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 0-15378
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
-----------------------------------------------------------------------
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
------------------------
June 30, December 31,
ASSETS 1998 1997
------ ------------ ------------
CASH $ 158,328 $ 363,032
TRADE RECEIVABLES, less allowance for doubtful receivables of
$107,709 and $85,436 at June 30, 1998 and December 31, 1997,
respectively 851,142 931,372
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 89,190,257 86,431,357
Less- accumulated depreciation (53,730,065) (50,186,043)
------------ ------------
35,460,192 36,245,314
Franchise costs and other intangible assets, net of accumulated
amortization of $12,380,250 and $11,920,332 at June 30, 1998
and December 31, 1997, respectively 2,001,124 2,461,042
Investment in cable television joint venture 356,055 3,337,731
------------ ------------
Total investment in cable television properties 37,817,371 42,044,087
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 1,628,453 1,644,310
------------ ------------
Total assets $ 40,455,294 $ 44,982,801
============ ============
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
------------------------
June 30, December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1998 1997
------------------------------------------- ------------ ------------
LIABILITIES:
Debt $ 23,455,629 $ 22,773,095
General Partner advances 235,908 489,313
Trade accounts payable and accrued liabilities 2,206,623 2,440,724
Subscriber prepayments 168,575 84,154
------------ ------------
Total liabilities 26,066,735 25,787,286
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (1,000) (73,389)
------------ ------------
- (72,389)
------------ ------------
Limited Partners-
Net contributed capital (160,000 units outstanding
at June 30, 1998 and December 31, 1997) 68,722,000 68,722,000
Accumulated earnings (deficit) 5,698,628 (14,906,596)
Distributions (60,032,069) (34,547,500)
------------ ------------
14,388,559 19,267,904
------------ ------------
Total liabilities and partners' capital (deficit) $ 40,455,294 $ 44,982,801
============ ============
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 Six Months Ended
June 30, June 30,
-------------------------- -------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
REVENUES $ 5,874,300 $ 7,422,692 $11,511,006 $15,193,103
COSTS AND EXPENSES:
Operating expenses 3,766,324 5,553,318 7,297,732 9,027,852
Management fees and allocated
overhead from General Partner 652,173 747,994 1,260,384 1,663,779
Depreciation and amortization 2,160,009 3,080,949 4,117,966 5,903,129
----------- ----------- ----------- -----------
OPERATING LOSS (704,206) (1,959,569) (1,165,076) (1,401,657)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (414,774) (557,834) (830,186) (1,174,837)
Gain on sale of cable television systems - 7,050,021 - 69,973,972
Other, net 2,064 895,444 169,982 (1,361,157)
----------- ----------- ----------- -----------
Total other income (expense), net (412,710) 7,387,631 (660,204) 67,437,978
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE EQUITY IN
NET INCOME (LOSS) OF CABLE
TELEVISION JOINT VENTURE (1,116,916) 5,428,062 (1,825,280) 66,036,321
EQUITY IN NET INCOME (LOSS) OF
CABLE TELEVISION JOINT VENTURE 486,106 (155,767) 22,502,893 (316,899)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (630,810) $ 5,272,295 $20,677,613 $65,719,422
=========== =========== =========== ===========
ALLOCATION OF NET INCOME
(LOSS):
General Partner $ - $ (17,778) $ 72,389 $ 733,606
=========== =========== =========== ===========
Limited Partners $ (630,810) $ 5,290,073 $20,605,224 $64,985,816
=========== =========== =========== ===========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ (3.94) $ 33.06 $ 128.79 $ 406.16
=========== =========== =========== ===========
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 Six Months Ended
June 30,
----------------------------
1998 1997
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 20,677,613 $ 65,719,422
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,117,966 5,903,129
Equity in net (income) loss of cable television joint venture (22,502,893) 316,899
Gain on sale of cable television systems - (69,973,972)
Decrease in trade receivables 80,230 534,277
Increase in deposits, prepaid expenses and
deferred charges (98,169) (1,463,760)
Decrease in trade accounts payable, accrued liabilities
and subscriber prepayments (149,680) (775,628)
Decrease in General Partner advances (253,405) (17,314)
------------ ------------
Net cash provided by operating activities 1,871,662 243,053
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (2,758,900) (3,246,139)
Proceeds from sale of cable television systems, net of
brokerage fees - 101,890,280
Distribution from Joint Venture 25,484,569 -
------------ ------------
Net cash provided by investing activities 22,725,669 98,644,141
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 750,000 32,291,728
Repayment of debt (67,466) (99,329,454)
Increase in accrued distribution to limited partners - 9,547,500
Distributions to limited partners (25,484,569) (34,547,500)
------------ ------------
Net cash used in financing activities (24,802,035) (92,037,726)
------------ ------------
Increase (decrease) in cash (204,704) 6,849,468
Cash, beginning of period 363,032 1,257,022
------------ ------------
Cash, end of period $ 158,328 $ 8,106,490
============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 995,084 $ 1,234,566
============ ============
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 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-A, 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 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"), all of which are in various stages of being sold. See Note 4.
In addition, the Partnership owns a 27 percent interest in Cable TV Fund 14-A/B
Venture (the "Venture"). The Venture owned and operated the cable television
system serving certain areas in Broward County, Florida (the "Broward System")
until its sale on March 31, 1998. See Note 3.
(2) 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 six month periods ended June 30, 1998 (excluding the
Partnership's interest in the Venture) were $293,715 and $575,550, respectively,
compared to $371,134 and $759,655, 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 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 six month
periods ended June 30, 1998 (excluding the Partnership's interest in the
Venture) were $358,458 and $684,834, respectively, compared to $376,860 and
$904,124, respectively, for the similar 1997 periods.
(3) On March 31, 1998, the Venture sold the Broward System to an unaffiliated
third party for $140,000,000. The agreement provided that 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 initial proceeds of the Broward System sale at initial closing,
the Venture settled working capital adjustments, repaid the outstanding balance
on its credit facility, which totaled $39,902,968 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 27 percent of
the net sale proceeds, or $25,484,569. In April 1998, the Partnership
distributed its net
6
sale proceeds to its limited partners of record as of March 31, 1998. Such
distribution represented approximately $159 for each $500 limited partnership
interest or $318 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 27 percent of the additional net
sale proceeds, or $452,433. The Partnership will retain the $452,433 for
working capital purposes. 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.
(4) The Partnership is in various stages of selling its three remaining cable
television systems. These transactions are discussed below in the order of
anticipated sale closing date.
Calvert County System
---------------------
On June 29, 1998, the Partnership entered into a purchase and sale
agreement to sell the Calvert County System to Jones Communications of Maryland,
Inc., a Colorado corporation, which is a wholly owned subsidiary of Jones Cable
Holdings, Inc., which in turn is a wholly owned subsidiary of the General
Partner, for a sales price of $39,388,667, subject to customary closing
adjustments. The purchase price was determined by the average of three separate
independent appraisals of the fair market value of the Calvert County System.
Closing of the sale, which is expected to occur in the fourth quarter of 1998,
will be subject to several conditions, including necessary governmental and
other third party consents. Upon the proposed sale of the Calvert County
System, based upon financial information as of June 30, 1998, the Partnership
will repay $19,694,334 outstanding on its revolving credit facility, pay certain
fees and expenses of the transaction and distribute the remaining net sale
proceeds of approximately $19,300,000 to the Partnership's limited partners of
record as of the closing date of the sale of the Calvert County System. Because
the distribution to the limited partners from the sale of the Calvert County
System, together with all prior distributions, will not return to the limited
partners 125 percent of the capital initially contributed to the Partnership by
the limited partners, the General Partner will not receive a general partner
distribution from the sale of the Calvert County System. Based upon financial
information as of June 30, 1998, this distribution will give the Partnership's
limited partners an approximate return of $121 for each $500 limited partnership
interest, or $242 for each $1,000 invested in the Partnership.
Buffalo System
--------------
On April 13, 1998, the Partnership signed a letter of intent to sell its
Buffalo System to an unaffiliated party for a sales price of $27,000,000,
subject to customary closing adjustments. The sale of the Buffalo System is
contingent upon the Partnership and the prospective buyer negotiating a
definitive asset purchase agreement. Closing of the sale, which is expected to
occur in the first quarter of 1999, will be subject to several conditions,
including necessary governmental and other third party consents. Upon the
proposed sale of the Buffalo System, based upon financial information as of June
30, 1998, the Partnership will repay the balance outstanding on its revolving
credit facility, estimated to total $3,355,666, pay a brokerage fee to The Jones
Group totaling $675,000, representing 2.5 percent of the sales price, for acting
as a broker in this transaction, settle working capital adjustments and deposit
$1,200,000 into an indemnity escrow account. The remaining net sale proceeds of
approximately $21,600,000 will be distributed to the Partnership's partners of
record as of the closing date of the sale of the Buffalo System. Because the
distribution to the limited partners from the sale of the Buffalo System,
together with all prior distributions, will return to the limited partners more
than 125 percent of the capital initially contributed to the Partnership by the
limited partners, the General Partner will receive a general partner
distribution from the proceeds of the sale of the Buffalo System. It is
estimated that the limited partners, as a group, will receive $21,367,000, or
approximately $134 for each $500 limited partner interest, or $268 for each
$1,000 invested in the Partnership, and the General Partner will receive a
general partner distribution of $233,000 from the net sale proceeds.
For a period of 90 days following the closing date, $1,200,000 of the sale
proceeds will remain in escrow as security for the Partnership's agreement to
indemnify the purchaser under the asset purchase agreement. The Partnership's
primary exposure, if any, will relate to the representations and warranties made
about the Buffalo System in the asset purchase agreement. Any amounts remaining
from this indemnity escrow account that are not claimed by the purchaser at
7
the end of the 90 day period will be distributed to the partners of the
Partnership at that time. If the entire $1,200,000 escrow amount is distributed
to the partners, of which there can be no assurance, the limited partners as a
group would receive 75 percent ($900,000) and the General Partner would receive
25 percent ($300,000) of the net escrow proceeds; thus, the limited partners
would receive approximately $6 for each $500 limited partnership interest, or
$12 for each $1,000 invested in the Partnership from this portion of the sale
proceeds.
Naperville System
-----------------
On August 7, 1998, the Partnership signed an asset purchase agreement to
sell its Naperville System to an unaffiliated party for a sales price of
$23,000,000, subject to customary closing adjustments. Closing of the sale,
which is expected to occur in the first quarter of 1999, will be subject to
several conditions, including necessary governmental and other third party
consents. Upon the proposed sale of the Naperville System, based upon financial
information as of June 30, 1998, the Partnership will pay a brokerage fee to The
Jones Group totaling $575,000, representing 2.5 percent of the sales price, for
acting as a broker in this transaction, settle working capital adjustments, and
then deposit $696,000 into an indemnity escrow account. The remaining net sale
proceeds of approximately $21,000,000 will be distributed to the Partnership's
partners of record as of the closing date of the sale of the Naperville System.
The limited partners, as a group, will receive 75 percent ($15,750,000), and the
General Partner will receive a 25 percent ($5,250,000) general partner
distribution from the net sale proceeds; thus, the limited partners would
receive approximately $98 for each $500 limited partnership interest, or $196
for each $1,000 invested in the Partnership from the sale of the Naperville
System.
The $696,000 of sale proceeds to be placed in the indemnity escrow account
will remain in escrow until November 15, 1999 as security for the Partnership's
agreement to indemnify the buyer under the asset purchase agreement. The
Partnership's primary exposure, if any, will relate to the representations and
warranties to be made about the Naperville System in the asset purchase
agreement. Any amounts remaining from this indemnity escrow account and not
claimed by the buyer at the end of the escrow period will be distributed to the
Partnership's partners. If the entire $696,000 escrow amount is distributed to
the partners, of which there can be no assurance, the limited partners as a
group would receive 75 percent ($522,000) and the General Partner would receive
25 percent ($174,000) of the net escrow proceeds; thus, the limited partners
would receive approximately $3 for each $500 limited partnership interest, or $6
for each $1,000 invested in the Partnership from this portion of the sale
proceeds.
The Partnership will continue in existence at least until any amounts
remaining from the indemnity escrow account have been distributed. Since the
Naperville System will represent the only asset of the Partnership at the time
of its sale, the Partnership will be liquidated and dissolved upon the final
distribution of any amounts remaining from the Naperville System's indemnity
escrow account. If any disputes with respect to indemnification arise, the
Partnership would not be dissolved until such disputes were resolved, which
could result in the Partnership continuing in existence beyond 1999.
Anticipated Total Distributions
-------------------------------
Taking into account the distribution of the Partnership's portion of the
net proceeds from the sale of the Venture's Broward System and the anticipated
distributions of the net proceeds from the proposed sales of the Partnership's
remaining systems (excluding escrowed proceeds), together with all prior
distributions, the General Partner expects that the limited partners of the
Partnership will have received approximately $728 for each $500 limited partner
interest, or $1,456 for each $1,000 invested in the Partnership.
8
(5) 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)
============ ============ ============ ============
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
9
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. Management fees paid by the Venture and
attributable to the Partnership totaled $-0- and $95,729, respectively, for the
three and six months ended June 30, 1998, compared to $93,969 and $186,706,
respectively, for the similar 1997 periods. Reimbursements paid by the Venture
and attributable to the Partnership totaled $-0- and $110,406, respectively, for
the three and six months ended June 30, 1998, compared to $101,251 and $229,000,
respectively, for the similar 1997 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. In accordance
with this policy, the Partnership sold two of its systems in 1997, the Venture
sold the Broward System in March 1998, the Partnership has entered into
agreements to sell its Calvert County System (closing expected in 1998) and its
Naperville System (closing expected in 1999) and the Partnership has signed a
letter of intent to sell its Buffalo System (closing expected in 1999). There
is no assurance as to the timing or terms of any sales.
On March 31, 1998, the Venture sold the Broward System to an unaffiliated
third party for $140,000,000. The agreement provided that 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 initial proceeds of the Broward System sale at initial closing,
the Venture settled working capital adjustments, repaid the outstanding balance
on its credit facility, which totaled $39,902,968 and paid a 2.5 percent
brokerage fee of $3,420,216 to The Jones Group. 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 27 percent of the net sale proceeds, or
$25,484,569. 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 $159 for each $500 limited partnership interest or
$318 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 27 percent of the additional net
sale proceeds, or $452,433. The Partnership will retain the $452,433 for working
capital purposes. 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.
The Partnership is in various stages of selling its three remaining cable
television systems. These transactions are discussed below in the order of
anticipated sale closing date.
On June 29, 1998, the Partnership entered into a purchase and sale
agreement to sell the Calvert County System to Jones Communications of Maryland,
Inc., a Colorado corporation, which is a wholly owned subsidiary of Jones Cable
Holdings, Inc., which in turn is a wholly owned subsidiary of the General
Partner, for a sales price of $39,388,667, subject to customary closing
adjustments. The purchase price was determined by the average of three separate
independent appraisals of the fair market value of the Calvert County System.
Closing of the sale, which is expected to occur in the fourth quarter of 1998,
will be subject to several conditions, including necessary governmental and
other third party consents. Upon the proposed sale of the Calvert County
System, based upon financial information as of June 30, 1998, the Partnership
will repay $19,694,334 outstanding on its revolving credit facility, pay certain
fees and expenses of the transaction and distribute the remaining net sale
proceeds of approximately $19,300,000 to the Partnership's limited partners of
record as of the closing date of the sale of the Calvert County System. Because
the distribution to the limited partners from the sale of the Calvert County
System, together with all prior distributions, will not return to the limited
partners 125 percent of the capital initially contributed to the Partnership by
the limited partners, the General Partner will
11
not receive a general partner distribution from the sale of the Calvert County
System. Based upon financial information as of June 30, 1998, this distribution
will give the Partnership's limited partners an approximate return of $121 for
each $500 limited partnership interest, or $242 for each $1,000 invested in the
Partnership.
On April 13, 1998, the Partnership signed a letter of intent to sell its
Buffalo System to an unaffiliated party for a sales price of $27,000,000,
subject to customary closing adjustments. The sale of the Buffalo System is
contingent upon the Partnership and the prospective buyer negotiating a
definitive asset purchase agreement. Closing of the sale, which is expected to
occur in the first quarter of 1999, will be subject to several conditions,
including necessary governmental and other third party consents. Upon the
proposed sale of the Buffalo System, based upon financial information as of June
30, 1998, the Partnership will repay the balance outstanding on its revolving
credit facility, estimated to total $3,355,666, pay a brokerage fee to The Jones
Group totaling $675,000, representing 2.5 percent of the sales price, for acting
as a broker in this transaction, settle working capital adjustments and deposit
$1,200,000 into an indemnity escrow account. The remaining net sale proceeds of
approximately $21,600,000 will be distributed to the Partnership's partners of
record as of the closing date of the sale of the Buffalo System. Because the
distribution to the limited partners from the sale of the Buffalo System,
together with all prior distributions, will return to the limited partners more
than 125 percent of the capital initially contributed to the Partnership by the
limited partners, the General Partner will receive a general partner
distribution from the proceeds of the sale of the Buffalo System. It is
estimated that the limited partners, as a group, will receive $21,367,000, or
approximately $134 for each $500 limited partner interest, or $268 for each
$1,000 invested in the Partnership, and the General Partner will receive a
general partner distribution of $233,000 from the net sale proceeds.
For a period of 90 days following the closing date, $1,200,000 of the sale
proceeds will remain in escrow as security for the Partnership's agreement to
indemnify the purchaser under the asset purchase agreement. The Partnership's
primary exposure, if any, will relate to the representations and warranties made
about the Buffalo System in the asset purchase agreement. Any amounts remaining
from this indemnity escrow account that are not claimed by the purchaser at the
end of the 90 day period will be distributed to the partners of the Partnership
at that time. If the entire $1,200,000 escrow amount is distributed to the
partners, of which there can be no assurance, the limited partners as a group
would receive 75 percent ($900,000) and the General Partner would receive 25
percent ($300,000) of the net escrow proceeds; thus, the limited partners would
receive approximately $6 for each $500 limited partnership interest, or $12 for
each $1,000 invested in the Partnership from this portion of the sale proceeds.
On August 7, 1998, the Partnership signed an asset purchase agreement to
sell its Naperville System to an unaffiliated party for a sales price of
$23,000,000, subject to customary closing adjustments. Closing of the sale,
which is expected to occur in the first quarter of 1999, will be subject to
several conditions, including necessary governmental and other third party
consents. Upon the proposed sale of the Naperville System, based upon financial
information as of June 30, 1998, the Partnership will pay a brokerage fee to The
Jones Group totaling $575,000, representing 2.5 percent of the sales price, for
acting as a broker in this transaction, settle working capital adjustments, and
then deposit $696,000 into an indemnity escrow account. The remaining net sale
proceeds of approximately $21,000,000 will be distributed to the Partnership's
partners of record as of the closing date of the sale of the Naperville System.
The limited partners, as a group, will receive 75 percent ($15,750,000), and the
General Partner will receive a 25 percent ($5,250,000) general partner
distribution from the net sale proceeds; thus, the limited partners would
receive approximately $98 for each $500 limited partnership interest, or $196
for each $1,000 invested in the Partnership from the sale of the Naperville
System.
The $696,000 of sale proceeds to be placed in the indemnity escrow account
will remain in escrow until November 15, 1999 as security for the Partnership's
agreement to indemnify the buyer under the asset purchase agreement. The
Partnership's primary exposure, if any, will relate to the representations and
warranties to be made about the Naperville System in the asset purchase
agreement. Any amounts remaining from this indemnity escrow account and not
claimed by the buyer at the end of the escrow period will be distributed to the
Partnership's partners. If the entire $696,000 escrow amount is distributed to
the partners, of which there can be no assurance, the limited partners as a
group would receive 75 percent ($522,000) and the General Partner would receive
25 percent ($174,000) of the net escrow proceeds; thus, the limited partners
would receive approximately $3 for each $500 limited partnership interest, or $6
for each $1,000 invested in the Partnership from this portion of the sale
proceeds.
The Partnership will continue in existence at least until any amounts
remaining from the indemnity escrow account have been distributed. Since the
Naperville System will represent the only asset of the Partnership at the time
of its sale, the Partnership will be liquidated and dissolved upon the final
distribution of any amounts remaining from the Naperville
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System's indemnity escrow account. If any disputes with respect to
indemnification arise, the Partnership would not be dissolved until such
disputes were resolved, which could result in the Partnership continuing in
existence beyond 1999.
Taking into account the distribution of the Partnership's portion of the
net proceeds from the sale of the Venture's Broward System and the anticipated
distributions of the net proceeds from the proposed sales of the Partnership's
remaining systems (excluding escrowed proceeds), together with all prior
distributions, the General Partner expects that the limited partners of the
Partnership will have received approximately $728 for each $500 limited partner
interest, or $1,456 for each $1,000 invested in the Partnership.
For the six month period ended June 30, 1998, the Partnership generated net
cash from operating activities totaling $1,871,662, which is available to fund
capital expenditures and non-operating costs. For the six months ended June 30,
1998, capital expenditures totaled approximately $2,759,000 for all of the
Partnership's systems. Approximately 44 percent of the expenditures related to
construction of service drops to subscriber's homes. Approximately 35 percent of
the expenditures related to new plant construction associated with new homes
passed in all of the Partnership's systems. The remainder was for other capital
expenditures to maintain the value of the Partnership's systems. These
expenditures were funded by cash generated from operations, borrowings under the
Partnership's credit facility and cash on hand. Budgeted capital expenditures
for all of the Partnership's systems for the remainder of 1998 are approximately
$3,400,000. Approximately 45 percent of the expenditures will be used for new
plant construction associated with new homes passed in all of the Partnership's
systems. Approximately 27 percent will relate to construction of service drops
to subscribers' homes. The remainder is for other capital expenditures to
maintain the value of the Partnership's remaining systems until they are sold.
Depending upon the timing of the closing of the sale of the Partnership's
Calvert County System, the Partnership will make only the portion of the 1998
budgeted capital expenditures scheduled to be made in that system during the
Partnership's continued ownership of the system. Funding for the improvements
is expected to come from cash on hand, cash generated from operations and, if
necessary, borrowings under its credit facility. The Partnership is obligated
to conduct its business in the ordinary course until its systems are sold.
The Partnership is a party to a $27,700,000 revolving credit facility, of
which $23,050,000 was outstanding at June 30, 1998, leaving $4,650,000 available
for future borrowings. The revolving credit facility expires on September 30,
2000, at which time the then-outstanding balance is payable in full. The
revolving credit facility requires that one-half of the proceeds from the next
Partnership system sale be used to reduce amounts outstanding and that the
credit facility be repaid in full on the second system sale. Based on the
current expected order of closing, the Partnership will repay approximately
$19,694,000 upon the closing of the sale of the Calvert County System, which is
expected to occur before the end of 1998, and the maximum amount of borrowings
available under the revolving credit facility will be reduced to $8,005,666.
The remaining balance will be payable upon the sale of the Buffalo System, which
is expected to occur in the first quarter of 1999. Interest on the revolving
credit facility's outstanding balance is at the Partnership's option of the
London Interbank Offered Rate plus 1.125 percent, the Certificate of Deposit
Rate plus 1.25 percent or the Base Rate plus .125 percent. The effective
interest rates on amounts outstanding as of June 30, 1998 and 1997 were 6.83
percent and 7.14 percent, respectively.
Ameritech, which provides telephone service in a multi-state region
including Illinois, is providing cable television service in Naperville,
Illinois, the community served by the Partnership's Naperville System. This
competition has had an adverse effect on the Naperville System's revenues and
cash flow. 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 until it is sold. These steps include a judicial
challenge to the terms on which a franchise was issued to Ameritech. The City
of Naperville has filed a countersuit against the Partnership declaring that the
Partnership has breached its franchise agreement by withholding franchise
payments and seeks to impose liquidated damages on the Partnership for such
breach. 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. A trial date has not yet been set.
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 needs until its systems are 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.
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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 Partnership-
Revenues of the Partnership decreased $1,548,392, or approximately 21
percent, to $5,874,300 for the three month period ended June 30, 1998 compared
to $7,422,692 for the comparable 1997 period. Revenues decreased $3,682,097, or
approximately 24 percent, to $11,511,006 for the six months ended June 30, 1998
compared to $15,193,103 for the comparable 1997 period. These decreases were
primarily a result of the sales of the cable television systems serving the
areas in and around the communities of Turnersville, New Jersey (the
"Turnersville System") and Central Illinois (the "Central Illinois System") on
January 10, 1997 and June 30, 1997, respectively.
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 $1,786,994, or approximately 32 percent, to
$3,766,324 for the three month period ended June 30, 1998 compared to $5,553,318
for the comparable 1997 period. Operating expenses decreased $1,730,120, or
approximately 19 percent, to $7,297,732 for the six months ended June 30, 1998
compared to $9,027,852 for the comparable 1997 period. These decreases were
primarily a result of the sales of the Turnersville System and Central Illinois
System.
Management fees and allocated overhead from the General Partner decreased
$95,821, or approximately 13 percent, to $652,173 for the three month period
ended June 30, 1998 compared to $747,994 for the comparable 1997 period.
Management fees and allocated overhead from the General Partner decreased
$403,395, or approximately 24 percent, to $1,260,384 for the six month period
ended June 30, 1998 compared to $1,663,779 for the comparable 1997 period.
These decreases were primarily a result of the sales of the Turnersville System
and Central Illinois System.
Depreciation and amortization expense decreased $920,940, or approximately
30 percent, to $2,160,009 for the three month period ended June 30, 1998
compared to $3,080,949 for the comparable 1997 period. Depreciation and
amortization expense decreased $1,785,163, or approximately 30 percent, to
$4,117,966 for the six months ended June 30, 1998 compared to $5,903,129 for the
comparable 1997 period. These decreases were a result of the sales of the
Turnersville System and Central Illinois System.
Operating loss decreased $1,255,363, or approximately 64 percent, to
$704,206 for the three month period ended June 30, 1998 compared to $1,959,569
for the comparable 1997 period. Operating loss decreased $236,581, or
approximately 17 percent, to $1,165,076 for the six month period ended June 30,
1998 compared to $1,401,657 for the comparable 1997 period. These decreases
were a result of the sales of the Turnersville System and Central Illinois
System.
Interest expense decreased $143,060, or approximately 26 percent, to
$414,774 for the three month period ended June 30, 1998 compared to $557,834 for
the comparable 1997 period. Interest expense decreased $344,651, or
approximately 29 percent, to $830,186 for the six months ended June 30, 1998
compared to $1,174,837 for the comparable 1997 period. These decreases were
primarily due to lower outstanding balances on interest bearing obligations
during 1998. A portion of the proceeds from the sales of the Turnersville
System and Central Illinois System was used to reduce the Partnership's debt.
14
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 six month period ended June 30, 1997. No similar gains were
recognized during the comparable 1998 period.
The Partnership reported a loss before equity in net income of cable
television joint venture of $1,116,916 at June 30, 1998 compared to income
before equity in net loss of cable television joint venture of $5,428,062 for
the comparable 1997 period. Loss before equity in net income of cable
television joint venture totaled $1,825,280 for the six month period ended June
30, 1998 compared to income before equity in net loss of cable television joint
venture of $66,036,321 for the comparable 1997 period. These changes were
primarily a result of the gains on the sale of the Turnersville System and
Central Illinois System.
The Venture-
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.
15
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 June 29, 1998, reported that on June 29,
1998, Cable TV Fund 14-A, Ltd., entered into a Purchase and Sale
Agreement to sell the Calvert County System to Jones Communications
of Maryland, Inc.
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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: August 14, 1998
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