FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1998
-------------
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
-------------------------------------
June 30, December 31,
ASSETS 1998 1997
------ ------------ -------------
CASH $ 34,009,629 $ 173,628
TRADE RECEIVABLES, less allowance for doubtful receivables of
$13,745 and $133,188 at June 30, 1998 and December 31, 1997,
respectively 395,295 1,470,293
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 8,798,325 105,933,977
Less- accumulated depreciation (4,125,146) (55,360,283)
----------- ------------
4,673,179 50,573,694
Franchise costs and other intangible assets, net of accumulated
amortization of $1,895,632 and $84,913,605 at June 30, 1998
and December 31, 1997, respectively 736,928 46,126,693
----------- ------------
Total investment in cable television properties 5,410,107 96,700,387
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 2,162,137 789,427
----------- ------------
Total assets $ 41,977,168 $ 99,133,735
=========== ============
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
-------------------------------------
June 30, December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1998 1997
------------------------------------------- -------------- -------------
LIABILITIES:
Debt $ 29,494 $ 54,185,513
General Partner advances 1,200,082 835,015
Deferred brokerage fee - 920,000
Accrued distributions to limited partners 34,313,575 -
Accrued distribution to joint venture partner 452,433 -
Trade accounts payable and accrued liabilities 140,017 1,617,666
Subscriber prepayments - 569,308
------------- ------------
Total liabilities 36,135,601 58,127,502
------------- ------------
MINORITY INTEREST IN CABLE TELEVISION
JOINT VENTURE (96,378) 3,337,731
------------- ------------
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (1,000) (750,411)
------------- ------------
- (749,411)
------------- ------------
Limited Partners-
Net contributed capital (261,353 units
outstanding at June 30, 1998 and
December 31, 1997) 112,127,301 112,127,301
Accumulated deficit (3,321,350) (73,709,388)
Distributions (102,868,006) -
------------- ------------
5,937,945 38,417,913
------------- ------------
Total liabilities and partners' capital (deficit) $ 41,977,168 $ 99,133,735
============= ============
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 Six Months Ended
June 30, June 30,
-------------------------- ------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
REVENUES $ 3,623,059 $10,350,148 $14,159,133 $20,415,926
COSTS AND EXPENSES:
Operating expenses 1,954,079 5,792,380 7,939,820 11,500,182
Management fees and allocated overhead
from General Partner 396,691 1,059,667 1,532,687 2,250,843
Depreciation and amortization 1,455,631 3,462,605 5,126,136 6,853,769
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) (183,342) 35,496 (439,510) (188,868)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (277,335) (977,736) (1,248,940) (1,930,920)
Gain on sale of cable television system 15,035,149 - 97,500,303 -
Other, net (1,583,665) (14,197) (2,171,511) 36,520
----------- ----------- ----------- -----------
Total other income (expense), net 13,174,149 (991,933) 94,079,852 (1,894,400)
----------- ----------- ----------- -----------
CONSOLIDATED INCOME (LOSS)
BEFORE MINORITY INTEREST 12,990,807 (956,437) 93,640,342 (2,083,268)
MINORITY INTEREST IN
CONSOLIDATED (INCOME) LOSS (486,106) 155,767 (22,502,893) 316,899
----------- ----------- ----------- -----------
NET INCOME (LOSS) $12,504,701 $ (800,670) $71,137,449 $(1,766,369)
=========== =========== =========== ===========
ALLOCATION OF NET INCOME (LOSS):
General Partner $ - $ (8,007) $ 749,411 $ (17,664)
=========== =========== =========== ===========
Limited Partners $12,504,701 $ (792,663) $70,388,038 $(1,748,705)
=========== =========== =========== ===========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ 47.84 $ (3.03) $ 269.32 $ (6.69)
=========== =========== =========== ===========
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 Six Months Ended
June 30,
----------------------------
1998 1997
------------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 71,137,449 $(1,766,369)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 5,126,136 6,853,769
Gain on sale of cable television system (97,500,303) -
Minority interest in consolidated net income (loss) 22,502,893 (316,899)
Decrease in trade receivables 1,074,998 313,505
Increase in deposits, prepaid expenses and deferred charges (1,920,133) (545,711)
Increase (decrease) in General Partner advances 365,067 (43,991)
Decrease in trade accounts payable and accrued liabilities and
subscriber prepayments (2,966,957) (200,077)
------------- -----------
Net cash provided by (used in) operating activities (2,180,850) 4,294,227
------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (2,500,630) (3,078,039)
Proceeds from sales of cable television systems, net of brokerage fees 186,712,500 -
------------- -----------
Net cash provided by (used in) investing activities 184,211,870 (3,078,039)
------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 2,010,948 1,006,551
Repayment of debt (56,166,967) (2,066,123)
Distributions to limited partners (102,868,006) -
Increase in accrued distributions to limited partners 34,313,575 -
Distributions to joint venture partner (25,937,002) -
Increase in accrued distribution to joint venture partner 452,433 -
------------- -----------
Net cash used in financing activities (148,195,019) (1,059,572)
------------- -----------
Increase in cash 33,836,001 156,616
Cash, beginning of period 173,628 840,309
------------- -----------
Cash, end of period $ 34,009,629 $ 996,925
============= ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 1,746,772 $2,176,869
============= ============
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 complete 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 June 30, 1998 and December 31, 1997, its results of
operations for the three and six month periods ended June 30, 1998 and 1997 and
its cash flows for the six month periods ended June 30, 1998 and 1997. 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 which the Partnership owns a 73 percent
interest and Fund 14-A owns a 27 percent interest. The Venture's only asset was
the cable television system serving certain areas in Broward County, Florida
(the "Broward System"). The Venture sold the Broward System on March 31, 1998
(see Note 2). 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.
The Partnership directly owns the cable television system serving Littlerock,
California (the "Littlerock System"). The Partnership sold the cable television
system serving Surfside, South Carolina (the "Surfside System") on June 30, 1998
(see Note 3) and has entered into an agreement to sell the Littlerock System
(see Note 4).
(2) On March 31, 1998, the Venture sold the Broward System to an
unaffiliated third party for $140,000,000. The contract sales price of
$140,000,000 would be reduced $2,472 for each of the Broward System's equivalent
basic subscribers less than 56,637 at closing. At March 31, 1998, the Broward
System had 55,346 equivalent basic subscribers, which reduced the sales price by
$3,191,352. When final closing adjustments were completed on June 30, 1998,
however, additional equivalent basic subscribers that were not able to be
counted as basic subscribers of the Broward System at the March 31, 1998 closing
(because they were relatively recent subscribers at such date) were able to be
counted as equivalent basic subscribers of the Broward System. These basic
subscribers brought the equivalent basic subscriber count up to 56,637 and the
sales price accordingly was adjusted upward by $3,191,352 to $140,000,000.
From the proceeds of the Broward System sale at the initial closing,
the Venture settled working capital adjustments, repaid the outstanding balance
on its credit facility, which totaled $39,902,968 at March 31, 1998 and paid a
2.5 percent brokerage fee of $3,420,216 to The Jones Group, Ltd., a subsidiary
of the General Partner ("The Jones Group"), for acting as a broker in this
transaction. The Venture then distributed the remaining net sale proceeds, or
$94,039,000, to the two constituent partnerships of the Venture in proportion to
their ownership interests in the Venture. Accordingly, the Partnership received
73 percent of the net sale proceeds, or $68,554,431. In April 1998, the
Partnership distributed its net sale proceeds to its limited partners of record
as of March 31, 1998. Such distribution represented approximately $262 for each
$500 limited partnership interest or $524 for each $1,000 invested in the
Partnership.
From the additional proceeds of the Broward System sale at final
closing, the Venture settled final working capital adjustments and paid a 2.5
percent brokerage fee of $79,784 to The Jones Group. The Venture then
distributed the remaining additional net sale proceeds, or $1,669,056, to the
two constituent partnerships of the Venture in proportion to their ownership
interests in the Venture. Accordingly, the Partnership received 73 percent of
the additional net sale proceeds, or $1,216,623. In August 1998, the Partnership
will distribute the $1,216,623 to its limited partners, together with the
distribution to the limited partners from the net sales proceeds from the sale
of the Surfside System. Because the distributions to the limited partners from
the sale of the Broward System, together with all prior distributions, did not
return to the limited partners 125 percent of the capital initially contributed
to the Partnership by the limited partners, the General Partner did not receive
any general partner distribution from the Broward System's sale. Because the
Broward System represented the only asset of the Venture, the Venture will be
liquidated and dissolved before the end of 1998.
6
(3) On June 30, 1998, the Partnership sold the Surfside System to an
unaffiliated third party for $51,500,000, subject to customary closing
adjustments. Upon the closing of the sale of the Surfside System, the
Partnership retained approximately $240,000 of the sale proceeds for working
capital purposes, repaid all of its indebtedness (including $15,800,000 borrowed
under its credit facility, $658,490 in advances from the General Partner and
capital lease obligations of $143,870), paid a 2.5 percent brokerage fee
totaling $1,287,500 to The Jones Group, paid a deferred acquisition fee of
$920,000 to The Jones Group and then distributed the net sale proceeds of
approximately $33,096,952 to the Partnership's limited partners of record as of
June 30, 1998. This distribution will be made in August 1998. Such distribution
represents approximately $127 for each $500 limited partnership interest, or
$254 for each $1,000 invested in the Partnership.
Once the Partnership has completed the distribution of its portion of
the net proceeds from the sale of the Broward System and the sale of the
Surfside System, limited partners of the Partnership will have received a total
of $394 for each $500 limited partnership interest, or $788 for each $1,000
invested in the Partnership. Because the distributions to the limited partners
from the sale of the Surfside System and the Broward System will not return to
the limited partners 125 percent of the capital initially contributed by the
limited partners to the Partnership, the General Partner will not receive a
general partner distribution from the Surfside System's sale proceeds.
The pro forma effect of the sale of the Surfside System and the sale of
the Broward System on the results of the Partnership's operations for the six
months ended June 30, 1998 and 1997, assuming the transactions had occurred on
January 1, 1997, are presented in the following tabulations.
For the Six Months Ended June 30, 1998
---------------------------------------
Unaudited
Pro Forma Pro Forma
As Reported Adjustments Balance
------------ ------------- -----------
REVENUES $14,159,133 $(12,870,390) $1,288,743
=========== ============ ==========
OPERATING INCOME (LOSS) $ (439,510) $ 439,630 $ 120
=========== ============ ==========
NET INCOME (LOSS) $71,137,449 $(71,138,935) $ (1,486)
=========== ============ ==========
For the Six Months Ended June 30, 1997
---------------------------------------
Unaudited
Pro Forma Pro Forma
As Reported Adjustments Balance
------------ ------------- ----------
REVENUES $20,415,926 $(19,154,484) $1,261,342
=========== ============ ==========
OPERATING INCOME (LOSS) $ (188,868) $ 285,376 $ 96,508
=========== ============ ==========
NET INCOME (LOSS) $(1,766,369) $ 1,856,410 $ 90,041
=========== ============ ==========
(4) On March 10, 1998, the Partnership entered into an agreement with the
General Partner to sell the Littlerock System to the General Partner or one of
its subsidiaries for a sales price of $10,720,400, subject to customary closing
adjustments. The sales price represents the average of three independent
appraisals of the fair market value of the Littlerock System. The closing of
this transaction is expected to occur in the fourth quarter of 1998. The closing
is subject to a number of conditions including the approval of the transaction
by the holders of a majority of the limited partnership interests of the
Partnership, the expiration or termination of all waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 applicable to the agreement
or the transactions contemplated thereby, and the consents of governmental
authorities and other third parties. The General Partner expects to conduct a
vote of the limited partners on the Littlerock System sale during the third
quarter of 1998.
7
Upon the consummation of the proposed sale of the Littlerock System,
based upon financial information as of June 30, 1998, the Partnership will
settle working capital adjustments, repay capital lease obligations of $29,494
and then the Partnership will distribute the net sale proceeds of approximately
$11,039,000 to the limited partners of the Partnership. This distribution will
give the Partnership's limited partners a return of $42 for each $500 limited
partner interest, or $84 for each $1,000 invested in the Partnership.
Taking into account the distribution from the sale of the Broward
System, the distribution from the sale of the Surfside System, and the
anticipated distribution from the sale of the Littlerock System, the limited
partners of the Partnership can expect to receive a total of $436 for each $500
limited partnership interest, or $872 for each $1,000 invested in the
Partnership. Because the distributions to the limited partners from the sales of
the Surfside System, the Broward System and the anticipated distribution from
the sale of the Littlerock System will not return to the limited partners 125
percent of the capital initially contributed by the limited partners to the
Partnership, the General Partner will not receive a general partner distribution
from the Littlerock System's sale proceeds.
The Partnership will be liquidated and dissolved after the sale of the
Littlerock System, which will be the Partnership's last remaining asset at the
time of its sale. The General Partner anticipates that the Partnership will be
liquidated and dissolved in the first quarter of 1999.
(5) The General Partner manages the Partnership 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 six month periods ended June 30, 1998 were
$181,153 and $707,957, respectively, compared to $517,507 and $1,020,796,
respectively, for the similar 1997 periods.
The Partnership reimburses the General Partner for certain allocated
overhead and administrative expenses. These expenses represent the salaries and
related benefits paid for corporate personnel, rent, data processing services
and other corporate facilities costs. Such personnel provide engineering,
marketing, accounting, administrative, legal and investor relations services to
the Partnership and to 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 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 six month periods ended June 30,
1998 were $215,538 and $824,730, respectively, compared to $542,160 and
$1,230,047, respectively, for the similar 1997 periods.
8
(6) Financial information regarding the Venture is presented below:
UNAUDITED BALANCE SHEETS
------------------------
June 30, 1998 December 31, 1997
-------------- ------------------
ASSETS
------
Cash and accounts receivable $ - $ 1,688,123
Investment in cable television properties - 51,847,372
Other assets 2,290,433 620,522
------------ ------------
Total assets $ 2,290,433 $ 54,156,017
============ ============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Debt $ - $ 39,597,617
Payables and accrued liabilities 2,290,433 1,886,849
Partners' contributed capital 70,000,000 70,000,000
Distributions to joint venture partners (95,708,056) -
Accumulated capital (deficit) 25,708,056 (57,328,449)
------------ ------------
Total liabilities and partners' capital $ 2,290,433 $ 54,156,017
============ ============
UNAUDITED STATEMENTS OF OPERATIONS
----------------------------------
For the Three Months Ended For the Six Months Ended
June 30, June 30,
--------------------------- -------------------------
1998 1997 1998 1997
------------ ------------ ----------- -----------
Revenues $ - $ 6,934,990 $ 7,064,891 $13,779,095
Operating expenses - 3,877,200 3,981,015 7,710,954
Management fees and allocated overhead
from General Partner - 720,372 760,650 1,534,004
Depreciation and amortization - 2,182,538 2,249,219 4,304,255
------------ ------------ ----------- -----------
Operating income - 154,880 74,007 229,882
Interest expense - (719,372) (705,440) (1,423,029)
Gain on sale of cable television system 3,111,568 - 85,576,722 -
Other, net (1,317,821) (10,295) (1,908,784) 23,776
------------ ------------ ----------- -----------
Net income (loss) $ 1,793,747 $ (574,787) $83,036,505 $(1,169,371)
============ ============ =========== ===========
9
Management fees paid to the General Partner by the Venture totaled
$-0- and $353,245, respectively, for the three and six month periods ended June
30, 1998, compared to $346,750 and $688,955, respectively, for the similar 1997
periods. Reimbursements for overhead and administrative expenses paid to the
General Partner by the Venture totaled $-0- and $407,405, respectively, for the
three and six month periods ended June 30, 1998, compared to $373,622 and
$845,049 for the similar 1997 periods.
10
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 the Littlerock System and it owned the Surfside System
until its sale on June 30, 1998. The Partnership also 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 owned by Fund 14-A.
On March 31, 1998, the Venture sold the Broward System to an unaffiliated
third party for $140,000,000. The contract sales price of $140,000,000 would be
reduced $2,472 for each of the Broward System's equivalent basic subscribers
less than 56,637 at closing. At March 31, 1998, the Broward System had 55,346
equivalent basic subscribers, which reduced the sales price by $3,191,352. When
final closing adjustments were completed on June 30, 1998, however, additional
equivalent basic subscribers that were not able to be counted as basic
subscribers of the Broward System at the March 31, 1998 closing (because they
were relatively recent subscribers at such date) were able to be counted as
equivalent basic subscribers of the Broward System. These basic subscribers
brought the equivalent basic subscriber count up to 56,637 and the sales price
accordingly was adjusted upward by $3,191,352 to $140,000,000.
From the proceeds of the Broward System sale at the initial closing, the
Venture settled working capital adjustments, repaid the outstanding balance on
its credit facility, which totaled $39,902,968 at March 31, 1998 and paid a 2.5
percent brokerage fee of $3,420,216 to The Jones Group for acting as a broker in
this transaction. The Venture then distributed the remaining net sale proceeds,
or $94,039,000, to the two constituent partnerships of the Venture in proportion
to their ownership interests in the Venture. Accordingly, the Partnership
received 73 percent of the net sale proceeds, or $68,554,431. In April 1998,
the Partnership distributed its net sale proceeds to its limited partners of
record as of March 31, 1998. Such distribution represented approximately $262
for each $500 limited partnership interest or $524 for each $1,000 invested in
the Partnership.
From the additional proceeds of the Broward System sale at final closing,
the Venture settled final working capital adjustments and paid a 2.5 percent
brokerage fee of $79,784 to The Jones Group. The Venture then distributed the
remaining additional net sale proceeds, or $1,669,056, to the two constituent
partnerships of the Venture in proportion to their ownership interests in the
Venture. Accordingly, the Partnership received 73 percent of the additional net
sale proceeds, or $1,216,623. In August 1998, the Partnership will distribute
the $1,216,623 to its limited partners, together with the distribution to the
limited partners from the net sales proceeds from the sale of the Surfside
System. Because the distributions to the limited partners from the sale of the
Broward System, together with all prior distributions, did not return to the
limited partners 125 percent of the capital initially contributed to the
Partnership by the limited partners, the General Partner did not receive any
general partner distribution from the Broward System's sale. Because the
Broward System represented the only asset of the Venture, the Venture will be
liquidated and dissolved before the end of 1998.
On June 30, 1998, the Partnership sold the Surfside System to an
unaffiliated third party for $51,500,000, subject to customary closing
adjustments. Upon the closing of the sale of the Surfside System, the
Partnership retained approximately $240,000 of the sale proceeds for working
capital purposes, repaid all of its indebtedness (including $15,800,000 borrowed
under its credit facility, $658,490 in advances from the General Partner and
capital lease obligations of $143,870), paid a 2.5 percent brokerage fee
totaling $1,287,500 to The Jones Group, paid a deferred acquisition fee of
$920,000 to The Jones Group and then distributed the net sale proceeds of
approximately $33,096,952 to the Partnership's limited partners of record as of
June 30, 1998. This distribution will be made in August 1998. Such distribution
represents approximately $127 for each $500 limited partnership interest, or
$254 for each $1,000 invested in the Partnership.
Once the Partnership has completed the distribution of its portion of the
net proceeds from the sale of the Broward System and the sale of the Surfside
System, limited partners of the Partnership will have received a total of $394
for each $500 limited partnership interest, or $788 for each $1,000 invested in
the Partnership. Because the distributions to the limited partners from the
sale of the Surfside System and the Broward System will not return to the
limited partners 125
11
percent of the capital initially contributed by the limited partners to the
Partnership, the General Partner will not receive a general partner distribution
from the Surfside System's sale proceeds.
On March 10, 1998, the Partnership entered into an agreement with the
General Partner to sell the Littlerock System to the General Partner or one of
its subsidiaries for a sales price of $10,720,400, subject to customary closing
adjustments. The sales price represents the average of three independent
appraisals of the fair market value of the Littlerock System. The closing of
this transaction is expected to occur in the fourth quarter of 1998. The
closing is subject to a number of conditions including the approval of the
transaction by the holders of a majority of the limited partnership interests of
the Partnership, the expiration or termination of all waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 applicable to the agreement
or the transactions contemplated thereby, and the consents of governmental
authorities and other third parties. The General Partner expects to conduct a
vote of the limited partners on the Littlerock System sale during the third
quarter of 1998.
Upon the consummation of the proposed sale of the Littlerock System, based
upon financial information as of June 30, 1998, the Partnership will settle
working capital adjustments, repay capital lease obligations of $29,494 and then
the Partnership will distribute the net sale proceeds of approximately
$11,039,000 to the limited partners of the Partnership. This distribution will
give the Partnership's limited partners a return of $42 for each $500 limited
partner interest, or $84 for each $1,000 invested in the Partnership.
Taking into account the distribution from the sale of the Broward System,
the distribution from the sale of the Surfside System, and the anticipated
distribution from the sale of the Littlerock System, the limited partners of the
Partnership can expect to receive a total of $436 for each $500 limited
partnership interest, or $872 for each $1,000 invested in the Partnership.
Because the distributions to the limited partners from the sales of the Surfside
System, the Broward System and the anticipated distribution from the sale of the
Littlerock System will not return 125 percent of the capital initially
contributed by the limited partners to the Partnership, the General Partner will
not receive a general partner distribution from the Littlerock System's sale
proceeds.
The Partnership will be liquidated and dissolved after the sale of the
Littlerock System, which will be the Partnership's last remaining asset at the
time of its sale. The General Partner anticipates that the Partnership will be
liquidated and dissolved in the first quarter of 1999.
For the six months ended June 30, 1998, the Partnership expended
approximately $1,564,000 on capital additions in its Surfside System and
Littlerock System. Approximately 42 percent of these expenditures was for the
construction of cable plant extensions related to new homes passed.
Approximately 37 percent of the expenditures was for the construction of drops
to subscribers' homes. The remainder of the expenditures was for other capital
expenditures to maintain the value of the Partnership's cable television systems
until they are sold. Funding for these expenditures was provided by cash
generated from operations and borrowings from the Partnership's credit facility.
Budgeted capital expenditures for the remainder of 1998 are approximately
$378,000. Approximately 34 percent of these expenditures are expected to be used
for the construction of plant extensions related to new homes passed.
Approximately 34 percent are expected to be used for service drops to homes. The
remainder of these expenditures is for other capital expenditures to maintain
the value of the Partnership's Littlerock System until it is sold. Depending
upon the timing of the closing of the sale of the Partnership's Littlerock
System, the Partnership will make only the portion of the 1998 budgeted capital
expenditures scheduled to be made during the Partnership's continued ownership
of the system. Funding for these improvements will be provided by cash generated
from operations and cash on hand. The Partnership is obligated to conduct its
business in the ordinary course until the Littlerock System is sold.
The Partnership repaid the outstanding balance of its reducing revolving
credit facility, which totaled $15,800,000, from the proceeds of the sale of the
Surfside System on June 30, 1998. The Partnership therefore has no material debt
outstanding.
The Partnership has sufficient sources of capital from cash on hand and
cash generated from operations to meet its presently anticipated needs until the
Littlerock System is sold.
The Year 2000 issue is the result of many computer programs being written
such that they will malfunction when reading a year of "00." This problem could
cause system failure or miscalculations causing disruptions of business
processes.
12
The General Partner has initiated an assessment of its computer
applications to determine the extent of the problem. Based on this assessment,
the General Partner has determined that the majority of its computer
applications supporting business processes, including accounting and billing,
are designed to handle the Year 2000 appropriately.
The General Partner is currently focusing its efforts on the impact of the
Year 2000 issue on service delivery. The General Partner has established an
internal team to address this issue. The General Partner is identifying and
testing all date-sensitive equipment involved in delivering service to the
Partnership's customers. In addition, the General Partner will assess the
Partnership's options regarding repair or replacement of affected equipment
during this testing. The General Partner believes that the financial impact
will not be material.
RESULTS OF OPERATIONS
- ---------------------
The results of operations for the Partnership are summarized in the selected
financial data below:
For the Three Months Ended June 30, 1998
------------------------------------------
Partnership Venture
Owned Owned Consolidated
------------ ------------- -------------
Revenues $ 3,623,059 $ - $ 3,623,059
Operating expenses 1,954,079 - 1,954,079
Management fees and allocated
overhead from General Partner 396,691 - 396,691
Depreciation and amortization 1,455,631 - 1,455,631
----------- ------------ ------------
Operating loss (183,342) - (183,342)
----------- ------------ ------------
Interest expense (277,335) - (277,335)
Gain on sale of cable television system 11,923,581 3,111,568 15,035,149
Other, net (265,844) (1,317,821) (1,583,665)
----------- ------------ ------------
Consolidated income before minority interest 11,197,060 1,793,747 12,990,807
Minority interest in consolidated income - (486,106) (486,106)
----------- ------------ ------------
Net income $11,197,060 $ 1,307,641 $ 12,504,701
=========== ============ ============
13
For the Three Months Ended June 30, 1997
------------------------------------------
Partnership Venture
Owned Owned Consolidated
------------ ------------ ------------
Revenues $ 3,415,158 $ 6,934,990 $ 10,350,148
Operating expenses 1,915,180 3,877,200 5,792,380
Management fees and allocated
overhead from General Partner 339,295 720,372 1,059,667
Depreciation and amortization 1,280,067 2,182,538 3,462,605
----------- ------------ ------------
Operating income (loss) (119,384) 154,880 35,496
----------- ------------ ------------
Interest expense (258,364) (719,372) (977,736)
Other, net (3,902) (10,295) (14,197)
----------- ------------ ------------
Consolidated loss before minority interest (381,650) (574,787) (956,437)
Minority interest in consolidated loss - 155,767 155,767
----------- ------------ ------------
Net loss $ (381,650) $ (419,020) $ (800,670)
=========== ============ ============
For the Six Months Ended June 30, 1998
-----------------------------------------
Partnership Venture
Owned Owned Consolidated
------------ ----------- ------------
Revenues $ 7,094,242 $ 7,064,891 $ 14,159,133
Operating expenses 3,958,805 3,981,015 7,939,820
Management fees and allocated
overhead from General Partner 772,037 760,650 1,532,687
Depreciation and amortization 2,876,917 2,249,219 5,126,136
----------- ------------ ------------
Operating income (loss) (513,517) 74,007 (439,510)
----------- ------------ ------------
Interest expense (543,500) (705,440) (1,248,940)
Gain on sale of cable television system 11,923,581 85,576,722 97,500,303
Other, net (262,727) (1,908,784) (2,171,511)
----------- ------------ ------------
Consolidated income before minority interest 10,603,837 83,036,505 93,640,342
Minority interest in consolidated income - (22,502,893) (22,502,893)
----------- ------------ ------------
Net income $10,603,837 $ 60,533,612 $ 71,137,449
=========== ============ ============
14
For the Six Months Ended June 30, 1997
---------------------------------------
Partnership Venture
Owned Owned Consolidated
------------ ---------- ------------
Revenues $ 6,636,831 $ 13,779,095 $ 20,415,926
Operating expenses 3,789,228 7,710,954 11,500,182
Management fees and allocated
overhead from General Partner 716,839 1,534,004 2,250,843
Depreciation and amortization 2,549,514 4,304,255 6,853,769
----------- ------------ ------------
Operating income (loss) (418,750) 229,882 (188,868)
----------- ------------ ------------
Interest expense (507,891) (1,423,029) (1,930,920)
Other, net 12,744 23,776 36,520
----------- ------------ ------------
Consolidated loss before minority interest (913,897) (1,169,371) (2,083,268)
Minority interest in consolidated loss - 316,899 316,899
----------- ------------ ------------
Net loss $ (913,897) $ (852,472) $ (1,766,369)
=========== ============ ============
Partnership Owned -
- -----------------
Revenues of the Partnership's Surfside System and Littlerock System
increased $207,901, or approximately 6 percent, to $3,623,059 for the three
months ended June 30, 1998 from $3,415,158 for the three months ended June 30,
1997. For the six months ended June 30, 1998 and 1997, revenues increased
$457,411, or approximately 7 percent, to $7,094,242 in 1998 from $6,636,831 in
1997. These increases in revenues were due primarily to basic service rate
increases and increases in the number of basic subscribers. Basic service rate
increases accounted for approximately 45 percent and 42 percent, respectively,
of the increases in revenues for the three and six month periods ended June 30,
1998. The number of basic subscribers increased 1,440, or approximately 5
percent, to 28,558 at June 30, 1998 from 27,118 at June 30, 1997. The increase
in the number of basic subscribers accounted for approximately 50 percent and 41
percent, respectively, of the increases in revenues for the three and six month
periods ended June 30, 1998. No other individual factor was significant to these
increases in revenues.
Operating expenses consist primarily of costs associated with the operation
and administration of the Partnership's cable television systems. The principal
cost components are salaries paid to system personnel, programming expenses,
professional fees, subscriber billing costs, rent for leased facilities, cable
system maintenance expenses and marketing expenses.
Operating expenses increased $38,899, or approximately 2 percent, to
$1,954,079 for the three month period ended June 30, 1998 from $1,915,180 for
the comparable 1997 period. For the six month periods ended June 30, 1998 and
1997, operating expenses increased $169,577, or approximately 4 percent, to
$3,958,805 at June 30, 1998 from $3,789,228 at June 30, 1997. These increases
were primarily due to increases in programming fees. No other individual factor
significantly affected the increases in operating expenses. Operating expenses
represented 54 percent and 56 percent, respectively, of revenues for the three
and six month periods ended June 30, 1998, compared to 56 percent and 57
percent, respectively, in 1997.
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
$169,002, or approximately 11 percent, to $1,668,980 for the three months ended
June 30, 1998 from $1,499,978 for the three months ended June 30, 1997. For the
six month periods ended June 30, 1998 and 1997, operating
15
cash flow increased $287,834, or approximately 10 percent, to $3,135,437 in 1998
from $2,847,603 in 1997. 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
$57,396, or approximately 17 percent, to $396,691 for the three month period
ended June 30, 1998 from $339,295 for the comparable 1997 period. This increase
was primarily due to the timing of certain expenses allocated from Jones
Intercable, Inc. For the six month periods ended June 30, 1998 and 1997,
management fees and allocated overhead from the General Partner increased
$55,198, or approximately 8 percent, to $772,037 at June 30, 1998 from $716,839
at June 30, 1997. This increase was primarily due to the increases in revenues,
upon which such fees and allocations are based.
Depreciation and amortization expense increased $175,564, or approximately
14 percent, to $1,455,631 for the three month period ended June 30, 1998 from
$1,280,067 for the comparable 1997 period. For the six month periods ended June
30, 1998 and 1997, depreciation and amortization expense increased $327,403, or
approximately 13 percent, to $2,876,917 at June 30, 1998 from $2,549,514 at June
30, 1997. These increases were due to capital additions during 1998.
Operating loss increased $63,958, or approximately 54 percent, to $183,342
for the three month period ended June 30, 1998 from $119,384 for the comparable
1997 period. For the six month periods ended June 30, 1998 and 1997, operating
loss increased $94,767, or approximately 23 percent, to $513,517 at June 30,
1998 from $418,750 at June 30, 1997. These decreases were due to the increases
in management fees and allocated overhead from the General Partner and
depreciation and amortization expense exceeding the increases in operating cash
flow.
Interest expense increased $18,971, or approximately 7 percent, to $277,335
for three months ended June 30, 1998 from $258,364 for the three months ended
June 30, 1997. For the six month periods ended June 30, 1998 and 1997, interest
expense increased $35,609, or approximately 7 percent, to $543,500 at June 30,
1998 from $507,891 at June 30, 1997. These increases were primarily due to
higher outstanding balances on interest bearing obligations during the period.
For the three and six month periods ended June 30, 1998, the Partnership
reported a gain of $11,923,581 from the sale of the Surfside System. No similar
gain was reported for either the three or six month periods in 1997.
For the three months ended June 30, 1998, the Partnership reported net
income of $11,197,060 compared to a net loss of $381,650 for the similar 1997
period. For the six months ended June 30, 1998, the Partnership reported net
income of $10,603,837 compared to a net loss of $913,897 for the similar 1997
period. These changes were primarily due to the gain from the sale of the
Surfside System in June 1998.
Venture Owned -
- -------------
The Venture's only asset was the Broward System which was sold on March 31,
1998. The Venture will be liquidated and dissolved before the end of 1998.
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 July 14, 1998, reported that on June 30,
1998 the Partnership sold the Surfside System to an unaffiliated
party for a sales price of $51,500,000, subject to customary
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-B, LTD.
BY: JONES INTERCABLE, INC.
General Partner
By:/S/ Kevin P. Coyle
----------------------------------
Kevin P. Coyle
Group Vice President/Finance
(Principal Financial Officer)
Dated: August 13, 1998
18