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 September 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: 0-14689
JONES CABLE INCOME FUND 1-A, LTD.
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Exact name of registrant as specified in charter
Colorado 84-1010416
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State of organization I.R.S. employer I.D.#
9697 East Mineral Avenue, Englewood, Colorado 80112
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Address of principal executive office
(303) 792-3111
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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 ____
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JONES CABLE INCOME FUND 1-A, LTD.
---------------------------------
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
------------------------
September 30, December 31,
ASSETS 1996 1995
CASH $ 82,329 $ 28,199
TRADE RECEIVABLES, less allowance for doubtful
receivables of $10,958 and $5,875 at September 30, 1996
and December 31, 1995, respectively 91,171 128,240
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 10,725,430 10,237,855
Less- accumulated depreciation (6,533,932) (5,995,702)
---------- ----------
4,191,498 4,242,153
Franchise costs and other intangible assets, net of
accumulated amortization of $706,264 and $654,163 at
September 30, 1996 and December 31, 1995, respectively 204,736 256,837
---------- ----------
Total investment in cable television properties 4,396,234 4,498,990
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 33,742 36,394
---------- ----------
Total assets $ 4,603,476 $ 4,691,823
========== ==========
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
2
JONES CABLE INCOME FUND 1-A, LTD.
---------------------------------
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
------------------------
September 30, December 31,
LIABILITIES AND PARTNERS' DEFICIT 1996 1995
--------------------------------- ------------- ------------
LIABILITIES:
Debt $ 5,209,587 $ 4,606,827
Accounts payable - General Partner - 39,725
Trade accounts payable and accrued liabilities 215,797 347,836
Accrued distribution to limited partners 200,000 200,000
Subscriber prepayments 45,493 46,562
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Total liabilities 5,670,877 5,240,950
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PARTNERS' DEFICIT:
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (3,703) (4,581)
Distributions (80,289) (74,229)
----------- -----------
(82,992) (77,810)
----------- -----------
Limited Partners-
Net contributed capital
(17,000 units outstanding at
September 30, 1996 and December 31, 1995) 7,288,694 7,288,694
Accumulated deficit (324,103) (411,011)
Distributions (7,949,000) (7,349,000)
----------- -----------
(984,409) (471,317)
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Total liabilities and partners' deficit $ 4,603,476 $ 4,691,823
=========== ===========
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
3
JONES CABLE INCOME FUND 1-A, LTD.
---------------------------------
(A Limited Partnership)
UNAUDITED STATEMENTS OF OPERATIONS
----------------------------------
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
----------------------------- ---------------------------
1996 1995 1996 1995
------------ ------------- ----------- -------------
REVENUES $1,257,694 $1,159,976 $3,696,552 $3,410,205
COSTS AND EXPENSES:
Operating expenses 760,813 675,964 2,296,301 2,053,901
Management fees and
allocated overhead from
General Partner 141,858 141,303 435,195 424,183
Depreciation and
amortization 202,994 195,820 613,045 587,015
---------- ---------- ---------- ----------
OPERATING INCOME 152,029 146,889 352,011 345,106
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest expense (88,892) (80,496) (260,846) (247,513)
Other, net (1,446) 251 (3,379) 576
---------- ---------- ---------- ----------
Total other income (expense), net (90,338) (80,245) (264,225) (246,937)
---------- ---------- ---------- ----------
NET INCOME $ 61,691 $ 66,644 $ 87,786 $ 98,169
========== ========== ========== ==========
ALLOCATION OF NET INCOME:
General Partner $ 617 $ 667 $ 878 $ 982
========== ========== ========== ==========
Limited Partners $ 61,074 $ 65,977 $ 86,908 $ 97,187
========== ========== ========== ==========
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ 3.59 $ 3.88 $ 5.11 $ 5.72
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER
OF LIMITED PARTNERSHIP
UNITS OUTSTANDING 17,000 17,000 17,000 17,000
========== ========== ========== ==========
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
4
JONES CABLE INCOME FUND 1-A, LTD.
---------------------------------
(A Limited Partnership)
UNAUDITED STATEMENTS OF CASH FLOWS
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For the Nine Months Ended
September 30,
-----------------------------
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 87,786 $ 98,169
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 613,045 587,015
Decrease in trade receivables 37,069 1,239
Increase in deposits, prepaid expenses and
deferred charges (26,122) (29,018)
Decrease in trade accounts payable and
accrued liabilities and subscriber prepayments (133,108) (38,288)
Decrease in advances from General Partner (39,725) (483,487)
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Net cash provided by operating activities 538,945 135,630
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (487,575) (455,733)
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Net cash used in investing activities (487,575) (455,733)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 640,941 1,018,435
Repayment of debt (38,181) (29,886)
Cash flow distributions to limited partners (600,000) (600,000)
Decrease in accrued distributions to limited partners - (35,000)
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Net cash provided by financing activities 2,760 353,549
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Increase in cash 54,130 33,446
Cash, beginning of period 28,199 78,286
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Cash, end of period $ 82,329 $ 111,732
========= ==========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 262,051 $ 236,427
========= ==========
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
5
JONES CABLE INCOME FUND 1-A, 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-A, Ltd. (the
"Partnership") at September 30, 1996 and December 31, 1995, its Statements of
Operations for the three and nine month periods ended September 30, 1996 and
1995 and its Statements of Cash Flows for the nine month periods ended September
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 owns the cable television systems serving the communities
of Milwaukie, Oregon (the "Milwaukie System") and Owatonna and Glencoe,
Minnesota (the "Owatonna/Glencoe System").
(2) Jones Intercable, Inc. (the "General Partner"), a publicly held Colorado
corporation, 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 nine month periods ended September 30, 1996 were $62,885 and $184,828,
respectively, compared to $57,999 and $170,510, 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 services
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
allocated to the Partnership by the General Partner for allocated overhead and
administrative expenses for the three and nine month periods ended September 30,
1996 were $78,973 and $250,367, respectively, compared to $83,304 and $253,673,
respectively, for the similar 1995 periods.
(3) On November 8, 1996, the Partnership entered into an asset purchase
agreement providing for the sale of the Milwaukie System by the Partnership to
an unaffiliated party for a sales price of $8,200,000, subject to normal
closing adjustments. A condition to the closing of this transaction is that the
sale of the Milwaukie System occur on or prior to March 12, 1997. Closing of the
sale is subject to several closing conditions, including the receipt of the
consent of the governmental franchising authorities and other regulatory
authorities having jurisdiction. Because the sale of the Milwaukie System does
not represent the sale of all or substantially all of the assets of the
Partnership, no vote of the limited partners of the Partnership is required to
approve this sale.
Upon the consummation of the proposed sale of the Milwaukie System, the
Partnership intends to repay at least $2,550,000 of the amount outstanding under
the Partnership's credit facility and to distribute the remainder of the sale
proceeds to the Partnership's limited partners. Because the distributions to be
made on the sale of the Milwaukie System together with all prior distributions
made by the Partnership do not total the amounts originally contributed to the
Partnership by the limited partners, the General Partner will not receive any
general partner distribution on the sale of the Milwaukie System. A subsidiary
of the General Partner, The Jones Group, Ltd., will receive a brokerage fee of
2.5 percent of the sales price for acting as a broker in this transaction. The
asset purchase agreement requires that the General Partner guarantee the
Partnership's performance under the asset purchase agreement.
Following the sale of the Milwaukie System, the Parnership will continue to
own and operate the Owantonna/Glencoe System.
(4) Certain prior year amounts were reclassified to conform to the 1996
presentation.
6
JONES CABLE INCOME FUND 1-A, 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 has entered into an asset purchase agreement
to sell its Milwaukie System. No specific dates or terms have yet been set for
the sale of the Partnership's Owatonna/Glencoe System.
On November 8, 1996, the Partnership entered into an asset purchase
agreement providing for the sale of the Milwaukie System by the Partnership to
an unaffiliated party for a sales price of $8,200,000, subject to normal
closing adjustments. A condition to the closing of this transaction is that the
sale of the Milwaukie System occur on or prior to March 12, 1997. Closing of the
sale is subject to several closing conditions, including the receipt of the
consent of the governmental franchising authorities and other regulatory
authorities having jurisdiction. Because the sale of the Milwaukie System does
not represent the sale of all or substantially all of the assets of the
Partnership, no vote of the limited partners of the Partnership is required to
approve this sale.
Upon the consummation of the proposed sale of the Milwaukie System, the
Partnership intends to repay at least $2,550,000 of the amount outstanding under
the Partnership's credit facility and to distribute the remainder of the sale
proceeds to the Partnership's limited partners. Because the distributions to be
made on the sale of the Milwaukie System together with all prior distributions
made by the Partnership do not total the amounts originally contributed to the
Partnership by the limited partners, the General Partner will not receive any
general partner distribution on the sale of the Milwaukie System. A subsidiary
of the General Partner, The Jones Group, Ltd., will receive a brokerage fee of
2.5 percent of the sales price for acting as a broker in this transaction. The
asset purchase agreement requires that the General Partner guarantee the
Partnership's performance under the asset purchase agreement.
Following the sale of the Milwaukie System, the Parnership will continue to
own and operate the Owantonna/Glencoe System.
For the nine months ended September 30, 1996, the Partnership generated
operating income before depreciation and amortization totaling $965,056, which
is available to fund distributions, capital expenditures and non-operating
costs. During the first nine months of 1996, the Partnership expended
approximately $488,000 for capital improvements. Approximately 42 percent of
these expenditures related to service drops to subscribers' homes and
approximately 20 percent related to the upgrade of equipment within the
Partnership's systems. Funding for these expenditures was provided by cash
generated from operations and borrowings under the Partnership's credit
facility. Anticipated capital expenditures for the remainder of 1996 are
approximately $180,000. Of these expenditures, approximately 32 percent relates
to service drops. Approximately 21 percent relates to the upgrade of equipment
and approximately 16 percent relates to the purchase of converters. The
remainder of the anticipated expenditures are for various enhancements in the
Partnership's systems. These capital expenditures are necessary to maintain the
value of the Partnership's systems. Funding for these expenditures is expected
to be provided by cash generated from operations and borrowings under its credit
facility.
The Partnership is a party to a $6,500,000 revolving credit facility. The
revolving credit period expires December 31, 1997, at which time the outstanding
balance converts to a term loan with a final maturity of December 31, 2003. The
balance outstanding on the Partnership's credit facility at September 30, 1996
was $5,100,000, leaving $1,400,000 available to fund capital expenditures.
Interest on outstanding principal amounts on the credit facility is computed at
the Partnership's option of the London Interbank Offered Rate plus 1-1/4 percent
or the Prime Rate plus 1/4 percent. The effective interest rates on amounts
outstanding as of September 30, 1996 and 1995 were 6.84 percent and 7.17
percent, respectively.
A primary objective of the Partnership is to provide quarterly cash
distributions from operating cash flow to the limited partners. The Partnership
declared a $200,000 distribution to limited partners during the third quarter of
1996, which was principally from third quarter operating cash flow of the
Partnership. Future distributions will be announced on a quarter-by-quarter
basis and no determination has been made regarding the level of future
distributions. The payment of quarterly operating cash flow distributions may
reduce the financial flexibility of the Partnership.
The General Partner presently believes that the Partnership has sufficient
sources of capital available from cash on hand, cash generated from operations
and available borrowings under its credit facility to meet its presently
anticipated needs.
RESULTS OF OPERATIONS
- ---------------------
Revenues of the Partnership increased $97,718, or approximately 8 percent,
to $1,257,694 for the three months ended September 30, 1996 from $1,159,976 for
the similar period in 1995. For the nine month periods ended
7
September 30, 1996 and 1995, revenues increased $286,347, or approximately 8
percent, to $3,696,552 at September 30, 1996 from $3,410,205 for the similar
period in 1995. These increases in revenues were primarily due to basic rate
increases and increases in the number of basic subscribers. Basic rate increases
accounted for approximately 41 percent and 43 percent, respectively, of the
increase in revenues for the three and nine month periods ended September 30,
1996. The number of basic subscribers increased approximately 4 percent to
13,728 basic subscribers at September 30, 1996 from 13,184 for the similar
period in 1995. This increase in basic subscribers accounted for approximately
40 percent and 41 percent, respectively, of the increase in revenues for the
three and nine month periods ended September 30, 1996. No other individual
factor significantly affected the increases in revenues.
Operating expenses consist primarily of costs associated with the
administration of the Partnership'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 $84,849, or approximately 13 percent, to
$760,813 for the three month period ended September 30, 1996 from $675,964 for
the similar 1995 period. This increase was primarily due to increases in
programming costs. Operating expenses increased $242,400, or approximately 12
percent, to $2,296,301 for the nine month period ended September 30, 1996 from
$2,053,901 for the similar 1995 period. This increase was primarily due to
increases in programming costs and personnel costs. Operating expenses
represented approximately 60 percent and 58 percent of revenues for the three
month periods ended September 30, 1996 and 1995, respectively, and represented
approximately 62 percent and 60 percent of revenues for the nine month periods
ended September 30, 1996 and 1995, respectively. No other individual factor
contributed significantly to the increases in operating expenses.
Management fees and allocated overhead from the General Partner increased
$555, or less than 1 percent, to $141,858 for the three month period ended
September 30, 1996 from $141,303 for the similar 1995 period. Management fees
and allocated overhead from the General Partner increased $11,012, or
approximately 3 percent, to $435,195 for the nine months ended September 30,
1996 from $424,183 for the similar 1995 period. These increases were due to an
increase in management fees due to an increase in revenues, upon which such
management fees are based.
Depreciation and amortization expense increased $7,174, or approximately 4
percent, to $202,994 for the three months ended September 30, 1996 from $195,820
for the similar 1995 period. Depreciation and amortization expense increased
$26,030, or approximately 4 percent, to $613,045 for the nine months ended
September 30, 1996 from $587,015 for the similar 1995 period. These increases
were due to capital additions in 1996.
Operating income increased $5,140, or approximately 4 percent, to $152,029
for the three months ended September 30, 1996 from $146,889 for the similar 1995
period. Operating income increased $6,905, or approximately 2 percent, to
$352,011 for the nine months ended September 30, 1996 from $345,106 for the
similar 1995 period. These increases were due to the increases in revenues
exceeding the increases in operating expenses, management fees and allocated
overhead from the General Partner and depreciation and amortization expense.
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 $12,314, or approximately 4
percent, to $355,023 for the three months ended September 30, 1996 from $342,709
for the similar 1995 period. Operating income before depreciation and
amortization increased $32,935, or approximately 4 percent, to $965,056 for the
nine months ended September 30, 1996 from $932,121 for the similar 1995 period.
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 increased $8,396, or approximately 10 percent, to $88,892
for the three months ended September 30, 1996 from $80,496 for the similar 1995
period. Interest expense increased $13,333, or approximately 5 percent, to
$260,846 for the nine month period ended September 30, 1996 from $247,513 for
the similar 1995 period. These increases were due to higher outstanding balances
on interest bearing obligations.
Net income decreased $4,953, or approximately 7 percent, to $61,691 for the
three months ended September 30, 1996 from $66,644 for the similar 1995 period.
Net income decreased $10,383, or approximately 11 percent, to $87,786
8
for the nine month period ended September 30, 1996 from $98,169 for the similar
1995 period. These decreases were due to the factors discussed above.
9
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
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.
JONES CABLE INCOME FUND 1-A, LTD.
BY: JONES INTERCABLE, INC.
General Partner
By: /S/ Kevin P. Coyle
-----------------------------------
Kevin P. Coyle
Group Vice President/Finance
(Principal Financial Officer)
Dated: November 13, 1996
11