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 March 31, 1999.
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
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State of organization I.R.S. employer I.D. #
1500 Market Street, Philadelphia, PA 19102-2148
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Address of principal executive office
(215) 665-1700
-----------------------------
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
------------------------
March 31, December 31,
ASSETS 1999 1998
------ -------------- ---------------
CASH $ 11,223,305 $ 357,145
PROCEEDS FROM SALE IN ESCROW 1,200,000 -
TRADE RECEIVABLES, less allowance for doubtful receivables of
$105,835 and $127,439 at March 31, 1999 and December 31, 1998,
respectively 326,287 454,788
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 70,701,588 93,032,212
Less- accumulated depreciation (46,208,181) (57,669,712)
-------------- ---------------
24,493,407 35,362,500
Franchise costs and other intangible assets, net of accumulated
amortization of $13,060,204 and $12,840,171 at March 31, 1999
and December 31, 1998, respectively 1,307,483 1,541,203
-------------- ---------------
Total investment in cable television properties 25,800,890 36,903,703
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 364,342 757,085
-------------- ---------------
Total assets $ 38,914,824 $ 38,472,721
============== ===============
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
------------------------
March 31, December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1999 1998
------------------------------------------- -------------- --------------
LIABILITIES:
Debt $ 10,485,070 $ 23,432,210
General Partner advances - 365,829
Accrued distribution to limited partners 10,874,000 -
Trade accounts payable and accrued liabilities 2,098,911 2,625,673
Subscriber prepayments 123,982 123,905
-------------- --------------
Total liabilities 23,581,963 26,547,617
-------------- --------------
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (1,000) (25,635)
-------------- --------------
- (24,635)
-------------- --------------
Limited Partners-
Net contributed capital (160,000 units outstanding
at March 31, 1999 and December 31, 1998) 68,722,000 68,722,000
Accumulated earnings 17,516,930 3,259,808
Distributions (70,906,069) (60,032,069)
-------------- --------------
15,332,861 11,949,739
-------------- --------------
Total liabilities and partners' capital (deficit) $ 38,914,824 $ 38,472,721
============== ==============
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
March 31,
------------------------------
1999 1998
------------ -------------
REVENUES $ 6,037,128 $ 5,636,706
COSTS AND EXPENSES:
Operating expenses 3,881,538 3,531,408
Management fees and allocated overhead from General Partner 652,301 608,211
Depreciation and amortization 2,267,740 1,957,957
------------ -------------
OPERATING LOSS (764,451) (460,870)
------------ -------------
OTHER INCOME (EXPENSE):
Interest expense (385,069) (415,412)
Gain on sale of cable television system 15,864,241 -
Other, net (432,964) 167,918
------------ -------------
Total other income (expense), net 15,046,208 (247,494)
------------ -------------
INCOME (LOSS) BEFORE EQUITY IN NET INCOME
OF CABLE TELEVISION JOINT VENTURE 14,281,757 (708,364)
EQUITY IN NET INCOME OF CABLE TELEVISION
JOINT VENTURE - 22,016,787
------------ -------------
NET INCOME $ 14,281,757 $ 21,308,423
============ =============
ALLOCATION OF NET INCOME:
General Partner $ 24,635 $ 72,389
============ =============
Limited Partners $ 14,257,122 $ 21,236,034
============ =============
NET INCOME PER LIMITED PARTNERSHIP UNIT $ 89.11 $ 132.73
============ =============
WEIGHTED AVERAGE NUMBER OF LIMITED PARTNERSHIP
UNITS OUTSTANDING 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 Three Months Ended
March 31,
----------------------------
1999 1998
------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 14,281,757 $ 21,308,423
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 2,267,740 1,957,957
Gain on sale of cable television system (15,864,241) -
Equity in net income of cable television joint venture - (22,016,787)
Decrease (increase) in trade receivables 128,501 (248,689)
Decrease (increase) in deposits, prepaid expenses and
deferred charges 175,403 (9,074)
Decrease in trade accounts payable and accrued liabilities
and subscriber prepayments (526,685) (411,040)
Decrease in General Partner advances (365,829) (489,313)
------------- ------------
Net cash provided by operating activities 96,646 91,477
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (1,023,221) (1,001,815)
Proceeds from sale of cable television system, net of brokerage
fee and escrow 24,739,875 -
Increase in distribution receivable from Joint Venture - (25,484,569)
Distribution from Joint Venture - 25,484,569
------------- ------------
Net cash provided by (used in) investing activities 23,716,654 (1,001,815)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 800,000 750,000
Repayment of debt (13,747,140) (35,045)
Distributions to limited partners (10,874,000) (25,484,569)
Increase in accrued distributions to limited partners 10,874,000 25,484,569
------------- ------------
Net cash provided by (used in) financing activities (12,947,140) 714,955
------------- ------------
Increase (decrease) in cash 10,866,160 (195,383)
Cash, beginning of period 357,145 363,032
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Cash, end of period $ 11,223,305 $ 167,649
============= ============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 583,736 $ 404,407
============= ============
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 March 31, 1999 and December 31, 1998 and its results of
operations and cash flows for the three month periods ended March 31, 1999 and
1998. Results of operations for this period are not necessarily indicative of
results to be expected for the full year.
The Partnership owns and operates the cable television system serving
the areas in and around Calvert County, Maryland (the "Calvert County System").
The Partnership owned and operated the cable television system serving the areas
in and around Buffalo, Minnesota (the "Buffalo System") until its sale on March
29, 1999 and the Partnership owned and operated the cable television system
serving the areas in and around Naperville, Illinois (the "Naperville System")
until its sale on May 6, 1999. In addition, the Partnership owned a 27 percent
interest in the 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. Jones
Intercable, Inc., a publicly held Colorado corporation, is the "General
Partner" of the Partnership.
On April 7, 1999, Comcast Corporation ("Comcast") completed the
acquisition of a controlling interest in the General Partner. Comcast now owns
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 its
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.
Solot, 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.
Comcast is principally engaged in the development, management and
operation of broadband cable networks and in the provision of content through
programming investments. Comcast Cable is principally engaged in the
development, management and operation of broadband cable networks. The address
of Comcast's principal office is 1500 Market Street, Philadelphia, Pennsylvania
19102-2148, which is also now the address of the General Partner's principal
office. The address of Comcast Cable's principal office is 1201 Market Street,
Suite 2201, Wilmington, Delaware 19801.
(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 month periods ended March 31, 1999 and 1998 (excluding the
Partnership's interest in the Venture) were $301,856 and $281,835, respectively.
6
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, tax, 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 month periods ended
March 31, 1999 and 1998 (excluding the Partnership's interest in the Venture)
were $350,445 and $326,376, respectively.
(3) On March 29, 1999, the Partnership sold the Buffalo System to an
unaffiliated party for a sales price of $26,605,000, 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
March 1999. From the sale proceeds, the Partnership paid $13,500,000 outstanding
on its revolving credit facility, paid a brokerage fee to The Intercable Group,
Ltd. ("The Intercable Group"), a subsidiary of the General Partner, totaling
$665,125, representing 2.5 percent of the sales price, for acting as a broker in
this transaction, settled working capital adjustments and deposited $1,200,000
into an indemnity escrow account. The remaining net sale proceeds of $10,874,000
were distributed to the Partnership's limited partners of record as of March 29,
1999, in April 1999. This distribution gave the Partnership's limited partners
an approximate return of $68 for each $500 limited partnership interest, or $136
for each $1,000 invested in the Partnership. Because the distribution to the
limited partners from the sale of the Buffalo 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 a general partner distribution from the sale of the
Buffalo System.
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 interest-bearing indemnity escrow account that are not claimed by the
purchaser at the end of the 90-day period, plus interest earned on the escrowed
funds, will be returned to the Partnership. From this amount, the Partnership
will pay any remaining liabilities and it will then distribute the balance to
the Partnership's partners. Because the distribution to the limited partners
from the sale of the Calvert County 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 distribution from the escrowed proceeds. 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.
The pro forma effect of the sale of the Buffalo System on the results
of the Partnership's operations for the three months ended March 31, 1999 and
1998, assuming the transaction had occurred at the beginning of each year, is
presented in the following unaudited tabulation:
For the Three Months Ended March 31, 1999
-----------------------------------------
Unaudited
Pro Forma Unaudited
As Reported Adjustments Pro Forma
----------- ------------- -----------
Revenues $ 6,037,128 $ (1,514,568) $ 4,522,560
=========== ============= ===========
Operating Loss $ (764,451) $ 127,504 $ (636,947)
=========== ============= ===========
Net Income (Loss) $14,281,757 $ (15,320,086) $(1,038,329)
=========== ============= ===========
7
For the Three Months Ended March 31, 1998
-----------------------------------------
Unaudited
Pro Forma Unaudited
As Reported Adjustments Pro Forma
----------- ------------- -----------
Revenues $ 5,636,706 $ (1,328,694) $ 4,308,012
=========== ============= ===========
Operating Loss $ (460,870) $ (17,091) $ (477,961)
=========== ============= ===========
Net Income $21,308,423 $ 209,854 $21,518,277
=========== ============= ===========
(4) On May 6, 1999, the Partnership sold the Naperville System to an
unaffiliated party for a sales price of $23,000,000, 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
December 1998. From the sale proceeds, the Partnership paid the $10,350,000
balance outstanding on its revolving credit facility, paid a brokerage fee to
The Intercable Group totaling $575,000, representing 2.5 percent of the sales
price, for acting as a broker in this transaction, settled working capital
adjustments, and then deposited $696,000 into an indemnity escrow account. The
remaining net sale proceeds of $10,000,000 will be distributed to the
Partnership's limited partners of record as of the closing date of the sale of
the Naperville System. This distribution will be made in May 1999. This
distribution will give the Partnership's limited partners an approximate return
of $62.50 for each $500 limited partnership interest, or $125 for each $1,000
invested in the Partnership. Because the distributions to the limited partners
from the sale of the Naperville System and the Buffalo 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 Naperville System.
In connection with the sale of the Naperville System, on March 5, 1999
the Partnership entered into a signal and service agreement with the cable
company that purchased the system. Pursuant to the terms of this agreement, the
purchaser provided certain services to the Partnership relating to the
operations of the Naperville System from March 5, 1999 until the closing of the
sale, which occurred May 6, 1999. The Partnership paid the purchaser fees and
expense reimbursements related to this agreement and the Partnership indemnified
the purchaser in connection with the services it provided to the Partnership.
The management fees and expense reimbursements that the Partnership otherwise
would have paid to the General Partner were reduced to offset the fees and
expenses paid to the purchaser of the system pursuant to the signal and service
agreement.
The $696,000 of sale proceeds placed in the interest-bearing 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 interest-bearing
indemnity escrow account and not claimed by the buyer at the end of the escrow
period, plus interest earned on the escrowed funds, will be returned to the
Partnership. From this amount, the Partnership will pay any remaining
liabilities and it will then distribute the balance to the Partnership's
partners. Because the distribution to the limited partners from the sale of the
Calvert County 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
distribution from the escrowed proceeds.
(5) On June 29, 1998, the Partnership entered into a purchase and sale
agreement to sell the Calvert County System to a 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 May 1999, will be subject to
several conditions, including necessary governmental and other third party
consents. This sale was approved by the holders of a majority of the limited
partnership interests in a vote conducted by the General Partner in March and
April 1999. Upon the proposed sale of the Calvert County System, based upon
financial information as of March 31, 1999, the Partnership will pay certain
fees and expenses of the transaction and distribute the remaining net sale
proceeds of approximately $39,300,000 to the Partnership's partners of record as
of the closing date of the sale of the Calvert County System. The limited
partners, as a group, will receive $34,248,000, and the General Partner will
receive a $5,052,000 general partner distribution from the
8
net sale proceeds; thus, the limited partners will receive approximately $214
for each $500 limited partnership interest, or $428 for each $1,000 invested in
the Partnership from the sale of the Calvert County System.
The Partnership will continue in existence at least until any amounts
remaining from the indemnity escrow accounts have been distributed. The
Partnership will be liquidated and dissolved upon the final distribution of any
amounts remaining from the Buffalo System's and the Naperville System's
indemnity escrow accounts. 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 all distributions from prior sales and the
anticipated distribution of the net proceeds from the proposed sale of the
Calvert County System (excluding escrowed proceeds) in May 1999, the General
Partner expects that the limited partners of the Partnership will receive
approximately $720 for each $500 limited partnership interest, or $1,440 for
each $1,000 invested in the Partnership.
9
CABLE TV FUND 14-A, LTD.
------------------------
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
FINANCIAL CONDITION
- -------------------
The Partnership sold two of its systems in 1997 and the Venture sold
its Broward System in March 1998. The Partnership sold its Buffalo System in
March 1999, it sold its Naperville System in May 1999 and it expects to sell its
Calvert County System before the end of May 1999.
Buffalo System
--------------
On March 29, 1999, the Partnership sold the Buffalo System to an
unaffiliated party for a sales price of $26,605,000, 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
March 1999. From the sale proceeds, the Partnership paid $13,500,000 outstanding
on its revolving credit facility, paid a brokerage fee to The Intercable Group
totaling $665,125, representing 2.5 percent of the sales price, for acting as a
broker in this transaction, settled working capital adjustments and deposited
$1,200,000 into an indemnity escrow account. The remaining net sale proceeds of
$10,874,000 were distributed to the Partnership's limited partners of record as
of March 29, 1999, in April 1999. This distribution gave the Partnership's
limited partners an approximate return of $68 for each $500 limited partnership
interest, or $136 for each $1,000 invested in the Partnership. Because the
distribution to the limited partners from the sale of the Buffalo 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 a general partner
distribution from the sale of the Buffalo System.
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 interest-bearing indemnity escrow account that are not claimed by the
purchaser at the end of the 90-day period, plus interest earned on the escrowed
funds, will be returned to the Partnership. From this amount, the Partnership
will pay any remaining liabilities and it will then distribute the balance to
the Partnership's partners. Because the distribution to the limited partners
from the sale of the Calvert County 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 distribution from the escrowed proceeds. 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.
Naperville System
-----------------
On May 6, 1999, the Partnership sold the Naperville System to an
unaffiliated party for a sales price of $23,000,000, 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
December 1998. From the sale proceeds, the Partnership paid the $10,350,000
balance outstanding on its revolving credit facility, paid a brokerage fee to
The Intercable Group totaling $575,000, representing 2.5 percent of the sales
price, for acting as a broker in this transaction, settled working capital
adjustments, and then deposited $696,000 into an indemnity escrow account. The
remaining net sale proceeds of $10,000,000 will be distributed to the
Partnership's limited partners of record as of the May 6, 1999 closing date of
the sale of the Naperville System. This distribution will be made in May 1999.
This distribution will give the Partnership's limited partners an approximate
return of $62.50 for each $500 limited partnership interest, or $125 for each
$1,000 invested in the Partnership. Because the distributions to the limited
partners from the sale of the Naperville System and the Buffalo 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 Naperville System.
10
In connection with the sale of the Naperville System, on March 5, 1999
the Partnership entered into a signal and service agreement with the cable
company that purchased the system. Pursuant to the terms of this agreement, the
purchaser provided certain services to the Partnership relating to the
operations of the Naperville System from March 5, 1999 until the closing of the
sale, which occurred May 6, 1999. The Partnership paid the purchaser fees and
expense reimbursements related to this agreement and the Partnership indemnified
the purchaser in connection with the services it provided to the Partnership.
The management fees and expense reimbursements that the Partnership otherwise
would have paid to the General Partner were reduced to offset the fees and
expenses paid to the purchaser of the system pursuant to the signal and service
agreement.
The $696,000 of sale proceeds placed in the interest-bearing 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 interest-bearing
indemnity escrow account and not claimed by the buyer at the end of the escrow
period, plus interest earned on the escrowed funds, will be returned to the
Partnership. From this amount, the Partnership will pay any remaining
liabilities and it will then distribute the balance to the Partnership's
partners. Because the distribution to the limited partners from the sale of the
Calvert County 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
distribution from the escrowed proceeds. 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.
Calvert County System
---------------------
On June 29, 1998, the Partnership entered into a purchase and sale
agreement to sell the Calvert County System to a 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 May 1999, will be subject to
several conditions, including necessary governmental and other third party
consents. This sale was approved by the holders of a majority of the limited
partnership interests in a vote conducted by the General Partner in March and
April 1999. Upon the proposed sale of the Calvert County System, based upon
financial information as of March 31, 1999, the Partnership will pay certain
fees and expenses of the transaction and distribute the remaining net sale
proceeds of approximately $39,300,000 to the Partnership's partners of record as
of the closing date of the sale of the Calvert County System. The limited
partners, as a group, will receive $34,248,000, and the General Partner will
receive a $5,052,000 general partner distribution from the net sale proceeds;
thus, the limited partners will receive approximately $214 for each $500 limited
partnership interest, or $428 for each $1,000 invested in the Partnership from
the sale of the Calvert County System.
The Partnership will continue in existence at least until any amounts
remaining from the indemnity escrow accounts have been distributed. The
Partnership will be liquidated and dissolved upon the final distribution of any
amounts remaining from the Buffalo System's and the Naperville System's
indemnity escrow accounts. 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 all distributions from prior sales and the
anticipated distribution of the net proceeds from the proposed sale of the
Calvert County System (excluding escrowed proceeds) in May 1999, the General
Partner expects that the limited partners of the Partnership will receive
approximately $720 for each $500 limited partnership interest, or $1,440 for
each $1,000 invested in the Partnership.
For the three months ended March 31, 1999, the Partnership generated
net cash from operating activities totaling $96,646, which is available to fund
capital expenditures and non-operating costs. For the three months ended
March 31, 1999, capital expenditures totaled approximately $1,023,000 for all of
the Partnership's systems. Approximately 49 percent of the expenditures related
to construction of service drops to subscribers' homes. Approximately 38 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 remaining systems for the remainder of 1999 are
approximately
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$244,000. These capital expenditures are to maintain the value of the
Partnership's remaining systems until they are sold. Funding for the
improvements is expected to come from cash on hand and cash generated from
operations. The Partnership is obligated to conduct its business in the ordinary
course until its systems are sold.
The Partnership was a party to a revolving credit facility. The
revolving credit facility required that one-half of the proceeds from the
Buffalo System sale be used to reduce amounts outstanding and that the credit
facility be repaid in full on the next system sale. The Partnership paid
$13,500,000 upon the closing of the sale of the Buffalo System on March 29,
1999, and it repaid the remaining balance of $10,350,000 upon the sale of the
Naperville System on May 6, 1999. Interest on the revolving credit facility's
outstanding balance was 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 March 31, 1999 and 1998 were 6.06 percent and 6.83
percent, respectively.
The Partnership has sufficient sources of capital available from cash
on hand and cash generated from operations to meet its presently anticipated
needs.
RESULTS OF OPERATIONS
- ---------------------
Revenues of the Partnership increased $400,422, or approximately 7
percent, to $6,037,128 for the first quarter of 1999 from $5,636,706 for the
first quarter of 1998. This increase in revenues was primarily due to an
increase in basic service rates in all of the Partnership's systems and an
increase in subscribers in the Partnership's Buffalo System and Calvert County
System. Basic subscribers in the Partnership's Buffalo System and Calvert County
System increased 1,939, or approximately 6 percent, to 33,924 at March 31, 1999
from 31,985 at March 31, 1998. No other individual factor was significant to the
increase in revenues.
Operating expenses consist primarily of costs associated with the
operation and administration of the Partnership's cable television systems. The
principal cost components are salaries paid to system personnel, programming
expenses, professional fees, subscriber billing costs, rent for leased
facilities, cable system maintenance expenses and marketing expenses.
Operating expenses increased $350,130, or approximately 10 percent, to
$3,881,538 for the quarter ended March 31, 1999 from $3,531,408 for the quarter
ended March 31, 1998. This increase was primarily due to an increase in
programming costs. Operating expenses represented 64 percent of revenues in the
first quarter of 1999 compared to 63 percent of revenues in the first quarter of
1998.
Management fees and allocated overhead from the General Partner
increased $44,090, or approximately 7 percent, to $652,301 for the three month
period ended March 31, 1999 from $608,211 for the three month period ended March
31, 1998. This increase was due to the increase in revenues, upon which such
management fees and allocations are based.
Depreciation and amortization expense increased $309,783, or
approximately 16 percent, to $2,267,740 for the three month period ended March
31, 1999 from $1,957,957 for the three month period ended March 31, 1998. This
increase was due to capital additions in the Partnership's remaining systems.
Operating loss increased $303,581, or approximately 66 percent, to
$764,451 for the three month period ended March 31, 1999 from $460,870 for the
three month period ended March 31, 1998. This increase was primarily due to the
increase in operating expenses and management fees and allocated overhead from
the General Partner and depreciation and amortization expense exceeding the
increase in revenues.
Interest expense decreased $30,343, or approximately 7 percent, to
$385,069 for the three months ended March 31, 1999 from $415,412 for the
comparable 1998 period. This decrease was primarily due to lower effective
interest rates and to lower outstanding balances on interest bearing obligations
in 1999. A portion of the proceeds from the sale of the Buffalo System was used
to reduce the Partnership's debt in 1999.
The Partnership recognized a gain of $15,864,241 related to the sale of
the Buffalo System in March 1999. No similar gain was recognized in the first
quarter of 1998.
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The Partnership reported income before equity in net income of cable
television joint venture of $14,281,757 in 1999 compared to a loss of $708,364
in 1998. This change was primarily due to the gain on the sale of the Buffalo
System in the first quarter of 1999.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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 Naperville System.
This competition had an adverse effect on the Naperville System's
revenues and cash flow. The General Partner took prudent steps
necessary to meet this competition from Ameritech and, to the extent
possible, to safeguard the value of the Naperville System until its
sale to an unaffiliated party in May 1999. As part of this effort, the
Partnership filed an action in the U.S. District Court for the Northern
District of Illinois against both the City of Naperville and Ameritech,
challenging the terms on which a franchise was issued to Ameritech. The
City of Naperville filed a countersuit against the Partnership
declaring that the Partnership breached its franchise agreement by
withholding franchise payments. The parties reached a mutually
satisfactory settlement of these matters in May 1999 in connection with
the Naperville System's Sale, and all of the litigation has been
dismissed with prejudice.
Item 4. Submission of Matters to a Vote of Security Holders
The sales of the Buffalo System and the Calvert County System were
subject to the approval of the holders of a majority of the limited
partnership interests of the Partnership. Votes of the limited partners
on these sales were conducted by the General Partner by mail in the
first quarter of 1999. Following are the results of the votes of the
limited partners:
No. of
Interests Approved Against Abstained Did Not Vote
Entitled to -------------- ------------ -------------- ---------------
Vote No. % No. % No. % No. %
----------- --- -- --- -- --- -- --- --
Buffalo System Sale 160,000 89,940 56.21 936 .59 3,132 1.96 65,992 41.24
Calvert County System Sale 160,000 84,048 52.53 1,349 .84 5,044 3.15 69,559 43.48
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 March 29, 1999, filed in April 1999,
reported that on March 29, 1999, the Partnership sold its Buffalo
System to an unaffiliated third party for a sales price of
$26,605,000, subject to customary closing adjustments.
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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/ Lawrence S. Smith
-------------------------------
Lawrence S. Smith
Principal Accounting Officer
By: /S/ Joseph J. Euteneuer
-------------------------------
Joseph J. Euteneuer
Vice President (Authorized Officer)
Dated: May 14, 1999
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