<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
September 30, 1998
FALCON COMMUNICATIONS, L.P.
(successor to Falcon Holding Group, L.P.)
FALCON FUNDING CORPORATION
---------------------------------------------------------------
(Exact Name of Registrants as Specified in Their Charters)
CALIFORNIA
CALIFORNIA
---------------------------------------------------------------
(State or Other Jurisdiction of Incorporation or Organization)
33-60776 95-4654565
333-55755 95-4681480
----------------- ------------------
(Commission File Numbers) (I.R.S. Employer Identification Numbers)
10900 WILSHIRE BOULEVARD - 15TH FLOOR
LOS ANGELES, CALIFORNIA 90024
- ---------------------------------------------- ------------
(Address of Principal Executive Offices) (Zip Code)
(310) 824-9990
-------------------------------------------------
(Registrants' Telephone Number, Including Area Code)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
The audited financial statements of the cable television systems
contributed by TCI Falcon Holdings LLC as part of the TCI Transaction (as
defined in Item 2 of the original Form 8-K) for the three years ended
December 31, 1997 were previously filed in the Registration Statement on Form
S-4 (SEC file no. 333-55755) and are incorporated herein by this reference.
Interim financial information for the nine months ended September 30, 1998
and 1997 is included with this amended report beginning on page F-1.
(b) Pro Forma Financial Information.
Pro forma statements of operations for the year ended December 31, 1997
and for the nine months ended September 30, 1998 are included with this
amended report beginning on page P-1. The balance sheet filed with the Form
10-Q for the period ended September 30, 1998 reflected the consummation of
the TCI Transaction as of September 30, 1998 and is incorporated herein by
this reference. Therefore, a pro forma balance sheet as of September 30,
1998 is not included with this amended report in accordance with Rule
11-02(c) of Regulation S-X.
(c) Exhibits.
None.
2
<PAGE>
TCI FALCON SYSTEMS
(DEFINED IN NOTE 1)
COMBINED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
F-1
<PAGE>
TCI FALCON SYSTEMS
(Defined in note 1)
Combined Statements of Operations and Parent's Investment
(unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
----------------------
1998 1997
-------- --------
amounts in thousands
<S> <C> <C>
Revenue $86,476 86,480
Operating costs and expenses:
Operating (note 4) 31,154 30,078
Selling, general and administrative (note 1) 17,234 13,513
Administrative fees (note 4) 2,853 3,410
Depreciation and amortization 17,757 16,980
-------- --------
68,998 63,981
-------- --------
Operating income 17,478 22,499
Other income (expense):
Intercompany interest expense (note 4) (4,343) (4,383)
Other, net 28 (57)
-------- --------
(4,315) (4,440)
-------- --------
Earnings before income taxes 13,163 18,059
Income tax expense (5,423) (7,440)
-------- --------
Net earnings 7,740 10,619
Parent's investment:
Beginning of year 293,337 322,134
Change in due to TCI Communications, Inc. ("TCIC"),
excluding the Distribution (note 3) (5,107) (23,152)
-------- --------
End of period $295,970 309,601
-------- --------
-------- --------
</TABLE>
See accompanying notes to combined financial statements.
F-2
<PAGE>
TCI FALCON SYSTEMS
(Defined in note 1)
Combined Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
1998 1997
-------- --------
amounts in thousands
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 7,740 10,619
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 17,757 16,980
Deferred income tax expense 929 1,248
Changes in operating assets and liabilities,
net of effects of acquisitions:
Change in receivables 2,213 (1,042)
Change in other assets 84 212
Change in accounts payable and
accrued expenses 2,159 (206)
-------- --------
Net cash provided by operating
activities 30,882 27,811
-------- --------
Cash flows from investing activities:
Capital expended for property and equipment (13,540) (4,689)
-------- --------
Other investing activities (809) 85
Net cash used in investing activities (14,349) (4,604)
-------- --------
Cash flows from financing activities:
Change in due to TCIC, excluding the
Distribution (12,130) (23,152)
Change in cash overdraft (4,403) --
-------- --------
Net cash used in financing activities (16,533) (23,152)
-------- --------
Net increase in cash -- 55
Cash:
Beginning of year -- 2,614
-------- --------
End of period $ -- 2,669
-------- --------
-------- --------
</TABLE>
See accompanying notes to combined financial statements.
F-3
<PAGE>
TCI FALCON SYSTEMS
(Defined in note 1)
Notes to Combined Financial Statements
September 30, 1998
(unaudited)
(1) BASIS OF PRESENTATION
The combined financial statements include the accounts of thirteen cable
television systems serving certain subscribers within Oregon, Washington,
Alabama, Missouri and California (collectively, the "TCI Falcon Systems").
The TCI Falcon Systems were indirectly wholly-owned by various subsidiaries
of TCIC in all periods presented herein up to the date of the Contribution,
as defined below. TCIC is a subsidiary of Tele-Communications, Inc.
("TCI"). All significant inter-entity accounts and transactions have been
eliminated in combination.
The accompanying interim combined financial statements are unaudited but,
in the opinion of management, reflect all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of the results for
such periods. The results of operations for any interim period are not
necessarily indicative of results for the full year. These combined
financial statements should be read in conjunction with the combined
financial statements and notes thereto contained in the TCI Falcon Systems'
report for the year ended December 31, 1997.
The TCI Falcon Systems have been acquired through a series of transactions
where TCIC acquired various larger cable entities (the "Original Systems").
The TCI Falcon Systems' combined financial statements include an allocation
of certain purchase accounting adjustments, including the related deferred
tax effects, from TCIC's acquisition of the Original Systems. Such
allocation and the related franchise cost amortization is based on the
relative fair market value of systems involved. In addition, certain
operating costs of TCI are charged to the TCI Falcon Systems based on their
number of subscribers (see note 4). Although such allocations are not
necessarily indicative of the costs that would have been incurred by the
TCI Falcon Systems on a stand alone basis, management believes that the
resulting allocated amounts are reasonable.
On September 30, 1998, TCIC and Falcon Holding Group, LP ("Falcon") closed
a transaction under a Contribution and Purchase Agreement (the
"Contribution"), pursuant to which TCIC contributed the TCI Falcon Systems
to a newly formed partnership (the "Partnership") between TCIC and Falcon
in exchange for an approximate 46% ownership interest in the Partnership.
During the nine months ended September 30, 1998, the TCI Falcon Systems
incurred $1,113,000 in severance costs in connection with the Contribution.
Such costs are included in selling, general and administrative expenses in
the accompanying combined financial statements.
(continued)
F-4
<PAGE>
TCI FALCON SYSTEMS
(Defined in note 1)
Notes to Combined Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ from
those estimates.
(2) ACQUISITION
On January 1, 1998, a subsidiary of TCIC acquired certain cable television
assets in and around Ellensburg, WA from King Videocable Company. On the
same date, these assets were transferred to the TCI Falcon Systems. As a
result of these transactions, the TCI Falcon Systems recorded non-cash
increases in property and equipment of $2,100,000, in franchise costs of
$4,923,000, and in parent's investment of $7,023,000. Assuming the
acquisition had occurred on January 1, 1997, the TCI Falcon Systems' pro
forma results of operations would not have been materially different from
the results of operations for the nine months ended September 30, 1997.
(3) PARENT'S INVESTMENT
Parent's investment in the TCI Falcon Systems at September 30, 1998 is
summarized as follows:
<TABLE>
<CAPTION>
September 30,
1998
--------------------
amounts in thousands
<S> <C>
Due to TCIC $ 644,091
Retained earnings (348,121)
-----------
$ 295,970
-----------
-----------
</TABLE>
The amount due to TCIC represents advances for operations, acquisitions and
construction costs as well as the allocation of certain costs from TCIC.
See note 4.
On August 15, 1998, TCIC caused the TCI Falcon Systems to effect
distributions from the TCI Falcon Systems to TCIC aggregating $429,739,000
(the "Distribution"). The Distribution resulted in an increase to the
intercompany amounts owed to TCIC and a corresponding decrease to retained
earnings.
(continued)
F-5
<PAGE>
TCI FALCON SYSTEMS
(Defined in note 1)
Notes to Combined Financial Statements
(4) TRANSACTIONS WITH RELATED PARTIES
The amounts due to TCIC consist of various intercompany advances and
expense allocations. TCIC charges intercompany interest expense at
variable rates to cable systems within the TCI Falcon Systems based upon
amounts due to TCIC from the cable systems. As a result of TCIC's
ownership of 100% of the TCI Falcon Systems, the amounts due to TCIC have
been classified as a component of parent's investment in the accompanying
combined financial statements. Such amounts are due on demand.
The TCI Falcon Systems purchase, at TCIC's cost, substantially all of their
pay television and other programming from affiliates of TCIC. Charges for
such programming were $21,479,000 and $19,024,000 for the nine months ended
September 30, 1998 and 1997, respectively, and are included in operating
expenses in the accompanying combined financial statements.
Certain subsidiaries of TCIC provide administrative services to the TCI
Falcon Systems and have assumed managerial responsibility of the TCI Falcon
Systems' cable television system operations and construction. As
compensation for these services, the TCI Falcon Systems pay a monthly fee
calculated on a per-subscriber basis.
The intercompany advances and expense allocation activity in amounts due to
TCIC consists of the following:
<TABLE>
<CAPTION>
September 30,
1998
--------------------
amounts in thousands
<S> <C>
Beginning of year $219,459
Transfer of cable system acquisition
purchase price 7,023
Programming charges 21,479
Administrative fees 2,853
Intercompany interest expense 4,343
Tax allocations 4,494
Distribution to TCIC 429,739
Cash transfer (45,299)
-------
End of year $644,091
-------
-------
</TABLE>
(continued)
F-6
<PAGE>
TCI FALCON SYSTEMS
(Defined in note 1)
Notes to Combined Financial Statements
(5) COMMITMENTS AND CONTINGENCIES
On October 5, 1992, the United States Congress enacted the Cable Television
Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"). In
1993 and 1994, the Federal Communications Commission ("FCC") adopted
certain rate regulations required by the 1992 Cable Act and imposed a
moratorium on certain rate increases. As a result of such actions, the TCI
Falcon Systems' basic and tier service rates and its equipment and
installation charges (the "Regulated Services") are subject to the
jurisdiction of local franchising authorities and the FCC. Basic and tier
service rates are evaluated against competitive benchmark rates as
published by the FCC, and equipment and installation charges are based on
actual costs. Any rates for Regulated Services that exceeded the
benchmarks were reduced as required by the 1993 and 1994 rate regulations.
The rate regulations do not apply to the relatively few systems which are
subject to "effective competition" or to services offered on an individual
service basis, such as premium movie and pay-per-view services.
The TCI Falcon Systems believe that they have complied in all material
respects with the provisions of the 1992 Cable Act, including its rate
setting provisions. However, the TCI Falcon Systems' rates for Regulated
Services are subject to review by the FCC, if a complaint has been filed,
or the appropriate franchise authority, if such authority has been
certified. If, as a result of the review process, a system cannot
substantiate its rates, it could be required to retroactively reduce its
rates to the appropriate benchmark and refund the excess portion of rates
received. Any refunds of the excess portion of tier service rates would be
retroactive to the date of complaint. Any refunds of the excess portion of
all other Regulated Service rates would be retroactive to one year prior to
the implementation of the rate reductions.
Certain plaintiffs have filed or threatened separate class action
complaints against certain of the TCI Falcon Systems, alleging that the
systems' practice of assessing an administrative fee to subscribers whose
payments are delinquent constitutes an invalid liquidated damage provision,
a breach of contract, and violates local consumer protection statutes.
Plaintiffs seek recovery of all late fees paid to the subject systems as a
class purporting to consist of all subscribers who were assessed such fees
during the applicable limitation period, plus attorney fees and costs. In
addition to such matters, the TCI Falcon Systems have contingent
liabilities related to legal proceedings and other matters arising in the
ordinary course of business. Although it is possible the TCI Falcon
Systems may incur losses upon conclusion of the matters referred to above,
an estimate of any loss or range of loss cannot presently be made. Based
upon the facts available, management believes that, although no assurance
can be given as to the outcome of these actions, the ultimate disposition
should not have a material adverse effect upon the combined financial
condition of the TCI Falcon Systems.
(continued)
F-7
<PAGE>
TCI FALCON SYSTEMS
(Defined in note 1)
Notes to Combined Financial Statements
TCI formed a year 2000 Program Management Office (the "PMO") to organize
and manage its year 2000 remediation efforts. The PMO is responsible for
overseeing, coordinating and reporting on TCIC's year 2000 remediation
efforts, including the year 2000 remediation efforts of the TCI Falcon
Systems prior to the Contribution. For information related to TCIC's year
2000 program, please refer to TCIC's September 30, 1998 Form 10-Q filed
with the Securities and Exchange Commission. Subsequent to the date of the
Contribution, the year 2000 remediation efforts of the TCI Falcon Systems
are no longer the responsibility of TCI, TCIC or the PMO.
F-8
<PAGE>
PRO FORMA CONDENSED COMBINED FINANCIAL DATA
Set forth below are unaudited pro forma condensed combined statement of
operations data derived from the historical consolidated financial statements
of Falcon Communications, L.P. (the "Partnership"), Falcon Classic Cable
Income Properties, L.P. ("Falcon Classic"), Falcon Video Communications, L.P.
("Falcon Video") and the cable television systems contributed to the
Partnership by TCI Falcon Holdings LLC (the "TCI Systems") and reflect
management's determination of pro forma adjustments, including a preliminary
estimate of purchase price allocations. The unaudited pro forma data for the
year ended December 31, 1997 and for the nine months ended September 30, 1998
give effect to (i) the issuance of 8.375% Senior Debentures with an aggregate
original principal amount of $375,000,000 and the issuance of 9.285% Discount
Debentures with an aggregate original principal amount at maturity of
$435,250,000, (collectively, the "Debentures"), both of which occurred on
April 3, 1998, (ii) the refinancing of the Partnership's prior senior credit
agreement with proceeds from a new $1.5 billion senior credit agreement (the
"New Credit Facility") which was consummated on June 30, 1998, (iii) the
partial repurchase and subsequent redemption by the Partnership of the $282.2
million aggregate principal amount of the Partnership's outstanding 11%
Senior Subordinated Notes due 2003 (the "Notes"), (iv) the acquisition of the
Falcon Classic systems (the "Falcon Classic Acquisition") which substantially
occurred in March 1998, and the acquisition of the Falcon Video Systems and
the TCI Systems (the "TCI Transaction") which occurred on September 30, 1998,
as if such transactions had been consummated on January 1, 1997.
As the above transactions have been reflected in the Partnership's
unaudited condensed consolidated balance sheet as of September 30, 1998,
which was previously filed in the Partnership's September 30, 1998 report on
Form 10-Q, no unaudited pro forma balance sheet data has been presented
herein.
The unaudited pro forma condensed combined statements of operations may
not be indicative of the results that actually would have occurred if the
transactions described above had been completed and in effect for the periods
indicated or the results that may be obtained in the future. The unaudited
pro forma condensed combined financial data presented below should be read in
conjunction with the audited historical consolidated financial statements and
related notes thereto of the Partnership and the TCI Systems.
The pro forma condensed combined statements of operations do not reflect
the impact of certain non-recurring expenses associated with the
transactions. The Partnership's pro forma data do not include the write-off,
as an extraordinary charge, of deferred loan costs of $11.7 and $11.0 million
at December 31, 1997 and September 30, 1998, respectively, related to the
extinguishment of the prior senior credit agreement and the repurchase of the
Notes, as well as the approximate $19.7 million in premiums and costs related
to the repurchase of the Notes. Additionally, the pro forma data do not
include a one-time charge of approximately $7.7 million in compensation
expense, $6.5 million of which related to the payment to certain Falcon
Holding Group, L.P. ("FHGLP") employees of amounts due under the
Partnership's incentive plan, as required by the Contribution and Purchase
Agreement dated December 30, 1997 (the "Contribution Agreement"), and $1.2
million of which related to non-recurring bonus payments related to the TCI
Transaction.
P-1
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Year Ended December 31, 1997
<TABLE>
<CAPTION>
Historical
---------------------------------------------
The Falcon Falcon TCI Pro Forma
Partnership Classic Video Systems Adjustments Pro Forma
----------- ------- ------- ------- ----------- ---------
(in thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . $255,886 $20,299 $32,145 $113,897 $2,767 (1) $424,994
Expenses:
Costs and expenses . . . . . . . . . . . . . . . . (122,080) (11,248) (15,908) (64,113) (2,370) (2) (215,719)
Depreciation and amortization. . . . . . . . . . . (118,856) (8,080) (16,086) (22,509) (56,702) (3) (222,233)
----------- ------- ------- ------- ----------- ---------
Operating income (loss) . . . . . . . . . . . . . 14,950 971 151 27,275 (56,305) (12,958)
Other income (expense):
Interest expense, net. . . . . . . . . . . . . . . (79,137) (1,490) (10,985) (5,832) (22,481) (4) (119,925)
Equity in net income of investee partnerships. . . 443 - - - 4 (5) 447
Other income (expense), net. . . . . . . . . . . . 885 (61) - (84) 1,210 (6) 1,950
Income tax benefit (expense) . . . . . . . . . . . . 2,021 - - (8,808) 8,808 (7) 2,021
----------- ------- ------- ------- ----------- ---------
Income (loss) before extraordinary items . . . . . . $(60,838) $(580) $(10,834) $12,551 $(68,764) $(128,465)
----------- ------- ------- ------- ----------- ---------
----------- ------- ------- ------- ----------- ---------
</TABLE>
Nine Months Ended September 30, 1998
<TABLE>
<CAPTION>
Historical
---------------------------------------------
The Falcon Falcon TCI Pro Forma
Partnership Classic Video Systems Adjustments Pro Forma
----------- ------- ------- ------- ----------- ---------
(in thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . $ 201,789 $ 4,281 $ 24,993 $ 86,476 $ 3,519 (1) $ 321,058
Expenses:
Costs and expenses . . . . . . . . . . . . . . . . (105,879) (2,488) (12,801) (51,241) 5,555 (2) (166,854)
Depreciation and amortization. . . . . . . . . . . (98,284) (1,391) (10,253) (17,757) (40,038) (3) (167,723)
----------- ------- ------- -------- ----------- ---------
Operating income (loss) . . . . . . . . . . . . . (2,374) 402 1,939 17,478 (30,964) (13,519)
Other income (expense):
Interest expense, net. . . . . . . . . . . . . . . (69,744) (31) (8,528) (4,343) (10,931) (4) (93,577)
Equity in net income (loss) of investee partnerships (199) - - - 12 (5) (187)
Other income (expense), net. . . . . . . . . . . . (1,162) 34,436 (44) 28 (34,773) (6) (1,515)
Income tax benefit (expense) . . . . . . . . . . . . (2,848) - - (5,423) 5,423 (7) (2,848)
----------- ------- ------- -------- ----------- ---------
Income (loss) before extraordinary items . . . . . . $ (76,327) $34,807 $ (6,633) $ 7,740 $ (71,233) $(111,646)
----------- ------- ------- -------- ----------- ---------
----------- ------- ------- -------- ----------- ---------
</TABLE>
P-2
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
(1) To eliminate management fee income from Falcon Classic and Falcon Video, to
adjust the TCI Systems revenues to reflect revenues from additional assets
acquired and to eliminate certain revenues not being acquired pursuant to
the Contribution Agreement, and to conform to the Partnership's accounting
treatment of franchise fees charged to subscribers, as follows:
<TABLE>
<CAPTION>
Nine
Year Months
Ended Ended
12/31/97 9/30/98
-------- --------
($in 000's)
<S> <C> <C>
Eliminate management fee income from Falcon Classic . . . . . . . . . . . . . . . . . $(1,291) $ (191)
Eliminate management fee income from Falcon Video . . . . . . . . . . . . . . . . . . (1,582) (1,237)
Adjust TCI Systems revenues (See "Detail of TCI Systems Adjustments," below). . . . . 5,640 4,947
-------- --------
$ 2,767 $ 3,519
-------- --------
-------- --------
</TABLE>
(2) To eliminate Falcon Classic and Falcon Video management fee expense to the
Partnership, to adjust the TCI Systems expenses arising from additional
assets acquired and to eliminate certain expenses related to revenues not
being acquired pursuant to the Contribution Agreement, to conform to the
Partnership's accounting treatment of franchise fees charged to subscribers
and to eliminate the non-recurring compensation expense incurred by the
Partnership resulting from the TCI Transaction, as follows:
<TABLE>
<CAPTION>
Nine
Year Months
Ended Ended
12/31/97 9/30/98
-------- --------
($ in 000's)
<S> <C> <C>
Eliminate Falcon Classic's management fee expense to the Partnership. . . . . . . . . $(1,134) $ (222)
Eliminate Falcon Video's management fee expense to the Partnership. . . . . . . . . . (1,582) (1,237)
Eliminate non-recurring compensation expense related to the TCI Transaction . . . . . - (7,723)
Adjust TCI Systems expenses (See "Detail of TCI Systems Adjustments," below). . . . . 5,086 3,627
-------- --------
$ 2,370 $(5,555)
-------- --------
-------- --------
</TABLE>
(3) To record additional depreciation and amortization expense attributable to
the allocation of the fair value to tangible and intangible assets acquired
and liabilities assumed of Falcon Classic ($83.4 million), Falcon Video
($143.2 million) and the TCI Systems ($500.2 million), based on preliminary
estimates of their respective fair values as of the acquisition date:
<TABLE>
<CAPTION>
Nine
Year Months
Useful Ended Ended
Life 12/31/97 9/30/98
---------- -------- --------
(in years) ($ in 000's)
<S> <C> <C> <C>
Reduce estimated depreciation expense . . . . . . . . . . . . . . . . . . . 3 - 15 $(4,807) $(4,728)
Adjust estimated amortization expense:
Reduce franchise cost amortization. . . . . . . . . . . . . . . . . . . . . 12 (1,559) (105)
Increase goodwill amortization. . . . . . . . . . . . . . . . . . . . . . . 20 3,611 2,565
Increase customer lists and other intangible assets amortization. . . . . . 5 59,457 42,306
-------- --------
$56,702 $40,038
-------- --------
-------- --------
</TABLE>
P-3
<PAGE>
(4) To increase interest expense to reflect the acquisition of the Falcon
Classic and Falcon Video systems, the assumption of the TCI Systems
indebtedness, the partial repurchase and subsequent redemption of the Notes
and the issuance of the Debentures, as if those events had been in effect
during the entire period; and to record the amortization on new debt
discount and issuance costs estimated at $28.8 million in connection with
the New Credit Facility and the Debentures. The average interest rates
used to compute pro forma interest expense on the New Credit Facility were
7.0% for the year ended December 31, 1997 and 6.8% for the nine months
ended September 30, 1998. The effect on pro forma income (loss) before
extraordinary items of a 1/8% change in interest rates would be
approximately $1.1 million per year (without giving effect to the
Partnership's interest rate hedging agreements).
<TABLE>
<CAPTION>
Nine
Year Months
Ended Ended
12/31/97 9/30/98
-------- --------
($ in 000's)
<S> <C> <C>
Eliminate historical interest expense related to borrowings by Falcon Classic . . . . . . $ (1,490) $ (31)
Eliminate amortization expense on historical deferred loan costs for the
prior senior credit agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (825) (357)
Eliminate amortization expense on historical deferred costs for the Notes . . . . . . . . (874) (291)
Eliminate historical interest expense on the Notes. . . . . . . . . . . . . . . . . . . . (29,584) (13,121)
Eliminate historical interest expense on the prior senior credit agreement. . . . . . . . (44,493) (16,123)
Eliminate historical interest expense of Falcon Video . . . . . . . . . . . . . . . . . . (10,985) (8,528)
Eliminate historical interest expense of the TCI Systems. . . . . . . . . . . . . . . . . (5,832) (4,343)
Record estimated interest expense on the Debentures . . . . . . . . . . . . . . . . . . . 57,593 14,566
Record estimated interest expense on borrowings under the New Credit
Facility to finance the acquisition of Falcon Classic and to refinance the
Falcon Video and TCI Systems indebtedness . . . . . . . . . . . . . . . . . . . . . . . 56,439 38,272
Record amortization expense on new debt discount. . . . . . . . . . . . . . . . . . . . . 84 28
Record amortization expense on new debt issuance costs. . . . . . . . . . . . . . . . . . 2,448 859
-------- --------
$ 22,481 $ 10,931
-------- --------
-------- --------
</TABLE>
(5) To eliminate the Partnership's general partners' share of losses of
Falcon Classic.
(6) To increase other expenses for anticipated legal fees related to the
settlement of litigation ($150,000 for the year ended December 31, 1997),
to eliminate the historical loss of $1.4 million recorded in 1997 on the
sale of an international cable television investment which was retained by
FHGLP pursuant to the Contribution Agreement, and to eliminate the gain on
the sale of Falcon Classic's cable systems ($34.8 million for the nine
months ended September 30, 1998).
(7) To eliminate historical tax expense of the TCI Systems, which assets were
formerly held by a corporation.
P-4
<PAGE>
DETAIL OF TCI SYSTEMS ADJUSTMENTS
The combined statements of operations of the TCI Systems for the year
ended December 31, 1997 and the nine months ended September 30, 1998 have
been adjusted to reflect additional assets acquired (which acquisitions were
not material individually or in the aggregate), to eliminate certain revenues
and expenses not being acquired pursuant to the Contribution Agreement and to
conform to the Partnership's accounting treatment of franchise fees charged
to subscribers, as follows:
<TABLE>
<CAPTION>
Year Nine Months
Ended 12/31/97 Ended 9/30/98
----------------------- ------------------------
Revenues Expenses Revenues Expenses
-------- -------- -------- --------
($ in 000's)
<S> <C> <C> <C> <C>
Reclassify franchise fee pass-through. . . . . . . . . . . . . . $ 5,517 $(5,517) $4,619 $(4,619)
Eliminate revenues and expenses not being acquired . . . . . . . (2,122) 1,908 (12) 66
Eliminate severance costs incurred by the TCI
Systems upon closing . . . . . . . . . . . . . . . . . . . . . - - - 1,113
Add Ellensburg, WA . . . . . . . . . . . . . . . . . . . . . . . 1,850 (1,240) - -
Add Pomeroy, WA. . . . . . . . . . . . . . . . . . . . . . . . . 179 (107) 98 (55)
Add Clatskanie, OR . . . . . . . . . . . . . . . . . . . . . . . 216 (130) 242 (132)
-------- -------- -------- --------
$ 5,640 $(5,086) $4,947 $(3,627)
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
P-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this amended report to be signed on its behalf
by the undersigned hereunto duly authorized.
FALCON COMMUNICATIONS, L.P.
By: Falcon Holding Group, L.P., as
General Partner
By: Falcon Holding Group, Inc., its
General Partner
Date: December 11, 1998 By: /s/ Michael K. Menerey
---------------------------------------
Name: Michael K. Menerey,
Title: Executive Vice President,
Chief Financial Officer and
Secretary
FALCON FUNDING CORPORATION
Date: December 11, 1998 By: /s/ Michael K. Menerey
---------------------------------------
Name: Michael K. Menerey,
Title: Chief Financial Officer and
Secretary
