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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, 1994
( ) 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: 0-11911
CABLE TV FUND 11-B, LTD.
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Exact name of registrant as specified in charter
Colorado 84-0908730
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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 11-B
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
June 30, December 31,
1994 1993
------------- ------------
ASSETS
------
CASH $ 122,310 $ 1,171,764
TRADE RECEIVABLES, less allowance for doubtful
receivables of $63,875 and $79,607 at
June 30, 1994 and December 31, 1993, respectively 382,983 392,119
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 35,679,984 33,288,508
Less- accumulated depreciation (15,197,217) (14,068,966)
------------- ------------
20,482,767 19,219,542
Investment in cable television joint venture 536,411 521,450
------------- ------------
Total investment in cable television properties 21,019,178 19,740,992
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 1,471,770 993,169
------------- ------------
Total assets $ 22,996,241 $ 22,298,044
============= ============
The accompanying notes to unaudited financial statements
are an integral part of these balance sheets.
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CABLE TV FUND 11-B
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
June 30, December 31,
1994 1993
------------ ------------
LIABILITIES AND PARTNERS' DEFICIT
---------------------------------
LIABILITIES:
Debt $ 19,036,832 $ 18,089,150
Accounts payable-
Trade 272,236 284,471
General Partner - 42,288
Accrued liabilities 659,082 1,051,821
Subscriber prepayments 52,550 52,346
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Total liabilities 20,020,700 19,520,076
------------ ------------
PARTNERS' DEFICIT:
General Partner-
Contributed capital 1,000 1,000
Accumulated earnings 54,416 52,440
------------ ------------
55,416 53,440
------------ ------------
Limited Partners
Net contributed capital
(38,026 units outstanding at June 30, 1994
and December 31, 1993) 15,661,049 15,661,049
Distributions (19,013,121) (19,013,121)
Accumulated earnings 6,272,197 6,076,600
------------ ------------
2,920,125 2,724,528
------------ ------------
Total liabilities and partners' deficit $ 22,996,241 $ 22,298,044
============ ============
The accompanying notes to unaudited financial statements
are an integral part of these balance sheets.
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CABLE TV FUND 11-B
(A Limited Partnership)
UNAUDITED STATEMENTS OF OPERATIONS
For the Three Months Ended For the Six Months Ended
June 30, June 30,
--------------------------- -------------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
REVENUES $3,139,034 $2,959,026 $6,229,515 $5,884,714
COSTS AND EXPENSES:
Operating, general and
administrative 1,672,049 1,754,016 3,608,571 3,487,224
Management fees and
allocated overhead
from General Partner 401,690 343,291 799,801 676,966
Depreciation and
amortization 582,557 447,758 1,175,648 908,334
---------- ---------- ---------- ----------
OPERATING INCOME 482,738 413,961 645,495 812,190
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest expense (235,086) (141,782) (448,584) (253,683)
Other, net (22,231) (42,637) (14,299) (37,801)
---------- ---------- ---------- ----------
Total other income
(expense), net (257,317) (184,419) (462,883) (291,484)
---------- ---------- ---------- ----------
INCOME BEFORE EQUITY IN
NET INCOME (LOSS) OF
CABLE TELEVISION
JOINT VENTURE 225,421 229,542 182,612 520,706
EQUITY IN NET INCOME (LOSS)
OF CABLE TELEVISION JOINT
VENTURE 7,112 (2,917) 14,961 6,822
---------- ---------- ---------- ----------
NET INCOME $ 232,533 $ 226,625 $ 197,573 $ 527,528
========== ========== ========== ==========
ALLOCATION OF NET INCOME:
General Partner $ 2,326 $ 2,266 $ 1,976 $ 5,275
========== ========== ========== ==========
Limited Partners $ 230,207 $ 224,359 $ 195,597 $ 522,253
========== ========== ========== ==========
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ 6.05 $ 5.90 $ 5.14 $ 13.73
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER
OF LIMITED PARTNERSHIP
UNITS OUTSTANDING 38,026 38,026 38,026 38,026
========== ========== ========== ==========
The accompanying notes to unaudited financial statements
are an integral part of these statements.
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CABLE TV FUND 11-B
(A Limited Partnership)
UNAUDITED STATEMENTS OF CASH FLOWS
For the Six Months Ended
June 30,
--------------------------------
1994 1993
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 197,573 $ 527,528
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,175,648 908,334
Amortization of capitalized loan fees 10,002 12,522
Equity in net income of cable television joint
venture (14,961) (6,822)
Decrease in amount due General Partner (42,288) (150,536)
Decrease in trade receivables 9,136 30,365
Decrease (increase) in deposits, prepaid expenses and
deferred charges (536,000) 100,865
Decrease in accounts payable, accrued liabilities and
subscriber prepayments (404,770) (357,514)
----------- -----------
Net cash provided by operating activities 394,340 1,064,742
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (2,391,476) (2,315,764)
----------- -----------
Net cash used in investing activities (2,391,476) (2,315,764)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 1,000,000 1,149,186
Repayment of debt (52,318) (32,296)
----------- -----------
Net cash provided by financing activities 947,682 1,116,890
----------- -----------
Decrease in cash (1,049,454) (134,132)
Cash, beginning of period 1,171,764 187,901
----------- -----------
Cash, end of period $ 122,310 53,769
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 414,645 $ 324,777
=========== ===========
The accompanying notes to unaudited financial statements
are an integral part of these statements
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CABLE TV FUND 11-B
(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 fair 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 11-B (the
"Partnership") at June 30, 1994 and December 31, 1993 and its Statements of
Operations and Cash Flows for the three and six month periods ended June 30,
1994 and 1993. Results of operations for these periods are not necessarily
indicative of results to be expected for the full year.
(2) Jones Intercable, Inc., a publicly held Colorado corporation (the
"General Partner"), manages the cable television system serving areas in and
around Lancaster, New York (the "New York Systems") owned directly by the
Partnership and the cable television system owned by Cable TV Joint Fund 11
("the Venture"), in which the Partnership owns an approximate 8 percent
interest, and receives a fee for its services equal to 5 percent of the gross
revenues of the Partnership and the Venture, excluding revenues from the sale
of cable television systems or franchises. Management fees for the three and
six month periods ended June 30, 1994 (excluding the Partnership's 8 percent
interest in the Venture) were $156,952 and $311,476, respectively, as compared
to $147,952 and $294,236, respectively, for the similar 1993 periods.
The Partnership and the Venture reimburse 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 and the Venture. Allocations of
personnel costs are based upon actual time spent by employees of the General
Partner with respect to each partnership managed. Remaining overhead costs are
allocated based upon revenues and/or assets managed for the partnership.
Effective December 1, 1993, the allocation method was changed to be based only
on revenue, which the General Partner believes provides a more accurate method
of allocation. 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 by the Partnership to
the General Partner for allocated overhead and administrative expenses for the
three and six month periods ending June 30, 1994 (excluding the Partnership's 8
percent interest in the Venture) were $244,738 and $488,325, respectively, as
compared to $195,339 and $382,730, respectively, for the similar 1993 periods.
(3) On June 29, 1990, the Venture completed the sale of all of its
Wisconsin cable television systems, except for the system serving the City of
Manitowoc (the "Manitowoc System"). The Manitowoc System was not sold because
the City of Manitowoc (the "City") did not consent to the transfer of the
franchise. The City of Manitowoc franchise contains a provision that the City
claimed allowed the City to acquire the Manitowoc System upon expiration of the
franchise. On April 9, 1991, the Venture took legal action, seeking a
declaration as to whether the buy-out right was enforceable under Federal law.
In October 1993, the City and the Venture settled the legal action. In the
settlement, the City conceded that its buy-out right was not applicable in the
event the franchise is renewed, and represented to the Venture that it knew of
no reason for non-renewal of the franchise. The City also agreed that the term
of the renewal franchise would be 12 years and that the applicable franchise
fee would be 5 percent. The Venture paid the City $1,850,000, which will be
returned, with interest, in the event that the City does not renew the
franchise. If the franchise is renewed, the $1,850,000 will be amortized over
the life of the franchise. The franchise renewal process has begun and the
General Partner expects that it will be completed by year end. Upon completion
of the franchise renewal process, the Venture will consider selling the
Manitowoc System. Otherwise, the Venture will continue to own and operate the
Manitowoc System for the foreseeable future.
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(4) Financial information regarding the Venture is presented below.
UNAUDITED BALANCE SHEETS
June 30, December 31,
1994 1993
-------------- --------------
ASSETS
------
Cash and accounts receivable $ 2,211,965 $ 1,891,454
Investment in cable television properties 2,807,438 2,866,705
Other assets 1,855,863 1,851,983
-------------- --------------
Total assets $ 6,875,266 $ 6,610,142
=============== ==============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Debt $ 15,596 $ 20,129
Payables and accrued liabilities 442,705 365,349
Partners' contributed capital 45,000,000 45,000,000
Distributions (118,914,493) (118,914,493)
Accumulated earnings 80,331,458 80,139,157
------------ --------------
Total liabilities and partners' capital $ 6,875,266 $ 6,610,142
=============== ==============
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UNAUDITED STATEMENTS OF OPERATIONS
For the Three Months Ended For the Six Months Ended
June 30, June 30,
---------------------------- ------------------------
1994 1993 1994 1993
--------- --------- ---------- ---------
Revenues $ 823,499 $ 828,536 $1,634,657 $1,646,461
Operating, general and administrative
expenses (501,203) (484,224) (982,690) (963,494)
Management fees and allocated overhead
from Jones Intercable, Inc. (107,325) (104,583) (216,930) (205,741)
Depreciation and amortization (129,566) (128,032) (260,056) (256,149)
--------- --------- ---------- ----------
Operating income 85,405 111,697 174,981 221,077
Interest expense, net (6,169) (1,992) (10,466) (3,745)
Interest income 20,087 27,567 35,562 55,897
Other, net (7,909) (174,765) (7,776) (185,546)
--------- --------- ---------- ---------
Net income (loss) $ 91,414 $ (37,493) $ 192,301 $ 87,683
========= ========= ========== =========
Management fees paid to the General Partner by the Venture totalled
$41,175 and $81,733, respectively, for the three and six months ended June 30,
1994 and $41,427 and $82,323, respectively, for the three and six months ended
June 30, 1993. Reimbursements for overhead and administrative expenses paid to
the General Partner by the Venture totalled $66,150 and $135,197 for the three
and six month periods ended June 30, 1994, respectively, and $63,156 and
$123,418 for the three and six month periods ended June 30, 1993, respectively.
Management fees paid by the Venture and attributable to the
Partnership's approximate 8 percent interest totalled $3,203 and $3,223,
respectively, for the three month periods and $6,358 and $6,405, respectively,
for the six month periods. Reimbursements for overhead and administrative
expense paid by the Venture and attributable to the Partnership's interest
totalled $5,147 and $4,914, respectively, for the three month periods and
$10,518 and $9,602, respectively, for the six month periods.
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CABLE TV FUND 11-B
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
During the first six months of 1994, the Partnership expended
approximately $2,391,000 on capital improvements. The continuation of the
rebuild and upgrade of the New York Systems and the construction of a new
operations facility accounted for approximately 80 percent of the capital
expenditures. The remainder of the capital expenditures were for plant
extensions and various other enhancements in the New York Systems. Funding for
these expenditures was provided by cash generated from operations and
borrowings under the Partnership's credit facility. Subject to the regulatory
matters discussed below, budgeted capital additions for the remainder of 1994
are approximately $7,165,000. The rebuild and upgrade of the New York Systems
and the construction of a new operations facility will account for
approximately 76 percent of the expected capital expenditures. The remainder
of the capital expenditures will be used for plant extensions as well as for
various other enhancements in the New York Systems. The actual level of
capital expenditures will depend, in part, upon the General Partner's
determination as to the proper scope and timing of such expenditures in light
of the FCC's further rulemaking regarding the 1992 Cable Act on February 22,
1994, and the Partnership's liquidity position. Funding for these expenditures
is expected to be provided from cash generated from operations and borrowings
from the Partnership's existing facility and, if available, borrowings under a
renegotiated credit facility.
During March 1992, the Partnership entered into a new $25,000,000
revolving credit and term loan agreement. As a result of the subsequent sale
of the cable television system serving Grand Island, New York (the "Grand
Island System"), the maximum amount available was reduced to $20,000,000 in
July 1992. The revolving credit period expires December 31, 1994, at which
time the outstanding balance converts to a term loan payable in 24 consecutive
quarterly installments commencing March 31, 1995. As of June 30, 1994,
$18,250,000 was outstanding under this agreement, leaving $1,750,000 available
for future needs of the Partnership. The General Partner anticipates
renegotiating this credit facility to fund capital expenditures during 1994.
If the credit facility is not renegotiated, which is not anticipated, the
Partnership may need to rely on advances from the General Partner to fund
capital expenditures. Such advances will be made in the General Partner's
discretion and the General Partner has no obligation to make any advances to
the Partnership. Interest payable on outstanding amounts under the credit
facility is at the Partnership's option of the Prime Rate or a fixed rate of
LIBOR plus 1.125 percent. The effective interest rates on outstanding
obligations as of June 30, 1994 and 1993 were 5.63 percent and 4.48 percent,
respectively.
Subject to regulatory matters discussed below and assuming successful
renegotiation of the credit facility, the Partnership has sufficient sources of
capital available to meet its presently anticipated needs.
In addition to the systems owned by it directly, the Partnership owns
an approximate 8 percent interest in the Venture. The investment in this cable
television joint venture is accounted for under the equity method. When
compared to the December 31, 1993 balance, this investment increased by
$14,961. This increase represents the Partnership's proportionate share of
income generated by the Venture during the first six months of 1994.
On June 29, 1990, the Venture completed the sale of all of its
Wisconsin cable television systems, except for the system serving the City of
Manitowoc (the "Manitowoc System"). The Manitowoc System was not sold because
the City of Manitowoc (the "City") did not consent to the transfer of the
franchise. The City of Manitowoc franchise contains a provision that the City
claimed allowed the City to acquire the Manitowoc System upon expiration of the
franchise. On April 9, 1991, the Venture took legal action, seeking a
declaration as to whether the buy-out right was enforceable under Federal law.
In October 1993, the City and the Venture settled the legal action. In the
settlement, the City conceded that its buy-out right was not applicable in the
event the franchise is renewed, and represented to the Venture that it knew of
no reason for non-renewal of the franchise. The City also agreed that the term
of the renewal franchise would be 12 years and that the applicable franchise fee
would be 5 percent. The Venture paid the City $1,850,000, which will be
returned, with interest, in the event that the City does not renew the
franchise. If the franchise is renewed, the $1,850,000 will be amortized over
the life of the franchise. The franchise renewal process has begun and the
General
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Partner expects that it will be completed by year end. Upon completion of the
franchise renewal process, the Venture will consider selling the Manitowoc
System. Otherwise, the Venture will continue to own and operate the Manitowoc
System for the foreseeable future.
During the first six months of 1994, the Venture expended
approximately $201,000 for capital expenditures in the Manitowoc System. These
expenditures were used for various projects to maintain the value of the
system. These expenditures were funded from cash generated from operations.
Anticipated capital expenditures for the remainder of 1994 are approximately
$100,000. These expenditures will be for various projects to maintain the
value of the system. It is expected that these capital expenditures will be
funded from cash on hand and cash generated from operations.
The Venture had no bank debt outstanding at June 30, 1994.
Subject to regulatory matters discussed below, the Venture has
sufficient liquidity and capital resources, including cash on hand and its
ability to generate cash from operations, to meet its anticipated future needs.
Regulation and Legislation
Congress enacted the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act"), which became effective on
December 4, 1992. This legislation has caused significant changes to the
regulatory environment in which the cable television industry operates. The
1992 Cable Act generally allows for a greater degree of regulation of the cable
television industry. Under the 1992 Cable Act's definition of effective
competition, nearly all cable systems in the United States, including those
owned and managed by the Partnership and the Venture, are subject to rate
regulation of basic cable services. In addition, the 1992 Cable Act allows the
FCC to regulate rates for non-basic service tiers other than premium services
in response to complaints filed by franchising authorities and/or cable
subscribers. In April 1993, the FCC adopted regulations governing rates for
basic and non-basic services. The FCC's rules became effective on September 1,
1993.
In compliance with these rules, the Partnership and the Venture
reduced rates charged for certain regulated services effective September 1,
1993. These reductions resulted in some decrease in revenues and operating
income before depreciation and amortization; however the decrease was not as
severe as originally anticipated. The General Partner has undertaken actions
to mitigate a portion of these reductions primarily through (a) new service
offerings in some systems, (b) product re-marketing and re- packaging and (c)
marketing efforts directed at non-subscribers.
On February 22, 1994, the FCC adopted several additional rate orders
including an order which revised its earlier-announced regulatory scheme with
respect to rates. The FCC's new regulations will generally require rate
reductions, absent a successful cost-of-service showing, of 17 percent of
September 30, 1992 rates, adjusted for inflation, channel modifications,
equipment costs, and increases in programming costs. However, the FCC held
rate reductions in abeyance in certain systems. The new regulations became
effective on May 15, 1994, but operators could elect to defer rate reductions
to July 14, 1994, so long as they made no changes in their rates and did not
restructure service offerings between May 15 and July 14.
On February 22, 1994, the FCC also adopted interim cost-of-service
regulations. Rate reductions will not be required where it is successfully
demonstrated that rates for basic and other regulated programming services are
justified and reasonable using cost-of-service standards. The FCC established
an interim industry-wide 11.25 percent permitted rate of return, and requested
comments on whether this standard and other interim cost-of-service standards
should be made permanent. The FCC also established a presumption that
acquisition costs above a system's book value should be excluded from the rate
base, but the FCC will consider individual showings to rebut this presumption.
The need for special rate relief will also be considered by the FCC if an
operator demonstrates that the rates set by a cost-of-service proceeding would
constitute confiscation of investment, and that, absent a higher rate, the
credit necessary to operate and to attract investment could not be maintained.
The FCC will establish a uniform system of accounts for operators that elect
cost-of-service rate regulation, and the FCC has adopted affiliate transaction
regulations. The FCC also proposed adopting a productivity factor to be offset
against future inflation increases to be applied regardless of which form of
regulation is used, cost of service or benchmark regulation. After a rate has
been set pursuant to a cost-of-service showing, rate increases for regulated
services will be indexed for inflation, and operators will also be permitted to
increase rates in response to increases in costs beyond their control, such as
taxes and increased programming costs.
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The Partnership has elected to file cost-of-service showings for the
New York Systems. For the New York Systems, the General Partner anticipates no
further reduction in revenues or operating income before depreciation and
amortization. The Venture complied with the new benchmark regulations and
reduced rates in the Manitowoc System. The annualized reduction of revenues
and operating income before depreciation and amortization is $250,000, or
approximately 5 percent, and of $250,000, or approximately 10 percent,
respectively. The Partnership and/or Venture will continue its efforts to
mitigate the effect of such rate reductions.
The 1992 Cable Act contains new broadcast signal carriage
requirements, and the FCC has adopted regulations implementing the statutory
requirements. These new rules allow a local commercial broadcast television
station to elect whether to demand that a cable system carry its signal or to
require the cable system to negotiate with the station for "retransmission
consent." A cable system is generally required to devote up to one-third of
its activated channel capacity for the mandatory carriage of local commercial
broadcast television stations, and non-commercial television stations are also
given mandatory carriage rights, although such stations are not given the
option to negotiate retransmission consent for the carriage of their signals by
cable systems. Additionally, cable systems also are required to obtain
retransmission consent from all commercial television stations (except for
commercial satellite-delivered independent "superstations"), which do not elect
mandatory carriage, commercial radio stations and, in some instances, low-power
television stations carried by cable systems.
The retransmission consent rules went into effect on October 6, 1993.
Throughout the cable television system owned by the Partnership and the Venture
no television stations withheld their consent to retransmission of their
signal. Certain broadcast signals are being carried pursuant to extensions,
and the General Partner expects to finally conclude retransmission consent
negotiations with those remaining stations without having to terminate the
distribution of any of those signals. However, there can be no assurance that
such will occur. If any broadcast station currently being carried pursuant to
an extension is dropped, there could be a negative effect on the system in
which it is dropped if a significant number of subscribers in such system were
to disconnect their service. However, in most cases, only one broadcaster in
any market is being carried pursuant to an extension arrangement, and the
dropping of such broadcaster, were that to occur, is not expected to have a
negative effect on the system.
There have been several lawsuits filed by cable operators and
programmers in Federal court challenging various aspects of the 1992 Cable Act,
including provisions relating to mandatory broadcast signal carriage,
retransmission consent, access to cable programming, rate regulations,
commercial leased channels and public access channels. On April 8, 1993, a
three-judge Federal district court panel issued a decision upholding the
constitutionality of the mandatory signal carriage requirements of the 1992
Cable Act. That decision was appealed directly to the United States Supreme
Court. The United States Supreme Court vacated the lower court decision on
June 27, 1994 and remanded the case to the district court for further
development of a factual record. The Court's majority determined that the
must-carry rules were content neutral, but that it was not yet proven that the
rules were needed to preserve the economic health of the broadcasting industry.
In the interim, the must-carry rules will remain in place during the pendency
of the proceedings in district court. In 1993, a Federal district court for
the District of Columbia upheld provisions of the 1992 Cable Act concerning
rate regulation, retransmission consent, restrictions on vertically integrated
cable television operators and programmers, mandatory carriage of programming
on commercial leased channels and public, educational and governmental access
channels and the exemption for municipalities from civil damage liability
arising out of local regulation of cable services. The 1992 Cable Act's
provisions providing for multiple ownership limits for cable operators and
advance notice of free previews for certain programming services have been
found unconstitutional, and these decisions have been appealed. In November
1993, the United States Court of Appeals for the District of Columbia held that
the FCC's regulations implemented pursuant to Section 10 of the 1992 Cable Act,
which permit cable operators to ban indecent programming on public, educational
or governmental access channels or leased access channels, were
unconstitutional, but the court has agreed to reconsider its decision. All of
these decisions construing provisions of the 1992 Cable Act and the FCC's
implementing regulations have been or are expected to be appealed.
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RESULTS OF OPERATIONS
Revenues of the New York Systems increased $180,008, or approximately
6 percent, from $2,959,026 for the three month period ended June 30, 1993 to
$3,139,034 for the comparable 1994 period. Revenues increased $344,801, or
approximately 6 percent, from $5,884,714 for the six month period ended June
30, 1994 to $6,229,515 for the comparable 1994 period. An increase in basic
subscribers in the New York systems primarily accounted for the increase in
revenues. Basic subscribers increased 2,462, or approximately 7 percent, from
34,143 at June 30, 1993 to 36,605 at June 30, 1994. The increase in revenues
would have been greater but for the reduction in basic rates due to new basic
rate regulations issued by the FCC in May 1993 with which the Partnership
complied effective September 1, 1993. No other factors individually were
significant to the increase in revenues.
Operating, general and administrative expenses decreased $81,967, or
approximately 5 percent, from $1,754,016 for the three months ended June 30,
1993 to $1,672,049 for the comparable 1994 period. The decrease for the three
month period was primarily due to decreases in plant maintenance costs and
marketing costs. For the six month periods ended June 30, 1993 and 1994,
operating, general and administrative expenses increased $121,347, or
approximately 3 percent, from $3,487,224 to $3,608,571 for the comparable 1994
period. The increase for the six month period was due to increases in
programming expenses due, in part, to the increase in the subscriber base.
Operating, general and administrative expense represented 59 percent of
revenues for the three and six months periods of 1993, compared to 53 percent
and 58 percent, respectively, of revenues for the 1994 periods. No other
factors individually were significant to the increase in the Partnership's
operating, general and administrative expenses. Management fees and allocated
overhead from the General Partner increased $58,399, or approximately 17
percent, from $343,291 for the three months ended June 30, 1993 to $401,690 for
the comparable 1994 period. For the six months ended June 30, 1994, management
fees and allocated overhead increased $122,835, or approximately 18 percent,
from $676,966 in 1993 to $799,801 in 1994. The increase for the three and six
month periods was due to the increase in revenues, upon which such fees and
allocations are based, as well as an increase in expenses allocated from the
General Partner. The General Partner has experienced increases in expenses,
including personnel costs and reregualtion costs.
Depreciation and amortization increased $134,799, or approximately 30
percent, from $447,758 for the three month period ended June 30, 1993 to
$582,557 for the similar 1994 period. For the six month periods, depreciation
and amortization increased $267,314, or approximately 29 percent, from $908,334
to $1,175,648. These increases were due to capital additions, relating
primarily to the rebuild of the New York Systems, in 1993.
Operating income increased $68,777, or approximately 17 percent from
$413,961 for the three month period ended June 30, 1993 to $482,738 for the
comparable 1994 period. The increase for the three month period was primarily
due to the increase in revenues and the decrease in operating, general and
administrative expense exceeding the increases in management fees and allocated
overhead from the General Partner and depreciation and amortization expense.
For the six month period, operating income decreased $166,695, or approximately
21 percent from $812,190 in 1993 to $645,495 in 1994. The decrease for the six
month period was due primarily to the increases in operating, general and
administrative expenses, management fees and allocated overhead from the General
Partner and depreciation and amortization expense exceeding the increase in
revenues. The decreases in operating income before depreciation and amortization
reflect the current operating environment of the cable television industry. The
FCC rate regulations under the 1992 Cable Act have caused revenues to increase
more slowly than prior years. In turn, this has caused certain expenses which
are a function of revenue, such as franchise fees, copyright fees and management
fees to increase more slowly than prior years. However, other operating costs
such as programming fees, salaries and benefits, and marketing costs as well as
costs incurred by the General Partner, which are allocated to the Partnership,
continue to increase. This situation has led to reductions in operating income
before depreciation and amortization as a percent of revenue ("Operating
Margin"). Such reductions in Operating Margins may continue in the near term as
the Partnership and the General Partner incur cost increases due to, among other
things, programming fees, reregulation and competition, that exceed increases in
revenue. The General Partner will attempt to mitigate a portion of these
reductions through (a) rate adjustments; (b) new service offerings; (c) product
re-marketing and re-packaging and (d) targeted non-subscriber acquisition
marketing.
Operating income before depreciation and amortization increased
$203,576, or approximately 24 percent, from $861,719 for the three months ended
June 30, 1993 to $1,065,295 at June 30, 1994 due to the increase in revenues
and the decrease in operating, general and administrative expenses. Operating
income before depreciation and amortization increased $100,619, or
approximately 6 percent, from $1,720,524 for the six months ended June 30, 1993
to $1,821,143 at June 30, 1994 due to the increase in revenues exceeding the
increases in operating, general and administrative expense and management fees
and allocated overhead from the General Partner.
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Interest expense increased $93,304, or approximately 66 percent, from
$141,782 for the three months ended June 30, 1993 to $235,086 at June 30, 1994.
Interest expense increased for the six months ended June 30, 1993 as compared
to 1994 by $194,901, or approximately 77 percent, from $253,683 to $448,584.
These increases were due to higher balances on interest bearing obligations and
higher effective interest rates. Income before equity in net income of cable
television joint venture decreased $4,121, or approximately 2 percent, from
$229,542 for the three month period ending June 30, 1993 to $225,421 for the
comparable 1994 period. The decrease for the three month period was due to the
increase in interest expense exceeding the increase in operating income.
Income before equity in net income of cable television joint venture decreased
$338,094, or approximately 65 percent, from $520,706 for the six month period
ending June 30, 1993 compared to $182,612 for the comparable 1994 period. The
decrease for the six month period was due to the decrease in operating income
and the increase in interest expense.
In addition to the New York Systems owned by it directly, the
Partnership owns an approximate 8 percent interest in the Venture. Revenues of
the Venture decreased $5,037, or approximately 1 percent, from $828,536 for the
three month period ended June 30, 1993 to $823,499 for the comparable 1994
period. Revenues of the Venture decreased $11,804, or approximately 1 percent,
from $1,646,461 for the six month period ended June 30, 1993 to $1,634,657 for
the comparable 1994 period. Revenues decreased due to the reduction in basic
rates due to new basic rate regulations issued by the FCC in May 1993, with
which the Venture complied effective September 1, 1993. In addition, on
February 22, 1994, the FCC announced a further rulemaking which when
implemented on July 14, 1994, reduced rates further. See regulation and
legislation discussion above. The decrease in revenues was offset, in part, by
an increase in basic subscribers of approximately 5 percent. Basic subscribers
totalled 10,123 at June 30, 1994, compared to 9,634 at June 30, 1993. No other
individual factor contributed significantly to the increase in revenues.
Operating, general and administrative expense in the Manitowoc System
increased $16,979, or approximately 4 percent, from $484,224 for the three
month period ended June 30, 1993 to $501,203 for the comparable 1994 period.
Operating, general and administrative expense in the Manitowoc System increased
$19,196, or approximately 2 percent, from $963,494 for the six month period
ended June 30, 1994 to $982,690 for the comparable 1994 period. Operating,
general and administrative expense represented 58 percent and 59 percent,
respectively, of revenues for the three and six months periods of 1993 and 61
percent and 60 percent, respectively, for the comparable 1994 periods. The
increases in operating, general and administrative expense for the three and
six month periods were due to increases in programming fees, personnel related
costs and office related costs which were partially offset by decreases in
plant maintenance costs, advertising sales expense and copyright fees. No
other individual factor significantly affected the increases in operating,
general and administrative expenses. Management fees and allocated overhead
from the General Partner increased $2,742, or approximately 3 percent, from
$104,583 for the three month period ended June 30, 1993 to $107,325 for the
comparable 1994 period. Management fees and allocated overhead from the
General Partner increased $11,189, or approximately 5 percent, from $205,741
for the six month period ended June 30, 1993 to $216,930 for the comparable
1994 period. This increase for the three and six month periods was due to an
increase in expenses allocated from the General Partner. The General Partner
has experienced increases in expenses including personnel costs and
reregulation costs.
Depreciation and amortization expense increased $1,534, or
approximately 1 percent, from $128,032 for the three month period ended June
30, 1993 to $129,566 for the comparable 1994 period. Depreciation and
amortization expense increased $3,907, or approximately 2 percent, from
$256,149 for the six month period ended June 30, 1993 to $260,056 for the
comparable 1994 period. The increases for the three and six month periods were
due to capital additions in 1993.
Operating income decreased $26,292, or approximately 24 percent, from
$111,697 for the three month period ended June 30, 1993 compared to $85,405 for
the comparable 1994 period. Operating income decreased $46,096, or
approximately 21 percent, from $221,077 for the six month period ended June 30,
1993 to $174,981 for the comparable 1994 period. The decreases for the three
and six month periods were due to the decrase in revenues as well as the
increases in operating, general and administrative expense, management fees and
allocated overhead from the General Partner and depreciation and amortization
expense. Operating income before depreciation and amortization decreased
$24,758, or approximately 10 percent, from $239,729 for the three month period
ended June 30, 1993 compared to $214,971 for the comparable 1994 period.
Operating income before depreciation and amortization decreased $42,189, or
approximately 9 percent, from $477,226 for the six month period ended June 30,
1993 compared to $435,037 for the comparable 1994 period. The decreases for
both periods are due to the decrease in revenues as well as increases in
operating, general and administrative expense and management fees and allocated
overhead from the General Partner. The decreases in operating income before
depreciation and amortization reflect the current operating environment of the
cable
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television industry. The FCC rate regulations under the 1992 Cable Act have
caused revenues to increase more slowly than in prior years. In turn, this has
caused certain expenses which are a function of revenue, such as franchise
fees, copyright fees and management fees to increase more slowly than in prior
years. However, other operating costs such as programming fees, salaries and
benefits, and marketing costs as well as certain costs incurred by the General
Partner, which are allocated to the Partnership, continue to increase. This
situation has led to reductions in operating income before depreciation and
amortization as a percent of revenue ("Operating Margin"). Such reductions in
Operating Margins may continue in the near term as the Partnership and the
General Partner incur cost increases due to, among other things, programming
fees, reregulation and competition, that exceed increases in revenue. The
General Partner will attempt to mitigate a portion of these reductions through
(a) rate adjustments; (b) new service offerings; (c) product re-marketing and
re-packaging and (d) targeted non-subscriber acquisition marketing.
Interest expense for the Venture increased $4,177 from $1,992 for the
three month period ended June 30, 1993 to $6,169 for the comparable 1994
period. Interest expense for the Venture increased $6,721 from $3,745 for the
six month period ended June 30, 1993 to $10,466 for the comparable 1994 period.
The Venture incurred no costs associated with the litigation with the City of
Manitowoc during the first six months of 1994 compared to $186,000 in 1993.
The Venture recognized net loss of $37,493 for the three month period ended
June 30, 1993 compared to net income of $91,414 for the comparable 1994 period
due primarily to the litigation costs incurred in the three month period ended
June 30, 1993. Net income of the Venture increased $33,494, or approximately
38 percent, from $87,683 for the six month period ended June 30, 1993 to
$121,177 for the comparable 1994 period due primarily to the litigation costs
incurred in the six month period ended June 30, 1993.
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PART II - OTHER INFORMATION
NONE
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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 11-B
BY: JONES INTERCABLE, INC.
General Partner
By: /s/ KEVIN P. COYLE
Kevin P. Coyle
Group Vice President/Finance
(Principal Financial Officer)
Dated: August 10, 1994
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