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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 September 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: 0-13171
Cable TV Fund 11-D, Ltd.
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Exact name of registrant as specified in charter
Colorado 84-0917842
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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 (l) has filed all reports
required to be filed by Section l3 or l5(d) of the Securities Exchange Act of
l934 during the preceding l2 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-D
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
September 30, December 31,
ASSETS 1994 1993
------ ---------------- ---------------
INVESTMENT IN CABLE TELEVISION JOINT VENTURE $ 2,455,531 $ 2,324,240
=============== ===============
PARTNERS' CAPITAL (DEFICIT)
---------------------------
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital $ 1,000 $ 1,000
Distributions (8,005,517) (8,005,517)
Accumulated earnings 7,827,170 7,825,857
--------------- ---------------
(177,347) (178,660)
--------------- ---------------
Limited Partners-
Net contributed capital (50,000 units outstanding
at September 30, 1994 and December 31, 1993) 21,598,038 21,598,038
Distributions (49,016,548) (49,016,548)
Accumulated earnings 30,051,388 29,921,410
--------------- ---------------
2,632,878 2,502,900
--------------- ---------------
Total partners' capital (deficit) $ 2,455,531 $ 2,324,240
=============== ===============
The accompanying notes to unaudited financial statements
are an integral part of these balance sheets.
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CABLE TV FUND 11-D
(A Limited Partnership)
UNAUDITED STATEMENTS OF OPERATIONS
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
------------------------------ --------------------------
1994 1993 1994 1993
----------- ---------- ----------- ----------
EQUITY IN NET INCOME
OF CABLE TELEVISION
JOINT VENTURE $ 41,121 $ 37,696 $ 131,291 $ 78,810
-------- --------- --------- --------
NET INCOME $ 41,121 $ 37,696 $ 131,291 $ 78,810
======== ========= ========= ========
ALLOCATION OF NET INCOME:
General Partner $ 411 $ 377 $ 1,313 $ 788
======== ========= ========= ========
Limited Partners $ 40,710 $ 37,319 $ 129,978 $ 78,022
======== ========= ========= ========
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ .81 $ .75 $ 2.60 $ 1.56
======== ========= ========= ========
WEIGHTED AVERAGE NUMBER
OF LIMITED PARTNERSHIP
UNITS OUTSTANDING 50,000 50,000 50,000 50,000
======== ========= ========= ========
The accompanying notes to unaudited financial statements
are an integral part of these statements.
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CABLE TV FUND 11-D
(A Limited Partnership)
UNAUDITED STATEMENTS OF CASH FLOWS
For the Nine Months Ended
September 30,
---------------------------------
1994 1993
--------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 131,291 $ 78,810
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in net income of cable television
joint venture (131,291) (78,810)
--------- -----------
Net cash provided by operating activities - -
--------- -----------
Cash, beginning of period - -
--------- -----------
Cash, end of period $ - $ -
========= ===========
The accompanying notes to unaudited financial statements
are an integral part of these statements.
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CABLE TV FUND 11-D
(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-D (the
"Partnership") at September 30, 1994 and December 31, 1993 and its Statements
of Operations and Cash Flows for the three and nine month periods ended
September 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 Partnership and Cable TV Joint Fund 11 (the
"Venture"), in which the Partnership holds a 47 percent interest, 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.
The Partnership owns no properties directly, and it holds cable television
systems only through its investment in the Venture. Management fees paid by
the Venture and attributable to the Partnership for the three and nine month
periods ended September 30, 1994 (reflecting the Partnership's 47 percent
interest in the Venture) were $19,151 and $57,476, respectively, as compared to
$19,315 and $57,916, respectively, for the similar 1993 periods.
The Venture reimburses the General Partner for certain allocated
overhead and administrative expenses. These expenses represent the salaries
and related benefits paid to 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 Venture. Allocations of personnel costs are
primarily based on actual time spent by employees of the General Partner with
respect to each partnership managed. Remaining overhead costs were allocated
based upon revenues and/or the cost of partnership 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 to the General
Partner paid by the Venture and attributable to the Partnership for allocated
overhead and administrative expenses for the three and nine month periods ended
September 30, 1994 (reflecting the Partnership's 47 percent interest in the
Venture) were $29,198 and $92,592, respectively, as compared to $26,360 and
$84,230, 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 early 1995. 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
September 30, December 31,
ASSETS 1994 1993
------ ------------------- ------------------
Cash and accounts receivable $ 2,535,874 $ 1,891,454
Investment in cable television properties 2,749,050 2,866,705
Other assets 1,853,073 1,851,983
---------------- ---------------
Total assets $ 7,137,997 $ 6,610,142
================ ===============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Debt $ 11,494 $ 20,129
Payables and accrued liabilities 621,842 365,349
Partners' contributed capital 45,000,000 45,000,000
Distributions (118,914,493) (118,914,493)
Accumulated earnings 80,419,154 80,139,157
---------------- ---------------
Total liabilities and partners' capital $ 7,137,997 $ 6,610,142
================ ===============
UNAUDITED STATEMENTS OF OPERATIONS
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
1994 1993 1994 1993
---------- --------- ------------ ------------
Revenues $ 816,871 $ 823,842 $ 2,451,528 $ 2,470,303
Operating, general and
administrative expenses (513,846) (489,256) (1,496,536) (1,452,750)
Management fees and
allocated overhead from
Jones Intercable, Inc. (103,112) (97,408) (320,042) (303,149)
Depreciation and amortization (129,611) (130,505) (389,667) (386,654)
--------- --------- ----------- -----------
Operating income 70,302 106,673 245,283 327,750
Interest expense (1,186) (2,478) (11,652) (6,223)
Interest income 18,408 26,969 53,970 82,866
Other, net 172 (50,773) (7,604) (236,319)
--------- --------- ----------- -----------
Net income $ 87,696 $ 80,391 $ 279,997 $ 168,074
========= ========= =========== ===========
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Management fees paid to the General Partner by the Venture totalled
$40,843 and $122,576 for the three and nine month periods ended September 30,
1994, respectively, and $41,192 and $123,515 for the three and nine month
periods ended September 30, 1993, respectively. Reimbursements for overhead
and administrative expenses paid to the General Partner by the Venture totalled
$62,269 and $197,466 for the three and nine month periods ended September 30,
1994, respectively, and $56,216 and $179,634 for the three and nine month
periods ended September 30, 1993, respectively.
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CABLE TV FUND 11-D
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Partnership owns an approximate 47 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 has increased by $131,291. This increase represents the
Partnership's proportionate share of net income generated by the Venture during
the first nine 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 Partner expects that it will be completed by early 1995. 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 nine months of 1994, the Venture expended
approximately $272,000 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 by cash generated from operations.
Anticipated capital expenditures for the remainder of 1994 are approximately
$78,000. These expenditures will relate to various projects to maintain the
value of the system. It is expected that these capital expenditures will be
funded by cash on hand and cash generated from operations.
The Venture had no bank debt outstanding at September 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 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 the
Manitowoc System, 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.
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In compliance with these rules, the Venture reduced rates charged for
certain regulated services effective September 1, 1993. These initial
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 undertook actions to mitigate
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, however, the FCC adopted several additional rate
orders including an order which revised its earlier-announced regulatory
scheme with regard 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, as long as they made no change in their rates and did not
restructure service offerings between May 15, 1994 and July 14, 1994.
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
return 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. 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.
After analyzing the effect of the two methods of rate regulation the
General Partner concluded that the Venture should comply with the benchmark
regulations. The Venture complied with the new benchmark regulations and
further reduced rates in the Manitowoc System. The annualized reduction of
operating income before depreciation and amortization is approximately
$250,000, or 10 percent. The Venture will continue its efforts to mitigate the
effect of such rate reductions. To the extent such reductions are not
mitigated, the value of the Manitowoc System, which is calculated based on cash
flow, could be adversely impacted.
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
All of the Partnership's operations are generated through its
approximate 47 percent interest in the Venture. Revenues in the Manitowoc
System decreased $6,971, or approximately 1 percent, from $823,842 for the
three month period ended September 30, 1993 to $816,871 for the comparable 1994
period. Revenues in the Manitowoc System decreased $18,775, or approximately 1
percent, from $2,470,303 for the nine month period ended September 30, 1993 to
$2,451,528 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
regard to the 1992 Cable Act. See Regulation and Legislation discussion above.
The decrease in revenues was offset, in part, by an increase in basic
subscribers of approximately 7 percent and an increase in pay subscribers of
approximately 25 percent. Basic subscribers totalled 10,300 at September 30,
1994 compared to 9,668 at September 30, 1993 and pay subscribers totalled 6,218
at September 30, 1994 compared to 4,985 at September 30, 1993. No other
individual factor contributed significantly to the decrease in revenues.
Operating, general and administrative expense in the Manitowoc System
increased $24,590, or approximately 5 percent, from $489,256 for the three
month period ended September 30, 1993 to $513,846 for the comparable 1994
period. Operating, general and administrative expense in the Manitowoc System
increased $43,786, or approximately 3 percent, from $1,452,750 for the nine
month period ended September 30, 1993 to $1,496,536 for the comparable 1994
period. The increase in expense for the three and nine month periods was due
primarily to increases in programming fees, personnel related costs and office
related costs due to the increases in basic and pay subscribers. The increases
in operating, general and administrative expenses were offset by decreases in
copyright fees and system maintenance costs. No other individual factors
contributed significantly to the increase in expense. Operating, general and
administrative expense represented 59 percent of revenues for the three and
nine month periods of 1993 compared to 63 percent and 61 percent, respectively,
for the 1994 periods. Management fees and allocated overhead from the General
Partner increased $5,704, or approximately 6 percent, from $97,408 for the
three month period ended September 30, 1993 to $103,112 for the comparable 1994
period. Management fees and allocated overhead from the General Partner
increased $16,893, or approximately 6 percent, from $303,149 for the nine month
period ended September 30, 1993 to $320,042 for the comparable 1994 period.
The increases for the three and nine month periods are due to increases in
allocated expenses from the General Partner. The General Partner has
experienced increases in expenses, including personnel costs and reregulation
costs, a portion of which is allocated to the Venture.
Depreciation and amortization expense in the Manitowoc System remained
relatively constant for the three month periods ended September 30, 1993 and
1994. Depreciation and amortization expense in the Manitowoc System increased
$3,013, or approximately 1 percent, from $386,654 for the nine month period
ended September 30, 1993 to $389,667 for the comparable 1994 period. The
increase for the nine month period was due to capital additions in 1993.
Operating income decreased $36,371, or approximately 34 percent, from
$106,673 for the three month period ended September 30, 1993 to $70,302 for the
comparable 1994 period. Operating income decreased $82,467, or approximately
25 percent, from $327,750 for the nine month period ended September 30, 1993 to
$245,283 for the comparable 1994 period. The decrease for the three and nine
month periods was primarily due to the increase in operating, general and
administrative expenses and allocated overhead from the General Partner and the
decrease in revenues. Operating income before depreciation and amortization
decreased $37,265, or approximately 16 percent, from $237,178 for the three
month period ended September 30, 1993 compared to $199,913 for the comparable
1994 period. Operating income before depreciation and amortization decreased
$79,454, or approximately 11 percent, from $714,404 for the nine month period
ended September 30, 1993 compared to $634,950 for the comparable 1994 period.
The decreases for both periods were due to the decrease in revenues as well as
the 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 television industry.
The FCC rate regulations under the 1992 Cable Act have caused revenues to
decrease. In turn, this has caused certain expenses which are a function of
revenue, such as franchise fees, copyright fees and management fees to
decrease. 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 Venture, 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 Venture and the General
Partner incur cost increases due to, among other things, increase in
programming fees, compliance costs associated with 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)
marketing efforts targeted at non-subscribers.
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Interest expense for the Venture decreased $1,292, or approximately 52
percent, from $2,478 for the three month period ended September 30, 1993 to
$1,186 for the comparable 1994 period. The decrease for the three month period
was due to a lower outstanding balance on interest bearing obligations.
Interest expense for the Venture increased $5,429, or approximately 87 percent,
from $6,223 for the nine month period ended September 30, 1993 to $11,652 for
the comparable 1994 period. The increase for the nine month period was due to
higher outstanding balances on interest bearing obligations. The Venture
incurred no costs associated with the litigation with the City of Manitowoc
during the three and nine months periods ended September 30,1994 compared to
$50,000 and $236,000 for the three and nine month periods ended September 30,
1993. Net income for the Venture increased $7,305, or approximately 9 percent,
from $80,391 for the three month period ended September 30, 1993 to $87,696 for
the comparable 1994 period. Net income for the Venture increased $111,923, or
approximately 67 percent, from $168,074 for the nine month period ended
September 30, 1993 to $279,997 for the comparable 1994 period. The increases
for the three and nine month periods were due primarily to the decrease in
litigation costs discussed above.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
27) Financial Data Schedule
b) Reports on Form 8-K
None
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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-D
BY: JONES INTERCABLE, INC.
General Partner
By: /s/ Kevin P. Coyle
Kevin P. Coyle
Group Vice President/Finance
(Principal Financial Officer)
Dated: November 9, 1994
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INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
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27) Financial Data Schedule