<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 March 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transaction period from to
---------------- ----------------
Commission File Number 33-17174
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CENCOM CABLE INCOME PARTNERS II, L.P.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 43-1456575
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
12444 Powerscourt Drive - Suite 400
St. Louis, Missouri 63131
---------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(Registrant's telephone number, including area code) (314) 965-0555
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
<PAGE> 2
CENCOM CABLE INCOME PARTNERS II, L.P.
-------------------------------------
FORM 10-Q - FOR THE QUARTER ENDED MARCH 31, 1997
------------------------------------------------
INDEX
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<TABLE>
<CAPTION>
Page
----
Part I. Financial Information
<S> <C> <C>
Item 1. Financial Statements
a. Balance Sheets - March 31, 1997 and December 31, 1996 3
b. Statements of Operations - Three Months Ended 4
c. Statement of Partners' Capital (Deficit) - Three Months Ended
March 31, 1997 5
d. Statements of Cash flows - Three Months Ended March 31, 1997 and 1996 6
e. Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
Part II. Other Information
Item 1. Legal Proceedings 13
Item 2. Change in Securities - None -
Item 3. Defaults upon Senior Securities - None -
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information - None -
Item 6. Exhibits and Reports on Form 8-K 13
Signature Page 14
</TABLE>
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CENCOM CABLE INCOME PARTNERS II, L.P.
-------------------------------------
BALANCE SHEETS
--------------
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------------- --------------
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 360,057 $ 531,285
Accounts receivable, net 200,247 222,708
Prepaid expenses and other 138,824 78,705
-------------- --------------
Total current assets 699,128 832,698
PROPERTY AND EQUIPMENT, NET 15,827,334 18,938,808
FRANCHISE COSTS, net of accumulated amortization of $10,740,198 and
$22,383,464, respectively 411,919 724,004
DEBT ISSUANCE COSTS, net of accumulated amortization of $187,500 and
$-0-, respectively 162,500 350,000
RESTRICTED FUNDS HELD IN ESCROW 750,000 ---
-------------- --------------
$ 17,850,881 $ 20,845,510
============== ==============
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 21,718,122 $ 36,700,000
Accounts payable and accrued expenses 1,925,469 2,397,674
Payables to General Partner and affiliate 3,791,641 3,532,580
Subscriber deposits 16,837 18,460
-------------- --------------
Total current liabilities 27,452,069 42,648,714
-------------- --------------
DEFERRED REVENUE 20,522 24,803
-------------- --------------
PARTNERS' CAPITAL (DEFICIT):
General Partner (1,193,193) (2,828,374)
Limited Partners (250,000 units authorized; 90,915 units issued and
outstanding) (7,969,350) (18,540,466)
Note receivable from General Partner (459,167) (459,167)
-------------- --------------
Total Partners' capital (deficit) (9,621,710) (21,828,007)
-------------- --------------
$ 17,850,881 $ 20,845,510
============== ==============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
Page 3
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CENCOM CABLE INCOME PARTNERS II, L.P.
-------------------------------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
--------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
SERVICE REVENUES $ 4,622,978 $ 4,361,221
-------------- --------------
OPERATING EXPENSES:
Operating, general and administrative 2,600,186 2,523,518
Depreciation and amortization 1,372,243 1,388,735
Liquidation costs 203,685 ---
-------------- --------------
4,176,114 3,912,253
-------------- --------------
Income from operations 446,864 448,968
-------------- --------------
OTHER INCOME (EXPENSE):
Interest income 11,854 7,385
Interest expense (819,841) (703,416)
Equity in loss of unconsolidated limited partnership --- ---
Gain on sale of cable television systems 12,567,420 ---
------------- --------------
11,759,433 (696,031)
------------- --------------
Net income (loss) $ 12,206,297 $ (247,063)
============= ===============
NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT $ 132.92 $ (2.69)
============= ===============
AVERAGE NUMBER OF LIMITED PARTNERSHIP UNITS
OUTSTANDING 90,915 90,915
============= ===============
</TABLE>
The accompanying notes are an integral part of these statements.
Page 4
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CENCOM CABLE INCOME PARTNERS II, L.P.
-------------------------------------
STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
----------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 1997
-----------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Note
Receivable
From
General Limited General
Partner Partners Partner Total
-------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1996 $ (2,828,374) $(18,540,466) $ (459,167) $(21,828,007)
Net loss prior to the gain on sale of
cable television systems (3,611) (357,512) --- (361,123)
Gain on sale of cable television systems 1,638,792 10,928,628 --- 12,567,420
--------------- ------------- ------------ ------------
BALANCE, March 31, 1997 $ (1,193,193) $ (7,969,350) $ (459,167) $ (9,621,710)
=============== ============= ============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
Page 5
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CENCOM CABLE INCOME PARTNERS II, L.P.
-------------------------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
--------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 12,206,297 $ (247,063)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities-
Depreciation and amortization 1,372,243 1,388,735
Amortization of debt issuance costs 187,500 ---
Gain on sale of cable television systems (12,567,420) ---
Changes in assets and liabilities, net of effects from sale of
cable television systems
Accounts receivable, net (1,754) 13,496
Prepaid expenses and other (95,566) (195,230)
Accounts payable and accrued expenses (427,195) (280,754)
Payables to General Partner and affiliate 259,061 235,596
Subscriber deposits (325) 496
Deferred revenue (774) (776)
-------------- --------------
Net cash provided by operating activities 932,067 914,500
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment, net (443,530) (479,283)
Proceeds from sale of cable television systems, net of cash sold 15,072,113 ---
Restricted funds held in escrow (750,000) ---
-------------- --------------
Net cash provided by (used in) investing activities 13,878,583 (479,283)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on revolving line of credit (14,981,878) ---
-------------- --------------
Net cash used in financing activities (14,981,878) ---
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (171,228) 435,217
CASH AND CASH EQUIVALENTS, beginning of period 531,285 935,858
-------------- --------------
CASH AND CASH EQUIVALENTS, end of period $ 360,057 $ 1,371,075
============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
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CENCOM CABLE INCOME PARTNERS II, L.P.
-------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(Unaudited)
1. RESPONSIBILITY FOR INTERIM FINANCIAL STATEMENTS:
The financial statements of Cencom Cable Income Partners II, L.P. (the
"Partnership") as of March 31, 1997 and 1996, 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, 1996. Interim results are not necessarily indicative
of results for a full year.
2. 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 March 31, 1997, the unrecorded
losses in excess of investment were approximately $15,875,000.
Summary financial information for the operating results of CPLP, for the three
months ended March 31, 1997, which are not consolidated with the operating
results of the Registrant, are as follows:
Service revenues $ 3,569,367
===========
Loss from operations $ (177,158)
===========
Net loss $(1,164,388)
===========
3. LIQUIDATION:
The General Partner distributed a disclosure statement to the Limited Partners
on March 6, 1997 which described the various transactions and requested consent
for certain proposed sales by the Partnership and CPLP to affiliates of the
General Partner. On April 7, 1997, the last day of the voting period, a
majority of the Limited Partners gave their consent for the sale of certain
cable television systems to affiliates of the General Partner. Following
receipt of the Limited Partners' consent, the Partnership and CPLP consummated
the transactions with the affiliates of the General Partner, in accordance with
the disclosure statement.
On March 31, 1997, the Partnership consummated the sale of certain of the cable
television systems located in Texas in two separate asset sale transactions
with unaffiliated third parties. The sales price was approximately
$15,255,000, after initial closing adjustments, for the sale of approximately
10,300 basic subscribers, in the aggregate. Pursuant to the asset sale
transaction with the unaffiliated third parties, the aggregate amount of
$750,000 was deposited into indemnification escrow accounts. These funds will
be released to the Partnership upon mutual satisfaction of the seller's
representations and warranties related to the assets that were sold.
Proceeds from the sale of the Texas systems on March 31, 1997 and the South
Carolina systems on April 7, 1997 were used to reduce to zero the balance of
outstanding indebtedness, with the remaining funds of approximately $14.0
million placed in short-term investments.
Proceeds from the sale of certain of the cable television systems owned by CPLP
on April 7, 1997 to affiliates of the General Partner enabled CPLP to reduce to
zero the balance of its outstanding indebtedness, with the remaining funds of
approximately $6.6 million placed in short-term investments. During May 1997,
it is anticipated that CPLP will distribute approximately $5.5 million to the
Partnership.
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<PAGE> 8
The Partnership will utilize its short-term investments, the distribution that
it will receive from CPLP, plus funds available under its existing or
replacement credit facility for the purpose of generating a distribution to the
Limited Partners. The distribution is anticipated to occur on or about May 31,
1997, depending upon the Partnership's ability to successfully amend its
existing credit facility or negotiate a new credit facility. The Partnership
is currently negotiating with a bank for a new credit facility to replace its
existing credit agreement which is due to expire on June 30, 1997.
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.
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.
4. PARTNER ALLOCATIONS
In accordance with the Partnership Agreement, losses from operations shall be
allocated 99% to the Limited Partners and 1% to the General Partner. The gain
attributable to the sale or disposition of assets sold shall be allocated to
those partners with negative capital account balances in proportion to such
negative balances until the negative balances are restored to zero.
5. LITIGATION
Certain Limited Partners have initiated litigation in the Jackson County
Circuit Court in Kansas City, Missouri, under the name and style, In re:
Borgman, et al v. Cencom Cable Income Partners II, L.P., et al, case number
CV97-9292 (the "Action"). The Action names as defendants the Partnership, the
General Partner, and Kidder, Peabody & Co., Inc. and Dean Witter Reynolds,
Inc., two of the three brokerage firms involved in the underwriting and sale of
units to the Limited Partners. The Action alleges, among other things, that
the prospectus and sales materials provided to the Limited Partners by the
brokerage firms at the time the units were being marketed and sold were false
and misleading, which wrongfully induced the plaintiffs to purchase such units
of the Partnership, which in turn enriched the defendants at the expense of the
Limited Partners in breach of the Partnership Agreement and the defendants'
fiduciary duties. The Partnership and the General Partner believe the Action
to be without merit. In the opinion of management, after consulting with legal
counsel, the outcome of this lawsuit will not have a material adverse effect on
the Partnership's financial position or results of operation.
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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. The statistics as of March 31, 1997
reflect the sales of certain of the Texas systems, which consisted of
approximately 10,300 basic subscribers and approximately 2,800 premium units.
As of April 7, 1997, following the sale of the South Carolina systems, the
Partnership had approximately 14,100 basic subscribers with 5,500 premium
subscriptions.
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1997 1996 1996
--------- ------------ ---------
<S> <C> <C> <C>
Basic Subscribers:
Texas systems 12,200 21,900 23,000
South Carolina systems 21,100 20,800 20,600
Northeast Missouri systems 1,900 2,000 2,000
--------- ------------ ---------
35,200 44,700 45,600
========= ============ =========
Premium Subscriptions:
Texas systems 4,700 7,600 8,300
South Carolina systems 10,800 10,400 11,300
Northeast Missouri systems 800 900 1,000
--------- ------------ ---------
16,300 18,900 20,600
========= ============ =========
</TABLE>
The following table sets forth certain items in dollars and as a percentage of
total revenues for the periods indicated:
<TABLE>
For the Three Months
Ended March 31
--------------
(Unaudited)
1997 1996
---------------------------- ----------------------
Amount % of Revenue Amount % of Revenue
-------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
Service Revenues $ 4,622,978 100.0% $ 4,361,221 100.0%
------------- ----------- --------------- -------------
Operating Expenses:
Operating, General and Administrative 2,600,186 56.2 2,523,518 57.9
Depreciation and Amortization 1,372,243 29.7 1,388,735 31.8
Liquidation Costs 203,685 4.4 --- ---
------------- ----------- --------------- -------------
4,176,114 90.3 3,912,253 89.7
------------- ----------- --------------- -------------
Income (loss) From Operations 446,864 9.7 448,968 10.3
------------- ----------- --------------- -------------
Other Income (Expense):
Interest Income 11,854 0.1 7,385 0.1
Interest Expense (819,841) (17.7) (703,416) (16.1)
Gain on Sale of Cable Television Systems 12,567,420 271.9 --- ---
------------- ----------- --------------- -------------
11,759,433 254.3 (696,031) (16.0)
------------- ----------- --------------- -------------
Net Income (Loss) $ 12,206,297 264.0% $ (247,063) (5.7)%
============= =========== =============== =============
</TABLE>
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<PAGE> 10
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 6.0% to $4,622,978 for the three months ended
March 31, 1997, when compared to the similar period of 1996. These increases
in 1997 are primarily due to an increase in the retail rates to the customers,
in accordance with federal rate regulation.
Basic subscribers at March 31, 1997 decreased by approximately 100 basic
subscribers versus March 31, 1996, before the sale of certain of the Texas
systems. This decrease is attributable to the increase in competition for the
delivery of video programming services in these markets.
Premium service subscriptions decreased 7.3% from March 31, 1996 to March 31,
1997, before the sale of certain of the Texas systems. The ratio of premium
service subscriptions per basic subscriber decreased from 45.2% at March 31,
1996 to 42.0% at March 31, 1997, as determined before the sale of certain of
the Texas systems. 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 subscriptions 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 approximately
$77,000 or 3.0% during the three months ended March 31, 1997 when compared to
the similar period of 1996. The majority of this increase, approximately
$48,000, related to increases in license fees paid for programming.
The Partnership incurred liquidation costs of approximately $204,000 for the
preparation and distribution of the disclosure statement to the Limited
Partners related to the request for consent to sell certain assets to
affiliates of the General Partner.
Depreciation and amortization decreased by 1.2% from $1,388,735 for the three
months ended March 31, 1996, to $1,372,243 for the same period in 1997.
Although the Partnership had increased depreciation as a result of capital
expenditures made to the Systems, this was offset by a decrease in amortization
because of the completion of amortization periods for the Anderson County,
South Carolina franchises.
Other Income and Expenses
Interest expense increased by 16.6% from $703,416 during the first quarter of
1996 to $819,841 for the first quarter of 1997. This increase was primarily
due to the amortization of deferred debt costs associated with the cost of
amending the credit facility to extend its maturity from December 31, 1996 to
June 30, 1997.
The gain on sale of cable television systems resulted from the sales of certain
of the Texas systems on March 31, 1997. The net book value of these systems
was approximately $2.5 million. In addition, the gain was offset by brokerage
costs of approximately $0.2 million.
Net Loss
Net income was $12,206,297 for the current quarter compared to a net loss of
$(247,063) for the same period in the prior year. Net income for 1997 was a
result of the gain recorded on the sale of certain of the assets of the Texas
systems.
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Liquidity and Capital Resources
The Registrant has historically been able to meet capital needs through
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.
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 June 30, 1997. This Credit Agreement allows
borrowings up to $65 million, reduced by the proceeds from the sale of assets.
Availability under this credit agreement was reduced to approximately $50.7
million at March 31, 1997 as a result of the sale of certain of the assets of
the Texas systems. Availability was reduced to approximately $14.3 million as
a result of the sale of the South Carolina systems on April 7, 1997. 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 December 31, 1996 and March 31, 1997, was
$36,700,000 and $21,718,122 respectively borrowed under the Credit Agreement.
Outstanding indebtedness was reduced to zero on April 7, 1997 from the proceeds
of sale of the South Carolina systems.
The Partnership is currently negotiating with a bank for a new credit facility
to replace the existing Credit Agreement which is due to mature on June 30,
1997. There can be no assurance that the Partnership will be able to negotiate
such a new credit facility at terms that are favorable to the Partnership, if
at all. Failure of the Partnership to arrange a new credit facility or amend
its existing Credit Agreement would detrimentally impact the ability of the
Partnership to distribute cash proceeds to the Limited Partners as described in
the disclosure statement.
The Partnership made capital expenditures of approximately $444,000 during the
first three months of 1997 in connection with the improvement and upgrading of
the Partnership systems.
The Partnership Agreement provides for the dissolution of the Partnership to
have been initiated 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 accepted bids with
respect to the South Carolina systems, and for the Cleveland, Jasper,
Woodville, Marlin, Madisonville and Buffalo systems, which constitute a portion
of the Texas systems, for an aggregate purchase price of $51,950,000. 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 Limited Partner units.
Concurrent, with the liquidation of the Partnership's Systems, CPLP is
liquidating its assets through sales of the CPLP Systems. The liquidation is
being effected to satisfy the requirement by CPLP's senior bank lenders that
the CPLP credit facility be repaid in accordance with its terms. The CPLP
liquidation 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 liquidate 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 by affiliates of the General
Partner for CPLP's South Carolina and North Carolina Systems which serve
approximately 29,900 basic subscribers (82.5% of CPLP's total basic
subscribers) for an aggregate price of $52,450,000, subject to written consent
from the Limited Partners of the Registrant. The bids submitted for CPLP's
Texas Systems were below the
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<PAGE> 12
appraised fair market value and have not been accepted by its general partner.
CPLP intends to continue to operate its Texas Systems until an acceptable bid
is received.
On March 31, 1997, the Partnership consummated the sale of the aforementioned
cable television systems located in Texas in two separate asset sale
transactions with unaffiliated third parties. The sales price was
approximately $15,255,000, after initial closing adjustments, for the sale of
approximately 10,300 basic subscribers, in the aggregate. Pursuant to the
asset sale transactions with the unaffiliated third parties, the aggregate
amount of $750,000 was deposited into indemnification escrow accounts. These
funds will be released to the Partnership upon mutual satisfaction of the
seller's representations and warranties related to the assets that were sold.
The General Partner distributed a disclosure statement to the Limited Partners
on March 6, 1997 which described the various transactions and requested consent
for certain proposed sales by the Partnership and CPLP to affiliates of the
General Partner. On April 7, 1997, the last day of the voting period, a
majority of the Limited Partners gave their consent for the sale of certain
cable television systems to affiliates of the General Partner. Following
receipt of the Limited Partners' consent, the Partnership and CPLP consummated
the transactions with the affiliates of the General Partner, in accordance with
the disclosure statement.
Proceeds from the sale of the Texas systems on March 31, 1997 and the South
Carolina systems on April 7, 1997 were used to reduce to zero the balance of
outstanding indebtedness, with the remaining funds of approximately $14.0
million placed in short-term investments.
Proceeds from the sale of certain of the cable television systems owned by CPLP
on April 7, 1997 to affiliates of the General Partner enabled CPLP to reduce to
zero the balance of its outstanding indebtedness, with the remaining funds of
approximately $6.6 million placed in short-term investments. During May 1997,
it is anticipated that CPLP will distribute approximately $5.5 million to the
Partnership.
The Partnership will utilize its short-term investments, the distribution that
it will receive from CPLP, plus funds available under its existing or
replacement credit facility for the purpose of generating a distribution to the
Limited Partners. The distribution is anticipated to occur on or about May 31,
1997, depending upon the Partnership's ability to successfully amend its
existing credit facility or negotiate a new credit facility.
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.
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.
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 plant, due to
natural disasters or otherwise, is minimal and that damage to such distribution
plant at any individual location is unlikely to have a material 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 12
<PAGE> 13
Part II. Other Information
-----------------
Item 1. Legal Proceedings
Certain Limited Partners have initiated litigation in the Jackson County
Circuit Court in Kansas City, Missouri, under the name and style, In re:
Borgman, et al v. Cencom Cable Income Partners II, L.P., et al, case number
CV97-9292 (the "Action"). The Action names as defendants the Partnership, the
General Partner, and Kidder, Peabody & Co., Inc. and Dean Witter Reynolds,
Inc., two of the three brokerage firms involved in the underwriting and sale of
units to the Limited Partners. The Action alleges, among other things, that
the prospectus and sales materials provided to the Limited Partners by the
brokerage firms at the time the units were being marketed and sold were false
and misleading, which wrongfully induced the plaintiffs to purchase such units
of the Partnership, which in turn enriched the defendants at the expense of the
Limited Partners in breach of the Partnership Agreement and the defendants'
fiduciary duties. The Partnership and the General Partner believe the Action
to be without merit. In the opinion of management, after consulting with legal
counsel, the outcome of this lawsuit will not have a material adverse effect on
the Partnership's financial position or results of operations.
Item 2. Change in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders
On March 6, 1997, the General Partner distributed to each holder of units
of limited partnership interest a Disclosure Statement for the purpose of
obtaining the consent of the holders of a majority of such units for the sale
of certain cable television systems to affiliates of the General Partner. On
April 7, 1997, the General Partner was notified that holders of a majority of
units had given their consent for the transactions with the affiliates of the
General Partner (49,194 votes for, which represented 54.1% of the 90,915 issued
and outstanding units; 1,478 votes against; 1,850 votes abstained). The
transactions with the affiliates of the General Partner were consummated on
April 7, 1997, as described in the Disclosure Statement following the receipt
of consent.
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
Exhibits and Reports on Form 8-K - None
On April 15, 1997, the Partnership filed a report on Form 8-K related
to the three separate sales of cable television systems between March
31, 1997 and April 7, 1997, reported in Part I, Item 2 herein, as
follows:
a.) On March 31, 1997, the Partnership sold the cable television
systems serving Jasper, Woodville and Cleveland, Texas, to an
unaffiliated third party for approximately $9,986,000.
b.) On March 31, 1997, the Partnership sold the cable television
systems serving Marlin, Madisonville and Buffalo, Texas, to an
unaffiliated third party for approximately $5,269,000.
c.) On April 7, 1997, the Partnership sold the cable television systems
serving Anderson County, South Carolina, to an affiliate of the
General Partner for approximately $36,636,000. The sale of these
cable television systems was consummated following notification of
approval by a majority of the Limited Partners for such
transaction.
Pursuant to Article 3 of Regulation S-X, the Form 8-K filing included
certain unaudited pro forma financial information related to the three sale
transactions.
Page 13
<PAGE> 14
CENCOM CABLE INCOME PARTNERS II, L.P.
-------------------------------------
FOR QUARTER ENDED MARCH 31, 1997
--------------------------------
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENCOM CABLE INCOME PARTNERS II, L.P.
By: Cencom Properties II, Inc.
its General Partner
By: /s/ Jerald L. Kent
----------------------------
Jerald L. Kent
Executive Vice President and
Chief Financial Officer
By: /s/Jerald L. Kent May 13, 1997
----------------------------
Jerald L. Kent
Executive Vice President and
Chief Financial Officer
By: /s/Ralph G. Kelly May 13, 1997
----------------------------
Ralph G. Kelly
Treasurer
Page 14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 360,057
<SECURITIES> 0
<RECEIVABLES> 220,247
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 699,128
<PP&E> 15,827,334
<DEPRECIATION> 0
<TOTAL-ASSETS> 17,850,881
<CURRENT-LIABILITIES> 27,452,069
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (9,621,710)
<TOTAL-LIABILITY-AND-EQUITY> 17,850,881
<SALES> 4,622,978
<TOTAL-REVENUES> 4,622,978
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,176,114
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 807,987
<INCOME-PRETAX> 361,123
<INCOME-TAX> 0
<INCOME-CONTINUING> 361,123
<DISCONTINUED> 12,567,420
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,206,297
<EPS-PRIMARY> 132.92
<EPS-DILUTED> 132.92
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