<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM 10-Q
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transaction period from ________________ to _________________________
Commission File Number 33-17174
CENCOM CABLE INCOME PARTNERS II, L.P.
(Exact name of registrant as specified in its charter)
Delaware 43-1456575
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
12444 Powerscourt Drive #400
St. Louis, Missouri 63131
- --------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(Registrant's telephone number, including area code) (314) 965-0555
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
---- ----
<PAGE> 2
CENCOM CABLE INCOME PARTNERS II, L.P.
FORM 10-Q - FOR THE QUARTER ENDED JUNE 30, 1996
INDEX
<TABLE>
<CAPTION>
Page
----
Part I. Financial Information
---------------------
<S> <C> <C>
Item 1. Financial Statements
a. Balance Sheets -June 30, 1996 and December 31, 1995 3
b. Statements of Operations - Three Months Ended
June 30, 1996 and 1995 4
c. Statements of Operations - Six Months Ended
June 30, 1996 and 1995 5
d. Statement of Partners' Capital (Deficit) - Six Months Ended
June 30, 1996 6
e. Statements of Cash Flows - Six Months Ended June 30, 1996 and 1995 7
f. Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Part II. Other Information
-----------------
Item 1. Legal Proceedings - None -
Item 2. Change in Securities - None -
Item 3. Defaults upon Senior Securities - None -
Item 4. Submission of Matters to a Vote of Security Holders - None -
Item 5. Other Information - None -
Item 6. Exhibits and Reports on Form 8-K - None -
Signature Page 15
</TABLE>
Page 2
<PAGE> 3
CENCOM CABLE INCOME PARTNERS II, L.P.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 761,940 $ 935,858
Accounts receivable, net 211,333 190,968
Prepaid expenses and other 249,430 149,923
----------- ------------
Total current assets 1,222,703 1,276,749
PROPERTY AND EQUIPMENT 20,979,780 22,572,631
FRANCHISE COSTS 858,451 1,110,880
----------- -----------
$23,060,934 $ 24,960,260
=========== ============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $38,900,000 $ 40,400,000
Accounts payable and accrued expenses 1,992,151 2,160,916
Payables to General Partner and affiliate 3,189,973 2,731,619
Subscriber deposits and prepayments 19,305 20,675
----------- ------------
Total current liabilities 44,101,429 45,313,210
----------- ------------
DEFERRED REVENUE 26,353 27,904
----------- ------------
PARTNERS' CAPITAL (DEFICIT):
General Partner (2,820,762) (2,813,902)
Limited Partners (250,000 units
authorized; 90,915 units issued and
outstanding) (17,786,919) (17,107,785)
Note receivable from General Partner (459,167) (459,167)
----------- ------------
Total Partners' capital (deficit) (21,066,848) (20,380,854)
----------- ------------
$23,060,934 $ 24,960,260
=========== ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
Page 3
<PAGE> 4
CENCOM CABLE INCOME PARTNERS II, L.P.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
SERVICE REVENUES $ 4,550,665 $ 4,326,714
----------- ------------
OPERATING EXPENSES:
Operating, general and administrative 2,565,284 2,495,536
Liquidation costs 200,000 --
Depreciation and amortization 1,470,726 1,842,926
----------- -----------
4,236,010 4,338,462
----------- -----------
Income (loss) from operations 314,655 (11,748)
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 14,706 --
Interest expense (768,292) (853,430)
Equity in loss of unconsolidated limited partnership -- --
----------- -----------
(753,586) (853,430)
------------ -----------
Net loss $ (438,931) $ (865,178)
=========== ===========
NET LOSS PER UNIT OF LIMITED PARTNERSHIP INTEREST $ (4.78) $ (9.42)
=========== ===========
AVERAGE NUMBER OF LIMITED PARTNERSHIP UNITS
OUTSTANDING 90,915 90,915
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
Page 4
<PAGE> 5
CENCOM CABLE INCOME PARTNERS II, L.P.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
SERVICE REVENUES $ 8,911,886 $ 8,458,852
----------- -----------
OPERATING EXPENSES:
Operating, general and administrative 5,086,562 4,802,021
Liquidation costs 209,198 --
Depreciation and amortization 2,852,503 3,877,720
----------- -----------
8,148,263 8,679,741
----------- -----------
Income (loss) from operations 763,623 (220,889)
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 22,091 22,517
Interest expense (1,471,708) (1,770,327)
Equity in loss of unconsolidated limited partnership -- --
----------- -----------
(1,449,617) (1,747,810)
----------- -----------
Net Loss $ (685,994) $(1,968,699)
=========== ===========
NET LOSS PER UNIT OF LIMITED PARTNERSHIP INTEREST $ (7.47) $ (21.44)
=========== ===========
AVERAGE NUMBER OF LIMITED PARTNERSHIP UNITS
OUTSTANDING 90,915 90,915
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements
Page 5
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CENCOM CABLE INCOME PARTNERS II, L.P.
STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Note
Receivable
From
General Limited General
Partner Partners Partner Total
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1995 $(2,813,902) $(17,107,785) $(459,167) $(20,380,854)
Net loss (6,860) (679,134) -- (685,994)
----------- ------------ --------- ------------
BALANCE, June 30, 1996 $(2,820,762) $(17,786,919) $(459,167) $(21,066,848)
=========== ============ ========= ============
</TABLE>
The accompanying notes are an integral part of this statement.
Page 6
<PAGE> 7
CENCOM CABLE INCOME PARTNERS II, L.P.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (685,994) $(1,968,699)
----------- -----------
Adjustments to reconcile net loss to net cash provided by operating activities-
Depreciation and amortization 2,852,503 3,877,720
Changes in assets and liabilities-
Accounts receivable, net (20,365) (15,657)
Prepaid expenses and other (99,507) 4,597
Accounts payable and accrued expenses (168,765) 58,064
Payables to General Partner and affiliate 458,354 545,025
Subscriber deposits and prepayments (1,370) 602
Deferred revenue (1,551) 26,358
----------- -----------
Net cash provided by operating activities 2,333,305 2,528,010
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment, net (1,007,223) (1,603,992)
----------- -----------
Net cash used in investing activities (1,007,223) (1,603,992)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on revolving line of credit (1,500,000) (1,900,000)
----------- -----------
Net cash used in financing activities (1,500,000) (1,900,000)
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (173,918) (975,982)
CASH AND CASH EQUIVALENTS, beginning of period 935,858 3,240,343
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 761,940 $ 2,264,361
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
Page 7
<PAGE> 8
CENCOM CABLE INCOME PARTNERS II, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION:
Cencom Cable Income Partners II, L.P., a Delaware limited partnership (the
"Partnership" or the "Registrant"), was formed on August 13, 1987, for the
purpose of acquiring and operating existing cable television systems. The
accompanying unaudited financial statements have been prepared in accordance
with the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted.
2. RESPONSIBILITY FOR INTERIM FINANCIAL STATEMENTS:
The financial statements as of June 30, 1996 and 1995, are unaudited; however,
in the opinion of management, such statements include all adjustments necessary
for a fair presentation of the results for the periods presented. The interim
financial statements should be read in conjunction with the financial
statements and notes thereto contained in the Registrant's Form 10-K for the
year ended December 31, 1995. Interim results are not necessarily indicative
of results for a full year.
3. INVESTMENT IN UNCONSOLIDATED LIMITED PARTNERSHIP:
The Registrant owns Limited Partnership units of Cencom Partners, L.P. ("CPLP")
which provide the Registrant an 84.03% ownership interest in CPLP. The
Registrant owns only limited partnership units and does not exercise
significant influence over CPLP's operations; therefore, its investment in CPLP
is accounted for using the equity method and losses in excess of its investment
in limited partnership are not recorded. As of June 30, 1996, the unrecorded
losses in excess of investment were $12,605,167.
Summary financial information for the operating results of CPLP, for the first
six months of 1996, which are not consolidated with the operating results of
the Registrant, are as follows:
<TABLE>
<S> <C>
Service revenues $ 6,726,575
=============
Loss from operations $ (681,874)
=============
Net loss $ (2,029,866)
=============
Total partners' capital (deficit) $(13,144,270)
=============
</TABLE>
4. LIQUIDATION:
The Partnership Agreement provides for the dissolution of the Partnership on or
before December 31, 1995. In accordance with the Partnership Agreement, the
General Partner began dissolution during 1995. Two independent appraisals were
received, resulting in an appraised value of $73,850,000 as of March 31, 1995
for the Partnership's cable systems (the "Systems") (excluding its investment
in CPLP). The General Partner retained a broker to market the Systems using an
auction process and has accepted bids with respect to the South Carolina
systems, and for the Cleveland, Jasper and Woodville systems, which constitute
a portion of the Texas systems, for an aggregate purchase price of $46,700,000,
with each bid being subject to execution of a final sale agreement. The bid
for the South Carolina systems was submitted by an affiliate of the General
Partner. In accordance with the Partnership Agreement, the sale of assets to
an affiliate of the General Partner is subject to an appraisal process,
requiring two independent appraisers to jointly determine the appraised value,
and must be approved by a majority of outstanding
Page 8
<PAGE> 9
Limited Partner units. The General Partner is preparing a disclosure statement
for distribution to the Limited Partners which will describe the various
transactions of the Partnership and CPLP and request consent for the proposed
sales to affiliates of the general partners of the Registrant and CPLP.
Bids submitted to date with respect to the Northeast Missouri systems and the
remainder of the Texas systems were considered to be too low relative to the
appraised fair market values of such systems established pursuant to the
appraisal process. Thus, these bids have not been accepted by the General
Partner. The General Partner will continue to seek potential purchasers for
these remaining systems.
Concurrent with the disposition of the Partnership's Systems, CPLP is disposing
of its assets through sale of its television cable systems. The asset sale is
being effected to satisfy the requirement by CPLP's senior bank lenders that
the credit facility be repaid in accordance with its terms. The CPLP asset
disposition was also commenced to facilitate the liquidation of the Partnership
which requires the liquidation of all of the Partnership's assets, including
its entire ownership interest in CPLP.
To dispose of the assets of CPLP, the general partner of CPLP obtained
appraisals as of March 31, 1995 from Daniels and Western, who jointly reached
a valuation of $60,900,000 for all of the CPLP systems. Thereafter, Daniels
was retained to market the CPLP systems using an auction process substantially
identical to that employed for the Partnership's Systems. As a result of the
auction process, CPLP's general partner has accepted bids submitted by
affiliates of the General Partner of the Registrant for CPLP's South Carolina
and North Carolina Systems for an aggregate price of $52,450,000, subject to
execution of final sale agreements. The bids submitted for CPLP's Texas
Systems were below the appraised fair market value and have not been accepted.
CPLP intends to continue to operate its Texas Systems until an acceptable bid
is received.
Following CPLP's proposed sales of some or all of its systems, it will use the
available sale proceeds to pay outstanding indebtedness and expenses (including
the payment of accrued and unpaid management fees to its General Partner and
repayment of its senior bank credit facility), with any remaining proceeds to
be distributed in accordance with the terms of CPLP's partnership agreement,
which will include distributions to the Partnership in its capacity as a
Limited Partner of CPLP. The amount, if any, of a distribution to the
Partnership of remaining proceeds from the sale of the CPLP systems cannot be
estimated at this time and the amount of proceeds which may be available for
distribution is entirely dependent on the ultimate purchase price of CPLP's La
Grange System.
Upon dissolution, the General Partner or other liquidating agent is required to
liquidate partnership assets and to distribute all available proceeds as soon
as practicable after their receipt by the Partnership. After payment of the
Partnership's liabilities, these sales proceeds will be distributed as set
forth in the Partnership Agreement.
Upon finalization of a complete plan of liquidation and the determination of
net proceeds from sales of Partnership assets, the Partnership will change its
basis of accounting from the going-concern basis to the liquidation basis.
Under the liquidation basis of accounting, assets are recorded at their
estimated realizable values and liabilities are recorded at their estimated
settlement amounts.
Page 9
<PAGE> 10
CENCOM CABLE INCOME PARTNERS II, L.P.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The following table sets forth the approximate number of subscribers of the
Partnership as of the dates indicated:
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1996 1995 1995
--------- ------------ ---------
<S> <C> <C> <C>
Basic Subscribers:
Texas systems 22,400 22,200 22,100
South Carolina systems 20,700 20,200 19,900
Northeast Missouri systems 2,100 2,100 2,100
--------- ------------ ---------
45,200 44,500 44,100
========= ============ =========
Premium Subscriptions:
Texas systems 7,900 8,400 7,900
South Carolina systems 10,900 11,100 11,000
Northeast Missouri systems 900 1,000 1,000
--------- ------------ ---------
19,700 20,500 19,900
========= ============ =========
</TABLE>
The following table sets forth certain items as a percentage of total revenues
for the periods indicated:
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30 Ended June 30
--------------------- -------------------
(Unaudited) (Unaudited)
1996 1995 1996 1995
---- ---- ---- -----
<S> <C> <C> <C> <C>
Service Revenues 100.0% 100.0% 100.0% 100.0%
====== ====== ====== =====
Operating Expenses:
Operating, General and Administrative 56.4 57.7 57.1 56.8
Liquidation Costs 4.4 -- 2.2 --
Depreciation and Amortization 32.3 42.6 32.1 45.8
------ ------ ------ ------
93.1 100.3 91.4 102.6
------ ------ ------ ------
Income (Loss) from Operations 6.9 (0.3) 8.6 (2.6)
------ ------ ------ ------
Other Income (Expense):
Interest Income 0.3 0.0 0.2 0.3
Interest Expense (16.9) (19.7) (16.5) (20.9)
Equity in loss of unconsolidated limited partnership -- -- -- --
------ ------ ------ ------
(16.6) (19.7) (16.3) (20.6)
------ ------ ------ ------
Net Loss (9.7)% (20.0)% (7.7)% (23.2)%
====== ====== ====== ======
</TABLE>
Page 10
<PAGE> 11
Service Revenues
The Partnership earns substantially all of its revenues from monthly
subscription fees for basic tier, expanded tier, premium channels, equipment
rental and ancillary services provided by its cable television systems.
Service revenues increased by 5.2% to $4,550,665 and 5.4% to $8,911,886,
respectively, for the three and six month periods ended June 30, 1996, when
compared to the similar periods of 1995. These increases in 1996 are primarily
due to an increase in subscribers for the basic tier of cable service offered
by the Systems.
Basic subscribers at June 30, 1996 increased by 2.5% over June 30, 1995. This
reflects management's marketing efforts to add new customers and retain
existing customers, as well as improved customer service. It also reflects an
industry-wide increase in cable subscribers as a result of increased
advertising during 1995 by wireless and direct broadcast service providers;
these broad-based marketing campaigns appear to have enhanced overall consumer
awareness and desire for alternative programming options, with a "spill-over"
benefit for cable providers. In addition, a limited amount of new-build
construction increased the coverage of the Systems.
In addition, revenue increases through June 30, 1996, reflect minimal retail
and ancillary rate increases implemented in certain franchise areas. Rate
increases have been limited because federal rate regulation implemented in 1993
and 1994 rolled back cable rates and authorized only limited rate increases for
the pass-through of certain external costs as to those systems which rolled
back rates to the full extent required by law (up to 17%).
Premium service subscriptions decreased 1.0% from June 30, 1995 to June 30,
1996. The ratio of premium service subscriptions per basic subscriber
decreased from 45.1% at June 30, 1995 to 43.6 % at June 30, 1996. This overall
decrease may reflect the fact that there is an increasing variety of
programming on the basic tier. Given this change at the basic level, the
Partnership anticipates that premium services may continue to decline relative
to basic services over the next few years. As a result, the Partnership has
begun to offer premium services to subscribers in a packaged format, providing
subscribers with a discount from the combined retail rates of these packaged
services in an effort to maintain premium subscription levels and attract
additional subscriptions.
Operating Expenses
Operating, general and administrative expenses increased by $69,748 or 2.8% and
$284,541 or 5.9%, respectively for the three and six month periods ended June
30, 1996 when compared to the similar periods of 1995. The majority of these
increases were related to increases in license fees paid for programming. In
addition, there were increases in wages, bad debt and franchise fees between
the comparable quarters.
Liquidation costs for the three and six month periods ended June 30, 1996, were
$200,000 and $209,198, respectively. Liquidation costs during these periods
related primarily to professional fees for preparation of the disclosure
statements for distribution to the Limited Partners.
Depreciation and amortization decreased by 20.2% from $1,842,926 to $1,470,726
and 26.4% from $3,877,720 to $2,852,503, respectively, for the three and six
months ended June 30 1996, when compared to the similar periods of 1995.
Although the Partnership had increased depreciation as a result of capital
expenditures made to the Systems, this was offset by a significant decrease in
amortization because of the completion of amortization periods for Anderson
County, South Carolina franchises.
Other Income (Expense)
Interest expense decreased by 10.0% from $853,430 to $768,292 and 16.9% from
$1,770,327 to $1,471,708, respectively, for the three and six month periods
ended June 30, 1996, when compared to the similar periods of 1995. This
decrease was primarily due to the decrease in the average outstanding debt
balance between the comparable periods and a decrease in the effective weighted
average interest rates between the comparable periods.
Page 11
<PAGE> 12
Net Loss
Net loss was reduced by 49.3% from $865,178 to $438,931 and 65.2% from
$1,968,699 to $685,994 respectively for the three and six month periods ended
June 30, 1996 when compared to the similar periods of 1995. In 1996, decreases
in interest expense and in amortization expense were significant factors versus
the prior year.
Liquidity and Capital Resources
The Registrant has historically been able to meet capital needs through the
sale of partnership units, borrowings under credit facilities, and from cash
generated by operations. The Registrant anticipates that cash generated from
operations and available credit should be adequate for future foreseeable
capital requirements over the remaining life of the Partnership. However,
future actions which may be taken by the FCC could negatively impact the
ability of the Partnership to continue its historical levels of investment in
property and equipment.
The Partnership has arranged for a secured revolving line of credit agreement
(the "Credit Agreement") with a consortium of banks, for which The Toronto
Dominion Bank is the agent. Such Credit Agreement bears interest at a rate
selected by the Partnership equal to the Eurodollar basis, Toronto Dominion
Bank's prime rate, or certificate of deposit rate, as the case may be, plus a
spread, and has a maturity date of December 31, 1996. This Credit Agreement
allows borrowings up to $65 million. While the Partnership's cash flow from
operations has been used to fund a portion of capital expenditures, in prior
periods the Partnership from time to time did increase debt to cover the
balance of capital expenditures. Outstanding indebtedness of the Partnership
at June 30, 1996 was $38,900,000 borrowed under the Credit Agreement.
The Partnership made capital expenditures of approximately $1,007,000 during
the first six months of 1996 in connection with the improvement and upgrading
of the Partnership systems. The Registrant anticipates that capital
expenditures for such purposes will aggregate $2,400,000 during 1996.
Pursuant to the terms of the Partnership Agreement, the General Partner
suspended distributions to the Limited Partners during the fourth quarter of
1993. The distributions were suspended to provide the Partnership with greater
financial flexibility in meeting debt obligations and continuing capital
expenditures to maintain and enhance the Partnership's assets.
Pursuant to the terms of the Partnership Agreement, the Partnership's term
expired on December 31, 1995. In connection with the disposition of the
Partnership's assets, the Partnership Systems were appraised as of March 31,
1995 by Daniels & Associates ("Daniels") and Western Cablesystems, Inc.
("Western"), who jointly reached a valuation of $73,850,000 for all of the
Partnership Systems (referred to as the "Appraisal Process" herein).
Thereafter, the General Partner retained Daniels to market the Systems using an
auction process with competing bids and counter-bids. As a result of the
auction process, the General Partner has accepted bids with respect to the
South Carolina Systems and for the Woodville, Jasper and Cleveland areas (which
constitute a portion of the Texas Systems) for an aggregate purchase price of
$46,700,000, each subject to execution of a final sale agreement. The accepted
bids constitute approximately 61% of the Partnership's basic subscribers as of
June 30, 1996. The highest bid for the South Carolina Systems was submitted by
an affiliate of the General Partner. In accordance with the terms of the
Partnership Agreement, the sale of assets to an affiliate of the General
Partner must be approved by a majority of outstanding Limited Partner interests
and is subject to an appraisal process, which requires that two independent
appraisers jointly determine the appraised value. The General Partner has
retained Daniels and Western to update their earlier appraisal to satisfy this
requirement. The General Partner is preparing a disclosure statement for
distribution to the Limited Partners which will describe the various
transactions of the Partnership and Cencom Partners, L.P. ("CPLP") and request
consent for the proposed sales to affiliates of the general partners of the
Registrant and CPLP.
Bids submitted to date with respect to the Northeast Missouri and the remainder
of the Texas Systems are viewed by the General Partner to be too low relative
to the appraised fair market values of such Systems. Accordingly, these bids
have not been accepted by the General Partner. Although the General Partner
intends to liquidate the Partnership as expeditiously as possible, it does not
believe a sale or sales of the Northeast Missouri or the remainder of the Texas
Systems at this time would be in the best interests of the Partnership or the
Limited Partners.
Page 12
<PAGE> 13
The General Partner intends to continue to operate the Partnership in
accordance with the Partnership Agreement while it actively seeks potential
purchasers for these remaining Systems
Concurrent with the disposition of the Partnership's Systems, CPLP is disposing
of its assets through sale of its television cable systems. The asset sale is
being effected to satisfy the requirement by CPLP's senior bank lenders that
the credit facility be repaid in accordance with its terms. The CPLP asset
disposition was also commenced to facilitate the liquidation of the Partnership
which requires the liquidation of all of the Partnership's assets, including
its entire ownership interest in CPLP.
To dispose of the assets of CPLP, the general partner of CPLP obtained
appraisals as of March 31, 1995 from Daniels and Western, who jointly reached
a valuation of $60,900,000 for all of the CPLP systems. Thereafter, Daniels
was retained to market the CPLP systems using an auction process substantially
identical to that employed for the Partnership's Systems. As a result of the
auction process, CPLP's general partner has accepted bids submitted by
affiliates of the General Partner of the Registrant for CPLP's South Carolina
and North Carolina Systems for an aggregate price of $52,450,000, subject to
execution of final sale agreements. The bids submitted for CPLP's Texas
Systems were below the appraised fair market value and have not been accepted.
CPLP intends to continue to operate its Texas Systems until an acceptable bid
is received.
Following CPLP's proposed sales of some or all of its systems, it will use the
available sale proceeds to pay outstanding indebtedness and expenses (including
the payment of accrued and unpaid management fees to its General Partner and
repayment of its senior bank credit facility), with any remaining proceeds to
be distributed in accordance with the terms of CPLP's partnership agreement,
which will include distributions to the Partnership in its capacity as a
Limited Partner of CPLP. The amount, if any, of a distribution to the
Partnership of remaining proceeds from the sale of the CPLP systems cannot be
estimated at this time and the amount of proceeds which may be available for
distribution is entirely dependent on the ultimate purchase price of CPLP's La
Grange System.
After the consummation of the Partnership's proposed system sales for which
there are acceptable bids, and the receipt of the CPLP distribution, the
Partnership will first repay a portion of its outstanding senior indebtedness,
which was $38,900,000 as of June 30, 1996, second, pay accrued and unpaid
management fees to the General Partner which was approximately $3,154,000 at
June 30, 1996; and, thereafter, distribute the remaining proceeds to the
Limited Partners. Concurrently, the Partnership intends to either refinance or
amend the terms and extend the maturity of the remaining balance of its senior
indebtedness, pending the sale of the remainder of its assets. While the
Partnership continues to work toward the sale of its cable systems, there are
no assurances that such transactions will be consummated. Further, while the
Partnership will attempt to negotiate amendments and extensions for its
existing credit facility prior to the December 31, 1996 maturity, there are no
assurances that such negotiations will be successful or at terms consistent
with the current terms. If the negotiations are less favorable than
anticipated, the Partnership may be required to use the entire net proceeds to
pay down indebtedness.
The Partnership does not maintain property and casualty insurance covering its
underground cable television distribution plant. The General Partner believes
that the likelihood of any material damage to such distribution plan, due to
natural disasters or otherwise, is minimal and that damage to such distribution
plant at any individual location is unlikely to have a materiel adverse effect
on the Partnership. The General Partner also believes that its decision not to
insure such distribution plant is consistent with standard practices in the
cable television industry.
The Partnership believes that it has generally complied with the provisions of
the 1992 Act regarding cable programming service rates. However, some Systems
may be charging rates which are in excess of allowable rates and, accordingly,
may be subject to challenge by regulatory authorities; such challenge may
result in the Partnership being required to make refunds to subscribers. The
amount of refunds, if any, which could be payable by the Partnership in the
event such Systems' rates are successfully challenged by regulatory authorities
is not currently estimable. The Partnership has not reserved any amounts for
payment of such refunds as the General Partner does not believe that the
amounts of any such refunds would have a material adverse effect on the
financial position or results of the Partnership.
Page 13
<PAGE> 14
Part II. Other Information
Item 1. Legal Proceedings - None
Item 2. Change in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K - None
Page 14
<PAGE> 15
CENCOM CABLE INCOME PARTNERS II, L.P.
FOR QUARTER ENDED JUNE 30, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENCOM CABLE INCOME PARTNERS, II
By: Cencom Properties II, Inc.
General Partner
By: /s/ Jerald L. Kent
------------------------------
Jerald L. Kent
Executive Vice President and
Chief Financial Officer
By: /s/ Jerald L. Kent
------------------------------ August 13, 1996
Jerald L. Kent
Executive Vice President and
Chief Financial Officer
By: /s/ Ralph G. Kelly August 13, 1996
------------------------------
Ralph G. Kelly
Treasurer
Page 15
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 761,940
<SECURITIES> 0
<RECEIVABLES> 211,333
<ALLOWANCES> 0
<INVENTORY> 249,430
<CURRENT-ASSETS> 1,222,703
<PP&E> 20,979,780
<DEPRECIATION> 0
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<CURRENT-LIABILITIES> 44,101,429
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (21,066,848)
<TOTAL-LIABILITY-AND-EQUITY> 23,060,934
<SALES> 4,550,665
<TOTAL-REVENUES> 4,550,665
<CGS> 0
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<LOSS-PROVISION> 0
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<INCOME-PRETAX> (438,931)
<INCOME-TAX> 0
<INCOME-CONTINUING> (438,931)
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<CHANGES> 0
<NET-INCOME> (438,931)
<EPS-PRIMARY> (4.78)
<EPS-DILUTED> (4.78)
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