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, 1999
------------
[_] 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: 0-14906
JONES CABLE INCOME FUND 1-B, LTD.
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Exact name of registrant as specified in charter
Colorado 84-1010417
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State of organization I.R.S. employer I.D. #
c/o Comcast Corporation
1500 Market Street, Philadelphia, PA 19102-2148
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Address of principal executive office
(215) 665-1700
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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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JONES CABLE INCOME FUND 1-B, LTD.
---------------------------------
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
------------------------
June 30, December 31,
ASSETS 1999 1998
------ --------- ------------
INVESTMENT IN CABLE TELEVISION JOINT VENTURE $ 242,891 $ 83,879
--------- ---------
Total assets $ 242,891 $ 83,879
========= =========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
LIABILITIES:
Accounts payable and accrued liabilities $ 59,010 $ 53,197
--------- ---------
Total liabilities 59,010 53,197
--------- ---------
PARTNERS' CAPITAL:
General Partner-
Contributed capital 1,000 1,000
Accumulated earnings 110,751 109,219
Distributions (110,219) (110,219)
--------- ---------
1,532 -
------------ ------------
Limited Partners-
Net contributed capital (83,884 units outstanding
at June 30, 1999 and December 31, 1998) 34,449,671 34,449,671
Accumulated earnings 10,520,900 10,369,233
Distributions (44,788,222) (44,788,222)
------------ ------------
182,349 30,682
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Total liabilities and partners' capital $ 242,891 $ 83,879
============ ============
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,
----------------------- ----------------------
1999 1998 1999 1998
-------- --------- -------- ---------
OTHER INCOME (EXPENSE), net $ 10,231 $ (52,911) $ (5,813) $ (52,911)
EQUITY IN NET INCOME (LOSS) OF
CABLE TELEVISION JOINT
VENTURE 209,470 (111,076) 159,012 4,734,717
-------- --------- -------- ----------
NET INCOME (LOSS) $219,701 $(163,987) $153,199 $4,681,806
======== ========= ======== ==========
ALLOCATION OF NET INCOME (LOSS):
General Partner $ 2,197 $ (1,640) $ 1,532 $ 813
======== ========= ======== ==========
Limited Partners $217,504 $(162,347) $151,667 $4,680,993
======== ========= ======== ==========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ 2.59 $ (1.94) $ 1.81 $ 55.80
======== ========= ======== ==========
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
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For the Six Months Ended
June 30,
--------------------------
1999 1998
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 153,199 $ 4,681,806
Adjustments to reconcile net income to net
cash used in operating activities:
Equity in net income of cable television
joint venture (159,012) (4,734,717)
Increase in accounts payable and accrued liabilities 5,813 52,766
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Net cash used in operating activities - (145)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from cable television joint venture - 4,374,700
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Net cash provided by investing activities - 4,374,700
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CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to limited partners - (4,374,700)
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Net cash used in financing activities - (4,374,700)
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Decrease in cash (145)
Cash, beginning of period - 145
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Cash, end of period $ - $ -
========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ - $ -
========== ===========
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
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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, 1999 and December 31, 1998 and its
results of operations for the three and six month periods ended June 30, 1999
and 1998 and its cash flows for the six month periods ended June 30, 1999 and
1998. 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"). The Venture owned and operated the cable television
system serving Myrtle Creek, Oregon (the "Myrtle Creek System") until its sale
on July 30, 1999. Jones Cable Income Fund 1-C, Ltd. ("Fund 1-C") owns a 60
percent interest in the Venture. Jones Intercable, Inc., a publicly held
Colorado corporation, is the "General Partner" and manages the Partnership and
the Venture.
On April 7, 1999, Comcast Corporation ("Comcast") completed the acquisition
of a controlling interest in the General Partner. As of April 7, 1999, Comcast
owned approximately 12.8 million shares of the General Partner's Class A
Common Stock and approximately 2.9 million shares of the General Partner's
Common Stock, representing approximately 37% of the economic interest and 47% of
the voting interest in the General Partner. Also on that date, Comcast
contributed it shares in the General Partner to Comcast's wholly owned
subsidiary, Comcast Cable Communications, Inc. ("Comcast Cable"). The
approximately 2.9 million shares of Common Stock of the General Partner owned by
Comcast represents approximately 57% of the outstanding Common Stock, which
class of stock is entitled to elect 75% of the Board of Directors of the General
Partner. As a result of this transaction, the General Partner is now a
consolidated public company subsidiary of Comcast Cable.
Also on April 7, 1999, the bylaws of the General Partner were amended to
establish the size of the General Partner's Board of Directors as a range from
eight to thirteen directors and the board was reconstituted so as to have eight
directors and the following directors of the General Partner resigned: Robert E.
Cole, Josef J. Fridman, James J. Krejci, James B. O'Brien, Raphael M. Solor,
Robert Kearney, Howard O. Thrall, Siim Vanaselja, Sanford Zisman and Glenn R.
Jones. In addition, Donald L. Jacobs resigned as a director elected by the
holders of Class A Common Stock and was elected by the remaining directors as a
director elected by the holders of Common Stock. The remaining directors elected
the following persons to fill the vacancies on the board created by such
resignations: Ralph J. Roberts, Brian L. Roberts, John R. Alchin, Stanley Wang
and Lawrence S. Smith. All of the newly elected directors, with the exception of
Mr. Jacobs, are officers of Comcast. Also on April 7, 1999, the following
executive officers of the General Partner resigned: Glenn R. Jones, James B.
O'Brien, Ruth E. Warren, Kevin P. Coyle, Cynthia A. Winning, Elizabeth M.
Steele, Wayne H. Davis and Larry W. Kaschinske. The following persons were
appointed as executive officers of the General Partner on April 7, 1999: Ralph
J. Roberts, Brian L. Roberts, Lawrence S. Smith, John R. Alchin and Stanley
Wang.
(2) On July 30, 1999, the Venture sold the Myrtle Creek System to an
unaffiliated party for a sales price of $10,000,000, subject to customary
closing adjustments. This sale was approved by the holders of a majority of the
limited partnership interests in a vote conducted by the General Partner in June
and July 1999. From the sale proceeds, the Venture paid a $250,000 brokerage fee
to The Intercable Group, Ltd. ("The Intercable Group"), a subsidiary of the
General Partner, representing 2.5 percent of the sales price, for acting as a
broker in the transaction, repaid the then outstanding balance of the Venture's
credit facility of $2,400,000, and deposited $500,000 into an interest-bearing
indemnity escrow account. The Venture will settle working capital adjustments
and, based upon financial information as of June 30, 1999, the remaining net
sale proceeds of approximately $6,500,000 will be distributed 40 percent to the
Partnership and 60 percent to Fund 1-C. The Partnership will receive
approximately $2,585,000 and Fund 1-C will receive approximately $3,915,000 of
such distribution. The Partnership, in turn, will create a reserve to cover the
administrative expenses of the Partnership and then it will distribute the
balance to the limited partners of the Partnership. This distribution is
expected to be made in the third quarter of 1999. 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 Myrtle
Creek System's sale proceeds.
For a period of one year following the closing date, $500,000 of the sale
proceeds will remain in escrow as security for the Venture's agreement to
indemnify the purchaser under the asset purchase agreement. The Venture's
primary exposure, if any, will relate to the representations and warranties made
about the Myrtle Creek 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 one-year escrow period plus interest earned on the escrowed funds
will be returned to the Venture. From this amount, the Venture will pay its
remaining liabilities and the Venture will then distribute the balance, if any,
to its partners. From its share of this distribution, the Partnership will
retain funds necessary to cover the administrative expenses of the Partnership
and it will distribute the balance, if any, to the limited partners.
Although the sale of the Myrtle Creek System represented the sale of the
only remaining operating asset of the Venture, and the Partnership's interest in
the Venture represents its only asset, the Venture and the Partnership will not
be dissolved until all proceeds from escrow have been distributed and the
Partnership will not be dissolved and liquidated until the pending litigation in
which the Partnership is a named defendant has been resolved and terminated (See
Part II, Item 1).
(3) On January 9, 1998, the Venture sold the cable television system serving
Clearlake and Lakeport, California (the "Clearlake System") to an unaffiliated
party. The Venture repaid a portion of its indebtedness, settled working capital
adjustments, deposited $300,000 into an indemnity escrow account and distributed
the remaining net sale proceeds to the Partnership and Fund 1-C. The indemnity
escrow period expired on January 9, 1999, and all of the $300,000 indemnity
escrow amount plus $14,977 of interest was returned to the Venture. The Venture
has distributed these funds 40 percent to
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the Partnership and 60 percent to Fund 1-C. The Partnership used its portion of
these proceeds to repay a portion of its remaining liabilities, therefore no
distribution of these funds was made to the limited partners.
(4) Financial information regarding the Venture is presented below.
UNAUDITED BALANCE SHEETS
------------------------
ASSETS June 30, 1999 December 31, 1998
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Cash and accounts receivable $ 126,172 $ 127,614
Investment in cable television properties 3,020,372 3,265,432
Other assets 95,253 450,504
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Total assets $ 3,241,797 $ 3,843,550
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LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Debt $ 2,410,376 $ 2,417,756
Accounts payable and accrued liabilities 210,126 1,204,333
Partners' contributed capital, net (14,973,692) (14,973,692)
Accumulated earnings 15,594,987 15,195,153
------------ ------------
Total liabilities and partners' capital $ 3,241,797 $ 3,843,550
============ ============
UNAUDITED STATEMENTS OF OPERATIONS
----------------------------------
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1999 1998 1999 1998
---------- ----------- ----------- ----------
Revenues $587,663 $3,137,020 $1,195,013 $ 6,246,930
Operating expenses 353,486 1,681,411 725,418 3,613,725
Management fees and allocated overhead
from Jones Intercable, Inc. 54,691 352,162 128,483 697,002
Depreciation and amortization 198,520 1,080,899 397,044 2,173,449
-------- ---------- ---------- -----------
Operating income (loss) (19,034) 22,548 (55,932) (237,246)
-------- ---------- ---------- -----------
Interest expense (30,192) (258,007) (80,766) (402,286)
Gain on sale of cable television system - - - 12,638,349
Other, net 575,935 (43,835) 536,532 (93,568)
-------- ---------- ---------- -----------
Net income (loss) $526,709 $ (279,294) $ 399,834 $11,905,249
======== ========== ========== ===========
(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 the General Partner by the Venture for the three and six
month periods ended June 30, 1999 totaled $29,383 and $59,751, respectively,
compared to $156,851 and $312,347, respectively, for the similar 1998 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
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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, 1999 totaled $25,308 and $68,732, respectively, compared
to $195,311 and $384,655, respectively, for the similar 1998 periods.
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JONES CABLE INCOME FUND 1-B, LTD.
---------------------------------
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
FINANCIAL CONDITION
- -------------------
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,
1998 balance, this investment has increased by $159,012. This increase
represents the Partnership's proportionate share of income in 1999.
On July 30, 1999, the Venture sold the Myrtle Creek System to an
unaffiliated party for a sales price of $10,000,000, subject to customary
closing adjustments. This sale was approved by the holders of a majority of
the limited partnership interests in a vote conducted by the General Partner in
June and July 1999. From the sale proceeds, the Venture paid a $250,000
brokerage fee to The Intercable Group, Ltd. ("The Intercable Group"), a
subsidiary of the General Partner, representing 2.5 percent of the sales price,
for acting as a broker in the transaction, repaid the then outstanding balance
of the Venture's credit facility of $2,400,000, and deposited $500,000 into an
interest-bearing indemnity escrow account. The Venture will settle working
capital adjustments and, based upon financial information as of June 30, 1999,
the remaining net sale proceeds of approximately $6,500,000 will be distributed
40 percent to the Partnership and 60 percent to Fund 1-C. The Partnership will
receive approximately $2,585,000 and Fund 1-C will receive approximately
$3,915,000 of such distribution. The Partnership, in turn, will create a
reserve to cover the administrative expenses of the Partnership and then it will
distribute the balance to the limited partners of the Partnership. This
distribution is expected to be made in the third quarter of 1999. 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
Myrtle Creek System's sale proceeds.
For a period of one year following the closing date, $500,000 of the sale
proceeds will remain in escrow as security for the Venture's agreement to
indemnify the purchaser under the asset purchase agreement. The Venture's
primary exposure, if any, will relate to the representations and warranties made
about the Myrtle Creek 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 one-year escrow period plus interest earned on the escrowed funds
will be returned to the Venture. From this amount, the Venture will pay its
remaining liabilities and the Venture will then distribute the balance, if any,
to its partners. From its share of this distribution, the Partnership will
retain funds necessary to cover the administrative expenses of the Partnership
and it will distribute the balance, if any, to the limited partners.
Although the sale of the Myrtle Creek System represented the sale of the
only remaining operating asset of the Venture, and the Partnership's interest in
the Venture represents its only asset, the Venture and the Partnership will not
be dissolved until all proceeds from escrow have been distributed and the
Partnership will not be dissolved and liquidated until the pending litigation in
which the Partnership is a named defendant has been resolved and terminated (See
Part II, Item 1).
On January 9, 1998, the Venture sold the cable television system serving
Clearlake and Lakeport, California (the "Clearlake System") to an unaffiliated
party. The Venture repaid a portion of its indebtedness, settled working
capital adjustments, deposited $300,000 into an indemnity escrow account and
distributed the remaining net sale proceeds to the Partnership and Fund 1-C.
The indemnity escrow period expired on January 9, 1999, and all of the $300,000
indemnity escrow amount plus $14,977 of interest was returned to the Venture.
The Venture has distributed these funds 40 percent to the Partnership and 60
percent to Fund 1-C. The Partnership used its portion of these proceeds to
repay a portion of its remaining liabilities, therefore no distribution of these
funds was made to the limited partners.
During the first six months of 1999, capital expenditures within the Myrtle
Creek System totaled approximately $120,710. These expenditures were for the
construction of service drops to subscribers' homes. Funding for these
expenditures was provided by cash on hand and cash generated from operations.
Capital expenditures made in 1999 were used to maintain the value of the Myrtle
Creek System until its sale on July 30, 1999. Funding for these expenditures
was provided by cash on hand and cash generated from operations. The Venture
was obligated to conduct its business in the ordinary course until the Myrtle
Creek System's sale.
8
Because the Venture has sold all of its assets and further distributions,
if any, will be made to the limited partners of record as of the closing date of
the sale of the Venture's last remaining cable television system, new limited
partners would not be entitled to any distributions from the Partnership and
transfers of limited partnership interests would have no economic or practical
value. The General Partner therefore has determined, in accordance with the
authority granted to it under Section 3.5 of the Partnership's limited
partnership agreement, that it will not process any transfers of limited
partnership interests in the Partnership during the remainder of the
Partnership's term.
RESULTS OF OPERATIONS
- ---------------------
Due to the Myrtle Creek System sale on July 30, 1999, which was the
Venture's last remaining operating asset, a discussion of results of operations
would not be meaningful. The Venture and the Partnership will be liquidated and
dissolved upon the final distribution of any amounts remaining in the interest-
bearing indemnity escrow account and the Partnership will be liquidated and
dissolved upon the resolution and termination of the pending litigation in which
the Partnership is a defendant.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In July 1999, Jones Intercable, Inc., each of its subsidiaries that serve
as general partners of managed public partnerships and most of its managed
public partnerships, including the Partnership, were named defendants in a case
styled Everest Cable Investors, LLC, Everest Properties, LLC, Everest Properties
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II, LLC and KM Investments, LLC, plaintiffs v. Jones Intercable, Inc., et al.,
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defendants (Superior Court, Los Angeles County, State of California, Case No.
- ----------
C213638). Plaintiffs, all of which are affiliated with each other, are in the
business of, among other things, investing in limited partnerships that own and
operate cable television systems. Plaintiffs allege that one of the plaintiffs
has been a limited partner or has obtained a valid power-of-attorney from a
limited partner in each of Jones Intercable, Inc.'s managed public partnerships
and that they had formed a coordinated plan amongst themselves to acquire up to
4.9% of the limited partnership interests in each of Jones Intercable, Inc.'s
managed public partnerships during the latter half of 1996. Plaintiffs'
complaint alleges that they were frustrated in this purpose by Jones Intercable,
Inc.'s refusal to provide plaintiffs with lists of the names and addresses of
the limited partners of Jones Intercable, Inc.'s managed public partnerships.
The complaint alleges that Jones Intercable Inc.'s actions constituted a breach
of contract, a breach of Jones Intercable, Inc.'s implied covenant of good faith
and fair dealing owed to the plaintiffs as limited partners, a breach of Jones
Intercable, Inc.'s fiduciary duty owed to the plaintiffs as limited partners and
tortious interference with prospective economic advantage. Plaintiffs allege
that Jones Intercable, Inc.'s failure to provide them with the partnership lists
prevented them from making their tender offers and the plaintiffs claim that
they have been injured by such action in an amount to be proved at trial, but
not less than $17 million. Given the fact that this case was only recently
filed and that the time for Jones Intercable, Inc.'s response to the complaint
has not yet expired, Jones Intercable, Inc. has not yet responded to this
complaint. Jones Intercable, Inc. believes, however, that it and the defendant
subsidiaries and managed public partnerships have defenses to the plaintiffs'
claims for relief, and Jones Intercable, Inc. intends to defend this lawsuit
vigorously both on its own behalf and on behalf of its subsidiaries and its
managed public partnerships.
Item 4. Submission of Matters to a Vote of Security Holders
The sale of the Venture's Myrtle Creek System was subject to the approval
of the holders of a majority of the limited partnership interests of the
Partnership. Limited partners of record at the close of business on June 1,
1999 were entitled to notice of, and to participate in, this vote of limited
partners. Following are the results of the vote of the limited partners for the
system sale:
No. of
Interests Approved Against Abstained Did Not Vote
Entitled to --------------------------------------------------------
Vote No. % No. % No. % No. %
----------- ---- - --- - --- - --- -
Myrtle Creek System 83,884 47,646 56.8 355 .42 834 .99 35,049 41.79
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 April 7, 1999, filed on April 15, 1999,
reported that on April 7, 1999, Comcast Corporation completed the
acquisition on a controlling interest in the General Partner.
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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.
JONES CABLE INCOME FUND 1-B, LTD.
BY: JONES INTERCABLE, INC.
General Partner
By: /S/ Lawrence S. Smith
-----------------------------------
Lawrence S. Smith
Principal Accounting Officer
By: /S/ Joseph J. Euteneuer
-----------------------------------
Joseph J. Euteneuer
Vice President (Authorized Officer)
Dated: August 16, 1999
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