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, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ____________
Commission file number 1-9423
GALAXY CABLEVISION, L.P.
(Exact name of Registrant as specified in its charter)
Delaware 43-1429049
(state of incorporation) (IRS Employer Identification Number)
c/o Galaxy Cablevision Management, Inc.
1220 North Main, Sikeston, Missouri 63801
(address of principle executive offices) (zip code)
Registrant's telephone number, including area code (314) 471-3080
Indicate by check mark whether the Registrant (1) has filed all
reports required by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the previous 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 ______
Number of Limited Partnership Units outstanding as of May 1, 1995
- 2,142,000
GALAXY CABLEVISION, L.P.
FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 1995
INDEX
PAGE
PART I. Financial Information
Item 1. Financial Statements . . . . . . . . . . . 3
Notes to Financial Statements . . . . . . . 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . 11
PART II. Other Information . . . . . . . . . . . . . . 15
PART I. FINANCIAL INFORMATION
ITEM 1. -- FINANCIAL STATEMENTS
GALAXY CABLEVISION, L.P.
(IN PROCESS OF LIQUIDATION-NOTES 1 & 2)
STATEMENTS OF NET ASSETS IN PROCESS OF LIQUIDATION
March 31, 1995 December 31, 1994
(unaudited)
CASH AND CASH EQUIVALENTS $4,647,406 $14,571,652
OTHER CURRENT ASSETS 578,855 767,002
ESCROW DEPOSITS 100,000 100,000
DUE FROM AFFILIATES-NET 215,895 327,071
INVESTMENT IN AFFILIATE (Note 6) 2,500,000 2,500,000
CABLE TELEVISION SYSTEMS 0 3,550,000
NOTES RECEIVABLE 1,761,256 1,561,256
------------- ------------
TOTAL ASSETS 9,803,412 23,376,981
------------- ------------
NOTES PAYABLE 0 1,281,816
ACCOUNTS PAYABLE 155,922 602,448
ACCRUED EXPENSES AND OTHER
LIABILITIES 162,482 703,383
ACCRUED DISTRIBUTIONS TO PARTNERS 0 11,250,909
RESERVE FOR ESTIMATED COSTS
DURING PERIOD OF LIQUIDATION 1,146,583 1,200,000
------------- ------------
TOTAL LIABILITIES 1,464,987 15,038,556
------------- ------------
NET ASSETS IN PROCESS
OF LIQUIDATION $ 8,338,425 $8,338,425
============= ============
See notes to financial statements.
GALAXY CABLEVISION, L.P.
(IN PROCESS OF LIQUIDATION-NOTES 1 & 2)
STATEMENT OF CHANGES IN NET ASSETS IN PROCESS OF LIQUIDATION
(unaudited)
For the
Three Months Ended
March 31, 1995
Net Assets in Process of Liquidation
as of December 31, 1994 $8,338,425
Expenses in Excess of Revenues from
Operations (53,417)
Reduction in Reserve for Estimated Costs
During Period of Liquidation 53,417
-----------
Net Assets in Process of Liquidation
as of March 31, 1995 $8,338,425
See notes to financial statements.
GALAXY CABLEVISION, L.P.
STATEMENT OF OPERATIONS
(Historical Cost Basis)
(Unaudited)
For the
Three Months Ended
March 31, 1994
SUBSCRIPTION SERVICES REVENUE $5,043,918
-----------
OPERATING EXPENSES:
Systems operations (exclusive of
depreciation and amortization
expense shown separately below):
Related Party 12,003
Other 2,007,022
-----------
2,019,025
Selling, general and administrative:
Related Party 422,274
Other 998,166
-----------
1,420,440
Depreciation Expense 1,602,256
Amortization Expense 133,396
-----------
Total operating expenses 5,175,117
-----------
OPERATING LOSS (131,199)
EQUITY IN LOSS OF INVESTEE (189,704)
INTEREST INCOME 36,059
OTHER INCOME 34,912
INTEREST EXPENSE (409,216)
-----------
NET LOSS $ (659,148)
===========
ALLOCATION OF NET LOSS
General Partners $ (6,591)
===========
Limited Partners $ (652,557)
===========
NET LOSS PER LIMITED PARTNERSHIP UNIT $ (0.30)
===========
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 2,142,000
===========
See notes to financial statements.
GALAXY CABLEVISION, L.P.
STATEMENT OF CASH FLOWS
(Historical Cost Basis)
(Unaudited)
For the
Three Months Ended
March 31, 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (659,148)
Adjustments to reconcile net loss
to net cash flow provided by
operating activities:
Depreciation and amortization 1,735,652
Gain on sale of assets (27,382)
Equity in loss of investee 189,704
Net changes in assets and liabilities:
Subscriber receivables (81,116)
Prepaid expenses and other assets 2,136
Due to affiliate - net (345,582)
Accounts payable 407,210
Accrued expenses and
other liabilities (24,517)
-----------
Net cash provided by operating
activities 1,196,957
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 27,382
Upgrade of cable TV systems (587,385)
Purchase of vehicles and
equipment (236,291)
-----------
Net cash used by investing
activities (796,294)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of borrowings (507,468)
-----------
DECREASE IN CASH (106,805)
CASH AT BEGINNING OF THE PERIOD 475,345
CASH AT END OF THE PERIOD $ 368,540
===========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 474,522
===========
See notes to financial statements.
GALAXY CABLEVISION, L.P.
(In Process of Liquidation - Notes 1 & 2)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
1. STATEMENT OF ACCOUNTING PRESENTATIONS AND OTHER INFORMATION
The attached interim financial statements are unaudited;
however, in the opinion of management, all adjustments
necessary for a fair presentation of financial position and
results of operations have been made, including those
required for liquidation basis accounting. The interim
financial statements are presented in accordance with the
rules and regulations of the Securities and Exchange
Commission and consequently do not include all the
disclosures required by generally accepted accounting
principles. It is suggested that the accompanying financial
statements be read in conjunction with the Partnership's
Annual Report on Form 10-K for the year ended December 31,
1994.
On September 30, 1994, the partnership adopted the
liquidation basis of accounting as a result of the Texas-
Louisiana Sale (see below). The statements of net assets in
process of liquidation at March 31, 1995 and December 31,
1994 and the statement of changes in net assets in process
of liquidation for the three months ended March 31, 1995
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
assets. The actual value of liquidating distributions, if
any, will depend on a variety of factors, including the
actual timing of distributions to Unitholders, and the
resolution of the Partnership's contingent liabilities and
the costs of winding up. The actual amounts are likely to
differ from the amounts presented in the financial
statements.
The statements of operations and cash flows for the three
months ended March 31, 1994 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.
2. SALE OF CABLE TELEVISION SYSTEMS
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 Cable
of Texas. Inc. (the "Texas-Louisiana Sale") for a purchase
price of $42,625,000 (before proration of certain expenses),
or approximately $1,241 per basic subscriber. A portion of
the purchase price, approximately $100,000, is currently
being held in escrow pending the completion by the
partnership of certain tasks related to the sale.
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. (the "Kentucky Sale") for $18,437,500
(before proration of certain expenses), or approximately
$1,207 per basic subscriber.
On December 7, 1994 the Austin Systems, which served 5,417
basic subscribers as of November 30, 1994, were sold to Time
Warner Entertainment Company, L.P., through its division
Time Warner Cable Ventures ("Time Warner") for $7,300,000
(before proration of certain expenses), or approximately
$1,348 per basic subscriber.
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 "Cameron
Sale"). The sale was approved unanimously by the
disinterested directors of Galaxy Cablevision Management,
Inc., as required under the Partnership Agreement.
The Cameron Sale 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 March 31, 1995.
On 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 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.
3. RELATED PARTY TRANSACTIONS
The Partnership has historically shared certain operational
and administrative expenses with other companies affiliated
with the General Partners. Expenses which cannot be
specifically identified to a particular company are
allocated to the various companies using a formula that
relates benefits derived to subscribers of each company,
homes passed of each company and/or revenues of each
company. Management believes this allocation method and the
resulting expenses are reasonable. For the three months
ended March 31, 1994, there were $12,003 of systems
operating expenses and $422,274 of selling, general and
administrative expenses allocated to the Partnership from a
related party. For the three months ended March 31, 1995
the were $1,846 of systems operation expenses and $2,266 of
selling, general and administrative expenses allocated to
the Partnership from a related party.
The Partnership pays to the Managing General Partner
management fees for management services. Payments for the
three months ended March 31, 1995 were $14,834. Payments
for the three months ended March 31, 1994 totalled $226,973.
The Partnership has historically used a related entity to
provide air travel to the various regions where it operates
CATV systems and the corporate offices. These payments
totalled $23,999 for the three months ended March 31, 1994.
There were no such expenses for the three months ended March
31, 1995. The expense is based on an hourly in-flight
charge plus fuel and other direct costs. In addition, the
Partnership leases certain office space from a shareholder
of a related entity. The rental payments for the first
quarter of 1995 were 9,800. The rental payments for the
first quarter of 1994 were $28,825. 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.
4. NOTES PAYABLE
During January of 1995, the Partnership paid from the
proceeds from the Kentucky Sale $450,000 to Fleet National
Bank on its Revolving Credit and Term Loan Agreement,
$104,000 on the acquisition note payable to Jim Parks, and
$727,816 on certain installment notes payable. As of March
31, 1995 there are no outstanding notes payable by the
Partnership.
5. DISTRIBUTIONS TO UNITHOLDERS AND GENERAL PARTNERS
On April 10, 1995, the Managing General Partner of the
Partnership approved a distribution of $1.00 per unit
payable on May 5, 1995, to the Unitholders of record as of
the close of business on April 24, 1995. This distribution
resulted in a payment of $2,142,000 to the Unitholders and
$21,636 to the General Partners.
6. INVESTMENT IN AFFILIATE
The investment in affiliate, "Charter Holdings Investment",
has been adjusted to approximate the net realizable value of
the Company's investment assuming a discount factor of
approximately 30% applied to the quoted price of CableMaxx,
Inc. common stock multiplied by the estimated number of
shares of such common stock indirectly owned by the
Partnership through its investment in Charter Wireless Cable
Holdings, L.L.C. (approximately 730,000 shares). The only
assets held by Charter Wireless Holdings, L.L.C. are shares
of CableMaxx, Inc, a publicly traded operator of certain
wireless cable television systems located in Texas.
PART I. FINANCIAL INFORMATION
ITEM 2.--MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Partnership realized no revenues in excess of expenses
from operations during the first quarter of 1995, as
expenses incurred were generally anticipated and within
amounts accrued for such purposes under accrued expenses and
other liabilities and reserve for estimated costs during
period of liquidation. Aside from such expenses, no
adjustment was made to the reserve for estimated costs
during the period of liquidation. 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.
SALE OF CABLE 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 "Cameron
Sale"). The sale was approved unanimously by the
disinterested directors of Galaxy Cablevision Management,
Inc., as required under the Partnership Agreement.
The Cameron Sale 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.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1994, the Partnership had $14,571,652 in
cash and cash equivalents deposited primarily in interest-
bearing accounts. On January 20, 1995, the Partnership paid
distributions to the Unitholders and General Partners in the
amount of $11,250,909. On January 31, 1995 the Partnership
paid $450,000 to satisfy in full all principal indebtedness
under its Revolving Credit and Term Loan Agreement with
Fleet National Bank. On March 31, 1995 the Partnership
received cash proceeds from the Cameron Sale of $3,350,000.
During the first three months of 1995, the Partnership also
paid other liabilities and expenses, leaving a balance of
$4,647,406 in cash and cash equivalents deposited mainly in
interest-bearing accounts.
As of March 31, 1995, other current assets is comprised of
interest accrued on notes receivable of $537,082, and
miscellaneous receivables of $41,773.
As of March 31, 1995, cash and cash equivalents exceeded
total liabilities by $3,182,419.
The liquidity needs of the Partnership for the remainder of
1995 are expected to be satisfied by existing cash reserves
or by the proceeds from the sale of the remaining assets.
The Partnership accrued a reserve of $1,200,000 as of
December 31, 1994 to cover certain costs during the period
of liquidation, such as the accrual for state income taxes,
future losses from operations of the Cameron Systems, future
state income tax liabilities, professional fees, general and
administration expenses, contingency reserves and other
costs related to dissolution and winding up. Galaxy also
accrued $11,250,909 as of such date to pay the distribution
to the partners of the same amount declared by the
Partnership on December 23, 1994 and paid to the partners on
January 20, 1995.
RATE REGULATION
The Federal Communication Commission ("FCC") adopted new
rules effective September 1, 1993 that grant to local
franchising authorities the right to regulate rates charged
for basic cable service, subject to standards and procedures
established by the FCC. These rate regulations were revised
by the FCC effective May 15, 1994. The regulations, before
and after revision, did not have a material effect on the
Partnership's revenues, but did contribute to a climate of
uncertainty in the cable industry, which was a factor
considered by the Partnership in determining to sell its
cable systems.
DISSOLUTION; WINDING UP
Having sold all of its operating assets, the Partnership is
now in dissolution. The Managing General Partner is in the
process of liquidating the Partnership's non-operating
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 its minority (approximately
14.6%) interest in Charter Wireless Cable Holdings, L.L.C.
("Charter Holdings"), which is the majority owner of
CableMaxx, Inc. a publicly traded operator of certain
wireless cable television systems located in Texas (the
"Charter Holdings Investment").
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
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. However,
the Managing General Partner believes that Charter Holdings
may ultimately either liquidate its investment in CableMaxx
and distribute the proceeds to the members, including
Galaxy, or distribute the CableMaxx 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 well receive
distributions, if any, in respect of the Charter Holdings
Investments.
The Harron Note is a balloon note under which all
principal and accrued interest is not payable until June
1996. Principal and interest accrued through March 31, 1995
equals approximately $2,000,000. 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.
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 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. 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 connection with the Texas-Louisiana Sale and the Austin
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
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
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. 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.
PART II. OTHER INFORMATION
Items 1 through 5
None.
Item 6
(a) Exhibits
Exhibit
Number Description Reference
---------- -------------- -----------
3(a) Certificate of Limited Incorporated by reference
Partnership of Registrant, to Exhibit 3(a) of
filed with the state of Amendment No. 1 (filed
Delaware on December 15, February 18, 1987) to
1986. Galaxy's Registration
Statement on Form S-1
(filed January 16, 1987),
Commission File No. 33-
11388.
3(b) Amended and Restated Incorporated by reference
Certificate of Limited to Exhibit 3(b) of
Partnership of Registrant, Amendment No. 1 (filed
filed with the Secretary of February 18, 1987) to
State of Delaware on Galaxy's Registration
January 16, 1987. Statement on Form S-1
(filed January 16, 1987),
Commission File No. 33-
11388.
3(c) Amended and Restated Incorporated by reference
Agreement of Limited to Exhibit 3(c) of
Partnership of Registrant, Amendment No. 1 (filed
dated February 1, 1987 February 18, 1987) to
Galaxy's Registration
Statement on Form S-1
(filed January 16, 1987),
Commission File No. 33-11388.
27 Financial Data Schedule
provided for the
information of the
Securities and Exchange
Commission only.
(b) Reports on Form 8-K
Galaxy filed with the Commission on January 9, 1995, a Current
Report on Form 8-K in connection with (i) closing of the Kentucky
Sale, and (ii) the issuance of a press release announcing the
aforementioned closing, certain possible tax consequences and the
establishment of a record date for a distribution to Unitholders.
the report was made under Items 2 and 5. Pro forma financial
information with respect to the Kentucky Sale was filed therewith.
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.
GALAXY CABLEVISION, L.P.
BY: GALAXY CABLEVISION MANAGEMENT, L.P.,
as Managing General Partner
BY: GALAXY CABLEVISION MANAGEMENT, INC.,
as General Partner
Date: May 12, 1995 /s/ Tommy L. Gleason, Jr.
---------------------------------
BY: Tommy L. Gleason, Jr.
President and Director
Date: May 12, 1995 /s/ J. Keith Davidson
---------------------------------
BY: J. Keith Davidson
Chief Financial Officer