-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MmDQMRp0ebWYNOwlaEbYN9KAXqEe4e/Dw+5dZRmxaDUqq2OODEhMH++eKkt4RfSi g+vGlV/0FgvX4ypiAlSNIg== 0000354963-96-000021.txt : 19961106 0000354963-96-000021.hdr.sgml : 19961106 ACCESSION NUMBER: 0000354963-96-000021 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960930 ITEM INFORMATION: Changes in control of registrant FILED AS OF DATE: 19961105 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHENANDOAH TELECOMMUNICATIONS CO/VA/ CENTRAL INDEX KEY: 0000354963 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 541162807 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-09881 FILM NUMBER: 96654553 BUSINESS ADDRESS: STREET 1: PO BOX 459 STREET 2: 124 SOUTH MAIN ST CITY: EDINBURG STATE: VA ZIP: 22824 BUSINESS PHONE: 7039845247 MAIL ADDRESS: STREET 1: P O BOX 459 CITY: EDINBURG STATE: VA ZIP: 22824 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K/A 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, 1996 Shenandoah Telecommunications Company (Exact name of registrant as specified in charter) Virginia 0-9881 54-1162807 (State or other (Commission File (IRS Employer jurisdiction of Number) Identification incorporation) Number) 124 South Main Street, Edinburg, Virginia 22824 (Address of principal executive offices) Registrant's telephone number, including area code: (540) 984-4141 PAGE ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Audited Statements WOODSTOCK AND NEW MARKET CLUSTERS C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP FINANCIAL STATEMENTS December 31, 1995 PAGE ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued) (a) Audited Statements WOODSTOCK AND NEW MARKET CLUSTERS C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP FINANCIAL STATEMENTS December 31, 1995 CONTENTS Page Number Independent Auditors' Report 1 Combined Statement of Net Assets Exhibit A 3 Combined Statement of Operations Exhibit B 4 Combined Statement of Changes in Net Assets Exhibit C 5 Combined Statement of Cash Flows Exhibit D 6 Notes to Combined Financial Statements Exhibit E 7 PAGE ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued) (a) Audited Statements The Partners C4 Media Cable Southeast, Limited Partnership Lockney, Texas 79241 INDEPENDENT AUDITORS' REPORT We have audited the accompanying combined statement of net assets of the combined operations of C4 Media Cable Southeast, Limited Partnership's ("C4 Media") cable television systems serving 6 communities in Woodstock and New Market, Virginia (collectively referred to as the "Woodstock and New Market Clusters") as of December 31, 1995, and the related combined statements of operations, changes in net assets, and cash flows for the year then ended. These financial statements are the responsibility of the Woodstock and New Market Clusters' management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of the Woodstock and New Market Clusters at December 31, 1995, and the combined results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. As discussed in Note 7, on February 1, 1996, C4 Media sold substantially all operating assets (including the Woodstock and New Market Clusters) to FrontierVision Operating Partners, L.P. ("FVOP"). FVOP has subsequently entered into an agreement to sell the Woodstock and New Market Clusters to Shenandoah Telecommunications. Williams, Rogers, Lewis, & Co., P.C. Williams, Rogers, Lewis & Co., P.C. Plainview, Texas August 30, 1996 PAGE ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued) (a) Audited Statements Exhibit A WOODSTOCK AND NEW MARKET CLUSTERS C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP COMBINED STATEMENT OF NET ASSETS December 31, 1995 Assets Accounts Receivable, Net $ 19,321 Prepaid Expense and Other 13,404 Plant and Equipment, Net 1,235,652 Franchises, Net 656,036 Acquisition Costs, Net 174,637 $2,099,050 Liabilities and Net Assets Bank Overdraft $ 490 Accounts Payable 77,558 Other Current Liabilities 47,886 Accrued Interest Payable 5,156,619 Notes Payable 10,348,525 Total Liabilities 15,631,078 Net Assets (13,532,028) $ 2,099,050 The accompanying notes are an integral part of the financial statements. PAGE ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Audited Statements Exhibit B WOODSTOCK AND NEW MARKET CLUSTERS C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP COMBINED STATEMENT OF OPERATIONS For the Year Ended December 31, 1995 REVENUE Cable Service $ 1,640,624 EXPENSE Programming Costs 357,148 Salaries 165,197 Other Operating Expenses 353,883 Management Fees 93,850 Interest 1,411,821 Depreciation 209,434 Amortization 486,396 3,077,729 NET LOSS $(1,437,105) The accompanying notes are an integral part of the financial statements. PAGE ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued) (a) Audited Statements Exhibit C WOODSTOCK AND NEW MARKET CLUSTERS C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP COMBINED STATEMENT OF CHANGES IN NET ASSETS For the Year Ended December 31, 1995 Balance, December 31, 1994 $(12,094,923) Net Loss, 1995 (1,437,105) Balance, December 31, 1995 $(13,532,028) The accompanying notes are an integral part of the financial statements. PAGE ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued) (a) Audited Statements Exhibit D WOODSTOCK AND NEW MARKET CLUSTERS C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP COMBINED STATEMENT OF OPERATIONS For the Year Ended December 31, 1995 CASH FLOW FROM OPERATING ACTIVITIES: Net Loss $ (1,437,105) Adjustments to reconcile net income to net cash: Depreciation 209,434 Amortization 486,396 Changes in Assets and Liabilities: Accounts receivable 4,830 Prepaid expenses and other 7,683 Accounts payable 5,952 Other liabilities (34,338) Accrued interest 974,373 Net cash provided by operating activities: 217,225 CASH FLOW FROM INVESTING ACTIVITIES: Purchase of plant and equipment (244,994) Net cash used in investing activities: (244,994) CASH FLOW FROM FINANCING ACTIVITIES: Increase in bank overdraft 490 Net cash provided by financing activities: 490 Net Decrease in Cash (27,279) Cash, Beginning of Period 27,279 Cash, End of Period $ -0- Supplemental Disclosure for Statement of Cash Flow: Cash Paid for Interest $ 437,448 The accompanying notes are an integral part of the financial statement. PAGE Exhibit E WOODSTOCK AND NEW MARKET CLUSTERS C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 1995 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION AND BASIS OF PRESENTATION: These combined financial statements represent the combined operations of C4 Media Cable Southeast, Limited Partnership's ("C4 Media") cable television systems serving 6 communities in Woodstock and New Market, Virginia (collectively referred to as the "Woodstock and New Market Clusters"). C4 Media is a Delaware limited partnership organized to own and operate cable television systems in various communities throughout Virginia, Tennessee, and Georgia. The Woodstock and New Market Clusters provide basic and pay cable television service to approximately 5,040 subscribers. On February 1, 1996, C4 Media sold substantially all operating assets (including the Woodstock and New Market Clusters) to FrontierVision Operating Partners, LP ("FVOP"). FVOP has subsequently entered into an agreement to sell the Woodstock and New Market Clusters to Shenandoah Telecommunications. See Note 7. General partners of C4 Media are C4 Media Cable, Inc. and C4 Media Cable Employees Investment Corporation. C4 Media Cable, Inc. also participates as a limited partner. Under a letter agreement dated May 9, 1992, Philips Credit Corporation (Philips) exercised its rights under certain pledge agreements to exercise voting control over all partnership interest. Accordingly, effective October 30, 1992, C4 Media Cable, Inc. was replaced by Southeast Cable, Inc., a corporate affiliate of Philips, as the managing general partner. The managing general partner utilized Cablevision of Texas III, LP ("CAB III") as the business manager for the Partnership until the assets sold February 1, 1996. See Note 4. PAGE Exhibit E WOODSTOCK AND NEW MARKET CLUSTERS C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 1995 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) ORGANIZATION AND BASIS OF PRESENTATION (Continued): C4 Media had not previously prepared separate combined financial statements of the Woodstock and New Market Clusters and accounting records are not maintained to facilitate preparation of such financial statements; therefore, estimates of certain allocable assets, liabilities, income and expenses were required. The allocations, where necessary, are based on subscriber counts or plant miles of the systems. The allocation methods are believed to be reasonable by management. The combined financial statements do not necessarily reflect the results of operations or financial position that would have existed had the Woodstock and New Market Clusters been an independent company. The Woodstock and New Market Clusters recognize cable service revenue on the accrual basis in the month the cable service is provided. Payments received in advance are included in deferred revenue until the month the service is provided at which time they are recognized as income. Direct expenses of the Woodstock and New Market Clusters are recognized as the expense is incurred. Indirect and administrative expenses are allocated based on either subscriber counts or plant miles of the systems. PROPERTY, PLANT, EQUIPMENT AND DEPRECIATION: Property, plant, and equipment used in the business are stated at cost and depreciated over estimated useful lives generally on the straight line method for financial statement purposes. Expenditures which significantly increase asset values or extend useful lives are capitalized, limited by projected recoverability of such current year expenditures in the ordinary course of business from expected future revenue. PAGE Exhibit E WOODSTOCK AND NEW MARKET CLUSTERS C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 1995 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued) PROPERTY, PLANT, EQUIPMENT AND DEPRECIATION (Continued): The useful lives of property, plant, and equipment for purposes of computing depreciation range from 5 to 10 years. Accumulated depreciation at December 31, 1995 was $981,184. FRANCHISES C4 Media has been granted rights to operate within the locations of the cable television systems. Such franchises grant certain operating rights and impose certain costs and restrictions. C4 Media pays franchise fees annually on the Woodstock and New Market Clusters' locations based upon either gross or basic service revenues. Franchise fee expense for the year ended December 31, 1995 was $62,968 and is included in Other Operating Expense. Such franchises have varying lives and are renewable at the discretion of the locations' governing boards. For financial statement purposes, franchise costs acquired in connection with the purchase of cable systems are being amortized over the remaining average lives of the related cable television franchises at the date of acquisition, which approximates 8 years. Franchise amortization expense for the year ended December 31, 1995 was $437,356. Accumulated amortization for franchises at December 31, 1995 was $2,842,814. ACQUISITION COSTS: Acquisition costs are those costs incurred related to the acquisition of new systems. For financial statement purposes, such costs are amortized by using the straight-line method over 10 years. Amortization expense for acquisition costs for the year ended December 31, 1995 was $40,040. Accumulated amortization for acquisition costs at December 31, 1995 was $315,761. PAGE Exhibit E WOODSTOCK AND NEW MARKET CLUSTERS C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 1995 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) INCOME TAXES: C4 Media is a partnership and does not pay federal income tax, but is a pass through entity so that partners are taxed on their share of partnership earnings. Net income or loss on the entire partnership is allocated to each partner under a formula established in the partnership agreement. CASH EQUIVALENTS: For cash flow purposes, cash equivalents are cash and cash items with a maturity of less than 90 days. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 2: ACCOUNTS RECEIVABLE, NET Following is a summary of receivables at December 31, 1995: Trade Accounts $20,126 Less: Allowance for Doubtful Accounts (805) $19,321 PAGE Exhibit E WOODSTOCK AND NEW MARKET CLUSTERS C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 1995 NOTE 3: NOTES PAYABLE Following is a summary of notes payable at December 31, 1995: Senior loan payable to Philips, due September 30, 1990, interest due at prime + 2.25%, secured by substantially all assets of the partnership and the pledge of partnership interests. In addition, the loan is collateralized by the pledge of all stock held in C4 Media Cable, Inc. and C4 Media Cable, Employees Investment Corporation by the President and Chairman of C4 Media Cable, Inc. $ 7,599,963 Junior Loan payable to Philips, due September 30, 1990 interest due at 20%, secured by substantially all assets of the partnership and the pledge of partnership interests. In addition, the loan is collateralized by the pledge of all stock held in C4 Media Cable, Inc. and C4 Media Cable Employees Investment Corporation by the President and Chairman of C4 Media Cable, Inc. 2,748,562 Total $10,348,525 The Philips notes contain performance covenants concerning homes passed, subscriber levels, miles of plant, etc., some of which C4 Media had violated as of December 31, 1995. Philips has not waived compliance with these provisions. All notes payable and accrued interest to Philips were due September 30, 1990. Philips has not extended the due date of the notes and has the right to demand payment at any time. See Note 7. The fair market value of notes payable is estimated at $2.7 million based on the amount applied to the notes at the time of sale. PAGE Exhibit E WOODSTOCK AND NEW MARKET CLUSTERS C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 1995 NOTE 4: RELATED PARTY TRANSACTIONS Effective October 30, 1992, C4 Media Cable, Inc. was replaced by Southeast Cable, Inc. as the managing general partner. The managing partner entered into a management agreement with CAB III that provides for fixed fees and the reimbursement of direct expenses incurred on behalf of C4 Media. Management fees paid by the Woodstock and New Market Clusters under this agreement for the year ended December 31, 1995 were $93,850. Other fees and expense reimbursements paid under the agreement for the year ended December 31, 1995 were $20,600 and are included in Other Operating Expenses. NOTE 5: COMMITMENTS The Woodstock and New Market Clusters have certain obligations under pole rental agreements, tower site leases, etc. for assets utilized in the operation of the systems. These are mostly annual agreements. Expenses charged to operations for the year ended December 31, 1995 were $52,818 and are included in Other Operating Expenses. NOTE 6: CONTINGENCIES The Woodstock and New Market Clusters are to a significant degree self-insured for risks consisting primarily of physical loss to property and plant. The headend equipment is insured, but the plant itself is not and represents a potential exposure. Management is of the opinion the various systems' distance from each other make the likelihood of a complete loss to the plant unlikely. PAGE Exhibit E WOODSTOCK AND NEW MARKET CLUSTERS C4 MEDIA CABLE SOUTHEAST, LIMITED PARTNERSHIP NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 1995 NOTE 7: SUBSEQUENT EVENT On February 1, 1996, C4 Media sold substantially all assets to FVOP. FVOP subsequently entered into an agreement to sell the Woodstock and New Market Clusters to Shenandoah Telecommunications. After the initial sale, C4 Media was still liable for the remaining balance of the notes to Philips with no significant assets to satisfy that liability. The agreement between Philips and C4 Media provided that the liens attached to the assets of the Woodstock and New Market Clusters were released at the date of sale to FVOP. C4 Media is in the process of liquidating all partnership interests. Complete liquidation of C4 Media is expected by the end of 1996. PAGE ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued) (a) Unaudited Interim Financial Statements FRONTIER VISION OPERATING PARTNERS, L.P. Woodstock/New Market Unaudited Balance Sheet At June 30, 1996 Assets Accounts receivable, net $ 3,189 Prepaid expenses and other 7,564 Investment in cable television systems, net: Property and equipment 1,936,365 Intangibles 6,043,000 Total investment in cable television systems, net 7,979,365 Other, net - Total assets $ 7,990,117 Liabilities and Retained Earnings Accrued liabilities $ 38,580 Interdivisional liability 7,722,218 Total liabilities 7,760,798 Retained earnings 229,319 Total liabilities and retained earnings $ 7,990,117 See the accompanying notes to unaudited condensed financial statements. PAGE ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued) (a) Unaudited Interim Financial Statements C-4 MEDIA CABLE AND FRONTIERVISION, LP WOODSTOCK AND NEW MARKET CLUSTERS
UNAUDITED INTERIM COMBINED STATEMENT OF INCOME C-4 MEDIA CABLE FRONTIERVISION SOUTHEAST OPERATING PARTNERS LTD PARTNERSHIP LTD PARTNERSHIP WOODSTOCK/NEW MARKET WOODSTOCK/NEW MARKET ONE MONTH ENDED FIVE MONTHS ENDED JANUARY 31, 1996 JUNE 30, 1996 REVENUES Cable Television Service 127,054 638,373 127,054 638,373 OPERATING EXPENSES Cost of Products and Services Sold 30,481 113,152 Maintenance and Support 37,081 68,296 Depreciation and Amortization 59,064 162,498 Customer Operations 14,169 1,385 Corporate Operations 8,046 63,723 148,841 409,054 OPERATING INCOME (21,787) 229,319 INTEREST EXPENSE (117,689) NET INCOME (139,476) 229,319 PRO FORMA INCOME TAX EXPENSE (87,049) PRO FORMA NET INCOME 142,270 See accompanying notes to unaudited condensed financial statements. PAGE
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued) (a) Unaudited Interim Financial Statements C-4 MEDIA CABLE AND FRONTIERVISION, LP WOODSTOCK AND NEW MARKET CLUSTERS
UNAUDITED COMBINED STATEMENT OF CASH FLOWS C4 Media Cable Frontiervision Southeast Operating Partners LTD Partnership LTD Partnership Woodstock/New Market Woodstock/New Market One Month Ended Five Months Ended January 31, 1996 June 30, 1996 CASH FLOWS FROM OPERATING ACTIVITIES Net Income (139,476) 229,319 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and Amortization 59,064 162,498 Decrease (increase) in Accounts Receivable 3,211 12,921 Increase (decrease) in Accounts Payable (11,603) (27,865) Other prepaids, deferrals, and accruals 115,822 (157,867) Net cash provided by operating activities 27,018 219,006 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Property & Equipment, and Intangibles (6,904) (6,127,698) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from increase in equity 0 13,671,504 Principal payments on divisional liability 0 (7,782,926) Net cash provided by financing activities 0 5,888,578 NET INCREASE/(DECREASE) IN CASH 20,114 (20,114) See accompanying notes to unaudited condensed financial statements. PAGE
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued) (a) Unaudited Interim Financial Statements C-4 MEDIA CABLE AND FRONTIERVISION, LP WOODSTOCK AND NEW MARKET CLUSTERS UNAUDITED COMBINED STATEMENT OF CASH FLOWS
C4 Media Cable Frontiervision Southeast Operating Partners LTD Partnership LTD Partnership Woodstock/New Market Woodstock/New Market One Month Ended Five Months Ended January 31, 1996 June 30, 1996 CASH AND CASH EQUIVALENTS: Beginning 0 20,114 Ending 20,114 0 See accompanying notes to unaudited condensed financial statements. PAGE ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued) Notes to Unaudited Condensed Financial Statements 1. In the opinion of management, the accompanying consolidated financial statements contain all the adjustments (consisting of only normal recurring accruals) necessary to present fairly C4 Media Cable LTD Partnership's results of operations and cash flows for the month ended January 31, 1996 and FrontierVision Operating Partners LTD Partnership's financial position as of June 30, 1996 and the results of operations and cash flows for the five months ended June 30, 1996. 2. The results of operations for the one month and five month periods ended January 31, 1996 and June 30, 1996 are not necessarily indicative of the results to be expected for the full year. 3. On February 1, 1996, C4 Media sold substantially all assets to FrontierVision. On September 30, 1996 Shenandoah Telecommunications acquired the Woodstock and New Market CATV assets from frontierVision for approximately $7.8 million. See pro forma financial information regarding this transaction. 4. Pro forma income tax expense was computed as if FrontierVision Operating Partners, LTD Partnership was a taxable entity. An assumed combined income tax rate of 37.96% was used in establishing the income tax expense. PAGE ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (b) Pro Forma Financial Information The pro forma financial information is based on the purchase method of accounting for the Acquisition. The pro forma adjustments are described in the accompanying notes to Unaudited Pro Forma Condensed Combined Balance Sheet and Notes to Unaudited Condensed Combined Statements of Income. The unaudited pro forma Condensed Combined Statements of Income assume that the acquisition of the Shenandoah County, Virginia cable television systems of FrontierVision Operating Partners, L.P. (The Systems) had occurred on January 1, 1995 (combining the results for the year ended December 31, 1995 and for the six months ended June 30, 1996 for Shenandoah Telecommunications Company (STC) and The Systems). The unaudited pro forma condensed combined balance sheet assumes that the acquisition of The Systems had occurred on June 30, 1996 (combining the balance sheets for STC and The Systems as of June 30, 1996). FrontierVision Operating Partners had previously acquired the System from C-4 Media Southeast LTD Partnership in February 1996. Acquisition The total purchase price for the assets acquired by cash was $7,864,171 including $300,000 placed in an Indemnity Escrow Deposit. Assumptions Purchase Price Allocation The purchase price has been allocated to the assets acquired based on the estimated fair values of such assets. The purchased assets consist primarily of CATV distribution plant and equipment and various intangible assets. For purposes of proforma presentations, the fair value of the intangible assets is being amortized over an estimated life of 15 years. PAGE ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued) (b) Pro Forma Financial Information Interest Expense For purposes of preparing the pro forma financial information, actual borrowings and terms for the acquisition were used. Income Taxes For purposes of preparing the pro forma financial information, an assumed combined income tax rate of 37.96% was used in establishing the income tax benefit and for establishing the deferred income tax liability associated with the transaction. This information should be read in conjunction with the notes included herewith. The unaudited pro forma condensed combined financial statements do not purport to represent what the Company's results of operations or financial position actually would have been had such transactions and events occurred on the dates specified, or to project the Company's results of operations or financial position for any future period or date. The pro forma adjustments are based upon available information and certain adjustments that management believes are reasonable. In the opinion of management, all adjustments have been made that are necessary to present fairly the pro forma data. PAGE
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued) (b) Pro Forma Financial Information SHENANDOAH TELECOMMUNICATIONS AND FRONTIERVISION, LP WOODSTOCK AND NEW MARKET CLUSTERS UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET JUNE 30, 1996
ASSETS HISTORICAL SHENANDOAH FRONTIERVISION TELECOMMUNICATIONS OPERATING PARTNERS COMPANY LTD PARTNERSHIP CONSOLIDATED WOODSTOCK/NEW MARKET PROFORMA JUNE 30, 1996 JUNE 30, 1996 ADJUSTMENTS COMBINED CURRENT ASSETS Cash and Cash Equivalents 4,863,872 4,863,872 Certificates of Deposit 1,331,366 1,331,366 Investment in Held-to-Maturity Securities 1,151,123 1,151,123 Accounts Receivable 3,161,055 3,189 3,164,244 Direct Financing Leases, Current Portion 74,350 74,350 Materials and Supplies 2,408,770 2,408,770 Prepaid and Other Current Assets 255,730 7,563 263,293 Total Current Assets 13,246,266 10,752 0 13,257,018 INVESTMENTS AND OTHER ASSETS Investment in Available-for-Sale Securities 1,888,910 1,888,910 Investment in Held-to-Maturity Securities 2,622,405 2,622,405 Other Investments 3,084,160 3,084,160 Direct Financing Lease, Long-Term Portion 229,015 229,015 7,824,490 0 0 7,824,490 PAGE
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued) (b) Pro Forma Financial Information SHENANDOAH TELECOMMUNICATIONS AND FRONTIERVISION, LP WOODSTOCK AND NEW MARKET CLUSTERS UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET JUNE 30, 1996 ASSETS
HISTORICAL SHENANDOAH FRONTIERVISION TELECOMMUNICATIONS OPERATING PARTNERS COMPANY LTD PARTNERSHIP CONSOLIDATED WOODSTOCK/NEW MARKET PROFORMA JUNE 30, 1996 JUNE 30, 1996 ADJUSTMENTS COMBINED PROPERTY, PLANT, AND EQUIPMENT Plant in Service 56,769,893 1,936,365 53,255 A 58,759,513 Plant Under Construction 4,540,868 4,540,868 61,310,761 1,936,365 53,255 63,300,381 Less Accumulated Depreciation (20,202,536) (20,202,536) 41,108,225 1,936,365 53,255 43,097,845 FRANCHISES 6,043,000 (140,621)B 5,902,379 62,178,981 7,990,117 (87,366) 70,081,732
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued) (b) Pro Forma Financial Information SHENANDOAH TELECOMMUNICATIONS AND FRONTIERVISION, LP WOODSTOCK AND NEW MARKET CLUSTERS UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET JUNE 30, 1996
LIABILITIES AND STOCKHOLDERS EQUITY HISTORICAL SHENANDOAH FRONTIERVISION TELECOMMUNICATIONS OPERATING PARTNERS COMPANY LTD PARTNERSHIP CONSOLIDATED WOODSTOCK/NEW MARKET PROFORMA JUNE 30, 1996 JUNE 30, 1996 ADJUSTMENTS COMBINED CURRENT LIABILITIES Current Maturities of Long-Term Debt 461,927 461,927 Accounts Payable 479,507 479,507 Advance Billings and Payments 369,334 369,334 Customers' Deposits 101,863 101,863 Accrued Construction Costs 198,137 198,137 Interdivisional Liability 7,722,218 (7,722,218)C 0 Other Current Liabilities 891,586 38,580 930,166 Income Taxes Payable 10,339 10,399 Other Taxes Payable 252,259 252,259 Total Current Liabilities 2,764,952 7,760,798 (7,722,218) 2,803,532 Long-Term Debt, Less Current Maturities 10,978,182 7,864,171 D 18,842,353 OTHER LIABILITIES AND DEFERRED CREDITS Deferred Investment Tax Credit 329,807 329,807 Deferred Income Taxes 4,029,999 4,029,999 Pension and Other 487,448 487,448 4,847,254 0 0 4,847,254 MINORITY INTEREST 1,546,013 1,546,013 PAGE
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued) (b) Pro Forma Financial Information SHENANDOAH TELECOMMUNICATIONS AND FRONTIERVISION, LP WOODSTOCK AND NEW MARKET CLUSTERS UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET JUNE 30, 1996
LIABILITIES AND STOCKHOLDERS EQUITY HISTORICAL SHENANDOAH FRONTIERVISION TELECOMMUNICATIONS OPERATING PARTNERS COMPANY LTD PARTNERSHIP CONSOLIDATED WOODSTOCK/NEW MARKET PROFORMA JUNE 30, 1996 JUNE 30, 1996 ADJUSTMENTS COMBINED STOCKHOLDERS' EQUITY Common Stock 4,740,677 4,740,677 Retained Earnings 36,942,246 229,319 (229,319)E 36,942,246 Unrealized Gain on Available-For-Sale Securities 359,657 42,042,580 229,319 (229,319) 42,042,580 62,178,981 7,990,117 (87,366) 70,081,732 Notes to Unaudited Pro Forma Condensed Combined Balance Sheet: A - Reflects fair market value allocated to plant and equipment. B - Reflects fair value allocated to intangible assets. C - Elimination of divisional debt to FrontierVision, L. P. not assumed by STC. D - Assumption of debt by STC required to complete the acquisition. E - Elimination of FrontierVision retained earnings not acquired by STC. PAGE
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued) (b) Pro Forma Financial Information SHENANDOAH TELECOMMUNICATIONS AND FRONTIERVISION, LP WOODSTOCK AND NEW MARKET CLUSTERS UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 1995 HISTORICAL
SHENANDOAH FRONTIERVISION TELECOMMUNICATIONS OPERATING PARTNERS COMPANY LTD PARTNERSHIP CONSOLIDATED WOODSTOCK/NEW MARKET PRO FORMA ADJUSTMENTS COMBINED REVENUES Local Service 3,072,097 3,072,097 Access and Toll Service 6,658,076 6,658,076 Other and Unregulated 12,188,977 1,640,624 13,829,601 21,919,150 1,640,624 0 23,559,774 OPERATING EXPENSES Cost of Products & Services Sold 1,493,270 357,148 1,850,418 Maintenance and Support 3,909,571 353,883 4,263,454 Depreciation and Amortization 2,864,521 695,830 (158,936)A 3,401,415 Customer Operations 2,465,316 165,197 2,630,513 Corporate Operations 1,988,852 93,850 2,082,702 Taxes Other Than Income 305,938 305,938 13,027,468 1,665,908 (158,936) 14,534,440 OPERATING INCOME 8,891,682 (25,284) 158,936 9,025,334 PAGE
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued) (b) Pro Forma Financial Information SHENANDOAH TELECOMMUNICATIONS AND FRONTIERVISION, LP WOODSTOCK AND NEW MARKET CLUSTERS UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET YEAR ENDED DECEMBER 31, 1995 HISTORICAL
SHENANDOAH FRONTIERVISION TELECOMMUNICATIONS OPERATING PARTNERS COMPANY LTD PARTNERSHIP CONSOLIDATED WOODSTOCK/NEW MARKET PROFORMA ADJUSTMENTS COMBINED OTHER INCOME (EXPENSES) Nonoperating Income, Less Expense 991,202 991,202 Interest Expense (685,971) (1,411,821) 785,047 B (1,312,745) Gain On Sale of Assets 1,141,386 1,141,386 10,338,299 (1,437,105) 943,983 9,845,177 INCOME TAXES 3,572,956 (187,189)C 3,385,767 6,765,343 (1,437,105) 1,131,172 6,459,410 MINORITY INTERESTS (534,658) (534,658) NET INCOME 6,230,685 (1,437,105) 1,131,172 5,924,752 NET INCOME PER SHARE 1.66 1.58 WEIGHTED AVERAGE SHARES OUTSTANDING 3,760,760 3,760,760 PAGE
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued) (b) Pro Forma Financial Information SHENANDOAH TELECOMMUNICATIONS AND FRONTIERVISION, LP WOODSTOCK AND NEW MARKET CLUSTERS UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET SIX MONTHS ENDED JUNE 30, 1996
SHENANDOAH C-4 MEDIA CABLE FRONTIERVISION TELECOMMUNICATIONS SOUTHEAST OPERATING PARTNERS COMPANY LTD PARTNERSHIP LTD PARTNERSHIP CONSOLIDATED WOODSTOCK/NEW MARKET WOODSTOCK/NEW MARKET SIX MONTHS ENDED ONE MONTH ENDED FIVE MONTHS ENDED PROFORMA JUNE 30, 1996 JANUARY 31, 1996 JUNE 30, 1996 ADJUSTMENTS COMBINED REVENUES Local Service 1,602,425 1,602,425 Access & Toll Service 3,478,895 3,478,895 Other & Unregulated 6,789,519 127,054 638,373 7,554,946 11,870,839 127,054 638,373 0 12,636,266 OPERATING EXPENSES Cost of Products & Services Sold 842,225 30,481 113,152 985,858 Maintenance & Support 2,489,964 37,081 68,296 2,595,341 Depreciation & Amortization 1,617,960 59,064 162,498 46,885 A 1,886,407 Customer Operations 1,594,590 14,169 1,385 1,610,144 Corporate Operations 1,075,888 8,046 63,723 1,147,657 Taxes Other Than Income 201,986 201,986 7,822,613 148,841 409,054 46,885 8,427,393 OPERATING INCOME 4,048,226 (21,787) 229,319 (46,885) 4,308,873
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued) (b) Pro Forma Financial Information SHENANDOAH TELECOMMUNICATIONS AND FRONTIERVISION, LP WOODSTOCK AND NEW MARKET CLUSTERS UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET SIX MONTHS ENDED JUNE 30, 1996
SHENANDOAH C-4 MEDIA CABLE FRONTIERVISION TELECOMMUNICATIONS SOUTHEAST OPERATING PARTNERS COMPANY LTD PARTNERSHIP LTD PARTNERSHIP CONSOLIDATED WOODSTOCK/NEW MARKET WOODSTOCK/NEW MARKET SIX MONTHS ENDED ONE MONTH ENDED FIVE MONTHS ENDED PROFORMA JUNE 30, 1996 JANUARY 31, 1996 JUNE 30, 1996 ADJUSTMENTS COMBINED OTHER INCOME (EXPENSES) Nonoperating Income, Less Expense 436,531 436,531 Interest Expense (269,678) (117,689) (197,432)B (584,799) Gain On Sale of Assets 228,250 228,250 4,443,329 (139,476) 229,319 (244,317) 4,288,855 INCOME TAXES 1,500,806 (58,638)C 1,442,168 2,942,523 (139,476) 229,319 (185,679) 2,846,687 MINORITY INTERESTS (301,862) (301,862) NET INCOME 2,640,661 (139,476) 229,319 (185,679) 2,544,825 NET INCOME PER SHARE 0.70 0.68 WEIGHTED AVERAGE SHARES OUTSTANDING 3,760,760 3,760,760 Notes to Unaudited Pro Forma Condensed Combined Statement of Income: A - Reflects depreciation expense on fair value allocated to plant at STC rates. B - Reflects interest expense on debt required to fund the acquisition. C - To record the income tax effect of the adjustments to depreciation and interest expense. PAGE SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SHENANDOAH TELECOMMUNICATIONS COMPANY By: Christopher E. French President November 5, 1996
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