<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended March 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File No. 2-78751
AMERICAN CABLE TV INVESTORS 2
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
State of California 84-0904982
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5619 DTC Parkway
Englewood, Colorado 80111
- ---------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 267-5500
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
-------- ------
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PART I - FINANCIAL INFORMATION
AMERICAN CABLE TV INVESTORS 2
(A Limited Partnership)
Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ------------
Assets amounts in thousands
- ------
<S> <C> <C>
Cash and cash equivalents $2,031 2,238
====== =====
Liabilities and Partners' Equity
- --------------------------------
Accounts payable and accrued expenses $ 25 62
Amounts due to related parties (note 4) 29 181
------ -----
Total liabilities 54 243
------ -----
Partners' equity (deficit):
General partners 1,986 1,991
Initial limited partner (272) (272)
Limited partners 263 276
------ -----
Total partners' equity 1,977 1,995
------ -----
Contingency (note 5)
$2,031 2,238
====== =====
</TABLE>
See accompanying notes to financial statements.
I-2
<PAGE>
AMERICAN CABLE TV INVESTORS 2
(A Limited Partnership)
Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------
1997 1996
----------- ---------
amounts in thousands,
except unit amounts
<S> <C> <C>
Selling, general and administrative
expenses (note 5) $ (31) (118)
Interest income 13 43
------- ------
Net loss $ (18) (75)
======= ======
Loss per limited partnership unit
(note 2) $ (0.43) (1.78)
======= ======
Limited partnership units outstanding 30,772 30,772
======= ======
</TABLE>
See accompanying notes to financial statements.
I-3
<PAGE>
AMERICAN CABLE TV INVESTORS 2
(A Limited Partnership)
Statement of Partners' Equity
Three months ended March 31, 1997
(unaudited)
<TABLE>
<CAPTION>
Initial
General limited Limited
partners partner partners Total
-------- ------- -------- -----
<S> <C> <C> <C> <C>
amounts in thousands
Balance at January 1, 1997 $1,991 (272) 276 1,995
Net loss (5) -- (13) (18)
------ ------- --- -----
Balance at March 31, 1997 $1,986 (272) 263 1,977
====== ======= === =====
</TABLE>
See accompanying notes to financial statements.
I-4
<PAGE>
AMERICAN CABLE TV INVESTORS 2
(A Limited Partnership)
Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------
1997 1996
----------- ---------
<S> <C> <C>
amounts in thousands
(see note 3)
Cash flows from operating activities:
Net loss $ (18) (75)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Change in accounts payable, accrued
expenses and amounts due to related
parties (189) 119
------ -----
Net cash provided by (used in)
operating activities (207) 44
------ -----
Cash flows from investing activities -
Distribution to minority owner of
American Cable TV of Redlands
Joint Venture ("Redlands") -- (210)
------ -----
Cash flows from financing activities -- --
------ -----
Net decrease in cash and
cash equivalents (207) (166)
Cash and cash equivalents:
Beginning of period 2,238 3,045
------ -----
End of period $2,031 2,879
====== =====
</TABLE>
See accompanying notes to financial statements.
I-5
<PAGE>
AMERICAN CABLE TV INVESTORS 2
(A Limited Partnership)
Notes to Financial Statements
March 31, 1997
(unaudited)
(1) Basis of Financial Statement Preparation
----------------------------------------
The accompanying unaudited financial statements include the accounts of
American Cable TV Investors 2 ("ACT 2" or the "Partnership"). Through
December 31, 1995, ACT 2 had a 65% ownership interest in Redlands, a joint
venture which was formed to acquire, develop and operate cable television
systems in and around Redlands, California. American Cable TV Investors 3
("ACT 3"), an affiliate owned the 35% minority interest in Redlands. In
connection with a dissolution, indemnification and contribution agreement
(the "Dissolution Agreement"), Redlands was dissolved as of January 1,
1996. In accordance with the terms of the Dissolution Agreement, Redlands'
net assets were distributed to ACT 2 and ACT 3 based on their respective
ownership interests.
TCI Cablevision Associates, Inc. ("Cablevision"), an indirect subsidiary of
Tele-Communications, Inc. ("TCI"), is the managing agent of ACT 2.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ from
those estimates.
The accompanying financial statements of the Partnership are unaudited. In
the opinion of management, all adjustments (consisting only of normal
recurring accruals) have been made which are necessary to present fairly
the financial position of the Partnership as of March 31, 1997 and the
results of its operations for the three months ended March 31, 1997 and
1996. The results of operations for any interim period are not necessarily
indicative of the results for the entire year.
These financial statements should be read in conjunction with the financial
statements and related notes thereto included in the Partnership's December
31, 1996 Annual Report on Form 10-K.
(2) Allocation of Net Earnings and Net Losses
-----------------------------------------
Pursuant to ACT 2's limited partnership agreement, net earnings and net
losses of ACT 2 are to be allocated 1% to the general partners, 2% to the
initial limited partner and 97% to the limited partners until the limited
partners have received cumulative distributions equal to their original
capital contributions ("Payback"). After the limited partners have received
distributions equal to Payback, the allocations of net earnings and net
losses shall be 25% to the general partners, 2% to the initial limited
partner and 73% to the limited partners.
(continued)
I-6
<PAGE>
AMERICAN CABLE TV INVESTORS 2
(A Limited Partnership)
Notes to Financial Statements
Net loss per limited partnership unit is calculated by dividing the net
loss attributable to the limited partners by the number of limited
partnership units outstanding during the period. The limited partners
achieved Payback in 1994. Accordingly, the Partnership's losses for the
three months ended March 31, 1997 and 1996 have been allocated using the
post-Payback percentages set forth above.
(3) Supplemental Disclosure of Cash Flow Information
------------------------------------------------
ACT 2 considers investments with initial maturities of six months or less
to be cash equivalents. At March 31, 1997, $1,992,000 of money market funds
was included in cash and cash equivalents. ACT 2 is exposed to credit loss
in the event of non-performance by the other parties to such financial
instruments. However, ACT 2 does not anticipate non-performance by the
other parties.
(4) Transactions with Related Parties
---------------------------------
ACT 2 reimburses Cablevision for direct out-of-pocket and indirect expenses
allocable to ACT 2 and for certain personnel employed on a full- or part-
time basis to perform accounting or other services. Such reimbursements
amounted to $9,000 for both the three month periods ended March 31, 1997
and 1996.
Amounts due to related parties represent non-interest-bearing payables to
TCI and its affiliates consisting of (i) the net effect of cash advances
and certain expense allocations and (ii) the advancement of legal and other
fees and expenses associated with the litigation described in note 5.
(5) Litigation
----------
On September 30, 1994, a limited partner of ACT 2 filed suit in United
States District Court for the District of Colorado (the "District Court")
against the managing general partner of ACT 2. A similar suit was filed
against the managing general partner of ACT 3. The lawsuit, as amended,
also names certain affiliates of the managing general partner as
defendants. The lawsuit, as amended, alleges that the defendants violated
disclosure requirements under the Securities Exchange Act of 1934 and that
certain defendants breached a fiduciary duty to the plaintiffs in
connection with the sale of the Redlands, California cable television
system. The defendants believe that the claims asserted are without merit
and are vigorously defending the actions. The defendants moved to dismiss
various claims asserted in the complaint and the plaintiff opposed such
motions. The defendants' motion was denied by the District Court on March
24, 1995.
(continued)
I-7
<PAGE>
AMERICAN CABLE TV INVESTORS 2
(A Limited Partnership)
Notes to Financial Statements
On November 3, 1995, the District Court granted the plaintiff's motion for
certification of this case as a class action. The class has been defined to
include all persons who were limited partners of ACT 2 as of the close of
business on October 1, 1993, excluding, however, the defendants, their parent
corporations, subsidiaries, and affiliates. On August 5, 1996, the defendants
filed a motion for summary judgment on all of the plaintiff's claims, as well
as separate partial summary judgment motions with respect to certain of the
plaintiff's claims. The plaintiff filed a cross-motion for partial summary
judgment on one aspect of the case. The motions have been fully briefed,
however, the District Court has not yet ruled on such motions. On January 7,
1997, the District Court issued an order consolidating this case with a similar
case filed against the managing general partner of ACT 3 (the "Consolidated
Cases"). The Consolidated Cases have been set for a four week jury trial
beginning September 29, 1997.
Section 21 of the Partnership Agreement provides that the General Partners and
their affiliates, subject to certain conditions set forth in more detail in the
Partnership Agreement, are entitled to be indemnified for any liability or loss
incurred by them by reason of any act performed or omitted to be performed by
them in connection with the business of ACT 2, provided that the General
Partners determine, in good faith, that such course of conduct was in the best
interests of ACT 2 and did not constitute proven fraud, negligence, breach of
fiduciary duty or misconduct.
Through March 31, 1997, ACT 2 and ACT 3 have received requests from the General
Partners and certain of their affiliates for the advancement of legal and other
fees and expenses associated with the above-described lawsuit totaling $1.9
million. Consistent with the terms of the Partnership Agreement, this amount
has been advanced by ACT 2 and ACT 3. ACT 2's 50% share of such fees and
expenses for the three months ended March 31, 1997 and 1996, which total
$12,000 and $102,000, respectively, has been included in selling, general, and
administrative expenses in the accompanying financial statements. Fees and
expenses incurred by the defendants will continue to be paid in equal shares by
ACT 2 and ACT 3 as they are incurred and approved.
The litigation will have the effect of delaying ACT 2's final cash
distributions. In addition, any successful indemnification claims by the
defendants would have the effect of reducing the amount of such final cash
distributions.
I-8
<PAGE>
AMERICAN CABLE TV INVESTORS 2
(A Limited Partnership)
Management's Discussion and Analysis of
- ---------------------------------------
Financial Condition and Results of Operations
---------------------------------------------
Material Changes in Results of Operations
-----------------------------------------
ACT 2 is no longer engaged in the cable television business and is
currently seeking to make a final determination of its liabilities so that
liquidating distributions can be made in connection with its dissolution.
Accordingly, the Partnership's results of operations for the three month periods
ended March 31, 1997 and 1996 include (i) $12,000 and $102,000, respectively,
for the advancement of legal and other fees and expenses associated with the
litigation described in note 5 to the accompanying financial statements, (ii)
costs associated with the administration of the Partnership and (iii) interest
income earned on the Partnership's invested cash and cash equivalents.
Material Changes in Financial Condition
---------------------------------------
ACT 2 anticipates that it will make liquidating distributions in connection
with its dissolution as soon as possible following the final determination and
satisfaction of ACT 2's liabilities. However, ACT 2 currently is unable to
predict the timing or amount of such final cash distributions due primarily to
the existence of the litigation described in note 5 to the accompanying
financial statements.
I-9
<PAGE>
AMERICAN CABLE TV INVESTORS 2
(A Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits:
(27) Financial Data Schedule
(b) Reports on Form 8-K filed during the quarter ended March 31, 1997
- none
II-1
<PAGE>
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.
AMERICAN CABLE TV INVESTORS 2
(A Limited Partnership)
By: IR-TCI PARTNERS II,
Its Managing General Partner
By: TCI VENTURES, INC.,
A General Partner
Date: May 13, 1997 By: /s/ Gary K. Bracken
------------------------------
Gary K. Bracken
Vice President and Controller
(Principal Accounting Officer)
II-2
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,031
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,031
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,977
<TOTAL-LIABILITY-AND-EQUITY> 2,031
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (18)
<INCOME-TAX> 0
<INCOME-CONTINUING> (18)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18)
<EPS-PRIMARY> (.43)<F1>
<EPS-DILUTED> 0
<FN>
<F1>EPS-PRIMARY REPRESENTS NET EARNINGS PER LIMITED PARTNERSHIP UNIT
</FN>
</TABLE>
