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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 0-14206
Cable TV Fund 12-D, LTD.
Exact name of registrant as specified in charter
Colorado 84-1010423
- - --------------------------------------------------------------------------------
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
-------------------------------------
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 12-D
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
ASSETS 1994 1993
------ -------------- --------------
CASH $ 4,702,005 $ 1,962,657
RECEIVABLES:
Trade receivables, less allowance for
doubtful receivables of $383,691 and $265,542
at September 30, 1994 and December 31, 1993,
respectively 3,462,054 2,954,487
Affiliated entity 159,137 159,137
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 266,477,537 251,810,225
Less-accumulated depreciation (131,044,815) (117,498,465)
-------------- --------------
135,432,722 134,311,760
Franchise costs, net of accumulated amortization of
$47,373,848 and $43,008,846 at September 30, 1994
and December 31, 1993, respectively 19,674,795 23,539,797
Subscriber lists, net of accumulated amortization of
$32,743,306 and $32,420,504 at September 30, 1994
and December 31, 1993, respectively - 322,802
Cost in excess of interest in net assets purchased,
net of accumulated amortization of $1,242,638 and
$1,128,284 at September 30, 1994 and
December 31, 1993, respectively 4,813,790 4,928,144
-------------- --------------
Total investment in cable television
properties 159,921,307 163,102,503
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 1,855,813 1,491,768
-------------- --------------
Total assets $ 170,100,316 $ 169,670,552
============== ==============
The accompanying notes to unaudited consolidated financial statements
are an integral part of these consolidated balance sheets.
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CABLE TV FUND 12-D
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1994 1993
------------------------------------------- ------------- --------------
LIABILITIES:
Debt $ 179,845,761 $ 167,698,697
Accounts payable-
Trade 929,508 830,408
General Partner - 188,430
Other accrued liabilities 3,568,341 6,003,390
Subscriber prepayments 674,283 679,136
------------- --------------
Total liabilities 185,017,893 175,400,061
------------- --------------
MINORITY INTEREST IN JOINT VENTURE (3,904,563) (1,657,343)
------------- --------------
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (1,133,663) (1,064,255)
------------- --------------
(1,132,663) (1,063,255)
------------- --------------
Limited Partners-
Net contributed capital
(237,339 units outstanding at September 30, 1994
and December 31, 1993) 102,198,175 102,198,175
Accumulated deficit (112,078,526) (105,207,086)
------------- --------------
(9,880,351) (3,008,911)
------------- --------------
Total liabilities and partners' capital (deficit) $ 170,100,316 $ 169,670,552
============= ==============
The accompanying notes to unaudited consolidated financial statements
are an integral part of these consolidated balance sheets.
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CABLE TV FUND 12-D
(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
------------------------------- -------------------------------
1994 1993 1994 1993
------------- -------------- -------------- -------------
REVENUES $ 23,044,158 $ 22,258,841 $ 68,690,849 $ 66,856,774
COSTS AND EXPENSES:
Operating, general and
administrative expense 13,917,034 13,183,160 41,274,181 38,683,642
Management fees and
allocated overhead
from General Partner 2,716,895 2,586,639 8,413,202 7,638,684
Depreciation and amortization 5,955,556 6,296,713 18,488,878 19,131,623
------------- -------------- -------------- -------------
OPERATING INCOME 454,673 192,329 514,588 1,402,825
------------- -------------- -------------- -------------
OTHER INCOME (EXPENSE):
Interest expense (3,364,650) (3,001,313) (9,680,988) (9,005,389)
Other, net 69,457 28,321 (21,668) (513,546)
------------- -------------- -------------- -------------
Total other income
(expense), net (3,295,193) (2,972,992) (9,702,656) (9,518,935)
------------- -------------- -------------- -------------
CONSOLIDATED LOSS (2,840,520) (2,780,663) (9,188,068) (8,116,110)
MINORITY INTEREST IN
CONSOLIDATED LOSS 694,777 680,094 2,247,220 1,985,038
------------- -------------- -------------- -------------
NET LOSS $ (2,145,743) $ (2,100,569) $ (6,940,848) $ (6,131,072)
============= ============== ============== =============
ALLOCATION OF NET LOSS:
General Partner $ (21,457) $ (21,006) $ (69,408) $ (61,311)
============= ============== ============== =============
Limited Partners $ (2,124,286) $(2,079,563) $ (6,871,440) $ (6,069,761)
============= ============== ============== =============
NET LOSS PER LIMITED
PARTNERSHIP UNIT $ (8.95) $ (8.76) $ (28.95) $ (25.57)
============= ============== ============== =============
WEIGHTED AVERAGE NUMBER
OF LIMITED PARTNERSHIP
UNITS OUTSTANDING 237,339 237,339 237,339 237,339
============= ============== ============== =============
The accompanying notes to unaudited consolidated financial statements
are an integral part of these consolidated statements.
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CABLE TV FUND 12-D
(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended
September 30,
---------------------------------------
1994 1993
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (6,940,848) $ (6,131,072)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 18,488,878 19,131,623
Minority interest in consolidated loss (2,247,220) (1,985,038)
Increase in trade receivables (507,567) (510,681)
Decrease (increase) in deposits, prepaid expenses
and other assets (504,415) 76,060
Decrease in amount due General Partner (188,430) (511,646)
Decrease in accounts payable, accrued
liabilities and subscriber prepayments (2,340,802) (4,685,319)
------------- -------------
Net cash provided by operating activities 5,759,596 5,383,927
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (14,667,312) (11,575,421)
Franchise costs (500,000) -
------------- -------------
Net cash used in investing activities (15,167,312) (11,575,421)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 13,290,716 9,957,562
Repayment of debt (1,143,652) (3,673,737)
------------- -------------
Net cash provided by financing activities 12,147,064 6,283,825
------------- -------------
Increase in cash 2,739,348 92,331
Cash, beginning of period 1,962,657 1,368,051
------------- -------------
Cash, end of period $ 4,702,005 $ 1,460,382
============= =============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 11,668,361 $ 11,060,214
============= =============
The accompanying notes to unaudited consolidated financial statements
are an integral part of these consolidated statements.
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CABLE TV FUND 12-D
(A Limited Partnership)
NOTES TO UNAUDITED CONSOLIDATED 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 12-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 September 30, 1993. Results of operations for these
periods are not necessarily indicative of results to be expected for the full
year.
The accompanying consolidated financial statements include 100 percent
of the accounts of the Partnership and those of Cable TV Fund 12-BCD Venture
(the "Venture") including the cable television systems serving Palmdale,
California, Albuquerque, New Mexico and Tampa, Florida reduced by the
approximate 24 percent minority interest in the Venture. All interpartnership
accounts and transactions have been eliminated.
(2) Jones Intercable, Inc., a publicly held Colorado corporation (the
"General Partner"), manages the Partnership and the Venture and receives a fee
for its services equal to 5 percent of the gross revenues of the Venture,
excluding revenues from the sale of cable television systems or franchises.
Management fees paid to the General Partner by the Venture for the three and
nine month periods ended September 30, 1994 were $1,152,207 and $3,434,542,
respectively, as compared to $1,112,942 and $3,342,839, 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 upon actual time spent by employees of the General Partner with
respect to each partnership managed. Remaining overhead costs were allocated
based on 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 Venture to the General Partner
for allocated overhead and administrative expenses for the three and nine month
periods ended September 30, 1994 were $1,564,687 and $4,978,659, respectively,
as compared to $1,473,697 and $4,295,845, respectively, for the similar 1993
periods.
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CABLE TV FUND 12-D
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
Capital expenditures for the Venture totalled approximately
$14,670,000 during the first nine months of 1994. These capital additions were
funded by cash generated from operations and by borrowings from the Venture's
revolving credit facility. Approximately 30 percent of these expenditures were
for the construction of service drops to subscribers homes. The remainder of
the expenditures were for various enhancements in each of the Venture's cable
television systems. Anticipated capital expenditures for the remainder of 1994
are approximately $6,100,000. Cable television plant extensions are expected
to account for approximately 30 percent of these expenditures. Service drops
to homes are expected to account for 12 percent of the expenditures. The
remainder of the expenditures are for various system enhancements in all the
Venture's systems. Funding for these expenditures is expected to be provided
by cash generated from operations and borrowings from the Venture's newly
amended revolving credit facility. 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 adoption of the 1992
Cable Act and the Partnership's liquidity position.
During the first quarter of 1992, the Venture renegotiated its debt
arrangements, which increased the maximum amount of debt available to
$183,000,000. Such new debt arrangements consisted of $93,000,000 of Senior
Notes placed with a group of institutional lenders and a renegotiated
$90,000,000 revolving credit agreement with a group of commercial bank lenders.
The Senior Notes have a fixed interest rate of 8.64 percent and a
final maturity date of March 31, 2000. The Senior Notes call for interest only
payments for the first four years, with interest and accelerating amortization
of principal payments for the next four years. The Senior Notes carry a
"make-whole" premium, which is a penalty for prepayment of the notes prior to
maturity. The make-whole premium protects the lenders in the event that the
funds are reinvested at a rate below 8.64 percent, and is calculated per the
note agreement.
The revolving credit period on the Venture's $90,000,000 credit
facility expired on March 31, 1994. The then-outstanding balance of
$84,300,000 converted to a term loan payable in quarterly installments which
began June 30, 1994. The Venture repaid $758,700 of this loan in the second
quarter. In September 1994, however, the General Partner completed
negotiations to extend the revolving credit period and revised the commitment
to $87,000,000. The balance outstanding at September 30, 1994 was $86,141,300.
Under the new terms of this credit facility, the loan will convert to a term
loan on March 31, 1996 with quarterly installments beginning June 30, 1996 and
a final payment due March 31, 2000. Interest is at the Venture's option of
LIBOR plus 1.25 percent to 1.75 percent, the CD rate plus 1.375 percent to
1.875 percent or the Base Rate plus 0 percent to .50 percent. The effective
interest rates on amounts outstanding on the Venture's term credit facility as
of September 30, 1994 and 1993 were 6.44 percent and 4.97 percent,
respectively.
Both lending facilities are equal in standing with the other, and both
are equally secured by the assets of the Venture.
Subject to Regulation and Legislation as discussed below, and
assuming successful renegotiation of its credit facility, the Venture has
sufficient sources of capital available in its ability to generate cash from
operations and to borrow under its credit facility to meet its presently
anticipated needs.
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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, 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 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 Partnership undertook 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, however, 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, 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
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. 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 elect to file cost-of-service
showings in all of its systems. The General Partner anticipates no further
reductions in revenues or operating income before depreciation and amortization
resulting from the FCC's rate regulations.
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
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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.
RESULTS OF OPERATIONS
Revenues in the Venture's operating systems increased $785,317, or
approximately 4 percent, from $22,258,841 in 1993 to $23,044,158 for the three
months ended September 30, 1994. For the nine month periods ended September
30, revenues increased $1,834,075, or approximately 3 percent, from $66,856,774
in 1993 to $68,690,849 in 1994. The increases in revenue were primarily due to
increases in basic subscribers. The Venture had an increase of basic
subscribers of 13,620, or approximately 7 percent, from 209,197 at September
30, 1993 to 222,817 at September 30, 1994. The increases in revenues were also
partially due to an increase in ad sales revenues. No other single factor
significantly affected the increases in revenues. 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.
Operating, general and administrative expenses in the Venture's
operating systems increased $733,874, or approximately 6 percent, from
$13,183,160 in 1993 to $13,917,034 for the three months ended September 30,
1994. For the nine month periods, operating, general and administrative
expenses increased $2,590,539, or approximately 7 percent, from $38,683,642 in
1993 to $41,274,181 in 1994. Operating, general and administrative expenses
represented 60 percent of revenue for the three and nine month periods ended
September 30, 1994, compared to 59 percent and 58 percent, respectively for the
three and nine month periods ended September 30, 1993. Increases in subscriber
related costs accounted for approximately 39 percent and 30 percent,
respectively of the three and nine month increases in operating, general and
administrative expenses. Increases in marketing costs accounted for 31 percent
and 19 percent, respectively of the three and nine month increases. No other
individual factor contributed significantly to the increases in operating,
general and administrative expenses. Management fees and allocated overhead
from the General Partner increased $130,256 or approximately 5 percent, from
$2,586,639 for the three months ended September 30, 1993 to $2,716,895 for the
comparable 1994 period. For the nine months ended September 30, 1994
management fees and allocated overhead from the General Partner increased
$774,518, or approximately 10 percent, from $7,638,684 to $8,413,202. These
increases are primarily due to the increases in revenues, upon which such fees
and allocations are based, and 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 decreased $341,157, or approximately 5 percent, from
$6,296,713 to $5,955,556 for the three month periods and $642,745, or
approximately 3 percent, from $19,131,623 to $18,488,878 for the nine month
periods. These decreases are due primarily to the maturation of the Venture's
intangible asset base.
The Venture recorded operating income of $454,673 and $514,588,
respectively, for the three and nine month periods ended September 30, 1994,
compared to operating income of $192,329 and $1,402,825, respectively, for the
three and nine month periods ended September 30, 1993. This change is the
result of the increases in revenues and the decreases in depreciation and
amortization expenses exceeding the increases in operating, general and
administrative expenses and management fees and allocated overhead from the
General Partner. Operating income before depreciation and amortization
increased $78,813, or approximately 1 percent, from $6,489,042 for the three
months ended September 30, 1993 to $6,410,229 in 1994. This increase is due to
the increases in revenue exceeding the increases in operating, general and
administrative expense and management fees and allocated overhead from the
General Partner. For the nine month periods, operating income before
depreciation and amortization decreased $1,530,982 or approximately 7 percent,
from $20,534,448 for the nine months ended September 30, 1993 to $19,003,466 in
1994. This decrease is due to the increase in operating, general and
administrative expense exceeding the increase in revenue.
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For the three month periods ended September 30, 1994 and 1993,
interest expense increased $363,337, or approximately 12 percent, from
$3,001,313 to $3,364,650, for the nine month periods ended September 30, 1994
and 1993, interest expense increased $675,599, or approximately 8 percent, from
$9,005,389 to $9,680,988. The increases were due primarily to higher interest
rates on interest-bearing obligations.
The Venture's net loss increased $59,857, or approximately 2 percent,
from $2,780,663 to $2,840,520 between the three month periods and $1,071,958,
or approximately 13 percent, from $8,116,110 to $9,188,068 between the nine
month periods due primarily to the factors discussed above. Such losses are
expected to continue in the future.
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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 12-D
BY: JONES INTERCABLE, INC.
General Partner
By:/S/ Kevin P. Coyle
Kevin P. Coyle
Group Vice President/Finance
(Principal Financial Officer)
Dated: November 10, 1994
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