FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[x] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1998.
[_] Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to .
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Commission File Number 0-17733
Cable TV Fund 15-A, LTD.
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Exact name of registrant as specified in charter
Colorado #84-1091413
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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
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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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CABLE TV FUND 15-A, LTD.
------------------------
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
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September 30, December 31,
ASSETS 1998 1997
------ -------------- -------------
CASH $ 498,279 $ 771,309
TRADE RECEIVABLES, less allowance for doubtful
receivables of $74,732 and $123,823 at
September 30, 1998 and December 31, 1997, respectively 317,569 351,275
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 90,805,071 86,421,520
Less- accumulated depreciation (49,725,091) (44,723,417)
------------ ------------
41,079,980 41,698,103
Franchise costs and other intangible assets, net of
accumulated amortization of $111,106,178 and
$107,855,517 at September 30, 1998 and
December 31, 1997, respectively 8,716,794 11,967,455
------------ ------------
Total investment in cable television properties 49,796,774 53,665,558
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 1,047,876 1,065,796
------------ ------------
Total assets $ 51,660,498 $ 55,853,938
============ ============
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
2
CABLE TV FUND 15-A, LTD.
------------------------
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
------------------------
September 30, December 31,
LIABILITIES AND PARTNERS' DEFICIT 1998 1997
--------------------------------- -------------- --------------
LIABILITIES:
Debt $ 82,901,793 $ 83,284,060
General Partner advances - 429,811
Trade accounts payable and accrued liabilities 1,673,480 1,772,421
Subscriber prepayments 115,914 124,470
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Total liabilities 84,691,187 85,610,762
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PARTNERS' DEFICIT:
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (1,249,943) (1,217,204)
------------- -------------
(1,248,943) (1,216,204)
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Limited Partners-
Net contributed capital (213,174 units
outstanding at September 30, 1998
and December 31, 1997) 90,575,991 90,575,991
Accumulated deficit (122,357,737) (119,116,611)
------------- -------------
(31,781,746) (28,540,620)
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Total liabilities and partners' deficit $ 51,660,498 $ 55,853,938
============= =============
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
3
CABLE TV FUND 15-A, LTD.
------------------------
(A Limited Partnership)
UNAUDITED STATEMENTS OF OPERATIONS
----------------------------------
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
---------------------------- ---------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
REVENUES $10,074,702 $ 9,939,509 $30,255,444 $29,643,667
COSTS AND EXPENSES:
Operating expenses 5,695,081 5,329,737 17,040,264 16,437,942
Management fees and allocated overhead
from General Partner 1,062,288 1,023,387 3,259,036 3,156,987
Depreciation and amortization 2,450,661 3,078,303 8,692,930 9,185,977
----------- ----------- ----------- -----------
OPERATING INCOME 866,672 508,082 1,263,214 862,761
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (1,541,910) (1,549,840) (4,580,338) (4,590,567)
Other, net 10,670 1,959 43,259 48,645
----------- ----------- ----------- -----------
Total other income (expense) (1,531,240) (1,547,881) (4,537,079) (4,541,922)
----------- ----------- ----------- -----------
NET LOSS $ (664,568) $(1,039,799) $(3,273,865) $(3,679,161)
=========== =========== =========== ===========
ALLOCATION OF NET LOSS:
General Partner $ (6,646) $ (10,398) $ (32,739) $ (36,792)
=========== =========== =========== ===========
Limited Partners $ (657,922) $(1,029,401) $(3,241,126) $(3,642,369)
=========== =========== =========== ===========
NET LOSS PER LIMITED
PARTNERSHIP UNIT $ (3.09) $ (4.83) $ (15.21) $ (17.09)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF LIMITED PARTNERSHIP
UNITS OUTSTANDING 213,174 213,174 213,174 213,174
=========== =========== =========== ===========
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
4
CABLE TV FUND 15-A, LTD.
------------------------
(A Limited Partnership)
UNAUDITED STATEMENTS OF CASH FLOWS
----------------------------------
For the Nine Months Ended
September 30,
----------------------------
1998 1997
------------ --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,273,865) $(3,679,161)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 8,692,930 9,185,977
Decrease in trade receivables 33,706 320,696
Increase in deposits, prepaid expenses and
deferred charges (422,675) (135,250)
Decrease in trade accounts payable, accrued
liabilities and subscriber prepayments (107,497) (461,388)
Decrease in General Partner advances (429,811) (430,624)
----------- -----------
Net cash provided by operating activities 4,492,788 4,800,250
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (4,383,551) (3,748,430)
----------- -----------
Net cash used in investing activities (4,383,551) (3,748,430)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 1,200,000 7,407,459
Repayment of debt (1,582,267) (919,350)
----------- -----------
Net cash provided by (used in) financing activities (382,267) 6,488,109
----------- -----------
Increase (decrease) in cash (273,030) 7,539,929
Cash, beginning of period 771,309 452,484
----------- -----------
Cash, end of period $ 498,279 $ 7,992,413
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 4,604,884 $ 4,986,623
=========== ===========
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
5
CABLE TV FUND 15-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 15-A, Ltd.
(the "Partnership") at September 30, 1998 and December 31, 1997, its results of
operations for the three and nine month periods ended September 30, 1998 and
1997 and its cash flows for the nine month periods ended September 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
communities of Barrington, Lake Barrington, Deer Park, Long Grove, Elgin, South
Elgin, Hawthorn Woods, Kildeer, Lake Zurich, Indian Creek, Vernon Hills and
certain unincorporated areas of Cook, Kane and Lake Counties, all in the State
of Illinois (the "Barrington System") and the cable television system serving
the communities of Flossmoor, La Grange, La Grange Park, Riverside, Indianhead
Park, Hazel Crest, Thornton, Lansing, Matteson, Richton Park, University Park,
Crete, Olympia Fields, Western Springs and certain unincorporated areas of Will
and Cook Counties, all in the State of Illinois (the "South Suburban System").
(2) Jones Intercable, Inc. ("Intercable"), 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 paid to the General Partner by the Partnership for
the three and nine month periods ended September 30, 1998 were $503,735 and
$1,512,772, respectively, compared to $496,975 and $1,482,183, respectively, for
the comparable periods in 1997.
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, administrative, accounting, legal and investor relations services to
the Partnership. Such services, and their related costs, are necessary to the
operations 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
entity managed. Remaining expenses are allocated based on the pro rata
relationship of the Partnership'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 Intercable 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 by the Partnership to the General Partner for allocated overhead
and administrative expenses for the three and nine month periods ended September
30, 1998 were $558,553 and $1,746,264, respectively, compared to $526,412 and
$1,674,804, respectively, for the comparable periods in 1997.
(3) On August 7, 1998, the Partnership signed a contract to sell its Barrington
System and South Suburban System to an unaffiliated party for a contract sales
price of $175,000,000, subject to a sales price reduction if the number of basic
equivalent subscribers delivered to the buyer at the closing is less than 84,750
and subject to customary closing adjustments. The contract sales price of
$175,000,000 will be reduced $2,065 for each equivalent basic subscriber less
than 84,750 at closing. Because the General Partner currently estimates that the
Barrington System and South Suburban System will have, in total, only 82,500
basic equivalent subscribers, as defined in the asset purchase agreement, at
closing, the General Partner anticipates that the sales price will be only
$170,353,750. 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. In addition, because the Barrington
System and South Suburban System constitute all of the assets of the
Partnership, the sale must be approved by the owners of a majority of the
interests of the Partnership. The General Partner is currently conducting a vote
of the limited partners on the proposed sale of these systems.
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Upon the consummation of the proposed sale of the Barrington System and the
South Suburban System, based upon financial information as of September 30,
1998, the Partnership will repay all of its indebtedness, which totaled
$82,901,793, pay a brokerage fee to The Jones Group, Ltd. ("The Jones Group"), a
subsidiary of the General Partner, totaling approximately $4,258,844,
representing 2.5 percent of the $170,353,750 adjusted sales price, for acting as
a broker in this transaction, settle working capital adjustments, and then
deposit $5,298,000 into an indemnity escrow account. The remaining net sale
proceeds expected to total approximately $77,969,500 will be distributed to the
Partnership's limited partners of record as of the closing date of the sale of
the Barrington System and the South Suburban System. This distribution will
give the Partnership's limited partners an approximate return of $366 for each
$500 limited partnership interest, or $732 for each $1,000 invested in the
partnership. Because limited partners will not receive distributions in an
amount equal to 100 percent of the capital initially contributed to the
Partnership by the limited partners plus an amount equal to 6 percent per annum,
cumulative and noncompounded, on an amount equal to their initial capital
contributions, the General Partner will not receive a general partner
distribution from the sale of the Barrington System and the South Suburban
System.
The $5,298,000 of the sale proceeds to be placed in the indemnity escrow
account will remain in escrow from the closing date 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 Barrington System and
the South Suburban 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 returned to and distributed by the Partnership.
If the entire $5,298,000 escrow amount is available, the Partnership would then
distribute the $5,298,000 to the limited partners, which would represent $25 for
each $500 limited partnership interest, or $50 for each $1,000 invested in the
Partnership. The Partnership will continue in existence at least until any
amounts remaining from the indemnity escrow account have been distributed.
Since the Barrington System and the South Suburban System represent the only
assets of the Partnership, the Partnership will be liquidated and dissolved upon
the final distribution of any amounts remaining from the indemnity escrow
account, most likely in the fourth quarter of 1999. 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.
7
CABLE TV FUND 15-A, LTD.
------------------------
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
FINANCIAL CONDITION
- -------------------
On August 7, 1998, the Partnership signed a contract to sell its Barrington
System and South Suburban System to an unaffiliated party for a contract sales
price of $175,000,000, subject to a sales price reduction if the number of basic
equivalent subscribers delivered to the buyer at the closing is less than 84,750
and subject to customary closing adjustments. The contract sales price of
$175,000,000 will be reduced $2,065 for each equivalent basic subscriber less
than 84,750 at closing. Because the General Partner currently estimates that
the Barrington System and South Suburban System will have, in total, only 82,500
basic equivalent subscribers, as defined in the asset purchase agreement, at
closing, the General Partner anticipates that the sales price will be only
$170,353,750. 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. In addition, because the
Barrington System and South Suburban System constitute all of the assets of the
Partnership, the sale must be approved by the owners of a majority of the
interests of the Partnership. The General Partner is currently conducting a
vote of the limited partners on the proposed sale of these systems.
Upon the consummation of the proposed sale of the Barrington System and the
South Suburban System, based upon financial information as of September 30,
1998, the Partnership will repay all of its indebtedness, which totaled
$82,901,793, pay a brokerage fee to The Jones Group totaling approximately
$4,258,844, representing 2.5 percent of the $170,353,750 adjusted sales price,
for acting as a broker in this transaction, settle working capital adjustments,
and then deposit $5,298,000 into an indemnity escrow account. The remaining net
sale proceeds expected to total approximately $77,969,500 will be distributed to
the Partnership's limited partners of record as of the closing date of the sale
of the Barrington System and the South Suburban System. This distribution will
give the Partnership's limited partners an approximate return of $366 for each
$500 limited partnership interest, or $732 for each $1,000 invested in the
partnership. Because limited partners will not receive distributions in an
amount equal to 100 percent of the capital initially contributed to the
Partnership by the limited partners plus an amount equal to 6 percent per annum,
cumulative and noncompounded, on an amount equal to their initial capital
contributions, the General Partner will not receive a general partner
distribution from the sale of the Barrington System and the South Suburban
System.
The $5,298,000 of the sale proceeds to be placed in the indemnity escrow
account will remain in escrow from the closing date 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 Barrington System and
the South Suburban 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 limited
partners. If the entire $5,298,000 escrow amount is available, the Partnership
would then distribute the $5,298,000 to the limited partners, which would
represent $25 for each $500 limited partnership interest, or $50 for each $1,000
invested in the Partnership. The Partnership will continue in existence at
least until any amounts remaining from the indemnity escrow account have been
distributed. Since the Barrington System and the South Suburban System
represent the only assets of the Partnership, the Partnership will be liquidated
and dissolved upon the final distribution of any amounts remaining from the
indemnity escrow account, most likely in the fourth quarter of 1999. 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.
For the nine months ended September 30, 1998, the Partnership generated net
cash from operating activities totaling $4,492,788, which is available to fund
capital expenditures and non-operating costs. Capital expenditures totaled
approximately $4,383,500 during the first nine months of 1998. Approximately 45
percent of these expenditures was for service drops to homes. New plant
construction related to new homes passed accounted for approximately 20 percent.
The remainder of the expenditures was for other capital expenditures to maintain
the value of the Partnership's systems. Funding for these expenditures was
provided by cash generated from operations and cash on hand. Budgeted capital
expenditures for the remainder of 1998 are approximately $1,671,500.
Approximately 43 percent of the remaining capital expenditures will be for
service drops to homes. Approximately 21 percent of the remaining capital
expenditures will be for new plant construction related to new homes passed.
The remainder of the anticipated expenditures is for other capital
8
expenditures to maintain the value of the Partnership's systems until they are
sold. Funding for these expenditures is expected to be provided by cash on hand,
cash generated from operations and, if necessary, borrowings from the
Partnership's credit facility. The Partnership is obligated to the prospective
buyer of the systems to conduct its business in the ordinary course until the
Barrington System and South Suburban System are sold.
Ameritech, which provides telephone service in a multi-state region,
including Illinois, has begun providing cable television service in a portion of
the Partnership's Barrington System. This competition has had a negative effect
on the revenues and cash flow of the Barrington System. 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 Partnership's systems until
they are sold.
The Partnership's $85,000,000 revolving credit facility allows for the
entire commitment to be available through March 31, 2000, at which time the
commitment will reduce quarterly until December 31, 2000, at which time the
commitment will reduce to zero and will be payable in full. At September 30,
1998, $82,700,000 was outstanding under the Partnership's revolving credit
facility, leaving $2,300,000 of available borrowings. The entire outstanding
balance of the revolving credit facility will be repaid with proceeds from the
proposed sale of the Barrington System and the South Suburban System. Interest
is at the Partnership's option of Prime plus 1/2 percent, the London Interbank
Offered Rate plus 1-1/2 percent or the Certificate of Deposit Rate plus 1-5/8
percent. The effective interest rates on outstanding obligations as of
September 30, 1998 and 1997 were 7.13 percent and 7.26 percent, respectively.
The Partnership has sufficient sources of capital in the form of cash on
hand, cash generated from operations and borrowings available under its
revolving credit facility to meet its presently anticipated liquidity and
capital needs until its systems are sold.
RESULTS OF OPERATIONS
- ---------------------
Revenues of the Partnership increased $135,193, or approximately 1 percent,
to $10,074,702 for the three month period ended September 30, 1998 from
$9,939,509 for the comparable period in 1997. Revenues of the Partnership
increased $611,777, or approximately 2 percent, to $30,255,444 for the nine
month period ended September 30, 1998 from $29,643,667 for the comparable period
in 1997. The increase in revenues was primarily due to basic service rate
increases implemented in the Partnership's systems and an increase in
advertising sales revenues. This increase would have been higher except for the
Barrington System's competition from Ameritech.
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 $365,344, or approximately 7 percent, to
$5,695,081 for the three month period ended September 30, 1998 from $5,329,737
for the comparable period in 1997. Operating expenses increased $602,322, or
approximately 4 percent, to $17,040,264 for the nine month period ended
September 30, 1998 from $16,437,942 for the comparable period in 1997.
Increases in marketing and advertising sales related expenses primarily
accounted for the increase in operating expenses. No other individual factor
contributed significantly to the increase in operating expenses. Operating
expenses represented approximately 57 percent and 56 percent, respectively, of
revenues for each of the three and nine month periods ended September 30, 1998
and 54 percent and 55 percent, respectively, of revenues for each of the three
and nine month periods ending September 30, 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
$230,151, or approximately 5 percent, to $4,379,621 for the three month period
ended September 30, 1998 from $4,609,772 for the comparable period in 1997.
This decrease was due to the increase in operating expenses exceeding the
increase in revenues. Operating cash flow increased $9,455 to $13,215,180 for
the nine month period ended September 30, 1998 from $13,205,725 for the
comparable period in 1997. This increase was due to the increase in revenues
exceeding the increase in operating expenses.
9
Management fees and allocated overhead from the General Partner increased
$38,901, or approximately 4 percent, to $1,062,288 for the three month period
ended September 30, 1998 from $1,023,387 for the comparable period in 1997.
Management fees and allocated overhead from the General Partner increased
$102,049, or approximately 3 percent, to $3,259,036 for the nine month period
ended September 30, 1998 from $3,156,987 for the comparable period in 1997.
These increases were due to increases in revenues, upon which such fees and
allocations are based.
Depreciation and amortization expense decreased $627,642, or approximately
20 percent, to $2,450,661 for the three month period ended September 30, 1998
from $3,078,303 for the comparable period in 1997. Depreciation and
amortization expense decreased $493,047, or approximately 5 percent, to
$8,692,930 for the nine month period ended September 30, 1998 from $9,185,977
for the comparable period in 1997. These decreases were due to the maturation
of a portion of the Partnership's intangible asset base.
The Partnership's operating income increased $358,590, or approximately 71
percent, to $866,672 for the three month period ended September 30, 1998
compared to $508,082 for the comparable period in 1997. This increase was a
result of the decrease in depreciation and amortization expense exceeding the
increase in management fees and allocated overhead from the General Partner and
the decrease in operating cash flow. The Partnership's operating income
increased $400,453, or approximately 46 percent, to $1,263,214 for the nine
month period ended September 30, 1998 from $862,761 for the comparable period in
1997. This increase was a result of the increase in operating cash flow and the
decrease in depreciation and amortization expense exceeding the increase in
management fees and allocated overhead from the General Partner.
Interest expense decreased $7,930, or less than 1 percent, to $1,541,910
for the three month period ended September 30, 1998 from $1,549,840 for the
comparable period in 1997. Interest expense decreased $10,229 to $4,580,338 for
the nine month period ended September 30, 1998 from $4,590,567 for the
comparable period in 1997. These decreases were due to lower interest rates on
interest bearing obligations.
Net loss decreased $375,231, or approximately 36 percent, to $664,568 for
the three month period ended September 30, 1998 from $1,039,799 for the
comparable period in 1997. Net loss decreased $405,296, or approximately 11
percent, to $3,273,865 for the nine month period ended September 30, 1998 from
$3,679,161 for the comparable period in 1997. These changes were due to the
factors discussed above.
10
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
11
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 15-A, LTD.
BY: JONES INTERCABLE, INC.
General Partner
By: /S/ Kevin P. Coyle
--------------------------------
Kevin P. Coyle
Group Vice President/Finance
(Principal Financial Officer)
Dated: November 13, 1998
12