UNITED STATES
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, 1996
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 (573) 472-8200
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, 1996 - 2,142,000
1
GALAXY CABLEVISION, L.P.
FORM 10-Q
FOR THE THREE MONTHS ENDED March 31, 1996
INDEX
PAGE
PART I. Financial Information
Item 1. Financial Statements..................................3
Notes to Financial Statements.........................5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations............................................7
PART II. Other Information............................................10
2
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
h March 31, 1996 December 31, 1995
----------- ---------------
h (unaudited)
CASH AND CASH EQUIVALENTS $ 1,908,582 $ 1,435,941
OTHER CURRENT ASSETS 843,305 787,092
ESCROW DEPOSITS 101,100 101,100
INVESTMENT IN AFFILIATE 5,500,000 3,800,000
NOTES RECEIVABLE 1,747,037 1,747,037
----------- ---------------
TOTAL ASSETS 10,080,024 7,871,170
----------- ---------------
ACCRUED EXPENSES AND OTHER
LIABILITIES 46,459 75,805
DUE TO AFFILIATES-NET 77,481 77,481
RESERVE FOR ESTIMATED COSTS
DURING PERIOD OF LIQUIDATION 500,000 500,000
----------- ---------------
TOTAL LIABILITIES 623,940 653,286
----------- ---------------
NET ASSETS IN PROCESS
OF LIQUIDATION $ 9,456,084 $ 7,217,884
=========== ===============
See notes to financial statements.
3
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, 1996 March 31, 1995
-------------- --------------
Net Assets in Process of Liquidation,
Beginnining of Period $ 7,217,884 $ 8,338,425
Expenses in Excess of Revenues from
Operations (53,417)
Increase in Value of Investment of Affiliate 2,238,200
Reduction in Reserve for Estimated Costs
During Period of Liquidation 53,417
----------- ------------
Net Assets in Process of Liquidation
End of Period $ 9,456,084 $ 8,338,425
=========== ===========
See notes to financial statements.
4
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, 1995.
On September 30, 1994, the Partnership adopted the liquidation basis of
accounting. The statements of net assets in process of liquidation at
March 31, 1996 and December 31, 1995 and the statements of changes in net
assets in process of liquidation for the three months ended March 31,
1996 and 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.
2. INVESTMENT IN AFFILIATE
On September 12, 1995, CableMaxx, Inc. ("CableMaxx") announced the
signing of a definitive agreement with Heartland Wireless Communications,
Inc. ("Heartland") in connection with a proposed merger of CableMaxx into
a subsidiary of Heartland. As a result of the merger, which closed
February 23, 1996, Charter Wireless Cable Holdings, L.L.C. ("Charter
Holdings") received an aggregate of 1,509,809 shares of Heartland common
stock in exchange for its holdings in CableMaxx. In February 1996,
Charter Holdings sold 150,000 of such shares at a net price of $26 per
share and distributed the proceeds to its members on March 19, 1996. The
Partnership received $538,200 as a result of this distribution. As of
March 31, 1996 Charter Holdings held 1,369,809 shares of Heartland common
stock.
5
The Charter Holdings Investment has been adjusted to approximate the net
realizable value of the Partnership's investment assuming a $5.5 million
distribution by Charter Holdings (See Note 3 below). The only assets held
by Charter Holdings as of March 31, 1996 were the shares of Heartland
stock.
3. SUBSEQUENT EVENTS
On May 14,1996, the Partnership announced that Charter Holdings sold its
remaining 1,369,809 shares of Heartland stock for a net price of
approximately $28.00 per share. On such date, the Partnership received a
distribution of $5.5 million from Charter Holdings in respect of such
sale.
Shortly after receipt of the distribution from Charter Holdings, the
Partnership anticipates making a distribution of approximately $3.00 per
Unit to its Unitholders. The Partnership has set the close of business on
Friday, May 31, 1996, as the record date for determining the Unitholders
eligible for distribution of the proceeds of the sale. Each Unitholder
will receive $3.00 per Unit held. Distributions are scheduled to be paid
on Wednesday, June 10, 1996.
Under Galaxy's Partnership Agreement, Galaxy's taxable gain or loss
recognized in a year from the sale of assets (as well as income or loss
from operations) is allocated to a Unitholder based on the number of
months during the year that such Unitholder held such Units. In making
this allocation, it does not matter whether such Units were acquired
before or after the date of the sale of such shares of stock. Management
estimates that the taxable gain from the sale of the Heartland common
stock will be approximately $1.45 per Unit. Accordingly, Unitholders will
be allocated from such transaction approximately $.12 per Unit for each
month during 1996 that he or she held such Units. For purposes of
determining the number of months a Unit is held by a Unitholder, Galaxy
treats all Unitholders that own a unit on the first day of the month as
Unitholders for the entire month.
6
PART I. FINANCIAL INFORMATION
ITEM 2.--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Partnership realized expenses in excess of revenues from operations
during the first quarter of 1996 and 1995. Such excess 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 expenses in excess of revenues from operations is
unaffected by depreciation and amortization expenses, as such expenses
are not recognized under liquidation basis accounting.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1995, the Partnership had $1,908,582 in cash and cash
equivalents deposited primarily in interest-bearing accounts. On March
19, 1996 the Partnership received cash distributions from Charter
Holdings of $538,200. During the first three months of 1996 the
Partnership also paid some accrued liabilities and expenses, leaving a
balance of $2,009,682 in cash and cash equivalents deposited mainly in
interest-bearing accounts.
As of March 31, 1996, other current assets is comprised of interest
accrued on notes receivable of $678,930, and miscellaneous receivables of
$108,162.
As of March 31, 1996, cash and cash equivalents exceeded total
liabilities by $1,385,742.
The liquidity needs of the Partnership for the remainder of 1996 are
expected to be satisfied by existing cash reserves or by the proceeds
from the sale of the remaining assets.
The Partnership has in reserve $500,000 as of March 31, 1996 to cover
certain costs during the period of liquidation, such as the accrual for
state income taxes, professional fees, general and administration
expenses, contingency reserves and other costs related to dissolution and
winding up.
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
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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").
The Telecom Note and the Harron Note are currently not liquid. On May
14,1996, the Partnership announced that Charter Holdings sold its
remaining 1,369,809 shares of Heartland stock for a net price of
approximately $28.00 per share. The Partnership received a distribution
of $5.5 million from Charter Holdings in respect of such sale. (See Note
3,"Subsequent Events" above)
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, 1996 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 sale of cable television system assets in Texas
(the"Austin Systems"), the Partnership agreed to certain indemnification
obligations with 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
8
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.
9
PART II. OTHER INFORMATION
Items 1 through 6
None.
10
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 14, 1995 /s/ Tommy L. Gleason, Jr.
---------------------------
BY: Tommy L. Gleason, Jr.
President and Director
Date: May 14, 1995 /s/ J. Keith Davidson
----------------------------
BY: J. Keith Davidson
Chief Financial Officer
11