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
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[_] 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: 0-14906
JONES CABLE INCOME FUND 1-B, LTD.
- --------------------------------------------------------------------------------
Exact name of registrant as specified in charter
Colorado 84-1010417
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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
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JONES CABLE INCOME FUND 1-B, LTD.
---------------------------------
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
------------------------
June 30, December 31,
ASSETS 1998 1997
------ ----------- -----------
CASH $ - $ 145
INVESTMENT IN CABLE TELEVISION JOINT VENTURE 2,486,428 2,126,411
----------- -----------
Total assets $ 2,486,428 $ 2,126,556
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
- -------------------------------------------
LIABILITIES
Accrued liabilities $ 52,766 $ -
----------- -----------
Total liabilities 52,766 -
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated earnings 105,774 104,961
Distributions (110,219) (110,219)
----------- -----------
(3,445) (4,258)
----------- -----------
Limited Partners-
Net contributed capital
(83,884 units outstanding
at June 30, 1998 and
December 31, 1997) 34,449,671 34,449,671
Accumulated earnings (deficit) 1,450,077 (3,230,916)
Distributions (33,462,641) (29,087,941)
----------- -----------
2,437,107 2,130,814
----------- -----------
Total liabilities and
partners' capital (deficit) $ 2,486,428 $ 2,126,556
=========== ===========
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
2
JONES CABLE INCOME FUND 1-B, LTD.
---------------------------------
(A Limited Partnership)
UNAUDITED STATEMENTS OF OPERATIONS
----------------------------------
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- -------------------------
1998 1997 1998 1997
----------- ----------- ----------- ----------
OTHER EXPENSE $ (52,911) $ - $ (52,911) $ -
----------- ----------- ----------- ----------
LOSS BEFORE EQUITY IN NET
INCOME (LOSS) OF CABLE
TELEVISION JOINT VENTURE (52,911) - (52,911) -
EQUITY IN NET INCOME (LOSS) OF
CABLE TELEVISION JOINT
VENTURE (111,076) (591) 4,734,717 7,274,020
----------- ----------- ----------- ----------
NET INCOME (LOSS) $ (163,987) $ (591) $ 4,681,806 $7,274,020
=========== =========== =========== ==========
ALLOCATION OF NET INCOME (LOSS):
General Partner $ (1,640) $ (6) $ 813 $ 10,675
=========== =========== =========== ==========
Limited Partners $ (162,347) $ (585) $ 4,680,993 $7,263,345
=========== =========== =========== ==========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ (1.94) $ (.01) $ 55.80 $ 86.58
=========== =========== =========== ==========
WEIGHTED AVERAGE NUMBER
OF LIMITED PARTNERSHIP
UNITS OUTSTANDING 83,884 83,884 83,884 83,884
=========== =========== =========== ==========
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
3
JONES CABLE INCOME FUND 1-B, LTD.
---------------------------------
(A Limited Partnership)
UNAUDITED STATEMENTS OF CASH FLOWS
----------------------------------
For the Six Months Ended
June 30,
--------------------------
1998 1997
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,681,806 $ 7,274,020
Adjustments to reconcile net income to net
cash used in operating activities:
Equity in net income of cable television
joint venture (4,734,717) (7,274,020)
Increase in accrued liabilities 52,766 -
----------- -----------
Net cash used in operating activities (145) -
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from cable television joint venture 4,374,700 5,965,360
----------- -----------
Net cash provided by investing activities 4,374,700 5,965,360
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to limited partners (4,374,700) (5,965,360)
----------- -----------
Net cash used in financing activities (4,374,700) (5,965,360)
----------- -----------
Decrease in cash (145) -
Cash, beginning of period 145 145
----------- -----------
Cash, end of period $ - $ 145
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ - $ -
=========== ===========
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
4
JONES CABLE INCOME FUND 1-B, 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 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 Jones Cable Income Fund 1-
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 owns a 40 percent interest in Jones Cable Income Fund 1-B/C
Venture (the "Venture"). Jones Cable Income Fund 1-C, Ltd. ("Fund 1-C") owns a
60 percent interest in the Venture. The Venture owns and operates the cable
television systems serving Myrtle Creek, Oregon; South Sioux City, Nebraska (the
"South Sioux City System"); and Three Rivers, Schoolcraft, Vicksburg,
Constantine, White Pigeon, Dowagiac, Watervliet and Vandalia, Michigan (the
"Southwestern Michigan System"). The Venture sold the cable television system
serving Clearlake and Lakeport, California (the "Clearlake System") on January
9, 1998 and sold the Southwestern Michigan System in July 1998. See Note 2.
Jones Intercable, Inc. (the "General Partner"), a publicly held Colorado
corporation, manages the Partnership and the Venture.
(2) On January 9, 1998, the Venture sold the Clearlake System to an
unaffiliated party for a sales price of $21,400,000, subject to customary
closing adjustments. The Venture distributed a total of $11,000,000 to the
Partnership and Fund 1-C in February 1998, which amount represented the net sale
proceeds following the Venture's repayment of $9,600,000 outstanding under the
Venture's credit facility and the payment of $535,000 representing a 2.5 percent
brokerage fee to The Jones Group, Ltd., a subsidiary of the General Partner
("The Jones Group"). The Partnership received $4,374,700 and Fund 1-C received
$6,625,300 of such distribution. The Partnership, in turn, distributed the
$4,374,700 (approximately $52 for each $500 limited partnership interest, or
$104 for each $1,000 invested in the Partnership) to the limited partners of the
Partnership. Because this distribution to the limited partners of the
Partnership together with all prior distributions did not return the amount
initially contributed by the limited partners to the Partnership plus the
limited partners' liquidation preference provided by the Partnership's limited
partnership agreement, the General Partner did not receive a general partner
distribution from the Clearlake System's sale proceeds. Because the sale of the
Clearlake 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 July 31, 1998, the Venture sold the Southwestern Michigan System to
three unaffiliated parties for a total sales price of $31,250,000, subject to
customary closing adjustments. From the sale proceeds, the Venture paid a
brokerage fee to The Jones Group totaling approximately $781,250 representing
2.5 percent of the sales price, repaid $9,500,000 of the then outstanding
balance of the Venture's credit facility, settled working capital adjustments
and then the Venture distributed the net sales proceeds of $21,200,000 to the
Partnership and Fund 1-C. The Partnership received $8,431,240 and Fund 1-C
received $12,768,760 of such distribution. The Partnership, in turn, will
distribute the $8,431,240 (approximately $100 for each $500 limited partnership
interest, or approximately $200 for each $1,000 invested in the Partnership) to
the limited partners of the Partnership in August 1998. Because this
distribution to the limited partners of the Partnership together with all prior
distributions will not return the amount initially contributed by the limited
partners to the Partnership plus the limited partnership liquidation preference
provided by the Partnership's limited partnership agreement, the General Partner
of the Partnership will not receive a general partner distribution from the
Southwestern Michigan System's sale proceeds. Because the sale of the
Southwestern Michigan 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.
5
The pro forma effect of the sale of the Southwestern Michigan System and
the sale of the Clearlake System on the results of the Venture's operations for
the six months ended June 30, 1998 and the sale of the Southwestern Michigan
System, the sale of the Clearlake System and the sale of the cable television
systems serving Brighton, Broomfield and Boulder County, Colorado (the "Colorado
Systems") on the Venture's operations for the six months ended June 30, 1997,
assuming the transactions had occurred at the beginning of each year, is
presented in the following unaudited tabulation:
For the Six Months Ended June 30, 1998
----------------------------------------
Unaudited
Pro Forma Unaudited
As Reported Adjustments Pro Forma
------------ ------------- -----------
Revenues $ 6,246,930 $ (3,764,144) $ 2,482,786
=========== ============ ===========
Operating Loss $ (237,246) $ 203,287 $ (33,959)
=========== ============ ===========
Consolidated Income (Loss) $11,905,249 $(12,093,431) $ (188,182)
=========== ============ ===========
For the Six Months Ended June 30, 1997
----------------------------------------
Unaudited
Pro Forma Unaudited
As Reported Adjustments Pro Forma
------------ ------------- -----------
Revenues $ 9,353,542 $ (6,941,055) $ 2,412,487
============ ============= ===========
Operating Income (Loss) $ 122,788 $ (209,417) $ (86,629)
============ ============= ===========
Consolidated Income (Loss) $ 18,290,220 $ (18,702,552) $ (412,332)
============ ============= ===========
(3) On June 24, 1998, the Venture entered into an asset purchase agreement
providing for the sale of the South Sioux City System to an unaffiliated party
for a sales price of $9,500,000, subject to customary closing adjustments. The
closing of this transaction, which is expected to occur in the third quarter of
1998, is subject to the consents of governmental authorities and third parties
with whom the Venture has contracted that are necessary for the transfer of the
South Sioux City System. Because the sale of the South Sioux City System does
not represent a 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 consummation of the proposed sale of the South Sioux City System based
upon financial information as of June 30, 1998, the Venture will pay a brokerage
fee to The Jones Group totaling approximately $237,500 representing 2.5 percent
of the sales price, settle working capital adjustments and repay $2,000,000 of
the outstanding balance on the Venture's credit facility, and then the Venture
will distribute the net sales proceeds of approximately $7,210,000 to the
Partnership and Fund 1-C. The Partnership will receive approximately $2,867,417
and Fund 1-C will receive approximately $4,342,583 of such distribution. The
Partnership, in turn, will distribute the $2,867,417 (approximately $34 for each
$500 limited partnership interest, or approximately $68 for each $1,000 invested
in the Partnership) to the limited partners of the Partnership. Because this
distribution to the limited partners of the Partnership together with all prior
distributions will not return the amount initially contributed by the limited
partners to the Partnership plus the limited partners' liquidation preference
provided by the Partnership's limited partnership agreement, the General Partner
of the Partnership will not receive a general partner distribution from the
South Sioux City System's sale proceeds.
Taking into account prior distributions to the limited partners from
operating cash flow, from the net proceeds of prior cable television system
sales and from the August 1998 distribution of the Partnership's portion of the
net sale proceeds from the sale of the Southwestern Michigan System and the
planned distribution of the Partnership's portion of the net sale proceeds from
the sale of the South Sioux City System, the limited partners of the Partnership
will have received approximately $533 for each $500 limited partner interest, or
approximately $1,066 for each $1,000 invested in the Partnership.
6
(4) Financial information regarding the Venture is presented below.
UNAUDITED BALANCE SHEETS
------------------------
ASSETS June 30, 1998 December 31, 1997
------ ------------- -----------------
Cash and accounts receivable $ 845,166 $ 816,973
Investment in cable television properties 19,764,399 29,221,097
Other assets 814,168 476,648
------------- -------------
Total assets $ 21,423,733 $ 30,514,718
============= =============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Debt $ 14,373,366 $ 23,624,588
Accounts payable and accrued liabilities 787,795 1,532,807
Partners' contributed capital, net 13,504,008 24,504,008
Accumulated deficit (7,241,436) (19,146,685)
------------- -------------
Total liabilities and partners' capital $ 21,423,733 $ 30,514,718
============= =============
UNAUDITED STATEMENTS OF OPERATIONS
----------------------------------
For the Three Months Ended For the Six Months Ended
June 30, June 30,
--------------------------- -------------------------
1998 1997 1998 1997
------------ ------------ ----------- -----------
Revenues $3,137,020 $4,507,844 $ 6,246,930 $ 9,353,542
Operating expenses 1,681,411 2,497,384 3,613,725 5,466,347
Management fees and allocated overhead
from Jones Intercable, Inc. 352,162 466,837 697,002 1,045,076
Depreciation and amortization 1,080,899 1,217,187 2,173,449 2,719,331
---------- ---------- ----------- -----------
Operating income (loss) 22,548 326,436 (237,246) 122,788
---------- ---------- ----------- -----------
Interest expense (258,007) (328,933) (402,286) (710,376)
Gain on sale of cable television system - - 12,638,349 18,889,257
Other, net (43,835) 1,012 (93,568) (11,449)
---------- ---------- ----------- -----------
Net income (loss) $ (279,294) $ (1,485) $11,905,249 $18,290,220
========== ========== =========== ===========
(5) The General Partner manages the Partnership and the Venture and receives a
fee for its services equal to 5 percent of the gross revenues of the Venture,
excluding revenues from the sale of cable television systems or franchises.
Management fees paid to Jones Intercable, Inc. by the Venture for the three and
six month periods ended June 30, 1998 totaled $156,851 and $312,347,
respectively, compared to $225,392 and $467,677, respectively, for the similar
1997 periods. Management fees paid by the Venture and attributable to the
Partnership for the three and six month periods ended June 30, 1998 totaled
$62,379 and $124,220 compared to $89,638 and $185,995, respectively, for the
similar 1997 periods.
The Venture 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
7
corporate facilities costs. Such personnel provide engineering, marketing,
administrative, accounting, legal and investor relations services to the
Venture. Such services, and their related costs, are necessary to the operations
of the Venture and would have been incurred by the Venture 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 entity managed.
Remaining expenses are allocated based on the pro rata relationship of 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 of allocating
overhead and administrative expenses is reasonable. Reimbursements for overhead
and administrative expenses paid by the Venture for the three and six month
periods ended June 30, 1998 totaled $195,311 and $384,655, respectively,
compared to $241,445 and $577,399, respectively, for the similar 1997 periods.
Reimbursements for overhead and administrative expenses attributable to the
Partnership for the three and six month periods ended June 30, 1998 totaled
$77,676 and $152,978, respectively, compared to $96,023 and $229,632,
respectively, for the similar 1997 periods.
8
JONES CABLE INCOME FUND 1-B, 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. In accordance
with the General Partner's policy, the Venture sold the Clearlake System in
January 1998 and it sold the Southwestern Michigan System in July 1998. The
Venture has entered into a contract to sell the South Sioux City System. No
specific dates or terms have yet been set for the sale of the Venture's
remaining system. A vote of the limited partners of the Partnership will be
required to approve this sale. There can be no assurance as to the timing or
terms of any sale.
The Partnership owns a 40 percent interest in the Venture. This investment
is accounted for under the equity method. When compared to the December 31, 1997
balance, this investment has increased by $360,017. This increase represents the
Partnership's proportionate share of income, reduced by distributions received
during 1998.
On January 9, 1998, the Venture sold the Clearlake System to an
unaffiliated party for a sales price of $21,400,000, subject to customary
closing adjustments. The Venture distributed a total of $11,000,000 to the
Partnership and Fund 1-C in February 1998, which amount represented the net sale
proceeds following the Venture's repayment of $9,600,000 outstanding under the
Venture's credit facility and the payment of $535,000 representing a 2.5 percent
brokerage fee to The Jones Group. The Partnership received $4,374,700 and
Fund 1-C received $6,625,300 of such distribution. The Partnership, in turn,
distributed the $4,374,700 (approximately $52.50 for each $500 limited
partnership interest, or $105 for each $1,000 invested in the Partnership) to
the limited partners of the Partnership. Because this distribution to the
limited partners of the Partnership together with all prior distributions did
not return the amount initially contributed by the limited partners to the
Partnership plus the limited partnership liquidation preference provided by the
Partnership's limited partners' agreement, the General Partner did not receive a
general partner distribution from the Clearlake System's sale proceeds. Because
the sale of the Clearlake 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 July 31, 1998, the Venture sold the Southwestern Michigan System to
three unaffiliated parties for a total sales price of $31,250,000, subject to
customary closing adjustments. From the sale proceeds, the Venture paid a
brokerage fee to The Jones Group totaling approximately $781,250 representing
2.5 percent of the sales price, repaid $9,500,000 of the then outstanding
balance of the Venture's credit facility, settled working capital adjustments
and then the Venture distributed the net sales proceeds of $21,200,000 to the
Partnership and Fund 1-C. The Partnership received $8,431,240 and Fund 1-C
received $12,768,760 of such distribution. The Partnership, in turn, will
distribute the $8,431,240 (approximately $100 for each $500 limited partnership
interest, or approximately $200 for each $1,000 invested in the Partnership) to
the limited partners of the Partnership in August 1998. Because this
distribution to the limited partners of the Partnership together with all prior
distributions will not return the amount initially contributed by the limited
partners to the Partnership plus the limited partnership liquidation preference
provided by the Partnership's limited partnership agreement, the General Partner
of the Partnership will not receive a general partner distribution from the
Southwestern Michigan System's sale proceeds. Because the sale of the
Southwestern Michigan 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 24, 1998, the Venture entered into an asset purchase agreement
providing for the sale of the South Sioux City System to an unaffiliated party
for a sales price of $9,500,000, subject to customary closing adjustments. The
closing of this transaction, which is expected to occur in the third quarter of
1998, is subject to the consents of governmental authorities and third parties
with whom the Venture has contracted that are necessary for the transfer of the
South Sioux City System. Because the sale of the South Sioux City System does
not represent a 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 consummation of the proposed sale of the South Sioux City System based
upon financial information as of June 30, 1998, the Venture will pay a brokerage
fee to The Jones Group totaling approximately $237,500 representing 2.5 percent
of the sales price, settle working capital adjustments and repay $2,000,000 of
the outstanding balance on the
9
Venture's credit facility, and then the Venture will distribute the net sales
proceeds of approximately $7,210,000 to the Partnership and Fund 1-C. The
Partnership will receive approximately $2,867,417 and Fund 1-C will receive
approximately $4,342,583 of such distribution. The Partnership, in turn, will
distribute the $2,867,417 (approximately $34 for each $500 limited partnership
interest, or approximately $68 for each $1,000 invested in the Partnership) to
the limited partners of the Partnership. Because this distribution to the
limited partners of the Partnership together with all prior distributions will
not return the amount initially contributed by the limited partners to the
Partnership plus the limited partners' liquidation preference provided by the
Partnership's limited partnership agreement, the General Partner of the
Partnership will not receive a general partner distribution from the South Sioux
City System's sale proceeds.
Taking into account prior distributions to the limited partners from
operating cash flow, from the net proceeds of prior cable television system
sales and from the August 1998 distribution of the Partnership's portion of the
net sale proceeds from the sale of the Southwestern Michigan System and the
planned distribution of the Partnership's portion of the net sale proceeds from
the sale of the South Sioux City System, the limited partners of the Partnership
will have received approximately $533 for each $500 limited partner interest, or
approximately $1,066 for each $1,000 invested in the Partnership.
For the six months ended June 30, 1998, the Venture generated net cash from
operating activities totaling $259,131, which is available to fund capital
expenditures and non-operating costs. During the first six months of 1998,
capital expenditures within the Venture's systems totaled approximately
$871,000. Approximately 50 percent of these expenditures was for the
construction of service drops to subscribers' homes and approximately 21 percent
of these expenditures was for the construction of new cable plant related to new
homes passed. The remainder was for other capital expenditures used to maintain
the value of the Venture's remaining systems. Funding for these expenditures was
provided by cash on hand, cash generated from operations and borrowings
available under the Venture's credit facility. Anticipated capital expenditures
for the remainder of 1998 are approximately $821,000. Construction of service
drops to homes will account for approximately 42 percent of the anticipated
expenditures and construction of new cable plant related to new homes passed
will account for approximately 36 percent of the anticipated expenditures. The
remainder is for other capital expenditures to be used to maintain the value of
the Venture's remaining systems. Depending upon the timing of the closing of the
sale of the South Sioux City System, the Venture will make only the portion of
the budgeted capital expenditures scheduled to be made during the Venture's
continued ownership of the South Sioux City System. Funding for these
expenditures is expected to come from cash on hand, cash generated from
operations and available borrowings under the Venture's credit facility. The
Venture is obligated to conduct its business in the ordinary course until the
remaining systems are sold.
On January 9, 1998, as required by the terms of its credit facility, the
Venture used a portion of the proceeds of the sale of the Clearlake System to
repay $9,600,000 of the balance then-outstanding. At the same time, the
commitment on the credit facility was reduced to $19,900,000. At June 30, 1998,
the Venture's credit facility had $14,100,000 outstanding, leaving $5,800,000
available for future borrowings. Upon the sale of the Southwestern Michigan
System on July 31, 1998, the Venture repaid $9,500,000 of the then-outstanding
balance, leaving $4,600,000 outstanding at such date. The commitment was then
reduced to $10,400,000. Upon the consummation of the proposed sale of the South
Sioux City System, the Venture will repay an additional $2,000,000 of the then-
outstanding balance and the commitment will be reduced by $2,000,000. On
September 30, 2000, the maximum amount available begins to reduce quarterly
until June 30, 2005 when the amount available will be zero. Interest on
outstanding principal is calculated at the Venture's option of the Base Rate
plus 1/8 percent, or the Euro-Rate plus 1-1/8 percent. The effective interest
rate on amounts outstanding as of June 30, 1998 and 1997 was 6.84 percent and
7.35 percent, respectively.
The Venture has sufficient sources of capital available from cash on hand,
cash generated from operations and from borrowings available under its credit
facility to meet its anticipated needs.
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.
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.
10
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
Venture's customers. In addition, the General Partner will assess the Venture'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
- ---------------------
Revenues of the Venture decreased $1,370,824, or approximately 30 percent,
to $3,137,020 for the three months ended June 30, 1998 from $4,507,844 for the
comparable 1997 period. Revenues decreased $3,106,612, or approximately 33
percent, to $6,246,930 for the six months ended June 30, 1998 from $9,353,542
for the comparable 1997 period. These decreases were a result of the sale of the
Colorado Systems and the Clearlake System. Disregarding the effect of these
sales, revenues would have increased $145,755, or approximately 5 percent, to
$3,137,020 for the three months ended June 30, 1998 from $2,991,265 for the
comparable 1997 period and revenues would have increased $236,598, or
approximately 4 percent, to $6,113,935 for the six months ended June 30, 1998
from $5,877,337 for the comparable 1997 period. Basic service rate increases
accounted for approximately 60 percent and 64 percent of the increases in
revenues for the three and six month periods ended June 30, 1998. An increase in
the number of basic service subscribers accounted for approximately 25 percent
and 23 percent of the increases in revenues for the three and six month periods
ended June 30, 1998. The number of basic service subscribers in the remaining
systems totaled 30,558 at June 30, 1998 compared to 30,220 at June 30, 1997, an
increase of 338, or approximately 1 percent. No other single factor
significantly affected these increases in revenues.
Operating expenses consist primarily of costs associated with the operation
and administration of the Venture'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 $815,973, or approximately 33 percent, to
$1,681,411 for the three months ended June 30, 1998 from $2,497,384 for the
comparable 1997 period. Operating expenses decreased $1,852,622, or
approximately 34 percent, to $3,613,725 for the six months ended June 30, 1998
from $5,466,347 for the comparable 1997 period. These decreases were a result of
the sale of the Colorado Systems and the Clearlake System. Disregarding the
effect of these sales, operating expenses would have increased $85,325, or
approximately 5 percent, to $1,679,566 for the three months ended June 30, 1998
from $1,594,241 for the comparable 1997 period, and operating expenses would
have increased $131,336, or approximately 4 percent, to $3,305,919 for the six
months ended June 30, 1998 from $3,174,583 for the comparable 1997 period. These
increases in operating expenses for the three and six month periods were due
primarily to increases in programming fees. No other individual factor was
significant to these increases in operating expenses. Operating expenses
represented 54 percent of revenues for the three and six month periods ended
June 30, 1998 compared to 53 percent and 54 percent, respectively, for the
similar periods 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 decreased $554,851, or approximately 28 percent, to
$1,455,609 for the three months ended June 30, 1998 from $2,010,460 for the
comparable 1997 period. Operating cash flow decreased $1,253,990, or
approximately 32 percent, to $2,633,205 for the three months ended June 30, 1998
from $3,887,195 for the comparable 1997 period. These decreases were a result of
the sale of the Colorado Systems and the Clearlake System. Disregarding the
effect of these sales, operating cash flow would have increased $60,430, or
approximately 4 percent, to $1,457,454 for the three months ended June 30, 1998
from $1,397,024 for the comparable 1997 period, and operating cash flow would
have increased $105,262, or approximately 4 percent to $2,808,016 for the six
months ended June 30, 1998 from $2,702,754 for the comparable 1997 period. These
increases were due to the increases in revenues exceeding the increases in
operating expenses.
Management fees and allocated overhead from the General Partner decreased
$114,675, or approximately 25 percent, to $352,162 for the three months ended
June 30, 1998 from $466,837 for the comparable 1997 period. Management fees and
allocated overhead from the General Partner decreased $348,074, or approximately
33 percent, to $697,002 for the six month period ended June 30, 1998 from
$1,045,076 for the comparable 1997 period. These decreases
11
were a result of the sale of the Colorado Systems and the Clearlake System.
Disregarding the effect of these sales, management fees and allocated overhead
from the General Partner would have increased $50,005, or approximately 17
percent, to $352,162 for the three months ended June 30, 1998 from $302,157 for
the comparable 1997 period, and would have increased $5,645, or approximately 1
percent, to $682,990 for the six months ended June 30, 1998 from $677,345 for
the comparable 1997 period. The increase for the three month period was
primarily due to the timing of certain expenses allocated from the General
Partner. The increase for the six month period was primarily due to the
increases in revenues upon which such management fees and allocations are based,
and to timing in the expenses allocated from the General Partner.
Depreciation and amortization expense decreased $136,288, or approximately
11 percent, to $1,080,899 for the three months ended June 30, 1998 from
$1,217,187 for the comparable 1997 period. Depreciation and amortization expense
decreased $545,882, or approximately 20 percent, to $2,173,449 for the six
months ended June 30, 1998 from $2,719,331 for the comparable 1997 period. These
decreases were a result of the sale of the Colorado Systems and the Clearlake
System. Disregarding the effect of these sales, depreciation and amortization
expense would have increased $78,560, or approximately 8 percent, to $1,080,898
for the three months ended June 30, 1998 from $1,002,338 for the comparable 1997
period, and would have increased $143,435, or approximately 7 percent, to
$2,145,370 for the six months ended June 30, 1998 from $2,001,935 for the
comparable 1997 period. These increases were due to an increase in the Venture's
depreciable asset base.
The Venture's operating income decreased $303,888 to $22,548 for the three
months ended June 30, 1998 compared to $326,436 for the comparable 1997 period.
The Venture reported an operating loss of $237,246 for the six months ended June
30, 1998 compared to operating income of $122,788 for the comparable 1997
period. Disregarding the effect of the sale of the Colorado Systems and the
Clearlake System, the Venture would have reported operating income of $24,394
for the three months ended June 30, 1998 compared to $92,529 for the comparable
1997 period, and an operating loss of $20,344 for the six months ended June 30,
1998 compared to operating income of $23,474 for the comparable 1997 period.
These decreases in operating income were a result of 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 decreased $70,926, or approximately 22 percent, to
$258,007 for the three months ended June 30, 1998 from $328,933 for the
comparable 1997 period. Interest expense decreased $308,090, or approximately 43
percent, to $402,286 for the six months ended June 30, 1998 from $710,376 for
the comparable 1997 period. These decreases were primarily due to the lower
outstanding balances on the Venture's interest bearing obligations, as a result
of a portion of the proceeds from the sale of the Colorado Systems and the
Clearlake System being used to repay a portion of the outstanding loan principal
balance.
The Venture reported a gain on the sale of the Clearlake System of
$12,638,349 in the first six months of 1998 and a gain on the sale of the
Colorado Systems of $18,889,257 in the first six months of 1997.
The Venture reported a net loss of $279,294 for the three months ended June
30, 1998 compared to $1,485 for the similar 1997 period. This change was due to
the factors discussed above. The Venture reported net income of $11,905,249 for
the six months ended June 30, 1998 compared to $18,290,220 for the similar 1997
period. This change was primarily a result of the gain on the sale of the
Colorado Systems in 1997 and the gain on the sale of the Clearlake System in
1998 and other factors as discussed above.
12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
27) Financial Data Schedule
b) Reports on Form 8-K
None
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JONES CABLE INCOME FUND 1-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
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