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Thomas Puckett

Interview Date: Tuesday March 06, 2001
Interview Location: Del Mar, CA
Interviewer: Jim Keller
Collection: Hauser Collection

Thomas Puckett

 
 
 
 

KELLER: This is the oral history of Thomas F. Puckett, chairman and CEO of HPC Puckett & Co., brokers and financial investment bankers for the cable television industry. Tom is also a member of the board of directors of The Cable Center and is chairman of the national fundraising committee of that organization. The date is March 6, 2001; we are in the offices of Puckett & Co. in Del Mar, California. This is a project of The Gustave Hauser Foundation and part of the oral history program of The Cable Center. Your interviewer is Jim Keller. Tom, tell us a little bit about your background before you got involved in cable television.

PUCKETT: I was born and raised in Topeka, Kansas. My family is still from Topeka and so I still have the hay in my hair to prove it. I went to school there at Washburn University and got an undergraduate degree in business and economics with an emphasis in accounting, and then actually stayed there. I had a job and I met my wife Carol, who I've been with forever. I started dating her when I was 17 on her 16th birthday.

KELLER: Two years ago.

PUCKETT: Yeah, that's right. I had to find somebody before I lost all this hair and looked this way. But I went to law school in Topeka at Washburn University, graduated from law school and just prior to graduation, among other jobs I had, I took a clerk position at a law firm in Topeka. The name of the firm was Heristy Hall and Schlosser, and so that really was my introduction to the business world at that point in time. In fact, my first days with the law firm were actually a cultural shock to me and it almost got me out of it because they put me in a 10 x 10 office with an 8 x 8 desk full of tax returns stacked to the ceiling, and I'd never prepared a tax return in my life. So it was kind of a sink or swim scenario.

KELLER: You were an accounting major in undergraduate school, weren't you?

PUCKETT: Exactly, but you know, the difference between practice and preach are significant. So I started preparing tax returns and found very quickly that I had a niche in the sales and compensating use tax area, and so there was a client of ours, Capital Electric Line Builders, who walked in my office one day, and he said, "I don't think I should pay this sales tax." And to you and I and everyone else in this room it sounds like the most boring thing in the world, but to me as a young lawyer that was a challenge, and I looked at it and it was, to me, clearly a sales tax issue he shouldn't pay and it had multi-million dollar ramifications, so I filed an appeal with the Kansas Department of Revenue and took that sales tax up through the Kansas Supreme Court and we won. So that was really my first and last litigation that I ever actually had a trial on.

KELLER: Did you argue before the Kansas Supreme Court?

PUCKETT: We did, and successfully won. In fact, we threw the sales tax statute out; I did it again and then I threw the local sales tax statute out later in my career. But I only practiced law – this would have been, I graduated from law school in May of 1977, so by August of 1977 I was practicing law full-time and I quit practicing, really filtered it out in 1982, so I had a fairly short lived practice. But the other thing that we did, in addition to the sales tax work, which I was only really one of two attorneys in the United States that did sales tax work, so we represented all the power companies, the electrical line companies, Getty Oil, Phillips Oil, Kuwani Oil. If you look at a map of the United States, every oil pipeline runs through Kansas. So the great state of Kansas was after them and when we would win a case there it would have ramifications in other states, so we were all over the United States handling those type cases. But my true love came in doing merger acquisition work. Our little law firm there did a lot of M&A work for other attorneys who didn't do it, and because we weren't a full-service firm we certainly wouldn't steal their clients so we would do the merger acquisition work, and that's how I kind of got introduced into the cable business. Again, it was between the time that in January of 1977 I actually took a full-time position as a law clerk – they hired me as a law clerk knowing they were going to hire me as a young lawyer – and I was given a job about January-February of 1977 to file a revenue ruling with the Internal Revenue Service to split up a cable television company that was serving 13 communities in Kansas.

KELLER: Which one was that, do you remember?

PUCKETT: Tri-Cities Cable. The principle individuals in that were two good lawyers in Kansas, an old boy by the name of Hollis Logan, who is just a prince of a fellow, and Hollis was an attorney but he didn't practice law, and the other one was Bob Weary, who we talked about a little bit ago and Bob just passed away, I'm sorry to say, but Bob was a real statesman for the state of Kansas. He was cable television, and I have a number of Bob Weary stories that I'm very proud of.

KELLER: He ran the state association for years and years and years.

PUCKETT: Exactly. He was on the NCTA board, very active, had about five or six cable ventures, which I'm proud to say we were involved in some of them. Anyway, Bob was involved in that deal and we got to the IRS and the IRS was going to take a year or so to finish a revenue ruling so they decided to sell the cable systems and they actually hired Daniels. I can't tell you who the gentleman was from Daniels, but at the time, as a young lawyer, that was my first deal. I wasn't even out of law school. All of the other attorneys in the office were deep analigators so I got the deal, but because I had two lawyers for clients they didn't mind. They actually had hired a guy who had graduated, by then it was May, I had graduated but hadn't passed the bar to do their deal and we sold it to Stan Searle, he started a company at that time, there was a cable television business magazine and Stan and a guy by the name of Pat Patterson, P.L. Patterson, started Cardiff Cable and this was their first acquisition.

KELLER: That was the one that they sold to CableVision Magazine too, wasn't it? They formed Cardiff and then they sold tax via exchange...

PUCKETT: The magazine portion, that's exactly right. Later we sold Cardiff... actually, the timing here was such that we were selling Cardiff as a young lawyer in '77 and then after that transaction their attorney did such a lousy job that they retained me to do acquisitions for them.

KELLER: For Stan?

PUCKETT: For Stan and for Pat, and Bob was involved in it a little bit, but Stan was more involved in it. But Pat Patterson was the front man, Pat and his wife Rhonda – later, she was actually dating him when we did that '77 deal – and Pat and Rhonda joined with us and we did quite a few acquisitions with them and for them.

KELLER: But you were operating then out of the Hardesty Law Firm, is that right?

PUCKETT: That's correct, at that point in time, clear up until 1982 and then I broke off on my own to practice law in 1982 and then in 1983, September of 1983, I formed the investment banking firm.

KELLER: And that was originally Hardesty and Puckett, was it not?

PUCKETT: No, it was actually – there were three names on the door – two of us, it was Hardesty, Puckett, Queen & Co.

KELLER: Hardesty being the senior partner of the law firm you worked for, is that correct?

PUCKETT: And we thought that he was going to be active in that and provide money and he never did, and never was, so he never owned a nickel's worth of stock, never was involved in it, the name just kind of stuck for awhile, but Jim Queen who was a cable operator in business with Rodney Weary actually approached me to do it with me and I brought him in and he and I were equal partners in that from 1983 to 1987 when I bought him out.

KELLER: Then the original name of the firm was Hardesty, Puckett & Queen.

PUCKETT: Hardesty, Puckett, Queen & Co. and then as I told you earlier we should have named it after three dead people. It would have made life so much simpler. We eventually changed the name, I bought out Jim Queen in 1987 and it became Hardesty, Puckett & Co., and then in 1989 or '90 everyone knew us as HPC, I mean that's just the name that everyone knew us by, so it became HPC Puckett & Co., and you know, it's funny, because no one ever noticed. The only person that actually said anything was Leo Hindery called me to congratulate me and say, "I see you bought everybody else, congratulations." I said, "Well, Leo, thanks for the call. I really appreciate it," because he was really busy at the time. This would have been 1989 or '90, and I said, "The truth is I just changed the name." He started laughing and he said, "Well, congratulations anyway." I said, "Thank you."

KELLER: Had you done some work with Leo?

PUCKETT: We've done a little bit with Leo. I consider Leo one of the pillars of the industry and certainly anything that I could do to emulate his stature I would be happy to do. The nice thing about Leo is he's done it all and done it all in a gentlemanly fashion.

KELLER: Indeed, I agree with that. What was the first deal you made as Hardesty, Puckett, and Queen?

PUCKETT: My partner and I, at the time, got in the car – I'll tell you the date, it was September 9th, 1983 – because we got in the car on a Monday morning and we started driving and we drove from Topeka, Kansas for the entire week. We came home Friday evening, which was not unusual in those days. We almost always got in the car early in the morning at 4 or 5 in the morning and came home Friday evenings. Anything within 500 miles was easily reachable, remember we didn't have fax machines then, we didn't have emails, we didn't have portable telephones, and the calls you made were on the side in the phone booth. It was a different world back then, so that was the norm, you had to go and sit down and meet with people. We left and went down to southeast Kansas and listed a group of little systems there – Pitcher Quapaw, we listed the Christian County, which is south of Springfield, Missouri, which is Ozark and Nixum, Missouri, and we listed the Merrimac Valley systems around St. Louis, Salem, Missouri, West Plains, Missouri – we had more listings than we could shake a stick at. Got home and all of the sudden there was no money, I mean, the interest rates were through the ceiling, equity was as tight as can be.

KELLER: This was what, in the early '80s?

PUCKETT: This would have been in 1983, late 1983, so we sat there trying to figure out how to sell all these and the logical buyers were the rural classic operators. TCI would have been a logical buyer, Time Warner had some presence in that area but not quite that far south, but we decided instead of doing that that we would create a group of rural classic buyers, classic cable television buyers. We would create the market, we'd find the money for them, we'd help them buy them, and then we'd build in our sellers later, and it was a good strategy that worked very, very well.

KELLER: You say "build in your sellers". I don't understand that.

PUCKETT: For instance, Cardiff didn't have the funds so we went and helped Pat Patterson raise the senior debt. We talked a little earlier about a guy, Bill Petty, who had left the Cap Cities group and Bill started a company called Empire Communications. We put together – Rodney Weary, he was in the Missouri area right outside of Kansas City, and we made a buyer out of him. So within the first year, we probably would have made more driving taxis than we did driving the car, but after that things kind of hit and eventually we sold all of those systems and quite a few more and that would have been in 1984. Nothing spectacular, I mean, it isn't like you can sit there and say, "My first deal I ever did once the firm was formed was something to write home about." They were all small pieces in the 2 to 20 million dollar range, but in those days a 20 million dollar transaction was a pretty good piece of business and we were pretty excited to be doing all that.

KELLER: You made a statement earlier on that you would rather do ten 10 million dollar deals than one 100 million dollar deal. Do you want to explain a little bit about that?

PUCKETT: Well, it's been our niche and we're very, we think we're very good at doing that and have done a lot of them. Our deal transaction size runs from the lower size up to just north of 150 million dollars. Each year we find that we do a transaction or a couple of transactions in the 100 to 175 million dollar range, but most of our business is in smaller pieces. As we sit here today, the firm has done – since we started in 1983 – we've done a little over 5 ½ billion dollars in deals, but they've all been in small pieces, so it's not unusual for us to do 25 to 35 transactions a year at a 10 million dollar level. The fees are good at that level, it's what we do well, one of the things that has kept us alive when others haven't survived, and it's actually made a pretty good living for us, is that we do a great deal of detail in the projects, and I think that's maybe one of the things that I'm most proud of is the people who have been with the firm for such a long time and the amount of detail that they get involved with in the firm. I've got a young man in our Topeka office, Hiram Powell – I guess he's not young anymore, he's 42 years old, but he seems young – that came into the firm in 1985 and Hiram came to us with no experience but he had a master's in finance and a law degree from Kansas University, and he spends countless hours on managing a team that does all the closing procedures and all the detail, and our clients, large and small, have become extremely dependent on that to the point where... I'm very proud for instance of our relationship with Cable ONE, with Post Newsweek, which is now Cable ONE. And the entire senior staff at Cable ONE hired us to do a very decent sized project for them a couple of years ago, it was a 30,000 subscriber project and we were competing with all of our logical competitors for that piece business and they had never hired anyone to sell a property for them prior to this so everybody wanted that first date. The reason we got the date is because they had seen the detail that we get involved in and how we make it easy to close the procedures, so those kinds of things are important to me.

KELLER: Tell me about some of the details that you do that maybe some of the other firms wouldn't do.

PUCKETT: For instance, when we go in to gather the information, I think the other firms are pretty consistent with us about putting the documents together, the offering documents, but we will send someone on-site to virtually photocopy all of the enabling agreements – the leases, franchise agreements, access agreements, any FCC elements, financial information. Once someone is really kind of a firm client, we spend years helping them format all that information as opposed to just basically coming in and selling them. So it becomes somewhat of a career date so to speak.

KELLER: Do you do franchise transfers too?

PUCKETT: During the process of the closing we oversee those but we don't go to the communities and do them. There are specialists that do that better than we do, frankly, and usually, particularly your larger consolidators have their own teams that go in there and their regional managers that take care of that, but we do coordinate all that. In other words, in the closing process, if you've looked at an acquisition agreement recently, they're probably on average 70 or 80 pages, well, each of those tie to schedules and exhibits and we prepare all of those schedules and exhibits and do all the drafting of that and coordinate with counsel on both sides to do that, and the way it works is we have a team that goes in and that team will generally involve the people in our Topeka, Kansas office. That's where most of the paper is moved out of our firm. So they'll do a lot of that. We do, for instance, on the financing side of it we almost do all of it from nuts to bolts when we got out and put together a financing we will do all of the financial procedures as well as actually act as second chair on all of the bank documents and I think that's probably been something that I've enjoyed on the one hand, but our legal background has been very helpful, is that I read every single document that's involved with any of our clients, any contracts, any subscription agreements, any legal documents, we second chair them so that they've got at least two individuals in our office reading those as well as their outside counsel. And a lot of times outside counsel appreciates that. We certainly don't get their nose out of joint.

KELLER: What are you looking for? Some anomaly somewhere?

PUCKETT: Something that's unusual to the cable television business that otherwise wouldn't be a fact in a standard acquisition. So that if you've got someone in an office that is not a specialist in this industry they might not see that anomaly. The other element of it is maybe you've got a definition that is standard for the industry and is boiler plate, for instance, the definition of an equivalent basic subscriber, but there might be a reason that for this particular transaction it could be a major negative. I won't say the deal, but a gentleman who was with our firm for some time, a very close friend of mine, Jim Faircloth, and that's a whole other conversation I could get into, but Jim and I got a call one time at the NCTA in about 1991 and we were asked to get involved in a transaction just to help them define – the transaction had closed, but it was 144 million dollar issue over the definition of the subscriber.

KELLER: I have no doubt about that. I've been up against that for years.

PUCKETT: And it was a drafting problem, and the investment banker that handled the transaction was a Wall Street firm and they received over 9 million dollars in fees and they wouldn't come back and fix the problem, so we were hired to come in and do some consulting on just that issue.

KELLER: Tell me, what definition did you finally decide on?

PUCKETT: We argued – they bought us a first class ticket and I can't say where we were flying to because it would give them away – we were on the airplane for five or six hours and we argued the entire time. It was very unclear. The way it was drafted it was very unclear.

KELLER: 40 years in the business and I've been arguing it for 40 years.

PUCKETT: There you go.

KELLER: So what did you finally decide on?

PUCKETT: Well, they settled it, they settled it. There was a reasonable interpretation that we were consistent with, and I think in order to get to that interpretation you couldn't read it literally, you had to use a logical interpretation.

KELLER: Did it finally end up as a revenue source?

PUCKETT: This was ten years ago, but basically it was a squirrelly definition to start with and they went back to what two reasonable people would have agreed on.

KELLER: Total revenue divided by number of subscribers... and on and on and on.

PUCKETT: That's exactly right.

KELLER: If someone comes to you and says, "I want to sell my system," will you tell him how much it's worth or does he tell you how much it's worth and then how do you argue that out?

PUCKETT: Well, that's an interesting position. Usually we will allow the market to tell us what it's worth, but we will set some guidelines. The one thing that we probably lost more business to competitors in the past is by not telling them it's worth something that they want to hear as opposed to what we honestly believe.

KELLER: Say that in another way please.

PUCKETT: In other words, we've been asked to do beauty contests with competitors and come in and ask them why we should handle their sale or why... you know, and do a beauty contest with another firm, and we have lost some business because I will tell them what I honestly believe it's worth, not what I think they want to hear at the time we list it. An average retainer agreement runs for approximately a year and then there's a year tail on it for anybody you talk to, so if you list it and somebody really wants to sell it and you tell them it's worth X and it's really worth Y, the chances are if they want to sell it they're going to sell it for Y, even if it's not worth X.

KELLER: How do you tell them the multiple of cash flow to use, because I assume you're using a multiple cash flow, aren't you?

PUCKETT: Floating all over the place. In my opinion, the best way to determine value using cash flow or in some cases EPITDA, earnings per interest taxes depreciation and amortization, is to go in and determine what the revenue stream and the resulting cash flow is going to be on the system for a period, and you really have a number of elements – if it's a high growth area, if it's a classic cable system, if it's a suburban area, what the risk factors are, and those, by the way, those become more and more complicated every day with the new ancillary services. That's why some of us are sitting here going I'm not sure we're young enough for this anymore. And we will calculate that cash flow stream out over, hopefully, a ten year period and then we will add in the cap X and the other ancillary...

KELLER: Do you use multiples of future cash flow or multiples of present cash flow?

PUCKETT: Both. We net present value at back and then we look at what we think an X at multiple will be, we look at a reasonable rate of return. For instance, right now with the cost of equity being what it is and rates being what it is, I think a 15% net present value factor today would be a reasonable one, but we look at the cost of equity and we look at the cost of senior facilities, we look at the ratios the senior facilities are lending at that point in time, then we net present at that to today. The other thing we do though, and I think you have to do, is you have to look at what will be the effect of this acquisition be on the acquiring entity. I can talk about it now because it will be history by the time anybody ever sees it, but we're working on a deal with Charter right now where they're acquiring the Heger properties in Nebraska. It wasn't the cable systems alone that they were interested in, they have a 600 mile fiber network that ties all of the Bresnan systems that they acquired earlier into a single headend. So there's a real ancillary value there, so you have to look at what the economies of the new operator are going to be. In that respect, you almost do your client a disservice by setting a price because there are certain people who will stretch that price in a free market bid scenario. And I'll tell you, there are some auctions being run by our competitors out there that are just run brilliantly. I mean, I've seen some great auction processes going on and I can give them strokes for that, but we traditionally, in our classic markets, have a limited number of buyers for them so we tend to run a bid scenario but not an auction process. It's kind of a first one to date us the way we want to be dated. So we tend to find one or two buyers and focus in on which of those is the best transaction.

KELLER: At this date, early March of 2001, what would you say the multiple of cash flow would be in a system that would be sold today. I wouldn't hold you to it, but roughly what it would be. 15 or 20 times?

PUCKETT: No, we traditionally don't see those. We're not talking about multi-billion dollar transactions here. We're talking about smaller transactions so a reasonable multiple would be a ten multiple of the acquiring entities first year cash flow, which might equate to a 12 ½ or 13 multiple of a smaller operator without programming or synergies, but a reasonable multiple would be closer to ten, give or take, it could be less than that or it could be slightly more than that, and like any good businessman I'm going to put caveats on that.

KELLER: Of course!

PUCKETT: That would be, what is the growth factor? We've got a beautiful little system right now that has a somewhere between 11 and 12 per cent internal growth factor right now. That blows the charts off that number. So we've got some systems that need extensive cap X, you have to make adjustments for that.

KELLER: Explain cap X.

PUCKETT: Capital expenditures, in other words, plant upgrades, improvements, not to increase the revenue but to maintain the revenue with the competitive forces that are out there right now.

KELLER: If you were to have a raw franchise right now, and I would assume that there are going to be some deals that you make that are going to have a franchise that hasn't been built yet, how would you value that?

PUCKETT: The truth is I haven't seen a raw franchise for awhile, and that's the honest to God truth. We cut our teeth on raw – and that's a whole other discussion as to how we really got into the business in the early '80s – but we did a lot of raw franchise financing initially, construction, and then later sold them, even pre-sold them, but I haven't seen a raw franchise for years.

KELLER: How many years?

PUCKETT: Since '92? Something like that. There were a few county franchises out there at that point in time, but that's my best guess I would say.

KELLER: I want to talk a little about the valuation of a property, including the basis of just a raw franchise itself. How would you put a value on that, and then how would you go about getting the thing financed and built?

PUCKETT: You mean historically?

KELLER: Well, with any deal you may have made. Or let's say today.

PUCKETT: Well, there are no raw franchises now. Well, that's untrue. If you want to overbuild someone right now, if you want a competitive situation you can still franchise, but there are no virgin franchises to speak of. Every so often you'll find that there's a private access property, or a series of private access properties and you can apply for a county franchise and tie them together and there may be some stragglers, but that's a different beast.

KELLER: What is somebody came and said, "I have an SMATV system that serves 500 subscribers. What's the value of it?"

PUCKETT: What it's worth to tie in. At one point in time, it was funny because Kagan contacted us...

KELLER: I want to define that – SMATV.

PUCKETT: Private access agreement, in other words, non-dedicated streets or it doesn't pass public right of ways. It's basically under a private agreement with an owner or management company to provide cable television or other services, and again, Kagan came to us in the mid-90s and said, "In the last few years you did 90-something per cent of the private deals in the country." And I said, "I hope not." And we took a hard look at that because we didn't really want to be, particularly, in that business, but we did. We had several... Ritchie Pacific, Steve Ritchie, which is a Bruce Merrill takeoff from Arizona, it was here in San Diego...

KELLER: I said SMATV, I should have just said MATV – Master Antenna Television.

PUCKETT: Master Antenna, that's right. We did a lot of that stuff and mostly we sold it, we would sell properties to Times Mirror like crazy on the west coast, to Cox, probably did a couple of dozen of those deals. They were small in nature.

KELLER: Within their own systems?

PUCKETT: Within their franchised area so they could interconnect to them. We've done them basically in all major metropolitan areas. What normally happens is you find a larger operator of those facilities and then you sell them as a bulk and tie them together. There were some very specific FCC prohibitions and laws for awhile. Those have fallen by the wayside. I don't think we've done one of those for three or four years to speak of. There are some that are hybrids. We have a beautiful system in Arizona right now, as pretty a cable system as I've had the luxury of ever looking at. It's two retirement communities, they have private access but they also are franchised cable television systems, and they serve about 10,000 subscribers. Just gorgeous facilities. And those I don't classify with your trailer park or your apartment complex on a one off basis. Those systems tend to sell for what they can be integrated in at a lower multiple. Whatever the multiple would normally be, we historically have seen it at a couple of multiples less than a cable television property, but again, that's not the mainstream of activity for either our firm or anyone else. There's a gentleman who I really like, a great guy, you probably know him – Bob Berger with CEA, and Bob made a business out of that afterwards and I actually had to call him and ask him a question about one about a year ago because I didn't know what the values were, so we'd kind of gotten out of the loop on that a little bit.

KELLER: Well, if they were currently doing a multiple of services within the franchise area that they would then introduce into that system. You could assume at that point that the revenue is going to increase, is that correct?

PUCKETT: Right. Normally they would need to increase the bandwidth, which means getting into the complex and either post wiring it, or in the case of a trailer park they would have to dig up the streets, and increase the bandwidth, and normally those things are only at best an amp deep, or they become another node, so the larger operators now have seen them as a real business, and then they will get a long term access agreement with them and historically the Cox's of the world, who do a great job, will go in and acquire one of those and they never lose it again to one of the private operators. There have been different levels of veracity in that business. There are some guys that are great guys and have done a good job on it, and then there are some guys in that business who have promised the moon and not delivered, so you run into all types. But again, if you were to tie some of those in with a county it is conceivable there would be a franchise. The real franchising of, particularly, rural classic America, took place early in the days. I mean, you remember going out and garnering those franchises in the '70s and the early to mid '80s. By 1986-87, the only real new franchises that were out there were the metropolitan areas, the real large unbuilt areas that were more difficult to deal with, the kind of last of the great conquerors, and then the rural classic county franchises. We did a lot of that small town rural classic county stuff, particularly in the early '80s, late '70s. And what we would do is we would go out and we had all these little banks that had financed them, all the way from SBA loans to small guys who had put together a series of bank loans. I went from Topeka, Kansas – "I'm Tom Puckett from Topeka Kansas" (using Midwestern accent) and I went to Philadelphia and New York to the lenders and taught them to look a little different at rural classic cable. It was a good business, it has always had a cash flow in the 50% range, give or take. When large communities are doing 32%, a rural classic system can do 55%, even owned by an entrepreneur who isn't getting all the breaks.

KELLER: That's interesting, because that's just a switch to what it was originally.

PUCKETT: Of course, and what we find is that the banks were very receptive to batching those and they would...

KELLER: Well, you can prove the cash flow in those small markets, what it was going to be.

PUCKETT: They were very predictable.

KELLER: Year in and year out.

PUCKETT: A lot of them were built with 300 foot sticks and a lot of them were built on water towers. They were all over the place. What you need to do was bring in – I mean, this is early days – all that you needed to do was bring in a good off-air signal from whatever community meant something to them, and there are usually three of those, and then what you would try and do is bring in HBO and ShowTime and anything else you could throw on there. The Disney programming, when it came into being, was such a great thing to sell to good, clean cable. We had people running up and down the street – they didn't know that it was pay programming – they were running up and down the street looking for HBO. They didn't want cable, they wanted HBO. So that was a very good, healthy way to bring rural America into the communications world.

KELLER: But you could show the banker that if they were doing $30,000 a month, that that $30,000 a month would be there on end.

PUCKETT: Absolutely.

KELLER: And their cash flow probably was $15,000 a month and you could prove that.

PUCKETT: That's exactly right. Sometime prior to 1990, we had bankers always questioning the bad debt reserves that we were putting in, and so we took all of the systems that we had handled through that time and a wealth of information – at that time we kept every piece of paper we ever had, which was not necessary – but we went through and the bad debt on rural classic cable was ½ of 1%.

KELLER: I was going to say 2%.

PUCKETT: It was just negligible and you had all this customer base, you had no competition from any of the other satellite services at that time. There wasn't such a thing as Direct TV, there wasn't the NRTC licenses, there wasn't NMDS, there was none of that to deal with at that point in time, so what you did is you provided a service to the community and it kept people in the community, which was a good thing.

KELLER: How do you factor in the required capital expenditure to increase the channel capacity of a system in the smaller markets?

PUCKETT: Well, today, with HITS to Home and HITS, there is an excellent way... you'll find that, and again, smaller is definitional. What we try and encourage our clients to do, and we have a lot of still independently owned rural classic operators, but we also have a lot of very large companies that are operating rural classic systems all the way from AT&T down, and what we try and encourage everyone to do at this point in time is use fiber to integrate the systems and tie them together. It does more than just provide video, obviously it opens it up for a wealth of other information services...

KELLER: You can do it by microwave.

PUCKETT: You can do some of it by microwave. We've got some Idaho properties. There's no way to fiber them together, but they microwave a very beautiful network. A perfect example is there is a huge microwave system up in Truckee and we're just now fibering it together, but the microwave has sufficed. It was Gene Iacopi's old system. What we try and do is encourage them to fiber them together and turn multiple communities into a single headend. A perfect example, as a just mentioned earlier, the Hilliard properties in Nebraska, they have fibered some 20-odd communities into Kearney, Nebraska into probably the nicest cable system in the state of Nebraska.

KELLER: I want to be more specific in that, and I'd like your answer to it: you have a system that currently has 350 megahertz bandwidth capability. In order to do what the operator wants to do within that community, to bring in additional channels and so on to increase his cash flow, he has to bring it up to 550.

PUCKETT: 550 or higher.

KELLER: How would you figure in the capital as opposed to the purchase price of that system?

PUCKETT: Well, I think you have to look at what capital is going to be required. The problem we run into every so often is that someone will have just rebuilt it to 550 and 550 is inadequate. So that's more of a problem than anything. You look at, for instance, if there is any 330 plant out there right now, it's probably losing subscribers like crazy.

KELLER: But just re-spacing could handle that.

PUCKETT: Exactly, so from a non-technical answer, which is all I can give you, I would say that what we do is we look at the cost of upgrading the system in relationship to the valuation. In other words, we subtract it from the valuation, but we also have to look at if you're going to spend the money to upgrade it, what's the ancillary revenue that's going to correspond to that and usually it's pretty much of a wash.

KELLER: That's interesting that you say that that's pretty much of a wash, because that's the way I would figure it.

PUCKETT: But the most dangerous scenario is not to do anything, and we found that those companies and those clients of ours who have not been proactive have effective mitigated the value of their asset and that's something that we have to warn against, and part of our job in warning them against is oftentimes to find them the money to do it if they want to stay in the business. Fortunately for us from a revenue standpoint, unfortunate for the business, a lot of the independents are finally hanging up their running shoes and selling out. The prices have been attractive, the cap X has been very, very strong and burdensome and a lot of these operators find that they have more money than they'll ever want to spend and they're selling out. The fortunate part about that is we start seeing some of them come back again.

KELLER: That's great. Again, you say if a system is worth, let's say 12 times next year's cash flow based on what's given right there, and they need $500,000 to upgrade the system to where it's going to handle 5, 10, 15 more channels and it's going to give you another revenue, you say that you feel that in itself is going to pretty much wash, that the additional revenue will compensate in one year for the capital expenditures required to upgrade that system?

PUCKETT: Well, it depends on the demographics. If I went into Sun City and expected to retain within the first 24 months 10 to 15% of the subscriber base taking high speed interactive services I may be pleasantly surprised because a lot of those people are watching their stock portfolios and emailing their grandchildren, however this is a moving target. Five years from now it's going to be totally different than it is now. So whoever's watching this tape ten years from now is going to laugh at whatever I say.

KELLER: That's the dilemma of a broker.

PUCKETT: Yeah, exactly, it's always a moving target. But being optimistic, we believe that there is no poorly spent cap X if it enhances the revenue stream, that you will get that back with the same return that you would expect, and it hasn't changed a lot from when I got in the business in the '70s to today. If you can't generate some kind of return north of 20% or in the mid-20s, it generally isn't a well spent dollar, whether you're buying something or you're putting cap X on it.

KELLER: Return on investment?

PUCKETT: Exactly, you're internal return on investment. Now we went through years and years where we all expected 40% annual return in this business because we got a little greedy, and that was fine.

KELLER: Well, that's before we were paying out 50 and 70% for programming.

PUCKETT: And before we had competition, before we had rate regulation, before we had all these various and sundry items, and before we had... you know. But the cable industry, given all of the bad press it's gotten, it has a great conscience, and you have to go back and you have to go to square one. The cable industry has charged what they thought they were worth for their services, and there are always exceptions, but the norm of our industry has been to go in and improve the communities that we moved into. And if you don't believe that, look at the young people that are moving back into hogback USA that before would never have thought about putting their business in there, but they can get T1s in there and they can have high speed internet access in there, they can have communications in there, their people feel like...

KELLER: T1 being a reverse channel?

PUCKETT: Exactly. They can do anything they want. They can have two-way service in there, they can go back to hogback and frankly know... when I get on this telephone or I get on my computer, no one knows if I'm in San Diego or in hogback. I could be in hogback and nobody cares, and that's one of the things that the new communications world, despite Al Gore and some of the others that tried to reverse this, have been able to pull off, and our industry does have a conscience, and if you go and you look at rates as to what they could charge and what they do charge, we've made it a good business and it has a good return and Wall Street has rewarded us generally speaking over the years, but there have not been any grand slams as far as taking advantage.

KELLER: I think for data transmission and other things, those rates have yet to be set as to what they're really going to be.

PUCKETT: That's probably a good statement.

KELLER: What was your first deal? I think we talked about the first deal; what was your most memorable deal?

PUCKETT: The current one. Always the current one.

KELLER: Okay, always the current one.

(LAUGHTER)

KELLER: It's the one you're working on right now.

PUCKETT: It sounds a little corny, but I have truthfully taken the position that every single transaction we work on is equally important as the next. I will get just as excited and work just as hard for a little deal as I will a larger deal.

KELLER: I didn't say important, I said memorable.

PUCKETT: Memorable – I really don't know.

KELLER: What was the most difficult deal you've made?

PUCKETT: We've had a number of difficult transactions because a lot of times we get the difficult ones, and with the moving tax laws there have been a number of times when we would pull our hair out because everything was moving in the middle. I knew you were going to ask me that question and I don't really have a good answer. I would say that probably the most difficult thing was living with the changes in the market place so fast, because everything has changed so fast. We've gone through all of the '86 reform, we went through the tax laws that went away, the limited partnership rules went away, we went through highly leveraged transaction during the George Bush years, we went through the Jimmy Carter interest rates, we got creative during that time. We did more seller paper probably than any other firm, we got our clients to take paper back, and I never, ever had one of those go bad. We never had bad debt on any of that. Everybody always paid their debts. As a firm, for years, we took, and still to this day sometimes, take paper as a fee if it means getting the deal done.

KELLER: That's how Daniels made his money, originally.

PUCKETT: Well, I'll tell you what, Monty Rifkin, with ATC, made a lot of brokers rich giving ATC stock out in those early days. That was before my time, but that was not a bad deal. We're doing a deal right now where our firm is taking convertible preferred stock because we happen to really like the public company that's going to do it with our client. But I'm hedging on your answer because so many of them are so difficult. I'll tell you what I'm most proud of as a firm, I think, is the fact that we created so many rural classic buyers that we built up a little piece at a time and then eventually sold them out. In some cases we didn't get the sale, in some cases they went public or something else, but I can name 15 or 20 companies that were nothing when we started, that didn't have a cable deal, and we sold them their first deal, we sold them their last deal, and that's what I think is a tribute.

KELLER: Do you remember who some of those were?

PUCKETT: Oh, I remember all of them unfortunately, that's the sad part!

KELLER: Please do.

PUCKETT: Cardiff was the first one we started with.

KELLER: Stan Searle.

PUCKETT: Stan Searle. Bill Petty at Empire Cable. We had Jack Fullheart; he built up and we sold him something like 120,000 subscribers in the Midwest and in the Carolinas. We had Rodney Weary at WW Communications, and then Rodney sold out to C4. We didn't sell them, another one of our competitors got them, but we sold them close to 100,000 subscribers one little deal at a time over the course of a year to a year and a half. When we sold Rodney Weary's WW to them, we turned around and started him again at Cable Video, built him up again and sold him to Classic Cable. Classic Cable is another perfect one. We sold them close to 200,000 subscribers in the Midwest. We had WK Communications, which was another Weary. That was Bob Weary, one of his ventures, Bob Weary and Bob Kinocki. We started selling them some systems that I actually owned in a limited partnership, south of Kansas City, and they we sold them systems all the way down the Kansas/Missouri line in both states and then we turned around and sold them to Classic. We did an enormous amount of business with Falcon in the early days and then turned around and sold Cardiff to Falcon, for instance.

KELLER: That was Marc Nathanson?

PUCKETT: Marc Nathanson, and Stan Iskowitch was an attorney who was his right hand man in that operation, and just great to deal with, clear up to the day they sold this last year to Charter. It's kind of sad to see all these guys going out of the business, but it goes on and on. I can sit here and... the Hilliards, I mentioned before, are perfect examples.

KELLER: Did you ever do anything with Bob Fanch?

PUCKETT: Bob Fanch came and he was looking in '83 or '84 for new projects and we tried to get him one or two deals but we didn't close them, but I've driven hundreds of miles with Bob. He was a good guy. He beat me out on Fulton, Missouri. I flew in one of Rodney Weary's rickety airplanes. We flew in the worst storm over to Fulton, Missouri trying to get that, but Bob slipped in and in Monty's name got the deal and that started Fanch Communications. That's what he eventually started off on that, then.

KELLER: Leonard, did you ever do anything with Bob Leonard?

PUCKETT: No.

KELLER: I'm trying to think of some of the other small guys.

PUCKETT: Well, we...

KELLER: Roger Leonard, I'm sorry.

PUCKETT: Roger Leonard, Leonard Communications. He was out of Denver as well, but we did not do anything with him. We actually, in that circle... our presence has... we've done some stuff in the Southeast, but our presence is the Midwestern states. We've controlled those states and the Southwest. When I moved the office to San Diego in '87, I did it because it was hard getting people to take you serious being from Topeka, Kansas. So, that was a good move for us because Arizona was a very large presence for us. We had a number of options and activities in the state of Arizona.

KELLER: Jim Monroe?

PUCKETT: Jim Monroe, great guy, good for four or five deals with us. We just closed – he had little Julian, California – we just closed that this year. Jim is doing well, and looks well, and getting along very well. He's very good friends with Kerry Kelly, who is Sun Lakes Cable, another project of ours over there. It's the kind of places that I like to go, I find, that we tend to gravitate towards, and that's natural.

KELLER: Oklahoma?

PUCKETT: Oklahoma. Big state for Oklahoma. We sold Classic a ton of Oklahoma, we sold TCI a lot of their systems in Oklahoma. Originally the Cardiff people bought the eastern part of Oklahoma. Terry Thomas of Thomas Communications bought and sold through that. I owned a little cable system in Anadarko, Oklahoma; had it, sold to Cardiff and Stan didn't want to close, or couldn't close, on the 11th hour, and my client informed me he was going to bring Daniels in to retain listing and I said, "Fine, I'll just buy it from you." So two weeks later I owned a cable system. I thought I was going to hold it for a couple of weeks and just warehouse it and sell it, but the tax write offs were too good and we owned it for about five years, and then sold it to Rodney Weary when he had Cable Video Enterprises.

KELLER: You've mentioned Daniels and you mentioned CEA earlier on, Communications Equity Associates, were these difficult competitors over the years?

PUCKETT: The interesting part about that is despite all the problems they had with each other, and the way they liked to go at it with each other, we were kind of the non-threatening little guys, so never in the history of this firm have I ever had a problem with those firms.

KELLER: Waller?

PUCKETT: No. John – great guys. A couple of guys that worked for Waller I knew in different lives, and Jack Woodruff, for instance, in his days as a buyer was a great client of ours. I like Jack. Rick Michaels is as good a friend as I have in the industry. I thoroughly enjoy him. If you asked him, I'm sure he would say the same thing, that we have had a very honorable relationship. If we're involved in a deal and he's involved in a deal, we just do not rain on their parade, and in fact I felt comfortable enough to call one of his guys and ask him about a valuation. No, it's fortunate that... the bad news is that some of those guys have done a little more volume than we have through the years, the good news is that we've retained our relationship. We really have, and I'm proud of it, and my guys and ladies that have worked for us for years, know that paramount is we've maintained our veracity and honesty in the industry. There may be somebody that might disagree with something I've done, but no one's going to say that we ever did anything that wasn't aboveboard.

KELLER: I've never heard anyone say anything.

PUCKETT: We've been able to do that and I guess I'm as proud of that as anything.

KELLER: You mentioned before that someone came to you and said, "I've got $100,000 of equity to put into a system." How would you take that and how many subscribers could he get for that, and how would you finance it?

PUCKETT: Well, I'm going to pick on poor Bill Petty and he wouldn't mind me doing it. He had left Cap Cities, Bill James was the president of Cap Cities and you may remember, he made a run on the company unsuccessfully and the Washington Post bought the company and so he was without a job and went off. Well, Bill Petty was one of three senior vice-presidents at that time. Tom Bessinger took his position, but there was Bill and two other guys; Harvey Boyd was one of them and I can't recall the third one.

KELLER: The only one I knew very well was James.

PUCKETT: Bill left the company and came to us and said, "I want to buy a rural classic." I said, "Good, what do you have," and he said, "I have $100,000 of equity." I said, "Well, that's not going to get you much." He said, "Look," this was in a time when interest rates were 20%, and he says, "I'll give them any price they want as long as they'll carry paper on everything above what I can get at the senior bank level." So we set him up with a line of credit at Heller Financial, and he went out...

KELLER: Those are usually secondary markets, aren't they, at Heller?

PUCKETT: Well, at that time... it's now become Vanova, and Vanova's a senior lender and competes with anybody as far as pricing and everything, but at that time Heller and Indianapolis Mortgage Plan, which became First Mart, they were...

KELLER: Was that originally Economy Finance?

PUCKETT: Before my time, if it was. The first loans I did with them would have been in '77, '78, and Bill Kennedy and Bill Van Huss were the lenders back then and they would lend you money but it was 5 over. It was expensive. I remember saying to one of our clients, Hollis Logan, "You can't make money at 13%." And he said, "Watch me." And he did. But back to Bill Petty, we sold them systems anywhere. We sold them systems in Kansas, in Oklahoma, in Nevada. We sold him little Tonopah, Nevada, which had more brothels than it had cable subscribers, and he built that up into Empire Communications. We sold him about 25,000 subscribers and then we turned around and sold the whole package later, and he retired off of it. So he did very, very well, and it was that pioneer spirit, they're willing to reach for the brass ring.

KELLER: And Heller financed that deal?

PUCKETT: Heller financed it, and we had a lot of owner finance. We had some other side paper, maybe some First Mart financing in it, it wasn't the kind of deal that you would have taken to First of Chicago or Toronto Dominion. It was highly leveraged.

KELLER: How much have you done with the Canadian banks?

PUCKETT: TD we've been involved with a little bit, but nothing more than that. Early on we did... we've been so busy as a firm the last four or five years that we haven't done as much financing as we did before that. In the early days we did a significant amount and then we would do two to three deals a years after that. That was primarily Hiram Powell in our office who did a lot of that.

KELLER: Euro dollars? Did you bring any European dollars into it?

PUCKETT: No.

KELLER: So you stayed pretty much in the American...

PUCKETT: We have focused on this market and stayed on this... My hat is off to Rick Michaels who flies all those thousands of miles overseas. No thanks. My idea of going to Europe is to go to Paris and have a good time with my wife.

KELLER: I would agree with that, but he sure does it.

PUCKETT: He does it and he enjoys it. He thrives on it.

KELLER: Have the New York brokerage firms cut into your business at all over the years? The Lehman Brothers and other big firms that have been...

PUCKETT: Not into the type of business which we have traditionally handled. Had we been handling the larger transactions where a Times Mirror would sell to Cox, yeah, it would have shut us out of that business, but since we're not involved in that... Before Times Mirror merged we did probably 16 or 17 deals with them, but not above that magnitude. The largest one we did with them was in the 55 to 60 million dollars range. They hired us to sell off their rural Texas systems; there were three or four systems there and we sold that to TCI in those days. But that was the largest magnitude deal we did with Times Mirror, so when it came time for them to do that deal they hired Wall Street to merge with Cox, and that was a logical move for them.

KELLER: Tom, what was the largest deal you ever did?

PUCKETT: We have several that are in the same category – probably the American Cable Entertainment Scott properties. We did them in two pieces; we sold 165 million dollars of it to Rifkin, and we sold about 40 million of it to Classic, and the combination of that was probably the largest. So the largest deal we were actually involved in we were doing some consulting work on the Storer transaction on SCI Holdings. That was through Jim Faircloth, originally, and Jim Hall, who were with the firm at the time, but that wasn't a true brokerage activity.

KELLER: Everybody got in on that deal at one time or another.

PUCKETT: Yeah, everybody took credit for that one, so I don't really count that one. That would be out of school, and we weren't negotiating the deal points on that, but we were involved in a due diligence position on that. We had had other very nice size transactions, ones that I'm really proud of that were difficult, but the combination of American Entertainment and Scott were the largest. During the same time, we were also doing the Westar Properties, which was 84 million, so that was a real busy time there, and then I told you our firm also handles the wholesale optical business and we did the Hoya transaction, which involved the Hoya Japanese company getting into American market and that was 150 million dollars.

KELLER: But it wasn't a cable deal.

PUCKETT: It was not a cable deal. So all those interacted, but in the 100 million dollar range is a very good piece of business for us and we like to stay in that range. Something less than that we get just as excited about.

KELLER: What other types of things do you do? Do you do appraisals only for the sake of appraisals, or only in connection with a sale?

PUCKETT: Of course there's an inherent valuation process you do as part of the transaction...

KELLER: I understand, that's why I ask.

PUCKETT: But that aside, during the... when Saddam Hussein did his wonderful thing in Kuwait, as you know, the cable market for transaction business went from 10 billion dollars down to about 800 million, so it was about 8% of its usual. A lot of our competitors decided to fold their tents or they merged in with...

KELLER: That was also because of the impending Cable Act in '92.

PUCKETT: All kinds of good stuff. It was the Cable Act, it was the economy, it was the tightening of the credit markets, and during the end of '89-'90 area we did a lot of valuation and appraisals. There are firms out there that do that regularly, more than the transaction business, but we took a lot of them. We did about 15 appraisals for TCI during that period on the ACT properties, a number of other smaller stuff, but that fed us very well during those years when the transaction market was a little slower. Now remember, our smaller transactions, we were still doing 1031 exchanges and deals, even though there weren't any large deals...

KELLER: Explain a 1031.

PUCKETT: That's basically where you have a tax-deferred gain, you trade a like kind asset under the code and are able to carry your basis from your earlier property over to the subsequent property.

KELLER: Straight tax free exchange.

PUCKETT: Exactly. They're not always totally tax free, you have to match up like kind assets, but we did a lot of that. We still do a lot of that with larger entities by finding a third party. For instance, if AT&T wanted to sell a cable system I could find them a like system to buy, go through a third party intermediary, do the exchange and there would be no tax consequence to that, but that aside, we did a lot of appraisals. We have done a few fairness opinions, which make me very nervous to do, but when no one else will do something like that...

KELLER: What is that?

PUCKETT: A fairness opinion takes your appraisal or others appraisals and issues an opinion to the shareholders that the transaction is fair from an economic standpoint, and those carry a high level of liability and risk, so we're very cognizant of that whenever we get into those. We did some analysis work like that for Falcon, for instance, because they were such good guys. But those are the types of projects that we historically do when we have a little more time, but you're looking at a small firm who does windows and basically our guys have learned what lights are for, so oftentimes we don't have that luxury of time.

KELLER: What did you think of the contribution that Milken made to the industry?

PUCKETT: At a time when the industry needed money he found money, and you can criticize him or not criticize him for all the other things he's done, but he put money into great companies like Comcast, who are a lot better for it now, and I may be wrong, but I know of no bond issuances that he was involved in in the cable television industry where everybody didn't get all their money plus their interest.

KELLER: Oh, I agree with that. The junk bonds did well by the industry.

PUCKETT: They were great and it was good for our industry, and if I'm limiting our conversation to our industry I would say that as far as I'm concerned it was great business. One of the reasons we came to the West Coast was the awareness in the financial markets of the West Coast, in great part, created by him. So, I guess that's a good answer.

KELLER: I know Paul Kagan thinks that the sun rises and sets on him for what he did for the industry.

PUCKETT: You know, we needed capital, we needed to grow. If there's one thing we've learned in the cable television industry is if you stay still you'll pay. The running joke was that our clients never ever made a principle payment on their debt for many years. It was all... you rolled it every two years and it was strictly term loans.

KELLER: Or as Malone said, I'd rather pay interest than taxes.

PUCKETT: That's right. Well, we have matured some, but it's the Malones of the world that made this industry and make it fun. The meetings that I had with Dr. M. I will really cherish; they were great. Whenever you'd start to say something he was three lines ahead of you. In large part those were due to introductions made by Bill Bresnan for me. As I told you earlier, Bill is one of my heroes in the industry, if not my "Blue Leader". A great guy.

KELLER: And Bill owes an awful lot to TCI and Malone.

PUCKETT: And them to him. I think they had a great relationship, and hopefully, maybe with Liberty he'll get something going again. You just never know how something like that will come around. But Bill, he's one of the guys that introduced me... the interesting part about this is in December of 1986 I hired a guy named Jim Faircloth, and Jim was the regional vice-president for Storer, he ran a half a million subscribers. The thing that Jim did for our firm is it moved us out of being a regional investment banker into a national firm. He introduced me to the Bill Bresnans and the different people who then introduced me to other people in the industry, and it was so much fun because I'd get a wild hair idea... one of the ideas I had was that TCI should buy Times Mirror. That was at a time when Times Mirror had – oh, gosh – they probably had one million two hundred thousand subscribers or more, so Bill says, "Let's go see Malone."

KELLER: The Chandlers never did like the business, though.

PUCKETT: It was a great business, and they had the beautiful systems. They had San Diego and Phoenix, and they had a lot of rural systems with 70 or 80 thousand subscribers per headend. They just had some great systems. They had the Orange County system with Irvine Ranch. I mean, just great systems. So we flew out to Denver and met with John and Bill. Bill took me out there and we met with John and he said, "Well, why don't you talk to J.C., it sounds good to me." So we went in to meet with J.C. Sparkman, and J.C. said, "Let's do it! It's a good deal. Let's do it – right now. Go see what you can do." So I, a very close friend of mine was a board member at Times Mirror and he sold his publishing company to them – Herb Schnall – here in San Diego. So I went to Herb and Herb introduced me to four or five of the board members and I went to the board and they said, "Hmmm, the timing just isn't right." And that was the end of that deal, but the fun was having that chase. We had the same chase with, it was then Post Newsweek, now Cable ONE. We had the exact same scenario, same chase, went through the same thing, and they came back and said, "We just don't need the money." Those type chases, although they never materialized, were a lot of fun, and to have a guy like Malone who was three steps ahead of you the whole time, it was really a fun experience.

KELLER: How about with Comcast? Did you ever do anything with Julian Brodsky?

PUCKETT: Absolutely. We measured... I tried my darndest to... well, we've done some smaller transactions that we've actually closed with Comcast, very pleasant to deal with. They ask more questions and do more due diligence than any three of the other companies put together and as Art Bloch, who is one of their head attorneys there said, he said, "When you work for Julian, if you get Saturday and Sunday off, you think you've gotten something." But we all have our Brodsky lines. I was in a cab with him one time and I said, "I think you're going to be late for your airplane, Julian," and he said, "If you don't miss an airplane once a week you're spending too much damn time in airports." You've done an interview with him, you know what his lines are like. But we tried our darndest to fix, and it wasn't Comcast's fault and it wasn't Bill Jackson, at Cable America's fault, we tried to fix an overbuild in Huntsville, Alabama for years. We measured it by Julian's vacations; he always takes exotic vacations to someplace – Africa or China or something – we measured it each year by those, and each time the federal government or the city would shut it down. We tried and tried and finally one of our competitors was going to sell that to an overbuilder – another overbuilder – and I'm proud to say that I didn't take the deal because I was able to walk into The Cable Center board meeting and Julian said, "I see you sold that to this other company," Nologies, who bought it, and I was able – I lost a lot of money by not taking the deal, but I was able to look Julian in the eye and say, "No, I didn't." I think that was worth that to me, it was very important to me. Now, the company that sold it – the other company on the other side of the table – they are extremely reputable, we represent them, we do a lot of stuff, they're not bad guys, but they got into a competition area there that actually they didn't start, it goes clear back to the TelePrompTer days, when somebody came...

KELLER: That's one of the classic overbuilds.

PUCKETT: It is. They started overbuilding Bill Jackson first – Group W did – it wasn't TelePrompTer, it was Group W, because Group W, during Bresnan's days as president there, started overbuilding Bill Jackson, the local manager...

KELLER: Bill was at TelePrompTer.

PUCKETT: But then Bill ended up running, for Westinghouse, Group W for one year.

KELLER: I guess I don't remember that.

PUCKETT: Yes, in a transition period, and during that tenure this whole battle started, so we initially took Bill Bresnan down there and tried to buy both Comcast and the overbuild part, and Julian had agreed to it reluctantly, and Comcast was going to let go of the whole market. It was about 60 or 70 thousand subscribers, and a dentist on the city council killed the deal, and we tried our darndest and it turned out that Cable America...

KELLER: Did he just want the competition to remain, is that it?

PUCKETT: No, he was buying both sides.

KELLER: No, I mean the city council member?

PUCKETT: Oh, absolutely! He thought that was best for the city. Well, it ended up costing the city 11 million dollars on a judgment, so it wasn't a great decision to make at the city council level, but that was a fun project that was an "almost" over and over again, and it was the hardest thing. As a firm we have been very good; we have fixed between a dozen and 15 overbuilds. We have gone in and...

KELLER: By buying one or the other?

PUCKETT: One buying the other, a third party buying one, convincing the overbuilder to get out for the cost of their money, bringing three-way trades in. A perfect example is Kearney, Nebraska in the mid-80s, the Huntel Telephone came in and said, "We're going to put a simul-sat mutli-feed SA pre-req, pre-wired system in and TCI's going to go away." Of course they didn't go away. It got to be major litigation, it was a mess, so how we fixed it is we brought the Hilliards in and they bought both pieces and they traded TCI for some stuff around their Scotts Bluff, Nebraska system for their part, and we got it all fixed. It took a long time to do, but we eventually got that deal done.

KELLER: Most of your business coming in today comes in the door from previous clients, or do you actually go out and solicit business today, too?

PUCKETT: It comes in from previous clients and major MSOs. So we deal with... there are some major MSOs we just don't have the relationship with, but we have it with a number of them, and they either have a property they don't desire to have, or a property they do desire to have, or it's relationships out there. In this industry there's not that many of us left; you pretty much know everyone.

KELLER: I'm just wondering how long there's going to be for these great national shows when they're spending hundreds of thousands of dollars to put up there to attract who?

PUCKETT: Well, you know, the truth of the matter is that I'm not a big National Show or Western Show fan. I'm not a big cocktail party kind of person. You'll see me not in center stage at any of those functions, and the reality is that the small guys tend not to go to those shows and the large guys are overwhelmed at them. So, I'll still go, I'll be there, but it's a different flavor.

KELLER: You've always said that you like to remain in the background. Where did you achieve this humility?

PUCKETT: Well, it's not so much humility, I think we're all vain to some extent, it's just a way of doing business. I think that if we can do it quietly there's a level of trust there. I guess it comes from the legal background – everything's confidential and quiet, but a number of the transactions, Comcast is an excellent example, Times Mirror was an absolute – you could not even do a press release, they didn't want you to do a press release. You just did your thing, you did it quietly, and you tried to do a good job and get it done as quick as possible, and I think that's important. Our competitors watch what we do, they know exactly what we do, and it doesn't seem to bother them too much. I think they've got enough pie on their plate at this time.

KELLER: Where do you see your business going in the next five, ten years?

PUCKETT: I think it'll be alive and strong. One of the reasons is we got smart along the way. We do, in the last couple of years we've averaged about 800 million dollars per year in sales, in transactions. That is actually our best years on average, and I think one of the reasons that we're able to do that is we're pretty lean and mean right now. I have found that the people who are with the firm don't mind working hard if they get compensated well. At the same time, I think there's enough creative business out there to keep doing what we're doing for some number of years. I told you that we have an ancillary business in the wholesale optical business; that business has a certain amount of life left in it, but the cable business by itself, there's no reason to think we have to change. We have a little spigot that I can turn up and turn down so that I don't just burn everybody out, because it is possible to burn yourself and those around you, so we all have peaks and valleys. I'm ready for a little bit of a valley now, that would be all right, but my son – and I'm not really encouraging him, but he keeps saying keep the firm alive until he gets out of school – I think he has some fire in him to make some money, and he's only a first year college student, and I'm encouraging him to go to Daniels School of Business and go through The Cable Center as well, and get that experience for his MBA. And if he goes into peanut manufacturing, that's fine, but he has asked for that and I also have some people, as I've said, that have been with our firm. I have Sylvia Schiller, who started as my secretary out here, and has been with me for 14 years and does some very intricate work on presentation work and closing procedures now, totally different work. But she went to night school, we paid for all the business classes she would take and she's learned to do that. We have a lot of people, or some people, certainly, that have been with us for a long time, and I've got some brand new talent that's phenomenal. I've got a young man with an accounting background that's been with me three years now that's as good as anybody's got out there. So I look for them to take more of the burden going forward.

KELLER: So you're going to kind of be semi-retired here before too long?

PUCKETT: No, I'd get bored. But if it meant that the evenings were all mine, that would be good.

KELLER: You can't do that today?

PUCKETT: Pretty much. It depends on, you know, you run into times when everybody's all hands on board. To be honest with you, the thing I dislike the most is the travel, and when you spend so many years and so many hours in airplanes – Rick can have those airplanes. I don't care if he's going business elite or not, he can have those airplanes, and I would prefer to stay home if possible, or travel for leisure.

KELLER: What's the biggest mistake you ever made? In business?

PUCKETT: Oh, okay, well that simplifies things. No, I knew what you were talking about. Assuming that one wants this, I probably should have tried to escalate the size of the firm and become a registered NASD firm and go after a larger piece of the industry. It would have been very easy to do with our friends and family, but I don't really see that as... that's probably something in hindsight that could have been easy to attain. I don't see that as necessarily a mistake because we've had a pretty good life, and I think we would have lost some of that. And frankly, my children now are 22 and 19, I didn't see a lot of them as it was, I would have seen very little of them at that point. There's a quid pro quo there.

KELLER: We all know that.

PUCKETT: Yes. Also, there was a lot of good talent out there. I think one of the things I really in hindsight should have done was pick up some more of the good talent like I do have, because it would have made life simpler and different, and there is a lot of very good talent in our industry.

KELLER: But then you would have been just managing people and not anything else.

PUCKETT: I found that. At one point in time we had about 25 in our firm and I wasn't doing deals, I was managing people, and believe it or not, we did less volume with those numbers than we do now with the smaller numbers.

KELLER: This has been the oral history of Thomas F. Puckett, chairman and CEO of HPC Puckett and Company. This oral history is part of the project sponsored by the Gustave Hauser Foundation and it part of the overall oral history program of The Cable Center. The date again, is March 6, 2001, and your interviewer was Jim Keller. Thanks very much, Tom. It's been a great pleasure.

PUCKETT: It was my pleasure, thank you.

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