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June 7, 1985 '
JUN 1 31985
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Dear City Clerk:
Enclosed is an audit report for fiscal year 1484 which we have just
received from our auditors.
Please note that this covers all of the Northern Colorado Video operations
including the Greeley, Evans, LaSalle area systems, the Tri-Town system
and the Windsor system.
For your information, the number of subscribers in your franchise area is
304 This represents a•3 % of the total subscribers in
Northern Colorado Video, Inc.
If you have any further questions about this, please contact me and I'll be
very happy to answer them.
And please remember, if you ever have any questions about cable service,
call me at any time. The satisfaction of our subscribers is our number one
goal. If we aren't meeting this goal, I'd very much appreciate knowing
about it.
Personal Regards,
Joe Tennessen
Systems Manager
850199
EPEAT
MARWICK
NORTHERN COLORADO VIDEO, INC.
Financial Statements
November 30, 1984
(With Audit Report Thereon)
PEAT Peat,Marwick,Mitchell & Co.
rE MARWICK Certified Public Accountants
To 2300 ARCO Tower
707 Seventeenth Street
Denver,Colorado 80202
The Board of Directors and Stockholder
Northern Colorado Video, Inc. :
We have examined the balance sheet of Northern Colorado Video, Inc. as of
November 30, 1984 and the related statements of operations, stockholder's
equity and changes in financial position for the year then ended. Our
examination was made in accordance with generally accepted auditing standards
and, accordingly, included such tests of the accounting records and such other
auditing procedures as we considered necessary in the circumstances.
In our opinion, the aforementioned financial statements present fairly the
financial position of Northern Colorado Video, Inc. at November 30, 1984 and
the results of its operations and the changes in its financial position for
the year then ended, in conformity with generally accepted accounting
principles applied on a basis consistent with that of the preceding year.
Pea Atam4::( _ , Co
January 11, 1985
NORTHERN COLORADO VIDEO, INC.
Balance Sheet
November 30, 1984
Assets (note 4)
Cash $ 141,989
Accounts receivable:
Trade, net of allowance for doubtful accounts of $13,143 95,083
Other 49 680
144 763
Prepaid expenses 17,619
Property and equipment, at cost (note 3) 7,673,506
Less accumulated depreciation (1 839 151)
583435S
Other assets, at cost, net of accumulated amortization:
Franchise costs 499,370
Deposits and other 28,195
527,565
$ 9.G@6,291
Liabilities and Stockholder's Equity
Accounts payable:
Trade $ 63,750
Affiliates (note 5) 252,880
316,630
Accrued interest payable 132,250
Other accrued expenses 353,056
Subscriber advance payments 25,109
Debt (note 4) 5,576,575
Total liabilities 6,403,620
Stockholder's equity (note 2):
Common stock, no par value. Authorized 100,000
shares; issued 11 shares (note 4) 677,600
Additional paid-in capital 3,326,936
Accumulated deficit (3,741,865)
Total stockholder's equity 262,671
Commitments (notes 5 and 6)
$ §,666,291
See accompanying notes to financial statements.
NORTHERN COLORADO VIDEO, INC.
Statement of Operations
Year Ended November 30, 1984
Revenue:
Basic service $ 1,567,620
Pay TV 1,854,804
Advertising time sales 156,526
Installation and other 311,923
3,890,873
Expenses:
Operating expenses, excluding depreciation and amortization 1,945,172
Selling, general and administrative 1,216,215
Management fee (note 5) 150,485
3,311,872
Operating income before depreciation and amortization 578,711
Depreciation 751,288
Amortization 41,749
793,037
Operating loss (214,326)
Other income (expense):
Interest expense (767,519)
Interest income 5,850
Gain on disposition of property and equipment, net 112,242
(649,427)
Net loss $ , (84,753)
See accompanying notes to financial statements.
NORTHERN COLORADO VIDEO, INC.
Statement of Stockholder's Equity
Year Ended November 30, 1984
Additional Accumul- Total
Common paid in lated stockholder's
stock capital deficit equity
Balance, December 1, 1983 $ 675,100 - (214,713) 460,387
Business combination with
affiliate (note 2) 2,500 2,372,400 (2,663,399) (288,499)
Contributions from stockholder - 954,536 - 954,536
Net loss - - (863,753) (863,753)
Balance, November 30, 1984 3 @77,000 ?,320.y36 (3,141,05)
See accompanying notes to financial statements.
NORTHERN COLORADO VIDEO, INC.
Statement of Changes in Financial Position
Year Ended November 30, 1984
Uses of funds:
Net loss $ 863,753
Items which do not (use) provide funds:
Depreciation and amortization (793,037)
Gain on disposition of property and equipment, net 112,242
Funds used in operations 182,958
Additions to property and equipment 847,136
Net stockholder's deficit resulting from business
combination with affiliate 288,499
Repayment and retirement of debt 610,700
Increase in accounts receivable 124,783
Increase in prepaid expenses 8,426
Increase in other assets 1 062
2,063 564
Sources of funds:
Net liabilities resulting from business combinations
with affiliates:
Debt 5,588,075
Property and equipment (4,813,338)
Franchise costs (529,544)
Other assets (13,259)
231,934
Retirements of property and equipment 451,468
Contributions from stockholder 954,536
Increase in accounts payable 164,781
Increase in accrued interest payable 119,559
Increase in other accrued expenses 252,248
Increase in subscriber advance payments 14,248
2,188,774
Increase in cash $
See accompanying notes to financial statements.
NORTHERN COLORADO VIDEO, INC.
Notes to Financial Statements
November 30, 1984
(1) Summary of Significant Accounting Policies
(a) General
Northern Colorado Video, Inc. (the Company) was organized for the
purpose of constructing and operating cable television systems in
northern Colorado.
During 1984, the Company's fiscal year-end was changed from August 31
to November 30.
(b) Property and Equipment
Property and equipment is stated at cost. Depreciation is computed
using the straight-line method over estimated useful lives which range
from 4 to 12 years for equipment and 15 years for leasehold
improvements.
During the prematurity period of construction, the Company capitalized
certain costs, including depreciation, relating to current
operations. The prematurity period is defined as the period from the
installation of the first subscriber until construction of the system
is substantially complete. These costs are being depreciated using
the straight-line method over a 10-year life and are included in
property and equipment as deferred prematurity costs.
Repairs and maintenance are charged to operations and renewals and
additions are capitalized. At the time of ordinary retirements, sales
or other dispositions of property, the depreciated cost and cost of
removal of such property are charged to the reserve for depreciation,
and salvage, if any, is credited thereto. Gains or losses are
recognized only in connection with major rebuilds or with the sale of
properties in their entirety.
(c) Other Assets
Franchise costs related to the operating cable system are being
amortized over the lives of the franchises ranging from 10 to
15 years, using the straight-line method.
(d) Income Taxes
The Company and its stockholder have elected, under the provisions of
Subchapter S of the Internal Revenue Code, to have profits and losses
reported directly by the stockholder for income tax purposes.
(2) Business Combinations with Affiliates
Effective January 1, 1984, Greeley Video, Inc. (Greeley Video), an affili-
ated company, was combined with the Company. The Company and Greeley
Video had the same sole stockholder and, accordingly, the combination was
(Continued)
2
NORTHERN COLORADO VIDEO, INC.
Notes to Financial Statements
accounted for in a manner similar to a pooling of interests and was
treated as a nontaxable transfer for income tax purposes. The Company
issued one share of its common stock for all of Greeley Video's
outstanding common shares, which were subsequently cancelled. The
accompanying statement of operations has been prepared as if the
combination was consummated on December 1, 1983 and include the operations
of both the Company and Greeley Video since that date. Separate financial
information for the one—month period prior to the date of the combination
is as follows:
Northern Colorado Greeley
Video, Inc. Video, Inc.
Revenue $ $2,892 255,517
Net loss $(22,439) (101,996)
Unaudited pro forma combined financial information for the Company and
Greeley Video for the year ended November 30, 1983 is as follows:
Revenue $ 3 ],75,635
Net loss $ (Q94,938)
In connection with the aforementioned combination, the Company's note
payable to Greeley Video in the amount of $599,200 was cancelled.
Effective February 1, 1984, the Company acquired the assets and assumed
the liabilities of Tri-Town Cablevision, Ltd. (Tri-Town), an affiliated
limited partnership. The acquisition was accounted for using the purchase
method of accounting and the operations of Tri-Town since the purchase
date are included in the accompanying statement of operations. The
purchase price totaled approximately $814,000 and was comprised of
$278,000 in cash and the assumption of approximately $536,000_ of net
liabilities of Tri-Town. The excess of the purchase price over the fair
value of the net tangible assets acquired was allocated to franchise costs
and will be amortized over an 11-year period.
(3) Property and Equipment
Property and equipment at November 30, 1984, is summarized as follows:
Receiving, transmission and
distribution equipment $ 7,198,935
Support equipment 415,484
Deferred prematurity costs 48,781
Leasehold improvements 10,306
$ 7,673,5Q6
(Continued)
3
NORTHERN COLORADO VIDEO, INC.
Notes to Financial Statements
Property and equipment at November 30, 1984 includes $72,323 of interest
capitalized during the construction stage of development. Interest costs
totaled $767,519 for the year ended November 30, 1984.
(4) Debt
Debt at November 30 consists of the following:
Note payable to bank with interest payable quarterly
at prime plus 1-1/4% (1-1/2% after July 1, 1985)
and principal payable in graduated quarterly
installments commencing June 30, 1985 with the
final installment due March 31, 1991 $ 5,200,000
Note payable to bank with interest payable
quarterly at prime plus 2% and principal payable
in graduated quarterly installments with the final
installment due March 31, 1991 376,575
$ 5,576,575
The above notes payable are secured by substantially all of the assets and
common stock of the Company and are guaranteed by the stockholder of the
Company.
Principal maturities for years after November 30, 1984 are as follows:
1985 $ 171,800
1986 520,550
1987 1,049,850
1988 1,372,250
1989 1,158,300
1990 and thereafter 1,303,825
$ x,'76,57,5
(5) Transactions with Affiliates and Stockholder
The Company has a management agreement with Daniels & Associates, Inc.
(D&A), an affiliated company, whereby D&A provides certain administrative
and management services to the Company. As compensation for these
services, the Company pays a fee equal to the greater of 4% of its gross
receipts as defined in the agreement, or $25,000 per year, plus
reimbursement of out-of-pocket expenses.
Included in accounts payable - affiliates is a $96,000 noninterest bearing
advance from an affiliate which was assumed upon the acquisition of
Tri-Town.
(Continued)
4
NORTHERN COLORADO VIDEO, INC.
Notes to Financial Statements
The Company leases office space on a month-to-month basis from an
affiliate. Lease payments for the year ended November 30, 1984 totaled
approximately $156,100. Included in accounts payable - affiliates is
$78,000 of lease payments due under the lease agreements.
(6) Commitments and Contingencies
The Company leases certain real property, transportation and office
equipment under noncancellable operating leases with original terms
varying from 3 to 10 years. Lease payments, excluding amounts paid to
affiliates, for the year ended November 30, 1984 totaled approximately
$85,900, including $26,400 paid under pole rental agreements which are
terminable on short notice by either party.
Future minimum lease payments under noncancellable leases as of
November 30, 1984 are as follows: 1985 - $35,500; 1986 - $24,800; 1987 -
$21,000; 1988 - $8,000; and 1989 - $1,200. Management expects that in the
normal course of business, leases that expire will be renewed or replaced
by other leases. Accordingly, annual commitments after 1984 are not
expected to decrease.
The Company has entered into agreements for programming services which are
terminable on short notice. Payments are based upon the number of
subscribers served by the Company and totaled approximately $923,900 for
the year ended November 30, 1984. Management anticipates that payments
under these agreements will not decrease after 1984.
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