PROJECTED:
ACTUAL ACTUAL ACTUAL ---------- ----------
CASH FLOW PROJECTIONS: 1994 1995 1996 1997 1998 1999 2000
- -------------------------------- --------- --------- --------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE:
Basic & Equipment Revenue 4,919,375 5,170,726 5,751,113 6,456,379 6,884,395 7,438,297 8,047,762
Pay and Mini-Pay Revenue 412,066 506,563 464,906 417,726 425,977 434,198 443,183
PPV Revenue 7,417 6,818 11,912 10,691 11,399 241,258 295,501
Advertising Revenue 256,444 297,294 345,077 387,297 412,972 463,036 519,881
Other Revenue 293,009 317,810 517,872 363,068 387,137 434,069 487,357
--------- --------- --------- --------- ---------- ---------- ---------
Total Revenue 5,888,311 6,299,211 7,090,880 7,635,160 8,121,880 9,010,858 9,793,784
% Growth 7.0% 12.6% 7.7% 6.4% 10.9% 8.7%
EXPENSES:
Basic Programming Costs 657,702 803,806 925,578 1,154,837 1,219,668 1,342,663 1,480,085
Pay Proramming Costs 234,780 275,154 251,372 236,591 248,502 260,897 274,285
PPV Programming Costs 4,149 (237) 6,730 5,559 5,928 125,454 153,661
Program Guide Costs 16,367 20,788 10,712 2,484 2,649 2,835 3,039
Franchise & License Fees 229,703 266,704 273,727 304,261 323,657 359,083 390,278
Bad Debt Expense 96,890 65,460 51,395 104,983 111,676 123,899 134,663
Technical Expenses 665,998 684,850 762,091 844,778 878,569 913,712 950,260
Production/LO Expenses 24,793 29,699 33,994 40,113 41,717 43,386 45,122
Gen. & Admin Expenses 556,149 556,363 619,042 685,094 712,498 740,997 770,637
Marketing Expenses 111,412 60,221 102,689 153,696 163,493 181,389 197,147
Advertising Sales Expenses 106,106 100,244 65,064 114,253 121,827 136,596 153,365
--------- --------- --------- --------- ---------- ---------- ---------
Total Expenses 2,704,049 2,863,052 3,102,394 3,646,649 3,830,184 4,230,912 4,552,542
OPERATING CASH FLOW 3,184,262 3,436,159 3,988,486 3,988,510 4,291,696 4,779,947 5,241,142
% Margin 54.1% 54.5% 56.2% 52.5% 52.8% 53.0% 53.5%
% Growth 7.9% 16.1% 0.0% 7.6% 11.4% 9.6%
CAPITAL EXPENDITURES:
Rebuild/Upgrade Costs - - - 5,666,255 5,666,255 -
Trunk & Distribution Costs 475,844 140,803 252,057 239,705 275,385 290,696 306,859
Make-Ready 133,245 82,814 20,003 - 8,408 8,875 9,369
Fiber Costs - Plant and Headend - 1,014,698 17,215 - - - -
Converters & Customer Equipment 131,756 157,008 207,988 29,310 44,020 54,026 57,263
Customer Connect Costs 92,578 76,545 186,887 149,167 157,541 167,005 177,279
Other Technical Capital 80,306 86,181 43,191 114,594 121,028 128,298 136,191
Other Capital 87,428 41,393 9,121 55,355 58,462 61,974 65,787
--------- --------- --------- --------- ---------- ---------- ---------
Total Capital Expenditures 1,001,157 1,599,442 736,462 6,254,386 6,331,099 710,875 752,748
NET CASH FLOW 2,183,105 1,836,717 3,252,024 (2,265,876) (2,039,402) 4,069,072 4,488,395
% Growth -10.0% -299.5% 10.3%
</TABLE>
<TABLE>
<CAPTION>
CASH FLOW PROJECTIONS: 2001 2002 2003 2004 2005 2006
- ------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Basic & Equipment Revenue 8,706,893 9,419,719 10,190,593 11,024,221 11,925,687 12,900,487
Pay and Mini-Pay Revenue 452,341 461,673 471,184 480,876 490,752 500,817
PPV Revenue 361,928 443,274 542,887 664,865 814,225 997,108
Advertising Revenue 583,685 655,300 735,679 825,893 927,141 1,040,772
Other Revenue 547,170 614,305 689,656 774,226 869,140 975,662
---------- ---------- ---------- ---------- ---------- ----------
Total Revenue 10,652,017 11,594,271 12,629,999 13,770,079 15,026,945 16,414,846
% Growth 8.8% 8.8% 8.9% 9.0% 9.1% 9.2%
EXPENSES:
Basic Programming Costs 1,631,521 1,798,396 1,982,279 2,184,897 2,408,155 2,654,147
Pay Proramming Costs 288,351 303,129 318,655 334,966 352,101 370,102
PPV Programming Costs 188,203 230,503 282,301 345,730 423,397 518,496
Program Guide Costs 3,257 3,490 3,740 4,008 4,294 4,602
Franchise & License Fees 424,483 462,032 503,305 548,738 598,824 654,132
Bad Debt Expense 146,465 159,421 173,662 189,339 206,620 225,704
Technical Expenses 988,271 1,027,801 1,068,914 1,111,670 1,156,137 1,202,382
Production/LO Expenses 46,926 48,804 50,756 52,786 54,897 57,093
Gen. & Admin Expenses 801,463 833,521 866,862 901,537 937,598 975,102
Marketing Expenses 214,425 233,393 254,242 277,192 302,492 330,431
Advertising Sales Expenses 172,187 193,313 217,025 243,638 273,507 307,028
---------- ---------- ---------- ---------- ---------- ----------
Total Expenses 4,905,552 5,293,803 5,721,741 6,194,499 6,718,023 7,299,219
OPERATING CASH FLOW 5,746,466 6,300,468 6,908,257 7,575,580 8,308,923 9,115,627
% Margin 53.9% 54.3% 54.3% 55.0% 55.3% 55.5%
% Growth 9.6% 9.6% 9.6% 9.7% 9.7% 9.7%
CAPITAL EXPENDITURES:
Rebuild/Upgrade Costs - - - - - -
Trunk & Distribution Costs 323,920 341,930 360,942 381,010 402,194 424,556
Make-Ready 9,889 10,439 11,020 11,632 12,279 12,962
Fiber Costs - Plant and Headend - - - - - -
Converters & Customer Equipment 60,692 64,325 68,175 72,254 76,576 81,155
Customer Connect Costs 188,180 199,745 212,014 225,030 238,838 253,486
Other Technical Capital 144,565 153,450 162,875 172,875 183,482 194,735
Other Capital 69,832 74,124 78,677 83,507 88,631 94,067
---------- ---------- ---------- ---------- ---------- ----------
Total Capital Expenditures 797,079 844,014 893,703 946,309 1,002,001 1,060,961
NET CASH FLOW 4,949,386 5,456,455 6,014,554 6,629,272 7,306,921 8,054,666
% Growth 10.3% 10.2% 10.2% 10.2% 10.2% 10.2%
</TABLE>
69
<PAGE> 77
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
SOMERSET, KY
REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL --------- ---------
PV OF CASH FLOWS 1994 1995 1996 1997 1998 1999 2000
- ---------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PROJECTED NET
CASH FLOW -2,265,876 -2,039,402 4,069,072 4,488,395
Value of Assets
in Year 10
assuming OCF
multiple of 8.0
Discount Rate 17.5%
PV OF CASH
FLOW STREAM 27,365.438
6.9 TIMES TRAILING CASH FLOW
6.9 TIMES PROJECTED CASH FLOW
$1,418 PER SUBSCRIBER
</TABLE>
<TABLE>
<CAPTION>
PV OF CASH FLOWS 2001 2002 2003 2004 2005 2006
- ---------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PROJECTED NET
CASH FLOW 4,949,386 5,456,455 6,014,554 6,629,272 7,306,921 8,054,666
Value of Assets
in Year 10
assuming OCF
multiple of 72,925,018
Discount Rate
</TABLE>
70
<PAGE> 78
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
SOMERSET, KY
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
REVENUE ASSUMPTIONS: 1994 1995 1996 1997 1998 1999 2000
- -------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
HOMES PASSED:
Beginning 21,577 22,120 22,015 22,060 22,060 22,391 22,727
Ending 22,120 22,015 22,060 22,060 22,391 22,727 23,068
Change 543 -105 45 0 331 336 341
% Change 2.5% -0.5% 0.3% 0.0% 1.5% 1.5% 1.5%
Average 21,849 22,068 22,038 22,060 22,225 22,559 22,897
BASIC SUBSCRIBERS:
Beginning 18,134 18,650 19,226 19,296 19,550 19,899 20,254
Ending 18,650 19,226 19,296 19,550 19,899 20,254 20,616
Change 516 576 70 254 349 355 361
% Change 2.8% 3.1% 0.5% 1.3% 1.8% 1.8% 1.8%
Average 18,392 18,938 19,261 19,423 19,724 20,076 20,435
Ending Penetration 84.3% 87.3% 87.5% 88.6% 88.9% 89.1% 89.4%
Monthly Basic Rev/Sub $22.29 $22.75 $24.88 $27.70 $29.09 $30.54 $32.07
% Change 2.1% 9.4% 11.3% 5.0% 5.0% 5.0%
PAY + MINI-PAY UNITS:
Beginning 4,291 4,840 5,170 3,914 3,999 4,070 4,143
Ending 4,840 5,170 3,914 3,999 4,070 4,143 4,217
Change 549 330 -1,256 85 71 73 74
% Change 12.8% 6.8% -32.4% 2.2% 1.8% 1.8% 1.8%
Average 4,566 5,005 4,542 3.956 4,035 4,107 4,180
Ending Penetration 26.0% 26.9% 20.3% 20.5% 20.5% 20.5% 20.5%
Monthly Pay Rev/Unit $7.52 $8.43 $8.53 $8.80 $8.80 $8.80 $8.80
% Change 12.1% 1.1% 3.2% 0.0% 0.0% 0.0%
PPV REVENUE PER SUB $0.03 $0.03 $0.05 $0.05 $0.05 $0.05 $0.05
% Change 0.0% 0.0% -11.3% 5.0% 5.0% 5.0%
ADVERTISING REVENUE
PER SUB $1.16 $1.31 $1.49 $1.66 $1.74 $1.83 $1.92
% Change 12.6% 14.1% 11.3% 5.0% 5.0% 5.0%
OTHER REVENUE PER SUB $1.31 $1.38 $2.24 $1.56 $1.64 $1.72 $1.80
% Change 5.2% 62.4% -30.4% 5.0% 5.0% 5.0%
TOTAL REVENUE PER SUB $26.68 $27.72 $30.68 $32.76 $34.31 $35.94 $37.65
% Change 3.9% 10.75 6.8% 4.7% 4.7% 4.7%
</TABLE>
<TABLE>
<CAPTION>
REVENUE ASSUMPTIONS: 2001 2002 2003 2004 2005 2006
- -------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
HOMES PASSED:
Beginning 23,068 23,414 23,765 24,121 24,483 24,850
Ending 23,414 23,765 24,121 24,483 24,850 25,223
Change 346 351 356 362 367 373
% Change 1.5% 1.5% 1.5% 1.5% 1.5% 1.5%
Average 23,241 23,589 23,943 24,302 24,667 25,037
BASIC SUBSCRIBERS:
Beginning 20,616 20,983 21,358 21,738 22,125 22,519
Ending 20,983 21,358 21,738 22,125 22,519 22,920
Change 368 374 381 387 394 401
% Change 1.8% 1.8% 1.8% 1.8% 1.8% 1.8%
Average 20,799 21,170 21,548 21,932 22,322 22,720
Ending Penetration 89.6% 89.9% 90.1% 90.4% 90.6% 90.0%
Monthly Basic Rev/Sub $33.67 $35.35 $37.12 $38.98 $40.93 $42.97
% Change 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
PAY + MINI-PAY UNITS:
Beginning 4,217 4,292 4,369 4,447 4,526 4,606
Ending 4,292 4,369 4,447 4,526 4,606 4,688
Change 75 77 78 79 81 82
% Change 1.8% 1.8% 1.8% 1.8% 1.8% 1.8%
Average 4,255 4,330 4,408 4,486 4,566 4,647
Ending Penetration 20.5% 20.5% 20.5% 20.5% 20.5% 20.5%
Monthly Pay Rev/Unit $8.80 $8.80 $8.80 $8.80 $8.80 $8.80
% Change 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
PPV REVENUE PER SUB $0.06 $0.06 $0.06 $0.07 $0.07 $0.07
% Change 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
ADVERTISING REVENUE
PER SUB $2.02 $2.12 $2.23 $2.34 $2.46 $2.58
% Change 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
OTHER REVENUE PER SUB $1.89 $1.99 $2.09 $2.19 $2.30 $2.42
% Change 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
TOTAL REVENUE PER SUB $39.44 $41.32 $43.30 $45.37 $47.55 $49.84
% Change 4.8% 4.8% 4.8% 4.8% 4.8% 4.8%
</TABLE>
71
<PAGE> 79
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
SOMERSET, KY
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
EXPENSE ACTUAL ACTUAL ACTUAL --------- ---------
ASSUMPTIONS: 1994 1995 1996 1997 1998 1999 2000
- ---------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BASIC PROGRAMMING
PER SUB $2.98 $3.54 $4.00 $4.95 $5.15 $5.36 $5.57
% Change 18.7% 13.2% 23.7% 4.0% 4.0% 4.0%
PAY/MINI-PAY PROG.
PER UNIT $4.29 $4.58 $4.61 $4.98 $5.13 $5.29 $5.45
% Change 6.9% 0.7% 8.1% 3.0% 3.0% 3.0%
PPV PROGRAMMING/
PPV REVENUE 0.0% -3.5% 56.5% 52.0% 52.0% 52.0% 52.0%
PROGRAM GUIDE
COST PER SUB $0.07 $0.09 $0.05 $0.01 $0.01 $0.01 $0.01
% Change 23.3% -49.3% -77.0% 5.0% 5.0% 5.0%
FRANCHISE, ACCESS
FEES/REVENUE 3.9% 4.2% 3.9% 4.0% 4.0% 4.0% 4.0%
BAD DEBT EXPENSE/
REVENUE 1.6% 1.0% 0.7% 1.4% 1.4% 1.4% 1.4%
TECHNICAL EXP.
GROWTH 2.8% 11.3% 10.9% 4.0% 4.0% 4.0%
PRODUCTION/LO
EXPENSE GROWTH 0.0% 0.0% 18.0% 4.0% 4.0% 4.0%
GEN & ADMIN
EXPENSE GROWTH 0.0% 11.3% 10.7% 4.0% 4.0% 4.0%
MARKETING EXP/
REVENUE 1.9% 1.0% 1.4% 2.0% 2.0% 2.0% 2.0%
AD SALES EXP/
AD REVENUE 41.4% 33.7% 18.9% 29.5% 29.5% 29.5% 29.5%
</TABLE>
<TABLE>
<CAPTION>
EXPENSE
ASSUMPTIONS: 2001 2002 2003 2004 2005 2006
- ---------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BASIC PROGRAMMING
PER SUB $5.80 $6.03 $6.27 $6.52 $6.78 $7.05
% Change 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
PAY/MINI-PAY PROG.
PER UNIT $5.61 $5.78 $5.95 $6.13 $6.31 $6.50
% Change 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
PPV PROGRAMMING/
PPV REVENUE 52.0% 52.0% 52.0% 52.0% 52.0% 52.0%
PROGRAM GUIDE COST
PER SUB $0.01 $0.01 $0.01 $0.01 $0.02 $0.02
% Change 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
FRANCHISE, ACCESS
FEES/REVENUE 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
BAD DEBT EXPENSE/
REVENUE 1.4% 1.4% 1.4% 1.4% 1.4% 1.4%
TECHNICAL EXP.
GROWTH 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
PRODUCTION/LO
EXPENSE GROWTH 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
GEN & ADMIN
EXPENSE GROWTH 4.0% 4.0% 4.0% 4.0% 4.0% 4.0%
MARKETING EXP/
REVENUE 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
AD SALES EXP/
AD REVENUE 29.5% 29.5% 29.5% 29.5% 29.5% 29.5%
</TABLE>
72
<PAGE> 80
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
SOMERSET, KY
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------- -------
CAPITAL EXPENDITURES: 1994 1995 1996 1997 1998 1999 2000
- --------------------- ------- ------- --------- ------- ------- ------- -------
NEW CONVERTER $658.78 $618.14 $1,276.00 $456.00 $474.24 $493.21 $512.94
<S> <C> <C> <C> <C> <C> <C> <C>
MILES OF PLANT:
Beginning 794.50 833.00 831.50 834.50 834.50 847.02 859.72
Ending 833.00 831.50 834.50 834.50 847.02 859.72 872.62
Change 38.50 (1.50) 3.00 -- 12.52 12.71 12.90
Average 813.75 832.25 833.00 834.50 840.76 853.37 866.17
Homes/Mile 26.6 26.5 26.4 26.4 26.4 26.4 26.4
CONVERTERS:
Beginning 4,515 4,715 4,969 5,132 5,196 5,289 5,384
Ending 4,715 4,969 5,132 5,196 5,289 5,384 5,480
Change 200 254 163 64 93 94 96
Average 4,615 4,842 5,051 5,164 5,243 5,336 5,432
Ending Penetration 25.6% 26.2% 26.6% 26.6% 26.6% 26.6% 26.6%
REBUILD CAPITAL:
UG Miles 18.00
Aerial Miles 816.50
Cost/UG Mile
Cost/Aerial Mile
Other Rebuild Costs
TRUNK & DISTRIBUTION/
NEW MILE $21,718 $22,000 $22,880 $23,795
(3-Year average)
MAKE-READY/MILE $163.74 $99.51 $24.01 $- $10.00 $10.40 $10.82
CONV & CUST EQUIP/
NEW CONVERTER $658.78 $618.14 $1,276.00 $456.00 $474.24 $493.21 $512.94
CUST. CONNECT
COSTS/SUB $5.03 $4.04 $9.70 $7.68 $7.99 $8.31 $8.64
OTHER TECHNICAL
CAPITAL/SUB $4.37 $4.55 $2.24 $5.90 $6.14 $6.38 $6.64
OTHER CAPITAL/SUB $4.75 $2.19 $0.47 $2.85 $2.96 $3.08 $3.21
</TABLE>
<TABLE>
<CAPTION>
CAPITAL EXPENDITURES: 2001 2002 2003 2004 2005 2006
- --------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
MILES OF PLANT:
Beginning 872.62 885.71 898.99 912.48 926.17 940.06
Ending 885.71 898.99 912.48 926.17 940.06 954.16
Change 13.09 13.29 13.48 13.69 13.89 14.10
Average 879.16 892.35 905.74 919.32 933.11 947.11
Homes/Mile 26.4 26.4 26.4 26.4 26.4 26.4
CONVERTERS:
Beginning 5,480 5,577 5,677 5,778 5,881 5,986
Ending 5,577 5,677 5,778 5,881 5,986 6,092
Change 98 99 101 103 105 107
Average 5,528 5,627 5,727 5,829 5,933 6,039
Ending Penetration 26.6% 26.6% 26.6% 26.6% 26.6% 26.6%
TRUNK & DISTRIBUTION/
NEW MILE $24,747 $25,737 $26.766 $27,837 $28,950 $30,109
(3-Year average)
MAKE-READY/MILE $11.25 $11.70 $12.17 $12.65 $13.16 $13.69
CONV & CUST EQUIP/
NEW CONVERTER $533.46 $554.79 $576.99 $600.06 $624.07 $649.03
CUST. CONNECT
COSTS/SUB $8.98 $9.34 $9.72 $10.11 $10.51 $10.93
OTHER TECHNICAL
CAPITAL/SUB $6.90 $7.18 $7.47 $7.76 $8.07 $8.40
OTHER CAPITAL/SUB $3.33 $3.47 $3.61 $3.75 $3.90 $4.06
</TABLE>
73
<PAGE> 81
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
SOMERSET, KY
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
CASH FLOW ACTUAL ACTUAL ACTUAL --------- ---------
PROJECTIONS: 1994 1995 1996 1997 1998 1999 2000
- ---------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE:
Basic & Equipment
Revenue 4,919,375 5,170,726 5,751,113 6,456,379 6,884,395 7,357,713 7,863,510
Pay and Mini-Pay
Revenue 412,066 506,563 464,906 417,726 425,977 433,584 441,324
PPV Revenue 7,417 6,818 11,912 10,691 11,399 12,183 13,021
Advertising
Revenue 256,444 297,294 345,077 387,297 412,972 441,365 471,706
Other Revenue 293,009 317,810 517,872 363,068 387,137 413,753 442,196
----------------------------------------------------------------------------
Total Revenue 5,888,311 6,299,211 7,090,880 7,635,160 8,121,880 8,658,598 9,231,757
% Growth 7.0% 12.6% 7.7% 6.4% 6.6% 6.6%
EXPENSES:
Basic Programming
Costs 657,703 803,806 925,578 1,154,837 1,219,668 1,291,108 1,366,722
Pay Programming
Costs 234,780 275,154 251,372 236,591 248,502 260,528 273,135
PPV Programming
Cost 4,149 (237) 6,730 5,559 5,928 6,335 6,771
Program Guide
Costs 16,367 20,788 10,712 2,484 2,649 2,831 3,026
Franchise & License
Fees 229,703 226,704 273,727 304,261 323,657 345,045 367,886
Bad Debt Expense 96,890 65,460 51,395 104,983 111,676 119,056 126,937
Technical Expenses 665,998 684,850 762,091 844,778 878,569 913,712 950,260
Production/LO
Expenses 24,793 29,699 33,994 40,113 41,717 43,386 45,122
Gen. & Admin
Expenses 556,149 556,363 619,042 685,094 712,498 740,997 770,637
Marketing Expenses 111,412 60,221 102,689 153,696 163,493 174,298 185,835
Advertising Sales
Expenses 106,106 100,244 65,064 114,253 121,827 130,203 139,153
---------------------------------------------------------------------------
Total Expenses 2,704,049 2,863,052 3,102,394 3,646,649 3,830,184 4,027,500 4,235,484
OPERATING CASH FLOW 3,184,262 3,436,159 3,988,486 3,988,510 4,291,696 4,631,099 4,996,274
% Margin 54.1% 54.5% 56.2% 52.2% 52.8% 53.5% 54.1%
% Growth 7.9% 16.1% 0.0% 7.6% 7.9% 7.9%
CAPITAL EXPENDITURES:
Rebuild/Upgrade Costs - - - 272,599 -
Trunk & Distribution
Costs 475,844 140,803 252,057 239,705 275,385 290,696 306,859
Make-Ready 133,245 82,814 20,003 - 8,408 8,875 9,369
Fiber Costs - Plant
and Headend - 1,014,698 17,215 - - - -
Converters &
Customer Equipment 131,756 157,008 207,988 29,310 44,020 46,578 49,284
Customer Connect
Costs 92,578 76,545 186,887 149,167 157,541 166,769 176,536
Other Technical
Capital 80,306 86,181 43,191 114,594 121,028 128,117 135,620
Other Capital 87,428 41,393 9,121 55,355 58,462 61,887 65,511
---------------------------------------------------------------------------
Total Capital
Expenditures 1,001,157 1,599,442 736,462 860,730 664,844 702,922 743,178
NET CASH FLOW 2,183,105 1,836,717 3,252,024 3,127,780 3,626,852 3,928,177 4,253,096
% Growth 16.0% 8.3% 8.3%
</TABLE>
<TABLE>
<CAPTION>
CASH FLOW
PROJECTIONS 2001 2002 2003 2004 2005 2006
- ---------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUE:
Basic & Equipment
Revenue 8,404,012 8,981,595 9,598,799 10,258,338 10,963,110 11,716,212
Pay and Mini-Pay
Revenue 449,199 457,211 465,361 473,654 482,091 490,674
PPV Revenue 13,916 14,872 15,894 16,986 18,153 19,400
Advertising Revenue 504,129 538,776 575,800 615,364 657,641 702,817
Other Revenue 472,591 505,071 539,779 576,867 616,499 658,849
Total Revenue 9,843,846 10,497,525 11,195,634 11,941,209 12,737,494 13,587,952
% Growth 6.6% 6.6% 6.7% 6.7% 6.7% 6.7%
EXPENSES:
Basic Programming
Costs 1,446,753 1,531,459 1,621,112 1,715,999 1,816,426 1,922,717
Pay Programming
Costs 286,348 300,199 314,718 329,935 345,887 362,606
PPV Programming
Costs 7,236 7,733 8,265 8,833 9,440 10,088
Program Guide Costs 3,234 3,456 3,694 3,947 4,219 4,508
Franchise & License
Fees 392,277 418,326 446,146 475,857 507,589 541,480
Bad Debt Expense 135,353 144,341 153,940 164,192 175,141 186,834
Technical Expense 988,271 1,027,801 1,068,914 1,111,670 1,156,137 1,202,382
Production/LO
Expense 46,926 48,804 50,756 52,786 54,897 57,093
Gen. & Admin.
Expenses 801,463 833,521 866,862 901,537 937,598 975,102
Marketing Expense 198,157 211,315 225,368 240,377 256,406 273,525
Advertising Sales
Expenses 148,718 158,939 169,861 181,532 194,004 207,331
---------------------------------------------------------------------
Total Expenses 4,454,737 4,685,896 4,929,634 5,186,665 5,457,743 5,743,668
OPERATING CASH FLOW 5,389,109 5,811,629 6,266,000 6,754,544 7,279,751 7,844,284
% Margin 54.7% 55.4% 56.0% 56.6% 57.2% 57.7%
% Growth 7.9% 7.8% 7.8% 7.8% 7.8% 7.8%
CAPITAL EXPENDITURES:
Rebuild/Upgrade
Costs - - - - - -
Trunk & Distribution
Costs 323,920 341,930 360,942 381,010 402,194 424,556
Make-Ready 9,889 10,439 11,020 11,632 12,279 12,962
Fiber-Costs -
Plant and Headend - - - - - -
Converters & Cus-
tomer Equipment 52,147 55,176 58,380 61,770 65,357 69,151
Customer Connect
Costs 186,873 197,814 209,394 221,651 234,623 248,352
Other Technical
Capital 143,561 151,967 160,863 170,279 180,244 190,791
Other Capital 69,347 73,408 77,705 82,253 87,067 92,162
---------------------------------------------------------------------
Total Capital
Expenditures 785,738 830,734 878,304 928,595 981,764 1,037,974
NET CASH FLOW 4,603,371 4,980,895 5,387,696 5,825,949 6,297,987 6,806,310
% Growth 8.2% 8.2% 8.2% 8.1% 8.1% 8.1%
</TABLE>
74
<PAGE> 82
VALUATION OF FALCON CLASSIC CABLE
INCOME PROPERTIES, L.P. COMMUNICATIONS EQUITY ASSOCIATES
SOMERSET, KY
NO REBUILD DCF APPROACH
<TABLE>
<CAPTION>
PRO-
BUDGET JECTED:
ACTUAL ACTUAL ACTUAL ------ ------
PV OF CASH FLOWS 1994 1995 1996 1997 1998 1999 2000
- ---------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
PROJECTED NET
CASH FLOW 3,127,780 3,626,852 3,928,177 4,253,096
Value of Assets in
Year 10 assuming
OCF multiple of 8.0
Discount rate 17.5%
PV OF CASH FLOW
STREAM 32,577,831
8.2 TIMES RUNNING RATE CASH FLOW
8.2 TIMES PROJECTED CASH FLOW
$1,688 PER SUBSCRIBER
</TABLE>
<TABLE>
<CAPTION>
PV OF CASH FLOWS 2001 2002 2003 2004 2005 2006
- ---------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PROJECTED NET
CASH FLOW 4,603,371 4,980,895 5,387,696 5,825,949 6,297,987 6,806,310
Value of Assets in
Year 10 assuming
OCF multiple of 62,754,274
Discount rate
</TABLE>
75
<PAGE> 83
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
CASH FLOW MULTIPLE AND ADJUSTED CASH FLOW MULTIPLE APPROACHES
As discussed previously, the Cable System generated revenue of
$7,090,880 and operating cash flow of $3,988,486 in 1996, for an actual
operating cash flow margin of 56.2%.
The current operating cash flow multiples indicated by the market
range from 6 to 11 times, based on transactions which have been announced
in recent months. In order to determine the respective appropriate cash
flow multiples to apply to the cash flow and to the adjusted cash flow of
the Cable System, the following factors must be considered:
o The Cable System has experienced only slight growth in basic
subscribers and no home growth.
o The cable plant needs to be rebuilt, as the portion of the plant
serving the bulk of the subscribers has no room to add programming.
Partnership management has estimated that a rebuild would cost in
excess of $11,000,000.
o The current rates of the Cable System are reasonable given the
level of service provided in each system.
o The operating cash flow margin approximates 56 percent, a slightly
high level by industry standards, leaving less perceived potential
for improvement by a buyer. A typical buyer would likely discount
this margin slightly in determining the potential cash flow that
such a buyer would be able to consistently generate from this Cable
System.
Based on these factors, as well as on CEA's recent experience in the cable
system transaction market, it is CEA's opinion that the following cash
flow multiples are appropriate in valuing the Cable System:
<TABLE>
<S> <C>
Operating Cash Flow Multiple 8.0
Adjusted Operating Cash Flow Multiple 8.5
</TABLE>
Applying these multiples respectively to the actual operating cash
flow and to the adjusted operating cash flow of the Cable System yields
the following calculations:
<TABLE>
<S> <C>
Cash Flow Multiple Approach:
Actual Operating Cash Flow $ 3,988,486
Operating Cash Flow Multiple x 8.0
------------
Value Indication $ 31,907,888
</TABLE>
76
<PAGE> 84
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
<TABLE>
<S> <C>
Adjusted Cash Flow Multiple Approach:
Actual Revenue $ 7,090,880
Adjusted Margin x 50%
------------
Adjusted Operating Cash Flow $ 3,545,440
Operating Cash Flow Multiple x 8.5
------------
Value Indication $ 30,136,240
</TABLE>
SUBSCRIBER MULTIPLE APPROACH
Based on CEA's recent experience in the cable system transaction
market, it is CEA's opinion that a buyer would expect the typical cable
system to generate just over $33.00 per month in total revenue, operate at
a 50% cash flow margin, and be valued at approximately 9 times this
operating cash flow. Based on these parameters, a buyer would be willing
to pay approximately $1,800 per subscriber for this typical cable system.
Applying this per-subscriber value to the subject Cable System results in
the following calculation:
<TABLE>
<S> <C>
Basic Subscribers 19,296
Per Subscriber Multiple x $ 1,800
-----------
Value Indication $34,732,800
</TABLE>
REBUILD CASH FLOW MULTIPLE APPROACH
Based on CEA's recent experience in the cable system transaction
market, it is CEA's opinion that a typical fully-rebuilt, state-of-the-art
cable system could reasonably be expected to sell, on average, for
approximately 10.5 times operating cash flow. For cable systems in need of
rebuild, a buyer would likely be willing to pay approximately 10.5 times
operating cash flow less the cost of the rebuild. Therefore, to estimate
the value of the Cable System using the Rebuild Cash Flow Multiple
Approach, CEA multiplied 1996 operating cash flow by 10.5 and subtracted
the estimated cost to rebuild the Cable System, as follows:
<TABLE>
<S> <C>
1996 Operating Cash Flow $ 3,988,486
Rebuild Operating Cash Flow Multiple x 10.5
-------------
Value of System After Rebuild 41,879,103
less: Cost of Rebuild (11,332,509)
-------------
Value Indication $ 30,546,594
</TABLE>
77
<PAGE> 85
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
VALUE CONCLUSIONS -- SOMERSET, KY
CEA used two variations of the discounted cash flow approach, and four
variations of the market approach to determine six indications of the value of
the Cable System. These value indications are summarized as follows:
<TABLE>
<S> <C>
Rebuild DCF Approach $ 27,365,438
No Rebuild DCF Approach $ 32,577,831
Cash Flow Multiple Approach $ 31,907,888
Adjusted Cash Flow Multiple Approach $ 30,136,240
Subscriber Multiple Approach $ 34,732,800
Rebuild Cash Flow Multiple Approach $ 30,546,594
VALUE CONCLUSION $ 31,000,000
</TABLE>
Therefore, based on this analysis, it is CEA's opinion that, as of
December 31, 1996, the fair market value of the Somerset, KY Cable System is
$31,000,000.
78
<PAGE> 1
EXHIBIT 10.32
FAIR MARKET VALUATION
OF THE REGIONS AND SYSTEMS THAT COMPRISE
FALCON CLASSIC CABLE INCOME PROPERTIES,
A CALIFORNIA LIMITED PARTNERSHIP
AS OF DECEMBER 31, 1996
Prepared For:
Falcon Cable Investors Group
Los Angeles, California
[LOGO]
KANE REECE
ASSOCIATES, INC.
<PAGE> 2
[KANE REECE LETTERHEAD]
March 10, 1997
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 each of the Regions (Burke County,
Centreville, and Somerset) and Systems (Redmond and California City) that
comprise Falcon Classic Cable Income Properties ("FCCIP" or the "Partnership").
This valuation study was conducted to determine the fair market value of 100%
of the assets described above as of December 31, 1996. The appraisal was
conducted pursuant to Section 4.9 of the Amended and Restated Agreement of
Limited Partnership of Falcon Classic Cable Income Properties, L.P. dated May
15, 1989. 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.
We did not visit the California City and Redmond systems.
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
<PAGE> 3
Falcon Cable Investors Group
March 10, 1997
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 each of the Regions' and
Systems' assets that make up FCCIP as of December 31, 1996 were:
<TABLE>
<S> <C>
Burke County $ 20,570,000
=================
Centreville $ 23,980,000
=================
Somerset $ 33,590,000
=================
Redmond $ 7,680,000
=================
California City $ 3,500,000
=================
</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 THE REGIONS AND SYSTEMS THAT COMPRISE
FALCON CLASSIC CABLE INCOME PROPERTIES,
A CALIFORNIA LIMITED PARTNERSHIP
AS OF DECEMBER 31, 1996
<PAGE> 6
FAIR MARKET VALUATION
OF THE REGIONS AND SYSTEMS THAT COMPRISE
FALCON CLASSIC CABLE INCOME PROPERTIES,
A CALIFORNIA LIMITED PARTNERSHIP
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
<S> <C>
TRANSMITTAL LETTER
LIMITING AND GENERAL SERVICE CONDITIONS
I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . 1
II. INDUSTRY REVIEW . . . . . . . . . . . . . . . . . . . . . . . 5
III. DESCRIPTION OF THE REGIONS' AND
SYSTEMS' SERVICE AREAS . . . . . . . . . . . . . . . . . 26
IV. BUSINESS ENTERPRISE VALUATION . . . . . . . . . . . . . . . 53
APPRAISAL CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
EXHIBIT A: Photographs
EXHIBIT B: Region and System Operating Statistics
EXHIBIT C: Region and System Cash Flow Statements
EXHIBIT D Region and System Cash Flow Projection Assumptions
EXHIBIT E Region and System Cash Flow Projections
QUALIFICATIONS OF THE APPRAISERS
APPENDIX: Glossary of Cable TV Terms
</TABLE>
<PAGE> 7
FAIR MARKET VALUATION
OF THE REGIONS AND SYSTEMS THAT COMPRISE
FALCON CLASSIC CABLE INCOME PROPERTIES,
A CALIFORNIA LIMITED PARTNERSHIP
AS OF DECEMBER 31, 1996
PART I - INTRODUCTION
Falcon Cable Investors Group, the General Partner (the "General Partner") of
Falcon Classic Cable Income Properties, a California Limited Partnership
("FCCIP" or the "Partnership") manages cable television systems located in
three (3) regional clusters in Burke County, North Carolina; Centreville,
Maryland; and Somerset, Kentucky; (the "Regions") as well as two (2) systems in
Redmond, Oregon and California City, California (the "Systems").
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 each Region and System of FCCIP as of
December 31, 1996. Kane Reece was retained pursuant to Section 4.9 of the
Partnership Agreement as Amended and Restated. This is the sole purpose 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.
The appraisers visited Burke County, Centreville, and Somerset for this study,
while having visited the Hesperia Region, the region that California City
reports to in a previous Falcon engagement. The appraisers visited the service
areas to interview
-1-
<PAGE> 8
management, inspect facilities, and to determine the growth potential of each
of the service areas. Pursuant to information requests, the appraisers were
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, 1996.
. Management prepared operating statistics reports -- homes
passed, basic subscribers, pay units, etc. for various dates
including December 31, 1996.
. 1997 operating budgets by Region and System.
. 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 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
-2-
<PAGE> 9
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.
-3-
<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, while 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.
-4-
<PAGE> 11
FAIR MARKET VALUATION
OF THE REGIONS AND SYSTEMS THAT COMPRISE
FALCON CLASSIC CABLE INCOME PROPERTIES,
A CALIFORNIA LIMITED PARTNERSHIP
AS OF DECEMBER 31, 1996
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
-5-
<PAGE> 12
government regulations, the increased availability of capital, more
cable-exclusive 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 1995 the number of cable subscribers more than tripled from 18.1
million in 1980 to 62.1 million in 1995 (Table 1A), representing a compound
annual growth rate ("CAGR") of 8.6%. During the same time period, pay TV units
grew from 9.1 million to 54.2 million representing a 12.6% CAGR. Basic cable
TV subscribers now comprise 67% of United States homes passed by cable
television. This is projected by Kagan1 to decline to 65.5% by 2000,
reflecting the impact of competitive delivery systems, such as direct broadcast
satellite (DBS), multichannel multipoint distribution service (MMDS), and
hybrid fiber/coax transport services, among others.
While the percent of cable television households subscribing to cable is
projected to be flat or slightly decline, basic subscribers will continue to
grow in absolute numbers, but at a rate of growth slower than in the past.
While basic cable units grew at a CAGR of 8.6% between 1980 - 1995, they are
expected to grow only at a 0.2% rate between 1995 and 2005. Pay unit growth
patterns are also projected at a substantially lower rate than the industry has
seen over the past 15 years. Between 1980 and 1995 pay units grew at a CAGR of
12.6%; however, between 1995 and 2005 the growth rate is expected to decline to
1.9% due to market saturation and increased competition.
Historical and projected subscriber growth rates and industry revenues are
shown in Table 1A and 1B.
______________________
(1)The Cable TV Financial Databook 1996, published by Paul Kagan Associates,
Inc.
-6-
<PAGE> 13
TABLE 1A
CABLE TELEVISION INDUSTRY STATISTICS
CABLE INDUSTRY GROWTH STATISTICS
<TABLE>
<CAPTION>
Basic Cable Pay Cable Units
------------------------- --------------------------------------
TV Homes % of % of
Passed Subscribers* Homes Units** Homes % of
Yr End (Millions) (Millions) Passed (Millions) Passed Basic
- ------ ---------- ---------- ------ ---------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
1980 32.8 18.1 55.2% 9.1 27.7% 50.3%
1981 41.2 22.5 54.6% 15.5 37.6% 68.9%
1982 49.1 27.2 55.4% 20.8 42.4% 76.5%
1983 55.9 31.4 56.2% 26.4 47.2% 84.1%
1984 60.5 34.2 56.5% 30.0 49.6% 87.7%
1985 64.7 36.7 56.7% 30.6 47.3% 83.4%
1986 69.4 39.7 57.2% 32.1 46.3% 80.9%
1987 73.1 42.6 58.3% 34.8 47.6% 81.7%
1988 77.2 45.7 59.2% 38.8 50.3% 84.9%
1989 82.8 49.3 59.5% 41.1 49.6% 83.4%
1990 86.0 51.7 60.1% 41.5 48.3% 80.3%
1991 88.4 53.4 60.4% 43.1 48.8% 80.7%
1992 89.7 55.2 61.5% 44.4 49.5% 80.4%
1993 90.6 57.2 63.1% 46.0 50.8% 80.4%
1994 91.6 59.7 65.2% 51.1 55.8% 85.6%
1995 92.7 62.1 67.0% 54.2 58.5% 87.3%
1996 (Est.) 93.7 64.0 68.3% 57.6 61.4% 89.9%
2000 (Est.) 98.1 64.3 65.5% 62.0 63.2% 96.4%
2005 (Est.) 103.9 63.3 60.9% 65.5 63.1% 103.5%
COMPOUND AVERAGE ANNUAL GROWTH RATES (CAGR)
1980-1995 7.2% 8.6% 12.6%
1995-2000 1.1% 0.7% 2.7%
1995-2005 1.1% 0.2% 1.9%
</TABLE>
*Prior to 1982, basic subscribers and homes passed reflect quantities in those
systems offering pay TV.
**Pay cable units includes both pay units and mini pay units.
Sources: Paul Kagan Associates, Inc., The Cable TV Financial Databook, June
1996.
Kane Reece Associates, Inc., Compound Annual Growth Rates.
-7-
<PAGE> 14
TABLE 1B
CABLE TELEVISION INDUSTRY STATISTICS (CONTINUED)
CABLE INDUSTRY REVENUES
($ Millions)
<TABLE>
<CAPTION>
Actual Forecast 1995-
------------------- 2000
Year 1995 1996 2000 CAGR
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic/Exp. Basic Cable Revenue $ 16,858 $ 18,600 $ 22,900 6.3%
Pay Revenue (1) 5,063 5,237 5,377 1.2%
--------- --------- ---------
Total Basic/Pay Revenue 21,921 23,837 28,277 5.22%
--------- --------- ---------
Other Revenue:
PPV Revenue (2) 595 718 2,367 31.8%
Net Advertising Revenue 1,281 1,499 2,451 13.9%
Digital Services Revenue (3) 341 468 3,273 57.2%
Other Video Revenue (4) 729 865 1,371 13.5%
--------- --------- ---------
Total Other Revenue 2,946 3,550 9,462 26.3%
--------- --------- ---------
Total Video Revenue 24,867 27,387 37,739 8.7%
--------- --------- ---------
Video Revenue/Subscriber/Month 34.03 36.17 48.76 7.5%
Cable Telephony Revenue (5) 222 416 2,868 66.8%
--------- --------- ---------
Total Video & Cable Telephony Revenue $ 25,089 $ 27,803 $ 40,607 10.1%
========= ========= =========
Per Basic Subscriber $ 34.33 $ 36.72 $ 52.46 8.9%
========= ========= =========
</TABLE>
Sources: Paul Kagan Associates, Inc., The Cable TV Financial Databook,
June 1996.
Kane Reece Associates, Inc. Compound Annual Growth Rate
Calculations.
(1) Pay cable revenue includes mini-pay revenue.
(2) PPV revenue includes PPV event, PPV/NVOD Movie and Non-Movie PPV/NVOD
revenue.
(3) Digital revenue includes cable delivered video game, digital video
tier, cable to business video and high speed access revenue.
(4) Other video revenue includes home shopping commission and
miscellaneous revenue.
(5) Cable telephony revenue includes residential cablephone and
wholesale/retail business cablephone revenue and cable Sprint Spectrum
revenue at 60%.
-8-
<PAGE> 15
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 Federal Communications Commission ("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.
- 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.
-9-
<PAGE> 16
- Other provisions affect channel positioning, customer service
standards, 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.
The 1992 Act had a substantial impact on the industry with revenues and cash
flows adversely affected, which in turn influenced the availability of capital.
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 regulations called 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.
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 under pressure to enact some "significant
legislation."
- Election year friendly/voter indifference.
- Regain policy authority from the court.
- Provides for "compromise," something for each industry.
- Public Relations Spin: jobs created for the information
superhighway.
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
-10-
<PAGE> 17
Title VI Effect on Other Laws
Title VII Miscellaneous Provisions
The 1996 Act is voluminous and complex. 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 is broadened and better defined
v. the 1992 Act.
Effective Competition
- Local exchange carriers ("LEC's") are added to test
criteria.
- Satisfaction of test criteria deregulates all rates.
- Subscriber notice of rate changes are relaxed.
- Customer premise equipment rules remain essentially
the same as the 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.
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.
-11-
<PAGE> 18
- Telephone and Cable Buyouts
- No LEC or affiliate can acquire more than 10% of a
cable operator providing cable service within the
carrier's 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 networks with
the telcos' networks.
- 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 the removal of rate regulations.
However, the deregulatory benefit is modified by several effects of the Act:
competitors are encouraged; telco takeovers become more feasible; the threat of
competition restricts cable financing; 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.
-12-
<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 put their cable systems up
for sale in 1995, systems serving over 13 million subscribers, almost 20% of
the industry. When all of these proposed deals close, the top 20 U.S. cable
multiple system operators ("MSOs") will serve about 87% of an estimated 62.1
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. According to a Wall Street Journal
special report on telecommunications (September 16, 1996), only about 15% to
20% of the country's cable lines are equipped for two-way service; however, the
industry is still leading the race to provide high speed data communications.
Securing a portion of the market for the revenues from this type of service
will serve as a key to maintaining competitiveness as convergence develops.
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
____________________________
(2) Cable TV Investor, December 18, 1995.
-13-
<PAGE> 20
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, as well as, major markets in which
to develop a Sprint branded wireline service. 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 the new
telecommunications legislation, and the ensuing competitive 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 investments
in a Time Warner cable and programming venture, acquisition of the Bass Atlanta
systems, and its pending acquisition of Continental Cablevision.
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 and new
competition. The industry will focus on new programming and alternative
viewing selections, such as staggered starting
_______________________________
(3) Cablevision Magazine, "Sprinting Into Telecommunications", November 13,
1995.
-14-
<PAGE> 21
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 standard
for industry rebuilds in high density areas. This, 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 will 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 1995
other revenues including telephony (see Table 1B) were approximately $3.2
billion, or 13%, of the industry's $25.0 billion in revenues. As depicted in
Table 1B, between 1995 and 2000 other revenues (non-telephony) are projected to
grow to $9.5 billion, representing a CAGR of 26.3%. Telephony revenue is
projected to grow at a rapid 66.8% CAGR between 1995 and 2000 reaching $2.9
billion in revenues. Basic cable subscription revenue is expected to grow at a
6.3% CAGR and pay services revenue will increase by 1.2% CAGR. These numbers
clearly determine what services cable television companies will be focusing
their energies on as convergence becomes a reality.
-15-
<PAGE> 22
In addition to providing broadcast networks, basic cable offers a great variety
of program alternatives in the form of basic cable networks. Each of the ten
largest basic service networks (the top five being: The Discovery Channel, USA
Network, Cable News Network, TBS Superstation, and TNT) have over 67 million
subscribers as of the end of July 1996.4 Other widely distributed basic cable
networks include The Learning Channel, Headline News, Lifetime, The Travel
Channel, The Family Channel, C-Span, MTV, ESPN, Arts & 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, April 29,
1996, the top five movie oriented pay channels served over 53 million
subscribers as of mid-1996. The top five movie entertainment services are Home
Box Office (19.2 million subscribers), Cinemax, Showtime, Disney Channel, and
Encore.(4) Many of these programmers have increased their development and
production of original programming as opposed to relying mostly on the
acquisition of Hollywood movies. In addition to these services, regional and
local sport networks and other specialized channels 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 (Bell Atlantic, Nynex,
Pacific Telesis) and Americast) (Ameritech, BellSouth, GTE, SBC Communications
and Disney).(5) The Tele-TV venture was formed by several "RBOC's" with the
intention of providing video on demand cable services over telephone wires in
an attempt to compete with the cable operators. However, due to technology
delay, the venture has since switched their strategy to wireless cable "MMDS"
in order to compete in video with a technology that is available
_______________________________
(4) Cablevision Magazine, October 21, 1996.
(5) Standard & Poor's Telecommunications Industry Survey, December 7, 1995.
-16-
<PAGE> 23
today. Americast is not a proponent of "MMDS" and will continue to focus their
efforts on competing in the video services industry via telephone
infrastructure. The "RBOC's" are currently struggling with digital technology
issues with MMDS and continue to be delayed in entering the market, but it is
still expected that they will have a direct impact on video delivery service.
Cable advertising revenues have begun to play a significant role in the
industry's profitability. According to Veronis, Suhler & Associates
Communications Industry Forecast, 1996, the audience share for daytime cable
increased from 30.1% in 1994 to 35.3% in 1995. Prime-time viewing also grew
significantly in 1995, basic cable rising 20 percent and pay cable rising 7
percent. In contrast the 1995-1996 major network television season was hit
hard by cable viewership due to the O.J. Simpson trial, the Winter Olympics and
a barrage of new shows that confused viewers and were narrowly targeted at the
shrinking 18-34 year old bracket. Network prime-time viewing fell 7.6% showing
a direct relationship between cable network viewership and major network
viewership. This has attracted the attention of both local and national
advertisers. 1995 total advertiser spending on subscription video services
rose to $5.3 billion, a 16.3% increase over the $4.6 billion spent in 1994
(Veronis Suhler & Associates, Communications Industry Forecast, 1996) "VS&A".
Furthermore, according to VS&A, network ad spending rose to $3.7 billion in
1995, an increase of only 14.4% compared to an 18.2% increase in 1994, whereas,
spot and local advertising rose 20.7% in 1995 versus 20.2% in 1994, another
comparison that reaffirms the trade-off between major broadcast networks and
cable networks.
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, facilitate
-17-
<PAGE> 24
the booking of advertising time at multiple cable systems time by national and
regional advertisers.
In the future, PPV will become a significant source of revenues as digital
technology is deployed 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 cable MSOs as
well as both cable and broadcast networks continue to show significant interest
in both acquiring and developing new programming. As of this writing,
approximately 150 new programming channels are in development for cable
television. Other examples of interest 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 of the Philadelphia Flyers
and 76ers, and the Spectrum Sports Arena. These purchases will lock-in cable
television broadcast rights.
Veronis, Suhler and Associates projects a downward trend in PPV movie prices,
falling to $2.95 per movie in the year 2000 from the 1995 rate of $4.10. This
trend in pricing will result in an increase in annual buys per PPV household
rising from 2.9 in 1995 to 5.6 in 2000.
With the success of DBS and the availability of PPV services offered (over 50%
of a DBS service's channels) and the coming of digital converters and increased
channels in cable, VS&A gives the following favorable projections to PPV:
- Total spending on PPV movies through cable operations will
grow at a CAGR of 25.1% between 1995 and 2000 reaching $776
million in 2000.
- Total spending on PPV movies through non-cable video services
will climb to $218 million in 2000 from $76 million in 1995, a
CAGR of 23.5%.
-18-
<PAGE> 25
. Total aggregate spending on PPV movies through cable and
non-cable video services will be $994 million in 2000, up from
$329 million in 1995, a CAGR of 24.7%.
Another source of incremental revenues has been the growth of home shopping
services on cable TV. Paul Kagan Associates that reported these services
generated 1995 revenue for CATV operators of $144 million and projects these
revenues to grow to $217 million by 2000 (an 8.5% CAGR). These services are
highly 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 systems.
These technical architectural changes include both digital and switched
technologies.
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;
-19-
<PAGE> 26
. Improved signal quality, due to fewer electronics and less
possibility of static or electrical interference.
Competition
Technological developments will dramatically alter the way households,
businesses, and schools "connect" with informational, educational,
entertainment, tele-communications 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 well 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 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. However, "U.S. Satellite Broadcasting's latest research
found that 63% of its recent subscribers live in a city, suburb, or town while
only 37% live in rural areas.6
The first DBS service was offered in June of 1994 by G.M. Hughes Electronics
("DirecTV") and U.S. Satellite Broadcasting, ("USSB"). The industry closed out
1995 with a subscriber base of 1.8 million, 500% greater than the 300,000
subscribers as of year-end 1994. DirecTV's 125 channel service accounted for
1.5 million of those subscribers, USSB had 800,000 subscribers and Primestar,
had 1.1 million subscribers (the total number of subscribers does not correlate
with the number of subscribers for each service because the services do have
overlapping subscribers).
________________________________
6Cable World, August 26, 1996.
-20-
<PAGE> 27
As expected, 1996 has brought added competition to the DBS service industry,
including Echostar, a company that is projecting 300,000 to 400,000 subscribers
by year end and Alphastar, a company that is projecting 100,000 to 150,000 by
year end.
DBS analysts are estimating that DBS hardware will be in 4.8 million homes by
the end of 1996 and between 13 and 17 million homes by the close of the year
2000 (CableWorld, August 1996). Donaldson, Lufkin and Jenrette projects a
subscriber base in the year 2000 of 19.3 million homes or roughly one of every
five homes in America.
These escalated growth projections are a direct result of the heated price wars
brought on by a strategy to realize quicker subscriber growth and rely on
monthly service revenue to cover offers to consumers of below-cost equipment
sale prices. Echostar offered DBS equipment to the consumer in May of 1996 for
$199 forcing the other DBS service providers to follow suit.
The monthly costs range between $5.95 and $44.95 per month and pay-per-view
movies cost $2.99 each, more than a dollar less than the average cable
pay-per-view.
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, 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 an entree to cable services. In fact, AT&T has made an
investment in DirecTV and has already begun to market the service to its 95
million customers; and Primestar is owned by GE and several major cable
operators.
-21-
<PAGE> 28
Wireless: Wireless cable (officially referred to as "multichannel multipoint
distribution system," or "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 the transition to digital technology. 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 when the service providers come up with the capital to make the
transition.
Support for this technology is offered by the recent entry of several RBOC's,
including 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. Some analysts believe the telco companies see
this technology as an opportunity to get into subscription video services now
while they await the arrival of video dial tone. The availability of digital
technology is a significant factor in reviewing the prospects of MMDS. If
deployed, it would give the industry a fair chance against DBS with the ability
to provide 120 plus channel systems, a vast improvement over the current 33
channel systems.
In addition to MMDS the government has proposed another frequency auction at
the 27.5-29.5 GHz range. This area of frequency providing for "LMDS" (local
multipoint distribution service) offers five times as much spectrum as MMDS and
is designed with two-way capability in mind. LMDS can be used for
video-on-demand, high quality, digital radio and TV programming. Because of
its cellular-like configuration, it is ideal for trunking personal
communications services, video teleconferencing, and local transactional
services. On the downside, LMDS requires that transmitters be placed
approximately 2-3 kilometers apart, or more frequently than those of MMDS,
giving
-22-
<PAGE> 29
LMDS a much higher cost structure and is also much more sensitive to
atmospheric conditions because of it's high frequency.
Though true competitive services to cable and DBS, 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, 1996 which
projects wireless cable subscribers increasing from 0.7 million in 1995 to 2.4
million in 2000 representing a 28% CAGR and 3% of the total subscription video
subscribers.
Telephone Companies: When talking about cable competition, "telephone" usually
means RBOCs 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 virtually no video
experience since historically 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 (though telephone
companies seem to be making significant inroads in certain states like
Connecticut and Michigan); telephone companies have little experience in
marketing services, much less in a complicated, multi- tiered, menu-driven
cable television era. The 1996 Act creates a competitive marketplace for
telephone and cable services by allowing phone and cable companies to compete
in each others businesses while prohibiting combinations of companies serving
overlapping areas. This so-called "two (2) wire" model is a situation that
cable is far better situated to take advantage of
-23-
<PAGE> 30
from both a technological and regulatory standpoint with its broadband network
in place. The telephone companies would face heavier costs, and time delays.
Many analysts continue to 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.
- RBOC's are occupied with other priorities such as entering the
long distance telephone market and defending their local
service "monopoly."
On the other hand, Standard & Poor's Telecommunications Industry Survey,
December 7, 1995 provides a synopsis of some of the more difficult 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.
-24-
<PAGE> 31
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 players in the CATV industry and
telecommunications industry, e.g., U.S. West's acquisition of Continental, Time
Warner's acquisition of Cablevision Industries in 1995 and Turner Broadcasting
in 1996 and Comcast's acquisition of Scripps Howard, will continue so that
economies of scale and sufficient resources, both capital and management, will
remain available.
-25-
<PAGE> 32
FAIR MARKET VALUATION
OF THE REGIONS AND SYSTEMS THAT COMPRISE
FALCON CLASSIC CABLE INCOME PROPERTIES,
A CALIFORNIA LIMITED PARTNERSHIP
AS OF DECEMBER 31, 1996
PART III - DESCRIPTION OF THE REGIONS'
AND SYSTEMS' SERVICE AREAS
Description of Service Areas
FCCIP is made up of three (3) Regions and two (2) Systems collectively called
the "Operating Areas" as follows:
Regions:
Burke County, North Carolina
Centreville, Maryland
Somerset, Kentucky
Systems:
Redmond, Oregon
California City, California
Figures 1 - 5 are maps showing the location of each Operating Area 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
2E depict various relevant demographic factors, available at the valuation
date, for each Operating Area'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 Operating
Area franchise areas. The Tables contain population and household statistics,
beginning with 1990 census data, show CACI projections for 1995 and 2000. Kane
Reece computed the
-26-
<PAGE> 33
FIGURE 1
[BURKE COUNTY REGION MAP]
[FALCON CLASSIC CABLE INC. PROP.]
-27-
<PAGE> 34
FIGURE 2
[CENTREVILLE REGION MAP]
[FALCON CLASSIC CABLE INC. PROP.]
-28-
<PAGE> 35
FIGURE 3
[SOMERSET REGION MAP]
[FALCON CLASSIC CABLE INC. PROP.]
-29-
<PAGE> 36
FIGURE 4
[REDMOND SYSTEM MAP]
[FALCON CLASSIC CABLE INC. PROP.]
-30-
<PAGE> 37
FIGURE 5
[CALIFORIA CITY SYSTEM MAP]
FALCON CLASSIC CABLE INC. PROP.]
-31-
<PAGE> 38
TABLE 2A
Burke County, NC Region
Demographic Characteristics
<TABLE>
<CAPTION>
Population
------------------------------------------------
Zip CAGR
Code Location 1990 1995 2000 90-95 95-00
---- -------- ---- ----- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C>
28601 Hickory 44,830 46,799 49,006 0.9% 0.9%
28602 Hickory 21,146 22,205 23,311 1.0% 1.0%
28603 N/A
28612 Connellys Spring 15,387 16,117 16,846 0.9% 0.9%
28619 N/A
28628 N/A
28637 N/A
28666 N/A
28671 N/A
28680 N/A
28690 Valdese 4,231 4,234 4,329 0.0% 0.4%
28761 Nebo 5,046 5,495 5,838 1.7% 1.2%
Total/Avg 90,640 94,850 99,330 0.9% 0.9%
Wtd. Avg. 30,196 31,535 33,037 0.9% 0.9%
North Carolina 6,628,637 7,179,473 7,704,035 1.6% 1.4%
United States 248,709,873 263,006,245 277,083,635 1.1% 1.0%
</TABLE>
* National Rank
Source: The Sourcebook of Zip Code Demographics, 1995
<TABLE>
<CAPTION>
Households
--------------------------------------------- Median
Zip CAGR Median Age HH National State
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>
28601 Hickory 18,141 19,003 19,920 0.9% 0.9% 34.7 36.3 $34,719 70% 77%
28602 Hickory 7,948 8,337 8,745 1.0% 1.0% 33.7 35.4 28,503 52% 46%
28603 N/A
28612 Connellys Spring 5,887 6,157 6,432 0.9% 0.9% 33.9 36 30,716 60% 61%
28619 N/A
28628 N/A
28637 N/A
28666 N/A
28671 N/A
28680 N/A
28690 Valdese 1,801 1,799 1,838 -0.0% 0.4% 37.5 38.7 29,277 55% 53%
28761 Nebo 1,747 1,906 2,026 1.8% 1.2% 34.4 36.4 29,165 54% 52%
Total/Avg 35,524 37,202 38,961 0.9% 0.9% 34.8 36.6 30,476 58% 58%
Wtd. Avg. 12,195 12,779 13,401 0.9% 1.0% 34.4 36.2 32,116
North Carolina 2,517,026 2,730,795 2,936,445 1.6% 1.5% 33.1 34.6 32,188 26 *
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
-32-
<PAGE> 39
TABLE 2B
Centreville, MD Region
Demographic Characteristics
<TABLE>
<CAPTION>
Population
----------------------------------------------------------
Zip CAGR
Code Location 1990 1995 2000 90-95 95-00
---- -------- ---- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
21620 Chestertown 10,618 11,541 12,304 1.7% 1.3%
21645 Kennedyville 1,811 1,877 1,955 0.7% 0.8%
21646 N/A
21661 Rock Hall 2,770 2,815 2,908 0.3% 0.7%
21667 Still Pond 289 300 312 0.7% 0.8%
21678 Worton 1,680 1,742 1,815 0.7% 0.8%
21610 Betterton 485 503 524 0.7% 0.8%
21651 Millington 2,003 2,096 2,200 0.9% 1.0%
21670 N/A
21668 Sudlersville 2,008 2,124 2,248 1.1% 1.1%
21623 Church Hill 814 879 939 1.5% 1.3%
21617 Centreville 5,863 5,856 6,025 -0.0% 0.6%
21658 Queenstown 3,301 3,582 3,838 1.6% 1.4%
21619 Chester 4,199 4,713 5,131 2.3% 1.7%
21628 Crumpton 689 736 782 1.3% 1.2%
21638 Grasonville 3,225 3,550 3,829 1.9% 1.5%
21666 Stevensville 8,630 9,541 10,316 2.0% 1.6%
21663 Saint Michael 3,247 3,427 3,606 1.1% 1.0%
21601 Easton 16,439 17,537 18,538 1.3% 1.1%
21612 Bozman 847 894 941 1.1% 1.0%
21624 N/A
21625 Cordova 2,346 2,472 2,599 1.1% 1.0%
21647 McDaniel 610 632 659 0.7% 0.8%
21652 N/A
21653 N/A
21662 Royal Oak 889 938 986 1.1% 1.0%
21665 Sherwood 262 272 283 0.8% 0.8%
21671 Tilghman 745 772 805 0.7% 0.8%
21676 Wittman 338 350 365 0.7% 0.8%
21679 Wye Mills 270 285 299 1.1% 1.0%
Total/Avg 74,378 79,434 84,207 1.3% 1.2%
Wtd. Avg. 7,701 8,303 8,833 1.5% 1.2%
Maryland 4,781,468 5,056,951 5,344,316 1.1% 1.1%
United States 248,709,873 263,006,245 277,083,635 1.1% 1.0%
</TABLE>
* National Rank
Source: The Sourcebook of Zip Code Demographics, 1995
<TABLE>
<CAPTION>
Households
---------------------------------------------- Median
Zip CAGR Median Age HH National State
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>
21620 Chestertown 3,996 4,378 4,698 1.8% 1.4% 35.5 36.7 $37,609 78% 29%
21645 Kennedyville 575 595 621 0.7% 0.9% 36.8 38 36,660 76% 26%
21646 N/A
21661 Rock Hall 1,175 1,191 1,230 0.3% 0.6% 41.3 41.8 26,571 43% 3%
21667 Still Pond 109 113 118 0.7% 0.9% 36.5 38 36,764 76% 27%
21678 Worton 645 668 697 0.7% 0.9% 36.7 38 36,680 76% 26%
21610 Betterton 195 202 211 0.7% 0.9% 36.6 38.2 36,777 76% 27%
21651 Millington 734 767 805 0.9% 1.0% 35.7 36.9 35,957 74% 23%
21670 N/A
21668 Sudlersville 695 734 777 1.1% 1.1% 34.3 36.4 37,608 78% 29%
21623 Church Hill 309 334 358 1.6% 1.4% 36.4 38.2 40,521 83% 35%
21617 Centreville 2,149 2,135 2,192 -0.1% 0.5% 36.9 37.6 40,604 83% 36%
21658 Queenstown 1,224 1,325 1,420 1.6% 1.4% 39.1 38.4 59,543 97% 77%
21619 Chester 1,634 1,828 1,986 2.3% 1.7% 34.3 34.5 52,153 94% 64%
21628 Crumpton 257 274 291 1.3% 1.2% 36.5 37.7 35,553 72% 22%
21638 Grasonville 1,204 1,323 1,426 1.9% 1.5% 35.5 35.5 46,040 90% 51%
21666 Stevensville 3,068 3,388 3,662 2.0% 1.6% 34.1 35.3 60,443 97% 79%
21663 Saint Michael 1,470 1,549 1,629 1.1% 1.0% 48.5 49.6 39,636 82% 33%
21601 Easton 6,859 7,320 7,745 1.3% 1.1% 38.3 39.1 36,144 74% 24%
21612 Bozman 376 396 417 1.0% 1.0% 49 50 39,191 81% 32%
21624 N/A
21625 Cordova 811 854 897 1.0% 1.0% 33.4 35.1 39,262 81% 32%
21647 McDaniel 247 256 267 0.7% 0.8% 40.9 40.7 32,288 64% 17%
21652 N/A
21653 N/A
21662 Royal Oak 371 391 411 1.1% 1.0% 44.3 46.5 40,628 83% 36%
21665 Sherwood 113 117 122 0.7% 0.8% 40.9 41.2 32,734 66% 18%
21671 Tilghman 307 318 331 0.7% 0.8% 40.7 40.8 32,537 65% 17%
21676 Wittman 154 159 166 0.6% 0.9% 40.9 40.8 32,466 65% 17%
21679 Wye Mills 104 109 115 0.9% 1.1% 33.9 35.3 39,651 82% 33%
Total/Avg 28,781 30,724 32,592 1.3% 1.2% 38.3 39.2 39,361 77% 33%
Wtd. Avg. 3,104 3,348 3,566 1.5% 1.3% 37.3 38.2 41,730
Maryland 1,748,991 1,845,277 1,948,339 1.1% 1.1% 33.0 34.2 47,728 4 *
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
-33-
<PAGE> 40
TABLE 2C
Somerset, KY Region
Demographic Characteristics
<TABLE>
<CAPTION>
Population
---------------------------------------------------------------------
Zip CAGR
Code Location 1990 1995 2000 90-95 95-00
---- -------- ---- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
42544 Nancy 3,861 4,622 5,220 3.7% 2.5%
42553 Science Hill 2,899 3,550 4,056 4.1% 2.7%
40489 Waynesburg 4,024 4,124 4,284 0.5% 0.8%
42567 Eubank 5,867 6,895 7,725 3.3% 2.3%
42519 Burnside 2,843 2,998 3,189 1.1% 1.2%
42518 Bronston 2,417 2,538 2,689 1.0% 1.2%
42555 N/A
42558 N/A
42633 Monticello 13,523 14,305 15,024 1.1% 1.0%
42533 N/A
40437 Hustonville 2,965 3,174 3,356 1.4% 1.1%
40448 N/A
40484 Stanford 9,072 9,831 10,524 1.6% 1.4%
42501 Somerset 28,546 30,687 32,941 1.5% 1.4%
40740 Lily 7,471 8,029 8,634 1.5% 1.5%
40741 London 20,329 23,226 25,770 2.7% 2.1%
42642 Russell Springs 9,569 9,908 10,393 0.7% 1.0%
42728 Columbia 10,012 10,690 11,282 1.3% 1.1%
42743 Greensburg 8,471 8,355 8,328 -0.3% -0.1%
Total/Avg 131,869 142,932 153,415 1.6% 1.4%
Wtd. Avg. 14,479 15,764 17,047 1.7% 1.6%
Kentucky 3,685,296 3,860,579 4,029,593 0.9% 0.9%
United States 248,709,873 263,006,245 277,083,635 1.1% 1.0%
</TABLE>
* National Rank
Source: The Sourcebook of Zip Code Demographics, 1995
<TABLE>
<CAPTION>
Households
-------------------------------------------------- Median
Zip CAGR Median Age HH National State
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>
42544 Nancy 1,488 1,789 2,024 3.8% 2.5% 37 38.7 20,197 16% 61%
42553 Science Hill 1,095 1,347 1,542 4.2% 2.7% 34.6 36.4 21,100 20% 65%
40489 Waynesburg 1,455 1,497 1,559 0.6% 0.8% 33.4 34.9 17,794 8% 45%
42567 Eubank 2,162 2,552 2,865 3.4% 2.3% 34.3 36.1 18,921 12% 53%
42519 Burnside 1,075 1,139 1,213 1.2% 1.3% 35.1 36.5 16,099 4% 31%
42518 Bronston 914 964 1,024 1.1% 1.2% 34.8 36.4 15,345 3% 25%
42555 N/A
42558 N/A
42633 Monticello 5,164 5,472 5,761 1.2% 1.0% 34.3 36 15,055 2% 24%
42533 N/A
40437 Hustonville 1,096 1,178 1,247 1.5% 1.1% 34.4 36.1 $19,589 14% 59%
40448 N/A
40484 Stanford 3,396 3,700 3,972 1.7% 1.4% 34 35.6 21,261 20% 66%
42501 Somerset 10,988 11,883 12,805 1.6% 1.5% 35.2 36.9 21,038 19% 65%
40740 Lily 2,627 2,840 3,066 1.6% 1.5% 31.6 33.3 16,989 6% 38%
40741 London 7,525 8,612 9,566 2.7% 2.1% 33.4 35 19,297 13% 56%
42642 Russell Springs 3,868 4,026 4,233 0.8% 1.0% 35.8 37.4 17,781 8% 45%
42728 Columbia 3,837 4,130 4,380 1.5% 1.2% 35.3 36.6 17,805 8% 45%
42743 Greensburg 3,357 3,325 3,320 -0.2% -0.0% 38 39.2 20,243 16% 62%
Total/Avg 50,047 54,454 58,577 1.7% 1.5% 34.7 36.3 18,568 11% 49%
Wtd. Avg. 5,531 6,038 6,541 1.8% 1.6% 34.7 36.3 18,981
Kentucky 1,379,782 1,450,703 1,516,692 1.0% 0.9% 33.0 34.6 24,504 48 *
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
-34-
<PAGE> 41
TABLE 2D
Redmond, OR Region
Demographic Characteristics
<TABLE>
<CAPTION>
Population
----------------------------------------------------------------
Zip CAGR
Code Location 1990 1995 2000 90-95 95-00
---- -------- ---- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
97756 Redmond 12,161 15,680 18,968 5.2% 3.9%
97760 Terrebonne 2,101 2,885 3,586 6.5% 4.4%
Total/Avg 14,262 18,565 22,554 5.4% 4.0%
Wtd. Avg. 10,679 13,692 16,522 5.1% 3.8%
Oregon 2,842,321 3,141,979 3,427,386 2.0% 1.8%
United States 248,709,873 263,006,245 277,083,635 1.1% 1.0%
</TABLE>
* National Rank
Source: The Sourcebook of Zip Code Demographics, 1995
<TABLE>
<CAPTION>
Households
---------------------------------------------------- Median
Zip CAGR Median Age HH National State
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>
97756 Redmond 4,644 5,967 7,210 5.1% 3.9% 34.9 35.9 $30,992 61% 52%
97760 Terrebonne 772 1,055 1,310 6.4% 4.4% 35.4 36.6 31,995 64% 56%
Total/Avg 5,416 7,022 8,520 5.3% 3.9% 35.2 36.3 31,494 63% 54%
Wtd. Avg. 4,092 5,229 6,303 5.0% 3.8% 35.0 36.0 31,143
Oregon 1,103,313 1,214,202 1,322,298 1.9% 1.7% 34.5 35.6 35,077 21 *
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
-35-
<PAGE> 42
TABLE 2E
California City, CA Region
Demographic Characteristics
<TABLE>
<CAPTION>
Population
---------------------------------------------------------------
Zip CAGR
Code Location 1990 1995 2000 90-95 95-00
---- -------- ----------- ----------- ------------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
93505 California City 6,086 10,090 13,337 10.6% 5.7%
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%
</TABLE>
* National Rank
Source: The Sourcebook of Zip Code Demographics, 1995
<TABLE>
<CAPTION>
Households
-----------------------------------------------------------------
Zip CAGR
Code Location 1990 1995 2000 90-95 95-00
---- -------- ------------ ---------- ------------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
93505 California City 2,172 3,573 4,707 10.5% 5.7%
California 10,381,206 10,995,431 11,624,997 1.2% 1.1%
United States 91,947,410 97,069,804 102,201,641 1.1% 1.0%
</TABLE>
* National Rank
Source: The Sourcebook of Zip Code Demographics, 1995
<TABLE>
<CAPTION>
Median
Zip Median Age Median National State
Code Location 1990 1995 Income Centile Centile
---- -------- ---- ---- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
93505 California City 30.7 31.4 $37,779 78% 58%
California 31.5 32.6 38,099 15 *
United States 32.9 34.0 33,610
</TABLE>
* National Rank
Source: The Sourcebook of Zip Code Demographics, 1995
-36-
<PAGE> 43
various compound annual growth rates ("CAGR"). Median ages are shown for 1990
and 1995. Median household income for 1995 and the corresponding national
income centiles are also included. Statistics for each state served and the
U.S. are included for comparative purposes.
Area Description
BURKE COUNTY, CALIFORNIA - Table 2A depicts various relevant demographic
statistics for the service area which encompasses several communities lying
along Interstate Route 40. The service area lies approximately 70 miles north
west of Charlotte and 40 miles east of Asheville. The Region serves the
communities of Connelly Springs; Drexel, Glen Alpine, Rutherford College and
Valdese as well as the unincorporated portions of Burke County. The primary
industries in the county include furniture making and textiles. Other
employers manufacture anti-lock brakes, pharmaceutical glass, ceramic tile,
lithium batteries, medical appliances and truck axles. In spite of the strong
manufacturing base the area's household growth and income are slightly below
North Carolina and the U.S.
CENTREVILLE, MARYLAND - Table 2B depicts various relevant demographic
statistics for the service area consists of several communities located on the
eastern shore of Maryland (see Figure 2). Annual household growth between 1990
and 1995 (1.5%) is 0.4% higher than the state and U.S. This growth rate is
expected to decline by 0.2% through 2000 but is still expected to be above the
state and nation.
The eastern shore economy relies heavily on the Chesapeake Bay. Fishing,
crabbing, and processing are important industries as is a growing tourism
industry. Agriculture is also an important industry. According to regional
management, over the past fifteen years the area's relatively inexpensive land
has made it attractive for people to move from the western shore and commute to
Washington DC and Baltimore for work.
-37-
<PAGE> 44
The service area's median household income, while 12% below the state's, is 24%
higher than the U.S. The relatively high median age also suggests a sizable
retirement community.
SOMERSET, KENTUCKY - Table 2C depicts various relevant demographic statistics
for the service area which consists of several communities in southern
Kentucky, 75 miles south of Lexington, and 45 miles north of the Tennessee
border (see Figure 3). Annual household growth between 1990 and 1995 was
approximately 1.7% compared to Kentucky's annual growth rate of 1.0% on the
U.S. rate of 1.1%. This annual growth rate pattern (1.5%) is expected to
continue between 1995 and 2000. The service area's 1995 median household
income is significantly below the State (24%) and the U.S. average (45%), but
is growing at a fast rate as Somerset becomes a commerce center for southern
Kentucky.
Unemployment in Somerset is below the state average with large employers
including General Electric, Tecumseh Products Company, Kingsford Co., and
others.
REDMOND, OREGON - Table 2D depicts various relevant demographic statistics for
the service area which consists of the community of Redmond, Oregon (see Figure
4). Annual household growth between 1990 and 1995 was 5.1% which is
approximately 2.5 times higher than that of the State and 4.5 times that of the
U.S. average. Redmond is the single fastest growing city in Oregon. This
annual growth rate is expected to moderate somewhat between 1995 and 2000
(3.9%) but it is still over double the State and four times the U.S.
projections. The service area's 1995 median household income is 12% below the
State average and 8% below the U.S. average.
-38-
<PAGE> 45
The Region's economic base is largely based on timber and tourism. The city of
Redmond has the only airport in central Oregon bordered by industrial land.
The community also has a job and workforce training facility.
CALIFORNIA CITY, CALIFORNIA - Table 2E depicts various demographics for the
service area which encompasses the city of California City, California.
Household growth rates, both historical and projected, are well above the U.S.
and the State averages. Annual household growth rates between 1990 and 1995
were 10.0% compared to 1.2% for California and 1.1% for the U.S. For the
period 1995-2000 growth is projected at an annual rate of 5.7%. Median age is
below both the U.S. and State's average. Median household income is
approximately equal to the State and approximately 12% higher than the U.S.
The following paragraphs describe the physical plant, revenue and cash flow
generating capacity of the Regions. Tables 3A through 3E delineate the revenue
per subscriber from various services in the 1995 and 1996 historical time
periods, as well as budgeted 1997. These revenues per subscriber by revenue
category have been used in our discounted cash flow analysis methodology to
determine each Region's and System's fair market value at December 31, 1996.
System Description
BURKE COUNTY, NORTH CAROLINA - The Region serves subscribers from one (1)
headend. The headend is well-located on the tallest mountain in the area.
According to management, the System provides 43 channels and the plant is
approximately 10 years old. Recently, fiber optics has replaced 65 miles of
coax trunk. This has improved picture quality and capacity through a reduction
in amplifier cascades. In spite of the fiber upgrade, the system needs a
rebuild. In fact, Valdese requires an upgrade to 550 MHz by 2000.
Notwithstanding the Valdese requirement, the service area is overbuilt.
-39-
<PAGE> 46
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
Falcon Classic Cable Income Properties, L.P. Table 3A Revenue Analysis
Burke, NC Valuation Date: December 31, 1996
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1997 Budget Dec 1996 Actual 1996 Actual 1995 Actual
-------------------- --------------------- ---------------------- ----------------------
($000) /EBU/MO ($000) /EBU ($000) /EBU/MO ($000) /EBU/MO
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Primary/Commercial $2,220.2 $17.49 $179.1 $16.97 $2,051.1 $15.91 $2,048.9 $15.50
Expanded Tier 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
AL Tier 688.0 5.42 56.4 5.34 574.9 4.46 407.0 3.08
-------- ------ ------ ------ -------- ------ -------- ------
Total Reg. Prog. 2,908.3 22.91 236.2 22.32 2,626.0 20.37 2,455.9 18.58
Radio Services 34.7 0.27 2.9 0.27 39.2 0.30 47.7 0.36
Pay Cable - 1st Outlet 387.4 3.05 35.6 3.37 495.3 3.84 583.7 4.42
Pay Cable - Add'l Outlet 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
New Product Tier - 1 1,081.6 8.52 81.7 7.74 892.1 6.92 948.1 7.17
Commercial Pay 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
Mini-Pay 9.4 0.07 0.8 0.07 10.3 0.08 13.0 0.10
Mini-Pay - Add'l Outlet 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
Pay Per View 128.7 1.01 7.3 0.69 104.0 0.81 117.4 0.89
-------- ------ ------ ------ -------- ------ -------- ------
Total Unreg. Prog. 1,641.8 12.93 128.2 12.15 1,540.9 11.95 1,709.9 12.93
Primary Add'l Outlet 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
Remote Control 3.9 0.03 0.3 0.03 4.1 0.03 4.0 0.03
Converter Rental 463.7 3.65 38.3 3.63 472.3 3.66 488.9 3.70
Other - VCR 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
-------- ------ ------ ------ -------- ------ -------- ------
Total Equipment 467.6 3.68 38.7 3.67 476.5 3.70 492.9 3.73
Wire Maint. Agreements 68.4 0.54 5.7 0.54 68.2 0.53 62.3 0.47
New Cust. - Pay Installs 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
New Cust. - Basic Installs 93.3 0.74 1.0 0.09 17.6 0.14 28.1 0.21
Install Mat'l Charge 0.0 0.00 0.0 0.00 1.1 0.01 0.4 0.00
Installs - Non New Cust. 0.0 0.00 3.3 0.31 68.3 0.53 72.0 0.54
-------- ------ ------ ------ -------- ------ -------- ------
Total Install/Service 161.7 1.27 10.1 0.95 155.2 1.20 162.9 1.23
Guide Revenue 21.7 0.17 1.7 0.17 22.8 0.18 26.1 0.20
Late Charges 56.5 0.44 4.4 0.41 57.2 0.44 63.3 0.48
Rent 3.2 0.03 (0.3) (0.03) 2.7 0.02 3.0 0.02
Franchise Pass Thru 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
Miscellaneous 0.0 0.00 0.0 0.00 16.5 0.13 0.0 0.00
Shopping Net Car. Fee 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
FCC User Fee Pass Thru 5.8 0.05 0.4 0.04 5.3 0.04 5.1 0.04
QVC Monthly Comm. 16.7 0.13 0.9 0.09 16.7 0.13 15.1 0.11
QVC Carriage Payment 13.0 0.10 0.0 0.00 12.2 0.09 14.0 0.11
HSN Monthly Comm. 9.6 0.08 0.2 0.02 9.6 0.07 0.0 0.00
HSN Carriage Payment 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
-------- ------ ------ ------ -------- ------ -------- ------
Total Non-Service/Misc. 126.5 1.00 7.5 0.71 142.9 1.11 126.7 0.96
Advertising 152.7 1.20 16.5 1.56 136.4 1.06 97.8 0.74
-------- ------ ------ ------ -------- ------ -------- ------
Total Revenues $5,458.5 $42.99 $437.1 $41.35 $5,077.8 $39.39 $5,045.9 $38.17
======== ====== ====== ====== ======== ====== ======== ======
% Change from Prior Yr. 7.5% 9.1% 0.6% 3.2%
=== === === ===
Pay Revenue/Pay Unit $7.51 $7.66 $7.14 $6.25
===== ===== ===== =====
</TABLE>
* Adj to normalize: ** $39.26 When adj. for
$0.05 Rent one time program
(0.50) Advertising payments
($0.45)
-40-
<PAGE> 47
Falcon Classic Cable Income Properties, L.P. Table 3B
Revenue Analysis
Centreville, MD
Valuation Date: December 31, 1996
<TABLE>
<CAPTION>
1997 Budget Dec 1996 Actual 1996 Actual 1995 Actual
------------------- --------------- ----------------- ------------------
($000) /EBU/MO ($000) /EBU ($000) /EBU/MO ($000) /EBU/MO
----- ------- ------ ---- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Primary/Commercial $3,203.1 $20.70 $253.9 $19.91 $2,833.9 $19.02 $2,532.3 $17.60
Expanded Tier 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
AL Tier 516.9 3.34 41.8 3.28 425.0 2.85 340.5 2.37
Total Reg. Prog. 3,720.0 24.04 295.8 23.18 3,258.8 21.87 2,872.8 19.96
Radio Services 25.6 0.17 2.1 0.16 28.1 0.19 33.3 0.23
Pay Cable - 1st Outlet 745.2 4.82 62.4 4.89 845.1 5.67 931.2 6.47
Pay Cable - Add'l Outlet 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
New Product Tier - 1 790.1 5.11 63.5 4.97 580.6 3.90 361.8 2.51
Commercial Pay 0.0 0.00 1.2 0.09 14.7 0.10 13.8 0.10
Mini-Pay 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
Video Games & Activation 43.3 0.28 3.1 0.24 41.1 0.28 5.4 0.04
Pay Per View 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
Total Unreg. Prog. 1,604.2 10.37 132.2 10.36 1,509.6 10.13 1,345.5 9.35
Primary Add'l Outlet 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
Remote Control 5.8 0.04 0.5 0.04 5.7 0.04 6.2 0.04
Converter Rental 45.0 0.29 3.7 0.29 34.8 0.23 25.3 0.18
Other - VCR 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
Total Equipment 50.8 0.33 4.1 0.32 40.5 0.27 31.5 0.22
Wire Maint. Agreements 43.0 0.28 3.5 0.27 39.3 0.26 31.2 0.22
New Cust. - Pay Installs 58.4 0.38 0.0 0.00 0.3 0.00 0.0 0.00
New Cust. - Basic Installs 0.0 0.00 0.5 0.04 7.3 0.05 15.0 0.10
Install Mat'l Charge 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
Installs - Non New Cust. 0.0 0.00 2.0 0.16 47.8 0.32 28.8 0.20
Total Install/Service 101.4 0.66 6.0 0.47 94.7 0.64 75.0 0.52
Guide Revenue 21.3 0.14 1.9 0.15 13.8 0.09 8.8 0.06
Late Charges 67.8 0.44 7.1 0.55 74.0 0.50 64.6 0.45
Rent 23.7 0.15 1.9 0.15 23.5 0.16 14.8 0.10
Franchise Pass Thru 117.4 0.76 9.1 0.71 104.9 0.70 101.4 0.70
Miscellaneous 2.8 0.02 0.0 0.00 24.7 0.17 0.0 0.00
FCC User Fee Pass Thru 6.9 0.04 0.5 0.04 6.0 0.04 5.5 0.04
QVC Monthly Comm. 13.2 0.09 1.1 0.09 13.2 0.09 9.0 0.06
QVC Carriage Payment 18.3 0.12 0.0 0.00 31.5 0.21 0.0 0.00
HSN Monthly Comm. 22.2 0.14 1.6 0.13 22.2 0.15 18.6 0.13
HSN Carriage Payment 2.1 0.01 0.2 0.01 2.1 0.01 2.1 0.01
Total Non-Service/Misc. 295.7 1.91 23.4 1.83 315.9 2.12 224.8 1.56
Advertising 138.0 0.89 13.3 1.04 123.0 0.83 114.4 0.79
Total Revenues 5,910.1 $38.19 474.8 $37.22 5,342.6 $35.85 4,664.0 $32.41
% Change from Prior Yr 10.6% 6.5% 14.6% 10.6% 15.0% 15.0%
Pay Revenue/ Pay Unit $9.04 $8.23 $8.76 $8.67
</TABLE>
-41-
<PAGE> 48
- --------------------------------------------------------------------------------
Falcon Classic Income Properties Table 3C Revenue Analysis
Somerset, Kentucky Valuation Date: December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 Budget Dec Mo 1996 Actual 1996 Actual 1995 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 $4,579.9 $19.48 $371.3 $19.05 $4,158.5 $17.81 $3,850.2 $16.76
Expanded Tier 542.1 2.31 44.5 2.28 475.1 2.03 412.3 1.79
-------- ------ ------ ------ -------- ------ -------- ------
Total Regulated Programming 5,122.0 21.78 415.8 21.34 4,633.6 19.84 4,262.5 18.55
-------- ------ ------ ------ -------- ------ -------- ------
Radio Services 0.0 0.00 0.0 0.00 0.1 0.00 0.1 0.00
Pay Cable 417.7 1.78 34.1 1.75 464.9 1.99 506.6 2.20
New Product Tier 1,219.2 5.19 99.8 5.12 1,005.9 4.31 813.9 3.54
Mini-Pay 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
Pay Per View 10.7 0.05 0.6 0.03 11.9 0.05 6.8 0.03
-------- ------ ------ ------ -------- ------ -------- ------
Total Unregulated Programming 1,647.6 7.01 134.5 6.90 1,482.8 6.35 1,327.4 5.78
-------- ------ ------ ------ -------- ------ -------- ------
Remote Control 18.7 0.08 1.5 0.08 28.6 0.12 44.7 0.19
Converter Rental 96.4 0.41 8.1 0.42 83.0 0.36 49.6 0.22
Other - VCR 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
-------- ------ ------ ------ -------- ------ -------- ------
Total Equipment 115.1 0.49 9.6 0.49 111.6 0.48 94.3 0.41
-------- ------ ------ ------ -------- ------ -------- ------
Wire Maintenance Agreements 39.5 0.17 3.3 0.17 41.1 0.18 37.7 0.16
Installation 125.2 0.53 5.0 0.26 113.1 0.48 126.6 0.55
-------- ------ ------ ------ -------- ------ -------- ------
Total Installation / Service 164.7 0.70 8.3 0.43 154.2 0.66 164.3 0.72
-------- ------ ------ ------ -------- ------ -------- ------
Guide Revenue 5.1 0.02 0.4 0.02 3.8 0.02 0.0 0.00
Late Charges 66.4 0.28 6.6 0.34 70.6 0.40 67.9 0.30
Home Shopping 76.4 0.32 4.8 0.25 78.3 0.45 62.1 0.27
FCC User Fee Pass Thru 10.7 0.05 0.8 0.04 9.4 0.05 8.8 0.04
Franchise Pass Thru 25.4 0.11 2.1 0.11 22.9 0.10 5.5 0.02
Miscellaneous / Rent 14.4 0.06 47.1 2.42 178.6 0.76 9.1 0.04
-------- ------ ------ ------ -------- ------ -------- ------
Total Non-Service / Misc. 198.4 0.84 61.8 3.17 363.6 1.56 153.4 0.67
-------- ------ ------ ------ -------- ------ -------- ------
Advertising 387.2 1.65 43.9 2.25 345.1 1.48 297.3 1.29
-------- ------ ------ ------ -------- ------ -------- ------
Total Revenues $7,635.0 $32.47 $673.9 $34.58 $7,090.9 $30.36 $6,299.2 $27.41
======== ===== ====== ====== ======== ====== ======== ======
% Change From Prior Year 7.67% 6.94% 12.57% 10.76%
==== ==== ===== =====
Revenue / Pay Unit / Month $9.05 $8.43 $8.53 $8.43
===== ===== ===== =====
</TABLE>
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<PAGE> 49
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
Falcon Classic Cable Income Properties Table 3D Revenue Analysis
Redmond, Oregon Valuation Date: December 31, 1996
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1997 Budget Dec Mo 1996 Actual 1996 Actual 1995 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 $1,084.2 $21.41 $83.5 $22.57 $992.5 $21.47 $1,006.7 $20.27
Expanded Tier 75.9 1.50 5.8 1.57 69.6 1.51 74.1 1.49
-------- ------ ------ ------ -------- ------ -------- ------
Total Regulated Programming 1,160.1 22.91 89.3 24.14 1,062.1 22.98 1,080.8 21.76
-------- ------ ------ ------ -------- ------ -------- ------
Radio Services 8.1 0.16 0.6 0.16 8.7 0.19 11.5 0.23
Pay Cable 55.4 1.09 4.6 1.24 72.0 1.56 99.6 2.01
New Product Tier 297.7 5.88 22.8 6.16 245.5 5.31 219.1 4.41
Mini-Pay 2.4 0.05 0.2 0.05 2.5 0.05 2.4 0.05
Pay Per View 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
-------- ------ ------ ------ -------- ------ -------- ------
Total Unregulated Programming 363.6 7.18 28.2 7.62 328.7 7.11 332.6 6.70
-------- ------ ------ ------ -------- ------ -------- ------
Remote Control 2.5 0.05 0.2 0.05 2.5 0.05 2.9 0.06
Converter Rental 34.1 0.67 2.7 0.73 35.6 0.77 39.4 0.79
Other - VCR 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
-------- ------ ------ ------ -------- ------ -------- ------
Total Equipment 36.6 0.72 2.9 0.78 38.1 0.82 42.3 0.85
-------- ------ ------ ------ -------- ------ -------- ------
Wire Maintenance Agreements 6.6 0.13 0.5 0.14 7.0 0.15 7.8 0.16
Installation 14.5 0.29 0.7 0.19 13.6 0.29 14.5 0.29
-------- ------ ------ ------ -------- ------ -------- ------
Total Installation / Service 21.1 0.42 1.2 0.32 20.6 0.45 22.3 0.45
-------- ------ ------ ------ -------- ------ -------- ------
Guide Revenue 3.4 0.07 0.3 0.08 2.3 0.05 0.0 0.00
Late Charges 13.7 0.27 0.8 0.22 13.5 0.29 14.0 0.28
Home Shopping 10.3 0.20 1.3 0.35 14.5 0.31 7.8 0.16
FCC User Fee Pass Thru 2.1 0.04 0.1 0.03 1.8 0.04 1.8 0.04
Franchise Pass Thru 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
Miscellaneous / Rent 7.0 0.14 0.5 0.14 12.7 0.27 6.0 0.12
-------- ------ ------ ------ -------- ------ -------- ------
Total Non-Service / Misc. 36.5 0.72 3.0 0.81 44.8 0.97 29.6 0.60
-------- ------ ------ ------ -------- ------ -------- ------
Advertising 68.4 1.35 6.5 1.76 67.2 1.45 69.4 1.40
-------- ------ ------ ------ -------- ------ -------- ------
Total Revenues $1,686.3 $33.30 $131.1 $35.43 $1,561.5 $33.78 $1,577.0 $31.75
======== ====== ====== ====== ======== ====== ======== ======
% Change From Prior Year 7.99% -1.41% -0.98% 6.41%
==== ===== ===== ====
Revenue / Pay Unit / Month $6.21 $6.32 $7.12 $7.45
===== ===== ===== =====
</TABLE>
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<PAGE> 50
- --------------------------------------------------------------------------------
Table 3E
Falcon Classic Cable Income Properties Revenue Analysis
California City, California Valuation Date: December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 Budget Dec Mo 1996 Actual 1996 Actual 1995 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 $377.5 $15.85 $31.4 $15.96 $364.6 $14.92 $367.0 $14.57
Expanded Tier 131.1 5.50 10.9 5.54 136.4 5.58 145.7 5.78
------ ------ ----- ------ ------ ------ ------ ------
Total Regulated Programming 508.6 21.35 42.3 21.50 501.0 20.50 512.7 20.35
------ ------ ----- ------ ------ ------ ------ ------
Radio Services 6.0 0.25 0.5 0.25 6.4 0.26 7.7 0.31
Pay Cable 78.0 3.27 6.9 3.51 94.5 3.87 107.8 4.28
New Product Tier 66.2 2.78 5.0 2.54 51.2 2.10 40.8 1.62
Mini-Pay 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
Pay Per View 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
------ ------ ----- ------ ------ ------ ------ ------
Total Unregulated Programming 150.2 6.31 12.4 6.30 152.1 6.22 156.3 6.21
------ ------ ----- ------ ------ ------ ------ ------
Remote Control 3.3 0.14 0.3 0.15 3.5 0.14 3.6 0.14
Converter Rental 50.0 2.10 4.1 2.08 54.1 2.21 55.7 2.21
Other - VCR 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
------ ------ ----- ------ ------ ------ ------ ------
Total Equipment 53.3 2.24 4.4 2.24 57.6 2.36 59.3 2.35
------ ------ ----- ------ ------ ------ ------ ------
Wire Maintenance Agreements 4.2 0.18 0.4 0.20 4.7 0.19 4.3 0.17
Installation 18.3 0.77 1.4 0.71 16.9 0.69 24.9 0.99
------ ------ ----- ------ ------ ------ ------ ------
Total Installation / Service 22.5 0.94 1.8 0.92 21.6 0.88 29.2 1.16
------ ------ ----- ------ ------ ------ ------ ------
Guide Revenue 1.0 0.04 0.1 0.05 0.8 0.03 0.0 0.00
Late Charges 8.1 0.34 0.6 0.31 8.7 0.36 7.9 0.31
Home Shopping 7.1 0.30 0.5 0.25 7.1 0.29 9.9 0.39
FCC User Fee Pass Thru 1.0 0.04 0.1 0.05 1.0 0.04 1.0 0.04
Franchise Pass Thru 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
Miscellaneous / Rent 0.6 0.03 0.0 0.00 3.4 0.14 0.0 0.00
------ ------ ----- ------ ------ ------ ------ ------
Total Non-Service / Misc. 17.8 0.75 1.3 0.66 21.0 0.86 18.8 0.75
------ ------ ----- ------ ------ ------ ------ ------
Advertising 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00
------ ------ ----- ------ ------ ------ ------ ------
Total Revenues $752.4 $31.59 $62.2 $31.62 $753.3 $30.83 $776.3 $30.82
====== ====== ===== ====== ====== ====== ====== ======
% Change From Prior Year -0.12% 2.45% -2.96% 0.03%
===== ==== ===== =====
Revenue / Pay Unit / Month $8.10 $8.12 $7.80 $7.28
===== ===== ===== =====
</TABLE>
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<PAGE> 51
The following remarks on overbuilds from Wanda Parsons, the Regional Manager,
follow:
Cable TV is a very competitive business in Burke County. The City of
Morganton built a municipally-owned interdiction system in the early
1990's and quickly converted our customers within the city limits with
their dramatically lower rates and greater channel offerings. The
City is aggressively annexing more of our service area and they
continue to convert virtually all of our subscribers in those areas.
Additionally, TCI and Falcon have parallel lines in Valdese, Drexel
and a small area in the County. They too have substantially lower
rates and a comparable channel line-up. Most residents subscribe to
TCI in those overbuilt areas.
This competition has put further urgency on the rebuild.
Burke's operating statistics as of the valuation date follow;
<TABLE>
<CAPTION>
December 31, 1996
-----------------
<S> <C>
Homes passed 18,986
Equivalent Billing Units (EBU's) 10,546
Penetration % 55.5%
Pay Units 4,614
Pay-to-EBU's % 43.8%
Plant Miles: Aerial 469
Underground 262
---------
Total 731
=========
Density (Homes/Miles) 26.0
=========
</TABLE>
EBU and pay unit penetrations are well-below industry averages of 68.3% and
78.0% respectively. The planned plant rebuild coupled with increased marketing
efforts should result in improved subscriber retention growth and revenues per
subscriber particularly from ancillary revenue sources. The Region's average
density of 26 homes/mile is well
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<PAGE> 52
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 Burke's actual revenues for 1995 and the month of December
and year 1996; and the budget for 1997. The Table shows the impact of the
overbuilds and FCCIP's efforts to minimize the revenue impact.
Primary/Commercial (Basic) revenues increased 6.9% between 1995 and 1996 by
increasing the rates for basic and tier services offset by a 3.6% decline in
EBU's. Total 1996 revenue/EBU increased 3.2% while total revenues remained
essentially flat as compared to 1995.
Total 1997 budgeted revenues are expected to increase 7.5% while revenues/EBU
are expected to increase 9.1%. The largest year-to-year increases are expected
to come from regulated basic and tier services. The Table also shows a decline
in 1997 pay cable revenues. This is due in part to moving Disney from the pay
category to the new product tier.
Exhibit C1 presents operating cash flow statements for time periods comparable
to Table 3A. Cash flow margins after an allocation of corporate expenses were
53.5% and 55.1% of revenues for 1995 and 1996 respectively. The 1997 Budget
reflects a margin increase to 56%. These margins are quite high based upon our
experience and discussions 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") accounts which increased cash flow margins. However, net cash flow,
i.e., cash flow minus capex negates the effect of this expense capitalization
policy.
CENTREVILLE, MARYLAND - The Centreville Region serves its subscribers from a
single headend located at Wye Mills. The plant dates back to 1978 but was
upgraded to 450
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<PAGE> 53
gear spaced at 330 MHz in 1989. A rebuild has already begun in the St.
Michael's portion of the Region and according to management a complete rebuild
of the entire plant and headend is planned.
Centreville's operating statistics as of the valuation date follow:
<TABLE>
<CAPTION>
December 31, 1996
-----------------
<S> <C>
Homes passed 23,857
EBU's 12,593
Penetration % 52.8%
Pay Units 7,440
Pay-to-EBU's % 59.1%
Plant Miles: Aerial 460.15
Underground 189.60
---------
Total 649.75
=========
Density (Homes/Miles) 36.7
=========
</TABLE>
EBU penetration of 52.8% is well below the industry average of 68.3% and pay
unit penetration of 60.4% is below the industry average of 78.0%. The Region's
average density of 36.7 home/mile is well below the industry average of 105
homes/mile.
Table 3B details Centreville's actual revenues for 1995, and the month of
December and year 1996, as well as the 1997 budget. Total 1996 revenue/EBU
rose by 10.6% and total revenue increased by nearly 15% as compared to 1995.
Total budgeted 1997 revenues are expected to increase by 10.6%, while
revenue/EBU are expected to increase by 6.5%. EBU's are expected to increase
by nearly 700 or 5.5% by years end.
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<PAGE> 54
Exhibit C2 presents operating cash flow statements for time periods comparable
to Table 3B. Cash flow margins after allocated corporate expense were 39.5% in
1995 and 45.9% in 1996. The 1997 budget reflects a margin increase to 47.7%.
The margin increase is due to rate increase, subscriber growth and higher
capitalization of in-house labor.
SOMERSET, KENTUCKY - The Somerset Region serves its subscribers from five
separate headends; Burnside, Columbia, Eubank, London, and McKinney that offer
between 23 and 40 channels. The plant ranges from 270 MHz to 400 MHz in
capacity. It is projected that the Burnside (Somerset) area will be rebuilt in
the next few years. Burnside comprises approximately 528 miles or 63% of the
total of 834.5 plant miles. The London (Laurel) area has been partially
rebuilt to 750 MHz in 1996, and it is expected to complete the rebuild in 1997.
Somerset operating statistics as of the valuation date follows:
<TABLE>
<CAPTION>
December 31, 1996
-----------------
<S> <C>
Homes Passed 22,060
EBU's 19,486
Penetration % 88.3%
Pay Units 3,914
Pay-to-EBU's % 20.1%
Plant Miles: Aerial 816.5
Underground 18.0
--------
Total 834.5
========
Density (Homes/Mile) 26.4
========
</TABLE>
EBU penetration is well above industry average of 68.3%, while the pay unit
penetration of 20.1% is well below industry averages of 78.0%. The EBU
penetration is reflective of the area's poor off-air reception. The planned
rebuild and the continued improvement in
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<PAGE> 55
the economy should result in improved revenue per subscriber, particularly from
pay and ancillary revenue sources. The Region's average density of 26.4
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.
Table 3C details Somerset's actual revenues for 1995 and the month of December
and year 1996, and the budget for 1997. Primary/Commercial (Basic) revenue
increased 6.3% on an EBU basis between 1995 and 1996. Total 1996 revenue/EBU
increased 10.8% and total revenues increased 12.6% as compared to 1995.
Total 1997 budgeted revenues are expected to increase 7.7% while revenue/EBU
are expected to increase 7.0%. 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 50.9% in 1995 and 52.5% in 1996.
The 1997 budget reflects a margin of 48.5%. The major area of increased costs
is the technical category which has increased costs to accommodate the
projected rebuild. Also, Somerset's 1996 margin is 1% point higher than normal
due to one-time payments from programmers to insure carriage. These include
Disney, Home Shopping, QVC, and Sci-Fi among others. These margins are
approximately at levels that other cable systems with these characteristics
would exhibit.
REDMOND, OREGON - The Redmond System serves its subscribers from one headend
that offers 32 channels. The plant is predominantly 270 MHz, with a portion at
450 MHz. The plant was built in 1965 and upgraded over the years, but needs to
be rebuilt, especially in the light of competition from MMDS operators. The
System has not been
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<PAGE> 56
scheduled for a rebuild in the next few years, however, the appraisers have
assumed a rebuild in our cash flow projections.
Redmond's operating statistics as of the valuation date follows:
<TABLE>
<CAPTION>
December 31, 1996
-----------------
<S> <C>
Homes Passed 7,252
EBU's 3,679
Penetration % 50.7%
Pay Units 706
Pay-to-EBU's % 19.2%
Plant Miles: Aerial 116.0
Underground 54.0
--------
Total 170.0
========
Density (Homes/Mile) 42.7
========
</TABLE>
The Redmond System has been losing both basic and pay units in recent years due
to a very strong MMDS competitor (American Telecasting) and DTH installations.
EBU's in 1995 were 4,025, a decline of 8.6% in 1996. Pay units were 979 in
1995, a decline in 1996 of 27.9%. This has led to EBU and pay unit penetration
of 50.7% and 19.2% respectively, well-below the industry average of 68.3% and
78.0% respectively. The appraiser projected rebuild combined with increased
marketing should result in improved subscriber growth. According to System
management, financial constraints did not permit the System to compete for the
majority of new homes built in the System's franchise area in the past year or
more. This is to be rectified in 1997 and the System is optimistic it can
capture the majority of new built homes due to superior programming and picture
quality. The System's average density of 42.7 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.
-50-
<PAGE> 57
Table 3D details Redmond's actual revenues for 1995 and the month of December
and year 1996, and the budget for 1997. Primary/Commercial (Basic) revenue
increased 5.9% on an EBU basis between 1995 and 1996. Total 1996 revenue/EBU
increased approximately 6.4% and total revenues declined 1% as compared to
1995, due to loss of EBU's and pay units.
Total 1997 budgeted revenues are expected to increase 8.0% while revenues/EBU
are expected to decrease 1.4%.
Exhibit C4 presents operating cash flow statements for time periods comparable
to Table 3D. Cash flow margins after allocated corporate expense were 52.4%
and 55.8% in 1995 and 1996 respectively after a reduction of 3.7% from before
allocation margins. The 1997 budget reflects a margin of 51.1%, with virtually
all the increased expense in the technical category. These margins are high
based upon our experience. Factors which contribute to these historically 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.
CALIFORNIA CITY, CALIFORNIA - The California City System serves subscribers
from a single headend, with a capacity of 300 MHz and offering 41 channels.
The system was upgraded in 1982. A rebuild has not been projected for the
system. System management believes that channel capacity and picture quality
are adequate for the foreseable future.
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<PAGE> 58
California City's operating statistics as of the valuation date follows:
<TABLE>
<CAPTION>
December 31, 1996
-----------------
<S> <C>
Homes Passed 2,858
EBU's 1,960
Penetration % 68.6%
Pay Units 839
Pay-to-EBU's % 42.8%
Plant Miles: Aerial 79.0
Underground 11.1
---------
Total 90.1
=========
Density (Homes/Mile) 31.7
=========
</TABLE>
EBU penetration is equal to and pay unit penetration is well-below industry
averages of 68.3% and 78.0% respectively. Density of 31.7 homes/mile is
extremely low.
Table 3E details California City's actual revenue for 1995 and the month of
December and year 1996; and the 1997 budget. Primary (Basic) revenue/EBU
increased by 2.5% while total revenues/EBU was flat compared to 1995. Total
1997 revenues are expected to be flat compared to 1996.
Exhibit B5 presents operating cash flow statements for time periods comparable
to Table E. Cash flow margins after allocation of corporate expenses were
54.1% and 49.6% for 1996 and 1995 respectively. The projected 1997 margin is
49.6%. The areas of increased expense are technical and marketing. The
appraisers have utilized a projected 1997 margin of 54%, in line with the 1996
margin. A rebuild is not scheduled, therefore not necessitating the increased
technical costs. Subscriber losses were due to the closing of Edwards Air
Force Base, not competitive pressure, therefore eliminating the need for
increased marketing costs.
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<PAGE> 59
FAIR MARKET VALUATION
OF THE REGIONS AND SYSTEMS THAT COMPRISE
FALCON CLASSIC CABLE INCOME PROPERTIES,
A CALIFORNIA LIMITED PARTNERSHIP
AS OF DECEMBER 31, 1996
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 FCCIP.
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 FCCIP
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 as discussed above, but rejected as inappropriate.
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<PAGE> 60
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 and Systems 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 and
System.
In determining each Region's and System's operating cash flows, the appraisers
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 and System 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> 61
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.7 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 appraisers considered various
factors, such as competition, demographics, geography, clustering, etc. in
arriving at FCCIP'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.
_______________________________
7Stocks, Bonds, Bills and Inflation 1996 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
-55-
<PAGE> 62
TABLE 4
WEIGHTED AVERAGE COST OF CAPITAL
FALCON CLASSIC CABLE INCOME PROPERTIES
AS OF DECEMBER 31, 1996
<TABLE>
<S> <C>
Cost of Equity
Risk Free Rate
(10-Year Treasury Securities Composite; December 26, 1996;
Source: Value Line) 6.33%
Equity Risk Premium Intermediate-Term (Entire Market) 7.80%
(Ibbotson Associates, 1995)
Market Beta CATV Stocks x 1.60
------
Adjusted Equity Risk Premium 12.48%
--------
Small Stock Premium
(Ibbotson Associates, 1996) 3.60%
Unsystematic Risk - Company Specific 5.00%
========
Cost of Equity 27.41%
========
Cost of Debt
Kagan High Yield Media Bonds 10.23%
Less Tax Effect (at 35%) 3.58%
After Tax Cost of Debt 6.65%
=========
Weighting
% % of Capital Weighted Cost
Return Structure of Capital
------ --------- ----------
Equity 27.41% 40% 10.96%
Debt 6.65% 60% 3.99%
--------
Weighted Average Cost of Capital 14.95%
========
Rounded to 15.00%
========
</TABLE>
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<PAGE> 63
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 October 15, 1996, reported a yield to maturity for
high yield cable bonds of 10.23%. Cable TV Investor tracked a large number of
cable bonds providing a cable high-yield bond average. The appraisers 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 FCCIP is shown in Table 4. The weighted average cost of
capital for FCCIP was 15% (rounded).
Beyond the projection horizon, each Region and System 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 appraisers
selected a residual multiple of 8.0 for each Region and System. 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.
The value indications, under the income approach from Exhibit E, for 100% of
the assets for each Region and System of FCCIP as of December 31, 1996 were as
follows:
-57-
<PAGE> 64
<TABLE>
<S> <C>
Burke County $ 19,960,000
=================
Centreville $ 23,800,000
=================
Somerset $ 33,230,000
=================
Redmond $ 7,770,000
=================
California City $ 3,530,000
=================
</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 appraisers 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.
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,
-58-
<PAGE> 65
to complete a valid comparative analysis the following variables would need 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 and System.
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 appraisers reviewed the cable television transaction market, as
reported in Cable TV Investor (Paul Kagan Associates) and selected the
transactions of between 1,000 and 10,000 subscribers for comparisons to Redmond
and California City and between 10,000 and 30,000 subscribers for comparisons
to Burke, Centreville, and Somerset, announced between July 31, 1996 and
December 31, 1996 (Table 5). The weighted average multiples and standard
deviations are as follows:
-59-
<PAGE> 66
TABLE 5A
Market Approach Valuation Date
1996 Announced/Proposed Cable System Sales (less than 10,000 subscribers)
<TABLE>
<CAPTION>
PRICE HOMES
LOCATION STATE SELLER BUYER (MIL) PASSED
- -------- ----- ------ ----- ----- ------
<S> <C> <C> <C> <C> <C>
DAVIDSON, WILLIAMSON TN CABLEVISION INTERMEDIA PRTNRS. $1.7 1.5
CLINTON COUNTY KY CLINTON CABLE ROY L. BAKER 1.4 1.9
BROOKHAVEN MS FUTUREVISION MARCUS CABLE 2.6 5.5
FRANKFORT IN FRANKFORT CABLE MARCUS CABLE 6.7 8.0
& DAYTON OH
NH ME PHOENIX GRASSRTS FRONTIERVISION 9.6 11.3
CHARTSWORTH, ETON GA FRONTIERVISION HELICON PRTNRS. I LP 8.6 7.0
WOODSTOCK, NEW MKT. VA FRONTIERVISION SHENANDOAH CBL. 8.5 6.2
PA OH SRW INC PA/OH CBL. FRONTIERVISION 3.8 5.3
ROSENBERG TX JONES SPACELINK TCI 5.5 8.3
CHESTERFIELD NH GATEWAY CVISION PINE STATE 2.9 4.0
VAN BUREN ET AL. AR CLASSIC CABLE TCA 9.6 9.0
BOGART, WATKINSVILLE GA OCB INTERMEDIA 8.3 7.0
OH, IN, PA NORTHERN OHIO FANCH 9.4 12.1
CENTRAL/NORTHERN NH PEGASUS CABLE STATE CABLE TV 7.2 6.1
MOCKSVILLE NC FRIENDSHIP GENESIS CABLE 7.8 10.0
N. BREVARD FL BREVARD GENESIS CABLE 1.6 2.6
ROBESON COUNTY NC GWC PROPERTIES GENESIS CABLE 2.5 3.8
TOTALS / SIMPLE AVERAGES $97.7 109.5
</TABLE>
<TABLE>
<CAPTION>
BASIC CASH
SUBS % FLOW PROJ
LOCATION STATE SELLER BUYER (000) PEN. VPS ($000s) CFx
- -------- ----- ------ ----- --- ---- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DAVIDSON, WILLIAMSON TN CABLEVISION INTERMEDIA PRTNRS. 1.3 87.0% $1,283 $212.5 8.0
CLINTON COUNTY KY CLINTON CABLE ROY L. BAKER 1.3 70.0% 1,111 197.2 7.1
BROOKHAVEN MS FUTUREVISION MARCUS CABLE 2.4 44.0% 1,079 346.7 7.5
FRANKFORT IN FRANKFORT CABLE MARCUS CABLE 5.6 70.0% 1,196 705.3 9.5
& DAYTON OH
NH ME PHOENIX GRASSRTS FRONTIERVISION 7.0 62.0% 1,371 1,142.9 8.4
CHARTSWORTH, ETON GA FRONTIERVISION HELICON PRTNRS. I LP 5.7 81.0% 1,509 1,048.8 8.2
WOODSTOCK, NEW MKT. VA FRONTIERVISION SHENANDOAH CBL. 5.0 81.0% 1,700 904.3 9.4
PA OH SRW INC PA/OH CBL. FRONTIERVISION 3.3 62.0% 1,152 506.7 7.5
ROSENBERG TX JONES SPACELINK TCI 2.9 35.0% 1,896 509.3 10.8
CHESTERFIELD NH GATEWAY CVISION PINE STATE 2.5 63.0% 1,170 367.1 7.9
VAN BUREN ET AL. AR CLASSIC CABLE TCA 8.0 89.0% 1,199 1,185.2 8.1
BOGART, WATKINSVILLE GA OCB INTERMEDIA 6.3 90.0% 1,333 1,024.7 8.1
OH, IN, PA NORTHERN OHIO FANCH 6.8 56.0% 1,387 1,132.5 8.3
CENTRAL/NORTHERN NH PEGASUS CABLE STATE CABLE TV 4.6 75.0% 1,572 757.9 9.5
MOCKSVILLE NC FRIENDSHIP GENESIS CABLE 7.4 74.0% 1,057 1,114.3 7.0
N. BREVARD FL BREVARD GENESIS CABLE 1.6 62.0% 1,013 228.6 7.0
ROBESON COUNTY NC GWC PROPERTIES GENESIS CABLE 2.5 66.0% 1,015 347.2 7.2
TOTALS / SIMPLE AVERAGES 74.2 68.6% 1,297 $11,730.9 8.2
WEIGHTED AVERAGES 67.7% 1,317 8.3
STANDARD DEVIATION 252 1.1
SIMPLE AVERAGE RANGE WITHIN 1 STANDARD DEVIATION - HIGH 1,548 9.3
SIMPLE AVERAGE RANGE WITHIN 1 STANDARD DEVIATION - LOW 1,045 7.1
</TABLE>
-60-
<PAGE> 67
TABLE 5B
Market Approach Valuation Date
1996 Announced/Proposed Cable System Sales (between 10,000 - 50,000
subscribers)
<TABLE>
<CAPTION>
BASIC CASH
PRICE HOMES SUBS % FLOW PROJ
LOCATION STATE SELLER BUYER (MIL) PASSED (000) PEN. VPS ($000) CFx
- -------- ----- ------ ----- ----- ------ ----- ---- --- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SAN FRAN BAY AREA CA BALKIN CABLE TCI OF GA $19.6 24.1 12.3 51.0% $1,594 $2,227.3 8.8
SUMMERVILLE,TRENTON GA CLEAR-VU CABLE HELICON 18.2 15.0 12.3 82.0% 1,530 2,246.9 8.1
& DAYTON OH
MOSES LAKE WA MARCUS CABLE NORTHLAND COMM. 20.0 15.1 12.5 83.0% 1,568 2,105.3 9.5
ANAHEIM, ORANGE CO. CA JONES PRTNRS. II CENTURY COMM. 36.0 24.3 17.0 70.0% 2,102 3,428.6 10.5
PALM COAST FL BENCHMARK COMM. MOFFAT COMM. 29.7 12.3 10.0 81.0% 2,965 3,228.3 9.2
ALBUQUERQUE, SW WA, NM CLASSIC CABLE CAMBRIDGE 22.9 22.8 13.0 57.0% 1,760 2,694.1 8.5
NWEST OR
BROOMFIELD CO. JONES INTERCABLE TCI 33.8 28.9 18.5 64.0% 1,825 3,557.9 9.5
OK-EASTERN AREAS TX MISSION CABLE TW/FANCH-ONE 31.2 48.2 27.0 56.0% 1,156 4,105.3 7.6
ROSEVILLE CA JONES 87-A ROSEVILLE CABLE 31.0 21.9 16.0 73.0% 1,938 3,039.2 10.2
EVERGREEN ET AL CO JONES INTERCABLE TCI 43.2 31.3 26.0 83.0% 1,662 4,547.4 9.5
TOTALS / SIMPLE AVERAGES $285.6 244.0 164.6 70.0% $1,810 $31,180.1 9.1
====== ===== ===== ===== ====== ========= ====
WEIGHTED AVERAGES 67.5% $1,735 9.2
===== ====== ====
STANDARD DEVIATION $480 0.9
====== ====
SIMPLE AVERAGE RANGE WITHIN 1 STANDARD DEVIATION - HIGH $2,290 10.0
====== ====
SIMPLE AVERAGE RANGE WITHIN 1 STANDARD DEVIATION - LOW $1,330 8.2
====== ====
</TABLE>
-61-
<PAGE> 68
<TABLE>
<CAPTION>
Standard
Multiple Deviation
<S> <C> <C>
Less than 10,000 Subscribers:
Price/Subscriber $1,317 $252
====== ====
Price/Cash Flow 8.3 1.1
=== ===
Over 10,000 Subscribers:
Price/Subscriber $1,735 $480
====== ====
Price/Cash Flow 9.2 0.9
=== ===
</TABLE>
The standard deviations for the subscriber and cash flow multiples indicate
that the multiples can vary between 19% and 28% and 13% and 10% 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>
Burke California
Multiple County Centreville Somerset Redmond City
- -------- ------ ----------- -------- ------- ----
($000s)
<S> <C> <C> <C> <C> <C>
< 10K Subs Price/EBU $1,317
> 10K Subs Price/EBU $1,735
12/31/96 EBU's 10,546 12,593 19,406 3,679 1,960
Price/EBU
Value Indicator $18,297 $21,849 $33,808 $4,845 $2,581
< 10K Subs Price/Cash Flow 8.3x
> 10K Subs Price/Cash Flow 9.2x
1997 or Year One
Cash Flow $3,120.7 $2,925.2 $4,106.2 $913.3 $415.4
Price/Cash Flow
Value
Indicator $28,710 $26,912 $37,777 $7,580 $3,448
</TABLE>
-62-
<PAGE> 69
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 and System's assets
under the market approach as of December 31, 1996 was (rounded):
<TABLE>
<S> <C>
Burke County $ 26,107,000
=================
Centreville $ 25,646,000
=================
Somerset $ 36,785,000
=================
Redmond $ 6,897,000
=================
California City $ 3,231,000
=================
</TABLE>
Correlation and Conclusion
The valuation indicators, as of the valuation date, under the income and market
approaches follow as of December 31, 1996:
<TABLE>
<CAPTION>
Burke California
County Centreville Somerset Redmond City
------- ----------- -------- ------- ----
<S> <C> <C> <C> <C> <C>
Income $19,960,000 $23,800,000 $33,230,000 $7,770,000 $3,530,000
=========== =========== =========== ========== ==========
Market $26,107,000 $25,646,000 $36,785,000 $6,897,000 $3,231,000
=========== =========== =========== ========== ==========
</TABLE>
The appraisers 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.
-63-
<PAGE> 70
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.
The market approach, using market derived multiples, is a much less reliable
method to value the Regions and Systems 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 Systems of FCCIP as of December 31, 1996 were
(rounded):
<TABLE>
<S> <C>
Burke County $ 20,570,000
==================
Centreville $ 23,980,000
==================
Somerset $ 33,590,000
==================
Redmond $ 7,680,000
==================
California City $ 3,500,000
==================
</TABLE>
-64-
<PAGE> 71
APPRAISAL CERTIFICATE
The determination of the fair market value of 100% of the assets of the Regions
and Systems comprising Falcon Classic Cable Income Properties serving portions
of the states of North Carolina, Maryland, Kentucky, Oregon, and California 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, 1996.
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 November 11 and 13, 1996. The Systems (Redmond and
California City) were not visited.
No investigation has been made of the title to or the liabilities against the
assets which have been appraised.
-65-
<PAGE> 72
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 otherwise referred to or disseminated to any other
person, entity or government agency without the prior written consent of 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
March 10, 1997
-66-
<PAGE> 73
EXHIBIT A
PHOTOGRAPHS
<PAGE> 74
[BURKE REGION OFFICE PICTURE]
[BURKE HEADEND PICTURE]
-68-
<PAGE> 75
[WYE - MILLS HEADEND, 300' GUYED TOWER PICTURE]
[CENTERVILLE REGION OFFICE PICTURE]
-69-
<PAGE> 76
EXHIBIT B
REGION AND SYSTEM OPERATING STATISTICS
<PAGE> 77
- --------------------------------------------------------------------------------
Falcon Classic Cable Income EXHIBIT B1 Operating Statistics
Properties, L.P. Valuation Date:
Burke, NC December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 Pay
Homes Passed Basic Subscribers EBU's 1996 Units
------------------------- ---------------------------- FCC EBU Pay Pay/ % Chg
1996 1995 % Chg. 1996 1995 % Chg. Method Pene Units EBUs v. 95
------ ------ ------ ------ ------- ------ -------- ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Burke County 15,528 15,020 3.4% 9,233 9,652 -4.3% 9,255 59.6% 4,045 43.7% -34.5%
Valdese 1,377 1,097 25.5% 527 503 4.8% 527 38.3% 220 41.7% -25.9%
Drexel 653 653 0.0% 178 180 -1.1% 178 27.3% 93 52.2% -29.5%
Glen Alpine 514 514 0.0% 142 152 -6.6% 142 27.6% 52 36.6% -35.8%
Rutherford College 432 432 0.0% 136 139 -2.2% 144 33.3% 72 50.0% -30.1%
Connelly Springs 482 482 0.0% 300 282 6.4% 300 62.2% 132 44.0% -20.0%
------ ------ ---- ------ ------ ---- ------ ---- ----- ---- -----
Total Burke 18,986 18,198 4.3% 10,516 10,908 -3.6% 10,546 55.5% 4,614 43.8% -33.6%
======= ====== ==== ====== ====== ==== ====== ==== ===== ==== =====
</TABLE>
<TABLE>
<CAPTION>
Franchise
Plant Miles -------------------------
--------------------------------------------- 1996 Channel Address- Life
Aerial UG Total '96 1995 % Chg. Density Capacity able Fee Expiration (Yrs)
------ ------ --------- ------ ------ ------- -------- -------- ---- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Burke County 404.64 229.43 634.07 631.69 0.4% 24.5 43 Yes 3% Jun-98 1.4
Valdese 15.99 18.32 34.31 32.35 6.1% 40.1 43 Yes 5% Jun-2007 10.5
Drexel 8.92 4.91 13.83 13.83 0.0% 47.2 43 Yes 5% Feb-2005 8.1
Glen Alpine 8.50 5.81 14.31 14.31 -0.0% 35.9 43 Yes 3% Oct-98 1.8
Rutherford College 17.19 0.68 17.87 17.87 0.0% 24.2 43 Yes 5% Oct-2001 4.8
Connelly Springs 13.45 3.28 16.73 16.73 0.0% 28.8 43 Yes 3% Oct-99 2.8
------ ------ ------ ------ ---- ---- ---
Total Burke 468.69 262.43 731.12 726.78 0.6% 26.0 3.2%
====== ====== ====== ====== ==== ==== ===
</TABLE>
-71-
<PAGE> 78
- ------------------------------------------------------------------------------
Falcon Classic Cable EXHIBIT B2 Operating Statisics
Income Properties, L.P. Valuation Date:
Centreville, MD December 31, 1996
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 Pay
Homes Passed Basic Subscribers EBU's 1996 Units
---------------------------------------------------- FCC EBU Pay Pay/ % Chg
1996 1995 % Chg. 1996 1995 % Chg. Method Pene Units EBUs v. 95
----- ----- ----- ----- ----- ------ ----- ----- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Kent County 2,154 2,120 0.016 701 670 0.05 701 0.325 450 0.642 -0.19
Betterton 219 219 0 93 91 0.02 93 0.425 40 0.43 -0.22
Rock Hall 1,073 1,073 0 405 394 0.03 450 0.419 235 0.58 -0.2
Chestertown 1,404 1,396 0.006 1,212 1,231 -0.0 1,347 0.959 727 0.6 -0.07
Millington 215 215 0 176 169 0.04 176 0.819 115 0.653 -0.23
Templeville 44 44 0 18 19 -0.1 18 0.409 6 0.333 -0.4
Sudlersville 201 201 0 83 81 0.03 83 0.413 52 0.627 -0.09
Church Hill 203 203 0 95 97 -0.0 0 0 68 0.716 -0.16
Centreville 819 819 0 494 483 0.02 517 0.631 265 0.536 -0.18
Queenstown 240 220 0.091 167 147 0.14 167 0.696 103 0.617 -0.21
Queen Anne's County 10,964 10,682 0.026 5,805 5,519 0.05 5,873 0.536 3818 0.658 -0.12
St. Michaels 1,101 1,101 0 493 480 0.03 516 0.469 297 0.602 -0.13
Rio Vista 0 0 0 197 178 0.11 220 n/a 136 0.69 -0.05
Talbot County 4,253 4,237 0.004 1,569 1,542 0.02 1,592 0.374 690 0.44 -0.22
Barclay 56 56 0 47 52 -0.01 47 0.839 23 0.489 -0.34
Oxford 499 499 0 427 407 0.05 450 0.902 169 0.396 -0.16
Trappe 412 412 0 343 333 0.03 343 0.833 246 0.717 -0.05
------ ------ ----- ------ ------ ---- ------ ----- ----- ----- -----
Total Centreville 23,857 23,497 0.015 12,325 11,893 0.04 12,593 0.528 7,440 0.604 -0.14
====== ====== ===== ====== ====== ==== ====== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Franchise
Plant Miles -------------------------
------------------------------------------------ 1996 Address- Life
Aerial UG Total '96 1995 % Chg. Density able Fee Expiration (Yrs)
------ ---- --------- ----- ------ ------- -------- --- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Kent County 27.57 9.9 37.47 36.66 0.022 57.5 No 1.4
Betterton 3.32 0.04 3.36 3.36 0 65.2 No 10.5
Rock Hall 22.85 1.09 23.94 23.94 0 44.8 No 8.1
Chestertown 25.33 6.1 31.43 31.23 0.006 44.7 No 1.8
Millington 2.69 0.24 2.93 2.93 0 73.4 No 4.8
Templeville 0.72 0.07 0.79 0.79 0 55.7 No 2.8
Sudlersville 3.03 0.74 3.77 3.77 0 53.3 No 2.8
Church Hill 3.05 0.48 3.53 3.53 0 57.5 No 2.8
Centreville 11.12 1.21 12.33 12.33 0 66.4 No 2.8
Queenstown 4.15 0.66 4.81 4.2 0.145 49.9 No 2.8
Queen Anne's County 208.4 109.9 318.3 306.7 0.038 34.4 No 2.8
St. Michaels 7.34 5.03 12.37 12.37 0 89 No 2.8
Rio Vista 0 0 0 0 0 n/a No 2.8
Talbot County 128.7 49.14 177.8 177.2 0.003 23.9 No 2.8
Barclay 1.22 0 1.22 1.22 0 45.9 No 12.2
Oxford 5.85 1.62 7.47 7.47 0 66.8 No 2.8
Trappe 4.81 3.34 8.15 8.15 0 50.6 No 2.8
----- ----- ----- ----- ----- ----
Total Centreville 460.2 189.6 649.8 635.9 0.022 36.7 No 100%/96-99
===== ===== ===== ===== ===== ====
</TABLE>
* Indicated capacity is 61 channels however plant spaced at 330 MHz with 450MHz
gear.
** Rebuild per Falcon Rebuild Projection (8/6/96). Portion of H/E service area
to be rebuilt/ Yr.(s) of rebuild.
-72-
<PAGE> 79
- --------------------------------------------------------------------------------
Falcon Classic Cable EXHIBIT B3 Operating Statistics
Income Properties Valuation Date:
Somerset, Kentucky December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Homes Passed
--------------------------- '96-'95
1996 1995 1994 % Chg.
---- ---- ---- ------
<S> <C> <C> <C> <C>
Somerset 4,890 4,890 4,890 0.0%
Pulaski Co. (Somerset) 4,269 4,269 4,336 0.0%
Science Hill 809 809 809 0.0%
Lincoln Co. (Eubank) 618 618 618 0.0%
Eubank 438 438 438 0.0%
Pulaski Co. (Eubank) 230 230 230 0.0%
Burnside 299 299 299 0.0%
Pulaski Co. (Burnside) 4,275 4,275 4,275 0.0%
Ferguson 366 366 366 0.0%
Woodson Bend 454 454 454 0.0%
Lincoln Co. (McKinney) 316 316 316 0.0%
SOMXPC 229 229 229 0.0%
Laurel County 2,263 2,218 2,256 2.0%
Clay County 57 57 57 0.0%
Columbia 1,529 1,529 1,529 0.0%
Adair County 1,018 1,018 1,018 0.0%
----- ----- ----- ----
Total Somerset 22,060 22,015 22,120 0.2%
===== ===== ===== ====
</TABLE>
<TABLE>
<CAPTION>
1996 Pay
Basic Subscribers EBU's 1996 Units
-------------------------- '96-'95 FCC EBU Pay Pay/ % Chg.
1996 1995 1994 % Chg. Method Pene Units EBUs v. 95
---- ---- ---- ------ ------ ---- ----- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Somerset 3,867 3,972 3,927 -2.6% 3,924 731 18.6% -40.3%
Pulaski Co. (Somerset) 3,502 3,439 3,302 1.8% 3,529 82.7% 599 17.0% -23.4%
Science Hill 630 637 624 -1.1% 635 78.5% 80 12.6% -23.1%
Lincoln Co. (Eubank) 474 501 493 -5.4% 474 76.7% 162 34.2% -16.1%
Eubank 289 287 281 0.7% 289 66.0% 74 25.6% -18.7%
Pulaski Co. (Eubank) 129 121 123 6.6% 129 56.1% 32 24.8% -25.6%
Burnside 251 254 257 -1.2% 270 90.3% 47 17.4% -33.8%
Pulaski Co. (Burnside) 4,645 4,580 4,358 1.4% 4,688 109.7% 866 18.5% -25.8%
Ferguson 298 304 302 -2.0% 298 81.4% 38 12.8% -35.6%
Woodson Bend 346 353 370 -2.0% 346 76.2% 17 4.9% -43.3%
Lincoln Co. (McKinney) 302 298 284 1.3% 302 95.6% 47 15.6% -17.5%
SOMXPC 189 183 191 3.3% 189 82.5% 41 21.7% -10.9%
Laurel County 1,762 1,728 1,681 2.0% 1,762 77.9% 309 17.5% -18.5%
Clay County 47 48 51 -2.1% 47 82.5% 14 29.8% -22.2%
Columbia 1,461 1,475 1,481 -0.9% 1,500 98.1% 501 33.4% -7.2%
Adair County 1,104 1,046 925 5.5% 1,104 108.4% 356 32.2% -2.5%
------ ------ ------ ----- ------ ------ ----- ----- ------
Total Somerset 19,296 19,226 18,650 0.4% 19,486 88.3% 3,914 20.1% -24.3%
====== ====== ====== ===== ====== ====== ===== ===== ======
</TABLE>
<TABLE>
<CAPTION>
Plant Miles
-------------------------------------------------------
Aerial UG 1996 1995 % Chg.
------ -- ---- ---- ------
<S> <C> <C> <C> <C> <C>
Somerset 74.00 1.00 75.00 75.00 0.0%
Pulaski Co. (Somerset) 182.50 0.00 182.50 182.50 0.0%
Science Hill 29.50 0.00 29.50 29.50 0.0%
Lincoln Co. (Eubank) 30.00 1.00 31.00 31.00 0.0%
Eubank 16.00 0.00 16.00 16.00 0.0%
Pulaski Co. (Eubank) 19.00 0.00 19.00 19.00 0.0%
Burnside 12.00 0.00 12.00 12.00 0.0%
Pulaski Co. (Burnside) 185.00 0.00 185.00 185.00 0.0%
Ferguson 14.00 8.00 22.00 22.00 0.0%
Woodson Bend 5.00 8.00 13.00 13.00 0.0%
Lincoln Co. (McKinney) 19.00 0.00 19.00 19.00 0.0%
SOMXPC 9.00 0.00 9.00 9.00 0.0%
Laurel County 116.50 0.00 116.50 113.50 2.6%
Clay County 3.00 0.00 3.00 3.00 0.0%
Columbia 39.00 0.00 39.00 39.00 0.0%
Adair 63.00 0.00 63.00 63.00 0.0%
------ ----- ------ ------ ----
Total Somerset 816.50 18.00 834.50 831.50 0.4%
====== ===== ====== ====== ====
</TABLE>
<TABLE>
<CAPTION>
Franchise
--------------------------------
1996 Channel Address- Life
Density Capacity able Rebuild Fee Expiration (Yrs)
------- -------- -------- ------- --- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Somerset 65.2 40 No 3% Feb-96 (0.9)
Pulaski Co. (Somerset) 23.4 40 No 3% Oct-2008 11.8
Science Hill 27.4 40 No 3% n/a
Lincoln Co. (Eubank) 19.9 36 No 3% Sep-98 1.7
Eubank 27.4 36 No 3% Sep-98 1.7
Pulaski Co. (Eubank) 12.1 36 No 3% Sep-98 1.7
Burnside 24.9 52 Yes '97 - 99 3% Jun-99 2.4
Pulaski Co. (Burnside) 23.1 52 Yes '97 - 99 3% Jun-99 2.4
Ferguson 16.6 52 Yes '97 - 99 3% Nov-2008 11.9
Woodson Bend 34.9 52 Yes '97 - 99 3% Sep-98 1.7
Lincoln Co. (McKinney) 16.6 52 Yes '97 - 99 3% May-2007 10.3
SOMXPC 25.4 40 No 3% n/a
Laurel County 19.4 24 No 1997 5% May-2008 11.4
Clay County 19.0 24 No 3% n/a
Columbia 39.2 52 No 3% - 5% Aug-2011 14.7
Adair 16.2 52 No 3% May-2005 8.4
----
Total Somerset 26.4
====
</TABLE>
-73-
<PAGE> 80
- -------------------------------------------------------------------------------
Falcon Classic Cable EXHIBIT B4 Operating Statisics
Income Properties Valuation Date:
Redmond, Oregon December 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Homes Passed Basic Subscribers 1996 Pay
------------------------------- ------------------------------ EBU's 1996 Units
'96-'95 '96-'95 FCC EBU Pay Pay/ % Chg.
1996 1995 1994 % Chg. 1996 1995 1994 % Chg. Method Pene Units EBUs v. 95
---- ---- ---- ------ ---- ---- ---- ------- ------ ---- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Redmond 7,252 6,881 6,487 5.4% 2,367 2,573 2,684 -8.0% 2,461 33.9% 446 18.1% -28.9%
Deschutes County 0 0 0 0.0% 1,149 1,260 1,378 -8.8% 1,218 n/a 260 21.3% -26.1%
----- ----- ----- ---- ----- ----- ----- ----- ----- ---- --- ----- -----
Total Redmond 7,252 6,881 6,487 5.4% 3,516 3,833 4,062 -8.3% 3,679 50.7% 706 19.2% -27.9%
===== ===== ===== ==== ===== ===== ===== ===== ===== ==== === ===== =====
</TABLE>
<TABLE>
<CAPTION>
Plant Miles Franchise
----------------------------------------- -----------------------
1996 Channel Address- Life
Aerial UG 1996 1995 % Chg. Density Capacity able Rebuild Fee Expiration (Yrs)
------ -- ---- ---- ------ ------- -------- ---- ------- --- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Redmond 116.00 54.00 170.00 162.00 4.9% 42.7 32 yes '98 - '99 1% Feb-2002 5.2
Deschutes County 0.00 0.00 0.00 0.00 0.0% 0.0 32 yes '98 - '99
------ ----- ------ ------ ---- ----
</TABLE>
-74-
<PAGE> 81
- -------------------------------------------------------------------------------
Falcon Classic Cable EXHIBIT B5 Operating Statisics
Income Properties Valuation Date:
California City, California December 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Homes Passed Basic Subscribers 1996 Pay
--------------------------------- -------------------------------- EBU's 1996 Units
'96-'95 '96-'95 FCC EBU Pay Pay/ % Chg
1996 1995 1994 % Chg. 1996 1995 1994 % Chg. Method Pene Units EBU's v. 95
----- ----- ----- ------ ----- ----- ----- ------ ------ ---- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
California City 2,858 2,858 2,707 0.0% 1,922 2,097 2,075 -8.3% 1,960 68.6% 839 42.8% -28.9%
----- ----- ----- --- ----- ----- ----- ---- ----- ---- --- ---- -----
Total California City 2,858 2,858 2,707 0.0% 1,922 2,097 2,075 -8.3% 1,960 68.6% 839 42.8% -28.9%
===== ===== ===== === ===== ===== ===== ==== ===== ==== === ==== =====
</TABLE>
<TABLE>
<CAPTION>
Franchise
Plant Miles ------------------------
------------------------------------------ 1996 Channel Address- Life
Aerial UG 1996 1995 % Chg. Density Capacity able Rebuild Fee Expiration (Yrs)
------ ----- ----- ----- ------ ------- -------- -------- ------- --- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
California City 79.02 11.10 90.12 90.12 0.0% 0.0 41 yes no Apr-2001 4.3
----- ----- ----- ----- ---- ---
Total California City 79.02 11.10 90.12 90.12 -0.0% 31.7
===== ===== ===== ===== ==== ====
</TABLE>
-75-
<PAGE> 82
EXHIBIT C
REGION AND SYSTEM CASH FLOW STATEMENTS
<PAGE> 83
- --------------------------------------------------------------------------------
EXHIBIT C1
Falcon Classic Cable Income Operating Cash Flow: Actual & Budget
Properties, L.P. Burke, NC Valuation Date: December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 Budget Dec 1996 Actual 1996 Actual
-------------------- ------------------- -------------------
($000) % to Rev. ($000) % to Rev. ($000) % to Rev.
-------- --------- ------ ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Primary 2,211.7 40.5% $178.4 40.9% $2,042.6 40.2%
Commercial 8.5 0.2% 0.7 0.2% 8.5 0.2%
Expanded Tier 0.0 0.0% 0.0 0.0% 0.0 0.0%
AL Tier 688.0 12.6% 56.4 12.9% 574.9 11.3%
------- ----- -------
Total Reg. Prog. 2,908.3 53.3% 235.5 54.0% 2,626.0 51.7%
Radio Services 34.7 0.6% 2.9 0.7% 39.2 0.8%
Pay Cable - 1st Outlet 387.4 7.1% 35.6 8.2% 495.3 9.8%
Pay Cable - Add'l Outlet 0.0 0.0% 0.0 0.0% 0.0 0.0%
New Product Tier - 1 1,081.6 19.8% 81.7 18.7% 892.1 17.6%
Commercial Pay 0.0 0.0% 0.0 0.0% 0.0 0.0%
Mini-Pay 9.4 0.2% 0.8 0.2% 10.3 0.2%
Mini-Pay - Add'l Outlet 0.0 0.0% 0.0 0.0% 0.0 0.0%
Pay Per View 128.7 2.4% 7.3 1.7% 104.0 2.0%
------- ----- -------
Total Unreg. Prog. 1,641.8 30.1% 128.2 29.4% 1,540.9 30.3%
Primary Add'l Outlet 0.0 0.0% 0.0 0.0% 0.0 0.0%
Remote Control 3.9 0.1% 0.3 0.1% 4.1 0.1%
Converter Rental 463.7 8.5% 38.3 8.8% 472.3 9.3%
Other - VCR 0.0 0.0% 0.0 0.0% 0.0 0.0%
------- ----- -------
Total Equipment 467.6 8.6% 38.7 8.9% 476.5 9.4%
Wire Maint. Agreements 68.4 1.3% 5.7 1.3% 68.2 1.3%
New Cust. - Pay Installs 0.0 0.0% 0.0 0.0% 0.0 0.0%
New Cust. - Basic Installs 93.3 1.7% 1.0 0.2% 17.6 0.3%
Install Mat'l Charge 0.0 0.0% 0.0 0.0% 1.1 0.0%
Installs - Non New Cust. 0.0 0.0% 3.3 0.8% 68.3 1.3%
------- ----- -------
Total Install/Service 161.7 3.0% 10.1 2.3% 155.2 3.1%
Guide Revenue 21.7 0.4% 1.7 0.4% 22.8 0.4%
Late Charges 56.5 1.0% 4.4 1.0% 57.2 1.1%
Rent 3.2 0.1% (0.3) -0.1% 2.7 0.1%
Franchise Pass Thru 0.0 0.0% 0.0 0.0% 0.0 0.0%
Miscellaneous 0.0 0.0% 0.0 0.0% 16.5 0.3%
Shopping Net Car. Fee 0.0 0.0% 0.0 0.0% 0.0 0.0%
FCC User Fee Pass Thru 5.8 0.1% 0.4 0.1% 5.3 0.1%
QVC Monthly Comm. 16.7 0.3% 0.9 0.2% 16.7 0.3%
QVC Carriage Payment 13.0 0.2% 0.0 0.0% 12.2 0.2%
HSN Monthly Comm. 9.6 0.2% 0.2 0.1% 9.6 0.2%
HSN Carriage Payment 0.0 0.0% 0.0 0.0% 0.0 0.0%
------- ----- -------
Total Non-Service/Misc. 126.5 2.3% 7.5 1.7% 142.9 2.8%
Advertising 152.7 2.8% 16.5 3.8% 136.4 2.7%
------- ----- -------
Total Revenues 5,458.5 100.0% 436.4 100.0% 5,077.8 100.0%
======= ===== ===== ===== ======= =====
</TABLE>
<TABLE>
1995 Actual 1994 Actual
-------------------- -------------------
($000) % to Rev. ($000) % to Rev.
-------- ---------- -------- ---------
<S> <C> <C> <C> <C>
Revenues:
Primary $2,040.1 40.4% $2,064.9 40.6%
Commercial 8.8 0.2% 5.3 0.1%
Expanded Tier 0.0 0.0% 0.0 0.0%
AL Tier 407.0 8.1% 160.0 3.1%
------- -------
Total Reg. Prog. 2,455.9 48.7% 2,230.3 43.9%
Radio Services 47.7 0.9% 58.9 1.2%
Pay Cable - 1st Outlet 583.7 11.6% 589.5 11.6%
Pay Cable - Add'l Outlet 0.0 0.0% 0.0 0.0%
New Product Tier - 1 948.1 18.8% 1,127.7 22.2%
Commercial Pay 0.0 0.0% 0.0 0.0%
Mini-Pay 13.0 0.3% 18.2 0.4%
Mini-Pay - Add'l Outlet 0.0 0.0% 0.0 0.0%
Pay Per View 117.4 2.3% 124.0 2.4%
------- -------
Total Unreg. Prog. 1,709.9 33.9% 1,918.3 37.8%
Primary Add'l Outlet 0.0 0.0% 0.0 0.0%
Remote Control 4.0 0.1% 4.2 0.1%
Converter Rental 488.9 9.7% 489.2 9.6%
Other - VCR 0.0 0.0% 0.0 0.0%
------- -------
Total Equipment 492.9 9.8% 493.3 9.7%
Wire Maint. Agreements 62.3 1.2% 47.5 0.9%
New Cust. - Pay Installs 0.0 0.0% 0.0 0.0%
New Cust. - Basic Installs 28.1 0.6% 50.4 1.0%
Install Mat'l Charge 0.4 0.0% 0.0 0.0%
Installs - Non New Cust. 72.0 1.4% 81.1 1.6%
------- -------
Total Install/Service 162.9 3.2% 179.0 3.5%
Guide Revenue 26.1 0.5% 35.4 0.7%
Late Charges 63.3 1.3% 68.2 1.3%
Rent 3.0 0.1% 3.3 0.1%
Franchise Pass Thru 0.0 0.0% 0.0 0.0%
Miscellaneous 0.0 0.0% 0.0 0.0%
Shopping Net Car. Fee 0.0 0.0% 0.0 0.0%
FCC User Fee Pass Thru 5.1 0.1% 0.1 0.0%
QVC Monthly Comm. 15.1 0.3% 19.4 0.4%
QVC Carriage Payment 14.0 0.3% 14.0 0.3%
HSN Monthly Comm. 0.0 0.0% 0.0 0.0%
HSN Carriage Payment 0.0 0.0% 0.0 0.0%
------- -------
Total Non-Service/Misc. 126.7 2.5% 140.4 2.8%
Advertising 97.8 1.9% 118.6 2.3%
------- -------
Total Revenues 5,045.9 100.0% 5,080.0 100.0%
======= ===== ======= =====
</TABLE>
-77-
<PAGE> 84
- --------------------------------------------------------------------------------
Falcon Classic Cable EXHIBIT C2 Operating Cash Flow:
Income Properties, L.P. Actual & Budget
Burke, NC Valuation Date:
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 Budget Dec 1996 Actual 1996 Actual 1995 Actual 1994 Actual
------------------- ------------------ ------------------ ----------------- -------------------
($000) % to Rev. ($000) % to Rev. ($000) % to Rev. ($000) % to Rev. ($000) % to Rev.
------ --------- ------ --------- ------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Expenses:
Technical
Personnel 551.5 10.1% 13.7 3.1% 266.7 5.3% 285.0 5.6% 295.7 5.8%
Other 23.1 5.3% 295.1 5.8% 232.8 4.6% 245.1 4.8%
Programming 964.6 17.7% 69.2 15.9% 887.5 17.5% 942.9 18.7% 908.6 17.9%
Capitalized Labor & O/H (243.4) -4.5% (8.0) -1.8% (227.9) -4.5% (142.6) -2.8% (105.1) -2.1%
-------- ------ -------- -------- --------
Total Technical 1,272.7 23.3% 98.0 22.5% 1,221.4 24.1% 1,318.1 26.1% 1,344.3 26.5%
Production & L/O
Personnel 0.0 0.0% 0.0 0.0% (0.1) -0.0% 17.2 0.3%
Other 0.0 0.0% 0.0 0.0% 0.3 0.0% 0.9 0.0%
------ -------- -------- --------
Total Prod. & L/O 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.2 0.0% 18.1 0.4%
Ad Sales
Personnel 1.7 0.4% 20.2 0.4% 21.6 0.4% 49.3 1.0%
Other 1.3 0.3% 15.3 0.3% 16.3 0.3% 21.9 0.4%
------ -------- -------- --------
Total Ad Sales 26.4 0.5% 3.0 0.7% 35.4 0.7% 37.9 0.8% 71.2 1.4%
Marketing
Commissions 0.4 0.1% 0.8 0.0% 0.2 0.0% 2.6 0.1%
Other 11.1 2.5% 68.9 1.4% 78.2 1.6% 108.6 2.1%
------ -------- -------- --------
Total Marketing 83.5 1.53% 11.5 2.6% 69.7 1.4% 78.5 1.6% 111.2 2.2%
General & Administrative
Personnel 374.8 6.87% 13.0 3.0% 157.9 3.1% 137.9 2.7% 140.7 2.8%
Other 373.4 6.84% 49.5 11.4% 548.2 10.8% 535.3 10.6% 523.4 10.3%
Capitalized Labor & O/H (0.2) -0.0% (9.1) -0.2% (13.3) -0.3% (16.8) -0.3%
------ -------- -------- --------
Total G & A 748.2 13.71% 62.4 14.3% 697.0 13.7% 659.9 13.1% 647.3 12.7%
Total Operating Expense
Before Partnership Exps. 2,130.8 39.04% 174.9 40.1% 2,023.5 39.9% 2,094.5 41.5% 2,192.2 43.2%
Total Oper. Cash Flow
Before Partnership Exps. 3,327.7 61.0% 261.5 59.9% 3,054.2 60.1% 2,951.4 58.5% 2,887.8 56.8%
Partnership Expenses 272.9 5.0% 21.8 5.0% 253.9 5.0% 252.3 5.0% 254.0 5.0%
-------- ------ -------- -------- --------
Total Oper. Cash Flow
After Partnership Exps. $3,054.8 56.0% $239.7 54.9% $2,800.4 55.1% $2,699.1 53.5% $2,633.8 51.8%
======== ===== ====== ===== ======== ===== ======== ===== ======== =====
</TABLE>
-78-
<PAGE> 85
- --------------------------------------------------------------------------------
Falcon Classic Cable EXHIBIT C3 Operating Cash Flow:
Income Properties, L.P. Actual & Budget
Centreville, MD
Valuation Date:
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December
1997 Budget 1996 Actual 1996 Actual 1995 Actual 1994 Actual
-------------------- ----------------- ----------------- ------------------- ------------------
($000) % to Rev. ($000) % to Rev. ($000) % to Rev. ($000) % to Rev. ($000) % to Rev.
------ --------- ------ --------- ------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Primary 3,112.2 52.7% $246.4 51.9% $2,754.9 51.6% $2,478.8 53.1% $2,377.4 58.6%
Commercial 90.9 1.5% 7.6 1.6% 79.007 1.5% 53.5 1.1% 38.9 1.0%
Expanded Tier 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0%
AL Tier 516.9 8.7% 41.8 8.8% 425.0 8.0% 340.5 7.3% 129.3 3.2%
------- ----- ------- ------- --------
Total Reg. Prog. 3,720.0 62.9% 295.8 62.3% 3,258.8 61.0% 2,872.8 61.6% 2,545.6 62.7%
Radio Services 25.6 0.4% 2.1 0.4% 28.1 0.5% 33.3 0.7% 39.7 1.0%
Pay Cable - 1st Outlet 745.2 12.6% 62.4 13.1% 845.1 15.8% 931.2 20.0% 805.1 19.8%
Pay Cable - Add'l Outlet 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0%
New Product Tier - 1 790.1 13.4% 63.5 13.4% 580.6 10.9% 361.8 7.8% 290.5 7.2%
Commercial Pay 0.0 0.0% 1.2 0.3% 14.7 0.3% 13.8 0.3% 13.8 0.3%
Mini-Pay 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0%
Video Games & Activation 43.3 0.7% 3.1 0.6% 41.1 0.8% 5.4 0.1% 0.0 0.0%
Pay Per View 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0%
------- ----- ------- ------- --------
Total Unreg. Prog. 1,604.2 27.1% 132.2 27.8% 1,509.6 28.3% 1,345.5 28.8% 1,149.1 28.3%
Primary Add'l Outlet 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0% (0.1) -0.0%
Remote Control 5.8 0.1% 0.5 0.1% 5.7 0.1% 6.2 0.1% 5.2 0.1%
Converter Rental 45.0 0.8% 3.7 0.8% 34.8 0.7% 25.3 0.5% 25.9 0.6%
Other - VCR 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0%
------- ----- ------- ------- --------
Total Equipment 50.8 0.9% 4.1 0.9% 40.5 0.8% 31.5 0.7% 31.1 0.8%
Wire Maint. Agreements 43.0 0.7% 3.5 0.7% 39.3 0.7% 31.2 0.7% 18.6 0.5%
New Cust. - Pay Installs 58.4 1.0% 0.0 0.0% 0.3 0.0% 0.0 0.0% 20.7 0.5%
New Cust. - Basic Installs 0.0 0.0% 0.5 0.1% 7.3 0.1% 15.0 0.3% 0.0 0.0%
Install Mat'l Charge 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 0.0%
Installs - Non New Cust. 0.0 0.0% 2.0 0.4% 47.8 0.9% 28.8 0.6% 16.5 0.4%
------- ----- ------- ------- --------
Total Install/Service 101.4 1.7% 6.0 1.3% 94.7 1.8% 75.0 1.6% 55.9 1.4%
Guide Revenue 21.3 0.4% 1.9 0.4% 13.8 0.3% 8.8 0.2% 8.8 0.2%
Late Charges 67.8 1.1% 7.1 1.5% 74.0 1.4% 64.6 1.4% 72.2 1.8%
Rent 23.7 0.4% 1.9 0.4% 23.5 0.4% 14.8 0.3% 12.8 0.3%
Franchise Pass Thru 117.4 2.0% 9.1 1.9% 104.9 2.0% 101.4 2.2% 95.7 2.4%
Miscellaneous 2.8 0.0% 0.0 0.0% 24.7 0.5% 0.0 0.0% 0.0 0.0%
FCC User Fee Pass Thru 6.9 0.1% 0.5 0.1% 6.0 0.1% 5.5 0.1% 0.2 0.0%
QVC Monthly Comm. 13.2 0.2% 1.1 0.2% 13.2 0.2% 9.0 0.2% 8.4 0.2%
QVC Carriage Payment 18.3 0.3% 0.0 0.0% 31.5 0.6% 0.0 0.0% (10.2) -0.3%
HSN Monthly Comm. 22.2 0.4% 1.6 0.3% 22.2 0.4% 18.6 0.4% 0.0 0.0%
HSN Carriage Payment 2.1 0.0% 0.2 0.0% 2.1 0.0% 2.1 0.0% 0.9 0.0%
------- ----- ------- ------- --------
Total Non-Service/Misc. 295.7 5.0% 23.4 4.9% 315.9 5.9% 224.8 4.8% 188.8 4.7%
Advertising 138.0 2.3% 13.3 2.8% 123.0 2.3% 114.4 2.5% 86.8 2.1%
------- ----- ------- ------- --------
Total Revenues 5,910.1 100.0% 474.8 100.0% 5,342.6 100.0% 4,664.0 100.0% 4,057.2 100.0%
======= ===== ======= ======= ========
</TABLE>
-79-
<PAGE> 86
- --------------------------------------------------------------------------------
Falcon Classic Cable EXHIBIT C4 Operating Cash Flow:
Income Properties, L.P. Actual & Budget
Centreville, MD Valuation Date:
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December
1997 Budget 1996 Actual 1996 Actual 1995 Actual 1994 Actual
-------------------- ----------------- ----------------- ------------------- ------------------
($000) % to Rev. ($000) % to Rev. ($000) % to Rev. ($000) % to Rev. ($000) % to Rev.
------ --------- ------ --------- ------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Expenses:
Technical
Personnel 593.9 10.05% 20.5 4.3% 260.5 4.9% 255.2 5.5% 295.7 7.3%
Other 12.4 2.6% 330.1 6.2% 320.5 6.9% 245.1 6.0%
Programming 1,379.5 23.34% 103.0 21.7% 1,220.7 22.8% 1,197.4 25.7% 908.6 22.4%
Capitalized Labor & O/H (237.4) -4.02% (30.2) -6.4% (196.1) -3.7% (127.4) -2.7% (105.1) -2.6%
------- ----- ------- ------- -------
Total Technical 1,736.0 29.37% 105.7 22.3% 1,615.1 30.2% 1,645.8 35.3% 1,344.3 33.1%
Production & L/O
Personnel 0.0 0.0% 0.0 0.0% (0.1) -0.0% 17.2 0.4%
Other 0.0 0.0% 0.0 0.0% 0.3 0.0% 0.9 0.0%
----- ------- ------- -------
Total Prod. & L/O 0.0 0.00% 0.0 0.0% 0.0 0.0% 0.2 0.0% 18.1 0.4%
Ad Sales
Personnel 4.3 0.9% 50.2 0.9% 42.1 0.9% 49.3 1.2%
Other 2.1 0.4% 29.3 0.5% 22.1 0.5% 21.9 0.5%
----- ------- ------- -------
Total Ad Sales 69.4 1.17% 6.4 1.4% 79.6 1.5% 64.2 1.4% 71.2 1.8%
Marketing
Commissions 0.0 0.0% 25.3 0.5% 89.3 1.9% 2.6 0.1%
Other 7.6 1.6% 76.5 1.4% 59.6 1.3% 108.6 2.7%
----- ------- ------- -------
Total Marketing 133.1 2.25% 7.6 1.6% 101.8 1.9% 148.9 3.2% 111.2 2.7%
General & Administrative
Personnel 6.2 1.3% 124.3 2.3% 144.5 3.1% 140.7 3.5%
Other 58.0 12.2% 713.2 13.3% 605.0 13.0% 523.4 12.9%
Capitalized Labor & O/H 0.0 0.0% (10.6) -0.2% (20.0) -0.4% (16.8) -0.4%
----- ------- ------- -------
Total G & A 874.3 14.79% 64.2 13.5% 826.8 15.5% 729.5 15.6% 647.3 16.0%
Total Operating Expense
Before Partnership Exps. 2,812.8 47.59% 184.0 38.8% 2,623.3 49.1% 2,588.6 55.5% 2,192.2 54.0%
Total Oper. Cash Flow
Before Partnership Exps. 3,097.4 52.4% 290.8 61.2% 2,719.4 50.9% 2,075.4 44.5% 1,865.1 46.0%
Partnership Expenses 295.5 5.0% 23.7 5.0% 267.1 5.0% 233.2 5.0% 254.0 6.3%
------- ----- ------- ------- -------
Total Oper. Cash Flow
After Partnership Exps. $2,801.9 47.4% $267.0 56.2% $2,452.2 45.9% $1,842.2 39.5% $1,611.1 39.7%
======= ==== ===== ==== ======== ==== ======= ==== ======= ====
</TABLE>
=80=
<PAGE> 87
- --------------------------------------------------------------------------------
Falcon Classic Cable EXHIBIT C5 Operating Cash Flow:
Income Properties Budget & Actual
Somerset, Kentucky Valuation Date:
December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 Budget Dec Mo 1996 Actual 1996 Actual 1995 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 $4,579.9 59.99% $371.3 55.10% $4,158.5 58.65% $3,850.2 61.12%
Expanded Tier 542.1 7.10% 44.5 6.60% 475.1 6.70% 412.3 6.55%
-------- ------ ------ ------ -------- ------ -------- ------
Total Regulated Programming 5,122.0 67.09% 415.8 61.70% 4,633.6 65.35% 4,262.5 67.67%
-------- ------ ------ ------ -------- ------ -------- ------
Radio Services 0.0 0.00% 0.0 0.00% 0.1 0.00% 0.1 0.00%
Pay Cable 417.7 5.47% 34.1 5.06% 464.9 6.56% 506.6 8.04%
New Product Tier 1,219.2 15.97% 99.8 14.81% 1,005.9 14.19% 813.9 12.92%
Mini-Pay 0.0 0.00% 0.0 0.00% 0.0 0.00% 0.0 0.00%
Pay Per View 10.7 0.14% 0.6 0.09% 11.9 0.17% 6.8 0.11%
-------- ------ ------ ------ -------- ------ -------- ------
Total Unregulated Programming 1,647.6 21.58% 134.5 19.96% 1,482.8 20.91% 1,327.4 21.07%
-------- ------ ------ ------ -------- ------ -------- ------
Remote Control 18.7 0.24% 1.5 0.22% 28.6 0.40% 44.7 0.71%
Converter Rental 96.4 1.26% 8.1 1.20% 83.0 1.17% 49.6 0.79%
Other - VCR 0.0 0.00% 0.0 0.00% 0.0 0.00% 0.0 0.00%
-------- ------ ------ ------ -------- ------ -------- ------
Total Equipment 115.1 1.51% 9.6 1.42% 111.6 1.57% 94.3 1.50%
-------- ------ ------ ------ -------- ------ -------- ------
Wire Maintenance Agreements 39.5 0.52% 3.3 0.49% 41.1 0.58% 37.7 0.60%
Installation 125.2 1.64% 5.0 0.74% 113.1 1.60% 126.6 2.01%
-------- ------ ------ ------ -------- ------ -------- ------
Total Installation / Service 164.7 2.16% 8.3 1.23% 154.2 2.17% 164.3 2.61%
-------- ------ ------ ------ -------- ------ -------- ------
Guide Revenue 5.1 0.07% 0.4 0.06% 3.8 0.05% 0.0 0.00%
Late Charges 66.4 0.87% 6.6 0.98% 70.6 1.00% 67.9 1.08%
Home Shopping 76.4 1.00% 4.8 0.71% 78.3 1.10% 62.1 0.99%
FCC User Fee Pass Thru 10.7 0.14% 0.8 0.12% 9.4 0.13% 8.8 0.14%
Franchise Pass Thru 25.4 0.33% 2.1 0.31% 22.9 0.32% 5.5 0.09%
Miscellaneous / Rent 14.4 0.19% 47.1 6.99% 178.6 2.52% 9.1 0.14%
-------- ------ ------ ------ -------- ------ -------- ------
Total Non-Service / Misc. 198.4 2.60% 61.8 9.17% 363.6 5.13% 153.4 2.44%
-------- ------ ------ ------ -------- ------ -------- ------
Advertising 387.2 5.07% 43.9 6.51% 345.1 4.87% 297.3 4.72%
------ ------ ------ ------
Total Revenues 7,635.0 100.00% 673.9 100.00% 7,090.9 100.00% 6,299.2 100.00%
-------- ------- ------ ------- -------- ------- -------- -------
</TABLE>
-81-
<PAGE> 88
- -------------------------------------------------------------------------------
Falcon Classic Cable EXHIBIT C6 Operating Cash Flow:
Income Properties Budget & Actual
Somerset, Kentucky Valuation Date:
December 31, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 Budget Dec Mo 1996 Actual 1996 Actual 1995 Actual
--------------------- -------------------- ---------------------- ---------------------
($000s) % to Rev. ($000s) % to Rev. ($000s) % to Rev. ($000s) % to Rev.
------- --------- ------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Expenses:
Technical
Personnel 472.1 6.18% 25.1 3.72% 412.8 5.82% 378.3 6.01%
Other 603.0 91.1 13.52% 638.1 9.00% 540.5 8.58%
Programming 1,399.5 18.33% 100.5 14.91% 1,194.4 16.84% 1,099.5 17.45%
Capitalized Labor & O/H (230.3) ------ (30.9) -4.59% (288.8) -4.07% (233.9) -3.71%
-------- ------ ------ -------- ------ -------- ------
Total Technical 2,244.3 29.39% 185.8 27.57% 1,956.5 27.59% 1,784.4 28.33%
-------- ------ ------ ------ -------- ------ -------- ------
Production & L/O
Personnel 2.4 0.36% 27.9 0.39% 29.1 0.46%
Other 0.8 0.12% 6.1 0.09% 0.6 0.01%
------ ------ -------- ------ -------- ------
Total Production & L/O 40.1 0.53% 3.2 0.47% 34.0 0.48% 29.7 0.47%
-------- ------ ------ ------ -------- ------ -------- ------
Ad Sales
Personnel 5.3 0.79% 51.3 0.72% 78.5 1.25%
Other -12.2 -1.81% 13.8 0.19% 21.7 0.34%
------ ------ -------- ------ -------- ------
Total Ad Sales 114.5 1.50% -6.9 -1.02% 65.1 0.92% 100.2 1.59%
-------- ------ ------ ------ -------- ------ -------- ------
Marketing
Commissions 0.5 0.07% 1.0 0.01% 0.3 0.00%
Other 4.1 0.61% 101.7 1.43% 59.9 0.95%
------ ------ -------- ------ -------- ------
Total Marketing 153.8 2.01% 4.6 0.68% 102.7 1.45% 60.2 0.96%
-------- ------ ------ ------ -------- ------ -------- ------
General & Administrative
Personnel 10.0 1.48% 165.0 2.33% 158.6 2.52%
Other 70.3 10.43% 779.2 10.99% 729.9 11.59%
------ ------ -------- ------ -------- ------
Total G & A 1,093.8 14.33% 80.3 11.92% 944.2 13.32% 888.5 14.10%
-------- ------ ------ ------ -------- ------ -------- ------
Total Operating Expense
Before Partnership Exps. 3,646.5 47.76% 267.0 39.62% 3,102.5 43.75% 2,863.0 45.45%
-------- ------ ------ ------ -------- ------ -------- ------
Total Oper. Cash Flow
Before Partnership Exps. $3,988.5 52.24% $406.9 60.38% $3,988.4 56.25% $3,436.2 54.55%
======== ====== ====== ====== ======== ====== ======== ======
</TABLE>
-82-
<PAGE> 89
<TABLE>
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Falcon Classic Cable EXHIBIT C7 Operating Cash Flow: Budget & Actual
Income Properties Valuation Date: December 31, 1996
Redmond, Oregon
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1997 Budget Dec Mo 1996 Actual 1996 Actual 1995 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 $1,084.2 64.29% $83.5 63.69% $992.5 63.56% $1,006.7 63.84%
Expanded Tier 75.9 4.50% 5.8 4.42% 69.6 4.46% 74.1 4.70%
------- ------ ----- ------ ------- ------- ------- -------
Total Regulated Programming 1,160.1 68.80% 89.3 68.12% 1,062.1 68.02% 1,080.8 68.54%
------- ------ ----- ------ ------- ------ ------- -------
Radio Services 8.1 0.48% 0.6 0.46% 8.7 0.56% 11.5 0.73%
Pay Cable 55.4 3.29% 4.6 3.51% 72.0 4.61% 99.6 6.32%
New Product Tier 297.7 17.65% 22.8 17.39% 245.5 15.72% 219.1 13.89%
Mini-Pay 2.4 0.14% 0.2 0.15% 2.5 0.16% 2.4 0.15%
Pay Per View 0.0 0.00% 0.0 0.00% 0.0 0.00% 0.0 0.00%
------- ------ ----- ------ ------- ------ ------- -------
Total Unregulated Programming 363.6 21.56% 28.2 21.51% 328.7 21.05% 332.6 21.09%
------- ------ ----- ------ ------- ------- ------- -------
Remote Control 2.5 0.15% 0.2 0.15% 2.5 0.16% 2.9 0.18%
Converter Rental 34.1 2.02% 2.7 2.06% 35.6 2.28% 39.4 2.50%
Other - VCR 0.0 0.00% 0.0 0.00% 0.0 0.00% 0.0 0.00%
------- ------ ----- ------ ------- ------- ------- -------
Total Equipment 36.6 2.17% 2.9 2.21% 38.1 2.44% 42.3 2.68%
------- ------ ----- ------ ------- ------- ------- -------
Wire Maintenance Agreements 6.6 0.39% 0.5 0.38% 7.0 0.45% 7.8 0.49%
Installation 14.5 0.86% 0.7 0.53% 13.6 0.87% 14.5 0.92%
------- ------ ----- ------ ------- ------- ------- -------
Total Installation / Service 21.1 1.25% 1.2 0.92% 20.6 1.32% 22.3 1.41%
------- ------ ----- ------ ------- ------- ------- -------
Guide Revenue 3.4 0.20% 0.3 0.23% 2.3 0.15% 0.0 0.00%
Late Charges 13.7 0.81% 0.8 0.61% 13.5 0.86% 14.0 0.89%
Home Shopping 10.3 0.61% 1.3 0.99% 14.5 0.93% 7.8 0.49%
FCC User Fee Pass Thru 2.1 0.12% 0.1 0.08% 1.8 0.12% 1.8 0.11%
Franchise Pass Thru 0.0 0.00% 0.0 0.00% 0.0 0.00% 0.0 0.00%
Miscellaneous / Rent 7.0 0.42% 0.5 0.38% 12.7 0.81% 6.0 0.38%
------- ------ ----- ------ ------- ------ ------- -------
Total Non-Service / Misc. 36.5 2.16% 3.0 2.29% 44.8 2.87% 29.6 1.88%
------- ------ ----- ------ ------- ------- ------- -------
Advertising 68.4 4.06% 6.5 4.96% 67.2 4.30% 69.4 4.40%
------ ------ ------ -------
Total Revenues 1,686.3 100.00% 131.1 100.00% 1,561.5 100.00% 1,577.0 100.00%
------- ------ ----- ------ ------- ------- ------- -------
</TABLE>
-83-
<PAGE> 90
- --------------------------------------------------------------------------------
Falcon Classic Cable EXHIBIT C8 Operating Cash Flow: Budget & Actual
Income Properties Valuation Date: December 31, 1996
Redmond, Oregon
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 Budget Dec Mo 1996 Actual 1996 Actual 1995 Actual
-------------------- -------------------- -------------------- ---------------------
($000s) % to Rev. ($000s) % to Rev. ($000s) % to Rev. ($000s) % to Rev.
------- --------- ------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Expenses:
Technical
Personnel 125.0 7.41% 3.5 2.67% 100.9 6.46% 90.6 5.75%
Other (8.6) -6.56% 48.3 3.09% 61.4 3.89%
Programming 261.7 15.52% 18 13.73% 208.4 13.35% 249.9 15.85%
------
Capitalized Labor & O/H (8.4) -6.41% (82.3) -5.27% (36.4) -2.31%
---- ------ ----- ----- ----- ------
Total Technical 386.7 22.93% 4.5 3.43% 275.3 17.63% 365.5 23.18%
----- ------ ---- ------ ----- ----- ----- ------
Production & L/O
Personnel 0.5 0.38% 2.4 0.15% 1.2 0.08%
Other 0.2 0.15% 1.6 0.10% 0.3 0.02%
---- ------ ----- ----- ----- ------
Total Production & L/O 4.7 0.28% 0.7 0.53% 4.0 0.26% 1.5 0.10%
----- ------ ---- ------ ----- ----- ----- ------
Ad Sales
Personnel 2.2 1.68% 34.3 2.20% 21.3 1.35%
Other 1.7 1.30% 17.9 1.15% 12.7 0.81%
---- ------ ----- ----- ----- ------
Total Ad Sales 45.8 2.72% 3.9 2.97% 52.2 3.34% 34.0 2.16%
----- ------ ---- ------ ----- ----- ----- ------
Marketing
Commissions 1.0 0.76% 2.3 0.15% 0.6 0.04%
Other 3.4 2.59% 47.2 3.02% 35.1 2.23%
---- ------ ----- ----- ----- ------
Total Marketing 36.5 2.16% 4.4 3.36% 49.5 3.17% 35.7 2.26%
----- ------ ---- ------ ----- ----- ----- ------
General & Administrative
Personnel 3.4 2.59% 82.6 5.29% 75.6 4.79%
Other 15.4 11.75% 169.0 10.82% 179.6 11.39%
---- ------ ----- ----- ----- ------
Total G & A 289.2 17.15% 18.8 14.34% 251.6 16.11% 255.2 16.18%
----- ------ ---- ------ ----- ----- ----- ------
Total Operating Expense
Before Partnership Exps. 762.9 45.24% 32.3 24.64% 632.6 40.51% 691.9 43.87%
----- ------ ---- ------ ----- ----- ----- ------
Total Oper. Cash Flow
Before Partnership Exps. $923.4 54.76% $98.8 75.36% $928.9 59.49% $885.1 56.13%
====== ====== ===== ====== ====== ====== ====== ======
</TABLE>
-84-
<PAGE> 91
- --------------------------------------------------------------------------------
Falcon Classic Cable EXHIBIT C9 Operating Cash Flow:
Income Properties Budget & Actual
California City, California
Valuation Date:
December 31,1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 Budget Dec Mo 1996 Actual 1996 Actual 1995 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 $377.5 50.17% $31.4 50.48% $364.6 48.40% $367.0 47.28%
Expanded Tier 131.1 17.42% 10.9 17.52% 136.4 18.11% 145.7 18.77%
------ ----- ----- ------ ------ ------ ------ ------
Total Regulated Programming 508.6 67.60% 42.3 68.01% 501.0 66.51% 512.7 66.04%
------ ----- ----- ------ ------ ------ ------ ------
Radio Services 6.0 0.80% 0.5 0.80% 6.4 0.85% 7.7 0.99%
Pay Cable 78.0 10.37% 6.9 11.09% 94.5 12.54% 107.8 13.89%
New Product Tier 66.2 8.80% 5.0 8.04% 51.2 6.80% 40.8 5.26%
Mini-Pay 0.0 0.00% 0.0 0.00% 0.0 0.00% 0.0 0.00%
Pay Per View 0.0 0.00% 0.0 0.00% 0.0 0.00% 0.0 0.00%
------ ----- ----- ------ ------ ------ ------ ------
Total Unregulated Programming 150.2 19.96% 12.4 19.94% 152.1 20.19% 156.3 20.13%
------ ----- ----- ------ ------ ------ ------ ------
Remote Control 3.3 0.44% 0.3 0.48% 3.5 0.46% 3.6 0.46%
Converter Rental 50.0 6.65% 4.1 6.59% 54.1 7.18% 55.7 7.18%
Other - VCR 0.0 0.00% 0.0 0.00% 0.0 0.00% 0.0 0.00%
------ ----- ----- ------ ------ ------ ------ ------
Total Equipment 53.3 7.08% 4.4 7.07% 57.6 7.65% 59.3 7.64%
------ ----- ----- ------ ------ ------ ------ ------
Wire Maintenance Agreements 4.2 0.56% 0.4 0.64% 4.7 0.62% 4.3 0.55%
Installation 18.3 2.43% 1.4 2.25% 16.9 2.24% 24.9 3.21%
------ ----- ----- ------ ------ ------ ------ ------
Total Installation / Service 22.5 2.99% 1.8 2.89% 21.6 2.87% 29.2 3.76%
------ ----- ----- ------ ------ ------ ------ ------
Guide Revenue 1.0 0.13% 0.1 0.16% 0.8 0.11% 0.0 0.00%
Late Charges 8.1 1.08% 0.6 0.96% 8.7 1.15% 7.9 1.02%
Home Shopping 7.1 0.94% 0.5 0.80% 7.1 0.94% 9.9 1.28%
FCC User Fee Pass Thru 1.0 0.13% 0.1 0.16% 1.0 0.13% 1.0 0.13%
Franchise Pass Thru 0.0 0.00% 0.0 0.00% 0.0 0.00% 0.0 0.00%
Miscellaneous / Rent 0.6 0.08% 0.0 0.00% 3.4 0.45% 0.0 0.00%
------ ----- ----- ------ ------ ------ ------ ------
Total Non-Service / Misc. 17.8 2.37% 1.3 2.09% 21.0 2.79% 18.8 2.42%
------ ----- ----- ------ ------ ------ ------ ------
Advertising 0.0 0.00% 0.0 0.00% 0.0 0.00% 0.0 0.00%
Total Revenues 752.4 100.00% 62.2 100.00% 753.3 100.00% 776.3 100.00%
------ ------ ----- ------ ------ ------ ------ -------
</TABLE>
-85-
<PAGE> 92
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Falcon Classic Cable Income Properties EXHIBIT C10 Operating Cash Flow: Budget & Actual
California City, California Valuation Date: December 31, 1996
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1997 Budget Dec Mo 1996 Actual 1996 Actual 1995 Actual
--------------------- -------------------- -------------------- ------------------
($000s) % to Rev. ($000s) % to Rev. ($000s) % to Rev. ($000s) % to Rev.
------- --------- ------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Expenses:
Technical
Personnel 52.9 7.03% 1.1 1.77% 15.1 2.00% 17.5 2.25%
Other 5.6 9.00% 72.9 9.68% 73.7 9.49%
Programming 178.5 23.72% 11.2 18.01% 145.9 19.37% 177.1 22.81%
-----
Capitalized Labor & O/H (1.1) -1.77% (15.0) -1.99% (18.5) -2.38%
----- ----- ------ ----- ------ -----
Total Technical 231.4 30.75% 16.8 27.01% 218.9 29.06% 249.8 32.18%
------ ----- ----- ----- ------ ----- ------ -----
Production & L/O
Personnel 0 0.00% 0.1 0.01% 0.0 0.00%
Other 0 0.00% 0.0 0.00% 0.0 0.00%
----- ----- ------ ----- ------ -----
Total Production & L/O 0.0 0.00% 0 0.00% 0.1 0.01% 0.0 0.00%
------ ----- ----- ----- ------ ----- ------ -----
Ad Sales
Personnel 0 0.00% 0.0 0.00% 0.0 0.00%
Other 0 0.00% 0.0 0.00% 0.0 0.00%
----- ----- ------ ----- ------ -----
Total Ad Sales 0.0 0.00% 0 0.00% 0.0 0.00% 0.0 0.00%
------ ----- ----- ----- ------ ----- ------ -----
Marketing
Commissions 0.0 0.00% 0.0 0.00% 0.0 0.00%
Other 0.6 0.96% 6.2 0.82% 11.7 1.51%
----- ----- ------ ----- ------ -----
Total Marketing 16.1 2.14% 0.6 0.96% 6.2 0.82% 11.7 1.51%
------ ----- ----- ----- ------ ----- ------ -----
General & Administrative
Personnel 1.0 1.61% 7.3 0.97% 11.3 1.46%
Other 6.6 10.61% 85.8 11.39% 90.1 11.61%
----- ----- ------ ----- ------ -----
Total G & A 102.0 13.56% 7.6 12.22% 93.1 12.36% 101.4 13.06%
------ ----- ----- ----- ------ ----- ------ -----
Total Operating Expense
Before Partnership Exps. 349.5 46.45% 25.0 40.19% 318.3 42.25% 362.9 46.75%
------ ----- ----- ----- ------ ----- ------ -----
Total Oper. Cash Flow
Before Partnership Exps. $402.9 53.55% $37.2 59.81% $435.0 57.75% $413.4 53.25%
====== ===== ===== ===== ====== ===== ====== =====
</TABLE>
-86-
<PAGE> 93
EXHIBIT D
REGION AND SYSTEM CASH FLOW PROJECTION ASSUMPTIONS
<PAGE> 94
EXHIBIT D
REGION AND SYSTEM CASH FLOW PROJECTION ASSUMPTIONS
BEGINNING DECEMBER 31, 1996
INTRODUCTION
A cash flow projection has been developed for each Region and System. These
projections are shown in Exhibit E.
HOMES PASSED
Homes passed are based upon current passings and projection of growth provided
by CACI and operational management (see Tables 2A-2E). Accordingly, households
are projected to grow at the following annual rates during the projection
period.
<TABLE>
<CAPTION>
Years 1-5 Years 6-10
Operating Annual Annual
Area Growth Rate Growth Rate
---- ----------- -----------
<S> <C> <C>
Burke County 1.0% 0.5%
Centreville 2.0% 1.0%
Somerset 3.0% 1.5%
Redmond 3.8% 1.9%
California City 3.0% 1.5%
</TABLE>
EBU PENETRATION
Current penetrations are shown below. The national average basic penetration
is 68.3%. Penetration is increased as shown in the table below. This growth
considers the relatively poor off-air reception in certain of the areas and
increased System channel offerings after projected rebuilds.
<TABLE>
<CAPTION>
Operating Current Projected Projected
Area Penetration Year 1 Penetration Year 10 Penetration
---- ----------- ------------------ -------------------
<S> <C> <C> <C>
Burke County 55.5% 55.4% 60.0%
Centreville 52.8% 53.8% 65.0%
Somerset 88.3% 89.0% 90.0%
Redmond 50.7% 50.0% 52.5%
California City 68.6% 69.0% 73.5%
</TABLE>
EBU's
This is the product of homes passed times EBU penetration.
AVERAGE EBU REVENUE
Tables 3A-3E analyze regional and system revenues for 1995, 1996 and projected
1997. 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 (1996).
Revenues for digital and telephony services have not been
-88-
<PAGE> 95
EXHIBIT D (Continued)
projected as they were too speculative, nor was the capex needed to implement
these services forecasted.
TOTAL REVENUE
This is the product of EBU's times average EBU revenue. Page 2 of Exhibit for
each Region and System 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 and System was
reviewed for prior years and for 1996. The 1996 cash flow margin, after
corporate expense allocation is shown below. Including the corporate expense
allocation reduces the margins by approximately 3.7%. 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 1996 margin, the year one projected margin,
the ultimate margin, and the year achieved.
<TABLE>
<CAPTION>
Ultimate Margin
---------------
Operating 1996 Year One Year
Area Actual Margin Margin % Achieved
- ---- ------------- ------ - --------
<S> <C> <C> <C> <C>
Burke County 56.1% 57.3% 55.0% 5
Centreville 47.2% 48.7% 55.0% 8
Somerset 51.6% 52.0% 55.0% 7
Redmond 55.8% 51.1% 55.0% 6
California City 54.0% 54.0% 55.0% 3
</TABLE>
Year one margin is based upon appraisers review of the FCCIP management
prepared 1997 budget and adjusted as necessary.
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 and System, the appraisers
determination of various components of customer and replacement capital, and
the FCCIP management prepared capital expenditure 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 capex requirements by
Region and System ($000s).
-89-
<PAGE> 96
EXHIBIT D (Continued)
<TABLE>
<CAPTION>
Operating
Area Rebuild Recurring Total
---- ------- --------- -----
<S> <C> <C> <C>
Burke County $10,700 $3,227 $13,927
Centreville 9,692 6,127 15,819
Somerset 11,853 2,503 14,356
Redmond 4,985 1,082 6,067
California City 692 633 1,325
</TABLE>
NET CASH FLOW
This is the computational result of operating cash flow minus capital
expenditures.
PRESENT VALUE FACTOR
A 15% 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 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.
-90-
<PAGE> 97
EXHIBIT D (Continued)
<TABLE>
<CAPTION>
Burke California
County Centreville Somerset Redmond City
------ ----------- -------- ------- ----------
<S> <C> <C> <C> <C>
Estimated Tax Basis for Residual Calculation
Business Enterprise Value $19,960,000 $23,800,000 $33,230,000 $7,770,000 $3,530,000
Unamortized Basis:
Tangible @ 25% life less than 10 yrs 0 0 0 0 0
Amortizable intangibles at 75% 4,985,010 5,944,050 8,299,193 1,940,558 881,618
Capital Expenditures 993,829 1,565,225 1,020,830 634,982 362,902
----------- ----------- ----------- ----------- ----------
Tax Basis 5,978,839 7,509,275 9,320,023 2,575,607 1,244,520
Year 10 "Sales Price" 46,776,571 63,056,287 70,531,280 21,255,607 6,897,117
Percent of "Sales Price" not Taxable 12.8% 11.9% 13.2% 12.1% 18.0%
Net Capital Gains Tax 30.5% 30.8% 30.4% 30.8% 28.7%
=========== =========== =========== =========== ==========
</TABLE>
-91-
<PAGE> 98
EXHIBIT E
REGION AND SYSTEM CASH FLOW PROJECTIONS
<PAGE> 99
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Falcon Classic Cable Income Properties, L.P. KANE REECE ASSOCIATES, INC. Exhibit E-1A
Burke, NC CATV SYSTEM VALUATION MODEL Valuation Date: December 31, 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Growth Rate in Homes Passed 1.0% Thru Yr 5
Homes Passed @ 12/31/96 18,986
Equivalent Billing Units @ 12/31/96 10,546 55.5% EBU's/HP
Pay Units @ 12/31/96 4,614 43.8% Pay Units/EBU's
Operating Margin for 96 Yr. 56.4% After Adj Partnership Expenses & One time payments from programmers.
Operating Margin for 95 Yr. 54.8% After Adj Partnership Expenses
Weighted average discount rate 15.0%
</TABLE>
<TABLE>
<CAPTION>
Year 1 2 3 4 5
---- - - - - -
<S> <C> <C> <C> <C> <C>
Basic Rev/EBU (now $22.32) $22.91 $23.90 $25.00 $26.10 $27.30
Growth rate 2.6% 4.5% 4.5% 4.5% 4.5%
Kagan Projection $26.04 $27.35 $28.44 $29.58 $30.76
Growth rate 12.9% 5.0% 4.0% 4.0% 4.0%
Pay Rev/Pay Unit (now $7.66) $7.51 $7.51 $7.51 $7.51 $7.51
Growth rate -1.9% 0% 0% 0% 0%
Kagan Projection* $8.15 $8.03 $7.93 $7.82 $7.73
Growth rate -1.5% -1.5% -1.2% -1.4% -1.2%
New Product Tier (now $7.74) $8.52 $9.37 $10.07 $10.58 $11.11
Growth rate 23.1% 10.0% 7.5% 5.0% 5.0%
Mini-Pay/EBU (now $0.07) $0.07 $0.09 $0.12 $0.14 $0.18
Growth rate 0.0% 25.0% 25.0% 25.0% 25.0%
Pay-Per-View Rev/EBU (now $0.81) $1.01 $1.22 $1.40 $1.61 $1.85
Growth rate 25.2% 20.0% 15.0% 15.0% 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$3.67) $3.68 $3.79 $3.91 $4.02 $4.15
Growth rate 0.3% 3% 3% 3% 3%
Advertising/EBU (now $1.06) $1.20 $1.44 $1.73 $2.08 $2.39
Growth rate 13.5% 20.0% 20.0% 20.0% 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 $0.29) $0.31 $0.37 $0.45 $0.54 $0.62
Growth rate 6.9% 20% 20% 20% 15%
Install/Service/EBU (now $.68) $0.74 $0.78 $0.82 $0.86 $0.90
Growth rate 8.8% 5% 5% 5% 5%
Wire Maint. Agreement/EBU (now $0.54) $0.54 $0.56 $0.57 $0.59 $0.61
Growth rate 0.0% 3.0% 3.0% 3.0% 3.0%
Late Fees, Radio & Other/EBU (now $0.95) $0.96 $1.01 $1.06 $1.11 $1.17
growth rate 1.1% 5.0% 5.0% 5.0% 5.0%
Pay-to-EBU (now 43.9%) 40.7% 41.0% 41.5% 42.0% 43.0%
Kagan Projection* 79.7% 81.2% 81.9% 82.4% 82.8%
Total Annual EBU Rev $516.15 $547.34 $578.89 $609.42 $641.94
monthly (now $40.90) $43.01 $45.61 $48.24 $50.78 $53.50
Compound growth 5.3%
Kagan Projection $33.72 $35.22 $36.85 $38.70 $40.62
Compound growth 4.8%
</TABLE>
<TABLE>
<S> <C>
Growth Rate in Homes Passed 1.0% Thru Yr 5
Homes Passed @ 12/31/96 18,986
Equivalent Billing Units @ 12/31/96 10,546 55.5% EBU's/HP
Pay Units @ 12/31/96 4,614 43.8% Pay Units/EBU's
Operating Margin for 96 Yr. 56.4% After Adj Partnership Expenses & One time payments from programmers.
Operating Margin for 95 Yr. 54.8% After Adj Partnership Expenses
Weighted average discount rate 15.0%
</TABLE>
<TABLE>
<CAPTION>
Year 6 7 8 9 10
---- - - - - --
<S> <C> <C> <C> <C> <C>
Basic Rev/EBU (now $22.32) $28.50 $29.80 $31.10 $32.50 $34.00
Growth rate 4.5% 4.5% 4.5% 4.5% 4.5%
Kagan Projection $31.99 $33.27 $34.60 $35.99 n/a
Growth rate 4.0% 4.0% 4.0% 4.0%
Pay Rev/Pay Unit (now $7.66) $7.51 $7.51 $7.51 $7.51 $7.51
Growth rate 0% 0% 0% 0% 0%
Kagan Projection* $7.63 $7.54 $7.45 $7.35 n/a
Growth rate -1.3% -1.2% -1.2% -1.3%
New Product Tier (now $7.74) $11.66 $12.25 $12.86 $13.50 $14.18
Growth rate 5.0% 5.0% 5.0% 5.0% 5.0%
Mini-Pay/EBU (now $0.07) $0.23 $0.28 $0.35 $0.44 $0.55
Growth rate 25.0% 25.0% 25.0% 25.0% 25.0%
Pay-Per-View Rev/EBU (now $0.81) $2.04 $2.24 $2.46 $2.71 $2.98
Growth rate 10.0% 10.0% 10.0% 10.0% 10.0%
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 $3.67) $4.27 $4.40 $4.53 $4.67 $4.81
Growth rate 3% 3% 3% 3% 3%
Advertising/EBU (now $1.06) $2.75 $3.02 $3.33 $3.66 $4.02
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 $0.29) $0.71 $0.81 $0.94 $1.08 $1.24
Growth rate 15% 15% 15% 15% 15%
Install/Service/EBU (now $.68) $0.94 $0.99 $1.04 $1.09 $1.15
Growth rate 5% 5% 5% 5% 5%
Wire Maint. Agreement/EBU (now $0.54) $0.63 $0.64 $0.66 $0.68 $0.70
Growth rate 3.0% 3.0% 3.0% 3.0% 3.0%
Late Fees, Radio & Other/EBU (now $0.95) $1.23 $1.29 $1.35 $1.42 $1.49
growth rate 5.0% 5.0% 5.0% 5.0% 5.0%
Pay-to-EBU (now 43.9%) 44.0% 45.0% 46.0% 47.0% 48.0%
Kagan Projection* 83.0% 83.2% 83.1% 83.1% n/a
Total Annual EBU Rev $675.03 $709.29 $744.95 $783.36 $824.70
monthly (now $40.90) $56.25 $59.11 $62.08 $65.28 $68.73
Compound growth
Kagan Projection $42.60 $44.74 $46.91 $49.15
Compound growth 4.8%
</TABLE>
*Kane Reece adjusted Kagan Projection to exclude mini-pay from pay category.
-93-
<PAGE> 100
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Falcon Classic Cable Income Properties, L.P. KANE REECE ASSOCIATES, INC. Exhibit E-1b
Burke, NC CATV SYSTEM VALUATION MODEL
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year 1 2 3 4 5
---- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Homes Passed 19,046 19,237 19,429 19,623 19,820
EBU Penetration 55.4% 56.0% 56.0% 57.0% 58.0%
Kagan Penetration Projection 68.5% 67.7% 66.6% 65.5% 64.4%
Equivalent Billing Units 10,552 10,773 10,880 11,185 11,495
Basic Revenue/EBU $22.91 $23.90 $25.00 $26.10 $27.30
Basic Revenue 2,900,929 3,089,579 3,264,095 3,503,253 3,765,895
---------- ---------- ---------- ---------- -----------
Pay-to-Basic Ratio 40.7% 42.0% 43.0% 44.0% 45.0%
Pay Units 4,295 4,524 4,679 4,922 5,173
Pay Revenue/Pay Unit $7.51 $7.51 $7.51 $7.51 $7.51
Pay Revenue 387,234 407,970 421,860 443,773 466,439
---------- ---------- ---------- ---------- -----------
New Product Tier/EBU $8.52 $9.37 $10.07 $10.58 $11.11
New Product Tier Revenue 1,078,801 1,211,529 1,315,417 1,419,911 1,532,233
---------- ---------- ---------- ---------- -----------
Mini-Pay Revenue/EBU $0.07 $0.09 $0.12 $0.14 $0.18
Mini-Pay Revenue/EBU 9,370 11,958 15,096 19,400 24,922
---------- ---------- ---------- ---------- -----------
Pay-Per-View Revenue/EBU $1.01 $1.22 $1.40 $1.61 $1.85
Pay-Per-View Revenue 128,393 157,297 182,701 215,996 255,281
---------- ---------- ---------- ---------- -----------
Equipment Revenue/ EBU $3.68 $3.79 $3.91 $4.02 $4.15
Equipment Revenue 466,316 490,362 510,124 540,158 571,785
---------- ---------- ---------- ---------- -----------
Advertising Revenue/EBU $1.20 $1.44 $1.73 $2.08 $2.39
Advertising Revenue/EBU 152,286 186,569 226,122 278,954 329,689
---------- ---------- ---------- ---------- -----------
Home Shopping/EBU $0.31 $0.37 $0.45 $0.54 $0.62
Home Shopping Revenue 39,252 48,089 58,284 71,901 84,978
---------- ---------- ---------- ---------- -----------
Installation Revenue/EBU $0.74 $0.78 $0.82 $0.86 $0.90
Installation Revenue 93,699 100,444 106,520 114,982 124,078
---------- ---------- ---------- ---------- -----------
Franchise Fee Pass-thru Revenue/EBU $0.54 $0.56 $0.57 $0.59 $0.61
Franchise Fee Pass-thru Revenue 68,375 71,901 74,798 79,202 83,839
---------- ---------- ---------- ---------- -----------
Late Fees & Other Revenue/EBU $0.96 $1.01 $1.06 $1.11 $1.17
Late Fees & Other Revenue 121,555 130,305 138,189 149,166 160,966
---------- ---------- ---------- ---------- -----------
Total Revenue $5,446,208 $5,906,002 $6,313,206 $6,836,696 $7,400,105
========== ========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
Year 6 7 8 9 10
---- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Homes Passed 19,919 20,018 20,118 20,219 20,320
EBU Penetration 59.0% 60.0% 60.0% 60.0% 60.0%
Kagan Penetration Projection 63.4% 62.3% 61.6% 60.9%
Equivalent Billing Units 11,752 12,011 12,071 12,131 12,192
Basic Revenue/EBU $28.50 $29.80 $31.10 $32.50 $34.00
Basic Revenue 4,019,208 4,295,139 4,504,923 4,731,255 4,974,369
---------- ---------- ---------- ---------- -----------
Pay-to-Basic Ratio 46.0% 47.0% 48.0% 49.0% 50.0%
Pay Units 5,406 5,645 5,794 5,944 6,096
Pay Revenue/Pay Unit $7.51 $7.51 $7.51 $7.51 $7.51
Pay Revenue 487,450 509,021 522,451 536,002 549,675
---------- ---------- ---------- ---------- -----------
New Product Tier/EBU $11.66 $12.25 $12.86 $13.50 $14.18
New Product Tier Revenue 1,644,767 1,765,057 1,862,577 1,965,484 2,074,077
---------- ---------- ---------- ---------- -----------
Mini-Pay Revenue/EBU $0.23 $0.28 $0.35 $0.44 $0.55
Mini-Pay Revenue/EBU 31,848 40,687 51,113 64,210 80,664
---------- ---------- ---------- ---------- -----------
Pay-Per-View Revenue/EBU $2.04 $2.24 $2.46 $2.71 $2.98
Pay-Per-View Revenue 287,079 322,745 356,794 394,436 436,049
---------- ---------- ---------- ---------- -----------
Equipment Revenue/ EBU $4.27 $4.40 $4.53 $4.67 $4.81
Equipment Revenue 602,088 633,815 656,093 679,155 703,027
---------- ---------- ---------- ---------- -----------
Advertising Revenue/EBU $2.75 $3.02 $3.33 $3.66 $4.02
Advertising Revenue/EBU 387,608 435,763 481,736 532,559 588,744
---------- ---------- ---------- ---------- -----------
Home Shopping/EBU $0.71 $0.81 $0.94 $1.08 $1.24
Home Shopping Revenue 99,907 117,425 135,714 156,851 181,281
---------- ---------- ---------- ---------- -----------
Installation Revenue/EBU $0.94 $0.99 $1.04 $1.09 $1.15
Installation Revenue 133,191 142,932 150,829 159,162 167,956
---------- ---------- ---------- ---------- -----------
Franchise Fee Pass-thru Revenue/EBU $0.63 $0.64 $0.66 $0.68 $0.70
Franchise Fee Pass-thru Revenue 88,283 92,935 96,201 99,583 103,083
---------- ---------- ---------- ---------- -----------
Late Fees & Other Revenue/EBU $1.23 $1.29 $1.35 $1.42 $1.49
Late Fees & Other Revenue 172,788 185,425 195,670 206,480 217,888
---------- ---------- ---------- ---------- -----------
Total Revenue $7,954,215 $8,540,942 $9,014,100 $9,525,178 $10,076,814
========== ========== ========== ========== ===========
</TABLE>
-94-
<PAGE> 101
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Falcon Classic Cable Income Properties, L.P. KANE REECE ASSOCIATES, INC. Exhibit E-1c
Burke, NC CATV SYSTEM VALUATION MODEL
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year 1 2 3 4 5
---- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total Revenue $5,446,208 $5,906,002 $6,313,206 $6,836,696 $7,400,105
Margin % to Revenue 57.3% 56.5% 56.0% 55.5% 55.0%
Operating Cash Flow 3,120,677 3,336,891 3,535,395 3,794,366 4,070,058
Captal Expenditures:
- Rebuild/Extensions 423,000 2,857,000 2,971,000 4,199,000 66,000
- Recurring 713,000 292,000 278,000 288,000 293,000
---------- ---------- ---------- ---------- ----------
Total 1,136,000 3,149,000 3,249,000 4,487,000 359,000
---------- ---------- ---------- ---------- ----------
Net Cash Flow 1,984,677 187,891 286,395 (692,634) 3,711,058
Present Value Factor @ 15.0% 0.93250 0.81087 0.70511 0.61314 0.53316
PV Net Cash Flow 1,850,721 152,356 201,940 (424,679) 1,978,597
---------- ---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
Year 6 7 8 9 10
---- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Total Revenue $7,954,215 $8,540,942 $9,014,100 $9,525,178 $10,076,814
Margin % to Revenue 55.0% 55.0% 55.0% 55.0% 55.0%
Operating Cash Flow 4,374,818 4,697,518 4,957,755 5,238,848 5,238,848
Captal Expenditures:
- Rebuild/Extensions 34,000 36,000 37,000 38,000 39,000
- Recurring 288,000 292,000 259,000 261,000 263,000
---------- ---------- ---------- ---------- -----------
Total 322,000 328,000 296,000 299,000 302,000
---------- ---------- ---------- ---------- -----------
0
Net Cash Flow 4,052,818 4,369,518 4,661,755 4,939,848 5,240,248
Present Value Factor @ 15.0% 0.46362 0.40315 0.35056 0.30484 0.26508
PV Net Cash Flow 1,878,966 1,761,561 1,634,239 1,505,851 1,389,064
---------- ---------- ---------- ---------- -----------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Present Value of Net Cash Flows $11,928,616 Residual Value
Present Value of Residual 8,032,852 ---------------
----------- 8x's Yr 11 Operating Cash Flow $46,776,571
Value Indication under Income Approach $19,961,467 Less: Taxes 30.5% 14,279,206
----------- -----------
Value Indication (Rounded) $19,960,000 After Tax Proceeds (end of year 10) 32,497,365
----------- -----------
Value Indication/EBU $1,893 Present Value @ 15.0% $ 8,032,852
------ -----------
Cash Flow Multiple - Projected 6.4
---
</TABLE>
-95-
<PAGE> 102
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Falcon Classic Cable Income Properties, L.P. KANE REECE ASSOCIATES, INC. Exhibit E-2a
Centreville, MD CATV SYSTEM VALUATION MODEL Valuation Date: December 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Growth Rate in Homes Passed 2.0% Thru Yr 5
Homes Passed @ 12/31/96 23,857
Equivalent Billing Units @ 12/31/96 12,593 52.8% EBU's/HP
Pay Units @ 12/31/96 7,440 59.1% Pay Units/EBU's
Operating Margin for 96 Yr. 47.2% After Adj Partnership Expenses
Operating Margin for 95 Yr. 40.8% After Adj Partnership Expenses
Weighted average discount rate 15.0%
</TABLE>
<TABLE>
<CAPTION>
Year 1 2 3 4 5
- - - - -
<S> <C> <C> <C> <C> <C>
Basic Rev/EBU (now $23.18) $24.04 $25.10 $26.20 $27.40 $28.60
Growth rate 3.7% 4.5% 4.5% 4.5% 4.5%
Kagan Projection $26.04 $27.35 $28.44 $29.58 $30.76
Growth rate 12.9% 5.0% 4.0% 4.0% 4.0%
Pay Rev/Pay Unit (now $8.50) $9.04 $9.04 $9.04 $9.04 $9.04
Growth rate 6.4% 0% 0% 0% 0%
Kagan Projection* $8.15 $8.03 $7.93 $7.82 $7.73
Growth rate -1.5% -1.5% -1.2% -1.4% -1.2%
New Product Tier (now $4.97) $5.11 $5.37 $5.63 $5.92 $6.21
Growth rate 2.8% 5.0% 5.0% 5.0% 5.0%
Video Games & Activation/EBU (now $0.28) $0.28 $0.35 $0.44 $0.55 $0.68
Growth rate 0.0% 25.0% 25.0% 25.0% 25.0%
Pay-Per-View Rev/EBU (now $0.00) $0.00 $0.00 $0.02 $0.50 $1.00
Growth rate 0.0% 0.0% n/a 2400.0% 100.0%
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$0.32) $0.33 $0.34 $0.35 $1.05 $1.72
Growth rate 3.1% 3% 3% 3% 3%
Advertising/EBU (now $0.83) $0.89 $1.07 $1.28 $1.54 $1.77
Growth rate 7.2% 20.0% 20.0% 20.0% 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 $0.46) $0.36 $0.43 $0.52 $0.62 $0.72
Growth rate -21.7% 20% 20% 20% 15%
Install/Service/EBU (now $0.37) $0.38 $0.40 $0.42 $0.44 $0.46
Growth rate 2.7% 5% 5% 5% 5%
Wire Maint. Agreement/EBU (now $0.27) $0.28 $0.29 $0.30 $0.31 $0.32
Growth rate 3.7% 3.0% 3.0% 3.0% 3.0%
Late Fees, Radio & Other/EBU (now $1.53) $1.72 $1.81 $1.90 $1.99 $2.09
growth rate 12.4% 5.0% 5.0% 5.0% 5.0%
Pay-to-EBU (now 59.1%) 60.0% 60.0% 60.0% 60.0% 60.0%
Kagan Projection* 79.7% 81.2% 81.9% 82.4% 82.8%
Total Annual EBU Rev $465.77 $486.87 $509.73 $540.53 $571.70
monthly (now $37.22) $38.81 $40.57 $42.48 $45.04 $47.64
Compound growth 5.4%
Kagan Projection $33.72 $35.22 $36.85 $38.70 $40.62
Compound growth 4.8%
</TABLE>
<TABLE>
<CAPTION>
Year 6 7 8 9 10
- - - - --
<S> <C> <C> <C> <C> <C>
Basic Rev/EBU (now $23.18) $29.90 $31.20 $32.60 $34.10 $35.60
Growth rate 4.5% 4.5% 4.5% 4.5% 4.5%
Kagan Projection $31.99 $33.27 $34.60 $35.99 n/a
Growth rate 4.0% 4.0% 4.0% 4.0%
Pay Rev/Pay Unit (now $8.50) $9.04 $9.04 $9.04 $9.04 $9.04
Growth rate 0% 0% 0% 0% 0%
Kagan Projection* $7.63 $7.54 $7.45 $7.35 n/a
Growth rate -1.3% -1.2% -1.2% -1.3%
New Product Tier (now $4.97) $6.52 $6.85 $7.19 $7.55 $7.93
Growth rate 5.0% 5.0% 5.0% 5.0% 5.0%
Video Games & Activation/EBU (now $0.28) $0.85 $1.07 $1.34 $1.67 $2.09
Growth rate 25.0% 25.0% 25.0% 25.0% 25.0%
Pay-Per-View Rev/EBU (now $0.00) $1.50 $1.88 $2.16 $2.37 $2.61
Growth rate 50.0% 25.0% 15.0% 10.0% 10.0%
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$0.32) $3.04 $3.02 $3.00 $3.06 $3.13
Growth rate 3% 3% 3% 3% 3%
Advertising/EBU (now $0.83) $2.03 $2.24 $2.46 $2.71 $2.98
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 $0.46) $0.82 $0.95 $1.09 $1.25 $1.44
Growth rate 15% 15% 15% 15% 15%
Install/Service/EBU (now $0.37) $0.48 $0.51 $0.53 $0.56 $0.59
Growth rate 5% 5% 5% 5% 5%
Wire Maint. Agreement/EBU (now $0.27) $0.32 $0.33 $0.34 $0.35 $0.37
Growth rate 3.0% 3.0% 3.0% 3.0% 3.0%
Late Fees, Radio & Other/EBU (now $1.53) $2.20 $2.30 $2.42 $2.54 $2.67
growth rate 5.0% 5.0% 5.0% 5.0% 5.0%
Pay-to-EBU (now 59.1%) 60.0% 60.0% 60.0% 60.0% 60.0%
Kagan Projection* 83.0% 83.2% 83.1% 83.1% n/a
Total Annual EBU Rev $605.33 $637.69 $671.52 $707.38 $745.40
monthly (now $37.22) $50.44 $53.14 $55.96 $58.95 $62.12
Compound growth
Kagan Projection $42.60 $44.74 $46.91 $49.15
Compound growth
</TABLE>
*Kane Reece adjusted Kagan Projection to exclude mini-pay from pay category.
-96-
<PAGE> 103
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
Falcon Classic Cable Income Properties, L.P. KANE REECE ASSOCIATES, INC. Exhibit E-2b
Centreville, MD CATV SYSTEM VALUATION MODEL
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year 1 2 3 4 5
---- - - - - -
<S> <C> <C> <C> <C> <C> <C>
Homes Passed 23,953 24,432 24,920 25,419 25,927
EBU Penetration 53.8% 56.0% 56.0% 57.0% 59.0%
Kagan Penetration Projection 68.5% 67.7% 66.6% 65.5% 64.4%
Equivalent Billing Units 12,896 13,682 13,955 14,489 15,297
Basic Revenue/EBU $24.04 $25.10 $26.20 $27.40 $28.60
Basic Revenue 3,720,238 4,120,965 4,387,596 4,763,903 5,249,957
---------- ---------- ---------- --------- ----------
Pay-to-Basic Ratio 60.0% 42.0% 43.0% 44.0% 45.0%
Pay Units 7,738 5,746 6,001 6,375 6,884
Pay Revenue/Pay Unit $9.04 $9.04 $9.04 $9.04 $9.04
Pay Revenue 839,375 623,366 650,972 691,566 746,742
---------- ---------- ---------- --------- ----------
New Product Tier/EBU $5.11 $5.37 $5.63 $5.92 $6.21
New Product Tier Revenue 790,783 880,918 943,463 1,028,493 1,140,165
---------- ---------- ---------- --------- ----------
Mini-Pay Revenue/EBU $0.28 $0.35 $0.44 $0.55 $0.68
Mini-Pay Revenue/EBU 43,331 57,464 73,266 95,082 125,484
---------- ---------- ---------- --------- ----------
Pay-Per-View Revenue/EBU $0.00 $0.00 $0.02 $0.50 $1.00
Pay-Per-View Revenue 0 0 3,349 86,933 183,565
---------- ---------- ---------- --------- ----------
Equipment Revenue/ EBU $0.33 $0.34 $0.35 $1.05 $1.72
Equipment Revenue 51,068 55,805 58,629 182,696 315,379
---------- ---------- ---------- --------- ----------
Advertising Revenue/EBU $0.89 $1.07 $1.28 $1.54 $1.77
Advertising Revenue/EBU 137,729 175,346 214,624 267,391 324,654
---------- ---------- ---------- --------- ----------
Home Shopping/EBU $0.36 $0.43 $0.52 $0.62 $0.72
Home Shopping Revenue 55,711 70,927 86,814 108,158 131,321
---------- ---------- ---------- --------- ----------
Installation Revenue/EBU $0.38 $0.40 $0.42 $0.44 $0.46
Installation Revenue 58,806 65,509 70,160 76,483 84,787
---------- ---------- ---------- --------- ----------
Franchise Fee Pass-thru Revenue/EBU $0.28 $0.29 $0.30 $0.31 $0.32
Franchise Fee Pass-thru Revenue 43,331 47,350 49,746 53,196 57,849
---------- ---------- ---------- --------- ----------
Late Fees & Other Revenue/EBU $1.72 $1.81 $1.90 $1.99 $2.09
Late Fees & Other Revenue 266,173 296,512 317,565 346,185 383,774
---------- ---------- ---------- --------- ----------
Total Revenue $6,006,544 $6,394,161 $6,856,184 $7,700,085 $8,743,677
---------- ---------- ---------- --------- ----------
</TABLE>
<TABLE>
<CAPTION>
Year 6 7 8 9 10
---- - - - - --
<S> <C> <C> <C> <C> <C> <C>
Homes Passed 26,187 26,448 26,713 26,980 27,250
EBU Penetration 61.0% 63.0% 65.0% 65.0% 65.0%
Kagan Penetration Projection 63.4% 62.3% 61.6% 60.9%
Equivalent Billing Units 15,974 16,662 17,363 17,537 17,712
Basic Revenue/EBU $29.90 $31.20 $32.60 $34.10 $35.60
Basic Revenue 5,731,391 6,238,434 6,792,548 7,176,140 7,566,724
---------- ----------- ----------- ----------- -----------
Pay-to-Basic Ratio 46.0% 47.0% 48.0% 49.0% 50.0%
Pay Units 7,348 7,831 8,334 8,593 8,856
Pay Revenue/Pay Unit $9.04 $9.04 $9.04 $9.04 $9.04
Pay Revenue 797,104 849,547 904,117 932,183 960,719
---------- ----------- ----------- ----------- -----------
New Product Tier/EBU $6.52 $6.85 $7.19 $7.55 $7.93
New Product Tier Revenue 1,250,133 1,369,234 1,498,170 1,588,809 1,684,932
---------- ----------- ----------- ----------- -----------
Mini-Pay Revenue/EBU $0.85 $1.07 $1.34 $1.67 $2.09
Mini-Pay Revenue/EBU 163,794 213,569 278,191 351,216 443,411
---------- ----------- ----------- ----------- -----------
Pay-Per-View Revenue/EBU $1.50 $1.88 $2.16 $2.37 $2.61
Pay-Per-View Revenue 287,528 374,906 449,277 499,147 554,552
---------- ----------- ----------- ----------- -----------
Equipment Revenue/ EBU $3.04 $3.02 $3.00 $3.06 $3.13
Equipment Revenue 582,563 603,297 624,809 644,424 664,663
---------- ----------- ----------- ----------- -----------
Advertising Revenue/EBU $2.03 $2.24 $2.46 $2.71 $2.98
Advertising Revenue/EBU 389,869 447,345 512,779 569,697 632,933
---------- ----------- ----------- ----------- -----------
Home Shopping/EBU $0.82 $0.95 $1.09 $1.25 $1.44
Home Shopping Revenue 157,700 189,174 226,701 263,313 305,838
---------- ----------- ----------- ----------- -----------
Installation Revenue/EBU $0.48 $0.51 $0.53 $0.56 $0.59
Installation Revenue 92,965 101,822 111,410 118,150 125,298
---------- ----------- ----------- ----------- -----------
Franchise Fee Pass-thru Revenue/EBU $0.32 $0.33 $0.34 $0.35 $0.37
Franchise Fee Pass-thru Revenue 62,220 66,850 71,752 74,644 77,652
---------- ----------- ----------- ----------- -----------
Late Fees & Other Revenue/EBU $2.20 $2.30 $2.42 $2.54 $2.67
Late Fees & Other Revenue 420,788 460,877 504,276 534,785 567,140
---------- ----------- ----------- ----------- -----------
Total Revenue $9,936,056 $10,915,054 $11,974,031 $12,752,508 $13,583,862
---------- ----------- ----------- ----------- -----------
</TABLE>
-97-
<PAGE> 104
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Falcon Classic Cable Income Properties, L.P. KANE REECE ASSOCIATES, INC. Exhibit E-2c
Centreville, MD CATV SYSTEM VALUATION MODEL
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year 1 2 3 4 5
---- -- -- -- -- --
<S> <C> <C> <C> <C> <C>
Total Revenue $6,006,544 $6,394,161 $6,856,184 $7,700,085 $8,743,677
Margin % to Revenue 48.7% 49.0% 50.0% 51.0% 52.0%
Operating Cash Flow 2,925,187 3,133,139 3,428,092 3,927,043 4,546,712
Captal Expenditures:
- Rebuild/Extensions 1,194,000 4,552,000 3,021,000 183,000 193,000
- Recurring 636,000 303,000 275,000 1,477,000 1,183,000
---------- ---------- ---------- ---------- ----------
Total 1,830,000 4,855,000 3,296,000 1,660,000 1,376,000
========== ========== ========== ========== ==========
Net Cash Flow 1,095,187 (1,721,861) 132,092 2,267,043 3,170,712
Present Value Factor @ 15.0% 0.93250 0.81087 0.70511 0.61314 0.53316
PV Net Cash Flow 1,021,267 (1,396,212) 93,139 1,390,008 1,690,505
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Year 6 7 8 9 10
---- -- -- -- -- --
<S> <C> <C> <C> <C> <C>
Total Revenue $9,936,056 $10,915,054 $11,974,031 $12,752,508 $13,583,862
Margin % to Revenue 53.0% 54.0% 55.0% 55.0% 55.0%
Operating Cash Flow 5,266,109 5,894,129 6,585,717 7,013,880 7,471,124
Captal Expenditures:
- Rebuild/Extensions 101,000 105,000 110,000 114,000 119,000
- Recurring 523,000 489,000 505,000 365,000 371,000
---------- ---------- ---------- ---------- ----------
Total 624,000 594,000 615,000 479,000 490,000
========== ========== ========== ========== ==========
0
Net Cash Flow 4,642,109 5,300,129 5,970,717 6,534,880 6,981,124
Present Value Factor @ 15.0% 0.46362 0.40315 0.35056 0.30484 0.26508
PV Net Cash Flow 2,152,173 2,136,734 2,093,113 1,992,076 1,850,529
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<S> <C> <C>
Present Value of Net Cash Flows $13,023,334 Residual Value
Present Value of Residual 10,780,920 ---------------------------------------------------------
----------- 8x's Yr 11 Operating Cash Flow $63,056,287
Value Indication under Income Approach $23,804,253 Less: Taxes 30.8% 19,441,454
----------- -----------
Value Indication (Rounded) $23,800,000 After Tax Proceeds (end of year 10) 43,614,833
=========== ===========
Value Indication/EBU $1,890 Present Value @ 15.0% $10,780,920
====== ===========
Cash Flow Multiple - Proje 8.1
===
</TABLE>
-98-
<PAGE> 105
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Falcon Classic Cable Income Properties KANE REECE ASSOCIATES, INC. Exhibit E-3a
Somerset, Kentucky CATV SYSTEM VALUATION MODEL Valuation Date: December 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Growth Rate in Homes Passed 1.60% Thru Yr 5
Homes Passed @ 12/31/96 22,060
Equivalent Billing Units @ 12/31/96 19,486 88.3% EBU's/HP
Pay Units @ 12/31/96 3,914 20.1% Pay Units/EBU's
Operating Margin for 96 Yr. 51.5% After Adj Partnership Expenses & One-Time Payments from Programmers
Operating Margin for 95 Yr. 49.6% After Adj Partnership Expenses
Weighted average discount rate 15.0%
</TABLE>
<TABLE>
<CAPTION>
Year 1 2 3 4 5
---- - - - - -
<S> <C> <C> <C> <C> <C>
Basic Rev/EBU (now $21.34) $21.60 $22.60 $23.60 $25.00 $26.10
Growth rate 1.2% 7.0% 7.0% 6.0% 4.5%
Kagan Projection $26.04 $27.35 $28.44 $29.58 $30.76
Growth rate 12.9% 5.0% 4.0% 4.0% 4.0%
Pay Rev/Pay Unit (now $8.43) $8.43 $8.43 $8.43 $8.43 $8.43
Growth rate 0.0% 0.0% 0.0% 0.0% 0.0%
Kagan Projection $8.15 $8.03 $7.93 $7.82 $7.73
Growth rate -1.5% -1.5% -1.2% -1.4% -1.2%
New Product Tier (now $5.12) $5.48 $6.03 $6.63 $7.16 $7.52
Growth rate 7.0% 10.0% 10.0% 8.0% 5.0%
Mini-Pay/EBU (now $0.00) $0.00 $0.05 $0.06 $0.08 $0.10
Growth rate 0.0% 0.0% 25.0% 25.0% 25.0%
Pay-Per-View Rev/EBU (now $0.05) $0.06 $0.25 $0.50 $0.60 $0.69
Growth rate 25.0% 300.0% 100.0% 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$0.49) $0.50 $1.50 $2.50 $2.58 $2.65
Growth rate 3.0% 197.2% 66.7% 3.0% 3.0%
Advertising/EBU (now $1.48) $1.66 $1.86 $2.04 $2.21 $2.38
Growth rate 12.0% 12.0% 10.0% 8.0% 8.0%
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) $0.45 $0.47 $0.50 $0.52 $0.55
Growth rate 0.0% 5.0% 5.0% 5.0% 5.0%
Install/Service/EBU (now $0.66) $0.69 $0.73 $0.76 $0.80 $0.84
Growth rate 5.0% 5.0% 5.0% 5.0% 5.0%
Franchise Fee Pass-thru/EBU (now $0.11) $0.11 $0.18 $0.39 $0.63 $0.87
Growth rate n/a n/a n/a n/a n/a
Late Fees & Other/EBU (now $0.96) $1.01 $1.06 $1.11 $1.17 $1.23
growth rate 5.0% 5.0% 5.0% 5.0% 5.0%
Pay-to-EBU (now 20.1%) 20.0% 20.0% 20.0% 20.0% 20.0%
Kagan Projection 79.7% 81.2% 81.9% 82.4% 82.8%
Total Annual EBU Rev $399.00 $436.90 $477.42 $509.05 $535.37
monthly (now $32.22) $33.25 $36.41 $39.78 $42.42 $44.61
Compound growth 6.2%
Kagan Projection $33.72 $35.22 $36.85 $38.70 $40.62
Compound growth 4.8%
</TABLE>
<TABLE>
<S> <C>
Growth Rate in Homes Passed 1.60% Thru Yr 5
Homes Passed @ 12/31/96 22,060
Equivalent Billing Units @ 12/31/96 19,486 88.3% EBU's/HP
Pay Units @ 12/31/96 3,914 20.1% Pay Units/EBU's
Operating Margin for 96 Yr. 51.5% After Adj Partnership Expenses & One-Time Payments from Programmers
Operating Margin for 95 Yr. 49.6% After Adj Partnership Expenses
Weighted average discount rate 15.0%
</TABLE>
<TABLE>
<CAPTION>
Year 6 7 8 9 10
---- - - - - --
<S> <C> <C> <C> <C> <C>
Basic Rev/EBU (now $21.34) $27.30 $28.50 $29.80 $31.10 $32.50
Growth rate 4.5% 4.5% 4.5% 4.5% 4.5%
Kagan Projection $31.99 $33.27 $34.60 $35.99 n/a
Growth rate 4.0% 4.0% 4.0% 4.0%
Pay Rev/Pay Unit (now $8.43) $8.43 $8.43 $8.43 $8.43 $8.43
Growth rate 0.0% 0.0% 0.0% 0.0% 0.0%
Kagan Projection $7.63 $7.54 $7.45 $7.35 n/a
Growth rate -1.3% -1.2% -1.2% -1.3%
New Product Tier (now $5.12) $7.89 $8.29 $8.70 $9.14 $9.59
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%
Pay-Per-View Rev/EBU (now $0.05) $0.79 $0.91 $1.00 $1.10 $1.21
Growth rate 15.0% 15.0% 10.0% 10.0% 10.0%
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$0.49) $2.73 $2.81 $2.90 $2.99 $3.07
Growth rate 3.0% 3.0% 3.0% 3.0% 3.0%
Advertising/EBU (now $1.48) $2.56 $2.75 $2.96 $3.18 $3.42
Growth rate 7.5% 7.5% 7.5% 7.5% 7.5%
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) $0.57 $0.60 $0.63 $0.66 $0.70
Growth rate 5.0% 5.0% 5.0% 5.0% 5.0%
Install/Service/EBU (now $0.66) $0.88 $0.93 $0.98 $1.02 $1.08
Growth rate 5.0% 5.0% 5.0% 5.0% 5.0%
Franchise Fee Pass-thru/EBU (now $0.11) $1.15 $1.44 $1.76 $2.10 $2.20
Growth rate n/a n/a n/a n/a n/a
Late Fees & Other/EBU (now $0.96) $1.29 $1.35 $1.42 $1.49 $1.56
growth rate 5.0% 5.0% 5.0% 5.0% 5.0%
Pay-to-EBU (now 20.1%) 20.0% 20.0% 20.0% 20.0% 20.0%
Kagan Projection 83.0% 83.2% 83.1% 83.1% n/a
Total Annual EBU Rev $563.74 $593.13 $624.31 $656.57 $687.95
monthly (now $32.22) $46.98 $49.43 $52.03 $54.71 $57.33
Compound growth
Kagan Projection $42.60 $44.74 $46.91 $49.15
Compound growth 4.8%
</TABLE>
*Kane Reece adjusted Kagan Projection to exclude mini-pay from pay category.
-99-
<PAGE> 106
<TABLE>
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Falcon Classic Cable Income Properties KANE REECE ASSOCIATES, INC. Exhibit E-3b
Somerset, Kentucky CATV SYSTEM VALUATION MODEL
- --------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year 1 2 3 4 5
---- - - - - -
<S> <C> <C> <C> <C> <C> <C>
Homes Passed 22,236 22,592 22,954 23,321 23,694
EBU Penetration 89.0% 89.5% 90.0% 90.0% 90.0%
Kagan Penetration Projection 68.5% 67.7% 66.6% 65.5% 64.4%
Equivalent Billing Units 19,790 20,220 20,658 20,989 21,325
Basic Revenue/EBU $21.60 $22.60 $23.60 $25.00 $26.10
Basic Revenue 5,129,689 5,483,685 5,850,449 6,296,670 6,678,903
--------- --------- --------- --------- ---------
Pay-to-Basic Ratio 20.0% 20.0% 20.0% 20.0% 20.0%
Pay Units 3,958 4,044 4,132 4,198 4,265
Pay Revenue/Pay Unit $8.43 $8.43 $8.43 $8.43 $8.43
Pay Revenue 400,401 409,093 417,960 424,647 431,442
--------- --------- --------- --------- ---------
New Product Tier/EBU $5.48 $6.03 $6.63 $7.16 $7.52
New Product Tier Revenue 1,301,041 1,462,212 1,643,298 1,803,158 1,923,609
--------- --------- --------- --------- ---------
Mini-Pay Revenue/EBU $0.00 $0.05 $0.06 $0.08 $0.10
Mini-Pay Revenue/EBU 0 12,132 15,494 19,677 24,990
--------- --------- --------- --------- ---------
Pay-Per-View Revenue/EBU $0.06 $0.25 $0.50 $0.60 $0.69
Pay-Per-View Revenue 14,843 60,660 123,950 151,120 176,569
--------- --------- --------- --------- ---------
Equipment Revenue/ EBU $0.50 $1.50 $2.50 $2.58 $2.65
Equipment Revenue 119,859 363,961 619,751 648,557 678,702
--------- --------- --------- --------- ---------
Advertising Revenue/EBU $1.66 $1.86 $2.04 $2.21 $2.38
Advertising Revenue/EBU 393,656 450,466 506,253 555,501 609,541
--------- --------- --------- --------- ---------
Home Shopping/EBU $0.45 $0.47 $0.50 $0.52 $0.55
Home Shopping Revenue 106,869 114,648 122,990 131,205 139,970
--------- --------- --------- --------- ---------
Installation Revenue/EBU $0.69 $0.73 $0.76 $0.80 $0.84
Installation Revenue 164,578 176,558 189,404 202,056 215,553
--------- --------- --------- --------- ---------
Franchise Fee Pass-thru Revenue/EBU $0.11 $0.18 $0.39 $0.63 $0.87
Franchise Fee Pass-thru Revenue 26,123 43,951 97,650 157,897 223,856
--------- --------- --------- --------- ---------
Late Fees & Other Revenue/EBU $1.01 $1.06 $1.11 $1.17 $1.23
Late Fees & Other Revenue 239,385 256,811 275,497 293,900 313,532
--------- --------- --------- --------- ---------
Total Revenue $7,896,444 $8,834,177 $9,862,696 $10,684,390 $11,416,667
========== ========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Year 6 7 8 9 10
---- - - - - --
<S> <C> <C> <C> <C> <C> <C>
Homes Passed 23,884 24,075 24,267 24,461 24,657
EBU Penetration 90.0% 90.0% 90.0% 90.0% 90.0%
Kagan Penetration Projection 63.4% 62.3% 61.6% 60.9%
Equivalent Billing Units 21,495 21,667 21,841 22,015 22,191
Basic Revenue/EBU $27.30 $28.50 $29.80 $31.10 $32.50
Basic Revenue 7,041,867 7,410,211 7,810,206 8,216,127 8,654,673
--------- --------- --------- --------- ---------
Pay-to-Basic Ratio 20.0% 20.0% 20.0% 20.0% 20.0%
Pay Units 4,299 4,333 4,368 4,403 4,438
Pay Revenue/Pay Unit $8.43 $8.43 $8.43 $8.43 $8.43
Pay Revenue 434,893 438,372 441,879 445,414 448,978
--------- --------- --------- --------- ---------
New Product Tier/EBU $7.89 $8.29 $8.70 $9.14 $9.59
New Product Tier Revenue 2,035,948 2,154,847 2,280,690 2,413,882 2,554,853
--------- --------- --------- --------- ---------
Mini-Pay Revenue/EBU $0.12 $0.15 $0.19 $0.24 $0.30
Mini-Pay Revenue/EBU 31,487 39,674 49,989 62,986 79,363
Pay-Per-View Revenue/EBU $0.79 $0.91 $1.00 $1.10 $1.21
Pay-Per-View Revenue 204,678 237,263 263,077 291,700 323,437
--------- --------- --------- --------- ---------
Equipment Revenue/ EBU $2.73 $2.81 $2.90 $2.99 $3.07
Equipment Revenue 704,655 731,602 759,578 788,624 818,781
--------- --------- --------- --------- ---------
Advertising Revenue/EBU $2.56 $2.75 $2.96 $3.18 $3.42
Advertising Revenue/EBU 660,498 715,716 775,550 840,386 910,642
--------- --------- --------- --------- ---------
Home Shopping/EBU $0.57 $0.60 $0.63 $0.66 $0.70
Home Shopping Revenue 148,144 156,796 165,953 175,644 185,902
--------- --------- --------- --------- ---------
Installation Revenue/EBU $0.88 $0.93 $0.98 $1.02 $1.08
Installation Revenue 228,142 241,465 255,567 270,492 286,289
--------- --------- --------- --------- ---------
Franchise Fee Pass-thru Revenue/EBU $1.15 $1.44 $1.76 $2.10 $2.20
Franchise Fee Pass-thru Revenue 295,554 374,315 461,098 555,948 587,173
--------- --------- --------- --------- ---------
Late Fees & Other Revenue/EBU $1.29 $1.35 $1.42 $1.49 $1.56
Late Fees & Other Revenue 331,843 351,222 371,734 393,443 416,420
--------- --------- --------- --------- ---------
Total Revenue $12,117,710 $12,851,483 $13,635,321 $14,454,647 $15,266,511
=========== =========== =========== =========== ===========
</TABLE>
-100-
<PAGE> 107
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------
Falcon Classic Cable Income Properties KANE REECE ASSOCIATES, INC. Exhibit E-3c
Somerset, Kentucky CATV SYSTEM VALUATION MODEL
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year 1 2 3 4 5
---- - - - - -
<S> <C> <C> <C> <C> <C>
Total Revenue $7,896,444 $8,834,177 $9,862,696 $10,684,390 $11,416,667
Margin % to Revenue 52.0% 52.5% 53.0% 53.5% 54.0%
Operating Cash Flow 4,106,151 4,637,943 5,227,229 5,716,148 6,165,000
Capital Expenditures:
- Rebuild/Extensions 2,312,000 2,025,000 6,525,000 148,000 155,000
- Recurring 226,000 264,000 275,000 256,000 266,000
---------- ---------- ----------- ---------- ----------
Total 2,538,000 2,289,000 6,800,000 404,000 421,000
========== ========== =========== ========== ==========
Net Cash Flow 1,568,151 2,348,943 (1,572,771) 5,312,148 5,744,000
Present Value Factor @ 15.0% 0.93250 0.81087 0.70511 0.61314 0.53316
PV Net Cash Flow $1,462,308 $1,904,696 ($1,108,973) $3,257,075 $3,062,486
========== ========== =========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Year 6 7 8 9 10
---- - - - - --
<S> <C> <C> <C> <C> <C>
Total Revenue $12,117,710 $12,851,483 $13,635,321 $14,454,647 $15,266,511
Margin % to Revenue 54.5% 55.0% 55.0% 55.0% 55.0%
Operating Cash Flow 6,604,152 7,068,316 7,499,426 7,950,056 8,396,581
Capital Expenditures:
- Rebuild/Extensions 131,000 134,000 138,000 141,000 144,000
- Recurring 229,000 236,000 243,000 250,000 258,000
---------- ---------- ----------- ---------- ----------
Total 360,000 370,000 381,000 391,000 402,000
========== ========== =========== ========== ==========
Net Cash Flow 6,244,152 6,698,316 7,118,426 7,559,056 7,994,581
Present Value Factor @ 15.0% 0.46362 0.40315 0.35056 0.30484 0.26508
PV Net Cash Flow $2,894,912 $2,700,410 $2,495,458 $2,304,284 $2,119,172
========== ========== =========== ========== ==========
</TABLE>
<TABLE>
<S> <C> <C> <C>
Present Value of Net Cash Flows $21,091,827 Residual Value
Present Value of Residual 12,138,583 ------------------------------------------------------
----------- 8x's Yr 11 Operating Cash Flow $70,531,280
Value Indication under Income Approach $33,230,410 Less: Taxes (see Schedule 30.4% 21,423,940
=========== -----------
Value Indication (Rounded) $33,230,000 After Tax Proceeds (end of year 10) 49,107,340
=========== ===========
Value Indication/EBU $1,705 Present Value @ 15.0% $12,138,583
====== ===========
Cash Flow Multiple - Projected 8.1
===
</TABLE>
-101-
<PAGE> 108
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
Falcon Classic Cable Income Properties KANE REECE ASSOCIATES, INC. Exhibit E-4a
Redmond, Oregon CATV SYSTEM VALUATION MODEL Valuation Date: December 31, 1995
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Growth Rate in Homes Passed 3.80% Thru Yr 5
Homes Passed @ 12/31/96 7,252
Equivalent Billing Units @ 12/31/96 3,679 50.7% EBU's/HP
Pay Units @ 12/31/96 706 19.2% Pay Units/EBU's
Operating Margin for 96 Yr. 55.8% After Adj Partnership Expenses & One-Time Payments from Programmers
Operating Margin for 95 Yr. 52.4% After Adj Partnership Expenses
Weighted average discount rate 15.0%
</TABLE>
<TABLE>
<CAPTION>
Year 1 2 3 4 5 6
---- - - - - - -
<S> <C> <C> <C> <C> <C> <C>
Basic Rev/EBU (now $24.14) $24.14 $25.20 $26.30 $27.50 $28.70 $30.00
Growth rate 0.0% 4.5% 4.5% 4.5% 4.5% 4.5%
Kagan Projection $26.04 $27.35 $28.44 $29.58 $30.76 $31.99
Growth rate 12.9% 5.0% 4.0% 4.0% 4.0% 4.0%
Pay Rev/Pay Unit (now $6.32) $6.32 $6.51 $6.51 $6.70 $6.70 $6.91
Growth rate 0.0% 3.0% 0.0% 3.0% 0.0% 3.0%
Kagan Projection $8.15 $8.03 $7.93 $7.82 $7.73 $7.63
Growth rate -1.5% -1.5% -1.2% -1.4% -1.2% -1.3%
New Product Tier (now $6.16) $6.16 $6.78 $7.45 $8.05 $8.45 $8.88
Growth rate 0.0% 10.0% 10.0% 8.0% 5.0% 5.0%
Mini-Pay/EBU (now $0.05) $0.05 $0.06 $0.08 $0.10 $0.12 $0.15
Growth rate 0.0% 25.0% 25.0% 25.0% 25.0% 25.0%
Pay-Per-View Rev/EBU (now $0.00) $0.00 $0.50 $0.63 $0.78 $0.94 $1.08
Growth rate 0.0% 25.0% 25.0% 25.0% 20.0% 15.0%
Kagan Projection $0.74 $1.01 $1.27 $1.65 $2.01 $2.36
Growth rate 22.0% 36.5% 25.7% 29.9% 21.8% 17.4%
Equipment/EBU (now $0.82) $0.84 $1.50 $2.50 $2.58 $2.65 $2.73
Growth rate 3.0% 77.6% 66.7% 3.0% 3.0% 3.0%
Advertising/EBU (now $1.45) $1.54 $1.73 $1.95 $2.14 $2.35 $2.53
Growth rate 6.0% 12.5% 12.5% 10.0% 10.0% 7.5%
Kagan Projection $2.00 $2.24 $2.49 $2.75 $3.08 $3.47
Growth rate 14.0% 12.0% 11.2% 10.4% 12.0% 12.7%
Home Shopping/EBU (now $0.31) $0.33 $0.34 $0.36 $0.38 $0.40 $0.42
Growth rate 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Install/Service/EBU (now $.45) $0.45 $0.47 $0.50 $0.52 $0.55 $0.57
Growth rate 0.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Franchise Fee Pass-thru/EBU (now $0.00) $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Growth rate n/a n/a n/a n/a n/a n/a
Late Fees & Other/EBU (now $0.71) $0.71 $0.75 $0.78 $0.82 $0.86 $0.91
growth rate 0.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Pay-to-EBU (now 19.2%) 19.2% 19.0% 19.0% 19.0% 19.0% 19.0%
Kagan Projection 79.7% 81.2% 81.9% 82.4% 82.8% 83.0%
Total Annual EBU Rev $425.17 $462.77 $501.32 $529.65 $555.57 $582.91
monthly (now $35.43) $35.43 $38.56 $41.78 $44.14 $46.30 $48.58
Compound growth 5.8%
Kagan Projection $33.72 $35.22 $36.85 $38.70 $40.62 $42.60
Compound growth 4.8%
</TABLE>
<TABLE>
<CAPTION>
Year 7 8 9 10
---- - - - --
<S> <C> <C> <C> <C>
Basic Rev/EBU (now $24.14) $31.40 $32.80 $34.30 $35.80
Growth rate 4.5% 4.5% 4.5% 4.5%
Kagan Projection $33.27 $34.60 $35.99 n/a
Growth rate 4.0% 4.0% 4.0%
Pay Rev/Pay Unit (now $6.32) $6.91 $7.11 $7.11 $7.33
Growth rate 0.0% 3.0% 0.0% 3.0%
Kagan Projection $7.54 $7.45 $7.35 n/a
Growth rate -1.2% -1.2% -1.3%
New Product Tier (now $6.16) $9.32 $9.78 $10.27 $10.79
Growth rate 5.0% 5.0% 5.0% 5.0%
Mini-Pay/EBU (now $0.05) $0.19 $0.24 $0.30 $0.37
Growth rate 25.0% 25.0% 25.0% 25.0%
Pay-Per-View Rev/EBU (now $0.00) $1.24 $1.36 $1.50 $1.65
Growth rate 15.0% 10.0% 10.0% 10.0%
Kagan Projection $2.81 $3.25 $3.66 n/a
Growth rate 19.1% 15.7% 12.6%
Equipment/EBU (now $0.82) $2.81 $2.90 $2.99 $3.07
Growth rate 3.0% 3.0% 3.0% 3.0%
Advertising/EBU (now $1.45) $2.72 $2.92 $3.14 $3.38
Growth rate 7.5% 7.5% 7.5% 7.5%
Kagan Projection $3.87 $4.28 $4.69 n/a
Growth rate 11.5% 10.6% 9.6%
Home Shopping/EBU (now $0.31) $0.44 $0.46 $0.48 $0.50
Growth rate 5.0% 5.0% 5.0% 5.0%
Install/Service/EBU (now $.45) $0.60 $0.63 $0.66 $0.70
Growth rate 5.0% 5.0% 5.0% 5.0%
Franchise Fee Pass-thru/EBU (now $0.00) $0.00 $0.00 $0.00 $0.00
Growth rate n/a n/a n/a n/a
Late Fees & Other/EBU (now $0.71) $0.95 $1.00 $1.05 $1.10
growth rate 5.0% 5.0% 5.0% 5.0%
Pay-to-EBU (now 19.2%) 19.0% 19.0% 19.0% 19.0%
Kagan Projection 83.2% 83.1% 83.1% n/a
Total Annual EBU Rev $611.83 $641.41 $672.56 $705.13
monthly (now $35.43) $50.99 $53.45 $56.05 $58.76
Compound growth
Kagan Projection $44.74 $46.91 $49.15
</TABLE>
*Kane Reece adjusted Kagan Projection to exclude mini-pay from pay category.
-102-
<PAGE> 109
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Falcon Classic Cable Income Properties KANE REECE ASSOCIATES, INC . Exhibit E-4b
Redmond, Oregon CATV SYSTEM VALUATION MODEL
- --------------------------------------------------------------------------------------------------------------------
Year 1 2 3 4 5
---- - - - - -
<S> <C> <C> <C> <C> <C>
Homes Passed 8,407 9,925 10,303 10,694 11,100
EBU Penetration 50.0% 48.0% 49.0% 49.5% 50.0%
Kagan Penetration Projection 68.5% 67.7% 66.6% 65.5% 64.4%
Equivalent Billing Units 4,204 4,764 5,048 5,294 5,550
Basic Revenue/EBU $24.14 $25.20 $26.30 $27.50 $28.70
Basic Revenue 1,217,670 1,440,685 1,593,223 1,746,867 1,911,487
---------- ---------- ---------- ---------- ----------
Pay-to-Basic Ratio 19.2% 19.0% 19.0% 19.0% 19.0%
Pay Units 807 905 959 1,006 1,055
Pay Revenue/Pay Unit $6.32 $6.51 $6.51 $6.70 $6.70
Pay Revenue 61,208 70,709 74,925 80,923 84,847
---------- ---------- ---------- ---------- ----------
New Product Tier/EBU $6.16 $6.78 $7.45 $8.05 $8.45
New Product Tier Revenue 310,723 387,384 451,530 511,349 562,948
---------- ---------- ---------- ---------- ----------
Mini-Pay Revenue/EBU $0.05 $0.06 $0.08 $0.10 $0.12
Mini-Pay Revenue/EBU 2,522 3,573 4,733 6,203 8,130
---------- ---------- ---------- ---------- ----------
Pay-Per-View Revenue/EBU $0.00 $0.50 $0.63 $0.78 $0.94
Pay-Per-View Revenue 0 28,585 37,862 49,627 62,440
---------- ---------- ---------- ---------- ----------
Equipment Revenue/ EBU $0.84 $1.50 $2.50 $2.58 $2.65
Equipment Revenue 42,603 85,755 151,447 163,570 176,646
---------- ---------- ---------- ---------- ----------
Advertising Revenue/EBU $1.54 $1.73 $1.95 $2.14 $2.35
Advertising Revenue/EBU 77,529 98,854 117,842 135,925 156,767
---------- ---------- ---------- ---------- ----------
Home Shopping/EBU $0.33 $0.34 $0.36 $0.38 $0.40
Home Shopping Revenue 16,419 19,539 21,740 23,936 26,351
---------- ---------- ---------- ---------- ----------
Installation Revenue/EBU $0.45 $0.47 $0.50 $0.52 $0.55
Installation Revenue 22,699 27,013 30,055 33,091 36,430
---------- ---------- ---------- ---------- ----------
Franchise Fee Pass-thru Revenue/EB $0.00 $0.00 $0.00 $0.00 $0.00
Franchise Fee Pass-thru Revenue 0 0 0 0 0
Late Fees & Other Revenue/EBU $0.71 $0.75 $0.78 $0.82 $0.86
Late Fees & Other Revenue 35,814 42,620 47,420 52,210 57,478
---------- ---------- ---------- ---------- ----------
Total Revenue $1,787,187 $2,204,719 $2,530,776 $2,803,701 $3,083,524
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Year 6 7 8 9 10
---- - - - - --
<S> <C> <C> <C> <C> <C>
Homes Passed 11,311 11,526 11,745 11,968 12,196
EBU Penetration 50.5% 51.0% 51.5% 52.0% 52.5%
Kagan Penetration Projection 63.4% 62.3% 61.6% 60.9%
Equivalent Billing Units 5,712 5,878 6,049 6,224 6,403
Basic Revenue/EBU $30.00 $31.40 $32.80 $34.30 $35.80
Basic Revenue 2,056,393 2,214,969 2,380,801 2,561,613 2,750,633
---------- ---------- ---------- ---------- ----------
Pay-to-Basic Ratio 19.0% 19.0% 19.0% 19.0% 19.0%
Pay Units 1,085 1,117 1,149 1,182 1,217
Pay Revenue/Pay Unit $6.91 $6.91 $7.11 $7.11 $7.33
Pay Revenue 89,943 92,559 98,100 100,934 106,956
---------- ---------- ---------- ---------- ----------
New Product Tier/EBU $8.88 $9.32 $9.78 $10.27 $10.79
New Product Tier Revenue 608,350 657,349 710,225 767,283 828,849
---------- ---------- ---------- ---------- ----------
Mini-Pay Revenue/EBU $0.15 $0.19 $0.24 $0.30 $0.37
Mini-Pay Revenue/EBU 10,459 13,455 17,306 22,257 28,623
---------- ---------- ---------- ---------- ----------
Pay-Per-View Revenue/EBU $1.08 $1.24 $1.36 $1.50 $1.65
Pay-Per-View Revenue 73,902 87,459 98,994 112,040 126,793
---------- ---------- ---------- ---------- ----------
Equipment Revenue/ EBU $2.73 $2.81 $2.90 $2.99 $3.07
Equipment Revenue 187,256 198,485 210,366 222,937 236,238
---------- ---------- ---------- ---------- ----------
Advertising Revenue/EBU $2.53 $2.72 $2.92 $3.14 $3.38
Advertising Revenue/EBU 173,443 191,875 212,246 234,756 259,631
---------- ---------- ---------- ---------- ----------
Home Shopping/EBU $0.42 $0.44 $0.46 $0.48 $0.50
Home Shopping Revenue 28,476 30,770 33,245 35,916 38,798
---------- ---------- ---------- ---------- ----------
Installation Revenue/EBU $0.57 $0.60 $0.63 $0.66 $0.70
Installation Revenue 39,368 42,539 45,961 49,653 53,637
---------- ---------- ---------- ---------- ----------
Franchise Fee Pass-thru Revenue/EB $0.00 $0.00 $0.00 $0.00 $0.00
Franchise Fee Pass-thru Revenue 0 0 0 0 0
Late Fees & Other Revenue/EBU $0.91 $0.95 $1.00 $1.05 $1.10
Late Fees & Other Revenue 62,114 67,117 72,516 78,342 84,628
---------- ---------- ---------- ---------- ----------
Total Revenue $3,329,705 $3,596,576 $3,879,759 $4,185,732 $4,514,785
========== ========== ========== ========== ==========
</TABLE>
-103-
<PAGE> 110
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------
Falcon Classic Cable Income Properties KANE REECE ASSOCIATES, INC. Exhibit E-4c
Redmond, Oregon CATV SYSTEM VALUATION MODEL
- --------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year 1 2 3 4 5
---- - - - - -
<S> <C> <C> <C> <C> <C>
Total Revenue $1,787,187 $2,204,719 $2,530,776 $2,803,701 $3,083,524
Margin % to Revenue 51.1% 53.0% 53.5% 54.0% 54.5%
Operating Cash Flow 913,253 1,168,501 1,353,965 1,513,999 1,680,520
Capital Expenditures:
- Rebuild/Extensions 853,000 1,641,000 1,638,000 116,000 123,000
- Recurring 144,000 26,000 99,000 118,000 126,000
-------- --------- --------- -------- --------
Total 997,000 1,667,000 1,737,000 234,000 249,000
-------- --------- --------- -------- --------
Net Cash Flow (83,747) (498,499) (383,035) 1,279,999 1,431,520
Present Value Factor @ 15.0% 0.93250 0.81087 0.70511 0.61314 0.53316
PV Net Cash Flow ($78,095) ($404,220) ($270,081) $784,815 $763,233
======== ========= ========= ======== ========
</TABLE>
<TABLE>
<CAPTION>
Year 6 7 8 9 10
---- - - - - --
<S> <C> <C> <C> <C> <C>
Total Revenue $3,329,705 $3,596,576 $3,879,759 $4,185,732 $4,514,785
Margin % to Revenue 55.0% 55.0% 55.0% 55.0% 55.0%
Operating Cash Flow 1,831,338 1,978,117 2,133,867 2,302,153 2,483,132
Capital Expenditures:
- Rebuild/Extensions 116,000 119,000 123,000 126,000 130,000
- Recurring 104,000 109,000 113,000 119,000 124,000
-------- --------- --------- -------- --------
Total 220,000 228,000 236,000 245,000 254,000
-------- --------- --------- -------- --------
Net Cash Flow 1,611,338 1,750,117 1,897,867 2,057,153 2,229,132
Present Value Factor @ 15.0% 0.46362 0.40315 0.35056 0.30484 0.26508
PV Net Cash Flow $747,048 $705,555 $665,322 $627,097 $590,889
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<S> <C> <C> <C>
Present Value of Net Cash Flows $4,131,564 Residual Value
Present Value of Residual 3,637,961 ----------------------------------------------------
---------- 8x's Yr 11 Operating Cash Flow $21,255,607
Value Indication under Income Appr $7,769,526 Less: Taxes (see Schedule)(C) 30.8% 6,538,024
---------- -----------
Value Indication (Rounded) $7,770,000 After Tax Proceeds (end of year 10) 14,717,583
---------- -----------
Value Indication/EBU $2,112 Present Value @ 15.0% $ 3,637,961
------ ===========
Cash Flow Multiple - Proj 8.5
---
</TABLE>
-104-
<PAGE> 111
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Falcon Classic Cable Income Properties KANE REECE ASSOCIATES, INC. Exhibit E-5a
California City, California CATV SYSTEM VALUATION MODEL Valuation Date: December 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Growth Rate in Homes Passed 3.00% Thru Yr 5 (CACI shows 5.7%, System Mgmt says 2-3%)
Homes Passed @ 12/31/96 2,858
Equivalent Billing Units @ 12/31/96 1,960 68.6% EBU's/HP
Pay Units @ 12/31/96 839 42.8% Pay Units/EBU's
Operating Margin for 96 Yr. 54.0% After Adj Partnership Expenses & One-Time Payments from Programmers
Operating Margin for 95 Yr. 49.6% After Adj Partnership Expenses
Weighted average discount rate 15.0%
Year 1 2 3 4 5
---- - - - - -
<S> <C> <C> <C> <C> <C>
Basic Rev/EBU (now $21.50) $21.70 $22.70 $23.70 $24.80 $25.90
Growth rate 1.0% 4.5% 4.5% 4.5% 4.5%
Kagan Projection $26.04 $27.35 $28.44 $29.58 $30.76
Growth rate 12.9% 5.0% 4.0% 4.0% 4.0%
Pay Rev/Pay Unit (now $8.12) $8.12 $8.12 $8.12 $8.12 $8.12
Growth rate 0.0% 0.0% 0.0% 0.0% 0.0%
Kagan Projection $8.15 $8.03 $7.93 $7.82 $7.73
Growth rate -1.5% -1.5% -1.2% -1.4% -1.2%
New Product Tier (now $2.54) $2.67 $2.85 $3.05 $3.24 $3.40
Growth rate 5.0% 7.0% 7.0% 6.0% 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%
Pay-Per-View Rev/EBU (now $0.00) $0.00 $0.25 $0.33 $0.39 $0.45
Growth rate 0.0% 0.0% 30.0% 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$2.36) $2.43 $2.50 $2.58 $2.66 $2.74
Growth rate 3.0% 3.0% 3.0% 3.0% 3.0%
Advertising/EBU (now $0.00) $0.00 $0.00 $0.00 $0.00 $0.00
Growth rate 10.0% 10.0% 10.0% 8.0% 8.0%
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 $0.29) $0.30 $0.32 $0.34 $0.35 $0.37
Growth rate 5.0% 5.0% 5.0% 5.0% 5.0%
Install/Service/EBU (now $0.88) $0.92 $0.97 $1.02 $1.07 $1.12
Growth rate 5.0% 5.0% 5.0% 5.0% 5.0%
Franchise Fee Pass-thru/EBU (now $0.00) $0.00 $0.00 $0.00 $0.00 $0.00
Growth rate n/a n/a n/a n/a n/a
Late Fees & Other/EBU (now $0.72) $0.76 $0.79 $0.83 $0.88 $0.92
growth rate 5.0% 5.0% 5.0% 5.0% 5.0%
Pay-to-EBU (now 42.8%) 40.0% 40.0% 40.0% 40.0% 40.0%
Kagan Projection 79.7% 81.2% 81.9% 82.4% 82.8%
Total Annual EBU Rev $384.36 $404.27 $421.87 $440.48 $458.89
monthly (now $31.62) $32.03 $33.69 $35.16 $36.71 $38.24
Compound growth 4.4%
Kagan Projection $33.72 $35.22 $36.85 $38.70 $40.62
Compound growth 4.8%
</TABLE>
<TABLE>
<CAPTION>
Year 6 7 8 9 10
---- - - - - --
<S> <C> <C> <C> <C> <C>
Basic Rev/EBU (now $21.50) $27.10 $28.30 $29.60 $30.90 $32.30
Growth rate 4.5% 4.5% 4.5% 4.5% 4.5%
Kagan Projection $31.99 $33.27 $34.60 $35.99 n/a
Growth rate 4.0% 4.0% 4.0% 4.0%
Pay Rev/Pay Unit (now $8.12) $8.12 $8.12 $8.12 $8.12 $8.12
Growth rate 0.0% 0.0% 0.0% 0.0% 0.0%
Kagan Projection $7.63 $7.54 $7.45 $7.35 n/a
Growth rate -1.3% -1.2% -1.2% -1.3%
New Product Tier (now $2.54) $3.57 $3.75 $3.93 $4.13 $4.34
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%
Pay-Per-View Rev/EBU (now $0.00) $0.52 $0.59 $0.65 $0.72 $0.79
Growth rate 15.0% 15.0% 10.0% 10.0% 10.0%
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 $2.36) $2.82 $2.90 $2.99 $3.08 $3.17
Growth rate 3.0% 3.0% 3.0% 3.0% 3.0%
Advertising/EBU (now $0.00) $0.00 $0.00 $0.00 $0.00 $0.00
Growth rate 7.5% 7.5% 7.5% 7.5% 7.5%
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 $0.29) $0.39 $0.41 $0.43 $0.45 $0.47
Growth rate 5.0% 5.0% 5.0% 5.0% 5.0%
Install/Service/EBU (now $0.88) $1.18 $1.24 $1.30 $1.37 $1.43
Growth rate 5.0% 5.0% 5.0% 5.0% 5.0%
Franchise Fee Pass-thru/EBU (now $0.00) $0.00 $0.00 $0.00 $0.00 $0.00
Growth rate n/a n/a n/a n/a n/a
Late Fees & Other/EBU (now $0.72) $0.96 $1.01 $1.06 $1.12 $1.17
growth rate 5.0% 5.0% 5.0% 5.0% 5.0%
Pay-to-EBU (now 42.8%) 40.0% 40.0% 40.0% 40.0% 40.0%
Kagan Projection 83.0% 83.2% 83.1% 83.1% n/a
Total Annual EBU Rev $478.86 $499.23 $520.89 $542.96 $566.68
monthly (now $31.62) $39.91 $41.60 $43.41 $45.25 $47.22
Compound growth
Kagan Projection $42.60 $44.74 $46.91 $49.15
Compound growth 4.8%
</TABLE>
*Kane Reece adjusted Kagan Projection to exclude mini-pay from pay category.
-105-
<PAGE> 112
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Falcon Classic Cable Income Properties KANE REECE ASSOCIATES, INC. EXHIBIT E-5b
California City, California CATV SYSTEM VALUATION MODEL
- -----------------------------------------------------------------------------------------------------------------------------------
</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>
Homes Passed 2,901 2,988 3,078 3,170 3,265 3,314 3,364 3,414 3,465 3,517
EBU Penetration 69.0% 69.5% 70.0% 70.5% 71.0% 71.5% 72.0% 72.5% 73.0% 73.5%
Kagan Penetration
Projection 68.5% 67.7% 66.6% 65.5% 64.4% 63.4% 62.3% 61.6% 60.9%
Equivalent Billing
Units 2,002 2,077 2,154 2,235 2,318 2,369 2,422 2,475 2,530 2,585
Basic Revenue/EBU $21.70 $22.70 $23.70 $24.80 $25.90 $27.10 $28.30 $29.60 $30.90 $32.30
Basic Revenue 521,217 565,663 612,675 665,062 720,471 770,548 822,450 879,197 938,002 1,002,025
-------- -------- -------- -------- -------- -------- -------- -------- -------- ----------
Pay-to-Basic Ratio 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0% 40.0%
Pay Units 801 831 862 894 927 948 969 990 1,012 1,034
Pay Revenue/Pay Unit $8.12 $8.12 $8.12 $8.12 $8.12 $8.12 $8.12 $8.12 $8.12 $8.12
Pay Revenue 78,014 80,937 83,965 87,102 90,351 92,352 94,393 96,474 98,596 100,761
-------- -------- -------- -------- -------- -------- -------- -------- -------- ----------
New Product Tier/EBU $2.67 $2.85 $3.05 $3.24 $3.40 $3.57 $3.75 $3.93 $4.13 $4.34
New Product Tier
Revenue 64,059 71,111 78,936 86,797 94,537 101,462 108,890 116,855 125,397 134,558
-------- -------- -------- -------- -------- -------- -------- -------- -------- ----------
Mini-Pay Revenue/EBU $0.00 $0.05 $0.06 $0.08 $0.10 $0.12 $0.15 $0.19 $0.24 $0.30
Mini-Pay Revenue/EBU 0 1,246 1,616 2,095 2,717 3,471 4,434 5,665 7,237 9,245
-------- -------- -------- -------- -------- -------- -------- -------- -------- ----------
Pay-Per-View
Revenue/EBU $0.00 $0.25 $0.33 $0.39 $0.45 $0.52 $0.59 $0.65 $0.72 $0.79
Pay-Per-View Revenue 0 6,230 8,402 10,459 12,476 14,665 17,238 19,380 21,787 24,491
-------- -------- -------- -------- ---------- ---------- ---------- ---------- ---------- ----------
Equipment Revenue/EBU $2.43 $2.50 $2.58 $2.66 $2.74 $2.82 $2.90 $2.99 $3.08 $3.17
Equipment Revenue 58,386 62,390 66,666 71,231 76,105 80,125 84,352 88,798 93,474 98,392
-------- -------- -------- -------- ---------- ---------- ---------- ---------- ---------- ----------
Advertising Revenue/
EBU $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Advertising Revenue/
EBU 0 0 0 0 0 0 0 0 0 0
Home Shopping/EBU $0.30 $0.32 $0.34 $0.35 $0.37 $0.39 $0.41 $0.43 $0.45 $0.47
Home Shopping Revenue 7,314 7,967 8,679 9,453 10,296 11,050 11,859 12,726 13,657 14,654
-------- -------- -------- -------- ---------- ---------- ---------- ---------- ---------- ----------
Installation Revenue/
EBU $0.92 $0.97 $1.02 $1.07 $1.12 $1.18 $1.24 $1.30 $1.37 $1.43
Installation Revenue 22,194 24,176 26,335 28,685 31,243 33,531 35,986 38,618 41,441 44,468
-------- -------- -------- -------- ---------- ---------- ---------- ---------- ---------- ----------
Franchise Fee
Pass-thru
Revenue/EBU $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Franchise Fee
Pass-thru
Revenue 0 0 0 0 0 0 0 0 0 0
Late Fees & Other
Revenue/EBU $0.76 $0.79 $0.83 $0.88 $0.92 $0.96 $1.01 $1.06 $1.12 $1.17
Late Fees & Other
Revenue 18,159 19,781 21,547 23,469 25,562 27,435 29,443 31,597 33,906 36,383
-------- -------- -------- -------- ---------- ---------- ---------- ---------- ---------- ----------
Total Revenue $769,342 $839,501 $908,820 $984,353 $1,063,757 $1,134,639 $1,209,044 $1,289,311 $1,373,499 $1,464,978
======== ======== ======== ======== ========== ========== ========== ========== ========== ==========
</TABLE>
-106-
<PAGE> 113
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Falcon Classic Cable Income Properties KANE REECE ASSOCIATES, INC. Exhibit E-5c
California City, California CATV SYSTEM VALUATION MODEL
- ---------------------------------------------------------------------------------------------------------------------------------
Year 1 2 3 4 5
- - - - -
<S> <C> <C> <C> <C> <C>
Total Revenue $769,342 $839,501 $908,820 $984,353 $1,063,757
Margin % to Revenue 54.0% 54.5% 55.0% 55.0% 55.0%
Operating Cash Flow 415,445 457,528 499,851 541,394 585,067
Captal Expenditures:
- Rebuild/Extensions 20,000 41,000 44,000 96,000 99,000
- Recurring 70,000 79,000 81,000 58,000 61,000
-------- -------- -------- -------- ----------
Total 90,000 120,000 125,000 154,000 160,000
======== ======== ======== ======== ==========
Net Cash Flow 325,445 337,528 374,851 387,394 425,067
Present Value Factor
@ 15.0% 0.93250 0.81087 0.70511 0.61314 0.53316
PV Net Cash Flow $303,479 $273,693 $264,310 $237,526 $ 226,630
======== ======== ======== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
Year 6 7 8 9 10
- - - - --
<S> <C> <C> <C> <C> <C>
Total Revenue $1,134,639 $1,209,044 $1,289,311 $1,373,499 $1,464,978
Margin % to Revenue 55.0% 55.0% 55.0% 55.0% 55.0%
Operating Cash Flow 624,052 664,974 709,121 755,424 805,738
Captal Expenditures:
- Rebuild/Extensions 76,000 77,000 78,000 80,000 81,000
- Recurring 54,000 55,000 57,000 58,000 60,000
---------- ---------- ---------- ---------- ----------
Total 130,000 132,000 135,000 138,000 141,000
========== ========== ========== ========== ==========
Net Cash Flow 494,052 532,974 574,121 617,424 664,738
Present Value Factor
@ 15.0% 0.46362 0.40315 0.35056 0.30484 0.26508
PV Net Cash Flow $ 229,052 $ 214,867 $ 201,266 $ 188,214 $ 176,206
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<S> <C> <C>
Present Value of Net Cash Flows $2,315,242 Residual Value
Present Value of Residual 1,215,829 ------------------------------------------------
---------- 8x's Yr 11 Operating Cash Flow $6,897,117
Value Indication under Income Approach $3,531,072 Less: Taxes (see Schedule) @28.7% 1,978,409
---------- ----------
Value Indication (Rounded) $3,530,000 After Tax Proceeds (end of year 10) 4,918,708
---------- ----------
Value Indication/EBU $1,801 Present Value @ 15.0% $1,215,829
---------- ----------
Cash Flow Multiple - Projected 8.5
----------
</TABLE>
-107-
<PAGE> 114
QUALIFICATIONS OF THE APPRAISERS
<PAGE> 115
KANE REECE PROVIDES VALUATION, MANAGEMENT AND TECHNICAL CONSULTING TO THE MEDIA
AND COMMUNICATIONS INDUSTRIES.
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.
<PAGE> 116
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 seventeen 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, a member
of The New York Media Association, and a candidate for Senior Member - Business
Valuation of the American Society of Appraisers (ASA).
<PAGE> 117
APPENDIX
GLOSSARY OF CABLE TV TERMS
<PAGE> 118
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.
ASCERTAINMENT - A survey of a community to determine local
concerns, needs, and interests, especially
in regard to cable programming.
-A 1-
<PAGE> 119
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.
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
-A 2-
<PAGE> 120
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.
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.
-A 3-
<PAGE> 121
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 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
-A 4-
<PAGE> 122
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).
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
-A 5-
<PAGE> 123
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.
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.
-A 6-
<PAGE> 124
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.
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.
-A 7-
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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.
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.
-A 8-
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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.
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.
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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.
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.
-A 10-
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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.
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
-A 11-
<PAGE> 129
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.
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.
-A 12-
<PAGE> 130
MSO (Multiple System Operator) - Company that owns and operates more than
one cable television system.
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.
NUMBER PORTABILITY - A capability that permits
telecommunications users to maintain the
same telephone access number as they change
telecommunications suppliers.
-A 13-
<PAGE> 131
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 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.
-A 14-
<PAGE> 132
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 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.
-A 15-
<PAGE> 133
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 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.
-A 16-
<PAGE> 134
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.
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
-A 17-
<PAGE> 135
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.
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.
-A 18-
<PAGE> 136
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.
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.
-A 19-
<PAGE> 137
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).
-A 20-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT DECEMBER 31, 1996, AND THE STATEMENTS OF OPERATIONS FOR THE TWELVE
MONTHS ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FIANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 7,216
<SECURITIES> 0
<RECEIVABLES> 691
<ALLOWANCES> 31
<INVENTORY> 1,053
<CURRENT-ASSETS> 0
<PP&E> 49,783
<DEPRECIATION> 19,128
<TOTAL-ASSETS> 59,334
<CURRENT-LIABILITIES> 4,201
<BONDS> 24,300
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 59,334
<SALES> 0
<TOTAL-REVENUES> 19,826
<CGS> 0
<TOTAL-COSTS> 18,028
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 171
<INTEREST-EXPENSE> 1,813
<INCOME-PRETAX> (15)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15)
<EPS-PRIMARY> (0.21)
<EPS-DILUTED> 0
</TABLE>
