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 0-15378
CABLE TV FUND 14-A, LTD.
- --------------------------------------------------------------------------------
Exact name of registrant as specified in charter
Colorado #84-1024657
- --------------------------------------------------------------------------------
State of organization I.R.S. employer I.D.#
9697 East Mineral Avenue, P.O. Box 3309, Englewood, Colorado 80155-3309
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Address of principal executive office
(303) 792-3111
-----------------------------------
Registrant's telephone number
Indicate by check mark whether the registrant (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-A, LTD.
------------------------
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
------------------------
September 30, December 31,
ASSETS 1997 1996
------ -------------- -------------
CASH $ 579,202 $ 1,257,022
TRADE RECEIVABLES, less allowance for doubtful receivables
of $57,723 and $255,399 at September 30, 1997 and
December 31, 1996, respectively 658,868 1,142,329
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 83,702,508 137,237,866
Less- accumulated depreciation (48,221,671) (76,946,443)
------------ ------------
35,480,837 60,291,423
Franchise costs and other intangible assets, net of accumulated
amortization of $11,690,373 and $38,800,080 at
September 30, 1997 and December 31, 1996, respectively 2,691,001 11,788,190
Investment in cable television joint venture 3,500,884 3,963,820
------------ ------------
Total investment in cable television properties 41,672,722 76,043,433
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 1,916,698 900,270
------------ ------------
Total assets $ 44,827,490 $ 79,343,054
============ ============
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
2
CABLE TV FUND 14-A, LTD.
------------------------
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
------------------------
September 30, December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1997 1996
------------------------------------------- -------------- -------------
LIABILITIES:
Debt $ 21,759,916 $ 85,424,507
General Partner advances 167,820 352,232
Trade accounts payable and accrued liabilities 1,919,855 2,412,088
Subscriber prepayments 92,106 146,253
------------ ------------
Total liabilities 23,939,697 88,335,080
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (56,467) (777,152)
------------ ------------
(55,467) (776,152)
------------ ------------
Limited Partners-
Net contributed capital (160,000 units outstanding at
September 30, 1997 and December 31, 1996) 68,722,000 68,722,000
Accumulated deficit (13,231,240) (76,937,874)
Distributions (34,547,500) -
------------ ------------
20,943,260 (8,215,874)
------------ ------------
Total liabilities and partners' capital (deficit) $ 44,827,490 $ 79,343,054
============ ============
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
3
CABLE TV FUND 14-A, LTD.
------------------------
(A Limited Partnership)
UNAUDITED STATEMENTS OF OPERATIONS
----------------------------------
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
---------------------------- ---------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
REVENUES $ 5,819,961 $12,104,032 $21,013,064 $35,294,597
COSTS AND EXPENSES:
Operating expenses 3,810,457 7,024,489 12,838,309 20,570,930
Management fees and allocated
overhead from General Partner 604,970 1,314,828 2,268,749 4,026,927
Depreciation and amortization 1,961,052 3,544,984 7,864,181 10,777,905
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) (556,518) 219,731 (1,958,175) (81,165)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (371,624) (1,443,836) (1,546,461) (4,510,275)
Gain on sale of cable television
systems - - 69,973,972 -
Other, net (217,924) (56,661) (1,579,081) (120,405)
----------- ----------- ----------- -----------
Total other income (expense), net (589,548) (1,500,497) 66,848,430 (4,630,680)
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE EQUITY IN
NET LOSS OF CABLE TELEVISION
JOINT VENTURE (1,146,066) (1,280,766) 64,890,255 (4,711,845)
EQUITY IN NET LOSS OF CABLE
TELEVISION JOINT VENTURE (146,037) (198,636) (462,936) (568,472)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $(1,292,103) $(1,479,402) $64,427,319 $(5,280,317)
=========== =========== =========== ===========
ALLOCATION OF NET INCOME (LOSS):
General Partner $ (12,921) $ (14,794) $ 720,685 $ (52,803)
=========== =========== =========== ===========
Limited Partners $(1,279,182) $(1,464,608) $63,706,634 $(5,227,514)
=========== =========== =========== ===========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $(7.99) $(9.15) $398.17 $(32.67)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF LIMITED PARTNERSHIP
UNITS OUTSTANDING 160,000 160,000 160,000 160,000
=========== =========== =========== ===========
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
4
CABLE TV FUND 14-A, LTD.
------------------------
(A Limited Partnership)
UNAUDITED STATEMENTS OF CASH FLOWS
----------------------------------
For the Nine Months Ended
September 30,
---------------------------
1997 1996
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 64,427,319 $(5,280,317)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 7,864,181 10,777,905
Equity in net loss of cable television joint venture 462,936 568,472
Gain on sale of cable television systems (69,973,972) -
Decrease in trade receivables 483,461 73,355
Increase in deposits, prepaid expenses and
deferred charges (1,601,598) (439,374)
Decrease in trade accounts payable, accrued liabilities
and subscriber prepayments (546,380) (711,886)
Increase (decrease) in General Partner advances (184,412) 2,566,778
------------ -----------
Net cash provided by operating activities 931,535 7,554,933
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (5,287,544) (7,480,166)
Proceeds from sale of cable television systems, net
of brokerage fees 101,890,280 -
------------ -----------
Net cash provided by (used in) investing activities 96,602,736 (7,480,166)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 35,849,621 450,046
Repayment of debt (99,514,212) (420,511)
Distributions to limited partners (34,547,500) -
------------ -----------
Net cash provided by (used in) financing activities (98,212,091) 29,535
------------ -----------
Increase (decrease) in cash (677,820) 104,302
Cash, beginning of period 1,257,022 293,179
------------ -----------
Cash, end of period $ 579,202 $ 397,481
============ ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 2,126,279 $ 4,836,288
============ ===========
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
5
CABLE TV FUND 14-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 Cable TV Fund 14-A, 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 owns and operates the cable television systems serving the
areas in and around Buffalo, Minnesota (the "Buffalo System"); Naperville,
Illinois (the "Naperville System"); and Calvert County, Maryland (the "Calvert
County System"). The Partnership and Cable TV Fund 14-B, Ltd. ("Fund 14-B")
formed Cable TV Fund 14-A/B Venture (the "Venture") in 1988. The Partnership
owns a 27 percent interest in the Venture. The Venture owns and operates 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 3). The Partnership sold its cable television systems
in Turnersville, New Jersey (the "Turnersville System") on January 10, 1997 and
in Central Illinois (the "Central Illinois System") on June 30, 1997 (see Note
2).
(2) On January 10, 1997, the Partnership sold the Turnersville System to an
unaffiliated party for a sales price of $84,500,000. The Partnership distributed
$25,000,000 (or approximately $313 per $1,000 invested in the Partnership) of
the sale proceeds to its limited partners in January 1997, paid The Jones Group,
Ltd. ("The Jones Group"), a subsidiary of the General Partner, a brokerage fee
of $2,112,500, representing 2.5 percent of the sales price, for acting as a
broker in this transaction and repaid $57,387,500 of the balance outstanding on
its credit facility of which $52,500,000 was required to be repaid under the
terms of the Partnership's credit facility. Because the $25,000,000 distribution
to the limited partners did not return 125 percent of the capital initially
contributed to the Partnership by the limited partners, the General Partner did
not receive a general partner distribution from the proceeds of the sale of the
Turnersville System. Because the sale of the Turnersville System did not
represent a sale of all or substantially all of the Partnership's assets, no
vote of the limited partners of the Partnership was required to approve this
sale.
On June 30, 1997, the Partnership sold the Central Illinois System to an
unaffiliated party for a sales price of $20,005,280. The Partnership
distributed $9,547,500 (or approximately $119 per $1,000 invested in the
Partnership) of the sale proceeds to its limited partners in July 1997, paid a
2.5 percent brokerage fee of $502,500 to The Jones Group for acting as a broker
in this transaction and repaid $9,800,000 of the balance outstanding on its
credit facility. Because the limited partners had not yet received total
distributions equal to 125 percent of the capital initially contributed to the
Partnership by the limited partners, the General Partner did not receive a
general partner distribution from the proceeds of the sale of the Central
Illinois System. Because the sale of the Central Illinois System did not
represent a sale of all or substantially all of the Partnership's assets, no
vote of the limited partners of the Partnership was required to approve this
sale.
6
The pro forma effect of the sales of the Turnersville System and the
Central Illinois System on the results of the Partnership's operations for the
nine month periods ended September 30, 1997 and 1996, assuming the transactions
had occurred at the beginning of the year, is presented in the following
unaudited tabulation:
For the Nine Months Ended September 30, 1997
--------------------------------------------
Pro Forma
As Reported Adjustments Pro Forma
------------ ------------- ------------
Revenues $21,013,064 $ (3,357,752) $17,655,312
=========== ============ ===========
Operating Loss $(1,958,175) $ 722,564 $(1,235,611)
=========== ============ ===========
Net Income (Loss) $64,427,319 $(62,162,984) $(2,264,335)
=========== ============ ===========
For the Nine Months Ended September 30, 1996
--------------------------------------------
Pro Forma
As Reported Adjustments Pro Forma
------------ ------------- ------------
Revenues $35,294,597 $(16,744,417) $18,550,180
=========== ============ ===========
Operating Loss $ (81,165) $ 34,359 $ (46,806)
=========== ============ ===========
Net Loss $(5,280,317) $ 4,582,217 $ (698,100)
=========== ============ ===========
(3) 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
the necessary governmental and other third party consents. In addition, because
the Broward System constitutes all or substantially all of Fund 14-B's assets,
the sale must be approved by the owners of a majority of the interests of Fund
14-B. Because the proposed sale of the Broward System does not constitute the
sale of all or substantially all of the Partnership's assets, no vote of the
limited partners of the Partnership will be required to approve this sale. 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 27
percent of such proceeds, estimated to total $26,248,213, 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 an approximate
return of $164 for each $500 limited partner interest, or $328 for each $1,000
invested in the Partnership. Because limited partners will have not yet 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 $24,350,713, or $152 for each $500 limited partnership
interest, or $304 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
7
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 Fund 14-B that they vote in favor of the
sale of the Broward System to the Purchaser and the limited partners of Fund 14-
B fail to approve the sale of the Broward System to the Purchaser, or (ii) the
limited partners of Fund 14-B 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 Fund 14-B 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 of
the Partnership 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 Fund 14-B 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.
Taking into account the 1997 distributions made on the sale of the
Turnersville System and the Central Illinois System and the proposed
distribution to be made on the sale of the Broward System, the limited partners
will have received a total of $760 for each $1,000 invested in the Partnership.
(4) Jones Intercable, Inc., a publicly held Colorado corporation, is the
"General Partner" and 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, 1997 (excluding
the Partnership's interest in the Venture) were $290,998 and $1,050,653,
respectively, compared to $605,201 and $1,764,729, respectively, for the similar
1996 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 related 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 operation 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 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. Reimbursements made to the General Partner by the Partnership for
allocated overhead and administrative expenses for the three and nine month
periods ended September 30, 1997 (excluding the Partnership's interest in the
Venture) were $313,972 and $1,218,096, respectively, compared to $709,627 and
$2,262,198, respectively, for the similar 1996 periods.
8
(5) 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 six month periods ended June 30,
1997, compared to $380,995 and $1,222,874 for the similar 1996 periods.
Management fees paid by the Venture and attributable to the Partnership totaled
$92,371 and $279,078, respectively, for the three and nine months ended
September 30, 1997,
9
compared to $85,738 and $255,570, respectively, for the similar 1996 periods.
Reimbursements paid by the Venture and attributable to the Partnership totaled
$101,817 and $330,826, respectively, for the three and nine months ended
September 30, 1997, compared to $103,250 and $331,399, respectively, for the
similar 1996 periods.
10
CABLE TV FUND 14-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 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
Turnersville System and the Central Illinois System have been sold, the Broward
System is under contract for sale and the Naperville System is being marketed
for sale. There is no assurance as to the timing or terms of any sales.
Ameritech, which provides telephone service in a multi-state region
including Illinois, is providing cable television service in Naperville,
Illinois, a community currently served by the Partnership's Naperville System.
This competition is having a negative effect on the Naperville System's
revenues, cash flow and fair market value. It could also have a negative impact
on the Partnership's ability to sell the Naperville System and on the terms of
the renewal of the franchise. The General Partner is taking prudent steps
necessary to meet this competition from Ameritech and, to the extent possible,
to safeguard the value of the Naperville System. These steps include a judicial
challenge to the terms on which a franchise was issued to Ameritech. Litigation
is currently pending in federal court against both the City of Naperville and
Ameritech and includes claims made by the City of Naperville against the
Partnership.
The Venture-
In addition to those systems owned directly by it, the Partnership owns a
27 percent interest in the Venture. The Partnership's investment in the
Venture, accounted for under the equity method, decreased by $462,936 compared
to the December 31, 1996 balance. This decrease represents the Partnership's
proportionate share of losses generated by the Venture during the nine months
ended September 30, 1997.
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. 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 Fund 14-B's assets, the sale must
be approved by the owners of a majority of the interests of Fund 14-B. Because
the proposed sale of the Broward System does not constitute the sale of all or
substantially all of the Partnership's assets, no vote of the limited partners
of the Partnership will be required to approve this sale. 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 27 percent
of such proceeds, estimated to total $26,248,213, 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 $164 for
each $500 limited partner interest, or $328 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
11
only $24,350,713, or $152 for each $500 limited partnership interest, or $304
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 Fund 14-B that they vote in favor of the
sale of the Broward System to the Purchaser and the limited partners of Fund 14-
B fail to approve the sale of the Broward System to the Purchaser, or (ii) the
limited partners of Fund 14-B 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 Fund 14-B 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 of
the Partnership 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 Fund 14-B 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 remaining expenditures were used 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
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, the 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 needs until the Broward System
is sold.
The Partnership-
On January 10, 1997, the Partnership sold the Turnersville System to an
unaffiliated party for a sales price of $84,500,000. The Partnership
distributed $25,000,000 (or approximately $313 per $1,000 invested in the
Partnership) of the sale proceeds to its limited partners in January 1997, paid
The Jones Group a brokerage fee of $2,112,500, representing 2.5 percent of the
sales price, for acting as a broker in this transaction and repaid $57,387,500
of the balance outstanding on its credit facility of which $52,500,000 was
required to be repaid under the terms of the Partnership's credit
12
facility. Because the $25,000,000 distribution to the limited partners did not
return 125 percent of the capital initially contributed to the Partnership by
the limited partners, the General Partner did not receive a general partner
distribution from the proceeds of the sale of the Turnersville System. Because
the sale of the Turnersville System did not represent a sale of all or
substantially all of the Partnership's assets, no vote of the limited partners
of the Partnership was required to approve this sale.
On June 30, 1997, the Partnership sold the Central Illinois System to an
unaffiliated party for a sales price of $20,005,280. The Partnership
distributed $9,547,500 (or approximately $119 per $1,000 invested in the
Partnership) of the sale proceeds to its limited partners in July 1997, paid a
2.5 percent brokerage fee of $502,500 to The Jones Group for acting as a broker
in this transaction and repaid $9,800,000 of the balance outstanding on its
credit facility. Because the limited partners had not yet received total
distributions equal to 125 percent of the capital initially contributed to the
Partnership by the limited partners, the General Partner did not receive a
general partner distribution from the proceeds of the sale of the Central
Illinois System. Because the sale of the Central Illinois System did not
represent a sale of all or substantially all of the Partnership's assets, no
vote of the limited partners of the Partnership was required to approve this
sale.
For the nine months ended September 30, 1997, the Partnership generated net
cash from operating activities totaling $931,535, which is available to fund
capital expenditures and non-operating costs. Capital expenditures totaled
approximately $5,288,000 during the first nine months of 1997. Approximately 39
percent of the expenditures related to construction of service drops to
subscriber's homes. Approximately 38 percent of the expenditures related to new
plant construction in all of the Partnership's systems. The remaining
expenditures were used to maintain the value of the Partnership's systems.
These expenditures were funded by cash generated from operations and borrowings
under the Partnership's credit facility. Budgeted capital expenditures for the
remainder of 1997 are approximately $1,885,000. Approximately 50 percent of the
expenditures will be used for new plant construction in all of the Partnership's
systems. Approximately 14 percent will relate to construction of service drops
to subscribers' homes. The remainder of the anticipated expenditures is
necessary to maintain the value of the Partnership's remaining systems until
they are sold. Funding for the improvements is expected to come from cash on
hand, cash generated from operations and, if necessary, borrowings under its new
credit facility.
In March 1997, the Partnership entered into a $37,500,000 revolving credit
facility. The Partnership borrowed $32,300,000 under the revolving credit
facility to repay the outstanding balance on its previous credit facility. Upon
the sale of the Central Illinois System on June 30, 1997 and as required by the
terms of the revolving credit facility, the Partnership repaid $9,800,000 of the
then-outstanding balance, and the commitment amount was reduced to $27,700,000,
of which $21,300,000 was outstanding at September 30, 1997, leaving $6,400,000
available for future borrowings. The revolving credit facility expires on
September 30, 2000, at which time the then-outstanding balance is payable in
full. Interest on the revolving credit facility's outstanding balance is at the
Partnership's option of LIBOR plus .875 percent to 1.375 percent, the CD Rate
plus 1.0 percent to 1.5 percent or the Base Rate plus 0 percent to .375 percent.
The effective interest rates on amounts outstanding as of September 30, 1997 and
1996 were 7.15 percent and 6.81 percent, respectively.
The General Partner believes that the Partnership has sufficient sources
of capital available from cash on hand, cash generated from operations and
borrowings available under its revolving credit facility to meet its anticipated
needs.
RESULTS OF OPERATIONS
- ---------------------
The Partnership-
Revenues of the Partnership decreased $6,284,071, or approximately 52
percent, to $5,819,961 for the three month period ended September 30, 1997
compared to $12,104,032 for the comparable 1996 period. Revenues decreased
$14,281,533, or approximately 40 percent, to $21,013,064 for the nine months
ended September 30, 1997 compared to $35,294,597 for the comparable 1996 period.
These decreases were primarily a result of the sale of the Turnersville System
on January 10, 1997 and the Central Illinois System on June 30, 1997.
Disregarding the effect of the sale of the Turnersville System and the Central
Illinois System, revenues would have decreased $760,240, or 12 percent, to
$5,681,220 for the three months ended September 30, 1997 from $6,441,460 for the
comparable 1996 period. Revenues would have decreased $894,868, or approximately
5 percent, to $17,655,312 for the nine months ended September 30, 1997 from
$18,550,180 for the comparable 1996 period. These decreases in revenues were
due to the Naperville System's loss of subscribers due to competition from
Ameritech.
13
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 decreased $3,214,032, or approximately 46 percent, to
$3,810,457 for the three month period ended September 30, 1997 compared to
$7,024,489 for the comparable 1996 period. Operating expenses decreased
$7,732,621, or approximately 38 percent, to $12,838,309 for the nine months
ended September 30, 1997 compared to $20,570,930 for the comparable 1996 period.
These decreases were primarily a result of the sale of the Turnersville System
and the Central Illinois System. Disregarding the effect of the Turnersville
System and the Central Illinois System sales, operating expenses would have
decreased $358,626, or approximately 9 percent, to $3,598,097 for the three
months ended September 30, 1997 from $3,956,723 for the comparable period.
Operating expenses would have decreased $438,648, or approximately 4 percent, to
$10,848,958 for the nine months ended September 30, 1997 from $11,287,606 for
the comparable 1996 period. These decreases were primarily due to a decrease in
subscriber related expenses as a result of the Naperville System's loss of
subscribers due to competition from Ameritech. Operating expenses represented 63
percent and 61 percent, respectively, of revenues for the three and nine month
periods ended September 30, 1997 compared to 61 percent for the comparable 1996
periods.
Management fees and allocated overhead from the General Partner decreased
$709,858, or approximately 54 percent, to $604,970 for the three month period
ended September 30, 1997 compared to $1,314,828 for the comparable 1996 period.
Management fees and allocated overhead from the General Partner decreased
$1,758,178, or approximately 44 percent, to $2,268,749 for the nine month period
ended September 30, 1997 compared to $4,026,927 for the comparable 1996 period.
These decreases were primarily a result of the sale of the Turnersville System
and the Central Illinois System. Disregarding the effect of the Turnersville
System and the Central Illinois System sales, management fees and allocated
overhead from the General Partner would have decreased $125,160, or
approximately 17 percent, to $592,065 for the three month period ended September
30, 1997 from $717,225 for the comparable 1996 period. Management fees and
allocated overhead from the General Partner would have decreased $241,180, or
approximately 11 percent, to $1,911,599 for the nine months ended September 30,
1997 from $2,152,779 for the comparable 1996 period. These decreases were due
to the decrease in revenues, upon which such management fees and allocations are
based.
Depreciation and amortization expense decreased $1,583,932, or
approximately 45 percent, to $1,961,052 for the three month period ended
September 30, 1997 compared to $3,544,984 for the comparable 1996 period.
Depreciation and amortization expense decreased $2,913,724, or approximately 27
percent, to $7,864,181 for the nine months ended September 30, 1997 compared to
$10,777,905 for the comparable 1996 period. These decreases were a result of
the sale of the Turnersville System and the Central Illinois System.
Disregarding the effect of the Turnersville System and the Central Illinois
System sales, depreciation and amortization expense would have increased
$223,278, or approximately 13 percent, to $1,960,467 for the three months ended
September 30, 1997 from $1,737,189 for the comparable 1996 period. Depreciation
and amortization expense would have increased $973,765, or approximately 19
percent, to $6,130,366 for the nine months ended September 30, 1997 from
$5,156,601 for the comparable 1996 period. These increases were a result of
capital additions during 1997.
The Partnership recognized an operating loss of $556,518 for the three
month period ended September 30, 1997 compared to operating income of $219,731
for the comparable 1996 period. Operating loss increased $1,877,010 to
$1,958,175 for the nine month period ended September 30, 1997 compared to
$81,165 for the comparable 1996 period. Disregarding the effect of the
Turnersville System and the Central Illinois System sales, the Partnership
reported an operating loss of $469,409 for the three month period ended
September 30, 1997, compared to operating income of $30,323 for the comparable
1996 period. Operating loss increased $1,188,805 to $1,235,611 for the nine
months ended September 30, 1997 from $46,806 for the comparable 1996 period.
These changes were a result of the decrease in revenue and the increase in
depreciation and amortization expense exceeding the decreases in operating
expenses and management fees and allocated overhead from the General Partner.
Interest expense decreased $1,072,212, or approximately 74 percent, to
$371,624 for the three month period ended September 30, 1997 compared to
$1,443,836 for the comparable 1996 period. Interest expense decreased
$2,963,814, or approximately 66 percent, to $1,546,461 for the nine months ended
September 30, 1997 compared to $4,510,275 for the comparable 1996 period. These
decreases were primarily due to lower outstanding balances on interest
14
bearing obligations during 1997. A portion of the proceeds from the sales of the
Turnersville System and the Central Illinois System was used to reduce the
Partnership's debt.
The Partnership recognized a gain on the sale of the Turnersville System of
$62,923,951 and a gain on the sale of the Central Illinois System of $7,050,021
during the nine month period ended September 30, 1997. No similar gains were
recognized during the comparable 1996 period.
The Partnership reported a loss before equity in net loss of cable
television joint venture of $1,146,066 for the three month period ended
September 30, 1997 compared to $1,280,766 for the comparable 1996 period. These
losses were the result of the factors discussed above. The Partnership reported
income before equity in net loss of cable television joint venture of
$64,890,255 for the nine month period ended September 30, 1997 compared to a
loss before equity in net loss of cable television joint venture of $4,711,845
for the comparable 1996 period. This change was primarily a result of the gain
on the sales of the Turnersville System and the Central Illinois System.
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.
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
$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 in 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.
15
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.
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.
16
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.
17
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-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 14, 1997
18