FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1996
-------------
[ ] 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: 0-14906
JONES CABLE INCOME FUND 1-B, LTD.
- --------------------------------------------------------------------------------
Exact name of registrant as specified in charter
Colorado 84-1010417
- --------------------------------------------------------------------------------
State of organization I.R.S. employer I.D.#
9697 East Mineral Avenue, P.O. Box 3309, Englewood, Colorado 80155-3309
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Address of principal executive office
(303) 792-3111
-----------------------------
Registrant's telephone number
Indicate by check mark whether the registrant (l) has filed all reports required
to be filed by Section l3 or l5(d) of the Securities Exchange Act of l934 during
the preceding l2 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
----- -----
JONES CABLE INCOME FUND 1-B, LTD.
---------------------------------
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
------------------------
June 30, December 31,
ASSETS 1996 1995
------ ---------- ------------
CASH $ 215 $ 54,135
RECEIVABLES:
Trade receivables, less allowance for doubtful
receivables of $17,594 at December 31, 1995 - 247,500
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost - 11,934,307
Less- accumulated depreciation - (5,878,915)
---------- -----------
- 6,055,392
Franchise costs and other intangible assets, net of
accumulated amortization of $3,518,302 at
December 31, 1995 - 1,240,298
Investment in cable television joint venture 1,640,967 2,348,059
---------- -----------
Total investment in cable television properties 9,643,749
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES - 48,919
---------- -----------
Total assets $1,641,182 $ 9,994,303
========== ===========
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
2
JONES CABLE INCOME FUND 1-B, LTD.
---------------------------------
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
------------------------
June 30, December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1996 1995
- --------------------------------------------- ------------- ------------
LIABILITIES:
Debt $ - $ 6,866,146
Accrued liabilities - 389,119
Closing adjustment payable 75,661 -
Accrued distribution to
limited partners - 250,000
Subscriber prepayments - 38,082
------------ ------------
Total liabilities 75,661 7,543,347
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit 100,187 (199,900)
Distributions (110,219) (110,219)
------------ ------------
(9,032) (309,119)
------------ ------------
Limited Partners-
Net contributed capital
(83,884 units outstanding at
June 30, 1996 and December 31, 1995) 34,449,671 34,449,671
Accumulated deficit (9,752,537) (19,671,890)
Distributions (23,122,581) (12,017,706)
------------ ------------
1,574,553 2,760,075
------------ ------------
Total liabilities and partners'
capital (deficit) $ 1,641,182 $ 9,994,303
============ ============
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
3
JONES CABLE INCOME FUND 1-B, LTD.
---------------------------------
(A Limited Partnership)
UNAUDITED STATEMENTS OF OPERATIONS
----------------------------------
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- ------------------------
1996 1995 1996 1995
--------- ---------- ----------- -----------
REVENUES $ - $1,232,710 $ 862,911 $ 2,411,465
COSTS AND EXPENSES:
Operating expense - 769,420 730,908 1,542,136
Management fees and allocated
overhead from General Partner - 144,399 106,575 295,583
Depreciation and amortization - 335,003 227,488 669,807
--------- ---------- ----------- -----------
OPERATING LOSS - (16,112) (202,060) (96,061)
--------- ---------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense - (130,933) (123,888) (253,512)
Gain on sale of cable television system - - 11,122,663 -
Other, net (37,636) (1,394) 129,817 (205)
--------- ---------- ----------- -----------
Total other income (expense), net (37,636) (132,327) 11,128,592 (253,717)
--------- ---------- ----------- -----------
INCOME (LOSS) BEFORE EQUITY
IN NET LOSS OF CABLE
TELEVISION JOINT VENTURE (37,636) (148,439) 10,926,532 (349,778)
EQUITY IN NET LOSS OF
CABLE TELEVISION JOINT
VENTURE (302,048) (393,140) $ (707,092) (1,041,973)
--------- ---------- ----------- -----------
NET INCOME (LOSS) $(339,684) $ (541,579) $10,219,440 $(1,391,751)
========= ========== =========== ===========
ALLOCATION OF NET INCOME (LOSS):
General Partner $(305,722) $ (5,416) $ (300,087) $ (13,918)
========= ========== =========== ===========
Limited Partners $(645,406) $ (536,163) $ 9,919,353 $(1,377,833)
========= ========== =========== ===========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $(4.06) $(6.40) $121.88 $(16.43)
========= ========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF LIMITED PARTNERSHIP
UNITS OUTSTANDING 83,884 83,884 83,884 83,884
========= ========== =========== ===========
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
4
JONES CABLE INCOME FUND 1-B, LTD.
---------------------------------
(A Limited Partnership)
UNAUDITED STATEMENTS OF CASH FLOWS
----------------------------------
For the Six Months Ended
June 30,
---------------------------
1996 1995
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 10,219,440 $(1,391,751)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 227,488 669,807
Equity in net loss of cable television
joint venture 707,092 1,041,973
Gain on sale of cable television system (11,122,663)
Decrease in trade receivables 247,500 34,969
Decrease (increase) in deposits, prepaid expenses
and deferred charges 124,580 (32,877)
Increase (decrease) in accrued liabilities and
subscriber prepayments (427,201) 19,424
------------ -----------
Net cash provided by (used in) operating activities (23,764) 341,545
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (156,802) (625,081)
Proceeds from the sale of cable television system 18,347,667 -
------------ -----------
Net cash provided by (used in) investing activities 18,190,865 (625,081)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 18,135 6,552,071
Repayment of debt (6,884,281) (3,514,555)
Distributions to limited partners (11,104,875) (500,000)
Decrease in accrued distributions to limited partners (250,000) 250,000
Decrease in advances from General Partner - (1,943,298)
------------ -----------
Net cash provided by (used in) financing activities (18,221,021) 844,218
------------ -----------
Increase (decrease) in cash (53,920) 560,682
Cash, beginning of period 54,135 116,839
------------ -----------
Cash, end of period $ 215 $ 677,521
============ ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ - $ 111,391
============ ===========
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
5
JONES CABLE INCOME FUND 1-B, LTD.
---------------------------------
(A Limited Partnership)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
---------------------------------------
(1) This Form 10-Q is being filed in conformity with the SEC requirements for
unaudited financial statements and does not contain all of the necessary
footnote disclosures required for a fair presentation of the Balance Sheets
and Statements of Operations and Cash Flows in conformity with generally
accepted accounting principles. However, in the opinion of management,
this data includes all adjustments, consisting only of normal recurring
accruals, necessary to present fairly the financial position of Jones Cable
Income Fund 1-B, Ltd. (the "Partnership") at June 30, 1996 and December 31,
1995, its Statements of Operations for the three and six month periods
ended June 30, 1996 and 1995 and its Statements of Cash Flows for the six
month periods ended June 30, 1996 and 1995. Results of operations for
these periods are not necessarily indicative of results to be expected for
the full year.
The Partnership owned and operated the cable television system serving the
areas in and around Orangeburg, South Carolina (the "Orangeburg System"). As
discussed below, the Partnership sold the Orangeburg System on February 28,
1996. In addition, the Partnership owns a 40 percent interest in Jones Cable
Income Fund 1-B/C Venture (the "Venture"). The Venture owns and operates the
cable television systems serving the areas in and around Brighton and
Broomfield, Colorado; Lake County, California; Myrtle Creek, Oregon; South Sioux
City, Nebraska; and Three Rivers and Watervliet, Michigan.
(2) Jones Intercable, Inc., a publicly held Colorado corporation (the "General
Partner"), manages the Partnership and receives a fee for its services
equal to 5 percent of the gross revenues of the Partnership, excluding
revenues from the sale of cable television systems or franchises.
Management fees for the three and six month periods ended June 30, 1996
(exclusive of the Partnership's 40 percent interest in the Venture) were $-
0- and $43,146, compared to $61,635 and $120,573, respectively, for the
similar 1995 periods.
The Partnership reimburses the General Partner for certain allocated
overhead and administrative expenses. These expenses represent the salaries and
related benefits paid for corporate personnel, rent, data processing and other
corporate facilities costs. Such personnel provide engineering, marketing,
administrative, accounting, legal and investor relations services to the
Partnership. Allocations of personnel costs are based primarily on actual time
spent by employees of the General Partner with respect to each partnership
managed. Remaining expenses are allocated based on the pro rata relationship of
the Partnership's revenues to the total revenues of all systems owned or managed
by the General Partner and certain of its subsidiaries. Systems owned by the
General Partner and all other systems owned by partnerships for which Jones
Intercable, Inc. is the general partner are also allocated a proportionate share
of these expenses. The General Partner believes that the methodology used in
allocating overhead and administrative expenses is reasonable. Amounts charged
the Partnership by the General Partner for allocated overhead and administrative
expenses for the three and six month periods ending June 30, 1996 (exclusive of
the Partnership's 40 percent interest in the Venture) were $-0- and $63,429,
compared to $82,764 and $175,010, respectively, for the similar 1995 periods.
See Note 4 for disclosure of the management fees and allocated overhead and
administrative expenses paid by the Venture.
(3) On February 28, 1996, the Partnership sold the Orangeburg System to a
subsidiary of the General Partner for $18,347,667, subject to working
capital adjustments of $376,646, which were deducted from the sale
proceeds. The sales price represented the average of three separate,
independent appraisals of the Orangeburg System. The Partnership used the
net sales proceeds to pay all of its indebtedness, which totaled
approximately $6,866,000, and the Partnership distributed the remaining net
sales proceeds, which totaled approximately $11,105,000, to its limited
partners pursuant to the terms of the Partnership's partnership agreement
in April 1996. This distribution represented a return to each limited
partner of approximately $265 for each $1,000 invested in the Partnership.
This amount was in addition to the $328 per $1,000 invested in the
Partnership already returned to the limited partners through prior
distributions. The Partnership will retain its interest in the Venture.
6
(4) Financial information regarding the Venture is presented below.
UNAUDITED BALANCE SHEETS
------------------------
ASSETS June 30, 1996 December 31, 1995
------ -------------- ------------------
Cash and accounts receivable $ 816,109 $ 1,405,468
Investment in cable television properties 46,984,394 49,052,982
Other assets 272,451 385,587
------------ ------------
Total assets $ 48,072,954 $ 50,844,037
============ ============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Debt $ 43,043,057 $ 43,104,090
Payables and accrued liabilities 1,007,956 1,824,946
Partners' contributed capital 39,504,008 39,504,008
Accumulated deficit (35,482,067) (33,589,007)
------------ ------------
Total liabilities and partners' capital $ 48,072,954 $ 50,844,037
============ ============
UNAUDITED STATEMENTS OF OPERATIONS
----------------------------------
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- -------------------------
1996 1995 1996 1995
------------- ------------- ------------ ------------
Revenues $ 6,160,349 $ 5,760,706 $12,117,745 $11,203,617
Operating expenses (3,380,680) (3,158,188) (6,756,806) (6,259,890)
Management fees and allocated overhead
from Jones Intercable, Inc. (710,038) (670,333) (1,413,011) (1,367,298)
Depreciation and amortization (2,079,519) (2,221,415) (4,183,197) (4,443,212)
----------- ----------- ----------- -----------
Operating loss (9,888) (289,230) (235,269) (866,783)
Interest expense (762,094) (906,623) (1,559,497) (1,775,116)
Other, net 12,496 27,010 16,814 21,902
----------- ----------- ----------- -----------
Net loss $ (759,486) $(1,168,843) $(1,777,952) $(2,619,997)
=========== =========== =========== ===========
Management fees paid to the General Partner by the Venture totaled $308,017
and $605,887, respectively, for the three and six months ended June 30, 1996
compared to $288,036 and $560,181, respectively, for the similar 1995 periods.
Reimbursements for overhead and administrative expenses totaled $402,021 and
$807,124, respectively, for the three and six months ended June 30, 1996
compared to $382,297 and $807,117, respectively, for the similar 1995 periods.
Management fees paid by the Venture and attributable to the Partnership totaled
$122,498 and $240,961, respectively, for the three and six months ended June 30,
1996 compared to $114,552 and $222,784, respectively, for the similar 1995
periods. Reimbursements for overhead and administrative expenses attributable
to the Partnership totaled $159,884 and $320,993, respectively, for the three
and six months ended June 30, 1996 compared to $152,040 and $320,990,
respectively, for the similar 1995 periods.
7
JONES CABLE INCOME FUND 1-B, LTD.
---------------------------------
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
FINANCIAL CONDITION
- -------------------
It is the General Partner's publicly announced policy that it intends to
liquidate its managed limited partnerships, including the Partnership, as
opportunities for sales of partnership cable television systems arise in the
marketplace over the next several years. In accordance with the General
Partner's policy, the Partnership sold the Orangeburg System in February 1996.
No specific dates or terms have yet been set for the sale of the Venture's
systems.
The Partnership-
On February 28, 1996, the Partnership sold the Orangeburg System to a
subsidiary of the General Partner for $18,347,667, subject to working capital
adjustments of $376,646, which were deducted from the sale proceeds. The sales
price represented the average of three separate, independent appraisals of the
Orangeburg System. The Partnership used the net sales proceeds to pay all of
its indebtedness, which totaled approximately $6,866,000, and the Partnership
distributed the remaining net sales proceeds, which totaled approximately
$11,105,000, to its limited partners pursuant to the terms of the Partnership's
partnership agreement in April 1996. This distribution represented a return to
each limited partner of approximately $265 for each $1,000 invested in the
Partnership. This amount was in addition to the $328 per $1,000 invested in the
Partnership already returned to the limited partners through prior
distributions. The Partnership will retain its interest in the Venture.
The Venture-
The Partnership continues to own a 40 percent interest in Jones Cable
Income Fund 1-B/C Venture (the "Venture"). The investment is accounted for
under the equity method. When compared to the December 31, 1995 balance, this
investment has decreased by $707,092. This decrease represents the
Partnership's proportionate share of losses during the first six months of 1996.
The Venture's losses, which are principally the result of depreciation and
amortization charges, are expected to continue.
For the six months ended June 30, 1996, the Venture generated net cash from
operating activities totaling $1,363,969, which is available to fund capital
expenditures and non-operating costs. During the first six months of 1996,
capital improvements within the Venture's systems totaled approximately
$1,914,000. Approximately 42 percent of these expenditures were for plant
construction in the Venture's Systems and approximately 20 percent were for
service drops to homes. The remainder of these expenditures related to various
enhancements in all of the Venture's systems. Funding for these expenditures was
provided by cash generated from operations and borrowings under the Venture's
credit facility. Anticipated capital expenditures for the remainder of 1996 are
approximately $2,588,000. Service drops to homes are expected to account for
approximately 51 percent of the anticipated expenditures and new plant
construction is expected to account for approximately 14 percent of the
expenditures. The remainder of the expenditures will be for various enhancements
in the Venture's systems. These capital expenditures are necessary to maintain
the value of the Venture's systems. Funding for these expenditures is expected
to be provided by cash generated from operations and available borrowings from
the Venture's credit facility.
At June 30, 1996, the Venture's $45,000,000 credit facility had $42,700,000
outstanding, leaving $2,300,000 of available borrowings. The revolving credit
facility matures on June 30, 1997, at which time the outstanding balance is
payable in full. Interest on outstanding principal is calculated at the
Venture's option of the Prime Rate plus 1/2 percent or the London Interbank
Offered Rate plus 1-1/2 percent. The effective interest rates on amounts
outstanding as of June 30, 1996 and 1995 were 7.00 percent and 7.81 percent,
respectively.
One of the primary objectives of the Venture is to provide quarterly cash
distributions to the Venture partners, primarily from cash generated through
operating activities of the Venture. The Venture's partners in turn seek to
provide quarterly cash distributions to their partners. The Venture's credit
facility has a maximum amount available of $45,000,000, of which $42,700,000 was
outstanding on June 30, 1996. This limits the amount of borrowing available to
8
the Venture to fund capital expenditures; therefore, the Venture used cash
generated from operations to fund capital expenditures and did not declare any
distributions during the first and second quarters of 1996. Due to the
borrowing limitations, the Venture will need to use cash generated from
operations to fund capital expenditures and the Venture does not anticipate the
resumption of distributions to the Venture partners in the near term.
The General Partner believes that the Venture has sufficient sources of
capital available from cash generated from operations and from borrowings
available under its credit facility to meet its presently anticipated needs so
long as the Venture does not resume cash distributions to the Venture partners.
RESULTS OF OPERATIONS
- ---------------------
On February 28, 1996, the Partnership sold the Orangeburg System, which was
the Partnership's only directly held system; therefore, meaningful comparisons
of revenues, operating expenses, management fees and allocated overhead from the
General Partner and depreciation and amortization expense cannot be made. The
Partnership continues to own a 40 percent interest in the Venture.
Revenues of the Venture increased $399,643, or approximately 7 percent, to
$6,160,349 for the three months ended June 30, 1996 from $5,760,706 for the
comparable 1995 period. Revenues increased $914,128, or approximately 8
percent, to $12,117,745 for the six months ended June 30, 1996 from $11,203,617
for the comparable 1995 period. Basic service rate increases accounted for
approximately 38 percent and 43 percent of the increase in revenues for the
three and six months ended June 30, 1996 and an increase in the number of basic
subscribers accounted for approximately 32 percent and 30 percent of the
increase in revenues for the similar periods. The number of basic subscribers
totaled 65,602 at June 30, 1996 compared to 63,804 at June 30, 1995, an increase
of approximately 3 percent. Increases in advertising activity accounted for
approximately 11 percent and 8 percent, respectively, of the increases in
revenue for the three and six month periods ended June 30, 1996. No other
single factor significantly affected the increases in revenues.
Operating expenses consist primarily of costs associated with the
administration of the Venture's cable television systems. The principal cost
components are salaries paid to system personnel, programming expenses,
professional fees, subscriber billing costs, rent for leased facilities, cable
system maintenance expenses and consumer marketing expenses.
Operating expenses increased $222,492, or approximately 7 percent, to
$3,380,680 for the three months ended June 30, 1996 from $3,158,188 for the
comparable 1995 period. Operating expenses increased $496,916, or approximately
8 percent, to $6,756,806 for the six months ended June 30, 1996 from $6,259,890
for the comparable 1995 period. Operating expenses represented 55 percent and
56 percent, respectively, of revenues for the three and six month periods ended
June 30, 1996 compared to 52 percent and 56 percent, respectively, for the
similar periods in 1995. Increases in personnel related costs and programming
costs primarily accounted for the increases in operating expenses for the three
and six month periods. No other individual factors were significant to the
increases in operating expenses.
Management fees and allocated overhead from the General Partner increased
$39,705, or approximately 6 percent, to $710,038 from $670,333 for the three
months ended June 30, 1996 compared to 1995. Management fees and allocated
overhead from the General Partner increased $45,713, or approximately 3 percent,
to $1,413,011 for the six months ended June 30, 1996 from $1,367,298 for the
comparable period. These increases were due to the increases in revenues, upon
which such fees are based.
Depreciation and amortization expense decreased $141,896, or approximately
6 percent, to $2,079,519 for the three months ended June 30, 1996 from
$2,221,415 for the comparable 1995 period. Depreciation and amortization
expense decreased $260,015, or approximately 6 percent, to $4,183,197 for the
six months ended June 30, 1996 from $4,443,212 for the comparable 1995 period.
These decreases were due to the decrease in the Venture's depreciable asset
base.
Operating loss decreased $279,342 to $9,888 for the three months ended June
30, 1996 compared to $289,230 for the comparable 1995 period. Operating loss
decreased $631,514, or approximately 73 percent, to $235,269 for the six months
ended June 30, 1996 compared to $866,783 for the comparable 1995 period. These
decreases were due to the increases in revenues and the decreases in
depreciation and amortization exceeding the increases in operating expenses and
management fees and allocated overhead from the General Partner.
9
The cable television industry generally measures the financial performance
of a cable television system in terms of cash flow or operating income before
depreciation and amortization. The value of a cable television system is often
determined using multiples of cash flow. This measure is not intended to be a
substitute or improvement upon the items disclosed on the financial statements,
rather it is included because it is an industry standard. Operating income
before depreciation and amortization increased $137,446, or approximately 7
percent, to $2,069,631 for the three months ended June 30, 1996 from $1,932,185
for the three months ended June 30, 1995. For the six month periods ended June
30, 1996, operating income before depreciation and amortization increased
$371,499, or approximately 10 percent, to $3,947,928 in 1996 from $3,576,429 in
1995. These increases were due to the increases in revenues exceeding the
increases in operating expenses and management fees and allocated overhead from
the General Partner.
Interest expense decreased $144,529, or approximately 16 percent, to
$762,094 for the three months ended June 30, 1996 compared to $906,623 for the
comparable 1995 period. Interest expense decreased $215,619, or approximately
12 percent, to $1,559,497 for the six months ended June 30, 1996 from $1,775,116
for the comparable 1995 period. These decreases were due to lower effective
interest rates on interest bearing obligations.
Net loss decreased $246,555, or approximately 35 percent for the three
month periods ended June 30, 1996 and 1995, to $457,438 in 1996 from $703,993 in
1995. For the six month periods ended June 30, 1996 and 1995, net loss
decreased $507,164, or approximately 32 percent, to $1,070,860 in 1996 from
$1,578,024 in 1995. These decreases were due to the factors discussed above.
10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
27) Financial Data Schedule
b) Reports on Form 8-K
None
11
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.
JONES CABLE INCOME FUND 1-B, LTD.
BY: JONES INTERCABLE, INC.
General Partner
By: /S/ Kevin P. Coyle
--------------------------------------
Kevin P. Coyle
Group Vice President/Finance
(Principal Financial Officer)
Dated: August 14, 1996
12