<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-Q
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transaction period from to
---------------- -----------------------
Commission File Number 333-3774
--------
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS, L.P.
-----------------------------------------------
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS CAPITAL CORPORATION
-------------------------------------------------------------
(Exact name of registrants as specified in their charters)
Delaware 43-1728405
-------- ----------
43-1740264
----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
12444 Powerscourt Drive #400
St. Louis, Missouri 63131
------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(Registrant's telephone number, including area code) (314) 965-0555
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
As of June 30, 1996, there was one share of common stock of Charter
Communications Southeast Holdings Capital Corporation outstanding, which was
owned by Charter Communications Southeast Holdings, L.P.
<PAGE> 2
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS, L.P.
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS CAPITAL CORPORATION
FORM 10-Q - FOR THE QUARTER ENDED JUNE 30, 1996
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information
---------------------
Item 1. Consolidated Financial Statements
a. Consolidated Balance Sheets - June 30, 1996 and December 31, 1995 3
b. Consolidated Statements of Operations - Three Months Ended
June 30, 1996 and 1995 4
c. Consolidated Statements of Operations - Six Months Ended
June 30, 1996 and 1995 5
d. Consolidated Statement of Partners' Capital (Deficit) - Six Months Ended
June 30, 1996 6
e. Consolidated Statements of Cash Flows - Six Months Ended June 30, 1996 and 1995 7
f. Notes to Consolidated Financial Statements 8
Separate financial statements of Charter Communications Southeast Holdings Capital
Corporation have not been presented as this entity had no operations and
substantially no assets or equity.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
Part II. Other Information
-----------------
Item 1. Legal Proceedings - None -
Item 2. Change in Securities - None -
Item 3. Defaults upon Senior Securities - None -
Item 4. Submission of Matters to a Vote of Security Holders - None -
Item 5. Other Information - None -
Item 6. Exhibits and Reports on Form 8-K - None -
Signature Page 14
</TABLE>
Page 2
<PAGE> 3
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS, L.P.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------- -------------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 3,057,373 $ 6,547,438
Accounts receivable, net of allowance for
doubtful accounts of $266,808 and $288,128,
respectively 1,729,972 1,314,179
Prepaid expenses and other 488,918 454,175
Receivable from parent and affiliates 500,000 796,179
------------- -------------
Total current assets 5,776,263 9,111,971
------------- -------------
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment 139,995,107 107,029,408
Franchise costs, net of accumulated
amortization of $53,025,044 and $40,899,887
respectively 387,022,416 303,827,917
------------- -------------
527,017,523 410,857,325
------------- -------------
OTHER ASSETS 14,516,427 5,592,429
------------- -------------
$547,310,213 $425,561,725
============= =============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
CURRENT LIABILITIES:
Note payable - related party $ -- $15,000,000
Accounts payable and accrued expenses 13,754,496 12,330,848
Subscriber deposits and prepayments 173,686 243,277
Payable to affiliates 1,479,613 1,060,451
------------- -------------
15,407,795 28,634,576
------------- -------------
DEFERRED MANAGEMENT FEES PAYABLE TO AFFILIATE 2,985,904 1,898,004
------------- -------------
DEFERRED REVENUE 1,763,363 1,114,699
------------- -------------
LONG-TERM DEBT, less current maturities 453,237,688 259,125,000
------------- -------------
DEFERRED INCOME TAXES 5,000,128 5,111,308
------------- -------------
REDEEMABLE PREFERRED LIMITED UNITS - 0 and
393.5 Class A units and 0 and 100 Class B
units, issued and outstanding, respectively -- 53,107,175
------------- -------------
SPECIAL LIMITED PARTNER UNITS - 0 and
345.8526 Class A and 0 and 54.1163 Class B
units, issued and outstanding, respectively -- 44,972,506
------------- -------------
PARTNERS' CAPITAL:
General Partner 689,154 315,985
Preferred Limited Partners - 0 and 291.26
Class B units, issued and outstanding,
respectively -- --
Common Limited Partners - 1,513.36 and
477.19 units, issued and outstanding,
respectively 68,226,181 31,282,472
------------- -------------
Total partners' Capital 68,915,335 31,598,457
------------- -------------
$547,310,213 $425,561,725
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
Page 3
<PAGE> 4
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
SERVICE REVENUES:
Basic service $ 22,570,066 $ 12,085,286
Premium service 3,856,149 2,209,615
Other 4,647,995 2,165,454
-------------- --------------
31,074,210 16,460,355
-------------- --------------
OPERATING EXPENSES:
Operating costs 13,062,708 7,171,354
General and administrative 2,296,148 1,423,408
Depreciation and amortization 13,372,178 10,802,641
Management fees - related party 1,552,599 818,757
-------------- --------------
30,283,633 20,216,160
-------------- --------------
Income (loss) from operations 790,577 (3,755,805)
-------------- --------------
OTHER INCOME (EXPENSE):
Interest income 41,665 45,959
Interest expense (11,337,716) (4,946,984)
Other (184,066) (5,340)
-------------- --------------
(11,480,117) (4,906,365)
-------------- --------------
Loss before benefit for income taxes and extraordinary
item (10,689,540) (8,662,170)
BENEFIT FOR INCOME TAXES 59,989 472,692
-------------- --------------
Loss before extraordinary item (10,629,551) (8,189,478)
EXTRAORDINARY ITEM - Loss on early retirement of debt -- (1,959,438)
-------------- --------------
Net loss (10,629,551) (10,148,916)
-------------- --------------
REDEMPTION PREFERENCE ALLOCATION:
Special Limited Partner units -- (762,760)
Redeemable Preferred Limited units -- (1,344,336)
NET LOSS ALLOCATED TO REDEEMABLE PREFERRED LIMITED UNITS -- --
-------------- --------------
Net loss applicable to partners' capital accounts $(10,629,551) $(12,256,012)
============== ==============
NET LOSS ALLOCATION TO PARTNERS' CAPITAL ACCOUNTS:
General Partner $ (106,296) $ (65,269)
Class B Preferred Limited Partners -- (5,729,067)
Common Limited Partners (10,523,255) (6,461,676)
-------------- --------------
$(10,629,551) $(12,256,012)
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Page 4
<PAGE> 5
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---------------- ----------------
<S> <C> <C>
SERVICE REVENUES:
Basic service $ 40,072,079 $ 22,716,042
Premium service 6,849,971 4,069,551
Other 7,996,334 3,998,224
---------------- ----------------
54,918,384 30,783,817
---------------- ----------------
OPERATING EXPENSES:
Operating costs 23,048,004 13,127,693
General and administrative 4,199,945 2,604,255
Depreciation and amortization 24,295,803 18,688,637
Management fees - related party 2,744,666 1,534,452
---------------- ----------------
54,288,418 35,955,037
---------------- ----------------
Income (loss) from operations 629,966 (5,171,220)
---------------- ----------------
OTHER INCOME (EXPENSE):
Interest income 88,509 63,555
Interest expense (18,116,240) (8,659,868)
Other (233,266) (1,757)
---------------- ----------------
(18,260,997) (8,598,070)
---------------- ----------------
Loss before benefit for income taxes and extraordinary
item (17,631,031) (13,769,290)
BENEFIT FOR INCOME TAXES 111,180 472,692
---------------- ----------------
Loss before extraordinary item (17,519,851) (13,296,598)
EXTRAORDINARY ITEM - Loss on early retirement of debt -- (1,959,438)
---------------- ----------------
Net loss (17,519,851) (15,256,036)
---------------- ----------------
REDEMPTION PREFERENCE ALLOCATION:
Special Limited Partner units (828,616) (1,525,520)
Redeemable Preferred Limited units (1,452,343) (2,533,330)
NET LOSS ALLOCATED TO REDEEMABLE PREFERRED LIMITED UNITS 4,063,274 --
---------------- ----------------
Net loss applicable to partners' capital accounts $(15,737,536) $(19,314,886)
================ ================
NET LOSS ALLOCATION TO PARTNERS' CAPITAL ACCOUNTS:
General Partner $(157,375) $ (81,104)
Class B Preferred Limited Partners -- (11,204,515)
Common Limited Partners (15,580,161) (8,029,267)
---------------- ----------------
$(15,737,536) $(19,314,886)
================ ================
</TABLE>
The accompanying notes are an integral part of these consolidated statements
Page 5
<PAGE> 6
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Class B
Preferred Common
General Limited Limited
Partner Partners Partners Total
------------- ----------------- -------------------- -------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1995 $ 315,985 $ -- $ 31,282,472 $ 31,598,457
Return of capital on Special Limited
Partners' buyout 25,582 -- 2,532,591 2,558,173
Capital contributions 504,962 -- 49,991,279 50,496,241
Allocation of net loss (157,375) -- (15,580,161) (15,737,536)
------------- ----------------- -------------------- -------------
BALANCE, June 30, 1996 $689,154 $ -- $ 68,226,181 $ 68,915,335
============= ================= ==================== =============
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
Page 6
<PAGE> 7
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (17,519,851) $ (15,256,036)
Adjustments to reconcile net loss to net cash provided by operating
activities
Extraordinary item - Loss on early retirement of debt -- 1,959,438
Depreciation and amortization 24,295,803 18,688,637
Amortization of debt issuance costs 199,409 --
Amortization of interest rate cap agreements 66,875 48,053
Forgiveness of note receivable with related party 100,000 --
Amortization on discount of debentures 2,837,627 --
Deferred income taxes -- --
Changes in assets and liabilities, net of effects from acquisitions -
Accounts receivable, net 1,558,448 475,113
Prepaid expenses and other 63,062 (2,718,725)
Receivable from parent and affiliates 296,179 (3,620,898)
Accounts payable and accrued expenses (197,889) 2,270,623
Subscriber deposits and prepayments (69,591) (58,782)
Payable to affiliates - deferred management fees 1,507,062 791,230
Deferred revenue 553,987 1,145,565
-------------- --------------
Net cash provided by operating activities 13,691,121 3,724,218
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (15,491,286) (5,397,672)
Payments for acquisitions, net of cash acquired (125,270,673) (180,617,269)
Payments of organizational expenses (34,257) --
-------------- --------------
Net cash used in investing activities (140,796,216) (186,014,941)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt borrowings $ 200,000,061 $ (3,214,631)
Payment of debt issuance costs (9,305,903) 125,800,000
Borrowings under revolving credit agreement 9,775,000 (1,000,000)
Payments under revolving credit agreement (18,500,000)
Payment of note payable (15,000,000) --
Partners' capital contributions -- 44,500,000
Preferred Limited Partners' Capital contributions -- 19,000,000
Redemption of Special Limited Partner units (43,242,948)
-------------- --------------
Net cash provided by financing activities 123,726,210 185,085,369
-------------- --------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (3,378,885) 2,794,646
CASH AND CASH EQUIVALENTS, beginning of period 6,547,438 1,484,263
-------------- --------------
CASH AND CASH EQUIVALENTS, end of period $ 3,168,553 $ 4,278,909
============== ==============
CASH PAID FOR INTEREST $ 12,669,902 $ 6,880,698
============== ==============
CASH PAID FOR TAXES $ -- $ --
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Page 7
<PAGE> 8
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1996
1. ORGANIZATION AND BASIS OF PRESENTATION:
Charter Communications Southeast Holdings, L.P. (Southeast Holdings), a
Delaware limited partnership, was formed in January 1995 for the purpose of
acquiring and operating existing cable television systems. Southeast Holdings'
stated termination date is December 31, 2014, as provided in the partnership
agreement.
In 1995, Southeast Holdings formed a new subsidiary, Charter Communication
Southeast L.P. (Southeast), and in connection with the initial capitalization
of Southeast, and a subsequent series of contribution transactions, Charter
Communications II, L.P. (CC-II) became an operating subsidiary.
On March 28, 1996 Southeast Holdings engaged in a corporate reorganization that
resulted in Charter Communications L.P. (CC-I) and its general partner, CCP
One, Inc. (CCP-I), becoming subsidiaries of Southeast Holdings. This
reorganization was facilitated because, in contemplation of the reorganization,
one of CCP-I's former shareholders acquired 100% of the CCP-I outstanding
shares and then contributed those shares so that CCP-I could become a Southeast
Holdings subsidiary. The contribution of the CCP-I shares was accounted for as
a reorganization under common control and accordingly, the consolidated
financial statements and notes have been restated to include the results and
financial position of CC-I for all periods presented.
The accompanying consolidated financial statements include the accounts of
Southeast Holdings and its direct and indirect wholly owned subsidiaries,
Charter Communications Southeast Properties, Inc., Charter Communications
Southeast Holdings Capital Corporation (Holdings Capital), Southeast, Charter
Communications Southeast Capital Corporation (Southeast Capital), CCP II, Inc.
(CCP II), CCP I,. CC-II, and CC-I, collectively referred to as the
"Partnership" or the "Company" herein. All significant intercompany balances
and transactions have been eliminated in consolidation.
The accompanying unaudited financial statements have been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted.
CC-I commenced operations effective April 1994, through the acquisition of
certain cable television systems. CC-II commenced operations effective January
1995 through the acquisition of certain cable television systems.
2. RESPONSIBILITY FOR INTERIM FINANCIAL STATEMENTS:
The consolidated financial statements as of June 30, 1996 and 1995, are
unaudited; however, in the opinion of management, such statements include all
adjustments necessary for a fair presentation of the results for the periods
presented. The interim consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
contained in the Registrant's Form S-4 dated as of July 26, 1996. Interim
results are not necessarily indicative of results for a full year.
Page 8
<PAGE> 9
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS, L.P.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Significant Transactions
Since April 1994, the Company and its subsidiaries have completed the following
acquisitions:
<TABLE>
<CAPTION>
Acquisition Date Approximate Purchase Price Location of Systems
- ---------------- -------------------------- ----------------------------------
<S> <C> <C>
April 1994 $174.7 million Georgia, Alabama, Louisiana
January 1995 $108.0 million Kentucky, N. Carolina, S. Carolina
May 1995 $22.0 million Georgia
May 1995 $48.0 million Alabama
July 1995 $34.7 million Georgia
November 1995 $35.0 million S. Carolina
January 1996 $8.4 million S. Carolina
March 1996 $112.0 million Georgia, N. Carolina, Tennessee,
Kentucky
</TABLE>
As of June 30, 1996, the Company had six pending acquisitions for the purchase
of cable television systems serving approximately 101,000 basic subscribers for
a total purchase price of approximately $179.2 million. These acquisitions are
anticipated to be consummated in late 1996 through early 1997.
Results of Operations
The following table sets forth the approximate number of basic subscribers and
premium subscriptions of the Partnership as of the dates indicated:
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1996 1995 1995
------------- ------------ ----------
<S> <C> <C> <C>
Basic Subscribers:
Nashville Cluster 41,617 -- --
Northern Alabama Cluster 47,787 47,757 47,336
New Orleans Cluster 34,746 35,461 34,943
Atlanta Cluster 60,635 57,722 40,009
Greenville/Spartanburg Cluster 76,831 71,083 48,762
Non-Cluster Systems 49,777 37,083 37,130
------------- ------------ ----------
311,393 249,106 208,180
============= ============ ==========
Premium Subscription Units:
Nashville Cluster 25,193 -- --
Northern Alabama Cluster 23,056 50,437 51,140
New Orleans Cluster 16,563 19,084 19,546
Atlanta Cluster 22,252 22,388 15,510
Greenville/Spartanburg Cluster 27,629 26,399 20,674
Non-Cluster Systems 30,968 23,851 24,682
------------- ------------ ----------
145,661 142,159 131,552
============= ============ ==========
</TABLE>
Page 9
<PAGE> 10
The following table sets forth certain items as a percentage of total service
revenues for the periods indicated:
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30 Ended June 30
---------------------- ----------------------
(Unaudited) (Unaudited)
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Service Revenues 100% 100% 100% 100%
-------- -------- -------- --------
Operating Expenses:
Operating, General and Administrative 49.4 52.2 49.6 51.1
Depreciation and Amortization 43.0 65.6 44.2 60.7
Management Fees - Related Party 5.0 5.0 5.0 5.0
-------- -------- -------- --------
97.4 122.8 98.8 116.8
-------- -------- -------- --------
Income (loss) From Operations 2.6 (22.8) 1.2 (16.8)
-------- -------- -------- --------
Other Income (Expense):
Interest Income 0.1 0.3 0.2 0.2
Interest Expense (36.5) (30.1) (33.0) (28.1)
Other (0.6) -- (0.4) --
-------- -------- -------- --------
(37.0) (29.8) (33.2) (27.9)
-------- -------- -------- --------
Net Loss before extraordinary item (34.4) (52.6) (32.0) (44.7)
======== ======== ======== ========
</TABLE>
Service Revenues
The Partnership earns substantially all of its revenues from monthly
subscription fees for basic tier, expanded tier, premium channels, equipment
rental and ancillary services provided by its cable television systems.
Service revenues increased by 88.8% to $31,074,210 and 78.4% to $54,918,384,
respectively, for the three and six month periods ended June 30, 1996, when
compared to the similar periods of 1995. These increases in 1996 are primarily
due to an increase in subscribers for the basic tier of cable service offered
by the systems resulting primarily from acquisitions of cable systems by the
Partnership throughout 1995 and 1996.
Basic subscribers at June 30, 1996 increased by 49.6% over June 30, 1995. In
addition to the acquisitions, this increase reflects management's marketing
efforts to add new customers and retain existing customers, as well as improved
customer service. It also reflects an industry-wide increase in cable
subscribers as a result of increased advertising during 1995 and 1996 by
wireless and direct broadcast service providers; these broad-based marketing
campaigns appear to have enhanced overall consumer awareness and desire for
alternative programming options, with a "spill-over" benefit for cable
providers. In addition, a limited amount of new-build construction increased
the coverage of the systems.
Premium service subscriptions increased 10.7% from June 30, 1995 to June 30,
1996. The ratio of premium service subscriptions per basic subscriber
decreased from 63.2% at June 30, 1995 to 46.8% at June 30, 1996. The overall
increase in the number of subscriptions is the result of the increased
subscriber base due to acquisitions, but the decrease in the premium ratio may
reflect the fact that there is an increasing variety of programming on the
basic tier. Given this change at the basic level, the Partnership anticipates
that premium services may continue to decline relative to basic services over
the next few years. As a result, the Partnership offers premium services to
subscribers in a packaged format, providing subscribers with a discount from
the combined retail rates of these packaged services in an effort to maintain
premium subscription levels and attract additional subscriptions.
Page 10
<PAGE> 11
Operating Expenses
Operating, general and administrative expenses increased by $6,764,094 or 78.7%
and $11,516,001 or 73.2%, respectively, for the three and six month periods
ended June 30, 1996 when compared to the similar periods of 1995. The majority
of these increases were related to the acquisitions of additional cable systems
during 1995 and 1996.
Depreciation and amortization increased by 23.8% from $10,802,641 to
$13,372,178 and 30% from $18,688,637 to $24,295,803, respectively, for the
three and six months ended June 30, 1996, when compared to the similar periods
of 1995. The increase in depreciation and amortization is a result of capital
expenditures made to the Systems, in addition to the increase in property,
plant and equipment and franchise costs resulting from the acquisitions of
additional cable systems.
Other Income / Expense
Interest expense increased by 129.2% from $4,946,984 to $11,337,716 and 109.2%
from $8,659,868 to $18,116,240, respectively, for the three and six month
periods ended June 30, 1996, when compared to the similar periods of 1995.
This increase was primarily due to the increase in the average outstanding debt
balance between the comparable periods and an increase in the interest expense
associated with issuing the Senior Notes and Discount Debentures on March 28,
1996.
Net Loss
Net loss increased by 4.7% from $10,148,916 to $10,629,551 and 14.8% from
15,256,036 to 17,519,851 respectively, for the three and six month periods
ended June 30, 1996 when compared to the similar periods of 1995. In 1996,
increased amortization and interest expense were significant factors versus the
prior year.
Liquidity and Capital Resources
The Partnership's growth by acquisition in 1995 and 1996 has been funded
primarily by borrowings under credit facilities with the exception of the
acquisition in 1996 that was funded with the proceeds of the Senior Secured
Discount Debentures and the Senior Notes. Cash flows provided by operating
activities together with third party borrowings have been sufficient to fund
the Partnership's debt service, capital expenditures and working capital
requirements. In addition, the Partnership has funded portions of certain
acquisitions through the issuance of equity securities. Future cash flows
provided by operating activities and availability for borrowings under the
existing credit facilities are anticipated to be sufficient, during the next 12
months, for the Partnership's ongoing debt service, capital expenditures and
working capital needs. The Partnership anticipates that future acquisitions
could be financed through borrowings, either presently available under the
existing credit facilities, or as a result of amending the existing credit
facilities to allow for expanded borrowing capacity. Although to date the
Partnership has been able to obtain financing on satisfactory terms, there can
be no assurance that this will continue to be the case in the future.
On March 28, 1996, the Partnership engaged in a corporate restructuring and
refinancing plan. As a result, Southeast Holdings and Holdings Capital issued
$146.8 million principal amount of Senior Secured Discount Debentures due 2007,
from which the net proceeds of $72.4 million were invested in its subsidiary,
Southeast, for use in operations. Simultaneously with this offering by
Southeast Holdings, Southeast and Southeast Capital issued $125.0 million
aggregate principal amount of Senior Notes due 2006, from which the proceeds to
the issuers were $121.3 million. The net proceeds of these offerings were
ultimately used, amongst other things, as follows: $17.5 million to repay
outstanding credit facilities, $16.1 million to repay other indebtedness, $43.2
million to redeem the Special Limited Partner units of CC-I, and $114.9 million
to consummate an acquisition.
Page 11
<PAGE> 12
At June 30, 1996, the Partnership's long-term debt of $453.2 million consisted
of $77.4 million outstanding under the revolving credit and term loan facility
of CC-I, $173.0 million outstanding under the revolving credit and term loan
facility of CC-II, $125 million of indebtedness from the sale of 11 1/4% Senior
Notes by Southeast, and $77.8 million of indebtedness from the sale of 14%
Senior Discount Debentures.
Cash interest is payable on a monthly and quarterly basis for borrowings
outstanding under the CC-I and CC-II credit facilities. Cash interest is
payable semi-annually, in March and September, on the Senior Notes until March
2006. Interest on the Senior Secured Discount Debentures is accrued (but not
payable) until March 2001; thereafter, cash interest is payable on a
semi-annual basis in March and September until March 2007. The first interest
payment on the Senior Notes will be due in September 1996.
The Partnership manages risk arising from fluctuations in interest rates
through the use of interest rate swap and cap agreements required under the
terms of the existing credit facilities. Interest rate swap and cap agreements
are accounted for by the Partnership as a hedge of the debt obligation. As a
result, the net settlement amount of any such swap or cap is recorded as an
adjustment to interest expense in the period incurred. The affects of the
Partnership's hedging practices on its weighted average borrowing rate and on
reported interest expense were not material for either the three or six months
ended June 30, 1996.
During the second quarter of 1996, subsidiaries of the Partnership entered into
separate agreements for the purchase of cable system assets from Masada Cable
Partners, L.P. and Prime Cable of Hickory, L.P., for approximately $22.0
million and $68.0 million, respectively. Subject to the satisfaction of certain
terms and conditions, it is anticipated that these acquisitions will be
consummated in late 1996 or early 1997. In addition, the Partnership's
subsidiaries entered into four separate agreements to purchase cable system
assets in Anderson County and Abbeville, South Carolina and Lincolnton and
Sanford, North Carolina for approximately $36.7 million, $4.2 million, $27.5
million and $20.8 million, respectively. The entities selling these four
systems are affiliated with Charter Communications, Inc., the management
company for, and a beneficial owner of an interest in, the Partnership. The
selling entities intend to seek prior approval of the holders of a majority of
their outstanding equity interests, and subject to other customary terms and
conditions, such purchases are expected to be consummated in 1997. The
Partnership anticipates funding these acquisitions by increasing the limits on
its credit facilities and borrowing necessary funds. In addition, the
Partnership will explore possibilities for additional equity contributions.
The Partnership incurred capital expenditures of approximately $15.5 million
during the first six months of 1996 in connection with the improvement and
upgrading of the Partnership's cable systems. The Partnership anticipates that
capital expenditures for such purposes will be approximately $50.0 million
during 1996 and $30.0 million during 1997, of which approximately $11.0 million
per year represents anticipated maintenance capital expenditures.
The Partnership has insurance covering risks incurred in the ordinary course of
business, including general liability, property and business interruption
coverage. As is typical in the cable television industry, the Partnership does
not maintain insurance covering its underground plant, the cost of which
management believes is currently prohibitive. Management believes that the
Partnership's insurance coverage is adequate, and intends to monitor the
insurance markets to attempt to obtain coverage for the Partnership's
underground plants at reasonable and cost-effective rates.
The Partnership believes that it has generally complied with the provisions of
the 1992 Act regarding cable programming service rates. However, some systems
may be charging rates which are in excess of allowable rates and, accordingly,
may be subject to challenge by regulatory authorities, such challenge may
result in the Partnership being required to make refunds to subscribers. The
amount of refunds, if any, which could be payable by the Partnership in the
event such systems' rates are successfully challenged by regulatory authorities
is not currently estimable. The Partnership has not reserved any amounts for
payment of such refunds as the General Partner does not believe that the
amounts of any such refunds would have a material adverse effect on the
financial position or results of the Partnership.
Page 12
<PAGE> 13
Part II. Other Information
Item 1. Legal Proceedings - None
Item 2. Change in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K - None
Page 13
<PAGE> 14
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS, L.P.
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS CAPITAL CORPORATION
FOR QUARTER ENDED JUNE 30, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS, L.P.
By: Charter Communications Holdings Properties, Inc..
General Partner
By: /s/ Jerald L. Kent
--------------------------------------------------
Jerald L. Kent
President and
Chief Financial Officer
By: /s/Jerald L. Kent September 9, 1996
------------------------------
Jerald L. Kent
President and
Chief Financial Officer
By: /s/Ralph G. Kelly September 9, 1996
------------------------------
Ralph G. Kelly
Senior Vice President and
Treasurer
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS
CAPITAL CORPORATION
By: /s/ Jerald L. Kent
--------------------------------------------------
Jerald L. Kent
President and
Chief Financial Officer
By: /s/Jerald L. Kent September 9, 1996
------------------------------
Jerald L. Kent
President and
Chief Financial Officer
By: /s/Ralph G. Kelly September 9, 1996
------------------------------
Ralph G. Kelly
Senior Vice President and
Treasurer
Page 14
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<PERIOD-START> APR-01-1996
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