SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended June 30, 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 No. 2-78751
AMERICAN CABLE TV INVESTORS 2
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(Exact name of Registrant as specified in its charter)
State of California 84-0904982
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5619 DTC Parkway
Englewood, Colorado 80111
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 267-5500
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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PART I - FINANCIAL INFORMATION
AMERICAN CABLE TV INVESTORS 2
(A Limited Partnership)
Balance Sheets
(unaudited)
June 30, December 31,
1996 1995
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Assets amounts in thousands
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Cash and cash equivalents $3,096 3,045
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Liabilities and Partners' Equity
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Accounts payable and accrued expenses $ 121 91
Amounts due to related parties (note 4) 825 444
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Total liabilities 946 535
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Minority interest in American Cable TV of
Redlands Joint Venture ("Redlands")
(note 1) -- 204
Partners' equity (deficit):
General partners 2,030 2,069
Initial limited partner (269) (266)
Limited partners 389 503
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Total partners' equity 2,150 2,306
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Commitments and contingencies
(notes 4 and 5)
$3,096 3,045
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See accompanying notes to financial statements.
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AMERICAN CABLE TV INVESTORS 2
(A Limited Partnership)
Statements of Operations
(unaudited)
Three months Six months
ended ended
June 30, June 30,
----------------- ----------------
1996 1995 1996 1995
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amounts in thousands,
except unit amounts
Selling, general and administrative
expenses (note 5) $ (153) (20) (271) (33)
Interest income 72 51 115 108
Minority interest's share of earnings
of Redlands -- (4) -- (11)
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Net earnings (loss) $ (81) 27 (156) 64
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Net earnings (loss) per limited
partnership unit (note 2) $ (1.92) 0.64 (3.70) 1.52
======= ====== ====== ======
Limited partnership units outstanding 30,772 30,772 30,772 30,772
======= ====== ====== ======
See accompanying notes to financial statements.
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AMERICAN CABLE TV INVESTORS 2
(A Limited Partnership)
Statement of Partners' Equity
Six months ended June 30, 1996
(unaudited)
Initial
General limited Limited
partners partner partners Total
--------- -------- --------- ------
amounts in thousands
Balance at January 1, 1996 $2,069 (266) 503 2,306
Net loss (39) (3) (114) (156)
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Balance at June 30, 1996 $2,030 (269) 389 2,150
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See accompanying notes to financial statements.
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AMERICAN CABLE TV INVESTORS 2
(A Limited Partnership)
Statements of Cash Flows
(unaudited)
Six months ended
June 30,
----------------------
1996 1995
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amounts in thousands
(see note 3)
Cash flows from operating activities:
Net earnings (loss) $ (156) 64
Adjustments to reconcile net earnings
(loss) to net cash provided by (used in)
operating activities:
Minority interest's share of earnings of
Redlands -- 11
Change in accounts payable, accrued
expenses and amounts due to related
parties 417 (350)
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Net cash provided by (used in)
operating activities 261 (275)
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Cash flows from investing activities -
Distribution to minority owner of (210) --
Redlands ------ -----
Cash flows from financing activities -- --
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Net increase (decrease) in cash and
cash equivalents 51 (275)
Cash and cash equivalents:
Beginning of period 3,045 3,544
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End of period $3,096 3,269
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See accompanying notes to financial statements.
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AMERICAN CABLE TV INVESTORS 2
(A Limited Partnership)
Notes to Financial Statements
June 30, 1996
(unaudited)
(1) Basis of Financial Statement Preparation
----------------------------------------
The accompanying unaudited financial statements include the accounts of
American Cable TV Investors 2 ("ACT 2") and, through December 31, 1995,
Redlands, a joint venture in which ACT 2 had a 65% ownership interest. ACT
2 and Redlands are collectively referred to herein as the "Partnership".
All significant intercompany transactions and accounts have been
eliminated. American Cable TV Investors 3 ("ACT 3"), an affiliate owned
the 35% minority interest in Redlands. In connection with a dissolution,
indemnification and contribution agreement (the "Dissolution Agreement"),
Redlands was dissolved as of January 1, 1996. In accordance with the terms
of the Dissolution Agreement, Redlands' net assets were distributed to ACT
2 and ACT 3 based on their respective ownership interests.
TCI Cablevision Associates, Inc. ("Cablevision"), an indirect subsidiary of
Tele-Communications, Inc. ("TCI"), is the managing agent of ACT 2.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
The accompanying financial statements of the Partnership are unaudited. In
the opinion of management, all adjustments (consisting only of normal
recurring accruals) have been made which are necessary to present fairly
the financial position of the Partnership as of June 30, 1996 and the
results of its operations for the six months ended June 30, 1996 and 1995.
The results of operations for any interim period are not necessarily
indicative of the results for the entire year.
These financial statements should be read in conjunction with the financial
statements and related notes thereto included in the Partnership's December
31, 1995 Annual Report on Form 10-K.
(2) Allocation of Net Earnings and Net Losses
-----------------------------------------
Pursuant to ACT 2's limited partnership agreement, net earnings and net
losses of ACT 2 are to be allocated 1% to the general partners, 2% to the
initial limited partner and 97% to the limited partners until the limited
partners have received cumulative distributions equal to their original
capital contributions ("Payback"). After the limited partners have
received distributions equal to Payback, the allocations of net earnings
and net losses shall be 25% to the general partners, 2% to the initial
limited partner and 73% to the limited partners.
(continued)
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AMERICAN CABLE TV INVESTORS 2
(A Limited Partnership)
Notes to Financial Statements
Net earnings (loss) per limited partnership unit is calculated by dividing
the net earnings (loss) attributable to the limited partners by the number
of limited partnership units outstanding during the period. The limited
partners achieved Payback in 1994. Accordingly, the Partnership's earnings
(losses) for the six months ended June 30, 1996 and 1995 have been
allocated using the post-Payback percentages set forth above.
(3) Supplemental Disclosure of Cash Flow Information
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ACT 2 considers investments with initial maturities of six months or less
to be cash equivalents. At June 30, 1996, $3,000,000 of commercial paper
was included in cash and cash equivalents. ACT 2 is exposed to credit loss
in the event of non-performance by the other parties to such financial
instruments. However, ACT 2 does not anticipate non-performance by the
other parties.
(4) Transactions with Related Parties
---------------------------------
ACT 2 reimburses Cablevision for direct out-of-pocket and indirect expenses
allocable to ACT 2 and for certain personnel employed on a full- or part-
time basis to perform accounting or other services. Such reimbursements
amounted to $18,000 for both the six month periods ended June 30, 1996 and
1995.
Amounts due to related parties represent non-interest-bearing payables to
TCI and its affiliates consisting of (i) the net effect of cash advances
and certain expense allocations and (ii) legal and other fees and expenses
associated with the litigation described in note 5.
(5) Litigation
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On September 30, 1994, a limited partner of ACT 2 filed suit in United
States District Court for the District of Colorado (the "District Court")
against the managing general partner of ACT 2. A similar suit was filed
against the managing general partner of ACT 3. The lawsuit, as amended,
also names certain affiliates of the managing general partner as
defendants. The lawsuit, as amended, alleges that the defendants violated
disclosure requirements under the Securities Exchange Act of 1934 and that
certain defendants breached a fiduciary duty to the plaintiffs in
connection with the sale of the Redlands cable television system. The
defendants believe that the claims asserted are without merit and are
vigorously defending the actions. The defendants moved to dismiss various
claims asserted in the complaint and the plaintiff opposed such motions.
The defendants' motion was denied by the District Court on March 24, 1995.
On November 3, 1995, the District Court granted the plaintiff's motion for
certification of this case as a class action. The class has been defined
to include all persons who were limited partners of ACT 2 as of the close
of business on October 1, 1993, excluding, however, the defendants, their
parent corporations, subsidiaries, and affiliates. A pre-trial conference
was conducted on April 9, 1996 and a trial has been scheduled for the
spring of 1997.
(continued)
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AMERICAN CABLE TV INVESTORS 2
(A Limited Partnership)
Notes to Financial Statements
Section 21 of ACT 2's limited partnership agreement (the "Partnership
Agreement") provides that the General Partners and their affiliates,
subject to certain conditions set forth in more detail in the Partnership
Agreement, are entitled to be indemnified for any liability or loss
incurred by them by reason of any act performed or omitted to be performed
by them in connection with the business of ACT 2, provided that the General
Partners determine, in good faith, that such course of conduct was in the
best interests of ACT 2 and did not constitute proven fraud, negligence,
breach of fiduciary duty or misconduct.
Through June 30, 1996, ACT 2 and ACT 3 have received requests from the
General Partners and certain of their affiliates for the advancement of
legal and other fees and expenses associated with the above-described
lawsuit totaling $1,524,000. Consistent with the terms of the Partnership
Agreement, this amount has been advanced by ACT 2 and ACT 3. ACT 2's 50%
share of such fees and expenses for the six months ended June 30, 1996,
which totals approximately $236,000, has been included in selling, general,
and administrative expenses in the accompanying financial statements. Fees
and expenses incurred by the defendants will continue to be paid in equal
shares by ACT 2 and ACT 3 as they are incurred and approved.
The litigation will have the effect of delaying ACT 2's final cash
distributions. In addition, any successful indemnification claims by the
defendants would have the effect of reducing the amount of such final cash
distributions.
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AMERICAN CABLE TV INVESTORS 2
(A Limited Partnership)
Management's Discussion and Analysis of
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Financial Condition and Results of Operations
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Material Changes in Results of Operations
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ACT 2 is no longer engaged in the cable television business and is
currently seeking to make a final determination of its liabilities so that
liquidating distributions can be made in connection with its dissolution.
Accordingly, the Partnership's results of operations for the six month periods
ended June 30, 1996 and 1995 include (i) the advancement of legal and other fees
and expenses associated with the litigation described in note 5 to the
accompanying financial statements, (ii) costs associated with the administration
of the Partnership and (iii) interest income earned on the Partnership's
invested cash and cash equivalents. Changes in interest income for the six month
period ended June 30, 1996, as compared to the corresponding prior year amount,
are due primarily to changes in the amount of available cash held for
investment.
Material Changes in Financial Condition
---------------------------------------
ACT 2 anticipates that it will make liquidating distributions in connection
with its dissolution as soon as possible following the final determination and
satisfaction of ACT 2's liabilities. However, ACT 2 currently is unable to
predict the timing or amount of such final cash distributions due primarily to
the existence of the litigation described in note 5 to the accompanying
financial statements.
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AMERICAN CABLE TV INVESTORS 2
(A Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
(27) Financial Data Schedule
(b) Reports on Form 8-K filed during the quarter ended June 30, 1996
- none
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SIGNATURES
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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.
AMERICAN CABLE TV INVESTORS 2
(A Limited Partnership)
By: IR-TCI PARTNERS II,
Its Managing General Partner
By: TCI VENTURES, INC.,
A General Partner
Date: August 13, 1996 By: /s/ Gary K. Bracken
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Gary K. Bracken
Vice President and Controller
(Principal Accounting Officer)
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