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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1995
[ ] 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.
Exact name of registrant as specified in charter
Colorado 36-3468573
State of organization I.R.S. employer I.D. #
9697 East Mineral Avenue, P.O. Box 3309, Englewood, Colorado 80155-3309
Address of principal executive office
(303) 792-3111
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 ______
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
June 30, December 31,
ASSETS 1995 1994
------ ------------- --------------
CASH $ 670,402 $ 607,422
TRADE RECEIVABLES, less allowance for doubtful
receivables of $67,343 and $76,659 at June 30, 1995
and December 31, 1994, respectively 521,934 741,315
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 62,351,093 60,015,800
Less- accumulated depreciation (27,377,024) (25,208,198)
------------ ------------
34,974,069 34,807,602
Franchise costs, net of accumulated amortization of
$37,507,789 and $35,793,356 at June 30, 1995 and
December 31, 1994, respectively 10,343,520 12,057,953
Costs in excess of interests in net assets purchased, net of
accumulated amortization of $50,689 and $47,562 at
June 30, 1995 and December 31, 1994, respectively 199,312 202,439
------------ ------------
Total investment in cable
television properties 45,516,901 47,067,994
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 165,580 141,087
------------ ------------
Total assets $ 46,874,817 $ 48,557,818
============ ============
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
June 30, December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1995 1994
------------------------------------------- ------------ ------------
LIABILITIES:
Credit facility $ 23,300,000 $ 23,000,000
Other debt 462,722 493,841
Trade accounts payable 34,590 5,381
Accrued distributions to Class A Unitholders 1,248,395 1,248,395
Accrued liabilities 1,477,017 1,685,890
Subscriber prepayments 118,961 124,890
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Total liabilities 26,641,685 26,558,397
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PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (10,383) (17,688)
------------ ------------
(9,383) (16,688)
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Class A Unitholders-
Net contributed capital
(8,322,632 units outstanding at
June 30, 1995 and December 31, 1994) 116,433,492 116,433,492
Accumulated deficit (1,027,983) (1,751,179)
Distributions to Unitholders (95,162,994) (92,666,204)
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20,242,515 22,016,109
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Total liabilities and
partners' capital (deficit) $ 46,874,817 $ 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 For the Six Months Ended
June 30, June 30,
--------------------------- ----------------------------
1995 1994 1995 1994
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REVENUES $7,484,211 $6,823,587 $14,724,201 $13,627,193
COSTS AND EXPENSES:
Operating expenses 3,667,387 3,431,439 7,352,318 6,785,735
Management fees and allocated overhead
from General Partner 865,066 843,084 1,777,698 1,707,490
Depreciation and amortization 1,957,931 2,213,318 3,915,850 4,777,695
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OPERATING INCOME 993,827 335,746 1,678,335 356,273
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OTHER INCOME (EXPENSE):
Interest expense (483,646) (283,850) (948,442) (533,760)
Other, net (1,107) (57,846) 608 (55,920)
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Total other income (expense) (484,753) (341,696) (947,834) (589,680)
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NET INCOME (LOSS) $ 509,074 $ (5,950) $ 730,501 $ (233,407)
========== ========== =========== ===========
ALLOCATION OF NET INCOME (LOSS):
General Partner $ 5,091 $ (60) $ 7,305 $ (2,334)
========== ========== =========== ===========
Class A Unitholders $ 503,983 $ (5,890) $ 723,196 $ (231,073)
========== ========== =========== ===========
NET INCOME (LOSS) PER CLASS A UNIT $ .07 $ .00 $ .10 $ (.03)
========== ========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
CLASS A UNITS OUTSTANDING 8,322,632 8,322,632 8,322,632 8,322,632
========== ========== =========== ===========
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 Six Months Ended
June 30,
------------------------------
1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 730,501 $ (233,407)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 3,915,850 4,777,695
Decrease in trade receivables 219,381 91,645
Increase in deposits, prepaid expenses
and deferred charges (53,957) (92,930)
Decrease in trade accounts payable, accrued
liabilities and subscriber prepayments (185,593) (43,674)
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Net cash provided by operating activities 4,626,182 4,499,329
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (2,335,293) (2,448,190)
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Net cash used in investing activities (2,335,293) (2,448,190)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 1,715,969 2,400,000
Repayment of debt (1,447,088) (1,940,667)
Distributions to unitholders (2,496,790) (2,496,790)
----------- -----------
Net cash used in financing activities (2,227,909) (2,037,457)
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Increase in cash 62,980 13,682
Cash, beginning of period 607,422 366,508
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Cash, end of period $ 670,402 $ 380,190
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SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 1,058,132 $ 442,947
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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 June 30, 1995 and December 31, 1994 and
its Statements of Operations for the six month periods ended June 30, 1995 and
1994, and its Statements of Cash Flows for the six month periods ended June 30,
1995 and 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 and six month periods ended June 30, 1995 were $374,211 and
$736,210, respectively, as compared to $341,179 and $681,360, respectively, for
the similar 1994 periods.
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 expenses are allocated based on the pro rata relationship
of the Partnership's revenues to the total revenues of all systems owned or
managed by the General Partner and certain of its subsidiaries. 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 six month
periods ended June 30, 1995 were $490,855 and $1,041,488, respectively, as
compared to $501,905 and $1,026,130, respectively, for the similar 1994
periods.
(3) On February 22, 1994, the General Partner and The Jones Group,
Ltd. (the "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. As originally filed, 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 an accounting
and other equitable relief. The plaintiffs also alleged that the $1,800,000
commission paid to Jones Group by the Partnership in connection with such sale
was improper, and asked the Court to order that such commission be repaid to
the Partnership.
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.
On October 21, 1994, plaintiffs filed a motion to dismiss Jones Group
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 Colorado against Jones Group seeking a return of the
brokerage commission.
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The General Partner and Jones Group filed motions for summary judgment
in the Missouri and Colorado cases, respectively. The Missouri court granted
the General Partner's motion in part and dismissed all counts of the complaint
for rescission. It also struck the plaintiffs' jury demand. The Colorado
court also granted Jones Group's motion in part finding that the payment of the
brokerage commission was not a breach of the partnership agreement, but leaving
for trial the issue of whether such payment constituted a breach of fiduciary
duty.
Subsequently, the plaintiffs have filed an amended complaint in the
Missouri case, recasting their allegations in terms of breach of contract,
common law fraud, conversion and breach of fiduciary duty. The plaintiffs have
reasserted their right to a jury trial.
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 has been set
in the Missouri case or in the Colorado case. Because discovery has just
commenced, it is premature to present a realistic evaluation of the probability
of a favorable or unfavorable outcome. However, the General Partner believes
both that the appraisals were proper and that the brokerage commission was
properly paid to Jones Group in 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.
(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 six months ended June 30, 1995, the Partnership generated net
cash from operating activities totaling $2,625,469, which is available to fund
capital expenditures and non-operating costs. Capital expenditures for the
Partnership's Independence System totaled approximately $2,335,000 for the
first six months of 1995. Approximately 40 percent of these expenditures were
for the extension and rebuild of cable plant. Approximately 23 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 and borrowings from the Partnership's
revolving credit facility. Budgeted capital expenditures for the remainder of
1995 are approximately $5,235,000. The rebuild of the Independence System is
expected to account for approximately 45 percent of the anticipated remaining
capital expenditures. Service drops connecting new subscribers are expected to
account for approximately 11 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. The maximum amount available
under the Partnership's revolving credit facility is $35,000,000. As of June
30, 1995, $23,300,000 was outstanding, leaving $11,700,000 of available
borrowings for future needs. Under the terms of the agreement, the revolving
credit facility will expire on 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 June 30, 1995 and 1994 were 7.69 percent and 5.36 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 both the
first and second quarters of 1995. 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.
The General Partner believes that the Partnership has sufficient
sources of capital to service its presently anticipated needs from cash on
hand, cash generated from operations and borrowings available under its
revolving credit facility.
RESULTS OF OPERATIONS
Revenues of the Partnership increased $660,624, or approximately 10
percent, to $7,484,211 for the three months ended June 30, 1995 from $6,823,587
for the comparable 1994 period. Revenues of the Partnership increased
$1,097,008, or approximately 8 percent, to $14,724,201 for the six months ended
June 30, 1995 from $13,627,193 for the comparable 1994 period. The increase in
revenues in the Independence System is primarily a result of increases in the
number of basic subscribers and basic rate adjustments. An increase in the
subscriber base accounted for approximately 50 percent and 59
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percent, respectively, of the increase in revenues for the three and
six month periods ended June 30, 1995 and 1994. Basic subscribers increased
4,459, or approximately 6 percent, to 81,449 at June 30, 1995 from 76,990 at
June 30, 1994. Basic rate adjustments accounted for approximately 44 percent
and 35 percent, respectively, of the increase in revenues for the three and six
month periods ended June 30, 1995 and 1994. 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 $235,948, or approximately 7 percent, to
$3,667,387 for the three month period ending June 30, 1995 from $3,431,439 for
the comparable 1994 period. Operating expense for the three month period
represented approximately 49 percent and 50 percent of revenue in 1995 and
1994, respectively. Operating expenses increased $566,583, or approximately 8
percent, to $7,352,318 for the six month period ending June 30, 1995 from
$6,785,735 for the comparable 1994 period. Operating expenses for the six
month period represented approximately 50 percent of revenue in both 1995 and
1994. These increases are due primarily to an increase in programming-related
costs and marketing costs. 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 $21,982, or approximately 3 percent, to $865,066 for the second
quarter of 1995 from $843,084 for the comparable 1994 period. For the six
months ended June 30, management fees and allocated overhead from the General
Partner increased $70,208, or approximately 4 percent, to $1,777,698 in 1995
from $1,707,490 in 1994. These increases were due primarily to the increase in
revenues, upon which such fees and allocations are based.
For the three month periods ended June 30, depreciation and
amortization expense decreased $255,387, or approximately 12 percent, to
$1,957,931 in 1995 from $2,213,318 in 1994. For the six month periods ended
June 30, depreciation and amortization expense decreased $861,845, or
approximately 18 percent, to $3,915,850 in 1995 from $4,777,695 in 1994. This
decrease is due to the maturation of the Independence System's asset base.
Operating income increased $658,081, to $993,827 for the three month
period ended June 30, 1995 compared to $335,746 for the similar period in 1994.
Operating income increased $1,322,062 to $1,678,335 for the six month period
ended June 30, 1995 from $356,273 for the comparable 1994 period. These
increases are due primarily to the decreases in depreciation and amortization
expense. Operating income before depreciation and amortization increased
$402,694, or approximately 16 percent, to $2,951,758 for the three months ended
June 30, 1995 from $2,549,064 for the similar period in 1994. Operating income
before depreciation and amortization increased $460,217, or approximately 9
percent, to $5,594,185 for the six months ended June 30, 1995 from $5,133,968
for the similar period in 1994. These increases are due to the increases in
revenues exceeding the increases in operating expenses and management fees and
allocated overhead from the General Partner.
For the three month periods, interest expense increased $199,796, or
approximately 70 percent, to $483,646 in 1995 from $283,850 in 1994. For the
six month periods, interest expense increased $414,682, or approximately 78
percent, to $948,442 in 1995 from $533,760 in 1994, 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
June 30, 1995 and 1994 were 7.69 percent and 5.36 percent, respectively.
The Partnership recorded net income of $509,074 for the three months
ended June 30, 1995 compared to net loss of $5,950 for the similar period in
1994. The Partnership recorded net income of $730,501 for the six months ended
June 30, 1995 compared to a net loss of $233,407 for the similar period in
1995. These changes are primarily due to the increases 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
-----------------------------
Kevin P. Coyle
Group Vice President/Finance
(Principal Financial Officer)
Dated: August 14, 1995
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EXHIBIT INDEX
Exhibit No. Exhibit Description Page
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27 Financial Data Schedule