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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: 0-13193
CABLE TV FUND 12-A, LTD.
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Exact name of registrant as specified in charter
Colorado #84-0968104
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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 12-A
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
September 30, December 31,
ASSETS 1994 1993
------ ------------ ------------
CASH $ 442,541 $ 1,610,187
TRADE RECEIVABLES, less allowance for
doubtful receivables of $28,829 and $49,157
at September 30, 1994 and December 31, 1993,
respectively 321,366 492,896
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 70,944,082 67,276,230
Less- accumulated depreciation (39,345,285) 35,137,424
------------ ------------
31,598,797 (32,138,806)
Franchise costs, net of accumulated
amortization of $19,919,264 and $19,132,967
at September 30, 1994 and December 31, 1993,
respectively 3,432,858 4,219,155
Subscriber lists, net of accumulated
amortization of $11,311,690 and $11,013,590
at September 30, 1994 and December 31, 1993,
respectively 299,175 597,275
------------ ------------
Total investment in cable television properties 35,330,830 36,955,236
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 212,047 239,671
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Total assets $ 36,306,784 $ 39,297,990
============ ============
The accompanying notes to unaudited financial statements
are an integral part of these balance sheets.
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CABLE TV FUND 12-A
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
September 30, December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1994 1993
------------------------------------------- ------------ ------------
LIABILITIES:
Debt $ 26,298,501 $ 29,724,530
Accounts payable-
Trade 4,705 36,877
General Partner 1,235,497 220,722
Accrued liabilities 1,003,063 1,109,852
Subscriber prepayments 129,376 175,959
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Total liabilities 28,671,142 31,267,940
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PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (372,152) (368,208)
------------ ------------
(371,152) (367,208)
------------ ------------
Limited Partners-
Net contributed capital (104,000 units
outstanding at September 30, 1994 and
December 31, 1993) 44,619,655 44,619,655
Accumulated deficit (36,612,861) (36,222,397)
------------ ------------
8,006,794 8,397,258
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Total liabilities and
partners' capital (deficit) $ 36,306,784 $ 39,297,990
============ ============
The accompanying notes to unaudited financial statements
are an integral part of these balance sheets.
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CABLE TV FUND 12-A
(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
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REVENUES $7,209,550 $ 7,181,048 $21,814,073 $21,874,055
COSTS AND EXPENSES:
Operating, general
and administrative 4,394,735 4,037,440 12,844,800 12,307,972
Management fees and
allocated overhead
from General Partner 863,600 844,679 2,713,707 2,522,740
Depreciation and
amortization 1,690,755 1,972,382 5,293,546 5,937,653
---------- ----------- ----------- -----------
OPERATING INCOME 260,460 326,547 962,020 1,105,690
---------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (413,595) (379,777) (1,210,774) (1,185,989)
Other, net (70,436) 16,425 (145,654) 42,335
---------- ----------- ----------- -----------
Total other income
(expense), net (484,031) (363,352) (1,356,428) (1,143,654)
---------- ----------- ----------- -----------
NET LOSS $ (223,571) $ (36,805) $ (394,408) $ (37,964)
========== =========== =========== ===========
ALLOCATION OF NET LOSS:
General Partner $ (2,236) $ (368) $ (3,944) $ (380)
========== =========== =========== ===========
Limited Partners $ (221,335) $ (36,437) $ (390,464) $ (37,584)
========== =========== =========== ===========
NET LOSS PER LIMITED
PARTNERSHIP UNIT $ (2.13) $ (.35) $ (3.76) $ (.36)
========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF LIMITED PARTNERSHIP
UNITS OUTSTANDING 104,000 104,000 104,000 104,000
========== =========== =========== ===========
The accompanying notes to unaudited financial statements
are an integral part of these statements.
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CABLE TV FUND 12-A
(A Limited Partnership)
UNAUDITED STATEMENTS OF CASH FLOWS
For the Nine Months Ended
September 30,
----------------------------------------
1994 1993
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (394,408) $ (37,964)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 5,293,546 5,937,653
Amortization of interest rate protection
contract 37,503 37,491
Decrease (increase) in trade receivables 171,530 (503,438)
Increase in deposits, prepaid expenses and
deferred charges (11,167) (231,303)
Increase (decrease) in amount due General Partner 1,014,775 (261,348)
Decrease in trade accounts payable,
accrued liabilities and subscriber prepayments (185,544) (453,394)
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Net cash provided by operating activities 5,926,235 4,487,697
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (3,667,852) (2,512,302)
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Net cash used in investing activities (3,667,852) (2,512,302)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 49,816 46,448
Repayment of debt (3,475,845) (2,350,388)
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Net cash used in financing activities (3,426,029) (2,303,940)
----------- ----------
Decrease in cash (1,167,646) (328,545)
Cash, beginning of period 1,610,187 1,599,111
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Cash, end of period $ 442,541 $1,270,566
=========== ==========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 1,220,742 $1,332,893
=========== ==========
The accompanying notes to unaudited financial statements
are an integral part of these statements.
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CABLE TV FUND 12-A
(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 12-A (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.
The Partnership owns and operates the cable television systems
serving areas in and around Fort Myers, Florida, Lake County, Illinois, Orland
Park, Illinois and Park Forest, Illinois.
(2) Jones Intercable, Inc., a publicly held Colorado corporation (the
"General Partner"), manages the Partnership and receives a fee for its services
equal to 5 percent of the gross revenues of the Partnership, excluding revenues
from the sale of cable television systems or franchises. Management fees for
the three and nine month periods ended September 30, 1994 were $360,478 and
$1,090,704, respectively, as compared to $359,052 and $1,093,703, respectively,
for the similar 1993 periods.
The Partnership reimburses the General Partner for certain allocated
overhead and administrative expenses. These expenses consist primarily of
salaries and benefits paid to corporate personnel, rent, data processing
services and other facilities costs. Such personnel provide engineering,
marketing, administrative, accounting, legal and investor relations services to
the Partnership. Allocations of personnel costs are based primarily on 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 the
cost of 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. Amounts charged the Partnership by the General Partner for
allocated overhead and administrative expenses for the three and nine month
periods ended September 30, 1994 were $503,122 and $1,623,003, respectively, as
compared to $485,627 and $1,429,037, respectively, for the similar 1993
periods.
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CABLE TV FUND 12-A
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
Capital expenditures totalled approximately $3,700,000 during the
first nine months of 1994. Approximately 30 percent of these expenditures
related to the construction of new cable plant. Approximately 26 percent of
these expenditures related to the construction of service drops to subscribers'
homes. The remaining expenditures were used for various enhancements in the
Partnership's systems. Funding for these expenditures was provided by cash
generated from operations and advances from the General Partner. Anticipated
capital expenditures for the remainder of 1994 are approximately $1,075,000.
Approximately 29 percent is expected to be used to continue the construction of
new cable plant. The remainder of the expenditures is expected to be for
various enhancements and rebuild projects in all of the Partnership's systems.
Funding for these expenditures is expected to be provided by cash generated
from operations. 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 rules and regulations adopted in connection with such legislation, and the
Partnership's ability to renegotiate its credit facility to reduce amortization
payments.
At June 30, 1992, the then-outstanding balance of $34,000,000 on the
Partnership's $35,000,000 credit facility converted to a term loan. The term
loan is payable in 20 consecutive quarterly installments that commenced on
September 30, 1992. At September 30, 1994, $26,125,000 was outstanding under
this term loan. Installments paid during the first three quarters of 1994
totalled $3,375,000. Payments due for the remainder of 1994 total $1,125,000.
The General Partner is currently negotiating to reduce amortization payments in
order to provide liquidity for capital expenditures. Generally, interest
payable on amounts borrowed under the term loan is at the Partnership's option
of prime plus 1/2 percent, or a fixed rate defined as the CD rate plus 1-1/4
percent or the Euro-Rate plus 1-1/4 percent. The effective interest rates on
outstanding obligations as of September 30, 1994 and 1993 were 6.25 percent and
4.44 percent, respectively. In January 1993, the Partnership entered into an
interest rate cap agreement covering outstanding debt obligations of
$15,000,000. The Partnership paid a fee of $150,000. The agreement protects
the Partnership from a three month LIBOR interest rate that exceeds 7 percent
for three years from the date of the agreement.
Subject to Regulation and Legislation as discussed below, and assuming
successful renegotiation of the credit facility of which there can be no
assurance, the General Partner believes that the Partnership has sufficient
sources of capital from cash on hand and cash generated from operations to meet
its presently 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 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 General Partner 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.
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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, so 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
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 Partnership should elect to file
cost-of-service showings in its Fort Myers, Florida and Orland Park, Illinois
systems and the Partnership should comply with the benchmark regulations in the
Lake County, Illinois system. In the systems electing cost-of-service, the
General Partner anticipates no further reduction in revenues or operating
income before depreciation and amortization resulting from the FCC's rate
regulations. The Partnership complied with the new benchmark regulations and
reduced rates in the Lake County, Illinois system. As a result, the annualized
reduction of operating income before depreciation and amortization is $250,000,
or approximately 3 percent. The Partnership will continue its efforts to
mitigate the effect of rate reductions.
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 regulation,
commercial leased channels and public-educational-governmental access channels.
On April 8, 1993, a three-judge Federal district court panel upheld the
validity of the mandatory signal carriage requirements established by 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 Partnership increased $28,502, or less than 1
percent, from $7,181,048 for the three month period ended September 30, 1993 to
$7,209,550 for the comparable 1994 period due primarily to an increase in
advertising revenue. Revenues of the Partnership decreased $59,982, or less
than 1 percent, from $21,874,055 for the first nine months of 1993 to
$21,814,073 for the comparable 1994 period. The decrease in revenue was caused
by the reduction in basic rates due to new basic rate regulations issued by the
FCC in regard to the 1992 Cable Act. The decrease in revenues due to rate
reductions was offset, in part, by increases in subscribers. The Partnership
has added 4,251 basic subscribers since September 30, 1993, an increase of
approximately 7 percent. Basic subscribers totalled 63,694 at September 30,
1993, compared to 67,945 at September 30, 1994.
Operating, general and administrative expense increased $357,295, or
approximately 9 percent, from $4,037,440 for the three months ended September
30, 1993 to $4,394,735 for the comparable 1994 period. This expense
represented 61 percent of revenue for the third quarter of 1994 compared to 56
percent for the similar 1993 period. Programming fees accounted for
approximately 47 percent of the increases in expense and personnel related
expense contributed approximately 32 percent to the increase in expense.
Operating, general and administrative expense increased $536,828, or
approximately 4 percent, from $12,307,972 for the nine months ended September
30, 1993 to $12,844,800 for the comparable 1994 period. This expense
represented 59 percent of revenue for the nine months ended September 30, 1994,
compared to 56 percent for the similar 1993 period. Programming fees accounted
for approximately 63 percent of the increase in expense and was due in part to
the increase in the subscriber base. In addition, increases in personnel,
marketing and advertising expenses were partially offset by decreases in plant
related and copyright expenses. Management fees and allocated overhead from
the General Partner increased $18,921, or approximately 2 percent, from
$844,679 for the three month period ended September 30, 1993 to $863,600 for
the comparable 1994 period. Management fees and allocated overhead from the
General Partner increased $190,967, or approximately 8 percent, from $2,522,740
for the nine month period ended September 30, 1993 to $2,713,707 for the
comparable 1994 period. These increases were due to an increase in allocated
expenses from the General Partner. The General Partner has experienced
increases in expenses, including personnel costs and reregulation costs.
Depreciation and amortization expense decreased $281,627, or
approximately 14 percent, from $1,972,382 for the three month period ended
September 30, 1993 to $1,690,755 for the similar 1994 period. Depreciation and
amortization expense decreased $644,107, or approximately 11 percent, from
$5,937,653 for the nine month period ended September 30, 1993 to $5,293,546 for
the similar 1994 period. These decreases are due to the maturation of the
Partnership's asset base.
Operating income decreased $66,087, or 20 percent, from $326,547 for
the three month period ended September 30, 1993 to $260,460 for 1994. For the
nine month periods, operating income decreased $143,670, or 13 percent, from
$1,105,690 in 1993 to $962,020 in 1994. These decreases are due to the
increases in operating, general and administrative expense and allocated
overhead from the General Partner. Operating income before depreciation and
amortization decreased $347,714, or 15 percent from $2,298,929 to $1,951,215,
and $787,777, or 11 percent, from $7,043,343 to $6,255,566, respectively, for
the three and nine month periods ending September 30, 1993 and 1994. These
decreases are due to the increases in operating, general and administrative
expenses 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 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, increases
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 increased $33,818, or approximately 9 percent, from
$379,777 for the three month period ended September 30, 1993 to $413,595 for
the comparable 1994 period and $24,785, or approximately 2 percent, from
$1,185,989 for the nine month period ended September 30, 1993 to $1,210,774 for
the comparable 1994 period. These increases are due to higher effective
interest rates on interest bearing obligations.
Net loss increased $186,766, from $36,805 for the three month period
ended September 30, 1993 to $223,571 for the similar 1994 period. Net loss
increased $356,444, from $37,964 for the nine month period ended September 30,
1993 to $394,408 for the comparable 1994 period. These increases in net loss
are due to the factors 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 12-A
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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INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
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27 Financial Data Schedule