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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 March 31, 1995
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/ / 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: 1-9287
JONES INTERCABLE INVESTORS, L.P.
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Exact name of registrant as specified in charter
Colorado 36-3468573
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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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Units outstanding as of the close of the period covered by this report:
8,322,632 Class A Units
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JONES INTERCABLE INVESTORS, L. P.
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
March 31, December 31,
ASSETS 1995 1994
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CASH $ 605,285 $ 607,422
TRADE RECEIVABLES, less allowance for doubtful
receivables of $64,371 and $76,659 at March 31, 1995
and December 31, 1994, respectively 605,775 741,315
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 61,021,794 60,015,800
Less- accumulated depreciation (26,303,233) (25,208,198)
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34,718,561 34,807,602
Franchise costs, net of accumulated amortization of
$36,650,573 and $35,793,356 at March 31, 1995 and
December 31, 1994, respectively 11,200,736 12,057,953
Costs in excess of interests in net assets purchased, net of
accumulated amortization of $49,126 and $47,562 at
March 31, 1995 and December 31, 1994, respectively 200,875 202,439
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Total investment in cable
television properties 46,120,172 47,067,994
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 104,363 141,087
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Total assets $ 47,435,595 $ 48,557,818
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The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
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JONES INTERCABLE INVESTORS, L. P.
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
March 31, December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1995 1994
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LIABILITIES:
Credit facility $ 24,100,000 $ 23,000,000
Other debt 420,415 493,841
Trade accounts payable - 5,381
Accrued distributions to Class A Unitholders 1,248,395 1,248,395
Accrued liabilities 560,892 1,685,890
Subscriber prepayments 133,440 124,890
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Total liabilities 26,463,142 26,558,397
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PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (15,474) (17,688)
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(14,474) (16,688)
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Class A Unitholders-
Net contributed capital
(8,322,632 units outstanding at
March 31, 1995 and December 31, 1994) 116,433,492 116,433,492
Accumulated deficit (1,531,966) (1,751,179)
Distributions to Unitholders (93,914,599) (92,666,204)
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20,986,927 22,016,109
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Total liabilities and
partners' capital (deficit) $ 47,435,595 $ 48,557,818
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The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
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JONES INTERCABLE INVESTORS, L. P.
(A Limited Partnership)
UNAUDITED STATEMENTS OF OPERATIONS
For the Three Months Ended
March 31,
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1995 1994
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REVENUES $7,239,990 $6,803,606
COSTS AND EXPENSES:
Operating expenses 3,684,931 3,354,296
Management fees and allocated overhead
from General Partner 912,632 864,406
Depreciation and amortization 1,957,919 2,564,377
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OPERATING INCOME 684,508 20,527
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OTHER INCOME (EXPENSE):
Interest expense (464,796) (249,910)
Other, net 1,715 1,926
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Total other income (expense), net (463,081) (247,984)
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NET INCOME (LOSS) $ 221,427 $ (227,457)
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ALLOCATION OF NET INCOME (LOSS):
General Partner $ 2,214 $ (2,275)
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Class A Unitholders $ 219,213 $ (225,182)
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NET INCOME (LOSS) PER CLASS A UNIT $ .03 $ (.03)
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WEIGHTED AVERAGE NUMBER OF CLASS A
UNITS OUTSTANDING 8,322,632 8,322,632
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The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
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JONES INTERCABLE INVESTORS, L. P.
(A Limited Partnership)
UNAUDITED STATEMENTS OF CASH FLOWS
For the Three Months Ended
March 31,
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1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 221,427 $ (227,457)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 1,953,816 2,561,835
Amortization of capitalized loan fees 4,103 2,542
Decrease in trade receivables 135,540 249,818
Decrease (increase) in deposits, prepaid expenses
and deferred charges 32,621 (89,189)
Decrease in trade accounts payable, accrued
liabilities and subscriber prepayments (1,121,829) (130,084)
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Net cash provided by operating activities 1,225,678 2,367,465
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,005,994) (764,483)
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Net cash used in investing activities (1,005,994) (764,483)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 1,600,000 800,000
Repayment of debt (573,426) (1,069,692)
Distributions to unitholders (1,248,395) (1,248,395)
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Net cash used in financing activities (221,821) (1,518,087)
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Increase (decrease) in cash (2,137) 84,895
Cash, beginning of period 607,422 366,508
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Cash, end of period $ 605,285 $ 451,403
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SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 570,123 $ 255,323
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The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
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JONES INTERCABLE INVESTORS, L.P.
(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 Jones Intercable
Investors, L.P. (the "Partnership") at March 31, 1995 and December 31, 1994,
and its Statements of Operations and Cash Flows for the three month periods
ended March 31, 1995 and March 31, 1994. 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 system serving
areas in and around Independence, Missouri.
(2) Jones Intercable, Inc. (the "General Partner"), a publicly held Colorado
corporation, manages the Partnership and receives a fee for its services equal
to 5 percent of the gross revenues of the Partnership, excluding revenues from
the sale of cable television systems or franchises. Management fees for the
three month periods ended March 31, 1995 and 1994 were $362,000 and $340,180,
respectively.
The Partnership reimburses the General Partner for certain allocated
overhead and administrative expenses. These expenses represent salaries and
related benefits for 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 are allocated primarily based on revenues of
the Partnership as a percentage of total revenues of owned and managed cable
television systems of the General Partner. 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 month periods ended March 31, 1995 and 1994 were
$550,632 and $524,226, respectively.
(3) On February 22, 1994, the General Partner and The Jones Group, Ltd.
("Jones Group"), a subsidiary of the General Partner engaged in the cable
television system brokerage business, were named as defendants in a lawsuit
brought by three individuals who are Class A Unitholders in the Partnership.
The litigation, entitled Luva Vaughan et al v. Jones Intercable, Inc. et al,
Case No. CV 94-3652 was filed in the Circuit Court for Jackson County,
Missouri, and purports to be "for the use and benefit of" the Partnership. The
suit sought rescission of the sale of the Alexandria, Virginia cable television
system (the "Alexandria System") by the Partnership to the General Partner,
which sale was completed on November 2, 1992. It also sought a constructive
trust on the profits derived from the operation of the Alexandria System since
the date of the sale, and sought an accounting and other equitable relief. The
plaintiffs also allege that the $1,800,000 commission paid to Jones Group by
the Partnership in connection with such sale was improper, and ask the Court to
order that such commission be repaid to the Partnership.
On October 21, 1994, plaintiffs filed a motion to dismiss Jones Group
as a defendant in response to Jones Group's argument that Missouri lacked
personal jurisdiction over it. Plaintiffs' motion was granted, and plaintiffs
then filed an action in the State of Colorado against Jones Group seeking a
return of the brokerage commission.
Under the terms of the partnership agreement of the Partnership, the
General Partner has the right to acquire cable television systems from the
Partnership at a purchase price equal to the average of three independent
appraisals of the cable television system to be acquired. The plaintiffs claim
that the appraisals obtained in connection with the sale of the Alexandria
System were improperly obtained, were not made by qualified appraisers and were
otherwise improper. The purchase price paid by the General Partner upon such
sale was approximately $73,200,000.
The amount of damages being sought by the plaintiffs has not yet been
specified. The General Partner believes both that the appraisals were properly
obtained and that the brokerage commission was properly paid to Jones Group in
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accordance with the express terms of the partnership agreement. The General
Partner further believes that its defenses are meritorious and it intends to
vigorously defend the litigation.
The General Partner filed a motion for summary judgment in Missouri
case. In response thereto, the Missouri court has entered an order dismissing
the plaintiffs' claims for rescission and disallowing the plaintiffs' request
for a jury trial. The only remaining claim, therefore, in the Missouri case is
a claim for an accounting. The General Partner and Jones Group also have filed
motions for summary judgment in the Colorado case, which are pending before the
Colorado court. In addition, the General Partner has conducted written
discovery in the form of interrogatories and requests for production of
documents, and has noticed the depositions of plaintiffs and plaintiffs'
expert. No trial date in either the Missouri case or the Colorado case has
been set. Because certain of the defendants' motions have not been resolved
and because discovery has just commenced, it is premature to present a
realistic evaluation of the probability of a favorable or unfavorable outcome.
(4) Certain prior year amounts have been reclassified to conform to the
1995 presentation.
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JONES INTERCABLE INVESTORS, L.P.
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
For the three months ended March 31, 1995, the Partnership generated
net cash from operating activities totaling $1,225,678, which is available to
fund capital expenditures and non-operating costs. Capital expenditures for
the Partnership's Independence System totaled approximately $1,006,000 during
the first quarter of 1995. Approximately 38 percent of these expenditures were
for the extension and rebuild of cable plant. Approximately 32 percent of
these expenditures were for the construction of service drops to subscriber
homes. The remaining expenditures were for various enhancements in the
Partnership's Independence System. Funding for these expenditures was provided
by cash generated from operations. Budgeted capital expenditures for the
remainder of 1995 are approximately $7,182,000. The rebuild of the
Independence System is expected to account for approximately 38 percent of the
anticipated remaining capital expenditures. Service drops connecting new
subscribers are expected to account for approximately 17 percent. The
remainder of the expenditures will relate to various enhancements in the
Independence System. Funding for these capital improvements is expected to be
provided by cash generated from operations and borrowings from the
Partnership's credit facility.
The maximum amount available under the Partnership's revolving credit
facility is subject to the terms of the credit agreement and the partnership
agreement's leverage limitations discussed below. Upon completion of the
Alexandria System sale, the maximum amount available under the Partnership's
revolving credit facility was reduced to $35,000,000. As of March 31, 1995,
$24,100,000 was outstanding, leaving $10,900,000 of available borrowings for
future needs. Although the revolving credit period was scheduled to expire on
December 31, 1994, the General Partner completed negotiations in December 1994
to extend the revolving credit period to December 31, 1996. Interest on
outstanding principal balances is at the Partnership's option of the Prime Rate
plus .25 percent, the Certificate of Deposit Rate plus 1.25 percent or the
Euro-rate plus 1.25 percent. In addition, a fee of 3/8 percent per annum is
required on the unused portion of the commitment. The effective interest rates
on amounts outstanding as of March 31, 1995 and 1994 were 7.73 percent and 4.61
percent, respectively.
The level of borrowings allowed by the Partnership's limited partnership
agreement is 25 percent of the fair market value of the Partnership's assets at
the time of borrowing or 25 percent of the cost of the Partnership's assets at
the time of borrowing, whichever is higher. This limitation restricts the
Partnership's ability to borrow funds for capital expenditures and to make
distributions. In addition, such limitations may reduce the financial
flexibility and liquidity of the Partnership. Further, the payment of the
principal and interest on outstanding debt obligations will diminish the level
of funds available to the Partnership and reduce the financial flexibility of
the Partnership. The Partnership's most recent appraisal of the Independence
System was $157,046,000. Based upon this appraised value, the Partnership has
a borrowing capacity of approximately $39,000,000, which would allow the
Partnership to borrow the maximum amount ($35,000,000) currently available
under its credit facility.
The Partnership has declared a $.15 per unit distribution for the first
quarter of 1995 which will be paid. The Partnership intends to distribute all
cash flow from operations after payment of expenses, capital additions, and
creation of cash reserves deemed reasonably necessary to preserve and enhance
the value of the Partnership's cable television system.
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Regulatory Matters
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 imposes a greater degree of regulation on the cable
television industry. Under the 1992 Cable Act's definition of effective
competition, nearly all cable systems in the United States, including the
Independence 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. In compliance with these
rules, the Partnership reduced rates charged for certain regulated services
effective September 1, 1993.
On February 22, 1994, however, the FCC adopted several additional
rate orders including orders which revised its earlier-announced regulatory
scheme with respect to rates and established interim cost-of-service
regulations. The FCC's February 22, 1994 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. 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.
The Partnership has filed cost-of-service showings for its
Independence System and thus anticipates no further reductions in rates. The
cost-of-service showings have not yet received final approval from franchising
authorities, however, and there can be no assurance that the Partnership's cost
of service showings will prevent rate reductions until such final approvals are
received.
RESULTS OF OPERATIONS
Revenues of the Partnership increased $436,384, or approximately 6
percent, from $6,803,606 for the three months ended March 31, 1994 to
$7,239,990 for the three months ended March 31, 1995. The increase in revenue
in the Independence System is primarily a result of increases in the number of
basic subscribers. Basic subscribers increased 4,646, or approximately 6
percent, from 76,158 at March 31, 1994 to 80,814 at March 31, 1995. No other
individual factor was significant to the increase in revenues.
Operating expenses consist primarily of costs associated with the
administration of the Partnership's cable television systems. The principal
cost components are salaries paid to system personnel, programming expenses,
professional fees, subscriber billing costs, rent for leased facilities, cable
system maintenance expenses and consumer marketing expenses.
Operating expenses increased $330,635, or approximately 10 percent, from
$3,354,296 for the period ending March 31, 1994 to $3,684,931 for the period
ending March 31, 1995. Operating expense represented approximately 49 percent
and 51 percent of revenue in 1994 and 1995, respectively. This increase in
operating expenses in the Partnership's Independence System was primarily due
to an increase in programming-related costs, which accounted for approximately
64 percent of the total increase in operating expenses. No other individual
factor was significant to the increase in operating expense in the
Partnership's Independence System.
Management fees and allocated overhead from the General Partner increased
$48,226, or approximately 6 percent, from $864,406 for the first three months
of 1994 to $912,632 for the comparable 1995 period. This increase was due
primarily to the increase in revenues, upon which such fees and allocations are
based, and an increase in allocated expenses from the General Partner. The
General Partner has experienced increases in expenses, including personnel
costs, a portion of which is allocated to the Partnership.
Depreciation and amortization expense decreased $606,458, or
approximately 24 percent, from $2,564,377 in 1994 to $1,957,919 in 1995. This
decrease is due to the maturation of the Independence System's asset base.
Operating income increased $663,981 to $684,508 in 1995 compared to
$20,527 in 1994. This change is due primarily to the decrease in depreciation
and amortization expense. Operating income before depreciation and
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amortization increased $57,523, or approximately 2 percent, from $2,584,904 for
the three months ended March 31, 1994 to $2,642,427 for the similar period in
1995. This decrease is due to the increases in operating expense and
management fees and allocated overhead from the General Partner exceeding the
increase in revenues.
Interest expense increased $214,886, or approximately 86 percent, from
$249,910 in 1994 to $464,796 in 1995 due to higher outstanding balances on
interest-bearing obligations and to higher interest rates in 1995 as compared
to 1994. The effective interest rates on amounts outstanding as of March 31,
1995 and 1994 were 7.73 percent and 4.61 percent, respectively.
The Partnership recorded net loss of $227,457 in the first quarter of
1994 compared to net income of $221,427 in the first quarter of 1995. This
change is primarily due to the change in operating income 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.
JONES INTERCABLE INVESTORS, L.P.
BY: JONES INTERCABLE, INC.
General Partner
By: /S/ Kevin P. Coyle
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Kevin P. Coyle
Group Vice President/Finance
(Principal Financial Officer)
Dated: May 12, 1995
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INDEX TO EXHIBITS
Exhibit Description Page
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27 Financial Data Schedule