<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
--------------------
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 Numbers: 33-60776 and 333-55755
---------------------------
FALCON COMMUNICATIONS, L.P.
FALCON FUNDING CORPORATION*
- -------------------------------------------------------------------------------
(Exact Names of Registrants as Specified in Their Charters)
California 95-4654565
California 95-4681480
- ------------------------------- ---------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) 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)
- -------------------------------------------------------------------------------
Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report.
Indicate by check mark whether the registrants (1) have 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
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
Number of shares of common stock of Falcon Funding Corporation outstanding as
of August 9, 1999: 1,000.
* Falcon Funding Corporation meets the conditions set forth in General
Instruction H(1)(a) and (b) to the Form 10-Q and is therefore filing with
the reduced disclosure format.
<PAGE>
PART I - FINANCIAL INFORMATION
FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
----------------------------------------------
<TABLE>
<CAPTION>
December 31, June 30,
1998* 1999
------------ ------------
(Unaudited)
(Dollars in Thousands)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 14,284 $ 11,852
Receivables:
Trade, less allowance of $670,000 and
$699,000 for possible losses 15,760 19,102
Affiliates 2,322 6,949
Other assets 16,779 35,007
Property, plant and equipment, less accumulated depreciation
and amortization of $320,209,000 and $349,316,000 505,894 522,587
Franchise cost, less accumulated
amortization of $226,526,000 and $251,998,000 397,727 384,197
Goodwill, less accumulated amortization
of $25,646,000 and $30,547,000 135,308 133,480
Customer lists and other intangible costs, less
accumulated amortization of $59,422,000 and $97,912,000 333,017 300,314
Deferred loan costs, less accumulated amortization
of $2,014,000 and $2,352,000 24,331 23,354
------------ ------------
$ 1,445,422 $ 1,436,842
============ ============
LIABILITIES AND PARTNERS' DEFICIT
LIABILITIES:
Notes payable $ 1,611,353 $ 1,665,676
Accounts payable 10,341 6,088
Accrued expenses 83,077 138,804
Customer deposits and prepayments 2,257 2,630
Deferred income taxes 8,664 2,287
Minority interest 403 387
------------ ------------
TOTAL LIABILITIES 1,716,095 1,815,872
------------ ------------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PARTNERS' EQUITY 133,023 400,471
------------ ------------
PARTNERS' EQUITY (DEFICIT):
General partner (408,369) (783,100)
Limited partners 4,673 3,599
------------ ------------
TOTAL PARTNERS' DEFICIT (403,696) (779,501)
------------ ------------
$ 1,445,422 $ 1,436,842
============ ============
</TABLE>
*As presented in the audited financial statements.
See accompanying notes to condensed consolidated financial statements.
-2-
<PAGE>
FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
<TABLE>
<CAPTION>
Unaudited
----------------------------
Three months ended
June 30,
----------------------------
1998 1999
------------ ------------
(Dollars in Thousands)
<S> <C> <C>
REVENUES $ 68,775 $ 106,396
------------ ------------
OPERATING COSTS AND EXPENSES:
Programming costs 13,285 24,247
Service costs 7,207 11,731
General and administrative expenses 12,838 21,369
Equity-based deferred compensation - 42,000
Depreciation and amortization 32,927 55,622
------------ ------------
Total operating costs and expenses 66,257 154,969
------------ ------------
Operating income (loss) 2,518 (48,573)
OTHER INCOME (EXPENSE):
Interest expense, net (24,212) (32,407)
Equity in net income (loss) of investee partnerships (18) 273
Other expense, net (50) (1,041)
Income tax benefit 1,466 1,325
------------ ------------
Net loss before extraordinary items (20,296) (80,423)
Extraordinary items (28,412) -
------------ ------------
NET LOSS $ (48,708) $ (80,423)
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-3-
<PAGE>
FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
<TABLE>
<CAPTION>
Unaudited
----------------------------
Six months ended
June 30,
----------------------------
1998 1999
------------ ------------
(Dollars in Thousands)
<S> <C> <C>
REVENUES $ 133,332 $ 212,205
------------ ------------
OPERATING COSTS AND EXPENSES:
Programming costs 25,933 47,233
Service costs 14,124 25,545
General and administrative expenses 24,516 39,779
Equity-based deferred compensation - 44,600
Depreciation and amortization 64,006 110,048
------------ ------------
Total operating costs and expenses 128,579 267,205
------------ ------------
Operating income (loss) 4,753 (55,000)
OTHER INCOME (EXPENSE):
Interest expense, net (44,699) (64,852)
Equity in net income (loss) of investee partnerships (266) 163
Other income (expense), net (824) 9,807
Income tax benefit 1,831 2,459
------------ ------------
Net loss before extraordinary items (39,205) (107,423)
Extraordinary items (28,412) -
------------ ------------
NET LOSS $ (67,617) $ (107,423)
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-4-
<PAGE>
FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
<TABLE>
<CAPTION>
Unaudited
------------------------------
Six months ended
June 30,
------------------------------
1998 1999
------------ ------------
(Dollars in Thousands)
<S> <C> <C>
Net cash provided by operating activities $ 13,558 $ 36,697
------------ ------------
Cash flows from investing activities:
Acquisition of cable television systems (76,789) (16,450)
Capital expenditures (38,609) (59,034)
Increase in intangible assets (1,102) (2,151)
Other 1,065 (2,107)
------------ ------------
Net cash used in investing activities (115,435) (79,742)
------------ ------------
Cash flows from financing activities:
Borrowings from notes payable 1,445,957 68,500
Repayment of debt (1,224,683) (27,871)
Deferred loan costs (23,944) (16)
Other 83 -
------------ ------------
Net cash provided by financing activities 197,413 40,613
------------ ------------
Net increase (decrease) in cash
and cash equivalents 95,536 (2,432)
Cash and cash equivalents
at beginning of period 13,917 14,284
------------ ------------
Cash and cash equivalents
at end of period $ 109,453 $ 11,852
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
-5-
<PAGE>
FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
NOTE 1 - BASIS OF PRESENTATION
Falcon Communications, L.P., a California limited partnership (the
"Partnership") and successor to Falcon Holding Group, L.P. ("FHGLP"), owns
and operates cable television systems serving small to medium-sized
communities and the suburbs of certain cities in 23 states. On September 30,
1998, pursuant to a Contribution and Purchase Agreement dated as of December
30, 1997, as amended (the "Contribution Agreement"), FHGLP acquired the
assets and liabilities of Falcon Video Communications, L.P. ("Falcon Video"
or the "Falcon Video systems"), in exchange for ownership interests in FHGLP.
Simultaneously with the closing of that transaction, in accordance with the
Contribution Agreement, FHGLP contributed substantially all of the existing
cable television system operations owned by FHGLP and its subsidiaries
(including the Falcon Video systems) to the Partnership and TCI Falcon
Holdings, LLC ("TCI") contributed certain cable television systems owned and
operated by affiliates of TCI (the "TCI systems") to the Partnership (the
"TCI Transaction"). In March 1999, AT&T and Tele-Communications, Inc.
completed a merger under which Tele-Communications, Inc. became a unit of
AT&T called AT&T Broadband & Internet Services, which became the owner of TCI
Falcon Holdings, LLC as a result of the merger. As a result, AT&T Broadband
and Internet Services holds approximately 46% of the equity interests of the
Partnership and FHGLP holds the remaining 54% and serves as the managing
general partner of the Partnership. The TCI Transaction has been accounted
for as a recapitalization of FHGLP into the Partnership and the concurrent
acquisition by the Partnership of the TCI systems.
On May 26, 1999, the Partnership and Charter Communications ("Charter")
announced a definitive agreement in which Charter will acquire the
Partnership in a cash and stock transaction valued at approximately $3.6
billion. Closing of the pending sale is subject to obtaining all necessary
government approvals, and is anticipated to take place in the fourth quarter
of 1999.
NOTE 2 - INTERIM FINANCIAL STATEMENTS
The interim financial statements for the three and six months ended June
30, 1999 and 1998 are unaudited. These condensed interim financial statements
should be read in conjunction with the audited financial statements and notes
thereto included in the Partnership's latest Annual Report on Form 10-K. In
the opinion of management, such statements reflect all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the results of such periods. The results of operations for
the three and six months ended June 30, 1999 are not indicative of results
for the entire year.
NOTE 3 - REDEEMABLE PARTNERS' EQUITY
Redeemable partners' equity has been adjusted as of June 30, 1999 based
on the estimated redemption value to be recognized from the pending sale to
Charter.
NOTE 4 - EQUITY-BASED DEFERRED COMPENSATION
In connection with the pending sale of the Partnership to Charter
discussed in Note 1, the Partnership recorded a non-cash charge of $42
million during the three months ended June 30, 1999 related to both the 1993
Incentive Performance Plan ($17.2 million) and the 1999 Employee Restricted
Unit Plan ($24.8 million). The amounts were determined based on the value of
the underlying ownership units, as established by the pending sale of the
Partnership to Charter. $2.6 million of additional compensation related to
the 1993 Incentive Performance Plan was recorded in the three
-6-
<PAGE>
FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
NOTE 4 - EQUITY-BASED DEFERRED COMPENSATION (CONTINUED)
months ended March 31, 1999 based on management's estimate of the increase in
value of the underlying ownership interests since December 31, 1998. Payments
under the plans are subject to closing of the sale to Charter, and will be
paid from net sales proceeds. The total deferred compensation of $44.6
million under these plans is included in accrued expenses.
NOTE 5 - ACQUISITIONS
In March 1998, the Partnership acquired substantially all of the assets
of Falcon Classic Cable Income Properties, L.P. As discussed in Note 1, on
September 30, 1998 the Partnership acquired the TCI systems and the Falcon
Video systems in accordance with the Contribution Agreement. The following
unaudited condensed consolidated pro forma statement of operations presents
the consolidated results of operations of the Partnership as if the
acquisitions had occurred at January 1, 1998 and is not necessarily
indicative of what would have occurred had the acquisitions been made as of
that date or of results which may occur in the future.
Three Six
Months Ended Months Ended
June 30, 1998 June 30, 1998
------------ ------------
(Dollars in Thousands)
Revenues $ 108,090 $ 213,639
Expenses (108,745) (221,238)
------------ ------------
Operating loss (655) (7,599)
Interest and other expenses (31,168) (63,951)
------------ ------------
Loss before extraordinary items $ (31,823) $ (71,550)
============ =============
In January 1999, the Partnership acquired the assets of certain cable
systems located in Oregon for $800,700. The acquired systems serve
approximately 591 customers, and are being operated as part of the Medford
region. On March 15, 1999, the Partnership acquired the assets of certain
cable systems located in Utah for $6.8 million. This system serves
approximately 7,928 customers and is being operated as part of the St. George
region. On March 22, 1999, the Partnership acquired the assets of the
Franklin, Virginia system in exchange for the assets of its Scottsburg,
Indiana systems and $8 million in cash and recognized a gain of $8.3 million.
The Franklin system serves approximately 9,042 customers and the Scottsburg
systems served approximately 4,507 customers. The effects of this transaction
on results of operations are not material. On July 30, 1999, the Partnership
acquired the assets of certain cable systems serving 6,500 customers located
in Oregon for $9.5 million.
NOTE 6 - RECENT DEVELOPMENTS
On April 8, 1999, the Partnership announced that it had executed a term
sheet with regard to a joint venture to be formed called @Home Solutions
which would offer turnkey, fully managed and comprehensive high speed
Internet access to cable operators serving small to medium-sized
-7-
<PAGE>
FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
NOTE 6 - RECENT DEVELOPMENTS (CONTINUED)
communities, including the Partnership. In connection with the sale of the
Partnership to Charter as discussed in Note 1, the Partnership withdrew from
the @Home Solutions joint venture and reimbursed @Home Solutions $500,000 for
costs incurred.
NOTE 7 - SALE OF SYSTEMS
On March 1, 1999, the Partnership contributed $2.4 million cash and
certain systems located in Oregon with a net book value of $5.6 million to a
joint venture with Bend Cable Communications, Inc., who manages the joint
venture. The Partnership owns 17% of the joint venture. These systems had
been acquired from Falcon Classic in March 1998, and served approximately
3,471 subscribers at March 1, 1999.
On March 26, 1999, the Partnership sold certain systems serving
approximately 2,550 subscribers in Kansas for $3.2 million and recognized a
gain of $2.5 million.
-8-
<PAGE>
FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
The Cable Television Consumer Protection and Competition Act of 1992
required the FCC to, among other things, implement extensive regulation of
the rates charged by cable television systems for basic and programming
service tiers, installation, and customer premises equipment leasing.
Compliance with those rate regulations has had a negative impact on our
revenues and cash flow. The Telecommunications Act of 1996 substantially
changed the competitive and regulatory environment for cable television and
telecommunications service providers. Among other changes, the
Telecommunications Act of 1996 ended regulation of cable programming service
tier rates on March 31, 1999. The FCC, Congress or other regulatory
authorities could take actions in the future that could negatively impact the
Partnership's business. Accordingly, the historical financial results
described below are not necessarily indicative of future performance.
REVENUE. Substantially all of our revenue is earned from subscriber fees
for cable television programming services, the sale of advertising,
commissions for products sold through home shopping networks, fees for
ancillary services (such as the rental of set top and remote control
devices), and installations.
OPERATING COSTS AND EXPENSES. Operating costs and expenses consist of
programming expenses, service costs, general and administrative expenses and
depreciation and amortization expense. Programming expenses have historically
increased at rates in excess of inflation due to system acquisitions, as well
as increases in the number, quality and costs of programming services
offered. Service costs primarily include expenses related to wages and
employee benefits of technical personnel, franchise fees, copyright fees,
property taxes, electricity, systems supplies and vehicles. General and
administrative expenses include wages and employee benefits of customer
service, accounting and administrative personnel, marketing and advertising
costs and expenses related to billing, payment processing, office
administration, insurance and corporate overhead. Depreciation and
amortization expense relates to depreciation of tangible assets and the
amortization of intangible costs.
This report includes certain forward looking statements regarding, among
other things, future results of operations, regulatory requirements,
acquisition transactions, competition, capital needs and general business
conditions applicable to us. 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 us. In
addition to the information provided herein, reference is made to our annual
report on Form 10-K for the year ended December 31, 1998 and the other
periodic reports and registration statements filed by Falcon Holding Group,
L.P. and Falcon Communications, L.P. with the Securities and Exchange
Commission from time to time for additional information regarding such
matters and the effect thereof on our business.
-9-
<PAGE>
FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES
RESULTS OF OPERATIONS
The following table sets forth the historical statement of operations
data and the components of net earnings and EBITDA expressed as a percentage
of revenue for the periods indicated.
<TABLE>
<CAPTION>
Unaudited
------------------------------------------------------
Three months Ended Six months Ended
June 30, June 30,
-------------------------- --------------------------
1998 1999 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenue 100.0% 100.0% 100.0% 100.0%
------------ ------------ ------------ ------------
Operating costs and expenses:
Programming costs 19.3% 22.8% 19.4% 22.3%
Service costs 10.5% 11.0% 10.6% 12.0%
General and administrative expenses 18.7% 20.1% 18.4% 18.7%
Depreciation and amortization 47.9% 52.3% 48.0% 51.9%
Equity-based deferred compensation - 39.5% - 21.0%
------------ ------------ ------------ ------------
Total operating costs and expenses 96.4% 145.7% 96.4% 125.9%
------------ ------------ ------------ ------------
Operating income (loss) 3.6% (45.7%) 3.6% (25.9%)
Interest expense, net (35.2%) (30.5%) (33.5%) (30.6%)
Other income 2.0% 0.5% 0.6% 5.9%
------------ ------------ ------------ ------------
Net loss before extraordinary items (29.6%) (75.7%) (29.3%) (50.6%)
Extraordinary items (41.3%) - (21.3%) -
------------ ------------ ------------ ------------
Net Loss (70.9%) (75.7%) (50.6%) (50.6%)
============ ============ ============ ============
EBITDA 51.5% (6.6%) 51.6% 26.0%
</TABLE>
Our revenues increased from $68.8 million to $106.4 million, or by
54.7%, and from $133.3 million to $212.2 million, or by 59.2%, for the three
and six months ended June 30, 1999 compared to the corresponding periods in
1998. Of the $37.6 million net increase in revenues for the three months
ended June 30, 1999 as compared to the corresponding period in 1998, $30.5
million was due to the acquisition in September 1998 of the TCI systems, $8.7
million was due to the acquisition in September 1998 of the Falcon Video
systems and $384,000 was due to the acquisition in July 1998 of the rest of
the Falcon Classic systems. These increases were partially offset by
decreases of $1.3 million related to reductions in the number of regulated
and premium subscriptions for cable service and to a $554,000 reduction in
management fees. Of the $78.9 million net increase in revenues for the six
months ended June 30, 1999 compared to the corresponding period in 1998,
$60.5 million was due to the acquisition of the TCI systems, $16.7 million
was due to the acquisition of the Falcon Video systems, $4.6 million was due
to the acquisition in July 1998 of the Falcon Classic systems and $440,000
was due to increases in regulated service rates implemented during 1998 and
1999. These increases were partially offset by decreases of $2.1 million
related to reductions in the number of regulated and premium subscriptions
for cable service and to a $1.2 million reduction in management fees. As of
June 30, 1999, we had approximately 1,008,000 basic subscribers and 276,000
premium service units.
Management and consulting fees decreased from $1.0 million to $397,000
and from $2 million to $796,000 for the three and six months ended June 30,
1999 compared to the corresponding periods
-10-
<PAGE>
FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES
RESULTS OF OPERATIONS (CONTINUED)
in 1998 primarily due to our acquisition of cable systems we managed. Of the
total reduction for the three and six months ended June 30, 1999 as compared
to the corresponding periods in 1998, $431,000 and $811,000 related to the
acquisition of the Falcon Video systems, $189,000 for the six months ended
June 30, 1999 related to the acquisition of the Falcon Classic systems and
$123,000 and $242,000 was due to a reduction in the amounts received from
Enstar Communications Corporation, the general partner of partnerships owning
approximately 93,000 subscribers that we manage.
Programming costs increased from $13.3 million to $24.2 million, or by
82.0%, and from $25.9 million to $47.2 million, or by 82.2%, for the three
and six months ended June 30, 1999 compared to the corresponding periods in
1998. Of the $10.9 million and $21.3 million increase in programming fees
paid to programming suppliers (including primary satellite fees) for the
three and six months ended June 30, 1999 compared to the corresponding
periods in 1998, $8.8 million and $17.4 million related to the acquisition of
the TCI systems, $1.9 million and $3.6 million related to the acquisition of
the Falcon Video systems and $936,000 for the six month period only related
to the acquisition of the Falcon Classic systems. These increases were
partially offset by reductions in the number of subscriptions for cable
service and by reductions in rates payable for certain programming services
due to the TCI transaction.
Service costs increased from $7.2 million to $11.7 million, or by 62.5%,
and from $14.1 million to $25.5 million, or by 80.9%, for the three and six
months ended June 30, 1999 compared to the corresponding periods in 1998.
Service costs represent costs other than programming costs that are directly
attributable to providing cable services to customers. Of the $4.5 million
and $11.4 million increase in service costs, for the three and six months
ended June 30, 1999 compared to the corresponding periods in 1998, $3.6
million and $7.8 million related to the acquisition of the TCI systems,
$943,000 and $1.9 million related to the acquisition of Falcon Video systems
and $709,000 for the six months ended June 30, 1999 related to the
acquisition of the Falcon Classic systems. The remainder of the increase in
service costs for the six months ended June 30, 1999 were the result of
increases in a number of categories, primarily personnel costs and property
taxes.
General and administrative expenses increased from $12.8 million to
$21.4 million, or by 67.2 %, and from $24.5 million to $39.8 million, or by
62.4%, for the three and six months ended June 30, 1999 compared to the
corresponding periods in 1998. Of the $8.6 million increase for the three
months ended June 30, 1999 compared to the corresponding period in 1998, $5.6
million related to the acquisition of the TCI systems, $1.2 million related
to the acquisition of Falcon Video systems, $820,000 related to personnel
costs and $768,000 related to increases in other general and administrative
expenses, primarily related to workman's compensation claims recorded during
1999. Of the $15.3 million increase for the six months ended June 30, 1999,
$10.5 million related to the acquisition of the TCI systems, $2.3 million
related to the acquisition of the Falcon Video systems, $1.5 million related
to increases in personnel costs and $607,000 related to the acquisition of
the Falcon Classic systems.
As discussed in Note 4 to the financial statements, we recorded a
non-cash charge of $42 million during the three months ended June 30, 1999
related to both the 1993 Incentive Performance Plan ($17.2 million) and the
1999 Employee Restricted Unit Plan ($24.8 million). In the three months ended
March 31, 1999, $2.6 million related to the 1993 Incentive Performance Plan
was recorded.
-11-
<PAGE>
FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES
RESULTS OF OPERATIONS (CONTINUED)
Payments under the plans are subject to closing of our pending sale to
Charter, and will be paid from net sales proceeds.
Depreciation and amortization expense increased from $32.9 million to
$55.6 million, or by 69.0%, and from $64 million to $110 million, or by
71.9%, for the three and six months ended June 30, 1999 compared to the
corresponding periods in 1998. Of the $22.7 million and $46 million increase
in depreciation and amortization expense for the three and six months ended
June 30, 1999 compared to the corresponding periods in 1998, $17.6 million
and $35.2 million related to the acquisition of the TCI systems, $5.1 million
and $9.9 million related to the acquisition of the Falcon Video systems,
$240,000 and $2.9 million related to the acquisition of the Falcon Classic
systems. These increases were partially offset by accelerated depreciation
related to asset retirements.
Operating income of $2.5 million and $4.8 million changed to operating
loss of $48.6 million and $55 million for the three and six months ended June
30, 1999 compared to the corresponding periods in 1998. The $51.1 million and
$59.8 million changes were principally due to the equity-based deferred
compensation expense discussed above and to the depreciation and amortization
expense associated with the acquisition of the TCI, Falcon Video and Falcon
Classic systems (which had a combined operating loss of $5.5 million and $12
million for the three and six month periods in 1999).
Interest expense, net, including the effects of interest rate hedging
agreements, increased from $24.2 million to $32.4 million, or by 33.9%, and
from $44.7 million to $64.9 million, or by 45.2%, for the three and six
months ended June 30, 1999 compared to the corresponding periods in 1998. The
increases were primarily due to higher average debt balances outstanding
partially offset by the effect of lower average interest rates (7.4% and 7.5%
during the three and six months ended June 30, 1999 compared to 9.4% and 9.1%
during the corresponding periods in 1998). Non-cash interest expense
associated with our senior discount debentures amounted to $7 million and
$13.7 million for the three and six months ended June 30, 1999. Interest rate
hedging agreements resulted in additional interest expense of $1.8 million
and $3.2 million during the three and six months ended June 30, 1999 compared
to additional interest expense of $162,000 and $215,000 during the
corresponding periods in 1998.
Other expense, net, increased from $50,000 to $1.0 million for the three
months ended June 30, 1999 and changed from $824,000 of expense to $9.8
million of income for the six months ended June 30, 1999 compared to the
corresponding periods in 1998. We recorded $804,000 of expenses during the
second quarter of 1999 related to our pending sale to Charter. The change for
the six months ended June 30, 1999 as compared to the corresponding period in
1998 was primarily related to the recognition of $11 million gain from the
exchange of cable systems located in Indiana ($8.5 million) and Kansas ($2.5
million) during the first quarter of 1999.
Due to the factors described above, our net loss increased from $48.7
million to $80.4 million, or by 65.1%, and from $67.6 million to $107.4
million, or by 58.9% for the three and six months ended June 30, 1999
compared to the corresponding periods in 1998.
Based on our experience in the cable television industry, we believe
that operating income before depreciation and amortization, commonly referred
to as "EBITDA", and related measures of cash flow serve as important
financial analysis tools for measuring and comparing cable television
-12-
<PAGE>
FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES
RESULTS OF OPERATIONS (CONTINUED)
companies in several areas, such as liquidity, operating performance and
leverage. In addition, the covenants in our primary debt instruments use
EBITDA-derived calculations as a measure of financial performance. EBITDA is
not a measurement determined under generally accepted accounting principles
and does not represent cash generated from operating activities in accordance
with these accounting principles. EBITDA should not be considered by the
reader as an alternative to net income as an indicator of our financial
performance or as an alternative to cash flows as a measure of liquidity. In
addition, our definition of EBITDA may not be identical to similarly titled
measures used by other companies. EBITDA decreased from $35.5 million to $7
million, or by 80.3% and from $68.8 million to $55 million, or by 20.1%.
EBITDA as a percentage of revenues decreased from 51.5% to 6.6% and from
51.6% to 25.9% for the three and six months ended June 30, 1999 compared to
the corresponding periods in 1998. The decrease was primarily caused by the
deferred compensation costs, as described above and by impact of the systems
acquired from TCI (which had an EBITDA margin of 41.1% and 41.0% for the
three and six months 1999 periods). Absent the impact of the equity-based
deferred compensation adjustments, EBITDA for the three and six months ended
June 30, 1999 would have been $49 million and $99.6 million, respectively,
and EBITDA as a percentage of revenues would have been 46.1% and 47.0%.
LIQUIDITY AND CAPITAL RESOURCES
Historically, our primary need for capital has been to acquire cable
systems, to finance plant extensions, rebuilds and upgrades and to add
addressable set top devices to certain of our cable systems. We spent $96.4
million during 1998 on capital expenditures. Our 1999 plan called for capital
expenditures of approximately $190 million, consisting of approximately $111
million to rebuild and upgrade certain cable systems and $79 million for line
extensions and other new equipment. Due to various factors, we do not
currently anticipate spending that much, and for the six months ended June
30, 1999 we spent $29 million to rebuild and upgrade certain cable systems
and $30 million for line extensions and other new equipment. We plan to
finance capital expenditures with cash flow from operations and borrowings
under our bank credit facility, subject to our ability to remain in
compliance with certain covenants of the bank credit facility and the
indenture for our outstanding debentures. The restriction on incurring
indebtedness contained in our partnership agreement was waived pending the
completion of our pending sale to Charter. Our proposed spending plans are
frequently reviewed and revised with respect to changes in technology,
acceptable leverage parameters (including those specified in our debt
agreements), franchise requirements, competitive circumstances and other
factors, and may change under Charter's management.
The bank credit facility entered into on June 30, 1998 provides for
maximum committed available borrowings of $1.15 billion, reducing to $827.5
million at December 31, 2004. As of June 30, 1999, the amount outstanding
under the bank credit facility was $967 million and, subject to complying
with covenants, we had available additional committed borrowing capacity
(excluding the supplemental credit facility) of approximately $179.1 million.
The bank credit facility requires that interest be tied to the ratio of
consolidated total debt to consolidated annualized cash flow, and further
requires that we maintain hedging arrangements with respect to at least 50%
of the outstanding borrowings thereunder plus any of our additional
borrowings, including the debentures, for a two-year period. As of June 30,
1999 borrowings under the bank credit facility bore interest at an average
rate of 7.4% (including the effect of interest rate hedging agreements). We
have entered into fixed interest
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<PAGE>
FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
rate hedging agreements with an aggregate notional amount at June 30, 1999 of
$1.5 billion. Agreements in effect at June 30, 1999 totaled $885 million,
with the remaining $575 million to become effective as certain of the
existing contracts mature during 1999 through October of 2004. The agreements
serve as a hedge against interest rate fluctuations associated with our
variable rate debt. These agreements expire at various times through October
2006. In addition to these agreements, we had one interest rate swap contract
with a notional amount of $25 million under which we paid variable LIBOR
rates and received fixed rate payments. This contract expired on July 1, 1999.
Our earnings are affected by changes in short-term interest rates
applied to the portion of our debt that is not protected by hedging
agreements. Because most of our debt is protected by hedging agreements, a 1%
change in average interest rates would have an immaterial impact on our
reported interest expense for the six months ended June 30, 1999.
The bank credit facility also contains various restrictions relating to,
among other things, mergers and acquisitions, a change in control and the
incurrence of additional indebtedness and also requires compliance with
certain financial covenants. We believe that we were in compliance with all
such requirements as of June 30, 1999. We believe that borrowings under the
credit facility together with cash flow from operations will be adequate to
meet our liquidity needs for the foreseeable future. Charter has indicated
its intent to keep the bank credit facility in place, and is obtaining an
amendment which will become effective upon closing.
We have outstanding $375 million aggregate principal amount of senior
debentures and $435.2 million aggregate principal amount at maturity of
senior discount debentures. Semiannual interest payments with respect to the
senior debentures are approximately $15.7 million. Interest on the senior
discount debentures accrete semiannually until April 15, 2003, unless we
elect to pay cash interest. After April 15, 2003, semiannual cash interest
payments will be approximately $35.9 million in the aggregate. We anticipate
that cash flow from operations and, if necessary, borrowings under the bank
credit facility (or a successor credit facility) will continue to be adequate
to meet our interest payment obligations under the debentures. Charter has
also indicated its intent to assume the outstanding senior debentures and
senior discount debentures upon closing.
Falcon Communications is a separate, stand-alone holding company which
employs all of the management personnel for its cable television systems. All
of the Falcon systems are owned by the subsidiaries of Falcon Communications.
Accordingly, to fund its operations and to pay our expenses, including
interest expense, we are financially dependent on the receipt of funds from
our subsidiaries, management fees from domestic cable ventures, and the
reimbursement of specified expenses by Enstar Communications Corporation.
Expected increases in funding requirements combined with limitations on our
sources of cash could create liquidity issues in the future. The bank credit
facility permits our subsidiaries to remit to us no more than 4.5% of their
net cable revenues in any year. For the six months ended June 30, 1999, our
credit agreements permitted our subsidiaries to remit approximately $9.4
million to us, and $9.4 million was actually remitted. As a result of the
1998 acquisition of the Falcon Video and Falcon Classic systems, we no longer
receive management fees and reimbursed expenses from Falcon Classic or
management fees from Falcon Video. Receivables from Enstar Communications
Corporation for services and reimbursements described above amounted
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<PAGE>
FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
to approximately $6.9 million at June 30, 1999. It is anticipated that our
expenses for managing our systems will decrease upon closing our pending sale
to Charter due to personnel reductions and amendments to certain provisions
in the bank credit agreement.
We have historically pursued a strategy of seeking to acquire attractive
acquisition candidates, with an emphasis on the acquisition of systems which
can be integrated with our existing operations. Over the past few years, we
have emphasized the acquisition of our affiliated systems due to our
familiarity with these assets and because, in many cases, these assets were
already operationally integrated with our systems located nearby. Except for
one acquisition of an affiliated Enstar partnership for approximately $10.5
million and the July 30, 1999 acquisition discussed in Note 5 to the
financial statements, we do not anticipate making additional acquisitions
until after the closing of our pending sale to Charter.
In October 1998, we reinstated third-party insurance coverage against
damage to its cable distribution plant and subscriber connections and against
business interruptions resulting from such damage. Although this coverage is
subject to a significant annual deductible, the policy is intended to insure
us against catastrophic losses, if any, in future periods.
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
Cash provided by operating activities (including interest expense and
management fee income) increased from $13.5 million to $36.7 million for the
six months ended June 30, 1999 compared to the corresponding period in 1998,
an increase of $23.2 million. The increase resulted primarily from a net
increase of $15.7 million in other operating items (receivables, other
assets, payables, accrued expenses and subscriber deposits and prepayments)
and to an increase of $7.5 million in non-cash interest expense recorded in
1999 related to the senior discount debentures.
Cash used in investing activities decreased from $115.4 million to $79.7
million, or by 30.9%, for the six months ended June 30, 1999 compared to the
corresponding period in 1998. The $35.7 million decrease was primarily due to
the 1998 acquisition of the Falcon Classic assets for $76.8 million partially
offset by increases of $20.4 million in capital expenditures, a $16.4 million
related to the 1999 acquisition of certain cable systems located in Virginia,
Utah and Oregon and a $2.4 million investment in a joint venture with Bend
Cable Communications, Inc.
Cash from financing activities decreased from $197.4 million to $40.6
million, or by 79.4%, for the six months ended June 30, 1999 compared to the
corresponding period in 1998. The decrease was primarily related to a
reduction in net borrowings of approximately $180.6 million from the 1998 six
month period related to the bank credit facility, partially offset by the
expenditure of $23.9 million in 1998 on deferred loan costs.
YEAR 2000
During the second quarter of 1999, we continued identification,
evaluation and remediation of our Year 2000 business risks associated with
operations directly under our control and those risks that are dependent on
third parties related to our exposure to computer systems, to operating
equipment
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<PAGE>
FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
which is date sensitive and to the interface systems of our vendors and
service providers. The evaluation has focused on identification, assessment
and remediation of systems and equipment that may fail to distinguish between
the year 1900 and the year 2000 and, as a result, may cease to operate or may
operate improperly when dates after December 31, 1999 are introduced. Most of
our exposure to Year 2000 issues is dependent in large part on third parties.
Failure to identify and remediate a critical Year 2000 issue could result in
an interruption of services to customers or in the interruption of critical
business functions, either of which could result in a material adverse impact
on our financial results.
We have concluded that certain of our internal information systems were
not Year 2000 compliant and elected to replace such software and hardware
with applications and equipment certified by the vendors as Year 2000
compliant. Replacement costs are capitalized in accordance with generally
accepted accounting principles and amortized over the lives of the assets.
Maintenance costs are expensed as incurred. We installed the new systems in
the first quarter of 1999. We are continuing to utilize internal and external
resources to extend the functionality of the new systems. The total
anticipated cost, including replacement software and hardware, is expected to
be approximately $2.7 million and is being funded through operating cash
flow. As of June 30, 1999, we had spent approximately $2.3 million. We do not
believe that any other significant information technology projects affecting
us have been delayed due to efforts to identify or address Year 2000 issues.
Additionally, we continue to inventory internal operating and revenue
generating equipment to identify items that need to be upgraded or replaced
and survey cable equipment manufacturers to determine which of their models
require upgrade or replacement to become Year 2000 compliant. Identification
and evaluation, while ongoing, are substantially completed and a plan has
been developed to remediate or replace non-compliant equipment. Of the total
number of potentially non-compliant items identified in the inventory,
approximately 1.5% are in the assessment stage. Approximately 14.4% of
non-compliant items are in the remediation planning phase and 85.6% are in
the implementation stage. We plan to conduct limited testing of our systems,
software and equipment in the third quarter of 1999 and place significant
reliance on test results provided by AT&T Broadband & Internet Services. The
cost of such replacement or remediation is currently estimated to be $1.7
million, of which $1.4 million had been incurred as of June 30, 1999. We have
also substantially completed the assessment and replacement or remediation of
the majority of our internal equipment containing embedded computer chips.
We continue to survey our significant third party vendors and service
suppliers to determine the extent to which our interface systems are
vulnerable should those third parties fail to solve their own Year 2000
problems on a timely basis. We are heavily dependent on third parties and
these parties are themselves heavily dependent on technology. For example, in
a situation impacting the entire cable industry, much of our headend
equipment that controls cable set-top devices was not Year 2000 compliant.
The manufacturers have been working with cable industry groups to develop
solutions that we are installing in our head-end equipment. It is currently
expected that these solutions will be substantially implemented by the end of
the third quarter of 1999. In addition, if a television broadcaster or cable
programmer encounters Year 2000 problems that impede its ability to deliver
its programming, we will be unable to provide that programming to our cable
customers, which would result in a loss of revenues, although we would
attempt to provide our customers with alternative
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<PAGE>
FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
program services. Virtually all of our most critical equipment vendors have
responded to the surveys regarding the Year 2000 compliance of their products
and indicated that they are already compliant or have indicated their intent
to be compliant. Additional compliance information has been obtained for
specific products from vendor Web sites, interviews, on-site visits, system
interface testing and industry group participation. Among the most
significant third party service providers upon which we rely are programming
suppliers, power and telephone companies, various banking institutions and
our customer billing service. We are taking steps to attempt to satisfy
ourselves that the third parties on which we are heavily reliant are Year
2000 compliant and are developing satisfactory contingency plans, or that
alternative means of meeting our business requirements are available, but
cannot predict the likelihood of such compliance nor the direct or indirect
costs to us of non-compliance by those third parties or of securing such
services from alternate compliant third parties. In areas in which we are
uncertain about the anticipated Year 2000 readiness of a significant third
party, we are investigating available alternatives, if any.
We believe that we have established an effective program to resolve all
significant Year 2000 issues in our control in a timely manner. As noted
above, however, we have not yet completed all phases of our program and are
dependent on third parties whose progress is not within our control. In the
event that we do not complete our currently planned additional remediation
prior to the Year 2000, we could experience significant difficulty in
producing and delivering our products and services and conducting our
business in the year 2000. In addition, disruptions experienced by third
parties with which we do business as well as by the economy generally could
also materially adversely affect us. The amount of potential liability and
lost revenue cannot be reasonably estimated at this time.
We have focused our efforts on identification and remediation of Year
2000 exposures and are beginning to develop specific contingency plans in the
event we do not successfully complete our remaining remediation as
anticipated or experience unforeseen problems. Considerable effort has been
directed toward distinguishing between those contingencies with a greater
probability of occurring from those whose occurrence is considered remote,
and on those systems whose failure poses a material risk to our results of
operations and financial condition. We are also examining our business
interruption strategies to evaluate whether they would satisfactorily meet
the demands of failures arising from Year 2000 related problems. We intend to
examine our status periodically to determine the necessity of establishing
and implementing such contingency plans or additional strategies, which could
involve, among other things, manual workarounds, adjusting staffing
strategies and sharing resources.
INFLATION
Certain of our expenses, such as those for wages and benefits, equipment
repair and replacement, and billing and marketing generally increase with
inflation. However, we do not believe that our financial results have been,
or will be, adversely affected by inflation in a material way, provided that
we are able to increase our service rates periodically, of which there can be
no assurance.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
See Item 2., "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources."
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<PAGE>
FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEMS 1-5. Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K
(a) EXHIBIT 10.36 Purchase and Contribution Agreement, dated as of
May 26, 1999, by and among Charter Communications, Inc.,
Falcon Communications, L.P., Falcon Holding Group L.P., TCI
Falcon Holdings, LLC, Falcon Cable Trust, Falcon Holding
Group, Inc., and DHN Inc. (incorporated herein by reference to
Exhibit 2.1 to the partnership's 8-K dated June 9, 1999.
EXHIBIT 10.37 First Amendment to Purchase and Contribution
Agreement, dated as of June 22, 1999, by and among Charter
Communications, Inc., Charter Communications Holding Company,
LLC, Falcon Communications, L.P., Falcon Holding Group, L.P.,
TCI Falcon Holdings, LLC, Falcon Cable Trust, Falcon Holding
Group, Inc., and DHN Inc.
EXHIBIT 10.38 Consent under Credit Agreement among Falcon
Cable Communications, LLC, certain of its subsidiaries,
BankBoston, N.A. and a group of lenders for which it is acting
as documentation agent.
EXHIBIT 27.1 Financial Data Schedule
(b) The Registrant filed a form 8-K dated June 9, 1999, reporting
under Item 5 that it had issued certain press releases in
which Charter will acquire Falcon in a cash and stock
transaction valued at approximately $3.6 billion.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
FALCON COMMUNICATIONS, L.P.
By: Falcon Holding Group, L.P.
General Partner
By: Falcon Holding Group, Inc., its
General Partner
Date: August 13, 1999 By: /s/ MICHAEL K. MENEREY
---------------------------------
Michael K. Menerey, Executive
Vice President, Secretary and
Chief Financial Officer
FALCON FUNDING CORPORATION
Date: August 13, 1999 By: /s/ MICHAEL K. MENEREY
---------------------------------
Michael K. Menerey, Chief
Financial Officer and Secretary
<PAGE>
FALCON COMMUNICATIONS, L.P. AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit
Number Description
10.37 First Amendment to Purchase and Contribution Agreement dated
as of June 22, 1999 by and among Charter Communications, Inc.,
Charter Communications Holding Company, LLC, Falcon
Communications, L.P., Falcon Holding Group, L.P., TCI Falcon
Holdings, LLC, Falcon Cable Trust, Falcon Holding Group, Inc.,
and DHN Inc.
10.38 Consent under Credit Agreement among Falcon Cable
Communications, LLC, certain of its subsidiaries, BankBoston,
N.A. and a group of lenders for which it is acting as
documentation agent.
E-1
<PAGE>
EXHIBIT 10.37
FIRST AMENDMENT TO
PURCHASE AND CONTRIBUTION AGREEMENT
THIS FIRST AMENDMENT TO PURCHASE AND CONTRIBUTION AGREEMENT
("Amendment") is made and entered into as of June 22, 1999 by and among
Charter Communications, Inc., a Delaware corporation ("CCI"), Charter
Communications Holding Company, LLC, a Delaware limited liability company
("Charter LLC"), Falcon Communications, L.P., a California limited
partnership ("Falcon"), Falcon Holding Group, L.P., a Delaware limited
partnership ("FHGLP"), TCI Falcon Holdings, LLC, a Delaware limited liability
company ("TCI"), Falcon Cable Trust, a California trust ("FC Trust"), Falcon
Holding Group, Inc., a California corporation ("FHGI"), and DHN Inc., a
California corporation ("DHN") (FHGLP, TCI, FC Trust, FHGI and DHN are
sometimes referred to herein as "Sellers").
PRELIMINARY STATEMENT
A. CCI, Falcon, and Sellers entered into the Purchase and
Contribution Agreement on May 26, 1999 (the "Purchase and Contribution
Agreement").
B. The parties hereto desire to modify the Purchase and Contribution
Agreement in certain respects as described herein. Section 11.9 of the
Purchase and Contribution Agreement provides that the Purchase and
Contribution Agreement may be amended; provided that any such amendment will
be binding on the parties prior to Closing only if set forth in writing
executed by them.
C. Section 11.3 of the Purchase and Contribution Agreement permits
CCI to assign its rights, but not its obligations, under the Purchase and
Contribution Agreement to an Affiliate of CCI under certain circumstances.
CCI desires to assign its rights to purchase the Purchased Interests under
the Purchase and Contribution Agreement to Charter LLC, and Charter LLC is
willing to accept such assignment and assume the obligations of CCI under the
Purchase and Contribution Agreement. Sellers consent to such assignment of
CCI's rights to Charter LLC on the terms and conditions set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
1. Except as otherwise provided in the Amendment, all capitalized
terms used herein and not otherwise defined herein shall have the same
meanings assigned to them in the Purchase and Contribution Agreement. As used
in the Purchase and Contribution Agreement, the term "Charter LLC" shall have
the meaning given to it in this Amendment.
2. Subject to the terms set forth herein, (a) CCI assigns, transfers
and conveys to Charter LLC any and all rights of CCI under the Purchase and
Contribution Agreement to purchase the Purchased Interests; (b) Charter LLC
accepts such assignment and assumes and undertakes to discharge, satisfy and
perform all obligations of CCI under the Purchase and Contribution Agreement;
and (c) Sellers consent to such assignment. This assignment and assumption
shall not (i) relieve CCI of any liability or obligation as Buyer under the
Purchase and Contribution Agreement; or (ii) deprive Sellers of any rights or
benefits under the Purchase and Contribution Agreement. Upon such assignment,
the term "Buyer" as used in the Purchase
<PAGE>
and Contribution Agreement shall include Charter LLC, to the extent
applicable as purchaser of and Purchased Interest, as well as CCI. Charter
LLC's assumption of the obligations of CCI under the Purchase and
Contribution Agreement is intended to be for the benefit of and shall be
enforceable by Sellers.
3. Clause (5) of Section 2.1(a) of the Purchase and Contribution
Agreement is hereby amended to read in its entirety as follows:
from FHGLP, all of the capital stock in Enstar, its entire membership
interest in Enstar Finance Company, LLC, and its entire membership
interest in CC VII, LLC, a Delaware limited liability company ("CC VII,
LLC"); and
4. The term "Minimum Contributed Interest" as defined in the fourth
sentence of Section 2.1(b) of the Purchase and Contribution Agreement is
hereby amended to be not less than 45.3% of FHGLP's partnership interest in
Falcon.
5. Clause (i) of Section 2.3(b) of the Purchase and Contribution
Agreement is hereby amended to read in its entirety as follows:
the value of the Aggregate Consideration allocated to FHGLP with respect
to its partnership interest in Falcon in Part III of the Allocation
Notice, and
6. Section 4 of the Purchase and Contribution Agreement is hereby
amended as follows:
(a) by amending the parenthetical clause of the first paragraph
of such Section to read in its entirety as follows:
(with respect to such Seller and not with respect to any other Seller, and
only FHGLP makes the representations and warranties in Sections 4.4(b),
4.7 and 4.9)
(b) by adding the following new subsection 4.9 to the end of
such Section:
4.9 CC VII, LLC was duly formed as a limited liability company
under the laws of the State of Delaware and is validly existing and in good
standing under the laws of the State of Delaware. FHGLP is the record and
beneficial owner of each issued and outstanding Equity Interest of CC VII,
LLC. FHGLP has formed CC VII, LLC solely to hold the interest in Falcon to be
transferred to it pursuant to Section 6.6(g) hereof and to exercise all
rights and perform all obligations pertaining thereto. At no time prior to
Closing will CC VII, LLC conduct any business activities or other operations
of any kind, or hold any asset other than the interest in Falcon, or become
liable for any obligation except its obligation under the Agreement. At all
times since its formation, CC VII, LLC has been treated for federal income
tax purposes as a disregarded entity under Treasury Regulations
ss.301.7701-3(b)(1)(ii).
2
<PAGE>
7. Section 5.6 of the Purchase and Contribution Agreement is hereby
amended to read in its entirety as follows:
The ownership chart of CCI and its Subsidiaries included as SCHEDULE 5.6
is true and correct in all material respects. Without limiting the
generality of the foregoing, CCI is, and as of the Closing either CCI or
Charter LLC will be, the record and beneficial owner of all of the issued
and outstanding Equity Interests of Charter Holdings, and CCI is, and as
of the Closing CCI will be, the record and beneficial owner of all of the
issued and outstanding equity Interest of Charter LLC.
8. Section 6.1(a) is hereby amended by adding the following new
subparagraph (1):
(10) TAX STATUS OF CC VII, LLC. Take any action that would cause CC
VII, LLC to be treated for federal income tax purposes as an entity other
than a disregarded entity under treasury Regulations
ss.301.7701-3(b)(1)(ii).
9. Clause (1) of Section 6.6(c)of the Purchase and Contribution
Agreement is hereby amended to read in its entirety as follows:
the definitive Charter LLC Operating Agreement to be effective upon the
Closing in accordance with the terms set forth on Exhibit D, with such
changes as are appropriate to reflect the assignment by CCI to Charter LLC
of the right to acquire the Purchased Interests, and such additional terms
as Buyer and FHGLP may mutually agree,
10. Section 6.6 of the Purchase and Contribution Agreement hereby
amended by adding the following new paragraph (g):
(g) On or prior to the Closing, FHGLP shall contribute a one
percent (1%) limited partnership interest in Falcon to CC VII, LLC, free
and clear of all Encumbrances and subject to the Legal Restrictions.
11. Clause (i) of Section 6.10(h) of the Purchase and Contribution
Agreement is hereby amended to read in its entirety as follows:
the Cash Consideration allocable (pursuant to Section 2.3(d)) to the
membership interest in CC VII, LLC and to the partnership interests in
Falcon other than the Contributed Interest,
12. For the purpose of this paragraph 12, each of CCI and Charter LLC is
referred to as a "Buyer" and CCI and Charter LLC are referred to collectively as
the "Buyers." CCI and Charter LLC agree that all obligations specified in the
Purchase and Contribution Agreement as obligations of CCI, including the
obligation to pay the Aggregate Consideration and any other amounts payable to
Sellers, whether to be performed at, before or after Closing, shall be joint and
several obligations of CCI and Charter LLC. All such obligations, including
those pay money, including, without limitation, the Cash Consideration, may be
enforced by Sellers against either Buyer individually, and such enforcement
shall not be conditioned or contingent upon the pursuit of any remedies against
the other Buyer. Each Buyer hereby waives diligence, demand of payment, filing
of claims with a court in the event of merger or bankruptcy of the other Buyer,
3
<PAGE>
any right to require a proceeding first against the other Buyer, the benefit
of discussion, protest or notice and all demands whatsoever, and covenants
that this agreement will not be discharged as to any obligation except by
satisfaction of such obligation in full. Until Sellers have been paid in full
any amounts due and owing to them under this Amendment and the Purchase and
Contribution Agreement, each Buyer hereby irrevocably waives any claim or
other rights which it may now or hereafter acquire against the other Buyer
that arise from the existence, payment, performance or enforcement of its
obligations under the Amendment or the Purchase and Contribution Agreement,
including, without limitation, any right of reimbursement, exoneration,
contribution, indemnification, any right to participate in any claim or
remedy of any Seller against the other Buyer or any collateral that any
Seller hereafter acquires, whether or not such claim, remedy or right arises
in equity, or under contract, statute or common law, including, without
limitation, the right to take or receive from the other Buyer, directly or
indirectly, in cash or other property or by set-off in any other manner,
payment or security on account of such claim or other rights. To the fullest
extent permitted by applicable law, the obligations of each Buyer under this
Amendment and the Purchase and Contribution Agreement shall not be affected
by (a) the failure of the applicable obligee to assert any claim or demand or
to enforce any right or remedy against the other Buyer pursuant to the
provisions of this Amendment or the Purchase and Contribution Agreement or
otherwise, (b) any rescission, waiver, amendment or modification of, or any
release from any of the terms or provisions of this Amendment or the Purchase
and Contribution Agreement or the invalidity or unenforceability (in whole or
in part) of this Amendment or the Purchase and Contribution Agreement, unless
consented to in writing by Sellers, each Buyer, and Falcon and (c) any change
in the existence (corporate or otherwise) of either Buyer or any Seller or
any insolvency, bankruptcy, reorganization or similar proceeding affecting
any of them or their assets.
13. Exhibit F to the Purchase and Contribution Agreement is hereby
amended in its entirety as set forth on the attached Exhibit I.
14. The parties hereby agree that the Purchase and Contribution
Agreement is hereby deemed amended in all respects necessary to give effect
to the consents, agreements and waivers contained in the Amendment, whether
or not a particular Section or provision of the Purchase and Contribution
Agreement has been referred to in this Amendment. Except as amended hereby,
the Purchase and Contribution Agreement shall remain unchanged and in full
force and effect, and this Amendment shall be governed by and subject to the
terms of the Purchase and Contribution Agreement, as amended hereby. From and
after the date of this Amendment, each reference in the Purchase and
Contribution Agreement to :"this Agreement," "hereof," "hereunder" or words
of like import, and all references to the Purchase and Contribution Agreement
in any and all agreements, instruments, documents, notes, certificates and
other writings of every kind and nature (other than in this Amendment or as
otherwise expressly provided) shall be deemed to mean the Purchase and
Contribution Agreement, as amended by this Amendment, whether or not such
Amendment is expressly referenced.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURES ON FOLLOWING PAGES]
4
<PAGE>
IN WITNESS WHEREOF, this Amendment has been executed by each of CCI,
Charter LLC, Falcon and Sellers as of the date first written above.
<TABLE>
<CAPTION>
SELLERS: CCI:
<S> <C>
FALCON HOLDING GROUP, L.P. CHARTER COMMUNICATIONS, INC.
By: Falcon Holding Group, Inc.,
General Partner By: /s/ Curtis S. Shaw
-------------------------------------
Name: Curtis S. Shaw
By: /s/ Stanley S. Itskowitch Title: Senior Vice President
----------------------------------
Name: Stanley S. Itskowitch
Title: Executive Vice President CHARTER LLC:
TCI FALCON HOLDINGS, LLC CHARTER COMMUNICATIONS HOLDING COMPANY, LLC
By: /s/ Derek Chang By: /s/ Curtis S. Shaw
---------------------------------- -------------------------------------
Name: Derek Chang Name: Curtis S. Shaw
Title: Vice President Title: Senior Vice President
FALCON HOLDING GROUP, INC. FALCON:
By: /s/ Stanley S. Itskowitch FALCON COMMUNICATIONS, L.P.
----------------------------------
Name: Stanley S. Itskowitch
Title: Executive Vice President By: Falcon Holding Group, L.P.
General Partner
FALCON CABLE TRUST By: Falcon Holding Group, L.P.
By: /s/ Marc B. Nathanson General Partner
----------------------------------
Name: Marc B. Nathanson
Title: Trustee By: /s/ Stanley S. Itskowitch
-------------------------------------
Name: Stanley S. Itskowitch
Title: Executive Vice President
DHN, INC.
By: /s/ Stanley S. Itskowitch By: TCI Falcon Holding, L.L.C.
---------------------------------- General Partner
Name: Stanley S. Itskowitch
Title: Executive Vice President By: /s/ Derek Chang
-------------------------------------
Name: Derek Chang
Title: Vice President
</TABLE>
[THIS IS A SIGNATURE PAGE
TO THE AMENDMENT]
5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT I
EXHIBIT F
FORM OF ALLOCATION NOTICE
(Example)
<S> <C> <C> <C>
I. Percentage of FHGLP's partnership interest in Falcon represented by %
the Contributed Interest:
II. Aggregage Consideration based on Preliminary Closing Statement: Less
payment to Encore Escrow
III. Aggregate Consideration payable to Sellers Allocation of Aggregate
Consideration based on Preliminary Closing Statement:
FHGLP, with respect to the stock of Enstar: 1
DHN, with respect to its interest in Adlink: 1
ALLOCATION OF PERCENTAGE SHARE
REMAINING OF REMAINING
AGGREGATE AGGREGATE
CONSIDERATION CONSIDERATION
FHGLP:
With respect to its membership interest in CC VII, LLC With
respect to its partnership interest in Falcon
Total to FHGLP %
TCI %
FC Trust %
FHGI %
Total 100.000000%
IV. Equity Value:
V. Payment of Cash Portion of Closing Payment:
FHGLP
[wire instructions]
TCI
[wire instructions]
FC Trust
[wire instructions]
FHGI
[wire instructions]
Total
VI. Payment to Sellers of Funds from Adjustment Escrow Account:
FHGLP %
TCI %
FC Trust %
FHGI %
Total 100.000000%
</TABLE>
<PAGE>
EXHIBIT 10.38
FALCON CABLE COMMUNICATIONS, LLC
CONSENT UNDER CREDIT AGREEMENT
Notwithstanding Section 7.9.7(b)(A) of the Credit Agreement dated as of
June 30, 1998, as now in effect (the "CREDIT AGREEMENT"), among Falcon Cable
Communications, LLC (the "COMPANY"), certain of its Subsidiaries, BankBoston,
N.A. and a group of Lenders for which it is acting as documentation agent (the
"DOCUMENTATION AGENT"), the Documentation Agent consents that:
1. Falcon Community Ventures I Limited Partnership ("COMMUNITY VENTURES"), a
Subsidiary of the Company, may consummate the acquisition contemplated by
the Asset Purchase Agreement made effective as of September 9, 1998 by and
between Jones Cable Income Fund 1-B/C Venture, Jones Intercable, Inc. and
Community Ventures, pursuant to the terms thereof, for a purchase price not
to exceed $10,000,000 (prior to the application of all purchase price
adjustments provided for therein).
2. Falcon Cablevision ("CABLEVISION") and Falcon Telecable ("TELECABLE"),
Subsidiaries of the Company, may consummate the acquisition contemplated by
the Asset Purchase Agreement dated as of November 6, 1998 by and among
Cablevision, Telecable and Enstar Income/Growth Program Six-B, L.P.,
pursuant to the terms thereof, for a purchase price not to exceed
$10,473,200 (prior to the application of all purchase price adjustments
provided for therein).
3. The aggregate purchase price paid in the acquisitions described above shall
not be counted toward the aggregate limit set forth in Section 7.9.7(b)(A)
for the fiscal year of the Company ending December 31, 1999; PROVIDED,
HOWEVER, that such acquisitions shall be subject to each other provision of
Section 7.9.7 and shall be treated for all purposes of the Credit Agreement
as acquisitions made pursuant to Section 7.9.7.
This consent is based on the representation by the Company that, after giving
effect to this consent and the acquisitions described above, no Default will
exist. This consent is a Credit Document and shall not be construed as a waiver
of any right or remedy on any future occasion. Terms defined in the Credit
Agreement are used herein with the meanings so defined.
Dated: July 19, 1999 BANKBOSTON, N.A., as Documentation Agent
By /s/ MATTHEW E. MURPHY
----------------------
Title: Director
The foregoing is hereby consented and agreed to:
<PAGE>
TORONTO DOMINION (TEXAS) INC.
By /s/ JEFFERY R. LENTS
---------------------
Title: Vice President
Toronto Dominion (Texas) Inc.
909 Fannin Street, 17th Floor
Houston, TX 77010
Telecopy: (713) 951-9921
<PAGE>
NATIONSBANK, N.A.
By
---------------------
Title:
Bank of America National Trust &
Savings Association
Communications Finance
Unit 9048
555 California Street, 41st Floor
San Francisco, CA 94104
Attn: Doug Meckelnburg
Telecopy: (415) 622-0632
with a copy to: NationsBank, N.A.
901 Main Street, 64th Floor
Dallas, TX 75202
Attn: Tom Carter
Telecopy: (214) 209-9390
<PAGE>
THE CHASE MANHATTAN BANK
By
---------------------
Title:
The Chase Manhattan Bank
270 Park Avenue, 37th Floor
New York, NY 10017
Telecopy: (212) 270-4584
<PAGE>
BANK OF AMERICA, N.A. (f/k/a
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION)
By /s/ JENNIFER ZYDNEY
---------------------
Title: Managing Director
Bank of America, N.A.
Communications Finance Division
901 Main St., 64th Floor
Dallas, TX 75202
Attn: Jennifer Zydney
Rich Peck
Telecopy: (214) 209-9390
<PAGE>
ABN AMRO BANK N.V.
By /s/ THOMAS M. TOERPE
---------------------
Title: Vice President
By /s/ SANG W. LEE
---------------------
Title: Assistant Vice President
ABN AMRO Bank N.V.
135 South LaSalle, Suite 640
Chicago, ILL 60603
<PAGE>
AG CAPITAL FUNDING PARTNERS, L.P.
By Angelo, Gordon & Co., as Investment Advisor
By
---------------------
Title:
AG Capital Funding Partners, L.P.
c/o Angelo, Gordon & Co.
245 Park Avenue, 26th Floor
New York, NY 10167
Telecopy: (212) 867-1388
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY
By
---------------------
Title:
By
---------------------
Title:
Its Authorized Signatories
Allstate Life Insurance Company
3075 Sanders Road, Suite G5A
Northbrook, IL 60062
Telecopy: (847) 402-9882
<PAGE>
BANQUE NATIONALE DE PARIS
By /s/ CLIVE BETTLES
---------------------
Title: Senior Vice President
By /s/ JANICE HO
---------------------
Title: Vice President
Banque Nationale de Paris
725 South Figueroa, Suite 2090
Los Angeles, CA 90017
Telecopy: (213) 488-9602
<PAGE>
BARCLAYS BANK PLC
By /s/ DANIEL IACOVONE
---------------------
Title: Associate Director
Barclays Bank PLC
388 Market Street, Suite 1700
San Francisco, CA 94111
Telecopy: (415) 765-4760
<PAGE>
B.D.C. FINANCE L.L.C.
By
---------------------
Title:
Black Diamond Capital Management
One Conway Park
100 Field Drive, Suite 100
Lake Forest, IL 60045
Attn: D.M. Brown, CFO
Telecopy: (847) 615-9064
<PAGE>
CIBC INC.
By /s/ LAURA HORN
---------------------
Title: Executive Director
CIBC Inc.
425 Lexington Avenue
New York, NY 10017
Telecopy: (212) 856-3558
<PAGE>
CITIZENS BANK OF RHODE ISLAND
By
---------------------
Title:
Citizens Bank of Rhode Island
One Citizens Plaza, 4th Floor
Providence, RI 02903
Telecopy: (401) 455-5404
<PAGE>
CITY NATIONAL BANK
By
---------------------
Title: Vice President
City National Bank
400 N. Roxbury Drive, 3rd Floor
Beverly Hills, CA 90210
Telecopy: (310) 888-6152
<PAGE>
COOPERATIVE CENTRALE RAIFFEISEN- BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND", NEW YORK BRANCH
By /s/ MICHIEL V.M. VAN DER VOORT
---------------------
Title: Vice President
By /s/ IAN REECE
---------------------
Title: Senior Credit Officer
Rabobank Nederland
Media & Telecommunications
300 South Wacker Drive, Suite 3500
Chicago, IL 60606
Telecopy: (312) 786-0052
<PAGE>
GOLDMAN SACHS CREDIT PARTNERS LP
By /s/ STEPHEN J. MCGUINNESS
---------------------
Title: Authorized Signatory
Goldman Sachs Credit Partners LP
85 Broad Street
New York, NY 10022
Attn: Susan Lancaster
Telecopy: (212) 357-8068
<PAGE>
CREDIT LOCAL DE FRANCE
By /s/ ROBERT N. SLOAN
---------------------
Title: Vice President
By /s/ JAMES R. MILLER
---------------------
Title: General Manager
Credit Local de France
450 Park Avenue, 3rd Floor
New York, NY 10022
Telecopy: (212) 753-5522
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH
By /s/ MARK D. THORSHEIM
---------------------
Title: Vice President
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, NY 10019
Telecopy: (212) 261-3288
<PAGE>
CYPRESSTREE INVESTMENT FUND LLC
By
---------------------
Title:
Cypresstree Investment Fund LLC
125 High Street
Boston, MA 02110
Telecopy: (617) 946-5880
<PAGE>
DEEP ROCK AND COMPANY
By: Eaton Vance Management, as Investment Advisor
By /s/ PAYSON F. SWAFFIELD
---------------------
Title: Vice President
Eaton Vance Management
Attn: Prime Rate Reserves
24 Federal Street, 6th Floor
Boston, MA 02110
Telecopy: (617) 695-9594
<PAGE>
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES
By
---------------------
Title:
Dresdner Bank AG, New York and Grand
Cayman Branches
75 Wall Street
New York, NY 10005
Telecopy: (212) 429-2374
<PAGE>
EATON VANCE SENIOR INCOME TRUST
By: Eaton Vance Management, as Investment Advisor
By /s/ PAYSON F. SWAFFIELD
---------------------
Title: Vice President
Eaton Vance Management
Attn: Prime Rate Reserves
24 Federal Street, 6th Floor
Boston, MA 02110
Telecopy: (617) 695-9594
<PAGE>
FIRST DOMINION FUNDING I
By
---------------------
Title:
Texas Commerce Bank, N.A.
600 Travis, 8th Floor
Houston, TX 77002
Attn: Crystal Williams
Telecopy: (713) 216-8299
with a copy to: First Dominion Funding I
1330 Avenue of the Americas, 10th Floor
New York, NY 10019
Attn: Shashi Srikantan
Telecopy: (212) 603-8505
<PAGE>
FLEET NATIONAL BANK
By
---------------------
Title:
Fleet National Bank
Media & Communications Group
1185 Avenue of the Americas, 16th Floor
New York, NY 10036
Telecopy: (212) 819-6202
<PAGE>
THE FUJI BANK, LIMITED, LOS ANGELES AGENCY
By
---------------------
Title:
The Fuji Bank, Limited, Los Angeles Agency
333 South Hope Street, 39th Floor
Los Angeles, CA 90071
Telecopy: (213) 253-4178
<PAGE>
HARCH CAPITAL MANAGEMENT
By
---------------------
Title:
Harch Capital Management
One Park Place
621 NW 53rd Street, Suite 620
Boca Raton, FL 33487
Telecopy: (561) 995-4955
<PAGE>
INDOSUEZ CAPITAL FUNDING IV, L.P.
By: Indosuez Capital Luxembourg, as Collateral Manager
By
---------------------
Title:
Indosuez Capital
1211 Avenue of the Americas, 7th Floor
New York, NY 10036-8701
Attn: Francoise Berthelot
Telecopy: (212) 278-2254
<PAGE>
THE INDUSTRIAL BANK OF JAPAN, LIMITED LOS ANGELES AGENCY
By /s/KAZUTOSHI KUWAHARA
---------------------
Title: General Manager
The Industrial Bank of Japan, Limited Los Angeles Agency
350 Grand South Avenue, Suite 1500
Los Angeles, CA 90071
Telecopy: (213) 488-9840
<PAGE>
KZH PONDVIEW LLC
By /s/PETER CHIN
---------------------
Title: Authorized Agent
KZH III LLC
c/o The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, NY 10001
Attention: Virginia Conway
Telecopy: (212) 946-7776
<PAGE>
KZH CYPRESSTREE-1 LLC
By /s/PETER CHIN
---------------------
Title: Authorized Agent
KZH CypressTree-1 LLC
c/o The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, NY 10001
Attention: Virginia Conway
Telecopy: (212) 946-7776
<PAGE>
KZH SOLEIL-2 LLC
By /s/PETER CHIN
---------------------
Title: Authorized Agent
KZH Soleil-2 LLC
c/o The Chase Manhattan Bank
450 West 33rd Street
New York, NY 10001
Attention: Virginia Conway
Telecopy: (212) 946-7776
<PAGE>
THE LONG TERM CREDIT BANK OF JAPAN LIMITED, LOS
ANGELES AGENCY
By
---------------------
Title:
The Long Term Credit Bank of Japan Limited, Los Angeles
Agency
350 South Grand Avenue, Suite 3000
Los Angeles, CA 90071
Telecopy: (213) 622-6908
<PAGE>
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By /s/ WALTER T. DWYER
---------------------
Title: Managing Director
Massachusetts Mutual Life Insurance Company
1295 State Street, First Floor
Springfield, MA 01111
Telecopy: (413) 744-6127
<PAGE>
MASSMUTUAL HIGH YIELD PARTNERS II, LLC
By /s/ WALTER T. DWYER
---------------------
Title: Managing Director
MassMutual High Yield Partners II, LLC
c/o Massachusetts Mutual Life
1295 Spring Street, First Floor
Springfield, MA 01111
Telecopy: (413) 744-6127
<PAGE>
MELLON BANK, N.A., AS TRUSTEE FOR THE GENERAL MOTORS
CASH MANAGEMENT MASTER TRUST
By Mellon Bank, N.A., solely in its capacity as Trustee
for the General Motors Cash Management Master Trust (as
directed by Shenkman Capital Management, Inc.) and not
in its individual capacity, as Assignee
By
---------------------
Title:
Mellon Bank, N.A., as Trustee for General Motors Cash
Management Master Trust
c/o Mellon Trust Investment Manager Relations
One Mellon Bank Center, Mail Stop #151-3346
Pittsburgh, PA 15258-0001
Attn: Laurie Adams
with a copy to: Shenkman Capital Management
461 Fifth Avenue
New York, NY 10017
Attn: Niall Rosenzweig
Telecopy: (212) 867-9106
<PAGE>
MERRILL LYNCH DEBT STRATEGIES PORTFOLIO
By: Merrill Lynch Asset Management, L.P., as Investment
Advisor
By
---------------------
Title:
Merrill Lynch Debt Strategies Portfolio
c/o Merrill Lynch Asset Management, L.P.
800 Scudders Mill Road, Area 1B
Plainsboro, NJ 08536
Telecopy: (609) 282-3542
<PAGE>
MERRILL LYNCH GLOBAL INVESTMENT SERIES: INCOME
STRATEGIES PORTFOLIO
By: Merrill Lynch Asset Management, L.P.
By
---------------------
Title:
Merrill Lynch Global Investment Series:
Income Strategies Portfolio
c/o Merrill Lynch Asset Management, L.P.
800 Scudders Mill Road, Area 1B
Plainsboro, NJ 08536
Telecopy: (609) 282-3542
<PAGE>
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By
---------------------
Title:
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, New York 10260
Telecopy: (212) 648-5197
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST
By
---------------------
Title: Vice President
Prime Income Trust
c/o Dean Witter InterCapital, Inc.
Two World Trade Center, 72nd Floor
New York, NY 10048
Telecopy: (212) 392-5345
<PAGE>
NATEXIS
By /s/EVAN B. KRAUS
---------------------
Title: Assistant Vice President
By /s/CYNTHIA E. BACHS
---------------------
Title: VP Group Manager
Natexis
645 Fifth Avenue
New York, NY 10022
Telecopy: (212) 872-5045
<PAGE>
OAK HILL SECURITIES FUND, L.P.
By: Oak Hill Securities GenPar, L.P., its General Partner
By: Oak Hill Securities MPG, Inc., its General Partner
By
---------------------
Title:
Oak Hill Securities Fund, L.P.
Park Avenue Tower
65 East 55th Street, 32nd Floor
New York, NY 10022
Telecopy: (212) 593-3596
<PAGE>
OSPREY INVESTMENTS PORTFOLIO
By: Citibank, N.A., as Manager
By
---------------------
Title:
Osprey Investments Portfolio
599 Lexington Avenue
26th Floor, Zone 10
New York, NY 10043
Telecopy: (212) 793-1871
<PAGE>
PARIBAS
By /s/ DARLYNN ERNST KITCHNER
--------------------------
Title: Vice President
By /s/ THOMAS G. BRANDT
---------------------
Title: Director
Paribas
2029 Century Park East, Suite 3900
Los Angeles, CA 90067
Telecopy: (310) 556-3762
<PAGE>
PROTECTIVE
By
---------------------
Title:
Protective
1150 Two Galleria Tower
12455 Noel Road, LB#45
Dallas, TX 76240
Telecopy: (972) 233-4343
<PAGE>
SENIOR DEBT PORTFOLIO
By: Boston Management and Research, as Investment Advisor
By
---------------------
Title:
Senior Debt Portfolio
c/o Boston Management and Research
24 Federal Street, 6th Floor
Boston, MA 02110
<PAGE>
STATE STREET BANK AND TRUST COMPANY, AS TRUSTEE FOR
GENERAL MOTORS WELFARE BENEFITS TRUST
By
---------------------
Title:
State Street Bank and Trust Company
Global Investment Manager Services Division
One Enterprise Drive W6C
North Quincy, MA 02171
Attn: Adam Antonik
with a copy to: Shenkman Capital Management
461 Fifth Avenue
New York, NY 10017
Attn: Niall Rosenzweig
Telecopy: (212) 867-9106
<PAGE>
SUMMIT BANK
By
---------------------
Title:
Summit Bank
512 Township Line Road, Suite 280
Blue Bell, PA 19422
Telecopy: (215) 619-4820
<PAGE>
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By
---------------------
Title:
Suntrust Bank, Central Florida, N.A.
200 South Orange Ave.
MC 1109
Orlando, FL 32801
Telecopy: (407) 237-5126
<PAGE>
TRANSAMERICA
By
---------------------
Title:
Transamerica
1100 South Olive Street, Suite 2700
Los Angeles, CA 90015
Telecopy: (213) 742-4160
<PAGE>
THE TRAVELERS INSURANCE COMPANY
By /s/ JORDAN M. STITZER
---------------------
Title: Vice President Company
The Travelers Insurance Company
One Tower Square
Hartford, CT 06183-2030
Telecopy: (860) 954-3730
<PAGE>
UNION BANK OF CALIFORNIA
By /s/ MICHAEL K. MCSHANE
---------------------
Title: Senior Vice President
Union Bank of California
445 South Figueroa Street
Los Angeles, CA 90071
Telecopy: (213) 236-5747
<PAGE>
VAN KAMPEN PRIME RATE INCOME TRUST
By /s/ LISA M. MINCHESKI
---------------------
Title: Vice President
Van Kampen Prime Rate Income Trust
One Parkview Plaza, 6th Floor
Oakbrook Terrace, IL 60181
Telecopy: (630) 684-6740
<PAGE>
VAN KAMPEN SENIOR INCOME TRUST
By /s/ LISA M. MINCHESKI
---------------------
Title: Vice President
Van Kampen Senior Income Trust
One Parkview Plaza, 6th Floor
Oakbrook Terrace, IL 60181
Telecopy: (630) 684-6740
<PAGE>
VAN KAMPEN CLO II, LIMITED
By: Van Kampen Management, Inc.,
as Collateral Manager
By /s/ LISA M. MINCHESKI
---------------------
Title: Vice President
Van Kampen CLO II, Limited
One Parkview Plaza, 6th Floor
Oakbrook Terrace, IL 60181
Telecopy: (630) 684-6740
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT JUNE 30, 1999, AND THE STATEMENTS OF OPERATIONS FOR THE SIX MONTHS
ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000900346
<NAME> FALCON COMMUNICATIONS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 11,852
<SECURITIES> 0
<RECEIVABLES> 26,750
<ALLOWANCES> 699
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 871,903
<DEPRECIATION> 349,316
<TOTAL-ASSETS> 1,436,842
<CURRENT-LIABILITIES> 147,522
<BONDS> 1,665,676
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,436,842
<SALES> 0
<TOTAL-REVENUES> 212,205
<CGS> 0
<TOTAL-COSTS> 264,653
<OTHER-EXPENSES> (9,970)
<LOSS-PROVISION> 2,552
<INTEREST-EXPENSE> 64,852
<INCOME-PRETAX> (109,882)
<INCOME-TAX> (2,459)
<INCOME-CONTINUING> (107,423)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (107,423)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
