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 March 31, 1997
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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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 (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 (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
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March 31, December 31,
ASSETS 1997 1996
------ ------------ -------------
CASH $ 37,230 $ 42,929
TRADE RECEIVABLES, less allowance for doubtful
receivables of $16,038 and $11,125 at March 31, 1997
and December 31, 1996, respectively 44,839 119,661
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 6,375,279 9,022,869
Less- accumulated depreciation (3,335,485) (4,794,646)
----------- -----------
3,039,794 4,228,223
Franchise costs and other intangible assets, net of
accumulated amortization of $457,730 and $723,631 at
March 31, 1997 and December 31, 1996, respectively 20,270 187,369
----------- -----------
Total investment in cable television properties 3,060,064 4,415,592
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 113,868 32,502
----------- -----------
Total assets $ 3,256,001 $ 4,610,684
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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
------------------------
March 31, December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1997 1996
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LIABILITIES:
Debt $ 2,086,324 $ 5,296,610
General Partner advances 40,509 -
Trade accounts payable and accrued liabilities 222,289 320,020
Accrued distribution to limited partners 200,000 200,000
Subscriber prepayments 34,033 41,856
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Total liabilities 2,583,155 5,858,486
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PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated earnings (deficit) 156,914 (3,487)
Distributions (84,329) (82,309)
------------ -----------
73,585 (84,796)
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Limited Partners-
Net contributed capital
(17,000 units outstanding at March 31, 1997
and December 31, 1996) 7,288,694 7,288,694
Accumulated earnings (deficit) 6,164,567 (302,700)
Distributions (12,854,000) (8,149,000)
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599,261 (1,163,006)
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Total partner's capital (deficit) 672,846 (1,247,802)
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Total liabilities and partners' capital (deficit) $ 3,256,001 $ 4,610,684
============ ===========
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
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For the Three Months Ended
March 31,
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1997 1996
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REVENUES $1,186,435 $1,198,372
COSTS AND EXPENSES:
Operating expense 811,818 778,951
Management fees and allocated overhead
from General Partner 135,721 141,408
Depreciation and amortization 218,559 205,090
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OPERATING INCOME 20,337 72,923
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OTHER INCOME (EXPENSE):
Interest expense (76,227) (84,999)
Gain on sale of cable television system 6,684,781 -
Other, net (1,223) (716)
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NET INCOME (LOSS) $6,627,668 $ (12,792)
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ALLOCATION OF NET INCOME (LOSS):
General Partner $ 166,401 $ (128)
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Limited Partners $6,461,267 $ (12,664)
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NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $380.07 $(.74)
========== ==========
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 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 Three Months Ended
March 31,
----------------------------
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 6,627,668 $ (12,792)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 218,559 205,090
Gain on sale of cable television system (6,684,781) -
Decrease in trade receivables 74,822 60,798
Increase in deposits, prepaid expenses
and deferred charges (91,415) (44,263)
Decrease in trade accounts payable and accrued
liabilities and subscriber prepayments (105,554) (103,856)
Increase (decrease) in advances from General Partner 40,509 (44,429)
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Net cash provided by operating activities 79,808 60,548
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (165,221) (150,984)
Proceeds from sale of cable television system, net of
brokerage fee 7,995,000 -
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Net cash provided by (used in) investing activities 7,829,779 (150,984)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 200,369 400,000
Repayment of debt (3,410,655) (11,793)
Distributions to limited partners (4,705,000) (200,000)
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Net cash provided by (used in) financing activities (7,915,286) 188,207
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Increase (decrease) in cash (5,699) 97,771
Cash, beginning of period 42,929 28,199
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Cash, end of period 37,230 $ 125,970
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SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 130,274 $ 99,227
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The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
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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 March 31, 1997 and December 31, 1996, its Statements of
Operations and its Statements of Cash Flows for the three month periods ended
March 31, 1997 and 1996. 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 system serving the communities of
Owatonna and Glencoe, Minnesota (the "Owatonna/Glencoe System"). As discussed
below, the Partnership sold its Milwaukie System in March 1997. (See Note 3.)
(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 month periods ended March 31, 1997 and 1996 were $59,321 and $59,919,
respectively.
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. Such services, and their related costs, are necessary to the
operations of the Partnership and would have been incurred by the Partnership if
it was a stand alone entity. 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 month periods ended
March 31, 1997 and 1996 were $76,400 and $81,489, respectively.
(3) On March 11, 1997, the Partnership sold its Milwaukie System to an
unaffiliated party for a sales price of $8,200,000, subject to normal working
capital closing adjustments. From the sale proceeds, the Partnership repaid
$3,200,000 of the amount outstanding under its credit facility, paid a brokerage
fee of 2.5 percent of the sales price, or $205,000, to The Jones Group, Ltd., a
subsidiary of the General Partner, for acting as a broker in this transaction,
and then made a distribution of $4,505,000 to the Partnership's limited
partners. This distribution gave the Partnership's limited partners an
approximate return of $530 for each $1,000 invested in the Partnership. This
distribution, together with all prior distributions, has given the Partnership's
limited partners a return of approximately $1,512 for each $1,000 invested in
the Partnership. Because the distributions 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 plus the liquidation preference as set forth in the partnership
agreement, the General Partner did not receive any general partner distribution
on the sale of the Milwaukie System. Because the sale of the Milwaukie System
did not represent the sale of all or substantially all of the assets of the
Partnership, no vote of the limited partners of the Partnership was required to
approve the sale. The Partnership will continue to own and operate its
Owatonna/Glencoe System.
6
The pro forma effect of the sale of the Milwaukie System on the results
of the Partnership's operations for the periods ended March 31, 1997 and 1996,
assuming the transaction had occurred at the beginning of the year, is presented
in the following unaudited tabulation:
For the Period Ended March 31, 1997
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Pro Forma
As Reported Adjustments Pro Forma
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Revenues $1,186,435 $ (412,366) $774,069
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Operating Income $ 45,337 $ 37,136 $ 82,473
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Net Income $6,627,668 $(6,604,594) $ 23,074
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For the Period Ended March 31, 1996
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Pro Forma
As Reported Adjustments Pro Forma
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Revenues $1,198,372 $ (485,260) $713,112
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Operating Income $ 72,923 $ (26,444) $ 46,479
========== =========== ========
Net Income $ (12,792) $ 190,932 $178,140
========== =========== ========
(4) Certain prior year amounts were reclassified to conform to the 1997
presentation.
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JONES CABLE INCOME FUND 1-A, LTD.
---------------------------------
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
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FINANCIAL CONDITION
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On March 11, 1997, the Partnership sold its Milwaukie System to an
unaffiliated party for a sales price of $8,200,000, subject to normal working
capital closing adjustments. The Partnership subsequently repaid $3,200,000 of
the amount outstanding under its credit facility, paid a brokerage fee of 2.5
percent of the sales price, or $205,000, to The Jones Group, Ltd., a subsidiary
of the General Partner, for acting as a broker in this transaction, and then
made a distribution of $4,505,000 to the Partnership's limited partners. This
distribution gave the Partnership's limited partners an approximate return of
$530 for each $1,000 invested in the Partnership. This distribution, together
with all prior distributions, has given the Partnership's limited partners a
return of approximately $1,512 for each $1,000 invested in the Partnership.
Because the distributions 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 plus the
liquidation preference as set forth in the partnership agreement, the General
Partner did not receive any general partner distribution on the sale of the
Milwaukie System. Because the sale of the Milwaukie System did not represent
the sale of all or substantially all of the assets of the Partnership, no vote
of the limited partners of the Partnership was required to approve the sale.
The Partnership will continue to own and operate its Owatonna/Glencoe System.
For the three months ended March 31, 1997, the Partnership generated
operating income before depreciation and amortization totaling $263,896, which
is available to fund distributions, capital expenditures and non-operating
costs. During the first three months of 1997, the Partnership expended
approximately $165,000 for capital improvements. Approximately 45 percent of
these expenditures related to the purchase of converters for the Partnership's
systems and approximately 35 percent related to service drops to subscribers'
homes. The remaining expenditures were for various enhancements in 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 1997 are
approximately $295,000. Of these expenditures, approximately 50 percent relates
to service drops to subscribers' homes. The remainder of the anticipated
expenditures are for various enhancements in the Partnership's Owatonna/Glencoe
System. These capital expenditures are necessary to maintain the value of the
Partnership's Owatonna/Glencoe System. Funding for these expenditures is
expected to be provided by cash generated from operations and borrowings under
the Partnership's new revolving credit facility.
As a result of the sale of the Milwaukie System on March 11, 1997, the
Partnership repaid $3,200,000 of the then-outstanding balance of its $6,500,000
revolving credit facility, and the commitment amount was reduced to $3,300,000.
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 March
31, 1997 was $2,000,000, leaving $1,300,000 for future needs. 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 March 31, 1997 and 1996 were 7.03 percent and 6.75 percent,
respectively.
A primary objective of the Partnership is to provide quarterly cash
distributions from operating cash flow to its partners. In addition to the
distribution from the sale proceeds from the Milwaukie System, the Partnership
declared a $200,000 cash flow distribution to its limited partners during the
first quarter of 1997, which was principally from first quarter operating cash
flow of the Partnership. The Partnership expects to continue quarterly
distributions from operating cash flow but anticipates that the amount of
distributions will be less due to the sale by the Partnership of its Milwaukie
System. The General Partner has agreed to defer its portion of cash
distributions until the Partnership is liquidated. Future distributions will be
announced on a quarter-by-quarter basis and no determination has been made
regarding any specific level of future distributions. The payment of quarterly
operating cash flow distributions may reduce the financial flexibility of the
Partnership.
The General Partner believes that cash flow from operations and available
borrowings under the Partnership's credit facility will be sufficient to fund
capital expenditures and other liquidity needs of the Partnership's
Owatonna/Glencoe System.
8
RESULTS OF OPERATIONS
- ---------------------
Revenues of the Partnership decreased $11,937, or approximately 1 percent,
to $1,186,435 for the three months ended March 31, 1997 from $1,198,372 for the
similar period in 1996. This decrease was a result of the sale of the Milwaukie
System. Disregarding the effect of the sale of the Milwaukie System, revenues
would have increased $60,957, or approximately 9 percent, to $774,069 in 1997
from $713,112 in 1996. The increase in revenues was primarily the result of
basic service rate increases and an increase in the number of basic subscribers.
Basic service rate increases accounted for approximately 47 percent of the
increase in revenues. The increase in the number of subscribers accounted for
approximately 22 percent of the increase in revenues. The number of basic
subscribers in the Partnership's Owatonna/Glencoe System increased by 213, or
approximately 3 percent, to 8,317 subscribers at March 31, 1997 from 8,104
subscribers at March 31, 1996. No other individual factor contributed
significantly to the increase in revenues.
Operating expenses consist primarily of costs associated with the operation
and 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 marketing expenses.
Operating expenses increased $32,867, or approximately 4 percent, to
$811,818 for the three month period ended March 31, 1997 from $778,951 for the
similar 1996 period. This increase was primarily due to increases in
programming costs. Disregarding the effect of the sale of the Milwaukie System,
operating expenses would have increased $21,788, or approximately 5 percent, to
$477,586 in 1997 from $455,798 in 1996. Operating expenses represented
approximately 66 percent and 65 percent of revenues for the three month periods
ended March 31, 1997 and 1996, respectively. No other individual factor
contributed significantly to the increases in operating expenses.
The cable television industry generally measures the financial performance
of a cable television system in terms of operating cash flow (revenues less
operating expenses). 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 cash flow decreased
$44,804, or approximately 11 percent, to $374,617 for the three months ended
March 31, 1997 from $419,421 for the similar 1996 period. This decrease was a
result of the sale of the Milwaukie System. Disregarding the effect of the sale
of the Milwaukie System, operating cash flow would have increased $39,169, or
approximately 15 percent, to $296,483 for the three months ended March 31, 1997
from $257,314 for the comparable 1996 period. This increase was due to the
increase in revenues exceeding the increase in operating expenses.
Management fees and allocated overhead from Jones Intercable, Inc.
decreased $5,687, or approximately 4 percent, to $135,721 for the three month
period ended March 31, 1997 from $141,408 for the similar 1996 period. This
decrease was a result of the sale of the Milwaukie System. Disregarding the
effect of the sale of the Milwaukie System, management fees and allocated
overhead from Jones Intercable, Inc. would have increased $10,809, or
approximately 14 percent to $86,122 in 1997 from $75,313 in 1996. This increase
was primarily due to the increase in revenues, upon which such management fees
and allocations are based, and the timing of certain expenses allocated from
Jones Intercable, Inc.
Depreciation and amortization expense increased $13,469, or approximately 7
percent, to $218,559 for the three months ended March 31, 1997 from $205,090 for
the similar 1996 period. Disregarding the effect of the sale of the Milwaukie
System, depreciation and amortization would have increased $17,130, or
approximately 13 percent, to $152,888 in 1997 from $135,758 in 1996. This
increase was a result of capital additions in 1996.
Operating income decreased $52,586, or approximately 72 percent, to $20,337
for the three months ended March 31, 1997 from $72,923 for the similar 1996
period. This decrease was a result of the sale of the Milwaukie System.
Disregarding the effect of the sale of the Milwaukie System, operating income
would have increased $11,230, or approximately 24 percent, to $57,473 for the
three months ended March 31, 1997 from $46,243 for the comparable 1996 period.
This increase was due to the increase in revenues exceeding the increases in
operating expenses, management fees and allocated overhead from the General
Partner and depreciation and amortization expense.
Interest expense decreased $8,772, or approximately 10 percent, to $76,227
for the three months ended March 31, 1997 from $84,999 for the similar 1996
period. This decrease was primarily due to lower outstanding balances on the
Partnership's interest bearing obligations as a result of the portion of the
proceeds from the sale of the Milwaukie System being used to repay $3,200,000 of
the outstanding loan principal balance.
9
The Partnership reported a gain of $6,684,781 from the sale of the
Milwaukie System for the quarter ended March 31, 1997. No such gain was
reported in the similar period in 1996.
The Partnership reported net income of $6,627,668 for the three months
ended March 31, 1997 compared to a net loss of $12,792 for the similar 1996
period. This change was primarily the result of the gain on the sale of the
Milwaukie System.
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-A, LTD.
BY: JONES INTERCABLE, INC.
General Partner
By: /S/ Kevin P. Coyle
-----------------------------
Kevin P. Coyle
Group Vice President/Finance
(Principal Financial Officer)
Dated: May 13, 1997
12