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, 1997
------------------
or
[_] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______ to _______
Commission File Number 0-16200
CABLE TV FUND 14-B, LTD.
- -------------------------------------------------------------------------------
Exact name of registrant as specified in charter
Colorado #84-1024658
- -------------------------------------------------------------------------------
State of organization I.R.S. employer I.D.#
9697 East Mineral Avenue, P.O. Box 3309, Englewood, Colorado 80155-3309
------------------------------------------------------------------------
Address of principal executive office
(303) 792-3111
-----------------------------
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
--- ---
CABLE TV FUND 14-B, LTD.
------------------------
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
-------------------------------------
September 30, December 31,
ASSETS 1997 1996
------ ------------- ------------
CASH $ 489,312 $ 840,309
TRADE RECEIVABLES, less allowance for doubtful receivables of
$177,587 and $140,879 at September 30, 1997 and December 31, 1996,
respectively 1,450,884 2,077,493
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 103,288,077 98,093,791
Less- accumulated depreciation (53,571,517) (48,820,169)
------------ ------------
49,716,560 49,273,622
Franchise costs and other intangible assets, net of accumulated
amortization of $83,122,181 and $77,746,909 at September 30, 1997
and December 31, 1996, respectively 47,918,117 53,293,389
------------ ------------
Total investment in cable television properties 97,634,677 102,567,011
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 798,101 430,596
------------ ------------
Total assets $100,372,974 $105,915,409
============ ============
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated balance sheets.
2
CABLE TV FUND 14-B, LTD.
------------------------
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
-------------------------------------
September 30, December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1997 1996
------------------------------------------- -------------- -------------
LIABILITIES:
Debt $ 54,108,713 $ 56,656,424
General Partner advances 475,162 449,094
Deferred brokerage fee 920,000 920,000
Trade accounts payable and accrued liabilities 2,172,916 2,151,254
Subscriber prepayments 577,554 562,446
------------ ------------
Total liabilities 58,254,345 60,739,218
------------ ------------
MINORITY INTEREST IN CABLE TELEVISION
JOINT VENTURE 3,500,884 3,963,820
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (740,918) (714,972)
------------ ------------
(739,918) (713,972)
------------ ------------
Limited Partners-
Net contributed capital (261,353 units
outstanding at September 30, 1997 and
December 31, 1996) 112,127,301 112,127,301
Accumulated deficit (72,769,638) (70,200,958)
------------ ------------
39,357,663 41,926,343
------------ ------------
Total liabilities and partners' capital (deficit) $100,372,974 $105,915,409
============ ============
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated balance sheets.
3
CABLE TV FUND 14-B, LTD.
------------------------
(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
---------------------------- ---------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
REVENUES $10,219,629 $ 9,444,545 $30,635,555 $27,941,427
COSTS AND EXPENSES:
Operating expenses 5,566,487 5,082,209 17,066,669 15,374,149
Management fees and allocated
overhead from General Partner 1,067,426 1,031,916 3,318,269 3,195,570
Depreciation and amortization 3,535,390 3,331,032 10,389,159 9,946,032
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) 50,326 (612) (138,542) (574,324)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (1,008,237) (1,042,277) (2,939,157) (3,078,436)
Other, net (16,383) (131,777) 20,137 (33,653)
----------- ----------- ----------- -----------
Total other income
(expense), net (1,024,620) (1,174,054) (2,919,020) (3,112,089)
----------- ----------- ----------- -----------
CONSOLIDATED LOSS BEFORE
MINORITY INTEREST (974,294) (1,174,666) (3,057,562) (3,686,413)
MINORITY INTEREST IN
CONSOLIDATED LOSS 146,037 198,636 462,936 568,472
----------- ----------- ----------- -----------
NET LOSS $ (828,257) $ (976,030) $(2,594,626) $(3,117,941)
=========== =========== =========== ===========
ALLOCATION OF NET LOSS:
General Partner $ (8,282) $ (9,760) $ (25,946) $ (31,179)
=========== =========== =========== ===========
Limited Partners $ (819,975) $ (966,270) $(2,568,680) $(3,086,762)
=========== =========== =========== ===========
NET LOSS PER LIMITED
PARTNERSHIP UNIT $ (3.14) $ (3.70) $ (9.83) $ (11.81)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF LIMITED PARTNERSHIP
UNITS OUTSTANDING 261,353 261,353 261,353 261,353
=========== =========== =========== ===========
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated statements.
4
CABLE TV FUND 14-B, LTD.
------------------------
(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
For the Nine Months Ended
September 30,
--------------------------
1997 1996
----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,594,626) $(3,117,941)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 10,389,159 9,946,032
Minority interest in consolidated loss (462,936) (568,472)
Decrease (increase) in trade receivables 626,609 (565,592)
Increase in deposits, prepaid expenses and
deferred charges (630,044) (82,664)
Increase (decrease) in General Partner advances 26,068 (1,896,049)
Increase (decrease) in trade accounts payable and
accrued liabilities and subscriber prepayments 36,770 (165,656)
----------- -----------
Net cash provided by operating activities 7,391,000 3,549,658
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (5,194,286) (5,154,910)
----------- -----------
Net cash used in investing activities (5,194,286) (5,154,910)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 1,452,055 4,077,690
Repayment of debt (3,999,766) (2,105,704)
----------- -----------
Net cash provided by (used in) financing activities (2,547,711) 1,971,986
----------- -----------
Increase (decrease) in cash (350,997) 366,734
Cash, beginning of period 840,309 474,904
----------- -----------
Cash, end of period $ 489,312 $ 841,638
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 3,228,868 $ 2,838,302
=========== ===========
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated statements.
5
CABLE TV FUND 14-B, LTD.
------------------------
(A Limited Partnership)
NOTES TO UNAUDITED CONSOLIDATED 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 Cable TV Fund 14-B, Ltd. (the
"Partnership") at September 30, 1997 and December 31, 1996, its results of
operations for the three and nine month periods ended September 30, 1997 and
1996 and its cash flows for the nine month periods ended September 30, 1997 and
1996. Results of operations for these periods are not necessarily indicative of
results to be expected for the full year.
The Partnership is a Colorado limited partnership that was formed pursuant
to the public offering of limited partnership interests in the Cable TV Fund 14
Limited Partnership Program (the "Program"), which was sponsored by Jones
Intercable, Inc. (the "General Partner"), to acquire, own and operate cable
television systems in the United States. Cable TV Fund 14-A, Ltd. ("Fund 14-A")
is the other partnership that was formed pursuant to the Program. The
Partnership and Fund 14-A formed a general partnership known as Cable TV Fund
14-A/B Venture (the "Venture") in 1988, in which the Partnership owns a 73
percent interest and Fund 14-A owns a 27 percent interest. The Venture owns the
cable television system serving certain areas in Broward County, Florida (the
"Broward System"). The Venture has entered into an agreement to sell its
Broward System (see Note 2). The Partnership also directly owns the cable
television systems serving Surfside, South Carolina (the "Surfside System") and
Littlerock, California (the "Littlerock System"). The Partnership has entered
into an agreement to sell its Surfside System (see Note 3). Because of the
Partnership's majority ownership interest in the Venture, the accompanying
financial statements present the Partnership's and the Venture's financial
condition and results of operations on a consolidated basis, with the ownership
interest of Fund 14-A in the Venture shown as a minority interest. All
interpartnership accounts and transactions have been eliminated.
(2) On October 3, 1997, the Venture entered into an Asset Purchase Agreement
(the "Agreement") to sell the Broward System to an unaffiliated party (the
"Purchaser") for a sales price of $140,000,000, subject to closing adjustments
that may have the effect of reducing the sales price by up to approximately
$7,000,000 (see below). Closing of the sale, which is anticipated to occur
during the first quarter of 1998, is subject to several conditions, including
necessary governmental and other third party consents. In addition, because the
Broward System constitutes all or substantially all of the Partnership's assets,
the sale must be approved by the owners of a majority of the interests of the
Partnership. Upon the consummation of the proposed sale of the Broward System,
the Venture will repay all of its indebtedness, which totaled $39,571,399 at
September 30, 1997, and a brokerage fee totaling $3,500,000 to The Jones Group,
Ltd. ("The Jones Group"), a wholly owned subsidiary of the General Partner, and
then the Venture will distribute the remaining net sale proceeds estimated to
total $96,831,351 to the two constituent partnerships of the Venture in
proportion to their ownership interests in the Venture. The Partnership
accordingly will receive 73 percent of such proceeds, estimated to total
$70,583,138, and then the Partnership will distribute this portion of the net
sale proceeds to its limited partners of record as of the closing date of the
sale of the Broward System. This distribution will give the Partnership's
limited partners a return of $270 for each $500 limited partner interest, or
$540 for each $1,000 invested in the Partnership. Because limited partners will
have not received total distributions equal to 125 percent of the capital
initially contributed to the Partnership by the limited partners, the General
Partner will not receive any general partner distribution from the Broward
System's sale. Since the Broward System represents the only asset of the
Venture, the Venture will be liquidated and dissolved upon completion of the
sale of the Broward System.
If the closing adjustments result in a lower sales price, however, the
amount of the net sale proceeds available for distribution to limited partners
will be reduced. If the sales price is reduced because the Broward System has
less than 56,637 basic subscribers at closing, the sales price will be reduced
by an amount equal to $2,472 multiplied by the number by which the system's
basic subscribers are less than 56,637. It is possible that the sales price
could be reduced by as much as $7,000,000, from $140,000,000 to $133,000,000, if
the number of basic subscribers to the Broward System are equal to or less than
53,805 at closing. In such event, the limited partners of the Partnership, as a
group, would receive only $65,480,638, or $251 for each $500 limited partnership
interest, or $502 for each $1,000 invested in the Partnership. The Venture
would have no obligation to close the sale of the Broward System if the sales
price were reduced below $133,000,000 due to this basic subscriber closing
adjustment. Because the General Partner expects that the Broward System will
have approximately 56,700 basic subscribers as of the closing date of the
system's sale to the Purchaser, the
6
General Partner anticipates that any closing adjustments relating to the number
of the system's basic subscribers will not reduce the sales price by a material
amount.
In order to induce the Purchaser to enter into the Agreement, the Venture
has agreed that if (i) the General Partner fails to vote in favor of or fails to
recommend to the limited partners of the Partnership that they vote in favor of
the sale of the Broward System to the Purchaser and the limited partners of the
Partnership fail to approve the sale of the Broward System to the Purchaser, or
(ii) the limited partners of the Partnership fail to approve the sale of the
Broward System to the Purchaser because of a superior proposal for the Broward
System received by the Venture after the date of the Agreement and prior to the
vote of the limited partners of the Partnership or any transaction having a
similar effect, the Venture will pay to the Purchaser a break-up fee in an
amount equal to the greater of 5 percent of the $140,000,000 sales price or 5
percent of the sales price to be received by the Venture from the party making
the superior proposal. For this purpose, the term "superior proposal" means any
bona fide, written, unsolicited offer or proposal relating to a merger or other
business combination involving the Venture or the acquisition in any manner of
any significant equity interest in, or a substantial portion of the assets of,
the Venture. Limited partners are informed that the Venture has received no
superior proposal for the Broward System and the General Partner currently does
not expect that the Venture will receive a superior proposal for the Broward
System.
In order to induce the Purchaser to enter into the Agreement, the Venture
also has agreed that if the limited partners of the Partnership fail to approve
the sale of the Broward System to the Purchaser for any reason, the Venture will
pay to the Purchaser an amount equal to the actual reasonable fees and expenses
paid or payable by or on behalf of the Purchaser to its attorneys, accountants,
environmental consultants, management consultants, as well as costs and expenses
incurred by the Purchaser in connection with time spent by its employees, in
connection with the negotiation, execution and delivery of the Agreement.
(3) On November 4, 1997, the Partnership entered into an asset purchase
agreement to sell the Surfside System to an unaffiliated party for a sales price
of $51,500,000, subject to customary closing adjustments. Closing of the sale,
which is anticipated to occur in the second quarter of 1998, is subject to
several conditions, including necessary governmental and other third party
consents. In addition, because the Surfside System constitutes all or
substantially all of the Partnership's assets, the sale must be approved by the
owners of a majority of the interests of the Partnership. Upon the consummation
of the proposed sale of the Surfside System, the Partnership will repay its
indebtedness, expected to total approximately $14,400,000, will pay a brokerage
fee totaling $1,287,500 to The Jones Group, will pay a deferred acquisition fee
of $920,000 to The Jones Group and the Partnership will retain approximately
$447,500 for working capital purposes. The Partnership will distribute the
remaining net sale proceeds of approximately $34,445,000 to the limited partners
of the Partnership. This distribution will give the Partnership's limited
partners a return of $132 for each $500 limited partner interest, or $264 for
each $1,000 invested in the Partnership. Taking into account the anticipated
distribution from the sale of the Broward System and the anticipated
distribution from the sale of the Surfside System, the limited partners of the
Partnership can expect to receive a total of $804 for each $1,000 invested in
the Partnership. Because the anticipated distributions to the limited partners
from the sale of the Surfside System and the Broward System will not return 125
percent of the amount initially contributed by the limited partners to the
Partnership, the General Partner will not receive a general partner distribution
from the sale proceeds.
(4) The General Partner manages the Partnership and the Venture and receives a
fee for its services equal to 5 percent of the gross revenues of the Partnership
and the Venture, excluding revenues from the sale of cable television systems or
franchises. Management fees paid to the General Partner by the Partnership and
the Venture for the three and nine month periods ended September 30, 1997 were
$510,982 and $1,531,778, respectively, compared to $472,227 and $1,397,071,
respectively, for the similar 1996 periods.
The Partnership and the Venture reimburse 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, accounting, administrative, legal and investor
relations services to the Partnership and the Venture. Such services, and their
related costs, are necessary to the operation of the Partnership and the Venture
and would have been incurred by the Partnership and the Venture if they were
stand alone entities. 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 and the Venture'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
7
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. Reimbursements made to the General Partner for allocated overhead
and administrative expenses for the three and nine month periods ended September
30, 1997 were $556,444 and $1,786,491, respectively, compared to $559,689 and
$1,798,499, respectively, for the similar 1996 periods.
(5) Certain prior year amounts have been reclassified to conform to the 1997
presentation.
8
(6) Financial information regarding the Venture is presented below.
UNAUDITED BALANCE SHEETS
------------------------
September 30, 1997 December 31, 1996
------------------- ------------------
ASSETS
------
Cash and accounts receivable $ 1,464,269 $ 1,368,882
Investment in cable television properties 52,942,242 56,526,226
Other assets 669,633 381,950
------------ ------------
Total assets $ 55,076,144 $ 58,277,058
============ ============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Debt $ 39,571,339 $ 41,262,561
Payables and accrued liabilities 2,231,212 2,032,654
Partners' contributed capital 70,000,000 70,000,000
Accumulated deficit (56,726,407) (55,018,157)
------------ ------------
Total liabilities and partners' capital $ 55,076,144 $ 58,277,058
============ ============
UNAUDITED STATEMENTS OF OPERATIONS
----------------------------------
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
---------------------------- ---------------------------
1997 1996 1997 1996
---------- ---------- ----------- -----------
Revenues $6,817,075 $6,327,488 $20,596,170 $18,861,274
Operating expenses 3,685,786 3,378,454 11,396,740 10,292,354
Management fees and allocated
overhead from General Partner 716,563 697,370 2,250,567 2,165,938
Depreciation and amortization 2,211,708 2,064,445 6,515,963 6,199,608
---------- ---------- ----------- -----------
Operating income 203,018 187,219 432,900 203,374
Interest expense (746,619) (777,137) (2,169,648) (2,268,893)
Other, net 4,722 (143,053) 28,498 (32,161)
---------- ---------- ----------- -----------
Net loss $ (538,879) $ (732,971) $(1,708,250) $(2,097,680)
========== ========== =========== ===========
Management fees paid to the General Partner by the Venture totaled $340,854
and $1,029,808, respectively, for the three and nine month periods ended
September 30, 1997, compared to $316,375 and $943,064, respectively, for the
similar 1996 periods. Reimbursements for overhead and administrative expenses
paid to the General Partner by the Venture totaled $375,709 and $1,220,759,
respectively, for the three and nine month periods ended September 30, 1997,
compared to $380,995 and $1,222,874 for the similar 1996 periods.
9
CABLE TV FUND 14-B, LTD.
------------------------
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
----------------------
FINANCIAL CONDITION
- -------------------
The Partnership owns a 73 percent interest in the Venture. The
accompanying financial statements include 100 percent of the accounts of the
Partnership and those of the Venture, reduced by the 27 percent minority
interest in the Venture.
The Venture-
On October 3, 1997, the Venture entered into an Asset Purchase Agreement
("the Agreement") to sell the Broward System to an unaffiliated party (the
"Purchaser") for a sales price of $140,000,000, subject to closing adjustments
that may have the effect of reducing the sales price by up to approximately
$7,000,000 (see below). Closing of the sale, which is anticipated to occur
during the first quarter of 1998, is subject to several conditions, including
necessary governmental and other third party consents. In addition, because the
Broward System constitutes all or substantially all of the Partnership's assets,
the sale must be approved by the owners of a majority of the interests of the
Partnership. Upon the consummation of the proposed sale of the Broward System,
the Venture will repay all of its indebtedness, which totaled $39,571,399 at
September 30, 1997, and a brokerage fee totaling $3,500,000 to The Jones Group,
and then the Venture will distribute the remaining net sale proceeds estimated
to total $96,831,351 to the two constituent partnerships of the Venture in
proportion to their ownership interests in the Venture. The Partnership
accordingly will receive 73 percent of such proceeds, estimated to total
$70,583,138, and then the Partnership will distribute this portion of the net
sale proceeds to its limited partners of record as of the closing date of the
sale of the Broward System. This distribution will give the Partnership's
limited partners a return of $270 for each $500 limited partner interest, or
$540 for each $1,000 invested in the Partnership. Because limited partners will
have not received total distributions equal to 125 percent of the capital
initially contributed to the Partnership by the limited partners, the General
Partner will not receive any general partner distribution from the Broward
System's sale. Since the Broward System represents the only asset of the
Venture, the Venture will be liquidated and dissolved upon completion of the
sale of the Broward System.
If the closing adjustments result in a lower sales price, however, the
amount of the net sale proceeds available for distribution to limited partners
will be reduced. If the sales price is reduced because the Broward System has
less than 56,637 basic subscribers at closing, the sales price will be reduced
by an amount equal to $2,472 multiplied by the number by which the system's
basic subscribers are less than 56,637. It is possible that the sales price
could be reduced by as much as $7,000,000, from $140,000,000 to $133,000,000, if
the number of basic subscribers to the Broward System are equal to or less than
53,805 at closing. In such event, the limited partners of the Partnership, as a
group, would receive only $65,480,638, or $251 for each $500 limited partnership
interest, or $502 for each $1,000 invested in the Partnership. The Venture
would have no obligation to close the sale of the Broward System if the sales
price were reduced below $133,000,000 due to this basic subscriber closing
adjustment. Because the General Partner expects that the Broward System will
have approximately 56,700 basic subscribers as of the closing date of the
system's sale to the Purchaser, the General Partner anticipates that any closing
adjustments relating to the number of the system's basic subscribers will not
reduce the sales price by a material amount.
In order to induce the Purchaser to enter into the Agreement, the Venture
has agreed that if (i) the General Partner fails to vote in favor of or fails to
recommend to the limited partners of the Partnership that they vote in favor of
the sale of the Broward System to the Purchaser and the limited partners of the
Partnership fail to approve the sale of the Broward System to the Purchaser, or
(ii) the limited partners of the Partnership fail to approve the sale of the
Broward System to the Purchaser because of a superior proposal for the Broward
System received by the Venture after the date of the Agreement and prior to the
vote of the limited partners of the Partnership or any transaction having a
similar effect, the Venture will pay to the Purchaser a break-up fee in an
amount equal to the greater of 5 percent of the $140,000,000 sales price or 5
percent of the sales price to be received by the Venture from the party making
the superior proposal. For this purpose, the term "superior proposal" means any
bona fide, written, unsolicited offer or proposal relating to a merger or other
business combination involving the Venture or the acquisition in any manner of
any significant equity interest in, or a substantial portion of the assets of,
the Venture. Limited partners are informed that the Venture has received no
superior
10
proposal for the Broward System and the General Partner currently does not
expect that the Venture will receive a superior proposal for the Broward System.
In order to induce the Purchaser to enter into the Agreement, the Venture
also has agreed that if the limited partners of the Partnership fail to approve
the sale of the Broward System to the Purchaser for any reason, the Venture will
pay to the Purchaser an amount equal to the actual reasonable fees and expenses
paid or payable by or on behalf of the Purchaser to its attorneys, accountants,
environmental consultants, management consultants, as well as costs and expenses
incurred by the Purchaser in connection with time spent by its employees, in
connection with the negotiation, execution and delivery of the Agreement.
For the nine months ended September 30, 1997, the Venture generated net
cash from operating activities totaling $4,455,355, which is available to fund
capital expenditures and non-operating costs. During the first nine months of
1997, capital expenditures in the Broward System totaled approximately
$2,700,000. Approximately 47 percent of these expenditures related to service
drops to homes. Approximately 37 percent of these expenditures related to new
plant construction. The remainder of the expenditures was to maintain the value
of the Broward System. Such expenditures were funded primarily from cash on
hand and cash generated from operations. Anticipated capital expenditures for
the remainder of 1997 are approximately $1,400,000. Approximately 36 percent
will relate to new plant construction. Approximately 29 percent will relate to
service drops to homes. The remainder of the anticipated expenditures is for
various enhancements in the Broward System. These capital expenditures are
necessary to maintain the value of the Broward System until it is sold. These
capital expenditures are expected to be funded from cash on hand, cash generated
from operations and, if necessary, borrowings under the Venture's credit
facility.
The Venture has a reducing revolving credit facility with an available
commitment of $42,500,000. The entire $42,500,000 commitment is available
through December 31, 1998, at which time the commitment will begin to reduce
quarterly until December 31, 2003 when the amount available will be zero. At
September 30, 1997, the balance outstanding was $39,403,000, leaving $3,097,000
available for future borrowings. Interest is at the Venture's option of the
Prime Rate plus 1/4 percent, London Interbank Offered Rate ("LIBOR") plus 1-1/4
percent or the Certificate of Deposit Rate (the "CD Rate") plus 1-3/8 percent.
The effective interest rates on amounts outstanding as of September 30, 1997 and
1996 were 6.95 percent and 6.85 percent, respectively.
The General Partner believes that the Venture has sufficient sources of
capital from cash on hand, cash generated from operations and borrowings
available under its credit facility to meet its current needs.
The Partnership-
On November 4, 1997, the Partnership entered into an asset purchase
agreement to sell the Surfside System to an unaffiliated party for a sales price
of $51,500,000, subject to customary closing adjustments. Closing of the sale,
which is anticipated to occur in the second quarter of 1998, is subject to
several conditions, including necessary governmental and other third party
consents. In addition, because the Surfside System constitutes all or
substantially all of the Partnership's assets, the sale must be approved by the
owners of a majority of the interests of the Partnership. Upon the consummation
of the proposed sale of the Surfside System, the Partnership will repay its
indebtedness, expected to total approximately $14,400,000, will pay a brokerage
fee totaling $1,287,500 to The Jones Group, will pay a deferred acquisition fee
of $920,000 to The Jones Group and the Partnership will retain approximately
$447,500 for working capital purposes. The Partnership will distribute the
remaining net sale proceeds of approximately $34,445,000 to the limited partners
of the Partnership. This distribution will give the Partnership's limited
partners a return of $132 for each $500 limited partner interest, or $264 for
each $1,000 invested in the Partnership. Taking into account the anticipated
distribution from the sale of the Broward System and the anticipated
distribution from the sale of the Surfside System, the limited partners of the
Partnership can expect to receive a total of $804 for each $1,000 invested in
the Partnership. Because the anticipated distributions to the limited partners
from the sale of the Surfside System and the Broward System will not return 125
percent of the amount initially contributed by the limited partners to the
Partnership, the General Partner will not receive a general partner distribution
from the sale proceeds.
For the nine months ended September 30, 1997, the Surfside and Littlerock
Systems generated net cash from operating activities totaling $2,935,645, which
is available to fund capital expenditures and non-operating costs. The
Partnership expended approximately $2,500,000 on capital additions in its wholly
owned Surfside and Littlerock Systems during the first nine months of 1997.
Plant extensions accounted for approximately 32 percent of these expenditures
and service drops to homes accounted for approximately 27 percent. Upgrade of
cable plant accounted for approximately 23 percent of these expenditures. The
remainder of the expenditures was to maintain the value of the Partnership's
systems.
11
Funding for these expenditures was provided by cash generated from operations.
Anticipated capital expenditures for the remainder of 1997 are approximately
$1,800,000. Upgrade of cable plant is expected to account for approximately 39
percent of these expenditures. Approximately 29 percent is designated for plant
construction in both of the Partnership's systems. Service drops to homes are
expected to account for approximately 14 percent. The remainder of these
expenditures is necessary to maintain the value of the Partnership's systems
until they are sold. Funding for these improvements will be provided by cash on
hand, cash generated from operations and, if necessary, borrowings under the
Partnership's credit facility.
The Partnership has a reducing revolving credit facility with an available
commitment of $18,000,000. At September 30, 1997, the balance outstanding was
$14,400,000, leaving $3,600,000 available for future borrowings. On September
30, 1998, the maximum amount available begins to reduce quarterly until December
31, 2003 when the amount available will be zero. Interest on the reducing
revolving credit facility is at the Partnership's option of the Base Rate, LIBOR
plus 1 percent, or the CD Rate plus 1-1/8 percent. The effective interest rates
on amounts outstanding as of September 30, 1997 and 1996 were 6.87 percent and
6.85 percent, respectively.
The General Partner believes that the Partnership's wholly owned systems
have sufficient sources of capital from cash generated from operations and
borrowings available under the reducing revolving credit facility to meet their
presently anticipated needs.
12
RESULTS OF OPERATIONS
- ---------------------
The results of operations for the Partnership are summarized in the selected
financial data below:
For the Three Months Ended September 30, 1997
----------------------------------------------
Partnership Venture
Owned Owned Consolidated
----------- ------- ------------
Revenues $3,402,554 $6,817,075 $10,219,629
Operating expenses $1,880,701 $3,685,786 $ 5,566,487
Management fees and allocated
overhead from General Partner $ 350,863 $ 716,563 $ 1,067,426
Depreciation and amortization $1,323,682 $2,211,708 $ 3,535,390
---------- ---------- -----------
Operating income (loss) $ (152,692) $ 203,018 $ 50,326
---------- ---------- -----------
Interest expense $ (261,618) $ (746,619) $(1,008,237)
Other, net $ (21,105) $ 4,722 $ (16,383)
---------- ---------- -----------
Consolidated loss before minority interest $ (435,415) $ (538,879) $ (974,294)
Minority interest in consolidated loss $ - $ 146,037 $ 146,037
---------- ---------- -----------
Net loss $ (435,415) $ (392,842) $ (828,257)
========== ========== ===========
For the Three Months Ended September 30, 1996
-----------------------------------------------
Partnership Venture
Owned Owned Consolidated
----------- ---------- ------------
Revenues $3,117,057 $6,327,488 $ 9,444,545
Operating expenses $1,703,755 $3,378,454 $ 5,082,209
Management fees and allocated
overhead from General Partner $ 334,546 $ 697,370 $ 1,031,916
Depreciation and amortization $1,252,102 $2,078,930 $ 3,331,032
---------- ---------- -----------
Operating income (loss) $ (173,346) $ 172,734 $ (612)
---------- ---------- -----------
Interest expense $ (265,140) $ (777,137) $(1,042,277)
Other, net $ (3,209) $ (128,568) $ (131,777)
---------- ---------- -----------
Consolidated loss before minority interest $ (441,695) $ (732,971) $(1,174,666)
Minority interest in consolidated loss $ - $ 198,636 $ 198,636
---------- ---------- -----------
Net loss $ (441,695) $ (534,335) $ (976,030)
========== ========== ===========
13
For the Nine Months Ended September 30, 1997
---------------------------------------------
Partnership Venture
Owned Owned Consolidated
----------- ----------- ------------
Revenues $10,039,385 $20,596,170 $30,635,555
Operating expenses $ 5,669,929 $11,396,740 $17,066,669
Management fees and allocated
overhead from General Partner $ 1,067,702 $ 2,250,567 $ 3,318,269
Depreciation and amortization $ 3,873,196 $ 6,515,963 $10,389,159
----------- ----------- -----------
Operating income (loss) $ (571,442) $ 432,900 $ (138,542)
----------- ----------- -----------
Interest expense $ (769,509) $(2,169,648) $(2,939,157)
Other, net $ (8,361) $ 28,498 $ 20,137
----------- ----------- -----------
Consolidated loss before minority interest $(1,349,312) $(1,708,250) $(3,057,562)
Minority interest in consolidated loss $ - $ 462,936 $ 462,936
----------- ----------- -----------
Net loss $(1,349,312) $(1,245,314) $(2,594,626)
=========== =========== ===========
For the Nine Months Ended September 30, 1996
--------------------------------------------
Partnership Venture
Owned Owned Consolidated
----------- ----------- ------------
Revenues $ 9,080,153 $18,861,274 $27,941,427
Operating expenses $ 5,081,795 $10,292,354 $15,374,149
Management fees and allocated
overhead from General Partner $ 1,029,632 $ 2,165,938 $ 3,195,570
Depreciation and amortization $ 3,746,424 $ 6,199,608 $ 9,946,032
----------- ----------- -----------
Operating income (loss) $ (777,698) $ 203,374 $ (574,324)
----------- ----------- -----------
Interest expense $ (809,543) $(2,268,893) $(3,078,436)
Other, net $ (1,492) $ (32,161) $ (33,653)
----------- ----------- -----------
Consolidated loss before minority interest $(1,588,733) $(2,097,680) $(3,686,413)
Minority interest in consolidated loss $ - $ 568,472 $ 568,472
----------- ----------- -----------
Net loss $(1,588,733) $(1,529,208) $(3,117,941)
=========== =========== ===========
14
Partnership Owned -
- -----------------
Revenues of the Partnership's Surfside System and Littlerock System
increased $285,497, or approximately 9 percent, to $3,402,554 for the three
months ended September 30, 1997 from $3,117,057 for the three months ended
September 30, 1996. For the nine months ended September 30, 1997 and 1996,
revenues increased $959,232, or approximately 11 percent, to $10,039,385 in 1997
from $9,080,153 in 1996. The increases in revenues were due primarily to basic
rate increases, increases in the number of basic subscribers and advertising
sales. Basic rate increases accounted for approximately 39 percent and 32
percent, respectively, of the increase in revenues for the three and nine month
periods ended September 30, 1997. The number of basic subscribers increased
approximately 3 percent to 27,391 at September 30, 1997 from 26,557 at September
30, 1996. The increases in the number of basic subscribers accounted for
approximately 21 percent and 18 percent, respectively, of the increases in
revenues for the three and nine month periods ended September 30, 1997. An
increase in advertising sales accounted for approximately 20 percent and 23
percent, respectively, of the increases in revenues for the three and nine month
periods ended September 30, 1997. No other individual factor was significant to
the increase.
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 marketing expenses.
Operating expenses for the three month periods increased $176,946, or
approximately 10 percent, to $1,880,701 at September 30, 1997 from $1,703,755 at
September 30, 1996. For the nine month periods ended September 30, operating
expenses increased $588,134, or approximately 12 percent, to $5,669,929 in 1997
from $5,081,795 in 1996. These increases were primarily due to increases in
programming fees. Operating expenses represented 55 percent and 56 percent,
respectively, of revenue for both the three and nine month periods ended
September 30, 1997 and 1996. No other individual factor significantly affected
the increase 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 increased
$108,551, or approximately 8 percent, to $1,521,853 for the three months ended
September 30, 1997 from $1,413,302 for the three months ended September 30,
1996. For the nine month periods ended September 30, operating cash flow
increased $371,098, or approximately 9 percent, to $4,369,456 in 1997 from
$3,998,358 in 1996. These increases were due to the increases in revenues
exceeding the increases in operating expenses.
Management fees and allocated overhead from the General Partner increased
$16,317, or approximately 5 percent, to $350,863 for the three months ended
September 30, 1997 from $334,546 for the comparable 1996 period. This increase
was due to the increase in revenues, upon which such management fees and
allocations are based. For the nine month periods ended September 30,
management fees and allocated overhead from the General Partner increased
$38,070, or approximately 4 percent, to $1,067,702 in 1997 from $1,029,632 in
1996. This increase was due to the increase in revenues, upon which such
management fees are based. This increase was partially offset by a decrease in
expenses allocated from Jones Intercable, Inc.
Depreciation and amortization expense for the three month periods increased
$71,580, or approximately 6 percent, to $1,323,682 at September 30, 1997 from
$1,252,102 at September 30, 1996. For the nine month periods ended September
30, depreciation and amortization expense increased $126,772, or approximately 3
percent, to $3,873,196 in 1997 from $3,746,424 in 1996. These increases were
due to capital additions during 1997.
Operating loss decreased $20,654, or approximately 12 percent, to $152,692
for the three months ended September 30, 1997 from $173,346 for the three months
ended September 30, 1996. For the nine month periods ended September 30,
operating loss decreased $206,256, or approximately 27 percent, to $571,442 in
1997 from $777,698 in 1996. These decreases were due to the increases in
operating cash flow exceeding the increases in depreciation and amortization
expense.
Interest expense decreased $3,522, or approximately 1 percent, to $261,618
for the three months ended September 30, 1997 from $265,140 for the three months
ended September 30, 1996. For the nine month periods ended
15
September 30, interest expense decreased $40,034, or approximately 5 percent, to
$769,509 in 1997 from $809,543 in 1996. These decreases were primarily due to
lower outstanding balances on interest bearing obligations.
Net loss decreased $6,280, or approximately 1 percent, to $435,415 for the
three months ended September 30, 1997 from $441,695 for the three months ended
September 30, 1996. For the nine month periods ended September 30, net loss
decreased $239,421, or approximately 15 percent, to $1,349,312 in 1997 from
$1,588,733 in 1996. These losses are the result of the factors discussed above.
Venture Owned -
- -------------
In addition to its ownership of the Surfside System and the Littlerock
System, the Partnership owns a 73 percent interest in the Venture.
Revenues of the Venture's Broward System increased $489,587, or
approximately 8 percent, to $6,817,075 for the three months ended September 30,
1997 from $6,327,488 for the three months ended September 30, 1996. Revenues
for the nine month periods ended September 30, 1997 and 1996 increased
$1,734,896, or approximately 9 percent, to $20,596,170 in 1997 from $18,861,274
in 1996. These increases in revenues were due to basic rate increases and
increases in advertising sales. Basic rate increases accounted for
approximately 57 percent and 42 percent, respectively, of the increases in
revenues for the three and nine month periods ended September 30, 1997. The
increase in advertising sales accounted for approximately 20 percent of the
increases in revenues for both the three and nine month periods ended September
30, 1997. No other individual factor was significant to the increase in
revenues.
Operating expenses increased $307,332, or approximately 9 percent, to
$3,685,786 for the three months ended September 30, 1997 from $3,378,454 for the
three months ended September 30, 1996. For the nine month periods ended
September 30, operating expenses increased $1,104,386, or approximately 11
percent, to $11,396,740 in 1997 from $10,292,354 in 1996. Operating expenses
represented 54 percent and 55 percent, respectively, of revenue for the three
and nine months ended September 30, 1997 compared to 53 percent and 55 percent
of revenue for the three and nine months ended September 30, 1996. These
increases in operating expenses were due primarily to increases in programming
fees and advertising costs. No other individual factor was significant to the
increase in operating expenses.
Operating cash flow increased $182,255, or approximately 6 percent, to
$3,131,289 for the three months ended September 30, 1997 from $2,949,034 for the
comparable 1996 period. For the nine month periods ended September 30,
operating cash flow increased $630,510, or approximately 7 percent, to
$9,199,430 in 1997 from $8,568,920 in 1996. These increases were due to the
increases in revenues exceeding the increases in operating expenses.
Management fees and allocated overhead from the General Partner increased
$19,193, or approximately 3 percent, to $716,563 for the three months ended
September 30, 1997 from $697,370 for the three months ended September 30, 1996.
For the nine month periods ended September 30, management fees and allocated
overhead from the General Partner increased $84,629, or approximately 4 percent,
to $2,250,567 in 1997 from $2,165,938 in 1996. These increases were due to the
increases in revenues, upon which such management fees are based. These
increases were partially offset by decreases in expenses allocated by Jones
Intercable, Inc.
Depreciation and amortization expense increased $132,778, or approximately
6 percent, to $2,211,708 for the three months ended September 30, 1997 from
$2,078,930 for the three months ended September 30, 1996. For the nine month
periods ended September 30, depreciation and amortization expense increased
$316,355, or approximately 5 percent, to $6,515,963 in 1997 from $6,199,608 in
1996. These increases were due to capital additions during 1997.
Operating income increased $30,284, or approximately 18 percent, to
$203,018 for the three months ended September 30, 1997 from $172,734 for the
comparable 1996 period. For the nine month periods ended September 30,
operating income increased $229,526 to $432,900 in 1997 from $203,374 in 1996.
These increases were due to the increases in operating cash flow exceeding the
increases in depreciation and amortization expense.
Interest expense decreased $30,518, or approximately 4 percent, to $746,619
for the three months ended September 30, 1997 from $777,137 for the three months
ended September 30, 1996. For the nine month periods ended September 30,
interest expense decreased $99,245, or approximately 4 percent, to $2,169,648 in
1997 from $2,268,893 in 1996. These decreases were primarily due to lower
outstanding balances on interest bearing obligations.
16
Net loss of the Venture decreased $194,092, or approximately 26 percent, to
$538,879 for the three months ended September 30, 1997 from $732,971 for the
three months ended September 30, 1996. For the nine month periods ended
September 30, net loss decreased $389,430, or approximately 19 percent, to
$1,708,250 in 1997 from $2,097,680 in 1996. These losses are the result of the
factors discussed above.
17
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
Report on Form 8-K dated October 3, 1997, reported that on October
3, 1997 the Venture entered into an asset purchase agreement to
sell the Broward System to an unaffiliated party for a sales price
of $140,000,000, subject to closing adjustments.
18
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.
CABLE TV FUND 14-B, 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, 1997
19