<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 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 number 0-14093
------------------------------
CENCOM CABLE INCOME PARTNERS, L.P.
(Exact Name of Registrant as Specified in its Charter)
Delaware 43-1415278
(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
------------------------------
Securities registered pursuant to Section 12(b) of the Act: None
------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interests $1,000 per unit
(Title of Class)
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:
----- -----
Indicate by check mark if disclosure of delinquent filers Pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. [X]
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated into this Report by reference: None
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<PAGE> 2
CENCOM CABLE INCOME PARTNERS, L.P.
1997 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Item 1. Business..................................................................................................3
Item 2. Properties................................................................................................3
Item 3. Legal Proceedings.........................................................................................3
Item 4. Submission of Matters to a Vote of Security Holders.......................................................4
Item 5. Market for Registrant's Common Equity and Related Security Holder Matters.................................4
Item 6. Selected Financial Data...................................................................................5
Item 7. Management's Discussion and Analysis Of Financial Condition and Results Of Operations....................6
Item 8. Financial Statements and Supplementary Data..............................................................10
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.....................10
Item 10. Directors and Executive Officers of the Registrant.......................................................10
Item 11. Executive Compensation...................................................................................11
Item 12. Security Ownership of Certain Beneficial Owners and Management...........................................11
Item 13. Certain Relationships and Related Transaction............................................................11
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K..........................................11
</TABLE>
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<PAGE> 3
ITEM 1. BUSINESS
Cencom Cable Income Partners, L.P., (the "Partnership" or the "Registrant") was
formed as a Delaware limited partnership in July 1986, and its sole business
activity was the ownership and operation of cable television systems (the
"Systems") until it sold all of the Systems on March 28, 1996 (the "Sale
Transaction"). Cencom Properties, Inc. (the "General Partner"), is a Delaware
corporation that was incorporated in July 1986. The sole business activities
engaged in by the General Partner were its service as the general partner of the
Partnership and as the management company which managed the Systems. See below
for discussion of the sale of the Systems. The principal executive offices of
the General Partner and the Partnership are located at 12444 Powerscourt Drive,
Suite 400, St. Louis, Missouri 63131 and their telephone number is (314)
965-0555.
Upon consummation of the Sale Transaction, the Partnership disposed of
substantially all of its assets (other than cash and certain other rights),
terminated all of its employees, and began the process of winding up and
dissolution. The net proceeds from the Sale Transaction were approximately
$211.3 million, of which $74.0 million was utilized to retire the Partnership's
outstanding indebtedness. On April 15, 1996 and December 15, 1996, the General
Partner made distributions of approximately $122.5 million ($120.1 million to
the Limited Partners and $2.4 million to the General Partner) and $7.6 million
($7.5 million to the Limited Partners and $.1 million to the General Partner),
respectively. The Partnership's net assets of approximately $5.1 million as of
December 31, 1997 represents a holdback reserve, as provided for in the
Partnership Agreement, from which the Partnership will pay any remaining
administrative costs and expenses, obligations and contingencies. The
Partnership intends to release all funds which have not been expended for
contingencies and obligations upon final resolution of such contingencies
including the settlement of all litigation (see "Item 3. Legal Proceedings").
Any successful claims against or expenses incurred by the Partnership will be
paid out of the reserve and will reduce the final amount of Partnership cash to
be distributed upon liquidation.
Upon completion of the Sale Transaction, the General Partner ceased to manage
the operations of the Systems and has no further rights to receive management
fees or reimbursement of its expenses for management services.
Upon completion of the "winding-up" of the Partnership, the General Partner will
file such certificates and documents as may be required to effectuate and
evidence the dissolution of the Partnership, and the Partnership Agreement will
be formally terminated. The General Partner expects to terminate the Partnership
upon final resolution of all contingencies.
Upon its termination, the Partnership will cease to be a public entity and will
no longer be subject to the informational reporting requirements of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act").
ITEM 2. PROPERTIES
During 1997, the Partnership did not own any properties.
ITEM 3. LEGAL PROCEEDINGS
On October 20, 1995, certain limited partners of the Partnership instituted a
class action lawsuit in the Chancery Court of New Castle County Delaware,
presently entitled In re: Cencom Cable Income Partners, L.P. Litigation, Civil
Action No. 14634 (the "Action"). The Action names the General Partner,
purchasing affiliates (the "Purchasing Affiliates") identified in the disclosure
statement (the "Disclosure Statement") distributed to Limited Partners in
connection with the solicitation of consents to the Sale Transaction, Charter
Communications, Inc. ("Charter") and certain individual defendants, including
certain of the General Partner's present and former directors and executives.
In January of 1997, Defendants filed a Motion for Summary Judgment, which the
Court granted in part and denied in part by a Memorandum Opinion dated October
15, 1997, thereby narrowing the remaining issues in the Action. The Court held
that issues of fact remain as to whether the Defendants breached the Partnership
Agreement with regard to
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<PAGE> 4
the Sale Transaction and the termination of distributions after the
effective date, breached their duty of loyalty with regard to the Sale
Transaction and breached their duty of candor by failing to disclose certain
information regarding the Sale Transaction in the Disclosure Statement.
The Court also narrowed Plaintiffs' damages claim to those concerning
failure to properly value the systems as part of the Sale Transaction and
termination of the Limited Partners' priority distribution on the date the
sale agreement was signed.
Based upon, among other things, advice of counsel, the General Partner believes
that the remaining portions of the Consolidated Amended Class Action Complaint
are legally inadequate and intends to contest them vigorously. However, the
General Partner cannot at this time predict the outcome of the Action with any
certainty and there can be no assurance that Defendants will successfully defeat
all of Plaintiffs' claims for damages.
In March of 1997, Plaintiffs filed their Motion for Class Certification. In
response, on February 25, 1998, Defendants filed a Motion for Judgment on the
Pleadings.
On March 17, 1998, Plaintiffs filed a Motion For Leave to Serve Supplemental
Complaint and a Motion For Preliminary Injunction and Permanent Injunction. In
those motions Plaintiffs seek to enjoin Cencom Properties, Inc., its affiliates
and all other defendants from advancing to themselves any Partnership funds for
payment of legal expenses in connection with the defense of the action and
enjoining defendants to return to the Partnership and distribute to the Limited
Partners all sums advanced to the defendants for the purpose of paying legal
expenses in connection with the defense of the action.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1997, no matters were submitted to a vote of
security holders.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS
As of December 31, 1997, there were approximately 10,400 holders of 149,204
Units of the Registrant. The Units of the Registrant are not publicly traded and
are subject to substantial restrictions on transfer.
Pursuant to the terms of the Partnership Agreement, the Registrant is required
to make cash distributions to the Limited Partners within 60 days after the end
of each calendar quarter and, with respect to certain available refinancing
proceeds and certain available sales proceeds, as soon as possible following
completion of the relevant transaction. Limited Partners received cash
distributions during 1995 and 1996 in the amount of $11,190,300 and
$127,602,245, respectively. The distributions made in 1995 were based on the
operating results of the fourth quarter of 1994 and the first two quarters of
1995. Because the Sale Transaction agreement was entered into as of July 1,
1995, no quarterly distributions were paid for quarters ending after June 30,
1995. However, the Limited Partners received a distributable share of the net
proceeds of the Sale Transaction during 1996 (see "Item 1.
Business").
During January 1995, Charter, an affiliate of the General Partner, acquired
8,159 Units of the Registrant as part of a negotiated transaction for a sale of
securities and assets. As of December 31, 1997, Charter held 8,159 Units of the
Registrant. With respect to Limited Partner Units owned by Charter, Charter was
entitled to distributions on the same basis as other Limited Partners.
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ITEM 6. SELECTED FINANCIAL DATA
The Partnership sold all of the Systems and ceased active operation on March 28,
1996.
The following selected financial data has been derived from the audited
financial statements of the Partnership during the period prior to the sale of
the Systems and should be read in conjunction with the financial statements
included pursuant to Item 8 of this Form 10K:
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED DECEMBER 31,
FOR THE PERIOD FROM ----------------------------------------------------------
JANUARY 1 TO
MARCH 28, 1996 1995 1994 1993
-------------- ------------------ ------------------ -------------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Service Revenues $11,878,555 $45,235,407 $41,982,678 $40,295,939
Net income (loss) 1,057,294 3,453,270 3,811,203 3,367,720
Net income (loss) per LP Unit 7.09 23.14 25.54 22.57
Cash distributions per LP Unit - 75.00 100.00 100.00
BALANCE SHEET DATA:
Total assets - 49,472,011 52,282,658 52,132,595
Long-term obligations, including
current maturities - 76,500,000 72,300,000 62,000,000
Partners' (deficit) capital - (32,908,763) (25,171,733) (14,062,536)
MISCELLANEOUS DATA:
Ratio of earnings to fixed 1.8 1.6 1.9 1.9
charges1
Book value per LP Unit - ($220.56) ($168.71) ($94.25)
</TABLE>
The following selected financial data has been derived from the audited
financial statements of the Partnership subsequent to the sale of the Systems
and the Partnership's adoption of the liquidation basis of accounting:
<TABLE>
<CAPTION>
As of December 31, 1996
As of and for and for the Period
the Year Ended from March 29 to
December 31, 1997 December 31, 1996
------------------------- -------------------------
<S> <C> <C>
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
DATA:
Change in net assets in liquidation $192,761 $35,981,632
Cash distribution per LP unit -- $855.22
STATEMENT OF NET ASSETS IN LIQUIDATION DATA:
Net assets in liquidation $5,076,480 $4,883,719
MISCELLANEOUS DATA:
Book value per LP unit $34.02 $32.73
</TABLE>
- --------
(1) Ratio of earnings to fixed charges is calculated using income from
operations including interest income; fixed charges include interest expense
and amortization expense for debt issuance costs.
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<PAGE> 6
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Introduction
The following table sets forth a summary of subscriber data of the Partnership's
Systems that were owned prior to March 28, 1996:
<TABLE>
<CAPTION>
SALE TRANSACTION DATE AS OF DECEMBER 31,
MARCH 28, 1996 1995 1994
--------------------- ------------ ------------
<S> <C> <C> <C>
Basic Subscribers:
Illinois Systems 44,300 43,600 41,400
Base Systems 22,700 22,500 22,400
Tennessee Systems 30,800 30,100 28,200
Kentucky System 10,800 10,700 10,400
Tryon System 2,100 2,100 2,000
-------------------- ------------ ------------
110,700 109,000 104,400
===================== ============ ============
Premium Subscriptions:
Illinois Systems 25,000 26,200 24,600
Base Systems 19,700 20,200 19,100
Tennessee Systems 19,500 17,000 15,600
Kentucky System 4,700 4,800 4,200
Tryon System 700 700 700
--------------------- ------------ ------------
69,600 68,900 64,200
===================== ============ ============
</TABLE>
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<PAGE> 7
RESULTS OF OPERATIONS
GENERAL INFORMATION
The following table sets forth the amounts (in thousands) and the percentage of
total revenues for certain items for the periods indicated:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
FOR THE PERIOD FROM ----------------------------------
JANUARY 1 TO MARCH 28, 1996 1995 1994
--------------------------- ---- ----
Amt. % Amt. % Amt. %
------------ ------- ---------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Service Revenues:
Basic Service $7,806 65.7 $29,568 65.4 $27,436 65.4
Premium Service 1,747 14.7 6,865 15.2 6,771 16.1
Other Services 2,326 19.6 8,802 19.4 7,776 18.5
------------ -------- ---------- ---------- ------------ ----------
11,879 100.0 45,235 100.0 41,983 100.0
Operating Expenses:
Operation, General and
Administrative 6,756 56.9 25,180 55.7 22,766 54.2
Depreciation and
Amortization 2,817 23.7 11,375 25.1 11,628 27.7
------------ -------- ---------- ---------- ------------ ----------
Income from Operations 2,306 19.4 8,680 19.2 7,589 18.1
------------ -------- ---------- ---------- ------------ ----------
Interest Income (Expense):
Interest Income 42 .4 176 .4 64 .2
Interest Expense (1,291) (10.9) (5,403) (12.0) (3,842) (9.2)
------------ --------
---------- ---------- ------------ ----------
(1,249) (10.5) (5,227) (11.6) (3,778) (9.0)
------------ -------- ---------- ---------- ------------ ----------
Net Income $1,057 8.9% $3,453 7.6% $3,811 9.1%
============ ======== ========== ========== ============ ==========
</TABLE>
The Registrant had no results of operations for the period subsequent to March
28, 1996, as a result of the sale of all of its cable television systems.
Results of operations for the period ended March 28, 1996 have been compared to
the quarter ended March 31, 1995 (see the March 31, 1996 Form 10-Q for
comparative information). No discussion of operating results for the year ended
December 31, 1996 versus the year ended December 31, 1995 has been provided as
such analysis is not meaningful.
CHANGES IN ASSETS AND LIABILITIES IN LIQUIDATION
Net assets in liquidation at March 31, 1996 were approximately $136.4 million,
consisting of cash and cash equivalents of approximately $140.1 million reduced
by liabilities to the Purchasing Affiliates of approximately $2.8 million and
accrued liquidation costs of $0.9 million. During the nine months ended December
31, 1996, the Partnership made disbursements to the Limited Partners and General
Partner of $130.1 million, paid $2.8 million to reduce the liability to
Purchasing Affiliates, paid approximately $.9 million of accrued liquidation
costs, and earned interest income of approximately $1.1 million. The Partnership
increased the accrual for liquidation costs by $1.8 million during the nine
month period ending December 31, 1996, which included an accrual of $800,000 for
a Partnership income tax liability to the state of Illinois. This tax liability
is based upon the apportionment to Illinois for the Partnership's gain on the
sale of the cable systems.
Net assets in liquidation at December 31, 1996, were approximately $4.9 million,
net of state income tax withholdings of approximately $1.1 million, which will
be available for distribution to the General Partner and Limited Partners upon
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<PAGE> 8
final dissolution of the Partnership. The Partnership is required to withhold
this amount under the income tax regulations of certain states. On April 15 and
December 15, 1996, the General Partner made partial distributions of proceeds to
the partners of $122.5 million and $7.6 million, respectively.
Net assets in liquidation at December 31, 1997 were approximately $5.1 million,
consisting of cash and cash equivalents of approximately $5.4 million and an
insurance receivable of $0.5 million, offset by accrued liquidation costs of
approximately $0.8 million. The net change in assets and liabilities during the
twelve months ended December 31, 1997 was approximately $193,000, which is
primarily the result of the increase in the cash and cash equivalents balance
due to approximately $362,000 of interest income earned by the Partnership. The
increase in the cash and cash equivalents balance was partially offset by an
increase in accrued costs of liquidation of approximately $278,000 for legal and
accounting services, insurance costs, and investor relations costs. In addition,
the Partnership increased the balance of its net receivable from an insurance
company by approximately $109,000 as a result of additional litigation costs
paid by the Partnership. No distributions were made during 1997 to the Limited
Partners or General Partner.
Final dissolution of the Partnership and related cash distributions to the
Limited Partners and General Partner will occur upon final resolution of all
liquidation issues, including all pending litigation, administrative costs and
expenses, and insurance receivable matters. Based upon net assets in liquidation
of approximately $5.1 million as of December 31, 1997, estimated proceeds to be
distributed to the General Partner are approximately $100,000. Proceeds
ultimately received by the partners upon liquidation could differ from the
amounts recorded in the December 31, 1997 financial statements.
At December 31, 1997, cash and cash equivalents consisted primarily of
investments in a money market account and commercial paper with original
maturities of 90 days or less. These investments are carried at cost, which
approximates market value.
OPERATIONS PRIOR TO SALE OF CABLE SYSTEMS ON MARCH 29, 1996
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 (the
"Systems"). Service revenues increased by 8.8% to $11,879,000 for the period
from January 1, 1996, to March 28, 1996, when compared to the three months ended
March 31, 1995. These increases in 1996 are primarily due to an increase in
subscribers for the basic tier of cable service offered by the Systems. In
addition, revenue increases between the comparative periods reflect certain
allowable retail and ancillary rate increases implemented in certain franchise
areas. Rate increases have been limited because federal rate regulation
implemented in 1993 and 1994 rolled back cable rates and authorized only limited
rate increases for the pass-through of certain external costs for those systems
which rolled back rates to the full extent required by law (up to 17%).
Basic subscribers at March 28, 1996 increased by 3.9% over March 31, 1995. This
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 by wireless cable television 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 8.4% from March 31, 1995 to March 28,
1996. The ratio of premium service subscriptions per basic subscriber increased
from 60.3% at March 31, 1995 to 62.9% at March 28, 1996. This increase was the
result of the Partnership offering 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.
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<PAGE> 9
Operating Expenses
Operating, general and administrative expenses increased by $665,000 or 12.5%
during the period from January 1, 1996 to March 28, 1996, when compared to the
first quarter of 1995. The majority of this increase, approximately $478,000,
related to increases in the license fees paid for programming. In addition,
there were increases in wages, bad debts, marketing and advertising.
Liquidation costs in the amount of approximately $157,000 were incurred by the
Partnership during the period from January 1, 1996, to March 28, 1996, related
to the process of selling the assets of the Partnership. Such sale of the assets
occurred on March 29, 1996.
Depreciation and amortization decreased by 7.3% from $3,039,000 for the three
months ended March 31, 1995, to $2,817,000 for the period from January 1, 1996,
to March 28, 1996. Although the Partnership had increased depreciation as a
result of capital expenditures made to the Systems, this was offset by a
decrease in amortization due to the completion of amortization periods for
certain franchise costs.
Interest Income and Expenses
Interest expense decreased by 4.1% from $1,346,000 during the first quarter of
1995 to $1,291,000 for the period from January 1, 1996, to March 28, 1996. This
decrease was primarily due to the decrease in the effective weighted average
interest rates between the periods.
Net Income
Net income increased by 55.8% from $679,000 during the first quarter of 1995 to
$1,057,000 for the period from January 1, 1996, to March 28, 1996. In 1996, the
increase in income from operations and the decrease in interest expense were
significant factors versus the prior year.
LIQUIDITY AND CAPITAL RESOURCES
On March 29, 1996, the Partnership consummated the Sale Transaction. The sale
was approved by a majority of the Limited Partners, following the distribution
of the Disclosure Statement. The net proceeds from the sale of approximately
$211.3 million were comprised of the purchase price plus interest, as defined in
the Asset Purchase Agreement, dated July 1, 1995, entered into by the General
Partner and the Purchasing Affiliates. In conjunction with the sale of the
Systems, the Partnership repaid in full the $74.0 million outstanding on its
credit facility.
On April 15, 1996 and December 15, 1996, the Partnership made a partial
distribution of approximately $122.5 million and $7.6 million, respectively to
the Limited Partners and the General Partner. The amount remaining after this
partial distribution represents a holdback reserve from which the Partnership
will pay any remaining obligations and contingencies. At December 31, 1997 and
1996, such estimated amounts are reported as accrued costs of liquidation. All
amounts held back but not applied to pay Partnership liabilities will be
distributed to the Partners, including interest earned thereon.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Schedules on Page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
During the fiscal year ended December 31, 1997, the Registrant was not involved
in any disagreements with its independent certified public accountants on
accounting principles or practices or on financial disclosure.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no officers or directors. The General Partner manages and
controls substantially all of the Partnership's affairs and has general
responsibility and ultimate authority in all matters affecting the Partnership's
business.
Set forth below is the present principal occupation or employment and employment
history of the executive officers and directors of the General Partner:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Howard L. Wood 58 President, Chief Executive Officer and
Director
Barry L. Babcock 51 Executive Vice President, Chief
Operating Officer and Director
Jerald L. Kent 41 Executive Vice President, Chief
Financial Officer and Director
</TABLE>
Mr. Wood has been affiliated with Charter since 1993, now holding the position
of Vice Chairman of the Board of Charter, and has served as President of the
General Partner since 1994. Mr. Wood also co-founded Charter Communications
Group ("CCG") in 1992. Prior to that time, he was associated with Cencom Cable
Associates, Inc. ("CCA"), which he joined in July 1987 as Director; at CCA he
held the position of President, Chief Executive Officer and Director from
January 1, 1989 to November 1992. Mr. Wood also serves on the Board of Directors
of CCA Holdings Corp., CCA Acquisition Corp. and Cencom Cable Entertainment,
Inc.
Mr. Babcock has been affiliated with Charter since 1993 and now holds the
position of Chairman of the Board, and has served as Executive Vice President of
the General Partner since 1994. Mr. Babcock also co-founded CCG in 1992. Prior
to that time, he was associated with CCA as the Executive Vice President of CCA
from February 1986 to November 1992, and as Chief Operating Officer of CCA from
May 1986 to November 1992. Mr. Babcock currently serves as Chairman of the Board
of Directors of the Cable Telecommunications Association (CATA) and also serves
on the Board of Directors of the National Cable Television Association (NCTA),
Mercantile Bank-St. Louis, and Cencom Cable Entertainment, Inc.
Mr. Kent has been affiliated with Charter since 1993 and now holds the position
of President and Chief Executive Officer, and has served as Executive Vice
President of the General Partner since 1994. Mr. Kent also co-founded CCG in
1992. Prior to that time, he was associated with CCA as Executive Vice President
and Chief Financial Officer of CCA from 1987 through November 1992. Mr. Kent
also serves on the Board of Directors of CCA Holdings Corp., CCA Acquisition
Corp. and Cencom Cable Entertainment, Inc.
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<PAGE> 11
ITEM 11. EXECUTIVE COMPENSATION
The Registrant is not required to pay and has not paid the officers or directors
of the General Partner any remuneration. The General Partner does not currently
pay any remuneration to any of its officers or directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1997, Charter was the sole Limited Partner known to the
General Partner to be the beneficial owner of more than five percent (5%) of the
outstanding LP Units issued by the Partnership. Charter owned 8,159 LP Units,
constituting approximately 5.5% of the LP Units. Charter has no right to acquire
additional LP Units.
The following table sets forth as of December 31, 1997, certain information
regarding the ownership of LP Units by (i) each of the directors and executive
officers of the General Partner and (ii) all directors and executive officers of
the General Partner as a group. Each of the named persons and each member of the
group shares voting and dispositive power with respect to LP Units held thereby.
None of these Limited Partners currently has any right to acquire additional LP
Units.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
----------------------------- ---------------------- ------------
<S> <C> <C>
Jerald L. Kent 59 LP Units .04%
Barry L. Babcock 30 LP Units .02%
All directors and executive officers of the 89 LP Units .06%
General Partner as a group
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTION
None.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements:
See Index to Financial Statements and Schedules on page F-1 of
this Report.
2. Financial Statement Schedules:
See Index to Financial Statements and Schedules on page F-1 of
this Report.
3. Exhibits:
See Index on Page E-1 of this Report.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the fourth quarter of 1997.
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<PAGE> 12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereto duly authorized.
CENCOM CABLE INCOME PARTNERS, L.P.
By: Cencom Properties, Inc.
General Partner
By: /s/ Howard L. Wood
------------------------------
Howard L. Wood, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities (as to the General Partner) and on the date indicated.
<TABLE>
<CAPTION>
Signature and Title Date
------------------- ----
<S> <C>
By: /s/ Howard L. Wood March 27, 1998
------------------------------------------------------
Howard L. Wood
President, Chief Executive Officer and Director
(Principal Executive Officer)
By: /s/ Barry L. Babcock March 27, 1998
------------------------------------------------------
Barry L. Babcock
Executive Vice President, Chief Operating Officer
and Director
(Principal Operating Officer)
By: /s/ Jerald L. Kent March 27, 1998
------------------------------------------------------
Jerald L. Kent
Executive Vice President, Chief Financial Officer
and Director
(Principal Financial Officer)
</TABLE>
S-1
<PAGE> 13
CENCOM CABLE INCOME PARTNERS, L.P.
INDEX TO FINANCIAL STATEMENTS SCHEDULES
<TABLE>
<CAPTION>
Page
----
<S> <C>
FINANCIAL STATEMENTS:
Report of Independent Public Accountants F-2
Statements of Net Assets in Liquidation F-3
Statements of Changes in Net Assets in Liquidation F-4
Statements of Operations for the period from January 1 to March 28, 1996 and for the
year ended December 31, 1995 F-5
Statements of Partners' Capital (Deficit) for the period from January 1 to March 28, 1996 and for the
year ended December 31, 1995 F-6
Statements of Cash Flows for the period from January 1 to March 28, 1996 and for the
year ended December 31, 1995 F-7
Notes to Financial Statement F-8
FINANCIAL STATEMENT SCHEDULES:
None required N/A
</TABLE>
F-1
<PAGE> 14
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Cencom Cable Income Partners, L.P.:
We have audited the accompanying statements of operations, partners' capital
(deficit) and cash flows of Cencom Cable Income Partners, L.P. (a Delaware
limited partnership) for the period from January 1, 1996, through March 28,
1996, and for the year ended December 31, 1995. In addition, we have audited the
statements of net assets in liquidation as of December 31, 1997 and 1996, and
the related statements of changes in net assets in liquidation for the year
ended December 31, 1997, and for the period from March 29, 1996, through
December 31, 1996. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Note 2 to the financial statements, the General Partner of
Cencom Cable Income Partners, L.P. finalized a plan for liquidation of the
Partnership on March 28, 1996, through the sale of its operating systems. As a
result, the Partnership has changed its basis of accounting for the period
subsequent to March 28, 1996, from the going concern basis to the liquidation
basis. Accordingly, the carrying value of the remaining assets as of December
31, 1997 and 1996, are presented at estimated realizable values and all
liabilities are presented at estimated settlement amounts.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations of Cencom Cable Income
Partners, L.P. and its cash flows for the year ended December 31, 1995, and for
the period from January 1, 1996, through March 28, 1996, its net assets in
liquidation as of December 31, 1997 and 1996, and the changes in its net assets
in liquidation for the year ended December 31, 1997, and for the period from
March 29, 1996, through December 31, 1996, in conformity with generally accepted
accounting principles applied on the basis described in the preceding paragraph.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
St. Louis, Missouri
February 6, 1998 (except
with respect to the matter
discussed in Note 4 as
to which the date is
March 25, 1998)
F-2
<PAGE> 15
CENCOM CABLE INCOME PARTNERS, L.P.
STATEMENTS OF NET ASSETS IN LIQUIDATION
<TABLE>
<CAPTION>
As of December 31
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
ASSETS, at estimated realizable values:
Cash and cash equivalents $ 5,348,312 $ 7,049,771
Insurance receivable 537,026 428,000
----------- -----------
5,885,338 7,477,771
----------- -----------
LIABILITIES, at estimated settlement amounts:
Accrued costs of liquidation 808,858 1,453,388
Income taxes withheld on behalf of Limited Partners - 1,140,664
----------- -----------
808,858 2,594,052
----------- -----------
NET ASSETS IN LIQUIDATION $ 5,076,480 $ 4,883,719
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 16
CENCOM CABLE INCOME PARTNERS, L.P.
STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION
<TABLE>
<CAPTION>
For the Period
from
For the Year March 29,
Ended 1996, through
December 31, December 31,
1997 1996
----------- --------------
<S> <C> <C>
NET PROCEEDS FROM SALES TO PURCHASING AFFILIATES $ - $ 211,321,760
----------- -------------
LESS- Portion of proceeds representing interest to partners - (5,202,207)
----------- -------------
ASSETS SOLD TO AND LIABILITIES ASSUMED BY THE PURCHASING AFFILIATES AS OF THE
CLOSING DATE:
Cash and cash equivalents - (3,504,678)
Accounts receivable, net of allowance for doubtful accounts of $83,159 - (795,144)
Prepaid expenses and other - (161,771)
Note receivable from General Partner - (753,556)
Property, plant and equipment, net - (39,506,499)
Franchise costs, net - (2,983,401)
Accounts payable and accrued expenses - 3,052,296
Payables to General Partner and affiliate - 727,882
Subscriber deposits and prepayments - 281,779
Deferred revenue - 183,044
----------- -------------
Net assets sold - (43,460,048)
----------- -------------
Gain on sale of net assets - 162,659,505
----------- -------------
INTEREST PAID BY THE PURCHASING AFFILIATES - 5,202,207
----------- -------------
CHANGE IN ASSETS AND LIABILITIES IN LIQUIDATION:
Decrease in long-term debt - 74,000,000
Distributions to Limited Partners - (127,602,245)
Distributions to General Partner - (2,502,894)
Interest income generated from investments 361,862 1,140,452
Increase in accrued costs of liquidation (278,127) (1,774,729)
Income taxes withheld on behalf of Limited Partners - (1,140,664)
Increase in insurance receivable, net 109,026 -
----------- -------------
192,761 (57,880,080)
----------- -------------
REPAYMENT OF LONG-TERM DEBT - (74,000,000)
----------- -------------
Net change in assets and liabilities 192,761 35,981,632
PARTNERS' CAPITAL (DEFICIT) AS OF MARCH 28, 1996:
General Partner - 905,039
Limited Partners - (32,002,952)
NET ASSETS IN LIQUIDATION, beginning of period 4,883,719 (31,097,913)
----------- -------------
NET ASSETS IN LIQUIDATION, end of period $ 5,076,480 $ 4,883,719
=========== =============
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 17
CENCOM CABLE INCOME PARTNERS, L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Period
from
January 1, For the Year
1996, through Ended
March 28 December 31,
1996* 1995
------------- ------------
SERVICE REVENUES:
<S> <C> <C>
Basic service $ 7,805,466 $ 29,567,936
Premium service 1,746,690 6,865,145
Other 2,326,399 8,802,326
------------ ------------
11,878,555 45,235,407
OPERATING EXPENSES:
Operating costs 5,146,841 18,463,285
General and administrative 857,623 3,349,345
Liquidation costs 157,147 1,105,556
Depreciation and amortization 2,816,999 11,375,090
Management fees - related party 594,268 2,261,775
------------ ------------
9,572,878 36,555,051
------------ ------------
Income from operations 2,305,677 8,680,356
------------ ------------
INTEREST INCOME (EXPENSE):
Interest income 42,351 176,126
Interest expense (1,290,734) (5,403,212)
------------ ------------
(1,248,383) (5,227,086)
------------ ------------
Net income $ 1,057,294 $ 3,453,270
============ ============
NET INCOME PER LIMITED PARTNERSHIP UNIT $ 7.09 $ 23.14
============ ============
</TABLE>
*Operating activity for the period from January 1, 1996, through March 28, 1996,
is prior to liquidation basis adjustments.
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 18
CENCOM CABLE INCOME PARTNERS, L.P.
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
FOR THE PERIOD FROM JANUARY 1, 1996, THROUGH MARCH 28, 1996, AND
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Note
Receivable
From
General Limited General
Partner Partners Partner Total
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1994 $ 905,039 $(25,323,216) $(753,556) $(25,171,733)
Distributions ($75 per unit) - (11,190,300) - (11,190,300)
Net income - 3,453,270 - 3,453,270
--------- ------------ --------- ------------
BALANCE, December 31, 1995 905,039 (33,060,246) (753,556) (32,908,763)
Net income - 1,057,294 - 1,057,294
--------- ------------ --------- ------------
BALANCE, March 28, 1996* $ 905,039 $(32,002,952) $(753,556) $(31,851,469)
========= ============ ========= ============
</TABLE>
*Operating activity for the period from January 1, 1996, through March 28, 1996,
is prior to liquidation basis adjustments.
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 19
CENCOM CABLE INCOME PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Period
from
January 1, For the Year
1996, through Ended
March 28 December 31,
1996* 1995
------------- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 1,057,294 $ 3,453,270
Adjustments to reconcile net income to net cash provided by operating
activities-
Depreciation and amortization 2,816,999 11,375,090
Changes in assets and liabilities-
Accounts receivable, net 122,963 34,888
Prepaid expenses and other 26,143 225,707
Accounts payable and accrued expenses (1,063,219) 422,092
Payables to General Partner and affiliate 9,375 187,911
Subscriber deposits and prepayments (19,055) (71,577)
Deferred revenue (4,913) 187,957
----------- ------------
Net cash provided by operating activities 2,945,587 15,815,338
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (1,402,127) (8,851,048)
Other - (55,526)
----------- ------------
Net cash used in investing activities (1,402,127) (8,906,574)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in long-term debt - 4,700,000
Payment of long-term debt (2,500,000) (500,000)
Distributions to partners - (11,190,300)
----------- ------------
Net cash used in financing activities (2,500,000) (6,990,300)
----------- ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (956,540) (81,536)
CASH AND CASH EQUIVALENTS, beginning of period 4,461,218 4,542,754
----------- ------------
CASH AND CASH EQUIVALENTS, end of period $ 3,504,678 $ 4,461,218
=========== ============
CASH PAID FOR INTEREST $ 1,628,515 $ 5,283,549
=========== ============
</TABLE>
*Operating activity for the period from January 1, 1996, through March 28, 1996,
is prior to liquidation basis adjustments.
The accompanying notes are an integral part of these statements.
F-7
<PAGE> 20
CENCOM CABLE INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization
Cencom Cable Income Partners, L.P. (the "Partnership") was formed for the
purpose of acquiring and operating existing cable television systems. CCI
Holdings, Inc. (CCI Holdings) acquired the common stock of Cencom Properties,
Inc. (Cencom Properties or the "General Partner") from Cencom Cable Associates,
Inc. (presently doing business as Cencom Cable Entertainment, Inc. and referred
to as "Cencom Cable Associates" herein) in September 1994. CCI Holdings is a
wholly owned subsidiary of Charter Communications, Inc. (Charter). The
partnership agreement (the "Partnership Agreement") provides for the dissolution
of the Partnership on or before September 30, 1994. (See Note 2.)
Prior to March 28, 1996, the Partnership provided cable television service to
approximately 44 franchises serving approximately 111,000 basic subscribers in
Illinois and the southern and southeastern United States including military
bases in Colorado, Georgia, Kansas, North Carolina and Texas.
Basis of Presentation
The accompanying statements of operations, partners' capital (deficit) and cash
flows for the year ended December 31, 1995, and the period from January 1, 1996,
through March 28, 1996, report the Partnership's financial position and results
of operations using accounting principles applicable to an entity under the
going concern basis of accounting prior to the adoption of the liquidation basis
of accounting. The financial statements for the period subsequent to March 28,
1996, are reported on the liquidation basis of accounting.
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of commercial paper, money market
accounts and repurchase agreements with original maturities of 90 days or less.
These investments are carried at cost, which approximates market value.
Revenue Recognition
Service revenues were recognized when the related services were provided.
Installation revenues were recognized to the extent of direct selling costs
incurred. The remainder, if any, was deferred and amortized to income over the
average estimated period that customers were expected to remain connected to the
cable television system.
Franchise fees collected from cable subscribers and paid to local franchises
were reported as revenues.
F-8
<PAGE> 21
Depreciation and Amortization
The Partnership provided depreciation using the composite method on a
straight-line basis over the estimated useful lives of the related property and
equipment as follows:
<TABLE>
<S> <C>
Trunk and distribution systems 10 years
Subscriber installations 10 years
Converters 3-5 years
Buildings and headends 9-20 years
Vehicles and equipment 4-8 years
Office equipment 5-10 years
</TABLE>
Franchise costs were amortized using the straight-line method over the term of
the individual franchises. Debt issuance costs were amortized over the term of
the debt.
During 1995, the Partnership adopted Statement of Financial Accounting Standards
(SFAS) No. 121 entitled "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of." In accordance with SFAS No. 121, the
Partnership periodically reviewed the carrying value of its long-lived assets,
identifiable intangibles and franchise costs in relation to historical financial
results, current business conditions and trends (including the impact of
existing legislation and regulation) to identify potential situations in which
the carrying value of such assets may not be recoverable. If a review indicated
that the carrying value of such assets may not be recoverable, the carrying
value of such assets in excess of their fair value would have been recorded as a
reduction of the assets' cost as if a permanent impairment had occurred. No
impairments occurred and accordingly, no adjustments to the financial statements
of the Partnership were recorded relating to SFAS No. 121.
Income Taxes
Income taxes are the responsibility of the partners and as such are not provided
for in the accompanying financial statements, except for the state of Illinois
liability required of the Partnership.
Net Income Per Limited Partnership Unit
The net income per Limited Partnership unit was calculated based on 149,204
Limited Partnership units outstanding at the end of each period presented.
Use of Estimates
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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-9
<PAGE> 22
2. ALLOCATIONS, DISTRIBUTIONS AND LIQUIDATION:
Allocations and Distributions
Prior to the sale of the cable television systems, profit and losses were
generally allocated in proportion to the partners' capital contributions. The
Partnership was required to distribute all cash available for distribution, as
defined in the Partnership Agreement, within 60 days after the end of each
calendar quarter. The Limited Partners were to receive 100% of all cash
available for distribution until they received a cumulative 11% per annum
preferred return on their adjusted capital contributions. If the Limited
Partners would have received their 11% preferred return, the General Partner was
to receive 11% per annum on its original capital contribution. Thereafter, the
Limited Partners were to receive 99% and the General Partner was to receive 1%
of all additional cash available for distribution. No additional quarterly
distributions were made after July 1, 1995, the effective sale date of the cable
television systems (other than the distribution with respect to the second
quarter of 1995).
Liquidation
In accordance with the Partnership Agreement, the General Partner began a
dissolution of the Partnership during 1994. Upon dissolution, the General
Partner or other authorized liquidating agent is required to distribute all
available proceeds as soon as practicable after their receipt by the
Partnership.
Two independent appraisals were conducted during 1995, and bids to purchase the
cable television systems of the Partnership were made by several entities
affiliated with the General Partner. On March 28, 1996, the Partnership
consummated the sale of all of its cable television systems to the affiliated
entities. The sale was approved by a vote of a majority of the Limited Partners.
The purchase price was $211.1 million less working capital adjustments through
July 1, 1995, and liquidation costs paid by the Partnership through the date of
closing, and increased for interest paid by the purchasing affiliates. Net
proceeds from the sale of the cable television systems were approximately $211.3
million.
As a result of this transaction, the Partnership changed its basis of accounting
to the liquidation basis effective March 29, 1996. Accordingly, the assets in
the accompanying statements of net assets in liquidation as of December 31, 1997
and 1996, have been stated at estimated realizable values and the liabilities
have been reflected at estimated settlement amounts. Net assets in liquidation
as of December 31, 1997, represent the estimated remaining distribution to be
made to the Limited Partners and the General Partner.
On April 15, 1996, and December 15, 1996, the Partnership made pro rata
distributions (in accordance with that set forth in the Partnership Agreement)
of approximately $122.5 million and $7.6 million, respectively, to the Limited
Partners and the General Partner. The amount remaining after these partial
distributions of sale proceeds represents a holdback reserve, as provided for in
the Partnership Agreement, from which the Partnership will pay any remaining
obligations and contingencies. At December 31, 1997, such estimated amounts are
reported as Accrued costs of liquidation in the accompanying statements of net
assets in liquidation. All amounts held back but not applied to pay Partnership
liabilities will be distributed to the partners, net of required income tax
withholdings. During 1997, the Partnership paid approximately $570,000 in state
income taxes. Proceeds ultimately received upon liquidation could differ from
the amounts recorded in the accompanying financial statements.
F-10
<PAGE> 23
3. LONG-TERM DEBT:
The Partnership maintained a loan agreement with a bank for borrowings up to
$80,000,000 (the "Debt Agreement"), secured by all the Partnership's assets. The
maturity date of the Debt agreement was June 30, 1996. Loans under the Debt
Agreement bore interest at a rate based upon a certain spread plus a base rate,
with the base rate being, at the Partnership's election, at the Toronto
Dominion's (the agent bank) prime rate of interest, Eurodollar or certificates
of deposit rate. The applicable spreads were based on the ratio of debt to
annualized operating cash flow. The weighted average interest rates and
borrowings for the period from January 1, 1996, through March 28, 1996, and for
the year ended December 31, 1995, were 7.1% and 7.3% and approximately
$74,871,000 and $73,993,000, respectively. On March 28, 1996, in connection with
the Partnership's sale of its cable television systems (as discussed in Note 2),
the Partnership repaid all of its outstanding borrowings.
4. LITIGATION:
Certain limited partners of the Partnership have instituted litigation in the
Chancery Court of New Castle County, Delaware, which has been consolidated under
the name and style, In re: Cencom Cable Income Partners, L.P. Litigation Civil
Action No. 14634 (the "Action"). This class action litigation was purportedly
filed by the plaintiffs on their behalf and on behalf of the Limited Partners.
The Action names as defendants the General Partner, purchasing affiliates
identified in the disclosure statement (the "Disclosure Statement") distributed
to the Limited Partners in connection with the solicitation of consents to the
sale of the Partnership's systems (the "Sale Transaction"), Charter and certain
individuals, including the directors and executive officers of the General
Partner.
The Action (as originally filed) alleged, among other things, that the
Disclosure Statement is false and misleading, wrongfully seeks to induce the
consent of the Limited Partners to the Sale Transaction in breach of the
defendants' fiduciary duties, and is the product and culmination of a course of
wrongful conduct designed to enrich the defendants at the expense of the Limited
Partners in breach of the Partnership Agreement and the defendants' fiduciary
duties. On February 15, 1996, the court refused to issue an injunction
precluding the Sale Transaction and granted defendants' motion to dismiss all
claims for injunctive relief, including claims seeking to require the
Partnership to attempt to market the systems to other parties. The remaining
causes of action seek compensation for the plaintiffs and other Limited Partners
for damages related to the alleged wrongdoing.
In October 1996, the plaintiffs filed a Consolidated Amended Class Action
Complaint (the "Amended Complaint"). In connection with the filing of the
Amended Complaint, the defendants informed the court that portions of the
Amended Complaint were legally inadequate. In January 1997, the defendants filed
a Motion for Summary Judgment to dismiss all remaining claims as to all parties
in the Action. In October 1997, an order was issued granting in part and denying
in part the defendants' Motion for Summary Judgment, the effect of which
narrowed the remaining issues significantly. Based upon, among other things, the
advice of counsel, the General Partner believes that the remaining portions of
the Amended Complaint are legally inadequate and intend to contest them
vigorously. There can be no assurance, however, that the plaintiffs will not be
awarded damages in connection with the Action.
As of December 31, 1997, the Partnership has recorded a receivable (net of the
deductible) from its insurance company for reimbursement of litigation costs
through December 31, 1997, incurred in connection with the Action. The
receivable of $537,026 represents all litigation costs less the deductible of
$100,000.
On March 17, 1998, plantiffs filed a Motion For Leave to Serve Supplemental
Complaint and a Motion For Preliminary Injunction and Permanent Injunction. In
these motions, plantiffs seek to enjoin Cencom Properties, its affiliates and
all other defendants from advancing to themselves any partnership funds for
payment of legal expenses in connection with the defense of the Action and
enjoining the defendants to return to the Partnership and distribute to the
Limited Partners all sums advanced to the defendants for the purpose of paying
legal expenses in connection with the defense of the Action.
F-11
<PAGE> 24
5. RELATED-PARTY TRANSACTIONS:
During 1994, Cencom Cable Associates assigned management services under contract
with the Partnership to the General Partner. The management service contract
provided for the payment of fees equal to 5% of the Partnership's gross annual
operating revenues. Expenses recognized by the Partnership under this contract
were $594,268 and $2,261,775 during the period from January 1, 1996, through
March 28, 1996, and for the year ended December 31, 1995, respectively. Prior to
approval of the Sale Transaction, management fees were paid after cumulative
quarterly cash distributions to the Limited Partners equaled certain preferred
distributions as specified in the Partnership Agreement (see Note 2). In
addition to the management fees, the Partnership reimbursed the General Partner
for expenses incurred on behalf of the Partnership for performance of services
under the contract.
During the period from January 1, 1996, through March 28, 1996, in connection
with the sale of the cable television systems (see Note 2) the General Partner
paid the Partnership $753,556 related to the Partnership's noninterest-bearing
promissory note receivable, which represented one half of the General Partner's
original capital contribution.
The Partnership and all entities affiliated with Charter collectively utilized a
combination of insurance coverage and self-insurance programs for medical,
dental and workers' compensation claims. The Partnership was allocated charges
monthly based upon its total number of employees, historical claims and medical
cost trend rates. Management considered this allocation to be reasonable for the
operations of the Partnership. During the period from January 1, 1996, through
March 28, 1996, and for the year ended December 31, 1995, the Partnership
expensed approximately $120,000 and $474,000, respectively, relating to
insurance allocations.
Affiliated entities maintain several regional offices. The regional offices
performed certain operational services on behalf of the Partnership and other
affiliated entities. The cost of these services was allocated to the Partnership
based on its number of subscribers. Management considered this allocation to be
reasonable for the operations of the Partnership. During the period from January
1, 1996, through March 28, 1996, and for the year ended December 31, 1995, the
Partnership expensed approximately $149,000 and $370,000, respectively, relating
to this allocation.
6. COMMITMENTS AND CONTINGENCIES:
Leases
The Partnership leased certain facilities and equipment under noncancelable
operating leases. Rent expense incurred under leases during the period from
January 1, 1996, through March 28, 1996, and for the year ended December 31,
1995, was approximately $41,000 and $145,000, respectively. There are no future
minimum lease payments.
The Partnership rented utility poles in its operations. Generally, pole rental
agreements were short term. Rent expense incurred for pole attachments during
the period from January 1, 1996, through March 28, 1996, and for the year ended
December 31, 1995, was approximately $132,000 and $503,000, respectively.
7. 401(k) PLAN:
The Partnership participated in the Charter Communications, Inc. 401(k) Plan
(the "Plan") for the benefit of its employees. All employees who had completed
one year of employment were eligible to participate in the Plan. The Plan is a
tax-qualified retirement savings plan to which employees could elect to make
pretax contributions up to the lesser of 10% of their compensation or dollar
thresholds established under the Internal Revenue Code. The Partnership
contributed an amount equal to 50% of the first 5% contributed by each employee.
During the period from January 1, 1996, through March 28, 1996, and for the year
ended December 31, 1995, the Partnership contributed approximately $65,000 and
$61,000, respectively.
F-12
<PAGE> 25
8. NET INCOME FOR INCOME TAX PURPOSES:
The following summarizes the differences between the Partnership's net income
for financial reporting and federal income tax purposes for the years
ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
--------- ------------ -----------
<S> <C> <C> <C>
Net income for financial reporting purposes:
"Going concern" basis of accounting (see Notes 1
and 2) $ -- $ 1,057,294 $ 3,453,270
Gain on sale of net assets -- 162,659,505 --
Interest paid by purchasing affiliates -- 5,202,207 --
Liquidation basis of accounting (see Notes 1 and 2) 192,761 (634,277) --
--------- ------------ -----------
192,761 168,284,729 3,453,270
Depreciation differences between financial reporting
and tax reporting -- (609,806) 1,804,940
Difference in gain on sale of net assets recorded for
financial reporting and tax reporting -- (17,091,185) --
Amortization differences between financial reporting
and tax reporting -- -- 57,969
Differences in expenses recorded for financial
reporting and tax reporting 83,197 (971,261) 844,798
Differences in revenue reported for financial
reporting and tax reporting -- (175,301) 187,957
Other -- 1,928 31,946
--------- ------------ -----------
Net income for federal income tax purposes $ 275,958 $149,439,104 $ 6,380,880
========= ============ ===========
Net income per Limited Partnership unit for
federal income tax purposes $ 1.82 $ 991.57 $ 42.77
========= ============ ===========
</TABLE>
The following summarizes the Partnership's financial reporting basis of net
assets less than its income tax reporting basis as of December 31:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Accrued expenses $ 1,532,582 $ 1,453,388
=========== ===========
</TABLE>
F-13
<PAGE> 26
CENCOM CABLE INCOME PARTNERS, L.P.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page
------- ----------- ----
<S> <C> <C>
3 Amended and Restated Agreement of Limited Partnership, N/A
filed as Exhibit 3(c) to the Registrant's Registration
Statement on Form S-1 (Registration No. 33-7843),
incorporated herein by this reference.
10(q) Assignment of shares of common stock of the General Partner, dated N/A
July 15, 1994, filed as Exhibit 10(q) to the Registrant's Form
10-K for the year ended December 31, 1994, incorporated herein by
this reference.
10(s) Transfer of Limited Partnership Interest, dated January 18, 1995, N/A
filed as Exhibit 10(s) to the Registrant's Form 10-K for the
year ended December 31, 1994, incorporated herein by this
reference.
10(u) Asset Purchase Agreement among Registrant, Charter Communications N/A
Properties, Inc., Charter Communications II, L.P. and Charter
Communications Entertainment I, L.P., dated as of July 1, 1995,
filed as Exhibit 10(u) to the Registrant's Form 10-K for the year
ended December 31, 1995, incorporated herein by this reference.
*12 Ratio of Earnings to Fixed Changes
*27.1 Financial Data Schedule
</TABLE>
E-1
*Filed herewith.
<PAGE> 1
Exhibit 12
CENCOM CABLE INCOME PARTNERS, L.P.
RATIO OF EARNINGS TO FIXED CHARGES CALCULATION
(In thousands except ratio amounts)
<TABLE>
<CAPTION>
For the Period From
January 1 to
March 28, 1996 For the Years Ended December 31
-------------- -------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Earnings
Net Income (loss) N/A $1,057 $3,453 $3,811 $3,368
Fixed Charges N/A 1,291 5,581 4,096 3,641
----------- ----------- ----------- ----------- ------------
Earnings N/A 2,348 9,034 7,907 7,009
Fixed Charges
Interest Expense N/A 1,291 5,403 3842 3,368
Amortization of debt costs N/A - 178 254 273
=========== =========== =========== =========== ============
Total Fixed Charges N/A $1,291 $5,581 $4,096 $3,641
=========== =========== =========== =========== ============
Ratio of Earnings to Fixed Charges N/A 1.8 1.6 1.9 1.9
</TABLE>
*Filed herewith.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 5,348,312
<SECURITIES> 0
<RECEIVABLES> 537,026
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,885,337
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,885,337
<CURRENT-LIABILITIES> 808,858
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,076,480
<TOTAL-LIABILITY-AND-EQUITY> 5,885,337
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 0
<EPS-PRIMARY> 0
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</TABLE>
