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HomeMy WebLinkAboutCable ACC Annual Financial StatementsJanuary 16, 1990 Ben Nichols Mayor City of Ithaca 108 E. Green St. Ithaca, NY 14850 Dear Mayor Nichols: Enclosed is a copy of American Community Cablevision's financial statements for the fiscal year ending June, 1989. The year's after tax net income of $415,299 represents a 4.2% return on investment. ACC measures its performance in many ways, however. From July 1988 to June 1989, ACC took significant positive steps to improve its cable operation in the Greater Ithaca Area. ACC and the City of Ithaca finally concluded their somewhat stormy negotiations'and signed a new franchise agreement. This specific agreement is one of the most detailed and the most favorable to the community of any cable television franchise agreement in the State of New York and is often used as a model by the New York State Commission on Cable Television. Following the signing of the agreement, ACC fully rebuilt the cable television system in the City of Ithaca, installing new cable and electronic equipment and taking down the old. Rebuilding the plant allowed us to increase the channel capacity and add new services. Among the new services added were C -Span II, The Discovery Channel, Madison Square Garden/The Travel Channel, Turner Network Television, The Family Channel, The Comedy Channel, Lifetime, Bravo and others. ACC concluded its office renovation and the public access studio was moved to a new location at 612 West Green Street, behind our other buildings which are on West State Street. The new studio boasts state-of-the-art video equipment and a staff of three knowledgeable facilitators whose function it is to guide Ithaca area citizens through the use of the equipment and all of the procedures involved in television production. The access studio is open and staffed 60 hours a week, meeting the needs of Ithaca's active producers. NewsCenter .7 became the choice of Ithacans for local news, according to a survey. This was positive reinforcement that people want to know what's happening about town. ACC is pleased to be able to help fill that need. NewsCenter 7 has also provided a great place for area businesses to promote their goods and services to a majority of our subscribers. While these advertisements are good business for ACC they also provide local businesses with a means for garnering new customers and thereby help to strengthen the local economy. ACC continued to show customer growth although growth in basic customers was not particularly strong due to a flattening of the local economy. Continued improvement of cable programming has helped maintain growth in the number of expanded tier customers. There was a declinein the number of customers taking premium services. Approximately twelve miles of line extensions were built in this period allowing us .to offer service to an additional 500-600 residences. As you probably know, Mike Withiam left ACC in May of 1989 and an acting manager who commuted from Pennsylvania helped the staff through the remainder of the fiscal year. I was named as Mike's replacement in July of 1989. It will remain to be seen how the change .in management will affect American Community Cablevision. I can sincerely say that we are making every effort to provide the very best in quality product and service to our customers. Our forthcoming customer newsletter will bring you up to date on the changes which are coming and which should enhance our position to serve customers better. Respectfully, Barbara L. Lukens General Manager BLL/fw enc. Audited Financial Statements American Community Cablevision Division of American Television and Communications Corporation June 30, 1989 Ernst &Whinney AMERICAN COMMUNITY CABLEVISION DIVISION OF AMERICAN TELEVISION AND COMMUNICATIONS CORPORATION Audited Financial Statements June 30, 1989. Audited Financial Statements Report of. Independent Auditors 1 Statement of Assets, Liabilities and Net Assets 2 Statement of Revenues and Expenses and Changes in Net Assets 3 Statement of Cash Flows 4 Notes to Financial Statements 5 4300 Republic Plaza Denver, Colorado 80202 Telephone: (303) 534-4300 Report of Independent Auditors. The Board of Directors American Television and Communications Corporation Stamford, Connecticut We have audited the accompanying statement of assets, liabilities and net assets of American Community Cablevision Division of American Television and Communications Corporation as of June 30, 1989, and the related statements of revenues and expenses and changes in net assets and cash flows for the year then ended. These financial statements are the responsibility of the Division's 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. As described in Note 1 to the financial statements, American Community Cablevision is one of several divisions and subsidiaries of American Television and Communications Corporation, and has material transactions with its affiliates. In our opinion, the financial statements referred to above present fairly, in all material respects, the assets, liabilities and net assets of American Community Cablevision Division of American Television and Communications Corporation at June 30, 1989, and its revenues and expenses and changes in net assets and its cash flows for the year then ended in conformity with generally accepted accounting principles. Denver, Colorado September 20, 1989 1 AMERICAN COMMUNITY CABLEVISION DIVISION OF AMERICAN TELEVISION AND COMMUNICATIONS CORPORATION STATEMENT OF ASSETS, LIABILITIES AND NET ASSETS June.30, 1989 ASSETS Cash $ 211,413 Accounts receivable, less allowance for doubtful accounts of $121,843 68,101 Prepaid expenses 7,617 Property, plant and equipment, at cost --Note 2: Land, building and improvements Distribution system Vehicles and other equipment Construction in progress $ 1,787,520 11,698,633 2,042,714 1,174,650 16,703,517 Less accumulated depreciation (6,378,008) Net property, plant and equipment 10,325,509 Franchise costs, less accumulated amortization of $1,002,170 --Note 2 1,465,832 LIABILITIES AND NET ASSETS Accounts payable Accrued liabilities Subscribers' advance payments and deposits Debt --Note 3 Net assets --Note 1 See notes to financial statements 2 $12,078,472 $ 592,503 411,530 282,481 207,597 1,494,111 10,584,361 12 078472 AMERICAN COMMUNITY CABLEVISION DIVISION. OF AMERICAN TELEVISION AND COMMUNICATIONS CORPORATION STATEMENT OF REVENUES AND EXPENSES AND CHANGES IN NET ASSETS Year Ended June 30, 1989 4 ti Revenues: Service Connection and other Expenses --Notes 1 and 2: Operating and origination Selling, general and administrative Depreciation and amortization Interest, net Income before charge in lieu of income taxes Charge in lieu of income taxes --Note 5 Net income Net assets at beginning'of year Net advances from corporate office Net assets at end of year $5,676,119 913,958 $ 6,590,077 2,511,741 1,566,768 1,196,249 616,020 See notes to financial statements -3 5,890,778 699,299 284,000 415,299 7,599,223 2,569,839 $10,584,361 AMERICAN COMMUNITY CABLEVISION DIVISION OF AMERICAN TELEVISION AND COMMUNICATIONS CORPORATION STATEMENT OF CASH FLOWS Year Ended June 30, 1989 Cash Flows From Operating Activities: Net income $ 415,299 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,196,249 Change in current assets and liabilities: Increase in accounts receivable (2,465) Decrease in prepaid expenses 41,971 Decrease in other assets 3,500 Decrease in accounts payable (390,706) Increase in accrued liabilities 182,326 Decrease in subscribers' advance payments and deposits (31,095) Net Cash Provided By Operating Activities $ 1,415,079 Cash Flows From Investing Activities: Net purchases of property, plant and equipment (4,090,696) Franchise costs (91,963) Net Cash Used In Investing Activities Cash Flows From Financing Activities: Net borrowings from American Television and Communications Corporation 2,569,839 Proceeds from long-term debt 207,597 Net Cash Provided By Financing Activities 2,777,436 Net increase in cash 9,856 Cash at beginning of year 201,557 Cash at end of year $ 211,413 Supplemental Disclosures of Cash Flow Information: (4,182,659) Cash paid during the year for: Interest $ 683,000 Income taxes 25,000 See notes to financial statements -4- AMERICAN COMMUNITY CABLEVISION DIVISION OF AMERICAN TELEVISION AND COMMUNICATIONS CORPORATION NOTES TO FINANCIAL STATEMENTS June 30, 1989 1. Basis of presentation American Community Cablevision Division of American Television and Communications Corporation (the Division) is principally engaged in the operation of a cable television business. Such operations consist primarily of selling video programming which is distributed to subscribers for a monthly fee through a network of coaxial cables. It operates in the City of Ithaca, New York and contiguous areas under nonexclusive franchise agreements which are in effect until 1998. The Division has no separate legal status or existence. Its resources and existence are at the disposal of American Television and Communications Corporation (ATC) management, subject to contractual commitments by ATC to perform certain long-term contracts within the present divisional structure. Its assets are legally available for the satisfaction of debts of the entire corporation, not solely those appearing in the accompanying statements, and its debts may result in claims against assets not appearing therein. It is one of several divisions and subsidiaries of ATC, and transactions and the terms thereof may be arranged by and among members of the affiliated group. ATC is an 82% owned subsidiary of Time Warner Inc. (formerly Time Inc., hereinafter referred to as. Time Warner). 2. Significant accounting policies Property, plant and equipment: Depreciation is provided on the straight-line basis over the estimated useful lives of the assets as follows: Building and improvements Distribution system Vehicles and other equipment 10-20 years 8-15 years 4-10 years Franchise costs: The Division has deferred costs incurred to acquire the franchises. Additional costs incurred to renew the franchise have also been deferred. Amortization of franchise costs is provided on the straight-line basis over periods of up to forty years. Statement of cash flows: Effective July 1, 1988 the Company adopted Financial Accounting Standards Board Statement No. 95, "Statement of Cash Flows." For purposes of this statement, all highly liquid investments with a maturity of three months or less are included in the category of cash. AMERICAN COMMUNITY CABLEVISION DIVISION OF AMERICAN TELEVISION AND COMMUNICATIONS CORPORATION NOTES TO. FINANCIAL STATEMENTS June 30, 1989 3. Debt A 10.25% mortgage note payable due June 2006 was assumed during the year ended June 30, 1989 related tothe purchase of a building in June 1988. The note was paid in August 1989. 4. Related party transactions The statement of revenues and expenses and changes in net assets includes charges for programming and promotional services provided by Home Box Office Incorporated, a subsidiary of Time Warner. These charges were based upon customary rates. The Division records charges for selling, general and administrative expenses that are directly associated with it and a portion of the ATC expenses ($455,854 for the year ended June 30, 1989) which are allocated to divisions and subsidiaries based upon subscriber levels. Interest chargedto the Division by ATC ($682,570) was computed by multiplying 71.8% of the Division's average net assets (computed using beginning and end of year balances) by the average interest rate (9.32% for the year ended June 30, 1989) on ATC's outstanding borrowings; $66,550 of the interest applicable to construction in progress was capitalized. 5. Income taxes Operating results of the Division are included in the consolidated federal income tax return of Time Warner. In lieu of income taxes, ATC charges the Division an amount which approximates statutory state and federal income tax rates on pretax income. 6. Leases Rental expenses for all operating leases, principally office and pole attachments, for the year ended June 30, 1989 amounted to $105,759. The Division had no significant noncancelable rental commitments. 7. Defined Benefit Plan The Division participates in a noncontributory defined benefit pension plan (the "Plan") which is maintained by ATC and covers substantially all employees. The benefits under the Plan are determined based on formulas which reflect employees' years of service and compensation levels during their employment period. January 19, 1990 City of Ithaca Ithaca, New York Dear Sir: wit �e Ana __ ® m LNmm American Television & Communications Corporation A Time Inc. Company National Division 160 Inverness Drive West Suite 300 Englewood, Colorado 80112 (303) 799-9599 ZZNY 0040 Below is a report showing Gross Revenues for January, 1989 through December, 1989. The report is in compliance with Section 18.5 (B) of the franchise agreement, approved by the City Council June 8, 1984, with American Community Cablevision. Computation is as follows: Month Gross Revenues January, 1989 $168,047.37 February 174,542.05 March 179,407.48 April 182,897.99 May 178,555.16 June 142,092.39 July 161,879.58 August 131,681.47 September 168,060.70 October 196,451.38 November 183,283.84 December 190,261.31 Total $2,057,160-.72 I, Ivy W. Parish, Controller of American Television and Communications Corporation, National Division, certify that the above schedule summarizes the Gross Revenues, as defined in the franchising agreement, for the period indicated for the CATV operations in the City of Ithaca. Signed: IWP/jdh Enclosure Ivy PW. Parish, Controller Providing entertainment and information choices. AMERICAN COMMUNITY CABLEVISION • ,April 10, 1990 Mr. Charles Gutman City Attorney City of Ithaca 108 E. Green St. . Ithaca,:. NY 14850 Dear Mr.. Gutman:. One .of. the requirements of ACC,'.s franchise agreement with the City. of. Ithaca is to provide a report on the ownership of the company. At the .time I submitted the annual report, I did not 'have -the information but I am able to provide it now. ACC .is 'a DBA and is. owned 100% by American Television and Communications Corporation (ATC). Time Warner owns 82% of ATC .while: public shareholders hold the remaining 18%. No public shareholder owns. more than 5% of;the public shares. The Board of Directors of ATC are: Glenn A. Britt, David C. Chang, Joseph J. Collins, brian Conboy, James H. Doolittle,. Philip R. Lochner, Jr., Richard D. Parsons and Herbert S. Schlosser. Respectfully, Barbara L. Lukens General Manager BLL/fw 519 West State Street Ithaca, New York 14850 607-272-3456