<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, 1997
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 333-26853
---------
CENCOM CABLE ENTERTAINMENT, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
Delaware 43-1258015
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
12444 Powerscourt Drive - Suite 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
--- ---
<PAGE> 2
CENCOM CABLE ENTERTAINMENT, INC.
FORM 10-Q - FOR THE QUARTER ENDED JUNE 30, 1997
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I. Financial Information
Item 1. Cencom Cable Entertainment, Inc.
a. Balance Sheets - June 30, 1997 and December 31, 1996 3
b. Statements of Operations - Three Months Ended
June 30, 1997 and 1996 4
c. Statements of Operations - Six Months Ended
June 30, 1997 and 1996 5
d. Statement of Shareholder's Investment (Deficit)- Six Months Ended June 30, 1997 6
e. Statements of Cash Flows - Six Months Ended June 30, 1997 and 1996 7
f. Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Part II. Other Information
Item 1. Legal Proceedings 11
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 11
Item 6. Exhibits and Reports on Form 8-K 12
Signature Page 13
</TABLE>
2
<PAGE> 3
CENCOM CABLE ENTERTAINMENT, INC.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
-------- ------------
<S> <C> <C>
ASSETS
INVESTMENT IN UNCONSOLIDATED LIMITED PARTNERSHIP $116,238,504 $122,582,298
------------ ------------
$116,238,504 $122,582,298
============ ============
LIABILITIES AND SHAREHOLDER'S INVESTMENT (DEFICIT)
NOTES PAYABLE $ 82,000,000 $ 82,000,000
ACCRUED INTEREST ON NOTES PAYABLE 29,661,420 22,843,403
DEFERRED INCOME TAXES 55,500,000 55,500,000
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER'S INVESTMENT (DEFICIT):
Common stock, $1 par value, 300,000 shares
authorized; 245,973 shares issued and
outstanding 245,973 245,973
Additional paid-in capital 21,954,139 21,954,139
Accumulated deficit (73,123,028) (59,961,217)
------------ -----------
Total shareholder's investment (deficit) (50,922,916) (37,761,105)
------------ -----------
$116,238,504 $122,582,298
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
3
<PAGE> 4
CENCOM CABLE ENTERTAINMENT, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------- -----------
<S> <C> <C>
EQUITY IN LOSS OF UNCONSOLIDATED LIMITED PARTNERSHIP $(3,437,200) $(3,239,253)
INTEREST EXPENSE (3,410,510) (3,004,261)
------------ ------------
Net loss $(6,847,710) $(6,243,514)
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
CENCOM CABLE ENTERTAINMENT, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
EQUITY IN LOSS OF UNCONSOLIDATED LIMITED PARTNERSHIP $ (6,343,793) $ (7,093,387)
INTEREST EXPENSE (6,818,018) (6,008,522)
------------ ------------
Net loss $(13,161,811) $(13,101,909)
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
CENCOM CABLE ENTERTAINMENT, INC.
STATEMENT OF SHAREHOLDER'S INVESTMENT (DEFICIT)
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Additional
Common Paid-In Accumulated
Stock Capital Deficit Total
------ ---------- ----------- -----
<S> <C> <C> <C> <C>
BALANCE, December 31, 1996 $245,973 $21,954,139 $(59,961,217) $(37,761,105)
Net loss -- -- (13,161,811) (13,161,811)
-------- ----------- ------------ ------------
BALANCE, June 30, 1997 $245,973 $21,954,139 $(73,123,028) $(50,922,916)
======== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
CENCOM CABLE ENTERTAINMENT, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(13,161,811) $(13,101,909)
Adjustments to reconcile net loss to net cash
provided by operating activities-
Equity in loss of unconsolidated limited partnerships 6,343,793 7,093,387
Changes in assets and liabilities-
Accrued interest on note payable 6,818,018 6,008,522
------------ ------------
Net cash provided by operating activities -- --
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES: -- --
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES: -- --
------------ ------------
CASH, beginning and end of period $ -- $ --
============ ============
CASH PAID FOR INTEREST $ -- $ --
============ ============
CASH PAID FOR TAXES $ -- $ --
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE> 8
CENCOM CABLE ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION:
Cencom Cable Entertainment, Inc. (CCE), a Delaware corporation, is a wholly
owned subsidiary of CCA Acquisition Corp. (CAC). CAC is a wholly owned
subsidiary of CCA Holdings Corp. (CCA Holdings). CCA Holdings is owned
approximately 85% by Kelso Investment Associated V, L.P., an investment fund,
together with an affiliate (collectively referred to as "Kelso" herein) and
certain other individuals, and approximately 15% by Charter Communications,
Inc. ("Charter"), manager of Charter Communications Entertainment I, L.P.'s
(CCE-I) and Charter Communications Entertainment II, L.P.'s (CCE-II) cable
television systems.
In January 1995, CAC completed certain acquisitions, including stock and asset
acquisitions of CCE and cable television systems located in Connecticut from
Crown Media, Inc., a subsidiary of Hallmark Cards, Incorporated (the "Crown
Transaction"). CCE's assets were comprised primarily of cable television
systems serving communities in St. Louis County, Missouri (the "Missouri
System"). On September 29, 1995, CAC and CCT Holdings Corp. (CCT Holdings), an
entity affiliated with CCA Holdings by common ownership, entered into an Asset
Exchange Agreement whereby CAC exchanged a 1% undivided interest in all of its
assets (including CCE's assets) for a 1.22% undivided interest in certain
assets to be acquired by CCT Holdings from an affiliate of Gaylord
Entertainment Company, Inc. (Gaylord). In September 1995, CCT Holdings
acquired certain cable television systems from Gaylord. Upon execution of the
Asset Purchase Agreement, CAC and CCT Holdings entered into a series of
agreements to contribute their assets to Charter Communications Entertainment,
L.P. (CCE, L.P.). CCE, L.P. immediately contributed the assets acquired under
the Crown Transaction to CCE-I and certain assets acquired in the Gaylord
acquisition to CCE-II.
The series of transactions representing the contribution of assets to CCE-I
acquired under the Crown Transaction is a reorganization of entities under
common control and has been accounted for in a manner similar to a pooling of
interests. Accordingly, CCE-I's financial statements reflect the activity of
these systems for the entire year. Thus, the net loss of CCE-I generated by
the Missouri system for the period prior to September 29, 1995, was allocated
entirely to CCE.
As a result of these transactions, CCE owns a 33% limited partnership interest
in CCE, L.P., CAC owns a 21% limited partnership in CCE, L.P. and CCT Holdings
owns a 44% limited partnership interest in CCE, L.P. In addition, CAC and CCT
Holdings each own a 1% general partnership interest in CCE, L.P.
The accompanying unaudited financial statements of CCE 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 the financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
2. RESPONSIBILITY FOR FINANCIAL STATEMENTS:
The financial statements as of June 1997, and for the three months ended June
30, 1997 and 1996, are unaudited; however, in the opinion of management, such
statements include all adjustments necessary for a fair presentation of the
financial position and results of operations for the periods presented. These
financial statements should be read in conjunction with the financial
statements and notes thereto as of and for the year ended December 31, 1996.
Interim results are not necessarily indicative of results for a full year.
8
<PAGE> 9
3. LITIGATION
CCE is involved from time to time in routine legal matters incidental to its
business. Management, after consultation with its legal counsel, believes that
the resolution of such matters will not have a material adverse effect on CCE's
financial position or results of operations.
CCE-I is a named defendant in a purported class action lawsuit filed on October
20, 1995 on behalf of the Cencom Cable Income Partners, L.P. ("CCIP") limited
partners, which was filed in the Chancery Court of New Castle County, Delaware
(the "Action"). The Action named as defendants the general partner of CCIP,
the purchasers of all the systems previously owned by CCIP (which includes
CCE-I and certain other affiliates of Charter), Charter and certain
individuals, including the directors and executive officers of the general
partner of CCIP. On February 15, 1996, the Court of Chancery of the State of
Delaware in and for New Castle County dismissed all of the plaintiff's claims
for injunctive relief (including that which sought to prevent the consummation
of the Illinois system acquisition); the plaintiff's claims for money damages
which may have resulted from the sale by CCIP of its assets (including the
Illinois system) remain pending. Based upon, among other things, the advice of
counsel, each of the defendants to the Action believes the Action to be without
merit and is contesting it vigorously. In October, 1996, the plaintiff filed a
Consolidated Amended Class Action Complaint (the "Amended Complaint"). The
general partner of CCIP believes that portions of the Amended Complaint are
legally inadequate and in January 1997, filed a motion for summary judgment to
dismiss all remaining claims in the Action. There can be no assurance,
however, that the plaintiff will not be awarded damages, some or all of which
may be payable by CCE-I, in connection with the Action.
CCE is a named defendant in two actions involving an affiliate of Charter,
Cencom Cable Income Partners II, L.P. ("CCIP II"), a public limited
partnership. On April 15, 1997, a complaint was filed, and on June 19, 1997,
an amended complaint was filed, in the Circuit Court of Jackson County,
Missouri by 269 individual plaintiffs who are limited partners of CCIP II
against Cencom Properties II, Inc., the general partner of CCIP II, Cencom
Partners Inc., the general partner of Cencom Partners, L.P., ("CPLP"), an
entity in which CCIP II invested certain named brokerage firms involved in the
original sale of the limited partnership units and CCE. CCE provided
management services to both CCIP II and CPLP and also owned all of the stock of
the general partners of each of these partnerships prior to mid-1994. The
plaintiffs allege that the defendants breached fiduciary duties, committed
fraud and made various misrepresentations in the marketing and sale of the CCIP
II limited partnership units. The plaintiffs seek recovery of the
consideration paid for their partnership units, restitution of all profits
received by the defendants in connection with the CCIP II transaction and
punitive damages. On June 10, 1997, a purported class action was filed in the
Court of Chancery of the State of Delaware, in and for New Castle County on
behalf of the limited partners of CCIP II against Cencom Properties II, Inc.,
CCE, Charter, certain other affiliates of Charter and certain individuals,
including officers of Charter or Cencom Properties II, Inc. The plaintiffs
allege that the defendants breached fiduciary duties and the terms of the CCIP
II partnership agreement in connection with the investment in Cencom Partners,
L.P., the management of certain CCIP II assets and the sale of the CCIP II
assets. The damages claimed by the plaintiffs are as yet unspecified. CCE
believes that it has meritorious defenses in both actions, including defenses
based on applicable statutes of limitations. CCE intends to defend the actions
vigorously. CCE is not able at this early stage to project the expenses which
will be associated with the actions or to predict any potential outcome or
exposure.
9
<PAGE> 10
CENCOM CABLE ENTERTAINMENT, INC.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Since Cencom Cable Entertainment, Inc. (the "Company") is a guarantor of the
$82.0 million Senior Subordinated Noted due 1999 (the "Notes"), an obligation
of CCA Holdings Corp. ("CCA Holdings Corp."), it is required to record the debt
as a liability for financial reporting purposes. Refer to CCA Holdings Corp.'s
quarterly report for the period ended June 30, 1997 filed on Form 10-Q for
additional information.
Equity in Loss of Unconsolidated Limited Partnership
Equity in loss of unconsolidated limited partnership pertains to the Company's
share of losses in Charter Communications Entertainment, L.P. ("CCE L.P.").
The Company maintains a 33% non-controlling investment in this entity. Equity
in loss of unconsolidated limited partnership increased (decreased) by 6.1% and
(10.6)% to $3,437,200 and $6,343,793 for the three and six months ended June
30, 1997, respectively, when compared to similar periods of 1996. These
fluctuations are due to results at CCE L.P. for the three and six months ended
June 30, 1997.
Interest Expense
Interest expense increased by 13.5% and 13.5% to $3,410,510 and $6,818,018 for
the three and six months ended June 30, 1997, respectively, when compared to
similar period of 1996. The increase is attributed to the semi-annual
compounding inherent in the $82.0 million Senior Subordinated Notes due 1999
(the "Notes").
Net Loss
Net loss increased by 9.7% and 0.5% to $6,847,710 and $13,161,811 for the three
and six months ended June 30, 1997 when compared to similar periods of 1996.
Liquidity and Capital Resources
The Company has issued a guarantee of payment to the holders of the Notes.
Accordingly, the Notes have been reflected as a liability of the Company for
financial reporting purposes. The Notes are also guaranteed by CCA Acquisition
Corp. ("CAC"), the parent of the Company and a wholly-owned subsidiary of CCA
Holdings, and Cencom Cable Entertainment, Inc. (including the Company and CAC,
collectively the "Guarantors" herein).
The Company has no operations or significant assets, other than its investment
in Charter Communications Entertainment, L. P. CCA Holdings and the Guarantors
are dependent primarily upon distributions from Charter Communications
Entertainment I, L.P. to service the Notes. The Company's guarantee cannot be
enforced until repayment in full and termination of CCE-I's credit facility.
10
<PAGE> 11
Part II. Other Information
Item 1. Legal Proceedings
CCE-I is a named defendant in a purported class action lawsuit filed on October
20, 1995 on behalf of the Cencom Cable Income Partners, L.P. ("CCIP") limited
partners, which was filed in the Chancery Court of New Castle County, Delaware
(the "Action"). The Action named as defendants the general partner of CCIP,
the purchasers of all the systems previously owned by CCIP (which includes
CCE-I and certain other affiliates of Charter), Charter and certain
individuals, including the directors and executive officers of the general
partner of CCIP. On February 15, 1996, the Court of Chancery of the State of
Delaware in and for New Castle County dismissed all of the plaintiff's claims
for injunctive relief (including that which sought to prevent the consummation
of the Illinois system acquisition); the plaintiff's claims for money damages
which may have resulted from the sale by CCIP of its assets (including the
Illinois system) remain pending. Based upon, among other things, the advice of
counsel, each of the defendants to the Action believes the Action to be without
merit and is contesting it vigorously. In October, 1996, the plaintiff filed a
Consolidated Amended Class Action Complaint (the "Amended Complaint"). The
general partner of CCIP believes that portions of the Amended Complaint are
legally inadequate and in January 1997, filed a motion for summary judgment to
dismiss all remaining claims in the Action. There can be no assurance,
however, that the plaintiff will not be awarded damages, some or all of which
may be payable by CCE-I, in connection with the Action.
CCE is a named defendant in two actions involving an affiliate of Charter,
Cencom Cable Income Partners II, L.P. ("CCIP II"), a public limited
partnership. On April 15, 1997, a complaint was filed, and on June 19, 1997,
an amended complaint was filed, in the Circuit Court of Jackson County,
Missouri by 269 individual plaintiffs who are limited partners of CCIP II
against Cencom Properties II, Inc., the general partner of CCIP II, Cencom
Partners Inc., the general partner of Cencom Partners, L.P., ("CPLP"), an
entity in which CCIP II invested certain named brokerage firms involved in the
original sale of the limited partnership units and CCE. CCE provided
management services to both CCIP II and CPLP and also owned all of the stock of
the general partners of each of these partnerships prior to mid-1994. The
plaintiffs allege that the defendants breached fiduciary duties, committed
fraud and made various misrepresentations in the marketing and sale of the CCIP
II limited partnership units. The plaintiffs seek recovery of the
consideration paid for their partnership units, restitution of all profits
received by the defendants in connection with the CCIP II transaction and
punitive damages. On June 10, 1997, a purported class action was filed in the
Court of Chancery of the State of Delaware, in and for New Castle County on
behalf of the limited partners of CCIP II against Cencom Properties II, Inc.,
CCE, Charter, certain other affiliates of Charter and certain individuals,
including officers of Charter or Cencom Properties II, Inc. The plaintiffs
allege that the defendants breached fiduciary duties and the terms of the CCIP
II partnership agreement in connection with the investment in Cencom Partners,
L.P., the management of certain CCIP II assets and the sale of the CCIP II
assets. The damages claimed by the plaintiffs are as yet unspecified. CCE
believes that it has meritorious defenses in both actions, including defenses
based on applicable statutes of limitations. CCE intends to defend the actions
vigorously. CCE is not able at this early stage to project the expenses which
will be associated with the actions or to predict any potential outcome or
exposure.
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
The Company filed with the Securities and Exchange Commission a Registration
Statement on Form S-4 for the purpose of registering its $82.0 million Senior
Subordinated Notes due 1999 (the "Notes"). The registration of the Notes was
completed on July 29, 1997. By August 28, 1997, all of the outstanding Series
A Notes had been tendered and exchanged for Series B Senior Subordinated Notes
due 1999.
11
<PAGE> 12
Item 6. Exhibits and Reports on Form 8-K
Exhibits
27 Financial Data Schedule
12
<PAGE> 13
CENCOM CABLE ENTERTAINMENT, INC.
FOR THE QUARTER ENDED JUNE 30, 1997
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.
CENCOM CABLE ENTERTAINMENT, INC.
By: /s/ Jerald L. Kent
-------------------------------
Jerald L. Kent
President and
Chief Executive Officer
By: /s/Jerald L. Kent September 12, 1997
-------------------------
Jerald L. Kent
President and
Chief Executive Officer
By: /s/Kent D. Kalkwarf September 12, 1997
-------------------------
Kent D. Kalkwarf
Senior Vice President and
Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 116,238,504
<CURRENT-LIABILITIES> 0
<BONDS> 111,661,420
0
0
<COMMON> (50,922,916)
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 116,238,504
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,437,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,410,510
<INCOME-PRETAX> (6,847,710)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,847,710)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,847,710)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
