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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the fiscal year ended December 31, 1995
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from to
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Commission file number: 1-9423
GALAXY CABLEVISION, L.P.
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(Exact name of Registrant as specified in its charter)
Delaware 43-1429049
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(State of organization) (IRS Employer Identification No.)
c/o Galaxy Cablevision Management, Inc.
1220 North Main, Sikeston, Missouri 63801
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (314) 472-8200
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Exchange on Which Registered
- - - ---------------------------------------- -------------------------------------
Units of Limited Partnership Interest American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the Units of Limited Partnership Interest
held by non-affiliates on March 26, 1996, based on the last sales price on that
date was approximately $5,978,282 (for purposes of this statement only,
<PAGE> 2
executive officers and directors of Galaxy Cablevision Management, Inc., the
general partner of the Managing General Partner of Galaxy Cablevision, L.P.,
are assumed to be affiliates; see Item 12).
DOCUMENTS INCORPORATED BY REFERENCE: None.
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GALAXY CABLEVISION, L.P.
FORM 10-K
Annual Report
Year Ended December 31, 1995
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Table of Contents
Item No. Topic Page
- - - -------- ----- ----
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . 11
PART II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5. Market for the Registrant's Securities and Related Security Holder
Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6. Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . . . . 13
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . 15
8. Financial Statements and Supplementary Data. . . . . . . . . . . . . . . 23
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 38
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10. Directors and Executive Officers of the Registrant . . . . . . . . . . . 39
11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 42
12. Security Ownership of Certain Beneficial Owners and Management . . . . . 44
13. Certain Relationships and Related Transactions . . . . . . . . . . . . . 46
PART IV. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. . . . . 49
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
<PAGE> 4
PART I
Item 1. Business
General Development of Galaxy Cablevision, L.P.
Galaxy Cablevision, L.P. ("Galaxy" or the "Partnership") is a publicly
traded limited partnership which is listed on the American Stock Exchange. In
an initial public offering in March 1987, Galaxy sold 2,150,000 units to the
public at an original price of $20 per unit. The units represent the
beneficial ownership of an equal number of Limited Partnership Interests held
in trust by Galaxy ALP, Inc., the sole limited partner of Galaxy ("Units").
Following its initial public offering, Galaxy was engaged in the business
of acquiring, owning, operating and selling small cable television systems
("Systems") in the south central United States. The principal objectives of
the Partnership have been (i) to generate current cash flow in order to provide
holders of the Units (the "Unitholders") with quarterly cash distributions; and
(ii) to obtain long-term capital appreciation in the value of the Partnership's
cable television properties. The Partnership has sought to attain these
objectives through the acquisition, upgrade, operation and ultimate sale of
cable television systems. After careful consideration, the Managing General
Partner determined that the interests of the Unitholders would be best served
by selling the Partnership's cable systems and dissolving the Partnership.
Until September 30, 1994, Galaxy operated systems in four regional
clusters, and provided service in six states, which served approximately 58,512
basic subscribers as of such date. Systems serving approximately 54,977 basic
subscribers were sold between September 30, 1994 and December 31, 1994. During
the first quarter of 1995, Galaxy operated cable systems serving approximately
3,741 basic subscribers in the Cameron, Texas area. Such systems were sold on
March 31, 1995.
Galaxy first announced that it was listing for sale certain of its cable
television systems in 1993. The Partnership retained Waller Capital
Corporation to serve as its broker. Waller Capital Corporation solicited
prospective purchasers for the systems, leading to (i) the sale of the
Northeast Texas and Arkansas-Louisiana Region cable systems (the "Texas-
Louisiana Systems") on September 30, 1994; (ii) the sale of the Kentucky Region
cable systems (the "Kentucky Systems") on December 23, 1994; (iii) the sale of
the cable systems in the Central Texas Region, excluding the Cameron Systems
(the "Austin Systems") on December 7, 1994; and (iv) the sale of the cable
systems in the Cameron, Texas area of the Central Texas Region (the "Cameron
Systems") on March 31, 1995. See "Sales of Cable Systems" and Item 7 --
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Sales of Cable Systems" below.
As a result of the foregoing sales, the Partnership no longer owns any
cable television systems and is in the process of liquidation. See
"Dissolution; Winding Up" below for a discussion of Galaxy's remaining assets
and the liquidation process.
Galaxy Cablevision, L.P. was formed as a Delaware limited partnership in
December 1986. The term of the Partnership will expire on December 31, 2011,
unless earlier terminated. The General Partners of Galaxy are Galaxy
Cablevision Management, L.P. (the "Managing General Partner") and Tommy L.
Gleason, Jr. (the "Individual General Partner"). Galaxy Cablevision
Management, L.P. is a Delaware limited partnership formed in January 1987 for
the purpose of acting as the Managing General Partner of Galaxy. Galaxy
<PAGE> 5
Cablevision Management, Inc. is a Delaware corporation formed in December 1986
for the purpose of acting as the general partner of the Managing General
Partner. The sole shareholders of the general partner of the Managing General
Partner are Tommy L. Gleason, Jr. and James M. Gleason, his brother.
The principal executive offices of Galaxy and the General Partners are
located at 1220 North Main, Sikeston, Missouri 63801, Telephone: (314) 472-
8200.
Dissolution; Winding Up
Assets
Under the terms of Galaxy's Partnership Agreement, the sale of the Texas-
Louisiana Systems on September 30, 1994, which represented substantially all of
the assets of the Partnership, commenced the dissolution of the Partnership.
The Managing General Partner has thereafter been engaged in liquidating the
remaining assets and winding up the affairs of the Partnership. The sale of
the Austin Systems and the Kentucky Systems were consummated on December 7 and
23, 1994, respectively. As of December 31, 1994, the Partnership's only
remaining cable systems were the Cameron Systems, which served 3,741 basic
subscribers as of March 31, 1995. The Cameron Systems were sold on March 31,
1995 to Galaxy Telecom, L.P., for approximately $3,550,000. The purchase price
was paid by delivery of $3,350,000 in cash and a $200,000 promissory note. The
$200,000 promissory note (the "Telecom Note") is from Galaxy Telecom, Inc., the
managing general partner of Galaxy Telecom, L.P. See "Sales of Cable Systems"
below.
The Telecom Note is also a balloon note, under which all principal and
accrued interest are due and payable in March 2004. Galaxy is restricted from
selling the Telecom Note to anyone except an affiliate of the Partnership. On
December 23, 1994, Galaxy entered into an agreement with Tommy L. Gleason and
Tommy L. Gleason, Jr. (the "Gleasons") which requires the Gleasons to purchase
the Telecom Note from the Partnership upon the Partnership thereafter making
one or more distributions to Unitholders amounting in the aggregate to $1.00
per Unit or more, excluding any distribution from the proceeds of the Kentucky
Sale or the sale of the Cameron Systems (the "Cameron Sale"). Under the
agreement (the "Put Agreement"), the purchase price to be paid by the Gleasons
for the Telecom Note is equal to the principal plus all accrued interest as of
the date of such purchase. The Managing General Partner currently intends to
hold the Telecom Note until it is purchased by the Gleasons in accordance with
the Put Agreement.
In addition to the Telecom Note, Galaxy owns an approximate 14.6% interest
in Charter Wireless Cable Holdings, L.L.C. ("Charter Holdings"), which, prior
to February 23, 1996, was the majority owner of CableMaxx, Inc. ("CableMaxx"),
a publicly traded operator of certain wireless cable television systems located
in Austin, San Antonio, Temple-Killeen and Waco, Texas (Nasdaq National Market
symbol "CMAX") (the "Charter Holdings Investment"). On September 12, 1995,
Cablemaxx announced the signing of a definitive agreement with Heartland
Wireless Communications, Inc. ("Heartland") in connection with a proposed
merger of a subsidiary of Heartland into Cablemaxx. Pursuant to the merger,
which closed effective February 23, 1996, Cablemaxx stockholders received newly
issued shares of Heartland valued at $8.50 per share of Cablemaxx stock and
Cablemaxx became a wholly-owned subsidiary of Heartland. As a result of the
merger, Charter Holdings received an aggregate of 1,519,809 shares of Heartland
common stock in exchange for its holdings in CableMaxx. In February 1996,
<PAGE> 6
Charter Holdings sold 150,000 of such shares at a net price of $26.00 per share
and distributed the proceeds to its members on March 19, 1996. The Partnership
received $538,200 as a result of this distribution. Charter Holdings currently
holds 1,369,809 shares of Heartland common stock. The common stock of
Heartland is quoted on the Nasdaq National Market; the closing price of such
stock on March 26, 1996 was $24.25 per share. Each of Tommy L. Gleason, Jr., a
director and officer of Galaxy Cablevision Management, Inc., and Ronald L.
Voss, an officer of Galaxy Cablevision Management, Inc., was an officer and
director of CableMaxx prior to the merger; neither Mr. Gleason nor Mr. Voss is
an officer or director of Heartland.
Galaxy's only other significant non-cash asset is a note receivable in the
face amount of $1,500,000 from Harron Cablevision of Texas, Inc. (the "Harron
Note"), which was received in partial satisfaction of the purchase price on the
Partnership's sale in 1991 of the cable systems in the Waxahachie region in
Texas.
The Harron Note is a balloon note under which all principal and accrued
interest is payable on July 1, 1996. Principal and interest accrued through
December 31, 1995 equalled approximately $2,200,000. Although the Partnership
is not restricted from selling the Harron Note, the Managing General Partner
believes that such a sale would be at a substantial discount to the value of
the note. As a result, the Managing General Partner currently expects to hold
the Harron Note until its maturity. If the Harron Note is paid in full in July
1996, and there are no claims for indemnification by Friendship or Time Warner,
the Partnership currently intends to distribute the proceeds to its partners.
None of the Charter Holdings Investment, the Telecom Note or the Harron
Note are currently liquid. Under the terms of the governing documents of
Charter Holdings, the Partnership cannot transfer its ownership interest in
Charter Holdings without the consent of the other members and, even if such
consents were obtained, the Managing General Partner believes the Partnership
would be required to sell its investment at a substantial discount. Charter
Holdings has certain registration rights with respect to the 1,369,809 shares
of Heartland common stock it currently holds. The Partnership understands
that, pursuant to such registration rights, Heartland may file a registration
statement with the Securities and Exchange Commission with respect to such
shares during 1996, which would enable Charter Holdings to sell such shares to
the public. However, there can be no assurance whether or when such
registration statement will be filed, whether Charter Holdings will
elect to sell any shares or, if so, when or at what price. However, the
Managing General Partner believes that Charter Holdings may ultimately either
liquidate its investment in Heartland and distribute the proceeds to the
members, including Galaxy, or distribute the Heartland stock directly to the
members. It is therefore the Managing General Partner's current intention to
continue to hold the Charter Holdings Investment until such time, unless the
Partnership were able to sell the investment without substantial discount. The
Partnership cannot predict when it will receive distributions, if any, in
respect of the Charter Holdings Investment.
Certain Liabilities
In connection with the Texas-Louisiana Sale and the Austin Sale, the
Partnership has undertaken certain indemnification obligations. Specifically,
Galaxy has agreed to indemnify Friendship Cable of Texas, Inc. ("Friendship"),
the purchaser of the Texas-Louisiana Systems, for certain damages, liabilities,
costs and expenses incurred by Friendship solely as a result of any breach by
<PAGE> 7
Galaxy of any written representation, warranty agreement or covenant of Galaxy
contained in the Texas-Louisiana Purchase Agreement and for liabilities arising
out of ownership of the systems prior to September 30, 1994. The Partnership's
maximum liability for such breach is $2,000,000. Galaxy's representations and
warranties expire on March 31, 1996 (except as to tax matters, which survive
for the applicable statute of limitations). Any claims for indemnification
cannot be made until the total of all such claims exceeds $50,000.
The Partnership has also agreed to indemnify Time Warner Cable Ventures, a
division of Time Warner Entertainment Company, L.P., the purchaser of the
Austin Systems ("Time Warner"), for certain claims, losses, liabilities,
damages, liens, penalties, costs and expenses incurred by Time Warner as a
result of any breach by Galaxy of any written representation, warranty,
agreement or covenant of Galaxy contained in the Austin Purchase Agreement.
The Partnership's maximum liability for such breach is $1,200,000. The
representations and warranties survive until June 7, 1996, and any claim for
indemnification must be made by September 5, 1996. No claim can be made until
the total of all such claims exceeds $25,000.
The risk of Galaxy being required to pay an indemnification claim is a
factor which the Managing General Partner will consider in determining the
amount and timing of any future distributions to Unitholders. As of March 29,
1995, no claims for indemnification have been made by either Friendship or Time
Warner. The Partnership has undertaken no indemnification obligations in
connection with the Kentucky Sale or the Cameron Sale.
Sales of Cable Systems
In 1993, Galaxy announced that certain of its cable television systems were
being listed for sale and retained Waller Capital Corporation ("Waller") to
serve as the Partnership's broker in connection therewith. Waller solicited
offers with respect to all of Galaxy's systems. The Partnership paid Waller
brokerage fees totalling $783,625 in 1994 and $33,550 in 1995 based on the
total purchase price of the completed sales described below.
On September 30, 1994, Galaxy completed the sale of the Texas-Louisiana
Systems to Friendship, for a cash purchase price of $42,625,000 (before
proration of certain expenses), or approximately $1,241 per basic subscriber.
Of such purchase price, approximately $100,000 is currently being held in
escrow pending the completion by the Partnership of certain tasks related to
the sale.
On December 7, 1994, the Partnership sold all of the Austin Systems to
Time Warner for a cash purchase price of $7,300,000 (before proration of
certain expenses), or approximately $1,348 per basic subscriber.
On December 23, 1994, Galaxy completed the sale of the Kentucky Systems to
Galaxy Telecom, L.P. for a cash purchase price of $18,437,500 (before proration
of certain expenses), or approximately $1,207 per basic subscriber. Tommy L.
Gleason, Tommy L. Gleason, Jr. and all of the other executive officers of the
Managing General Partner have an indirect equity interest in Galaxy Telecom.
See Item 13 - "Certain Relationships and Related Transactions" below.
On March 31, 1995, the Partnership completed the sale of the Cameron
Systems to Galaxy Telecom, L.P. in exchange for an aggregate purchase price of
$3,550,000 (or approximately $949 per basic subscriber), consisting of cash in
the amount of $3,350,000 (before proration of certain expenses), and a
<PAGE> 8
promissory note in the amount of $200,000 executed by Galaxy Telecom, Inc., the
managing general partner of Galaxy Telecom, L.P. The Telecom Note is a balloon
note under which all principal and interest are due and payable in March 2004.
Interest is compounded annually and accrues at a rate of 9% through March 30,
2000, with increases of two percentage points per year up to 17% after March
30, 2003. Pursuant to a Put Agreement entered into in connection with the sale
of the Cameron Systems, Tommy L. Gleason and Tommy L. Gleason, Jr. have agreed
to purchase the Telecom Note from the Partnership upon the Partnership making
one or more distributions to Unitholders amounting in the aggregate to $1.00
per Unit or more, excluding any distribution from the proceeds of the Kentucky
Sale or the Cameron Sale. See Item 13 - "Certain Relationships and Related
Transactions" below.
The sales of the Texas-Louisiana Systems, the Kentucky Systems and the
Austin Systems, which represented substantially all of the Partnership's
assets, were specifically approved by the holders of a majority of the
Partnership's Units in September 1994. At that time, the Unitholders also
adopted an amendment to the Partnership Agreement to permit the Partnership to
sell assets to a General Partner or an affiliate of a General Partner as part
of the liquidation and winding-up of the Partnership without requiring a
fairness opinion from an independent investment banking firm or cable
television advisory company, provided the sale is approved by a majority of the
directors of the Galaxy Cablevision Management, Inc. (the general partner of
the Managing General Partner) who do not have any direct or indirect interest
in the sale. The sale of the Cameron Systems to Galaxy Telecom, L.P. was made
pursuant to this amended provision.
Net proceeds from the Texas-Louisiana Sale, the Austin Sale and the
Kentucky Sales were used to repay long-term debt and make distributions to
partners. The Partnership used the net proceeds from the Cameron Sale (i) to
make additional distributions to the partners, and (ii) to add to the
Partnership's reserves to complete its liquidation and satisfy any
indemnification liabilities which may arise in connection with the Texas-
Louisiana Sale and the Austin Sale. The Partnership has undertaken no
indemnification obligations in connection with the Kentucky Sale or the Cameron
Sale. See Item 5 - "Market for the Registrant's Securities and Related
Security Holder Matters -- Distributions" below. See also "Dissolution;
Winding Up" above.
As consideration for Galaxy Cablevision Management, Inc. entering into a
noncompete agreement required by Friendship, the Partnership agreed to convey
to Galaxy Cablevision Management, Inc. the computer equipment and office
furniture utilized in Galaxy's headquarters office in Sikeston, Missouri
following the closing of the sale of the Austin Systems and the Kentucky
Systems, but reserved the right to continue to use the assets without cost
until the Partnership's liquidation is complete. See Item 13 - "Certain
Relationships and Related Transactions" below.
The majority of Galaxy's remaining assets consist of cash, the Charter
Holdings Investment, the Harron Note and the Telecom Note. Having sold all of
its operating assets, Galaxy is now dissolving. The Managing General Partner
intends to liquidate the Partnership's remaining assets as soon as practicable
on an economically favorable basis. See "Dissolution; Winding Up" above.
<PAGE> 9
Upgrades of Galaxy's Systems
The Partnership made a capital expenditure of approximately $20,000 to
upgrade its systems during 1995.
Employees
At December 31, 1995, Galaxy had no employees. The Managing General
Partner does not anticipate that the Partnership will employ any personnel in
connection with the continuation of its liquidation activities.
As of December 31, 1995, the general partner of the Managing General
Partner employed six persons, none of whom are paid a salary by Galaxy.
Federal and State Income Taxation
Galaxy, as a partnership, is not subject to federal income tax; rather, its
income, gain, loss, deduction and credit are passed through and taxed to its
partners. Each item of Partnership income, gain, loss, deduction and credit
retains its character to a Unitholder. A Unitholder is subject to tax on his
or her distributive share of the taxable income of the Partnership regardless
of the amount of cash distributions paid by the Partnership, if any. If a
Unitholder's distributive share of taxable income is less than the amount of
cash distributions for a given period, the difference is treated as a tax-free
return of capital to the extent of a Unitholder's tax basis in his or her
Units, with any remaining amount treated as a gain from the sale of the Units.
Under the Revenue Act of 1987, certain publicly-traded partnerships are
taxed as corporations, subject to a delayed effective date for partnerships
that were publicly traded on December 17, 1987. The provisions taxing
publicly-traded partnerships in existence on December 17, 1987 as corporations
are applicable to taxable years beginning after December 31, 1997 (the "Delayed
Effective Date"). A partnership is not treated as an existing partnership for
purposes of the Delayed Effective Date if it is deemed to add a substantial new
line of business. Nevertheless, expansion of an existing line of business
should not cause a partnership to be treated as adding a substantial new line
of business. Galaxy was an existing publicly-traded partnership on
December 17, 1987. Accordingly, Galaxy should continue to qualify for the
Delayed Effective Date. Beginning on the earlier of January 1, 1998 or the
date that Galaxy is deemed to have added a substantial new line of business,
the Partnership will be subject to tax as a corporation on its net income.
Galaxy believes that neither its acquisition nor continued ownership of its
interest in Charter Wireless Cable Holdings, L.L.C. will be treated as the
addition of a substantial new line of business.
Having sold all of its operating assets, Galaxy is now in dissolution. The
Managing General Partner is in the process of liquidating the Partnership's
assets and winding up the Partnership's affairs. The Managing General Partner
does not believe that Galaxy's activities in connection with its liquidation
will be deemed a substantial new line of business. The Managing General
Partner expects that the Partnership will complete its liquidation prior to the
Delayed Effective Date.
If at any time the Partnership were to be taxed as a corporation for
federal income tax purposes rather than a partnership, its income would be
taxable to the Partnership at corporate rates, and distributions to Unitholders
<PAGE> 10
might be taxable to them as dividends. In addition, losses, if any, of the
Partnership would not flow through to Unitholders.
Although a partnership is not generally subject to state income tax, the
Partnership files combined income tax returns and pays combined taxes in those
states that permit such filings on behalf of nonresident Unitholders with
respect to their share of Partnership items. Such filings occur where the
Partnership owned and operated cable television systems during the applicable
year, and in Missouri, where the Partnership's home office is located. As of
December 31, 1995, Galaxy had paid expenses of approximately $359,832 to cover
such state income tax obligations for fiscal year 1994.
The Partnership has made an election under Internal Revenue Code
Section 754 to adjust the cost basis of its assets upon a transfer of any
Units. Pursuant to the election, the Partnership adjusts, but only with
respect to the transferee of the Units, the Partnership's basis in its assets
to reflect the difference between the cost to the transferee of his Units and
his pro rata share of the Partnership's basis in its assets. Once made, the
Section 754 election remains in effect and may not be revoked without the
consent of the Internal Revenue Service.
If a transferee purchases Units for an amount in excess of the Unit's
proportionate basis in the Partnership's assets, the election will be
beneficial for the transferor and transferee. Conversely, if the price of the
Units is less than the proportionate basis of the assets, the election could
adversely affect the value of the investment in the Partnership and, thus,
limit the ability of a Unitholder to sell his Units.
The Partnership realized a gain of $2,180,076 in 1996 from the sale of the
Cameron Assets, based on the original cost of the assets and subsequent
depreciation. On a per Unit basis, the gain was approximately $1.02. However,
this amount represents the maximum gain realized by a partner. Due to the
Partnership's Section 754 election, Units purchased after December 31, 1992 may
have a lower gain due to utilization of Section 754 basis attributable to the
units.
Item 2. Properties
Cable System Properties
Sales of Cable Systems. The Texas-Louisiana Systems, which served 34,355
basic subscribers as of September 30, 1994, were sold on such date to
Friendship Cable of Texas, Inc. On December 7, 1994 the Austin Systems, which
served 5,417 basic subscribers as November 30, 1994, were sold to Time Warner
Entertainment Company, through its division Time Warner Cable Ventures. The
Kentucky Systems, which served 15,270 basic subscribers as November 30, 1994,
were sold on December 23, 1994 to Galaxy Telecom, L.P. Also, the Cameron
Systems, which served 3,741 basic subscribers as of March 31, 1995, were sold
on such date to Galaxy Telecom, L.P. See Item 1 -- "Business -- Sales of Cable
Systems" above and Item 7 -- "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" below.
Other Property Interests
Galaxy has generally leased the real estate on which its business offices,
microwave receiving antennae, microwave towers, warehouses, head-ends and other
<PAGE> 11
related equipment are located. The Partnership leased its office headquarters
in Sikeston, Missouri from Galaxy Cablevision Management, Inc. prior to
April 30, 1995. During 1995, Galaxy paid rent of approximately $26,400
pursuant to all such leases.
Galaxy owned substantially all of the assets related to its cable
television operations, including its production equipment, head-ends (towers,
antennae, electronic equipment and satellite earth stations), cable plant
(distribution equipment, amplifiers, subscriber drops and hardware),
converters, test equipment, tools and maintenance equipment and vehicles.
As consideration for Galaxy Cablevision Management, Inc. entering into an
agreement not to compete with Friendship Cable of Texas, Inc., the Partnership
conveyed to Galaxy Cablevision Management, Inc. in December 1994 the computer
equipment and office furniture utilized in Galaxy's headquarters office in
Sikeston, Missouri. The Partnership reserved the right to continue to use such
assets without cost until its liquidation is complete.
See Item 1 -- "Business -- Sales of Cable Systems" above and Item 13 --
Certain Relationships and Related Transactions -- Sales of Assets to
Management" below.
Item 3. Legal Proceedings
Galaxy has in the past been subject to lawsuits arising in the ordinary
course of its business. In addition, Galaxy has undertaken certain
indemnification obligations in connection with its sales of the Texas-Louisiana
Systems and the Austin Systems. As of March 29, 1995, no claims for
indemnification have been made in connection with such sales. The Managing
General Partner is not presently aware of any pending or threatened litigation
or indemnification claims. However, no assurance can be given that lawsuits
will not arise in the future in connection with Galaxy's prior operation and
sale of the Systems or that no such claims for indemnification will be made.
See "Dissolution; Winding Up" in Item 1 above and in Item 7 below.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of Unitholders during the fourth
quarter of 1995.
<PAGE> 12
PART II
Item 5. Market for the Registrant's Securities and Related Security Holder
Matters
Market Information
The Partnership's Units of Limited Partnership Interest are traded on the
American Stock Exchange. The high and low sales prices for the Units for each
full quarterly period in 1994 and 1995 were as follows:
Lowest Sale Highest Sale
Quarter Ended Price Price
- - - --------------------------------------------------- ------------ ------------
March 31, 1994 .................................... $15 1/2 $18 1/8
June 30, 1994...................................... 14 3/8 17 1/2
September 30, 1994................................. 15 3/8 18 1/8
December 31, 1994 * ............................... 7 3/8 18 1/2
March 31, 1995 * .................................. 2 7/8 2 7/8
June 30, 1995 ..................................... 2 5/16 2 5/16
September 30, 1995 ................................ 3 3
December 31, 1995 ................................. 3 1/16 3 1/8
- - - ---------------
* See "Distributions" below for information concerning distributions made
during the fourth quarter of 1994 and the first quarter of 1995 which
affected sales prices for the Units.
Holders
At December 31, 1995, the 2,142,000 Units of Limited Partnership Interest
were held of record by approximately 767 Unitholders.
Distributions
Pursuant to a May 1992 amendment to Galaxy's Revolving Credit and Term Loan
Agreement with Fleet National Bank, Galaxy's distributions to Unitholders were
limited to $2,250,000 in 1992 and $1,000,000 per year thereafter. Based on
factors such as the Partnership's revenues, cash flow and financial position,
its obligations under applicable law and agreements, including the Revolving
Credit and Term Loan Agreement, and such other considerations as the Managing
General Partner deemed relevant at that time, no distributions were made from
the fourth quarter of 1992 through the third quarter of 1994. During 1995, all
amounts due under the Revolving Credit and Term Loan Agreement were paid and
the agreement was terminated.
<PAGE> 13
Distributions were made to partners during 1994 and 1995 as follows:
General
Record Date Per Unit Unitholders Partners Paid
- - - -------------------------- -------- ------------ -------- -----------------
October 12, 1994 ......... $10.69 $22,897,980 $231,293 October 26, 1994
December 19, 1994 ........ 2.00 4,284,000 43,273 December 30, 1994
January 5, 1995 .......... 5.20 11,138,400 112,509 January 20, 1995
April 24, 1995 ........... 1.00 2,142,000 21,636 May 5, 1995
Future distributions will be determined by the Managing General Partner
based on the Managing General Partner's assessment of the reserve required to
cover costs associated with the completion of Galaxy's liquidation and any
indemnification liabilities which may arise in connection with the Texas-
Louisiana Sale and the Austin Sale. See "Dissolution; Winding Up" in Item 1
above and Item 7 below. The Managing General Partner currently does not intend
to distribute the $538,200 distribution received from Charter Holdings on
March 19, 1996. However, if the Harron Note is paid in full upon maturity on
July 1, 1996, and there are no claims for indemnification by Friendship or Time
Warner, the Partnership currently intends to distribute the proceeds of the
Harron Note, as well as the Charter Holdings distribution to its partners.
Item 6. Selected Financial Data
The selected financial data set forth below has been derived from the
liquidation basis financial statements of Galaxy as of December 31, 1995 and
1994 and from the historical cost basis financial statements for the nine month
period ended September 30, 1994, and as of December 31, 1993, 1992 and 1991 and
for each of the years then ended. Consummation of the Texas-Louisiana Sale on
September 30, 1994 constituted the disposition of substantially all of the
Partnership's assets and, under the terms of the Partnership Agreement,
commenced dissolution of the Partnership. As of such date, the Partnership
adopted the liquidation basis of accounting. Under liquidation basis
accounting, assets are presented at estimated net realizable value and
liabilities are presented at estimated settlement amounts.
Consummation of the Texas-Louisiana Sale, the Austin Sale and the Kentucky
Sale in 1994 and the Cameron Sale in 1995, as well as the change to liquidation
basis accounting as of September 30, 1994, materially affect the comparability
of the selected financial data for 1995 and 1994 to such data for prior
periods. In addition, due to such events, the selected financial data
reflected herein is not indicative of Galaxy's future financial condition or
results of operations. The selected financial data should be read in
conjunction with Galaxy's financial statements and the notes thereto appearing
in Item 8, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing in Item 7 herein.
<PAGE> 14
<TABLE>
Galaxy Cablevision, L.P.
Historical Cost Basis
<CAPTION>
Nine
Months Ended
September 30, Years Ended December 31,
------------- -------------------------------------------
1994 1993 1992 1991
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUE AND EXPENSE INFORMATION:
SUBSCRIPTION SERVICES REVENUE $15,244,882 $19,557,695 $18,033,956 $17,055,911
------------- ------------- ------------- -------------
OPERATING EXPENSES:
System operations (exclusive of depreciation
and amortization shown separately below) 6,262,974 7,815,508 7,103,663 6,811,486
Selling, general and administrative 4,328,120 5,633,356 5,185,794 5,123,308
Depreciation expense 3,848,646 6,066,978 6,948,581 7,078,547
Amortization expense 353,963 440,654 402,616 400,648
------------- ------------- ------------- -------------
Total operating expenses 14,793,703 19,956,496 19,640,654 19,413,989
------------- ------------- ------------- -------------
OPERATING INCOME (LOSS) 451,179 (398,801) (1,606,698) (2,358,078)
GAIN ON SALES OF CABLE TELEVISION SYSTEMS, NET 31,552,357 2,895,901
EQUITY IN LOSS OF INVESTEE (593,708) (699,849)
INTEREST INCOME 109,443 145,591 193,215 73,894
INTEREST EXPENSE (1,448,170) (1,979,481) (2,152,635) (2,515,363)
OTHER (EXPENSE) INCOME, NET (152,754) (7,464) (19,907) 31,565
------------- ------------- ------------- -------------
NET EARNINGS (LOSS) $29,918,347 $(2,940,004) $(3,586,025) $(1,872,081)
============= ============= ============= =============
NET EARNINGS (LOSS) PER LIMITED PARTNERSHIP UNIT $ 13.83 $ (1.36) $ (1.66) $ (.87)
============= ============= ============= =============
DECLARED CASH DISTRIBUTIONS PER LIMITED
PARTNERSHIP UNIT $ 10.69 $ 0 $ 1.05 $ 1.40
============= ============= ============= =============
</TABLE>
<PAGE> 15
<TABLE>
Historical Cost Basis
<CAPTION>
December 31,
-------------------------------------------
1993 1992 1991
------------- ------------- -------------
<S> <C> <C> <C>
BALANCE SHEET INFORMATION:
TOTAL ASSETS $26,686,270 $31,429,502 $34,326,100
TOTAL LIABILITIES $29,552,853 $31,356,081 $28,394,835
PARTNERS' CAPITAL (DEFICIENCY IN ASSETS) $(2,866,583) $ 73,421 $ 5,931,265
Liquidation Basis
<CAPTION>
December 31, December 31,
------------- -------------
1995 1994
------------- -------------
<S> <C> <C>
STATEMENT OF NET ASSETS IN PROCESS OF LIQUIDATION INFORMATION:
TOTAL ASSETS $ 7,871,170 $23,376,981
TOTAL LIABILITIES $ 653,286 $15,038,556
NET ASSETS IN PROCESS OF LIQUIDATION $ 7,217,884 $ 8,338,425
<CAPTION>
Twelve Months Three Months
Ended Ended
December 31, December 31,
------------- -------------
1995 1994
------------- -------------
<S> <C> <C>
STATEMENT OF CHANGE IN NET ASSETS IN PROCESS OF LIQUIDATION INFORMATION:
DISTRIBUTIONS TO PARTNERS $(2,163,636) $(27,456,545)
ACCRUED DISTRIBUTIONS TO PARTNERS (11,250,909)
REVENUES IN EXCESS OF EXPENSES FROM OPERATIONS $ 75,012 316,633
REDUCTION IN RESERVE FOR ESTIMATED COSTS DURING PERIOD OF LIQUIDATION $ 12,384 300,000
NET GAIN FROM THE SALES 200,000
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Liquidation Basis Comparisons
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994. As
discussed above, beginning September 30, 1994, the Partnership's financial
<PAGE> 16
statements have been prepared in accordance with liquidation basis accounting.
In addition, since March 31, 1995, the Partnership has had not operations.
Thus, the Managing General Partner does not believe a comparison of results for
periods subsequent to September 30, 1994 to periods prior to September 30, 1994
would be meaningful.
Year Ended December 31, 1995 Compared to Three Months Ended December 31,
1994. The Partnership's revenues in excess of expenses from operations during
the year ended December 31, 1995 and the fourth quarter of 1994 were $75,012
and $316,633, respectively. The revenues in excess of expenses from operations
is unaffected by depreciation and amortization expenses, as such expenses are
not recognized under liquidation basis accounting. All of the revenues for
1995 related to the first quarter of 1995, during which the Partnership was
still operating the Cameron Systems.
Galaxy reduced its reserve for estimated costs during the period of
liquidation from $1,500,000 at September 30, 1994 to $1,200,000 at December 31,
1994 to $500,000 at December 31, 1995. The reserve is provided to cover
certain costs during the period of liquidation, such as the accrual for state
income taxes, future state income tax liabilities, professional fees, general
and administrative expenses, contingency reserves and other costs related to
dissolution and winding-up. The $300,000 reduction is a result of (i) the
Partnership having incurred and paid certain of such expenses during the fourth
quarter of 1994, and (ii) the Managing General Partner revising its estimate of
such cost. The $700,000 reduction from December 31, 1994 to December 31, 1995
is a result of (i) the Partnership having incurred and paid certain of such
expenses during 1995, (ii) the payment of approximately $359,832 to cover state
income tax obligations for fiscal year 1994, and (iii) the Managing General
Partner revising its estimate of such costs.
The Partnership also realized a $200,000 net gain from the sales of
systems during the fourth quarter of 1994. The net gain results from a savings
in brokerage fees which the partnership enjoyed as a result of consummating
multiple sales through Waller Capital Corporation.
<PAGE> 17
Historical Cost Basis Comparisons
The following table sets forth the percentage relationship of selected
income statement items to subscription services revenues for the nine months
ending September 30, 1994 and the year ended December 31, 1993.
Nine Months Year
Ended Ended
September 30, December 31,
1994 1993
------------- ------------
Subscription services revenue..................... 100.0% 100.0%
Operating expenses (exclusive of
depreciation and amortization).................. (69.5) (68.8)
Operating income (before depreciation
and amortization)*.............................. 30.5 31.2
Depreciation...................................... (25.2) (31.0)
Amortization...................................... (2.3) (2.3)
------------- ------------
Operating income (loss)........................... 3.0 (2.1)
Other income (expense):
Gains on sales of cable television systems,
net........................................... 207.0
Interest income................................. .7 .7
Equity in loss of investee...................... (3.9) (3.5)
Interest expense................................ (9.5) (10.1)
Other expense, net.............................. (1.0)
------------- ------------
Net Earnings (Loss)............................... 196.3% (15.0)%
============= ============
- - - ---------------
* Operating income (before depreciation and amortization) should not be
construed as an alternative to operating income or cash flows from
operating activities as shown in the financial statements included herein
and should not be interpreted as the only measure of Galaxy's operating
performance.
Nine Months Ended September 30, 1994 Compared to Nine Months Ended
September 30, 1993. For the nine months ended September 30, operating expenses
before depreciation and amortization increased from $10,000,813 in 1993 to
$10,591,094 in 1994, an increase of $590,281 or 5.9%. The increase in system
operating costs was primarily a result of the addition of the new subscribers
discussed above, and to a lesser extent, administrative costs associated with
the implementation of new FCC procedures. The increase in expenses during the
nine months ended September 30, 1994 was less than the increase in revenues for
the same period. Therefore, operating cash flow for the nine months ended
September 30 increased slightly from $4,619,481 in 1993 to $4,653,788 in 1994,
an increase of $34,307 or 0.7%.
The Partnership generated revenues for the nine months ended September 30,
1993 of $14,620,294, and for the nine months ended September 30, 1994 of
$15,244,882, an increase of $624,588 or 4.3%. The increase in revenues was due
primarily to revenues from over 1,900 new subscribers within existing systems
during such period.
<PAGE> 18
Operating loss for the nine months ended September 30, 1993 was $128,663.
For the nine months ended September 30, 1994, the Partnership had operating
income of $451,179, an increase in operating income of $579,842. The
additional operating income was due primarily to the $545,535, or 11.5%,
decrease in depreciation and amortization expense from $4,748,144 for the nine
months ended September 30, 1993 to $4,202,609 for the same period of 1994. The
decrease in depreciation and amortization was primarily a result of additional
assets becoming fully depreciated, offset somewhat by additional depreciation
on capital expenditures in existing systems to add subscribers and purchase
equipment as budgeted. Such expenditures totalled $1,610,774 for the nine
months ended September 30, 1994.
For the nine months ended September 30, 1993 and 1994, other income/expense
(consisting of equity in loss of investee, interest income/expense and other
income/expense, but not including gain on sale of cable systems) went from a
net expense of $1,854,446 to a net expense of $2,085,189, respectively, an
increase of $230,743 or 12.4%. This increase was mainly due to expenses
accrued during 1994 associated with the sale of cable systems after
September 30, 1994. Other income/expense also includes the Partnership's share
of the net loss of CableMaxx, Inc. ("CableMaxx"), the majority-owned subsidiary
of Charter Wireless Holdings, L.L.C. ("Charter Holdings") in which Galaxy owns
an equity interest. The Partnership's share of the net loss of CableMaxx
increased from $478,372 to $593,708 for the nine months ended September 30,
1993 and 1994, respectively.
CableMaxx first commenced operation in December 1992. As of December 31,
1992, the Partnership owned a 14% equity interest in Charter Holdings. In
February 1993, the Partnership raised its ownership interest in Charter
Holdings to approximately 16.5% by purchasing an additional 2.5% equity
interest. In November 1993, CableMaxx completed an initial public offering,
which had the effect of diluting the Partnership's indirect interest in
CableMaxx to approximately 9.7%. In April 1994, in connection with the
exercise of certain options by Charter Holdings to purchase wireless cable
systems, Galaxy's interest in Charter Holdings was reduced to approximately
14.6%, and its indirect interest in CableMaxx was reduced to approximately
8.5%.
After December 31, 1992 and until September 30, 1994, the Partnership used
the equity method of accounting for its investment in Charter Holdings. Since
September 30, 1994, the investment in Charter Holdings has been adjusted to
approximate the net realizable value of the Partnership's investment assuming a
discount factor of approximately 30% applied to an average of the recent quoted
market prices of CableMaxx common stock multiplied by the number of shares of
such common stock indirectly owned by the Partnership through its investment in
Charter Holdings. Tommy L. Gleason, Jr., a director and officer of Galaxy
Cablevision Management, Inc., and Ronald L. Voss, an officer of Galaxy
Cablevision Management, Inc., are each officers and directors of CableMaxx.
<PAGE> 19
Subscriber Activity and Relations
The following table illustrates subscriber activity in 1993, 1994 and 1995:
Subscribers
-----------
Number of Subscribers on December 31, 1992........................ 54,900
Additional Subscribers in Existing Systems in 1993................ 2,075
-----------
Number of Subscribers on December 31, 1993........................ 56,975
Subscribers Lost Through Systems Sold in 1994..................... (55,040)
Additional Subscribers In Existing Systems in 1994................ 1,600
-----------
Number of Subscribers on December 31, 1994........................ 3,535
Additional Subscribers in Existing Systems in First Quarter
of 1995......................................................... 206
Subscribers Lost Through Systems Sold in First Quarter of 1995.... (3,741)
-----------
Number of Subscribers on March 31 and December 31, 1995........... -0-
===========
Sales of Cable Systems
The Texas-Louisiana Systems, which served 34,355 basic subscribers as of
September 30, 1994, were sold on such date to Friendship for $42,625,000
(before proration of certain expenses), or approximately $1,241 per basic
subscriber. Of such purchase price, approximately $100,000 is currently being
held in escrow pending the completion by the Partnership of certain tasks
related to the sale.
On December 7, 1994 the Austin Systems, which served 5,417 basic
subscribers as of November 30, 1994, were sold to Time Warner for $7,300,000
(before proration of certain expenses), or approximately $1,348 per basic
subscriber.
The Kentucky Systems, which served 15,270 basic subscribers as November 30,
1994, were sold on December 23, 1994 to Galaxy Telecom, L.P. for $18,437,500
(before proration of certain expenses), or approximately $1,207 per basic
subscriber.
The Cameron Systems, which served 3,741 basic subscribers as of March 31,
1995, were sold on such date to Galaxy Telecom, L.P. for a purchase price of
$3,550,000 (or approximately $949 per basic subscriber). In accordance with
the terms of the Cameron Purchase Agreement, Galaxy Telecom, L.P. delivered to
the Partnership cash in the amount of $3,350,000 (before proration of certain
expenses), and a promissory note in the amount of $200,000 executed by Galaxy
Telecom, Inc., the managing general partner of Galaxy Telecom, L.P. The
$200,000 promissory note (the "Telecom Note") is a balloon note under which all
principal and interest are due and payable in March 2004. Interest is
compounded annually and accrues at a rate of 9% through March 30, 2000, with
increases of two percentage points per year up to 17% after March 30, 2003.
Galaxy is restricted from selling the Telecom Note to anyone except an
affiliate of the Partnership. On December 23, 1994, Galaxy entered into an
agreement with Tommy L. Gleason and Tommy L. Gleason, Jr. (the "Gleasons")
which requires the Gleasons to purchase the Telecom Note from the Partnership
upon the Partnership thereafter making one or more distributions to Unitholders
<PAGE> 20
amounting in the aggregate to $1.00 per Unit or more, excluding any
distribution from the proceeds of the Kentucky Sale or the Cameron Sale. Under
the agreement (the "Put Agreement"), the purchase price to be paid by the
Gleasons for the Telecom Note is equal to the principal plus all accrued
interest as of the date of such purchase. See Item 13 - "Certain Relationships
and Related Transactions" below.
See Item 1 -- "Business -- Sales of Cable Systems" above for additional
information concerning the sales of the Partnership's cable systems.
Liquidity and Capital Resources
As of December 31, 1995, the Partnership had approximately $1.4 million in
cash which was deposited primarily in interest-bearing accounts.
The Partnership had a reserve of $500,000 as of December 31, 1995 to cover
future state income tax liabilities, professional fees, general and
administration expenses, contingency reserves and other costs related to
dissolution and winding-up.
Uses of Proceeds of Cable Systems Sales
Net proceeds from the Texas-Louisiana Sale, the Austin Sale and the
Kentucky Sales were used to repay long-term debt during 1994 and make
distributions to partners during 1994 and January 1995. The Partnership used
the net proceeds from the Cameron Sale, which closed on March 31, 1995, as
follows: (i) $2,163,636 to make a distribution to the partners in May 1995, and
(ii) $1,187,000 to retire certain debt, pay expenses related to sales of
systems and to add to the Partnership's cash reserves to complete its
liquidation and satisfy any indemnification liabilities which may arise in
connection with the Texas-Louisiana Sale and the Austin Sale. As of March 29,
1995, no claims for indemnification have been made by either Friendship or Time
Warner. The Partnership has undertaken no indemnification obligations in
connection with the Kentucky Sale or the Cameron Sale. See "Dissolution;
Winding Up" below.
Dissolution; Winding Up
Having sold all of its operating assets, Galaxy is now in dissolution. The
Managing General Partner is in the process of liquidating the Partnership's
remaining assets and winding up the Partnership's affairs. In connection with
the Cameron Sale, Galaxy received and now holds the Telecom Note, which is a
promissory note in the amount of $200,000 from Galaxy Telecom, Inc., the
managing general partner of Galaxy Telecom, L.P., the purchaser of the Cameron
Systems. Galaxy also holds the Harron Note, which is a note receivable in the
face amount of $1,500,000 from Harron Cablevision of Texas, Inc. Galaxy's
only other significant non-cash asset is the Charter Holdings Investment, which
represents a minority (approximately 14.6%) interest in Charter Holdings, the
only asset of which is 1,519,809 shares of common stock of Heartland Wireless
Communications, Inc.
None of the Telecom Note, the Harron Note or the Charter Holdings
Investment are currently liquid. Under the terms of the governing documents of
Charter Holdings, the Partnership cannot transfer its ownership interest in
Heartland without the consent of the other members and, even if such consents
<PAGE> 21
were obtained, the Managing General Partner believes the Partnership would be
required to sell its investment at a substantial discount. Charter Holdings
has certain registration rights with respect to the 1,369,809 shares of
Heartland common stock it currently holds. The Partnership understands that,
pursuant to such registration rights, Heartland may file a registration
statement with the Securities and Exchange Commission with respect to such
shares during 1996, which would enable Charter Holdings to sell such shares to
the public. However, there can be no assurance whether or when such
registration statement will be filed, whether Charter Holdings will elect to
sell any shares or, if so, when or at what price. However, the Managing
General Partner believes that Charter Holdings may ultimately either liquidate
its investment in Heartland and distribute the proceeds to the members,
including Galaxy, or distribute the Heartland stock directly to the members.
It is therefore the Managing General Partner's current intention to continue to
hold the Charter Holdings Investment until such distribution, unless the
Partnership is able to sell the investment without substantial discount. The
Partnership cannot predict when it will receive additional distributions, if
any, in respect of the Charter Holdings Investment. The Partnership received a
distribution of $538,200 from Charter Holdings on March 19, 1996 as a result of
the sale of shares of Heartland stock by Charter Holdings. The Managing General
Partner currently does not intend to distribute such amount to its partners
until the Harron Note is paid or it receives additional distributions from
Charter Holdings, provided there are no claims for indemnification by
Friendship or Time Warner at such time.
The Harron Note is a balloon note under which all principal and accrued
interest is payable on July 1, 1996. Principal and interest accrued through
December 31, 1994 equals approximately $2,200,000. Although the Partnership is
not restricted from selling the Harron Note, the Managing General Partner
believes that such a sale would be at a substantial discount to the value of
the note. As a result, the Managing General Partner currently expects to hold
the Harron Note until its maturity. If the Harron Note is paid in full upon
maturity, and there are no claims for indemnification by Friendship or Time
Warner, the Partnership currently intends to distribute the proceeds of the
Harron Note, as well as any distributions from Charter Holdings, to its
partners.
The Telecom Note is also a balloon note, under which all principal and
accrued interest are due and payable in March 2004. Galaxy is restricted from
selling the Telecom Note to anyone except an affiliate of the Partnership. On
December 23, 1994, Galaxy entered into a Put Agreement with Tommy L. Gleason
and Tommy L. Gleason, Jr. (the "Gleasons") which requires the Gleasons to
purchase the Telecom Note from the Partnership upon the Partnership thereafter
making one or more distributions to Unitholders amounting in the aggregate to
$1.00 per Unit or more, excluding any distribution from the proceeds of the
sale of the Kentucky Systems or the Cameron Systems. Under the Put Agreement,
the purchase price to be paid by the Gleasons for the Telecom Note is equal to
the principal plus all accrued interest as of the date of such purchase. The
Managing General Partner currently intends to hold the Telecom Note until it is
purchased by the Gleasons in accordance with the Put Agreement. It is
anticipated that any distribution resulting from the payment of the Harron Note
would exceed $1.00 per Unit.
In connection with the Texas-Louisiana Sale and the Austin Sale, the
Partnership undertook certain indemnification obligations. Specifically,
Galaxy agreed to indemnify Friendship, the purchaser of the Texas-Louisiana
Systems, for certain damages, liabilities, costs and expenses incurred by
Friendship solely as a result of any breach by Galaxy of any written
<PAGE> 22
representation, warranty agreement or covenant of Galaxy contained in the
Texas-Louisiana Purchase Agreement and for liabilities arising out of ownership
of the systems prior to September 30, 1994. The Partnership's maximum
liability for such breach is $2,000,000. Galaxy's representations and
warranties expire on March 31, 1996 (except as to tax matters, which survive
for the applicable statute of limitations). Any claims for indemnification
cannot be made until the total of all such claims exceeds $50,000.
The Partnership has also agreed to indemnify Time Warner, the purchaser of
the Austin Systems, for certain claims, losses, liabilities, damages, liens,
penalties, costs and expenses incurred by Time Warner as a result of any breach
by Galaxy of any written representation, warranty, agreement or covenant of
Galaxy contained in the Austin Purchase Agreement. The Partnership's maximum
liability for such breach is $1,200,000. The representations and warranties
expire on June 7, 1996, and any claim for indemnification must be made by
September 5, 1996. No claim can be made until the total of all such claims
exceeds $25,000.
The risk of Galaxy being required to pay an indemnification claim is a
factor which the Managing General Partner will consider in determining the
amount and timing of any future distributions to Unitholders. As of March 29,
1995, no claims for indemnification have been made by either Friendship or Time
Warner. The Managing General Partner believes that the likelihood of such a
claim being brought by Friendship or Time Warner decreases with the passage of
time.
The Partnership has undertaken no indemnification obligations in connection
with the Kentucky Sale or the Cameron Sale.
Rate Regulation
In early 1996, Congress adopted the Telecommunications Act of 1996.
However, because the Partnership has not operated any cable television systems
since March 31, 1995, such Act will not have any effect on the Partnership or
its liquidation.
<PAGE> 23
Item 8. Financial Statements and Supplementary Data
TABLE OF CONTENTS
Page
----
Galaxy Cablevision, L.P.:
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . 24
Financial Statements:
Statement of Net Assets in Process of Liquidation -
December 31, 1995 and 1994. . . . . . . . . . . . . . . . . . . 25
Statement of Changes in Net Assets in Process of Liquidation for
the Year Ended December 31, 1995 and for the Three Months Ended
December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . 26
Statements of Operations for the Nine Months
Ended September 30, 1994 and for the Year
Ended December 31, 1993 . . . . . . . . . . . . . . . . . . . . 27
Statements of Partners' Capital (Deficiency in Assets) for the
Nine Months Ended September 30, 1994 and for
the Year Ended December 31, 1993. . . . . . . . . . . . . . . . 28
Statements of Cash Flows for the Nine Months
Ended September 30, 1994 and for the Year Ended
December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . 29
Notes to Financial Statements . . . . . . . . . . . . . . . . . . 30
<PAGE> 24
INDEPENDENT AUDITORS' REPORT
Galaxy Cablevision, L.P.:
We have audited the accompanying statement of net assets in process of
liquidation of Galaxy Cablevision, L.P. (the "Partnership") as of December 31,
1995 and 1994 and the statement of changes in net assets in process of
liquidation for the year ended December 31, 1995 and the three months ended
December 31, 1994. In addition, we have audited the statement of operations,
partners' capital (deficiency in assets) and cash flows for the nine months
ended September 30, 1994 and the year ended December 31, 1993. These
consolidated 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 1 to the financial statements, the Partnership sold
certain assets on September 30, 1994 which, according to the Partnership
agreement, required the Partnership to commence liquidation of the remaining
assets. As a result, the Partnership has changed its basis of accounting for
September 30, 1994 and subsequent periods from the going-concern basis to the
liquidation basis. Accordingly, the carrying values of the remaining assets as
of December 31, 1995 and 1994, are presented at estimated realizable values and
all liabilities are presented at estimated settlement amounts. Actual amounts
depend upon a number of factors, and as a result, actual amounts are likely to
differ from the amounts presented in the accompanying financial statements.
In our opinion, such financial statements present fairly, in all material
respects, the net assets in process of liquidation of Galaxy Cablevision, L.P.
as of December 31, 1995 and 1994, the changes in net assets in process of
liquidation for the year ended December 31, 1995 and the three months ended
December 31, 1994, and the historical cost basis results of its operations and
its cash flows for the nine months ended September 30, 1994 and the year ended
December 31, 1993, in conformity with generally accepted accounting principles
applied on the basis described in the preceding paragraph.
Deloitte & Touche LLP
Saint Louis, Missouri
March 27, 1996
<PAGE> 25
<TABLE>
GALAXY CABLEVISION, L.P.
STATEMENT OF NET ASSETS IN PROCESS OF LIQUIDATION (NOTE 2)
<CAPTION>
Notes December 31, 1995 December 31, 1994
----- ----------------- -----------------
<S> <C> <C> <C>
ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,435,941 14,571,652
Prepaid Expenses and Other Assets. . . . . . . . . . . . . . 787,092 767,002
Escrow Deposits. . . . . . . . . . . . . . . . . . . . . . . 1 101,100 100,000
Due From Affiliates, Net . . . . . . . . . . . . . . . . . . -- 327,071
Notes Receivable . . . . . . . . . . . . . . . . . . . . . . 3 1,747,037 1,561,256
Cable Television Systems and Other Property and Equipment,
Net. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 -- 3,550,000
Investment in Affiliate. . . . . . . . . . . . . . . . . . . 4 3,800,000 2,500,000
----------------- -----------------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . . 7,871,170 23,376,981
----------------- -----------------
LIABILITIES
Notes Payable. . . . . . . . . . . . . . . . . . . . . . . . -- 1,281,816
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . -- 602,448
Accrued Expenses and Other Liabilities . . . . . . . . . . . 75,805 703,383
Due to Affiliates, Net . . . . . . . . . . . . . . . . . . . 77,481 --
Reserve for Estimated Costs During Period of Liquidation . . 500,000 1,200,000
Accrued Distributions to Partners. . . . . . . . . . . . . . 8 -- 11,250,909
----------------- -----------------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . 653,286 15,038,556
----------------- -----------------
NET ASSETS IN PROCESS OF LIQUIDATION . . . . . . . . . . . . $ 7,217,884 $ 8,338,425
================= =================
<FN>
See notes to financial statements.
</TABLE>
<PAGE> 26
<TABLE>
GALAXY CABLEVISION, L.P.
STATEMENT OF CHANGES IN NET ASSETS IN PROCESS OF LIQUIDATION (NOTE 2)
FOR THE YEAR ENDED DECEMBER 31, 1995
AND FOR THE THREE MONTHS ENDED DECEMBER 31, 1994
<CAPTION>
Note
----
<S> <C> <C>
Total Partners' Capital as of September 30, 1994 (Historical Cost Basis) . . . . . $27,051,764
Net Gain on Change to Liquidation Basis. . . . . . . . . . . . . . . . . . . . . . 19,177,482
------------
Net Assets in Process of Liquidation as of September 30, 1994. . . . . . . . . . . 46,229,246
Distributions to Partners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 (27,456,545)
Accrued Distributions to Partners. . . . . . . . . . . . . . . . . . . . . . . . . 8 (11,250,909)
Revenues in Excess of Expenses from Operations . . . . . . . . . . . . . . . . . . 316,633
Reduction in Reserve for Estimated Costs During Period of Liquidation. . . . . . . 300,000
Net Gain from the Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
------------
Net Assets in Process of Liquidation as of December 31, 1994 . . . . . . . . . . . $ 8,338,425
Distributions to Partners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 (2,163,636)
Increase in Value of Investment in Affiliate . . . . . . . . . . . . . . . . . . . 1,300,000
Additional Copyright Fees due to Amended Filings . . . . . . . . . . . . . . . . . (344,301)
Revenues in Excess of Expenses from Operations . . . . . . . . . . . . . . . . . . 75,012
Reduction in Reserve for Estimated Costs During Period of Liquidation. . . . . . . 12,384
------------
Net Assets in Process of Liquidation as of December 31, 1995 . . . . . . . . . . . $ 7,217,884
============
<FN>
See notes to financial statements.
</TABLE>
<PAGE> 27
<TABLE>
GALAXY CABLEVISION, L.P.
STATEMENTS OF OPERATIONS
(Historical Cost Basis)
<CAPTION>
Notes Nine Months Ended For the Year Ended
September 30, 1994 December 31, 1993
----- ------------------ ------------------
<S> <C> <C> <C>
SUBSCRIPTION SERVICES REVENUE. . . . . . . . . . . . . . . . 2 $15,244,882 $19,557,695
OPERATING EXPENSES:
System operations (exclusive of depreciation and
amortization shown separately below)
Related Party. . . . . . . . . . . . . . . . . . . . . . 20,346
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 6,242,628 7,815,508
----------------- -----------------
6,262,974 7,815,508
----------------- -----------------
Selling, general and administrative:
Related party. . . . . . . . . . . . . . . . . . . . . . . 5,6 1,206,808 1,946,826
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . 3,121,312 3,686,530
----------------- -----------------
4,328,120 5,633,356
----------------- -----------------
Depreciation expense . . . . . . . . . . . . . . . . . . . . 3,848,646 6,066,978
Amortization expense . . . . . . . . . . . . . . . . . . . . 353,963 440,654
----------------- -----------------
Total operating expenses . . . . . . . . . . . . . . . . . . 14,793,703 19,956,496
----------------- -----------------
OPERATING INCOME (LOSS). . . . . . . . . . . . . . . . . . . 451,179 (398,801)
GAINS ON SALES OF CABLE TELEVISION SYSTEMS, NET. . . . . . . 1 31,552,357
EQUITY IN LOSS OF INVESTEE . . . . . . . . . . . . . . . . . 2,4 (593,708) (699,849)
INTEREST INCOME. . . . . . . . . . . . . . . . . . . . . . . 109,443 145,591
INTEREST EXPENSE . . . . . . . . . . . . . . . . . . . . . . (1,448,170) (1,979,481)
OTHER EXPENSE, NET . . . . . . . . . . . . . . . . . . . . . (152,754) (7,464)
----------------- -----------------
NET EARNINGS (LOSS). . . . . . . . . . . . . . . . . . . . . $29,918,347 $(2,940,004)
================= =================
ALLOCATION OF NET EARNINGS (LOSS)
General Partners . . . . . . . . . . . . . . . . . . . . . 2 $ 299,183 $ (29,400)
================= =================
Limited Partners . . . . . . . . . . . . . . . . . . . . . $29,619,164 $(2,910,604)
================= =================
NET EARNINGS (LOSS) PER LIMITED PARTNERSHIP UNIT . . . . . . 2 $ 13.83 $ (1.36)
================= =================
WEIGHTED AVERAGE NUMBER OF LIMITED PARTNERSHIP UNITS
OUTSTANDING. . . . . . . . . . . . . . . . . . . . . . . . 2 2,142,000 2,142,000
================= =================
<FN>
See notes to financial statements.
</TABLE>
<PAGE> 28
<TABLE>
GALAXY CABLEVISION, L.P.
STATEMENTS OF PARTNERS' CAPITAL (DEFICIENCY IN ASSETS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30,1994 AND FOR THE
YEAR ENDED DECEMBER 31, 1993
(Historical Cost Basis)
<CAPTION>
Excess
Purchase
Price over
Cost of
Assets
Purchased Acquired
or from
Reissued Entities
Limited Under
General Limited Partnership Common
Partners Partners Units Control Total
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992 $ (338,005) $ 5,587,600 $ (140,628) $(5,035,546) $ 73,421
Net loss for 1993 (29,400) (2,910,604) (2,940,004)
------------- ------------- ------------- ------------- -------------
Balance at December 31, 1993 (367,405) 2,676,996 (140,628) (5,035,546) (2,866,583)
Net earnings for nine months ended
September 30, 1994 299,183 29,619,164 29,918,347
------------- ------------- ------------- ------------- -------------
Balance at September 30, 1994 $ (68,222) $32,296,160 $ (140,628) $(5,035,546) $27,051,764
============= ============= ============= ============= =============
<FN>
See notes to financial statements.
</TABLE>
<PAGE> 29
<TABLE>
GALAXY CABLEVISION, L.P.
STATEMENTS OF CASH FLOWS
(Historical Cost Basis)
<CAPTION>
Nine Months Ended Year Ended
September 30, 1994 December 31, 1993
------------------ -----------------
<S> <C> <C>
FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $29,918,347 $(2,940,004)
Adjustments to reconcile net earnings (loss) to net cash flow
provided by operating activities:
Depreciation and amortization 4,202,609 6,507,632
Gain on sale of cable systems (31,552,357)
Loss on sale of property and equipment, net 27,281 19,991
Equity in loss of investee 593,708 699,849
Net change in assets and liabilities:
Trade accounts receivable 150,450 (13,009)
Prepaid expenses and other assets 49,536 (209,675)
Due from affiliates, net (84,874) (507,226)
Accounts payable 532,346 (271,479)
Accrued expenses and other liabilities (306,097) 10,024
------------------ -----------------
Net cash provided by operating activities 3,530,949 3,296,103
------------------ -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of cable systems, net of certain expenses 41,491,051
Investment in affiliate (375,000)
Net distribution from affiliate 59,321
Upgrade of cable television systems (1,161,610) (1,209,184)
Purchases of property and equipment (449,164) (467,391)
Proceeds from sales of other assets 7,817 4,700
Proceeds from note receivable repayments 13,550 12,904
----------------- -----------------
Net cash provided by (used in) investing activities 39,901,644 (1,974,650)
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 85,230 805,561
Repayments of borrowings (25,410,225) (2,264,454)
Payment of distributions (82,880)
----------------- -----------------
Net cash used in financing activities (25,324,995) (1,541,773)
----------------- -----------------
NET INCREASE (DECREASE) IN CASH 18,107,598 (220,320)
CASH AT BEGINNING OF THE PERIOD 475,345 695,665
----------------- -----------------
CASH AT END OF THE PERIOD $18,582,943 $ 475,345
----------------- -----------------
SUPPLEMENTAL INFORMATION:
Cash paid for interest $ 1,659,661 $1,799,356
================= =================
</TABLE>
<PAGE> 30
GALAXY CABLEVISION, L.P.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
1. LIQUIDATION BASIS AND SALE OF CABLE TELEVISION SYSTEMS
At a special meeting of the Unitholders of Galaxy Cablevision, L.P.
("Galaxy" or the "Partnership") on September 28, 1994, the Unitholders voted to
approve the proposed sales of 1) the Northeast Texas and Louisiana-Arkansas
Region Systems (the "Texas-Louisiana Systems"), 2) the Kentucky Region Systems
(the "Kentucky Systems"), and 3) part of the Central Texas Region Systems (the
"Austin Systems"), which comprised 94% of the Partnership's total basic
subscribers. The remaining 6% of the subscribers represent the Partnership's
cable systems in the Cameron, Texas area of the Central Texas Region (the
"Cameron Systems"), which was sold in 1995.
TEXAS-LOUISIANA SYSTEMS
In March 1994, Galaxy entered into a definitive Asset Purchase Agreement
(effective February 21, 1994) (the "Texas-Louisiana Purchase Agreement") to
sell all of the Texas-Louisiana Systems to Buford Group, Inc., a Delaware
corporation, for a cash purchase price of $42,625,000. On June 13, 1994 Buford
Group, Inc. assigned its interest in the Texas-Louisiana Purchase Agreement to
Friendship Cable of Texas, Inc. ("Friendship"), a Texas corporation which is an
affiliate of Buford Group, Inc.
On September 30, 1994, the Partnership sold all of the Texas-Louisiana
Systems, which consisted of 34,355 basic subscribers as of such date
(approximately 59% of the Partnership's total basic subscribers), to Friendship
(the "Texas-Louisiana Sale") for a purchase price of $42,625,000 (before
proration of certain expenses), or approximately $1,241 per basic subscriber.
Of such purchase price, approximately $100,000 is currently being held in
escrow pending the completion by the Partnership of certain tasks related to
the sale. In connection with the Texas Louisiana Sale, the Partnership agreed
to enter into a noncompete agreement with Friendship. Friendship also
required, as a condition to closing, that Galaxy Cablevision Management, Inc.
entering into the noncompete agreement, the Partnership agreed to convey to it
the computer equipment and office furniture, valued at $54,000, utilized in
Galaxy's headquarters in Sikeston, Missouri. The Partnership agreed to convey
such assets once the Austin Sale and Kentucky Sale were closed, but reserved
the right to continue to use the assets without cost until its liquidation is
complete. Ownership of such assets were transferred to Galaxy Cablevision
Management, Inc. on December 27, 1994. The transfer of such assets was
approved unanimously by the independent directors of Galaxy Cablevision
Management, Inc.
Furthermore, in connection with the Texas-Louisiana Sale, the Partnership
has undertaken certain indemnification obligations. Specifically, Galaxy has
agreed to indemnify Friendship, the purchaser of the Texas-Louisiana Systems,
for certain damages, liabilities, costs and expenses incurred by Friendship
solely as a result of any breach by Galaxy of any written representation,
warranty, agreement or covenant of Galaxy contained in the Texas-Louisiana
Purchase Agreement and for liabilities arising out of ownership of the systems
prior to September 30, 1994. The Partnership's maximum liability for such
breach is $2,000,000. Galaxy's representations and warranties survive until
March 31, 1996 (except as to tax matters, which survive for the applicable
<PAGE> 31
statute of limitations). Any claims for indemnification cannot be made until
the total of all such claims exceeds $50,000.
Under the terms of the Partnership agreement, a disposition of
substantially all of the assets of the Partnership triggers liquidation of all
Partnership assets. The Partnership adopted the liquidation basis of
accounting (see Note 2 - Basis of Presentation) as a result of the Texas-
Louisiana Sale.
KENTUCKY SYSTEMS
On May 16, 1994 Galaxy entered into a definitive Asset Purchase Agreement
(the "Kentucky Purchase Agreement") to sell all of the Kentucky Systems to
Galaxy Management, Inc., a Delaware corporation owned by Tommy L. Gleason and
Tommy L. Gleason, Jr. (the "Gleasons"), for a cash purchase price of
$18,437,500. In November, 1994 Galaxy Management, Inc. assigned its interest
in the Kentucky Purchase Agreement to Galaxy Telecom, L.P., a Delaware limited
partnership in which the Gleasons and all other executive officers of the
Managing General Partner have an indirect equity interest.
The Kentucky Systems, which served 15,270 basic subscribers as of
November 30, 1994, were sold on December 23, 1994 to Galaxy Telecom, L.P. for
$18,437,500 (before proration of certain expenses), or approximately $1,207 per
basic subscriber.
AUSTIN SYSTEMS
On August 15, 1994 the Partnership entered into a definitive Asset Purchase
Agreement (the "Austin Purchase Agreement") to sell all of the Austin Systems
to Time Warner Entertainment Company, L.P., through its division Time Warner
Cable Ventures ("Time Warner"), for a cash purchase price of $7,300,000.
On December 7, 1994 the Austin Systems, which served 5,417 basic
subscribers as November 30, 1994, were sold to Time Warner for $7,300,000
(before proration of certain expenses), or approximately $1,348 per basic
subscriber.
In connection with the Austin Sale, the Partnership has undertaken certain
indemnification obligations. Specifically, the Partnership has agreed to
indemnify Time Warner, the purchaser of the Austin Systems, for certain claims,
losses, liabilities, damages, liens, penalties, costs and expenses incurred by
Time Warner as a result of any breach by Galaxy of any written representation,
warranty, agreement or covenant of Galaxy contained in the Austin Purchase
Agreement. The Partnership's maximum liability for such breach is $1,200,000.
The representations and warranties survive until June 7, 1996, and any claim
for indemnification must be made by September 6, 1996. No claim can be made
until the total of all such claims exceeds $25,000.
CAMERON SYSTEMS
On December 23, 1994, the Partnership entered into a definitive Asset
Purchase Agreement (the "Cameron Purchase Agreement") to sell the Cameron
Systems to Galaxy Telecom, L.P. for a purchase price of $3,550,000. The sale
was approved unanimously by the independent directors of Galaxy Cablevision
Management, Inc., as required under the Partnership Agreement.
<PAGE> 32
The Cameron Sale which served 3,755 subscribers, closed on March 31, 1995.
On that date, in accordance with the terms of the Cameron Purchase Agreement,
Galaxy Telecom, L.P. delivered to the Partnership cash in the amount of
$3,350,000 (before proration of certain expenses), and a promissory note in the
amount of $200,000 executed by Galaxy Telecom, Inc., the managing general
partner of Galaxy Telecom, L.P. The $200,000 promissory note (the "Telecom
Note") is a balloon note under which all principal and interest are due and
payable in March 2004. Interest is compounded annually and accrues at rates
from 9% to 17% over the 9 year term. This note is included in notes receivable
on the statement of net assets in process of liquidation as of December 31,
1995.
On, December 23, 1994 the same date the Partnership entered into the
Cameron Purchase Agreement, an agreement was reached between Galaxy and the
Gleasons providing for the purchase of the Telecom Note by the Gleasons from
the Partnership upon the Partnership making one or more distributions to
Unitholders amounting in the aggregate to $1.00 per Unit or more, excluding any
distribution from the proceeds of the Kentucky Sale or the Cameron Sale. Under
the agreement (the "Put Agreement"), the purchase price to be paid by the
Gleasons for the Telecom Note is equal to the principal plus all accrued
interest as of the date of such purchase.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
Basis of Presentation -- On September 30, 1994, the Partnership adopted the
liquidation basis of accounting as a result of the Texas-Louisiana Sale (See
Note 1). The statement of net assets in process of liquidation at December 31,
1995 and 1994 and the statement of changes in net assets in process of
liquidation for the year ended December 31, 1995 and the three months ended
December 31, 1994 have been prepared on a liquidation basis. Assets have been
presented at estimated net realizable value and liabilities have been presented
at estimated settlement amounts.
The valuation of assets and liabilities necessarily requires many estimates
and assumptions and there are uncertainties in carrying out the liquidation of
the Partnership's net assets. The actual value of the liquidating
distributions will depend on a variety of factors, including the actual timing
of distributions to Unitholders and the resolution of the Partnership's
contingent liabilities. The actual amounts are likely to differ from the
amounts presented in the financial statements.
The historical cost basis statements of operations, partners' capital
(deficiency in assets) and cash flows for the nine months ended September 30,
1994 and the year ended December 31, 1993 have been prepared using the
historical cost (going concern) basis of accounting on which the Partnership
had previously been reporting its financial condition and its results of
operations.
Formation of Partnership -- The Partnership is a limited partnership formed
under the laws of the State of Delaware. The General Partners of the
Partnership are Tommy L. Gleason, Jr. and Galaxy Cablevision Management, L.P.
(the "General Partners"). The purpose of the Partnership has been to develop
and operate cable television ("CATV") systems. The Partnership acquired its
initial CATV systems in a purchase transaction on March 19, 1987 and began
operations of those systems on that date.
<PAGE> 33
The capitalization of the Partnership is set forth in the accompanying
Statements of Partners' Capital (Deficiency in Assets). On March 19, 1987, the
Partnership sold 2,150,000 Units of Limited Partnership Interests ("Units") at
$20 per Unit representing an aggregate gross sales price of $43,000,000. Net
proceeds to the Partnership (net of underwriting commissions, legal, accounting
and other syndication costs) were $39,248,154. No limited partner is obligated
to make any additional contribution to partnership capital. The General
Partners purchased their interests in the Partnership by contributing $2,000 to
partnership capital.
Distributions of Cash Flow from Operations -- Distributions, if any, of
cash flow from operations, as defined in the Galaxy Cablevision, L.P.
Partnership Agreement (the "Partnership Agreement"), are allocated 1% to the
General Partners and 99% to the Unitholders and are paid to Unitholders of
record.
Distributions on Sale or Refinancing of Cable Television Systems -- Cash
distributions upon sale or refinancing of a cable television system (other than
upon dissolution) are made, subject to certain adjustments required to cause
distributions to be made among the Unitholders and General Partners in
accordance with capital account balances (including an allocation to the
General Partner's capital account of 1% of each item of income, gain, loss or
deduction), as follows: first, to all Unitholders until they have received an
amount equal to the capital contribution attributable to the Units; second, to
all Unitholders until they have received (together with all previous
distributions of cash flow from operations) an amount equal to at least a 10%
per annum return, calculated on a cumulative and noncompounded basis on the
adjusted capital contribution attributable to the Units; and the remainder, 60%
to all Unitholders and 40% to the General Partners.
The General Partners may reinvest any proceeds from a sale or refinancing
of cable television systems then owned by the Partnership in other cable
television systems, but will not reinvest any such proceeds unless sufficient
cash is first distributed to Unitholders to pay any federal income tax
liability created by the sale or refinancing, assuming a 33% marginal tax rate
for all Unitholders.
Distributions Upon Dissolution -- Cash distributions upon the dissolution
of the Partnership will generally be made in the same manner as cash
distributions on refinancing or sale of cable television systems.
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.
The following accounting policies apply to the historical cost basis
financial statements presented for all periods prior to September 30, 1994,
when the Partnership adopted the liquidation basis of accounting.
Subscription Services Revenue -- Subscription services revenue is recorded
in the month the service is provided.
<PAGE> 34
Depreciation Expense -- Depreciation is provided on a straight line basis
over the following estimated useful lives, beginning when the assets are placed
in service:
Cable television systems and equipment..... 5 to 10 years
Buildings and improvements................. 15 years
Vehicles................................... 3 to 5 years
Net Earnings (Loss) per Limited Partnership Unit -- Net earnings (loss) per
limited partnership unit is computed based on the weighted average number of
units outstanding.
3. NOTES RECEIVABLE
On May 24, 1991, the Partnership sold the 370 subscriber cable television
system in Porterville, Louisiana for $500,000, or approximately $1,350 per
subscriber, resulting in a loss on sale of $72,785. The Partnership received
$400,000 in cash at closing and a note for the remaining $100,000 payable in
seven annual installments of approximately $17,000 each, including accumulated
interest calculated at 5% per annum.
On June 27, 1991, the Partnership sold all of the cable television systems
in the Waxahachie region in Texas for $7,400,000, or approximately $1,600 per
subscriber, resulting in a gain on the sale of $2,968,686. The Partnership
received $5,900,000 in cash and $1,500,000 in a promissory note which is
subordinated to any debt of the purchaser which might be secured by the cable
television systems in the Waxahachie region, up to a maximum of 70% of the
purchase price excluding the value of the real estate. The principal amount
plus accumulated interest calculated at 9.5% per annum is due July 1, 1996. In
return, the Partnership delivered 4,610 subscribers and an agreement not to
compete in the region for three years.
On March 31, 1995, the Partnership sold the 3,755 subscriber cable
television system in Cameron, Texas for a purchase price of $3,550,000, or
approximately $940 per subscriber. The Partnership received $3,350,000 (before
proration of certain expenses), and a promissory note in the amount of $200,000
executed by Galaxy Telecom, Inc., the managing general partner of Galaxy
Telecom, L.P. The $200,000 promissory note (the "Telecom Note") is a balloon
note under which all principal and interest are due and payable in March, 2004.
Interest is compounded annually and accrues at rates ranging from 9% to 17%
over the 9 year term.
On December 23, 1994, the same date the Partnership entered into a
definitive asset purchase agreement to sell the Cameron Systems, an agreement
was reached between Galaxy and the Gleasons providing for the purchase of the
Telecom Note by the Gleasons from the partnership upon the Partnership making
one or more distributions to Unitholders amounting in the aggregate to $1.00
per Unit or more, excluding any distribution from the proceeds of the Kentucky
Sale or the Cameron Sale. Under the agreement (the "Put Agreement"), the
purchase price to be paid by the Gleasons for the Telecom Note is equal to the
principal plus all accrued interest as of the date of such purchase.
4. INVESTMENT IN AFFILIATE
In December 1992, the Partnership entered into an agreement with
Charterhouse Equity Partners, L.P., Northern & Midland Nominees Limited, Galaxy
<PAGE> 35
Management, Inc., and Supreme Cable Co., Inc. whereby together they would form
Charter Wireless Cable Holdings, L.L.C. ("Charter Holdings"), pursuant to the
Delaware Limited Liability Company Act, and Charter Cable Corporation, a wholly
owned subsidiary of Charter Holdings, for the purpose of directly or indirectly
acquiring, owning and operating a Multichannel Multipoint Distribution Service
("MMDS").
The Partnership was credited for a $2 million initial capital contribution
to, and received a 14% equity interest in, Charter Holdings based on escrow
deposits made pursuant to an initial acquisition agreement which was terminated
and replaced by the above-mentioned agreement.
Charter Cable Corporation executed an agreement ("Asset Purchase
Agreement") to acquire from Supreme Cable Co., Inc. and CableMaxx, Inc.
(collectively, "Sellers") certain wireless television assets consisting of an
existing MMDS system in Austin and an MMDS system to be constructed in and
around San Antonio, Texas. Charter Cable Corporation also executed agreements
("Option Agreements") with Sellers whereby it acquired options to purchase
wireless cable systems ("Option Cable Systems") in Amarillo, Athens, Lubbock,
Sherman-Dennison, Temple-Killeen, and Waco, Texas. In accordance with the
Option Agreements and a separate and concurrently executed agreement with
Sellers (the "Maintenance Agreement"), the Partnership assumed the
responsibility of maintaining FCC licenses, channel leases, tower leases,
maintenance contracts, and related insurance contracts for the Option Cable
Systems during the option period. Under the Option Agreements, the Partnership
was reimbursed for such expenses by Charter Cable Corporation when the options
were exercised. Such expenses were $232,892 as of December 31, 1993.
As of December 31, 1992, the Partnership owned 14% of the Charter Holdings
and carried its investment at cost, which includes the initial capital
contribution and related acquisition costs.
On February 16, 1993, the Partnership raised its ownership interest in
Charter Holdings to approximately 16.5% by purchasing an additional 2.5% equity
interest for $375,000. During 1993, Charter Cable Corporation changed its name
to CableMaxx, Inc. In November 1993, CableMaxx, Inc., a majority-owned
subsidiary and the only asset of Charter Holdings, completed an initial public
offering of 3.5 million shares of common stock. At December 31, 1993, the
Partnership owned 16.5% equity interest in Charter Holdings. The options
described above were exercised in 1994 and Galaxy's ownership interest in
Charter Holdings was reduced from 16.5% to approximately 14.6%.
On September 12, 1995, Cablemaxx, Inc. ("Cablemaxx") announced the signing
of a definitive agreement with Heartland Wireless Communications, Inc.
("Heartland") in connection with a proposed merger of Cablemaxx into a
subsidiary of Heartland. Pursuant to the merger, which closed effective
February 23, 1996, Cablemaxx stockholders received newly issued shares of
Heartland valued at $8.50 per share of Cablemaxx stock and Cablemaxx became a
wholly-owned subsidiary of Heartland. As a result of the merger, Charter
Holdings received an aggregate of 1,519,809 shares of Heartland common stock in
exchange for its holdings in CableMaxx. In February 1996, Charter Holdings
sold 150,000 of such shares at a net price of $26.00 per share and distributed
the proceeds to its members on March 19, 1996. The Partnership received
$538,200 as a result of this distribution. Charter Holdings currently holds
1,369,809 shares of Heartland common stock.
The Charter Holdings investment is current not liquid. Under the terms of
the governing documents of Charter Holdings, the Partnership cannot transfer
<PAGE> 36
its ownership interest in Charter Holdings without the consent of the other
members and, even if such consents were obtained, the Managing General Partner
believes the Partnership would be required to sell its investment at a
substantial discount. Charter Holdings has certain registration rights with
respect to the 1,369,809 shares of Heartland common stock it currently holds.
The Partnership understands that, pursuant to such registration rights,
Heartland may file a registration statement with the Securities and Exchange
Commission with respect to such shares during 1996, which would enable Charter
Holdings to sell such shares to the public. However, there can be no assurance
whether or when such registration statement will be filed, whether Charter
Holdings will elect to sell any shares or, if so, when or at what price.
However, the Managing General Partner believes that Charter Holdings may
ultimately either liquidate its investment in Heartland and distribute the
proceeds to the members, including Galaxy, or distribute the Heartland stock
directly to the members. It is therefore the Managing General Partner's
current intention to continue to hold the Charter Holdings Investment until
such time, unless the Partnership were able to sell the investment without
substantial discount. The Partnership cannot predict when it will receive
distributions, if any, in respect of the Charter Holdings Investment.
As of December 31, 1995 and 1994, the investment in Charter Holdings has
been adjusted to approximate the net realizable value of the Partnership's
investment assuming a discount factor of approximately 30% applied to the
quoted market prices of CableMaxx, Inc. common stock multiplied by the number
of shares of such common stock indirectly owned by the Partnership through its
investment in Charter Holdings. The only assets held by Charter Holdings are
shares of CableMaxx, Inc., a publicly traded operator of certain wireless cable
television systems located in Texas.
Tommy L. Gleason, Jr., a director and officer of Galaxy Cablevision
Management, Inc., and Ronald L. Voss, an officer of Galaxy Cablevision
Management, Inc., are each officers and directors of CableMaxx.
5. MANAGEMENT COMPENSATION AND FEES
Under the terms of the Partnership Agreement and the management agreement
between the Partnership and Galaxy Cablevision Management, L.P. (the "Managing
General Partner"), the Managing General Partner is responsible for managing the
business affairs of the Partnership.
The Partnership pays the Managing General Partner a minimum management fee
of 4-1/2% of the gross revenue of the Partnership (not including revenue from
the sales of cable television systems) for such services. Such fee is computed
and payable on a monthly basis. In certain circumstances which are now only
remotely possible, the Managing General Partner would receive an additional 1%
of such gross revenue, payable annually. Management fees for the nine months
ended September 30, 1994 and the year ended December 31, 1993 approximated
$687,000 and $880,000, respectively. Management fees for the year ended
December 31, 1995 and the three months ended December 31, 1994 approximated
$14,000 and $84,000, respectively. In addition, the Partnership reimburses the
Managing General Partner for certain of its direct and indirect expenses
allocable to the operations of the Partnership (See Note 6).
<PAGE> 37
6. RELATED PARTY TRANSACTIONS
Upon the closing of the March 19, 1987 public offering of Units, the
Partnership paid to the Managing General Partner an organization fee of
$250,000 for services rendered by management personnel and other employees of
the Managing General Partner and its affiliates in connection with the
preparation and the negotiation of documents related to the organization of the
Partnership and the negotiation of the terms of the offering.
The Partnership has historically shared office space and administrative and
certain operations personnel with other cable television companies affiliated
with the General Partners. Expenses are allocated directly when they are
clearly attributable to a specific party. The remaining expenses are allocated
pro rata based on the respective number of subscribers of each party.
Management believes that this allocation method and the resulting expenses are
reasonable. Such allocated expenses for personnel and other expenses for the
nine months ended September 30, 1994 and the year ended December 31, 1993 were
$340,919 and $763,750, respectively. In the nine months ended September 30,
1994, such allocated expenses decreased due to an affiliate switching the
management of operations to its Austin office. For the year ended December 31,
1995 and the three months ended December 31, 1994, such allocated expenses were
$48,890 and $88,740, respectively.
The Partnership uses related entities to provide installation services,
technicians and a construction labor force and air travel services. Such
capitalized expenditures related to technicians and construction labor for the
year ended December 31, 1993 were $15,526. There were no capitalized
expenditures for installation services, technicians or construction labor force
to related entities for the year ended December 31, 1995, the nine months ended
September 30, 1994, and the three months ended December 31, 1994. Travel
expenses to related entities for the nine months ended September 30, 1994 and
the year ended December 31, 1993 were $92,558 and $185,212, respectively. For
the year ended December 31, 1995 and the three months ended December 31, 1994,
such travel expenses were $9,691 and $40,061, respectively. The Partnership
also leases certain office space and equipment from related entities. Such
lease expense for the nine months ended September 30, 1994 and the year ended
December 31, 1993 was $86,503 and $117,716, respectively. For the year ended
December 31, 1995 and the three months ended December 31, 1994, the lease
expense was $26,400 and $29,723, respectively.
7. INCOME TAXES
No federal income taxes are reflected in the financial statements of the
Partnership. The Partners and General Partners of the Partnership must report
their allocable shares of the profits and losses of the Partnership in their
individual income tax returns. At December 31, 1994, the net tax basis was
greater than the reported amounts of the Partnership's assets and liabilities
by approximately $737,000.
Although a partnership is not generally subject to state income tax, the
Partnership files combined income tax returns and pays combined taxes in those
states that permit such filings on behalf of nonresident Unitholders with
respect to their share of Partnership items. Such filings occur where the
Partnership owned and operated cable television systems during the applicable
year, and in Missouri, where the Partnership's home office is located. During
1995, Galaxy paid expenses of approximately $360,000 to cover such state income
tax obligations for fiscal year 1994.
<PAGE> 38
8. DISTRIBUTIONS TO PARTNERS
The Managing General Partner of the Partnership approved distributions to
partners made during 1994 and 1995 as follows:
Record Date Partners
-------------------- --------------------
October 12, 1994 $23,129,273
December 19, 1994 4,327,273
--------------------
$27,456,546
====================
January 5, 1995 $11,250,909
April 24, 1995 2,163,636
--------------------
$13,414,545
====================
No distributions to partners were declared for the year ended December 31,
1993. The distributions shown for 1994 and 1995 were made from the proceeds of
the Texas-Louisiana Sale, the Austin Sale, the Kentucky Sale and the Cameron
Sale. The number of Units outstanding were 2,142,000 as of December 31, 1995
and 1994.
* * * *
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
<PAGE> 39
PART III
Item 10. Directors and Executive Officers of the Registrant
The General Partners of the Partnership are Galaxy Cablevision Management,
L.P. and Tommy L. Gleason, Jr. The General Partners have designated Galaxy
Cablevision Management, L.P. as the Managing General Partner, in which capacity
it has responsibility for the operations of the Partnership. The Unitholders
do not have the right to participate in the management of Galaxy.
The Managing General Partner
Galaxy Cablevision Management, L.P., a Delaware limited partnership, was
formed in January 1987 for the purpose of being a general partner in the
Partnership. The general partner of Galaxy Cablevision Management, L.P. is
Galaxy Cablevision Management, Inc., a Delaware corporation, which was formed
in December 1986 for the purpose of being a general partner in Galaxy
Cablevision Management, L.P. Galaxy Cablevision Management, Inc. has
responsibility for the management and operation of the Managing General
Partner. The voting securities of Galaxy Cablevision Management, Inc. are
owned 20% by Tommy L. Gleason, Jr., the Individual General Partner, and 80% by
James M. Gleason, his brother. The sole limited partner of Galaxy Cablevision
Management, L.P. is EDJ Ventures, Ltd. EDJ Ventures, Ltd. is a Missouri
limited partnership formed in May 1983, the general partner of which is
Conestoga Securities, Inc., a Missouri corporation wholly owned by The Jones
Financial Companies, a Limited Partnership. The sole limited partner of the
Partnership is Galaxy ALP, Inc., a Delaware corporation formed for the sole
purpose of assigning Units representing beneficial interests in the limited
partnership interests to the Unitholders.
Pursuant to an agreement among EDJ Ventures, Ltd. and Galaxy Cablevision
Management, Inc. and its shareholders, Galaxy Cablevision Management, Inc. must
obtain EDJ Ventures, Ltd.'s approval of the two additional outside directors
which Galaxy Cablevision Management, Inc. has undertaken to nominate to its
Board of Directors, and thereafter to obtain its approval of nominees to three
of the five director positions.
Set forth below is certain information concerning the directors and
officers of Galaxy Cablevision Management, Inc., the general partner of the
Managing General Partner.
Positions Held with
Name Age Galaxy Cablevision Management, Inc.
- - - ------------------------------ --- ------------------------------------------
Tommy L. Gleason 74 Chief Executive Officer, Secretary and
Chairman of the Board
Tommy L. Gleason, Jr. 50 President and Director
Ronald L. Voss 52 Vice President - Corporate Development
J. Keith Davidson 40 Chief Financial Officer and Assistant
Secretary
James M. Gleason 31 Director of Office Administration
<PAGE> 40
Positions Held with
Name Age Galaxy Cablevision Management, Inc.
- - - ------------------------------ --- ------------------------------------------
Daniel A. Burkhardt 47 Director
James W. Swenson 63 Director
William H. Straw 62 Director
Tommy L. Gleason. Mr. Gleason has served as Chief Executive Officer,
Secretary and Chairman of the Board of Galaxy Cablevision Management, Inc.
since its formation in 1986. He is also the Secretary of SEMO, Inc., an oil
and gas exploration company, and the Secretary of Central Nebraska
Broadcasting, a radio station operator. Mr. Gleason has been involved in the
cable television industry since 1961 and has been an FCC licensed engineer
since 1951. He is a past Director of the Mid-America Cable Television
Association and is a member of the Cable TV Pioneers. He owned and operated a
local radio station in Nebraska from 1953 to 1980, and built and operated other
similar radio stations. In the late 1950's, Mr. Gleason owned and operated a
local television station in Salina, Kansas and pioneered the establishment of
one of the first cable television systems in Nebraska in 1961. From 1961 to
1978, Mr. Gleason built, owned and eventually sold rural cable television
systems in Nebraska, Texas and Missouri. In 1978, he expanded his cable
television services to nine Missouri municipalities, including Sikeston,
Missouri, which system he sold that year. In 1979, Mr. Gleason formed Galaxy
Cablevision, Inc. (a cable television operation subsequently liquidated in
connection with the formation of the various existing affiliated partnerships
and corporate entities), and he and his son, Tommy L. Gleason, Jr., have since
franchised, built and operated more than 200 predominantly rural cable
television systems in the Galaxy family of companies and partnerships (the
"Galaxy Group"). Tommy L. Gleason is the father of Tommy L. Gleason, Jr. and
James M. Gleason.
Tommy L. Gleason, Jr. Tommy L. Gleason, Jr. has served as President and
director of Galaxy Cablevision Management, Inc. since its formation in 1986 and
is the Individual General Partner of the Partnership. He has served as
President and Chief Executive Officer of CableMaxx, Inc., President of SEMO,
Inc. an oil and gas production company, and President of Central Nebraska
Broadcasting, a radio station operator. Mr. Gleason serves as president of
Galaxy Telecom, Inc. ("GTI"), the managing general partner of Galaxy Telecom,
L.P., a recently formed rural cable television operator. He is also president
of Galaxy Systems Management, Inc. ("GSMI"), which manages system operations
for Galaxy Telecom, L.P. Since 1979 he has managed system operations and
engineering for other companies comprising the Galaxy Group. Mr. Gleason
became an FCC licensed engineer in 1964, and until 1971 was responsible as a
field engineer of the operation of 45 cable systems in 11 states for various
cable operators. From 1971 through 1978 he provided engineering and
construction services for various operators in the Midwest. Mr. Gleason served
as Secretary and Director of the National Cable Television Cooperative, Inc. in
1988 and 1989. He was inducted into the Cable TV Pioneers in 1989. He is
currently a director of GTI, GSMI, CableMaxx, Inc. and Capital Bancorporation,
Inc.. Mr. Gleason is an individual general partner of Community Investment
Partners, L.P. and Community Investment Partners II, L.P., venture capital
funds in St. Louis, Missouri. Mr. Gleason is the son of Tommy L. Gleason and
the brother of James M. Gleason.
Ronald L. Voss. Mr. Voss has served as the Vice President of Corporate
Development of Galaxy Cablevision Management, Inc. since its formation in 1986.
<PAGE> 41
Since joining the Galaxy Group in May 1981, he has served as Director of
Marketing. He is responsible for initiating acquisitions and dispositions, and
is involved in the franchising and licensing process. Mr. Voss is Vice
President of Corporate Development for both GTI and GSMI, and he serves as a
director of CableMaxx, Inc.
J. Keith Davidson. Mr. Davidson has served as the Chief Financial Officer
and Assistant Secretary of Galaxy Cablevision Management, Inc. since its
formation in 1986. He received a Bachelor of Science in Business
Administration from Southeast Missouri State University and he has served as
Chief Financial Officer of the Galaxy Group since April 1981. In addition, Mr.
Davidson is Chief Financial Officer and a director of both GTI and GSMI.
James M. Gleason. Mr. Gleason joined Galaxy Cablevision Management, Inc.
as Director of Administrative Operations in June 1987. Mr. Gleason served as
the Chairman of the Board of the National Cable Television Cooperative for
1992. He received a Bachelor of Science in Business Administration from
Southeast Missouri State University. Mr. Gleason is the son of Tommy L.
Gleason and the brother of Tommy L. Gleason, Jr.
Daniel A. Burkhardt. Mr. Burkhardt has served as a director of Galaxy
Cablevision Management, Inc. since its formation in 1986. He is a general
partner of The Jones Financial Companies, a limited partnership and the parent
company of Edward D. Jones & Co., where he has specialized in investment
banking since 1980. He is also a director of the following companies: Essex
County Gas Company; Mid America Realty Investments Inc.; St. Joseph Light &
Power Company; Community Investment Partners, L.P., Community Investment
Partners II, L.P. and Southeastern Michigan Gas Enterprises.
James W. Swenson. Mr. Swenson has served as a director of Galaxy
Cablevision Management, Inc. since January 1989. He served as President and
Chief Executive Officer of Louisiana General Services, Inc. from November 1982
to December 1990. Louisiana General Services, Inc. was the parent company of
various energy-related subsidiaries, the largest being Louisiana Gas Service
Company, for which Mr. Swenson served as Chief Executive Officer and director
from December 1990 until August 1991. He is a past director of WYES-TV 12 of
New Orleans, Louisiana, and he is currently a director of Impro Products, Inc.
of Waukon, Iowa.
William H. Straw. Mr. Straw has served as a director of Galaxy Cablevision
Management, Inc. since 1988. From February 1988 until December 1989, he served
as a visiting Professor of Finance at Drake University in Des Moines, Iowa. He
was Vice President of Finance for Meredith Corp. from August 1972 until
February 1988, when he retired. From 1984 until 1990, he served as a director
of American Federal Savings & Loan, Des Moines, Iowa.
The directors of Galaxy Cablevision Management, Inc. are elected at each
annual meeting of the shareholders and serve until their successors have been
elected and qualified. The officers serve at the discretion of the Board of
Directors.
Section 16(a) of the Securities Exchange Act of 1934 requires the officers
and directors of the general partner of the Managing General Partner, and
persons who own more than ten percent of the Partnership's Units, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission and with any applicable national securities exchange. Such
officers, directors and greater than ten percent Unitholders are required by
<PAGE> 42
SEC regulations to furnish the Partnership with copies of all Section 16(a)
forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 4 or 5
were required for those persons, the Partnership believes that, with respect to
fiscal year 1995, all filing requirements applicable to the officers and
directors of the general partner of the Managing general partner, and greater
than ten percent beneficial Unitholders were complied with.
The Individual General Partner
The Individual General Partner of Galaxy is Tommy L. Gleason, Jr. Mr.
Gleason's experience is described more fully above. Mr. Gleason may withdraw
as an Individual General Partner of Galaxy upon 90-days' written notice to the
Unitholders, but only if Galaxy has received an opinion of counsel that such
withdrawal will not affect the classification of Galaxy as a partnership for
federal income tax purposes and certain other conditions are met.
Item 11. Executive Compensation
The Partnership pays certain fees and other compensation to the General
Partners, their affiliates and others. The compensation of the General
Partners and their affiliates has been determined by the General Partners
without arm's-length negotiations with the Partnership. The Managing General
Partner believes, however, that the various fees that have been received by it
and its affiliates are no less favorable than those which would have been
charged by non-affiliates. See Item 13 - "Certain Relationships and Related
Transactions" below.
Brokerage Fee
No brokerage fees were paid to the Managing General Partner in 1995.
Management Fee of the Managing General Partner
Pursuant to a management agreement, the Managing General Partner receives a
management fee of 4-1/2% of the gross revenues of Galaxy (not including
revenues from the sale of any cable television system of Galaxy) for its
services in managing Galaxy's operations. Such fee is computed and payable on
a monthly basis. In certain circumstances which are now only remotely
possible, the Managing General Partner would receive an additional 1% of such
gross revenues, payable annually. The management fee paid to the Managing
General Partner for fiscal year 1995 was approximately $14,000.
Prior to dissolution and winding up of the Partnership, the functions that
the Managing General Partner performed for its management fee included
operation and control of physical assets such as vehicles, antennas,
amplifiers, towers, cable and test instruments, billing and receiving payments
from subscribers, supervision of expansion and construction activities,
obtaining and renewing pole attachment agreements and agreements with utility
companies, development of marketing programs for new subscribers,
administration of franchise agreements, data computations for FCC reports,
Copyright Office filings, supervision of employees, administration of state and
<PAGE> 43
federal employee FICA and unemployment requirements, administration of employee
timekeeping requirements, annual employee reviews and related wage matters,
development and maintenance of hiring and termination policies, liaison
functions and price negotiations with suppliers, the generation of purchase
orders and follow-up through receipt of materials and payment approval,
completion of field employment forms, generation, implementation and management
of standard operating procedures, leases, contracts and easements, maintenance
of compliance procedures with respect to safety requirements under the Federal
OSHA Program, final engineering approval of selected vendor products,
day-to-day bookkeeping, accounting, recordkeeping and financial reports, and
banking relationships. The management fee was terminated on March 31, 1995.
Reimbursement of Certain Expenses of the Managing General Partner
In addition to the management fee, the Managing General Partner is entitled
to reimbursement on a monthly basis from the Partnership for its direct and
indirect expenses allocable to the operation of the Partnership, which
includes, but is not limited to, reimbursement for expenses relating to the
performance of the management functions described above, including home office
and office equipment rental, supplies, telephone, travel, copying charges and
compensation of any full or part-time employees (other than the salaries of
officers and fees of the directors of the general partner of the Managing
General Partner). All of these direct and indirect expenses are allocated to
the entities managed by the Gleasons. Although there is no limit on the amount
of reimbursement which the Managing General Partner may receive, the allocation
of expenses to Galaxy is made on a proportionate basis by the Managing General
Partner and is subject to its fiduciary duty to the Unitholders to make a fair
and reasonable allocation. Expenses are allocated directly when they are
clearly attributable to a specific party. The remaining expenses were
allocated pro rata based on the respective number of subscribers of each
entity. Such allocated expenses for personnel and other expenses for the year
ended December 31, 1995 were $48,890. See Note 6 to financials.
Participation in Distributions and Allocation of Gain
The General Partners collectively receive, as General Partners, 1% of all
distributions of cash flow from operations of Galaxy. The General Partners
received, as General Partners, no distributions from the Partnership in 1995.
The General Partners collectively will receive 40% of distributions other
than from operations after the Unitholders have received from distributions
other than from operations an amount equal to the capital contributions with
respect to the Units, and from all cash distributions the 10% preferred return,
subject, in the case of liquidating distributions, to certain adjustments
required to cause distributions to be allocated in accordance with capital
account balances. The Managing General Partner does not expect that the
aforementioned 40% allocation will apply. Pursuant to the agreement of limited
partnership of the Managing General Partner, EDJ Ventures, Ltd., the limited
partner of the Managing General Partner will receive 20% of the distributions
other than from operations made to the Managing General Partner. The remainder
will be distributed to Galaxy Cablevision Management, Inc. The allocation of
gain on the sale or refinancing of a cable television system will generally be
made in the same manner as proceeds from any such sale or refinancing are
distributed.
<PAGE> 44
In March 1987, Galaxy Cablevision Management, Inc. purchased 50,000 Units
for cash at the same price as Units were initially offered to the public ($20
per Unit).
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table reflects the ownership of Galaxy's Units as of
March 20, 1996, by: (i) beneficial owners of more than five percent of the
outstanding Units; (ii) the General Partners; (iii) the named executive
officers and directors of the general partner of the Managing General Partner,
individually; and (iv) the executive officers and directors of the general
partner of the Managing General Partner, as a group. The address of all
holders listed is 1220 North Main, Sikeston, Missouri 63801.
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership (1) Percent
- - - -------------------------------------------- ------------------------ -------
Beneficial Owners of more than 5% of the
outstanding Units
Group consisting of:
Tommy L. Gleason
Mary E. Gleason
Tommy L. Gleason, Jr.
Carol A. Gleason
James M. Gleason
Galaxy Cablevision Management, Inc. 211,850 (2) 9.89%
General Partners
Galaxy Cablevision Management, L.P. 50,000 (3) 2.33%
Tommy L. Gleason, Jr. 211,850 (2) 9.89%
Directors and Named Executive Officers
Tommy L. Gleason 211,850 (2) 9.89%
Tommy L. Gleason, Jr. 211,850 (2) 9.89%
Ronald L. Voss 2,950 (4)
J. Keith Davidson 9,000 (4)
James M. Gleason 211,850 (2) 9.89%
Daniel A. Burkhardt 2,150 (4)
James W. Swenson 3,000 (4)
William H. Straw ___ ___
Executive officers and directors of
Galaxy Cablevision Management, Inc.
as a group (8 persons) 228,950 (5) 10.69%
- - - ---------------
(1) Unless otherwise noted, all persons indicated have full voting and
investment power with respect to the Unit ownership described.
(2) Based upon Amendment No. 5 to Schedule 13D filed March 29, 1995 with the
Securities and Exchange Commission by Tommy L. Gleason, Mary E. Gleason,
Tommy L. Gleason, Jr., Carol A. Gleason, James M. Gleason and Galaxy
Cablevision Management, Inc. and upon other information available to the
Partnership, Tommy L. Gleason, Mary E. Gleason, Tommy L. Gleason, Jr.,
Carol A. Gleason, James M. Gleason and Galaxy Cablevision Management, Inc.
<PAGE> 45
each beneficially own 211,850 Units (consisting of 92,450 units held
jointly by Tommy Gleason, Sr. and Mary E. Gleason, 63,150 Units held
jointly by Tommy Gleason, Jr. and Carol A. Gleason, 6,250 Units held by
James M. Gleason, and 50,000 Units held by Galaxy Cablevision Management,
Inc.), which amount represents 9.89% of the Units currently outstanding.
Galaxy Cablevision Management, Inc. beneficially owns 50,000 Units, which
amount represents 2.33% of the Units currently outstanding.
Tommy L. Gleason has sole power to vote or direct the vote as to 0
Units, shared power to vote or direct the vote as to 92,450 Units (all of
which are held by him jointly with Mary E. Gleason), sole power to dispose
or direct the disposition of 0 Units and shared power to dispose or direct
the disposition of 92,450 Units (all of which are held by him jointly with
Mary E. Gleason).
Mary E. Gleason has sole power to vote or direct the vote as to 0
Units, shared power to vote or direct the vote as to 92,450 Units (all of
which are held by her jointly with Tommy L. Gleason) sole power to dispose
or direct the disposition of 0 Units, and shared power to dispose or direct
the disposition of 92,450 Units (all of which are held by her jointly with
Tommy L. Gleason).
Tommy L. Gleason, Jr. has sole power to vote or direct the vote as to
0 Units, shared power to vote or direct the vote as to 113,150 Units
(consisting of 63,150 Units held by him jointly with Carol A. Gleason and
50,000 Units held by Galaxy Cablevision Management, Inc., of which Tommy L.
Gleason, Jr. is a director, officer and 20% stockholder), sole power to
dispose or direct the disposition of 0 Units, and shared power to dispose
or direct the disposition of 113,150 Units (consisting of 63,150 Units held
by him jointly with Carol A. Gleason and 50,000 Units held by Galaxy
Cablevision Management, Inc., of which Tommy L. Gleason, Jr. is a director,
officer and 20% stockholder).
Carol A. Gleason has sole power to vote or direct the vote as to 0
Units, shared power to vote or direct the vote as to 63,150 Units (all of
which are held by her jointly with Tommy L. Gleason, Jr.), sole power to
dispose or direct the disposition of 0 Units, and shared power to dispose
or direct the disposition of 63,150 Units (all of which are held by her
jointly with Tommy L. Gleason, Jr.).
James M. Gleason has sole power to vote or direct the vote as to 6,250
Units, shared power to vote or direct the vote as to 50,000 Units (all of
which are held by Galaxy Cablevision Management, Inc., of which James M.
Gleason is an officer and 80% stockholder), sole power to dispose or direct
the disposition of 6,250 Units, and shared power to dispose or direct the
disposition of 50,000 Units (all of which are held by Galaxy Cablevision
Management, Inc., of which James M. Gleason is an officer and 80%
stockholder).
Mary E. Gleason is the spouse of Tommy L. Gleason. Tommy L. Gleason,
Jr. and James M. Gleason are sons of Tommy L. Gleason and Mary E. Gleason.
Carol A. Gleason is the spouse of Tommy L. Gleason, Jr. Tommy L. Gleason,
Jr. and James M. Gleason are the sole stockholders of Galaxy Cablevision
Management, Inc. Tommy L. Gleason, Jr. is a general partner of Galaxy
Cablevision, L.P. Galaxy Cablevision Management, Inc. is the general
partner of Galaxy Cablevision Management, L.P., which is the managing
general partner of Galaxy Cablevision, L.P.
<PAGE> 46
(3) Includes all Units held in the name of Galaxy Cablevision Management, Inc.,
the general partner of Galaxy Cablevision Management, L.P.
(4) Less than 1%.
(5) Tommy L. Gleason, Jr. is a stockholder, director and officer of Galaxy
Cablevision Management, Inc., and James M. Gleason is a stockholder and
officer of such corporation. This entry includes, but is not limited to,
Units beneficially owned by both of them through their interest in Galaxy
Cablevision Management, Inc., and includes all of the Units that appear in
the entry associated with footnote 2 above (without duplication).
Item 13. Certain Relationships and Related Transactions
Compensation of General Partner of the Managing General Partner for Cable
Television Acquisitions and Sales
The Partnership has from time to time engaged Galaxy Cablevision
Management, Inc., the general partner of the Managing General Partner, to
perform brokerage services for the Partnership. The brokerage agreement (the
"Brokerage Agreement") provides that commissions paid for such brokerage
activity by the Partnership to Galaxy Cablevision Management, Inc. and any
other broker who may be involved in any particular acquisition or sale of a
cable television system on behalf of the Partnership will equal 5% on the first
$1 million of the purchase price or sales price of any cable system, 4% on the
second $1 million, 3% on the third $1 million, 2% on the fourth $1 million and
1% on the remaining sale or purchase price which exceeds $4 million. However,
under the Brokerage Agreement, Galaxy Cablevision Management, Inc. is not paid
such fees to the extent the Partnership is required to pay brokerage fees to a
third party. No brokerage fees were paid to Galaxy Cablevision Management,
Inc. in 1994 in respect of the Texas-Louisiana Sale, the Austin Sale or the
Kentucky Sale, for which Waller Capital Corporation, an investment banking firm
retained by the Partnership to assist in such sales, received brokerage fees of
$783,625 in 1994. In 1995, payments to Waller Capital Corporation in
connection with the Cameron sale totaled $33,550.
In addition, Galaxy Cablevision Management, Inc. did not receive any
brokerage fees in connection with the sale on March 31, 1995 of the
Partnership's Cameron Systems through Waller. See Item 1 - "Business -- Sales
of Cable Systems" above.
Tommy L. Gleason, Jr. and James M. Gleason are the sole shareholders of
Galaxy Cablevision Management, Inc.
Compensation of Other Affiliated Companies for Services, Equipment and Rent
Prior to March 31, 1995, the Managing General Partner contracted with
certain other of its affiliates for the provision of various goods and services
(including technicians and construction labor from Greater Vision, Inc., which
is owned by David Christy, son-in-law of Tommy Gleason and brother-in-law of
Tommy L. Gleason, Jr. and James M. Gleason, and air travel services from Galaxy
Air Services, Inc., which is owned by Tommy L. Gleason and Tommy L. Gleason,
Jr.) to Galaxy, the granting of rights to transmit signals on Partnership
systems, the purchase or lease of television or other signals or specialized
equipment from such affiliates, the sale of television or other signals to such
affiliates, the lease of channel space to such affiliates, merchandising and
<PAGE> 47
the provisions of credit arrangements from such affiliates and the licensing of
technology to Galaxy. All transactions with such affiliates were in writing
and on prices and terms at least as favorable as those prices and terms being
offered generally in the same marketplace by unrelated parties for goods and
services as nearly identical as possible in regard to quality, technical
advancement and availability.
During 1995, Galaxy and its related entities leased their principal
executive offices and equipment in Sikeston, Missouri from Galaxy Cablevision
Management, Inc. on a month-to-month basis. Galaxy's allocable share of the
rent in 1995 was approximately $26,400, the majority of which related to the
first quarter of 1995. In addition, Galaxy leased a warehouse in Wickliffe,
Kentucky from Tommy L. Gleason for $150 per month during 1994. Galaxy Air
Services, Inc. provided air travel to the Cameron, Texas region, where Galaxy
operated its cable television systems during the first quarter of 1995. During
1995, Galaxy paid approximately $9,691 for such services. The Managing General
Partner believes that such transactions with related entities are on terms at
least as favorable as those prices and terms being offered generally in the
same marketplace by unrelated entities for goods and services as nearly
identical as possible in regard to quality, technical advancement and
availability.
Sales of Assets to Management
On March 31, 1995, the Partnership completed the sale of the Cameron
Systems to Galaxy Telecom, L.P. in exchange for an aggregate purchase price of
$3,550,000 (or approximately $949 per basic subscriber), consisting of cash in
the amount of $3,350,000 (before proration of certain expenses), and a
promissory note in the amount of $200,000 executed by Galaxy Telecom, Inc., the
managing general partner of Galaxy Telecom, L.P. The Telecom Note is a balloon
note under which all principal and interest are due and payable in March 2004.
Interest is compounded annually and accrues at a rate of 9% through March 30,
2000, with increases of two percentage points per year up to 17% after March
30, 2003. Pursuant to a Put Agreement entered into in connection with the sale
of the Cameron Systems, Tommy L. Gleason and Tommy L. Gleason, Jr. have agreed
to purchase the Telecom Note from the Partnership upon the Partnership making
one or more distributions to Unitholders amounting in the aggregate to $1.00
per Unit or more, excluding any distribution from the proceeds of the Kentucky
Sale or the Cameron Sale. Principal and interest accrued on the Telecom Note
through December 31, 1995 totalled approximately $213,500.
On May 16, 1994, Galaxy entered into the Kentucky Purchase Agreement to
sell all of the Kentucky Systems to Galaxy Management, Inc. ("GMI"), a Delaware
corporation owned by Tommy L. Gleason and Tommy L. Gleason, Jr. (the
"Gleasons"), for a cash purchase price of $18,437,500. GMI was the high bidder
in a sealed bidding process conducted by Waller Capital Corporation and, as
required under the Partnership Agreement in the case of a sale of assets to a
General Partner of an affiliate of a General Partner, the Partnership received
a fairness opinion from the investment banking firm of William Blair & Company.
In addition, the Unitholders approved the sale at the Special Meeting of
Unitholders held on September 28, 1994. In November 1994, GMI assigned its
interest in the Kentucky Purchase Agreement to Galaxy Telecom, L.P., a Delaware
limited partnership in which the Gleasons and all other executive officers of
Galaxy Cablevision Management, Inc., general partner of the Managing General
Partner ("Executive Officers of Management"), have an indirect equity interest.
The managing general partner of Galaxy Telecom, L.P. is Galaxy Telecom, Inc.
Certain Executive Officers of Management serve as directors and/or officers for
<PAGE> 48
Galaxy Telecom, Inc. The other partner comprising Galaxy Telecom, L.P. is
Galaxy Telecom Investments, L.L.C. ("Telecom Investments"). The Executive
Officers of Management own an indirect interest in Telecom Investments and a
majority interest in a corporation which is a lender to Telecom Investments.
The sale of the Kentucky Systems closed on December 23, 1994.
At the Special Meeting of Unitholders held on September 28, 1994, the
Unitholders approved, in addition to each of the sales proposed by the Managing
General Partner, a proposal concerning the Partnership's future ability to sell
assets to a General Partner or an affiliate of a General Partner. Under the
then current terms of Galaxy's Partnership Agreement, as noted above, such
sales were permitted only when a fairness opinion was received from an
independent investment banking firm or cable television advisory company. The
proposal ("Proposal 4") sought to amend the Partnership Agreement so that, as
part of the liquidation and winding-up of the Partnership, a sale of any of the
remaining assets to a General Partner or an affiliate of a General Partner
could be accomplished without requiring Galaxy to engage an investment banking
firm to render a fairness opinion. Instead, such a sale could be accomplished
by obtaining approval by a majority of the directors of Galaxy Cablevision
Management, Inc. (the general partner of the Managing General Partner) who do
not have any direct or indirect interest in the sale. Proposal 4 was approved
by the holders of approximately 55% of all Units and became effective
immediately thereafter.
In connection with the sale of the Texas-Louisiana Systems, which closed on
September 30, 1994, the Partnership agreed to enter into a noncompete agreement
with the buyer of the systems, Friendship Cable of Texas, Inc. Friendship also
required, as a condition to closing, that Galaxy Cablevision Management, Inc.
enter into the noncompete agreement. As consideration for Galaxy Cablevision
Management, Inc. entering into the agreement, the Partnership agreed to convey
to it the computer equipment and office furniture utilized in Galaxy's
headquarters office in Sikeston, Missouri following the closing of the Austin
Sale and the Kentucky Sale, but reserved the right to continue to use the
assets without cost until its liquidation is complete. The Partnership
obtained appraisals from independent certified appraisers valuing the computer
equipment and office furniture at $54,000. Ownership of such assets was
transferred to Galaxy Cablevision Management, Inc. on December 27, 1994. The
transfer of such assets was approved unanimously by Messrs. Burkhardt, Straw
and Swenson, each of whom qualified as a disinterested director in the context
of such transfer.
On November 22, 1994, the sale of the Cameron Systems to Galaxy Telecom,
L.P. for a purchase price of $3,550,000 was approved by Messrs. Burkhardt,
Straw and Swenson, each of which qualified as disinterested directors in the
context of such sale. The purchase price of $3,550,000 was higher than two
earlier offers received by the Partnership, one from an independent third party
and one from Galaxy Management, Inc., an affiliate of the Company owned by
Tommy L. Gleason and Tommy L. Gleason, Jr. The Partnership entered into the
Cameron Purchase Agreement on December 23, 1994 and the sale closed on
March 31, 1995.
<PAGE> 49
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
A) Documents filed as a part of this report:
1. Financial Statements
Reference is made to the Table of Contents to Financial Statements and
Supplementary Data on page 23.
2. Financial Statement Schedules
None.
3. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description Reference
------- ------------------------------------------------- --------------------------------------
<C> <C> <C>
3(a) Certificate of Limited Partnership of Registrant, Incorporated by reference to
filed with the Secretary of State of Delaware on Exhibit 3(a) of Amendment No. 1 (filed
December 15, 1986. February 18, 1987) to Galaxy's
Registration Statement on Form S-1
(filed January 16, 1987), Commission
File No. 33-11388.
3(b) Amended and Restated Certificate of Limited Incorporated by reference to
Partnership of Registrant, filed with the Exhibit 3(b) of Amendment No. 1 (filed
Secretary of State of Delaware on January 16, February 18, 1987) to Galaxy's
1987. Registration Statement on Form S-1
(filed January 16, 1987), Commission
File No. 33-11388.
3(c) Amended and Restated Agreement of Limited Incorporated by reference to
Partnership of Registrant, dated February 1, Exhibit 3(c) of Amendment No. 1 (filed
1987. February 18, 1987) to Galaxy's
Registration Statement on Form S-1
(filed January 16, 1987), Commission
File No. 33-11388.
4(a) Form of Unit Certificate Incorporated by reference to Exhibit 4
of Amendment No. 1 (filed February 18,
1987) to Galaxy's Registration
Statement on Form S-1 (filed
January 16, 1987), Commission File
No. 33-11388.
10(a)* Management Agreement between the Registrant and Incorporated by reference to
Galaxy Cablevision Management, L.P., dated Exhibit 10(a) of Amendment No. 2
March 11, 1987. (filed March 12, 1987) to Galaxy's
Registration Statement on Form S-1
(filed January 16, 1987), Commission
File No. 33-11388.
<PAGE> 50
<CAPTION>
Exhibit
Number Description Reference
------- ------------------------------------------------- --------------------------------------
<C> <C> <C>
10(b)* Brokerage Contract between the Registrant and Incorporated by reference to
Galaxy Cablevision Management, Inc., dated Exhibit 10(b) of Amendment No. 2
March 11, 1987. (filed March 12, 1987) to Galaxy's
Registration Statement on Form S-1
(filed January 16, 1987), Commission
File No. 33-11388.
10(c)* Office Lease between the Registrant and Galaxy Incorporated by reference to
Cablevision Management, Inc. regarding offices at Exhibit 10(d) of Galaxy's 1990 Annual
1220 North Main, Sikeston, Missouri. Report on Form 10-K, filed on April 1,
1991.
10(d)* Construction Contract between the Registrant and Incorporated by reference to
Greater Visions, Inc. Exhibit 10(f) of Galaxy's 1990 Annual
Report on Form 10-K, filed on April 1,
1991.
10(e)* Air Flight Agreement between the Registrant and Incorporated by reference to
Galaxy Air Services, Inc. Exhibit 10(g) of Galaxy's 1990 Annual
Report on Form 10-K, filed on April 1,
1991.
10(f) Asset Purchase Agreement relating to the Cameron Incorporated by reference to
Systems, between the Registrant, Galaxy Telecom, Exhibit 10(h) of Galaxy's 1994 Annual
L.P. and Galaxy Telecom, Inc., dated December 23, Report on Form 10-K, filed on
1994 March 31, 1995.
10(g) Limited Liability Company Agreement of Charter Incorporated by reference to
Wireless Cable Holdings, L.L.C., dated Exhibit 10(i) of Galaxy's 1994 Annual
December 18, 1992 Report on Form 10-K, filed on
March 31, 1995.
10(h) Promissory Note for $1,500,000 from Harron Incorporated by reference to
Cablevision of Texas, Inc. to the order of Exhibit 10(i) of Galaxy's 1994 Annual
Galaxy Cablevision, L.P., dated June 27, 1991 Report on Form 10-K, filed on
March 31, 1995.
10(i) Promissory Note for $200,000 from Galaxy Telecom, Filed herewith.
Inc. to the order of Galaxy Cablevision, L.P.,
dated March 31, 1995.
27 Financial Data Schedule Provided for the information of the
Securities and Exchange Commission
only.
<FN>
* Represents management contract or compensatory plan or arrangement to be filed as an Exhibit pursuant
to Item 14(c) of Form 10-K.
</TABLE>
B) Reports on Form 8-K
The Partnership did not file any reports on Form 8-K during the fourth
quarter of 1995.
<PAGE> 51
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, thereunto duly authorized.
GALAXY CABLEVISION, L.P.
BY: GALAXY CABLEVISION MANAGEMENT, L.P.,
as Managing General Partner
BY: GALAXY CABLEVISION MANAGEMENT, INC.,
as General Partner
By: /S/ TOMMY L. GLEASON, JR.
-----------------------------------------
Tommy L. Gleason, Jr.
President
Galaxy Cablevision Management, Inc.
(Principal Executive Officer)
By: /S/ J. KEITH DAVIDSON
-----------------------------------------
J. Keith Davidson
Chief Financial Officer
Galaxy Cablevision Management, Inc.
(Principal Financial Officer and
Principal Accounting Officer)
Date: March 29, 1996
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 and on the dates indicated.
Signature Title Date
- - - ------------------------------ ------------------------------ ---------------
Chief Executive Officer, 3/__/96
- - - ------------------------------ Secretary and
Tommy L. Gleason Chairman of the Board
Galaxy Cablevision Management,
Inc.
/S/ TOMMY L. GLEASON, JR. President and Director 3/29/96
- - - ------------------------------ Galaxy Cablevision Management,
Tommy L. Gleason, Jr. Inc.
/S/ DANIEL A. BURKHARDT Director 3/29/96
- - - ------------------------------ Galaxy Cablevision Management,
Daniel A. Burkhardt Inc.
/S/ JAMES W. SWENSON Director 3/29/96
- - - ------------------------------ Galaxy Cablevision Management,
James W. Swenson Inc. Inc.
/S/ WILLIAM H. STRAW Director
- - - ------------------------------ Galaxy Cablevision Management, 3/29/96
William H. Straw Inc.
<PAGE> 52
EXHIBIT INDEX
Exhibit
Number Description
- - - ------- ----------------------------------------------------------------------
3(a) Certificate of Limited Partnership of Registrant filed with the
Secretary of State of Delaware on December 15, 1986.
3(b) Amended and Restated Certificate of Limited Partnership of Registrant,
filed with the Secretary of State of Delaware on January 16, 1987.
3(c) Amended and Restated Agreement of Limited Partnership of Registrant,
dated February 1, 1987.
4(a) Form of Unit Certificate
10(a) Management Agreement between the Registrant and Galaxy Cablevision
Management, L.P., dated March 11, 1987.
10(b) Brokerage Contract between the Registrant and Galaxy Cablevision
Management, Inc., dated March 11, 1987.
10(c) Office Lease between the Registrant and Galaxy Cablevision Management,
Inc. regarding offices at 1220 North Main, Sikeston, Missouri.
10(d) Construction Contract between the Registrant and Greater Visions, Inc.
10(e) Air Flight Agreement between the Registrant and Galaxy Air Services,
Inc.
10(f) Asset Purchase Agreement relating to the Cameron Systems, between the
Registrant, Galaxy Telecom, L.P. and Galaxy Telecom, Inc., dated
December 23, 1994.
10(g) Limited Liability Company Agreement of Charter Wireless Cable
Holdings, L.L.C., dated December 18, 1992.
10(h) Promissory Note for $1,500,000 from Harron Cablevision of Texas, Inc.
to the order of Galaxy Cablevision, L.P., dated June 27, 1991.
10(i) Promissory Note for $200,000 from Galaxy Telecom, Inc. to the order of
Galaxy Cablevision, L.P., dated March 31, 1995.
27 Financial Data Schedule (provided for the information of the
Securities and Exchange Commission only)
<PAGE> 1
EXHIBIT 10(i)
PROMISSORY NOTE
$200,000 Sikeston, Missouri
March 31, 1995
FOR VALUE RECEIVED the undersigned, GALAXY TELECOM, INC., a Delaware
corporation ("Maker"), hereby promises to pay to the order of Galaxy
Cablevision, L.P., a Delaware limited partnership, at 1220 N. Main Street,
Sikeston, MO 63801 (the "Payee"), or at such other address as the Payee shall
direct, the principal sum of Two Hundred Thousand Dollars ($200,000), together
with interest compounded annually at a rate of nine percent (9%) per annum from
the date hereof through March 30, 2000, eleven percent (11%) per annum from
March 31, 2000 through March 30, 2001, thirteen percent (13%) per annum from
March 31, 2001 through March 30, 2002, fifteen percent (15%) per annum from
March 31, 2002 through March 30, 2003 and seventeen percent (17%) per annum
thereafter, provided, however that following the due date hereunder, such
interest rate shall be eighteen percent (18%) per annum on the unpaid principal
and accrued interest. The amount of interest shall have been entered on this
Note. All interest hereunder shall accrue and shall be compounded annually
payable upon maturity as further set forth below.
So long as no default or Prepayment Event (as defined below) shall have
occurred hereunder and any amount due hereunder shall remain outstanding, the
entire principal amount hereof, together with all accrued but unpaid interest
shall be due and payable on March 31, 2004.
If any payment of principal or interest under this Note shall become due on
a Saturday, Sunday or a public holiday under the laws of the State of Missouri
shall be made on the next succeeding business day and such extension of time
shall be included in computing interest in connection with such payment.
This Note has been issued pursuant to the terms of an Asset Purchase
Agreement dated December 23, 1994, between Maker, Galaxy Telecom, L.P. (the
"Partnership") and Payee (the "Agreement"), and all of the terms, covenants and
conditions of the Agreement are hereby made a part of this Note and are deemed
incorporated herein in full. This Note is assignable only by Payee and only on
the following terms: Payee may assign this Note to an affiliate of Payee.
Within 120 days after the end of each fiscal year of the Partnership and
Maker, Maker shall cause to be transmitted to Payee: (a) a report containing
the following financial statements of the Partnership audited and certified by
the Partnership's accountants: (1) balance sheets of the Partnership;
(2) statements of income of the Partnership showing its results of operations
during such year; and (3) statements of source and application of funds of the
Partnership during such year; and (b) a report continuing the following
unaudited financial statements of Maker: (1) balance sheets of Maker; and
(2) statements of income of Maker showing its results of operations during such
year.
Maker shall be in default under this Note upon the happening of any of the
following events of default:
(a) default in payment of the interest or principal on this Note when due;
<PAGE> 2
(b) failure by Maker or the Partnership, which failure is not cured within
thirty (30) days from the date of receipt of notice by the Maker or the
Partnership of such failure, to comply with any other covenant, condition or
agreement in this Note;
(c) Maker or the Partnership shall become the subject of a voluntary or
involuntary state or federal bankruptcy, insolvency or similar proceeding or
case; or
(d) Maker shall cease to own an interest in the Partnership.
Upon the occurrence of any of the events of default mentioned above and at
any time thereafter as long as any such default is continuing, Payee may, by
notice to the Maker, declare the outstanding principal amount of this Note,
together with all accrued but unpaid interest thereon, immediately due and
payable and the same shall thereupon become immediately due and payable.
Upon the occurrence of any of the following events (each of which shall be
a "Prepayment Event"), the entire principal amount of this Note, together with
all accrued but unpaid interest thereon shall be immediately due and payable:
(a) the Partnership shall be merged into a Nonaffiliated entity, or the
Partnership shall sell or transfer substantially all of its assets to a
Nonaffiliated third party. (For purposes of this Section, the term
"Nonaffiliated" means any person or entity that is not controlled or managed by
the Partnership, investment funds controlled by TA Associates, Spectrum Equity
Investors, L.P., or Fleet Equity Partners or a member of the Gleason family);
(b) Maker shall (i) prepay all or a portion of interest and principal
under a Promissory Note dated as of December 23, 1994 from Maker to Vista
Communications Limited Partnership III, without a corresponding pro rata
prepayment under this Note; or (ii) amend such note to accelerate the payment
of principal or interest thereunder without a similar amendment to this note;
(c) Any distribution (other than distributions made pursuant to
Section 5.5(b) of the Limited Partnership Agreement of Galaxy Telecom, L.P.
(the "Partnership Agreement")) is made by the Partnership to a partner of the
Partnership which is not utilized to satisfy, on a pro rata basis and through
payment to Vantage Cable Associates, L.P. ("Vantage") or Maker, obligations
(1) under this Note, (2) under a similar note between Maker and Vista
Communications Limited Partnership III ("Vista") in the face amount of $416,000
and (3) associated with Vantage's $6,384,000 limited partnership equity
interest in the Partnership, all as further set forth in the Partnership
Agreement (each a "Take-Back Interest" and collectively the "Take-Back
Interests");
(d) Within ten business days after receipt thereof, Maker fails to pay to
Payee the full amount of any Take-Back Interest to which the Payee is entitled
pursuant to Section 5.5(a) of the Partnership Agreement.
Maker shall have the right at any time to prepay all, or any part of, the
outstanding principal amount of this Note without prepayment premium or penalty
of any kind.
Maker waives demand, presentment, protest or notice of any kind in
connection with this Note, and the holder hereof may extend the time for
payment, accept partial payment, take security therefor, or exchange or release
any collateral, without discharging or releasing Maker.
<PAGE> 3
The construction, validity and enforceability of this Note shall be
governed by, construed and enforced in accordance with the internal laws of the
State of Missouri.
In addition to all other amounts payable hereunder, Maker agrees to pay all
reasonable attorneys fees and expenses incurred by Payee in enforcing its
rights hereunder, including without limitation in connection with any legal
proceedings or bankruptcy proceedings.
IN WITNESS WHEREOF, Maker has caused this Note to be executed in its name
by its duly authorized officers on the date and year first above written.
ATTEST: GALAXY TELECOM, INC.
/s/ J. Keith Davidson By: /s/ Tommy L. Gleason, Jr.
- - - ----------------------------------- -------------------------------------
Secretary Tommy L. Gleason, Jr., President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1995 FOR GALAXY CABLEVISION, L.P. AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-K.
</LEGEND>
<CIK> 0000809608
<NAME> GALAXY CABLEVISION, L.P.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,537,041
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 787,092
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,871,170
<CURRENT-LIABILITIES> 653,286
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 7,217,884
<TOTAL-LIABILITY-AND-EQUITY> 7,871,170
<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
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
