<PAGE> 1
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, 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: 0-11910
CABLE TV FUND 11-A, LTD.
- - --------------------------------------------------------------------------------
Exact name of registrant as specified in charter
Colorado 84-0892990
- - --------------------------------------------------------------------------------
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
---- ----
<PAGE> 2
CABLE TV FUND 11-A
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1994 1993
------ ------------ ------------
<S> <C> <C>
INVESTMENT IN CABLE TELEVISION JOINT VENTURE $ 1,198,843 $ 1,163,806
============ ============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
LIABILITIES:
Accounts payable- General Partner $ 10,781 $ 10,781
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Distributions (11,079,511) (11,079,511)
Accumulated earnings 10,912,166 10,911,816
------------ ------------
(166,345) (166,695)
------------ ------------
Limited Partners-
Net contributed capital
(46,725 units outstanding at
June 30, 1994 and December 31, 1993) 19,516,170 19,516,170
Distributions (56,599,297) (56,599,297)
Accumulated earnings 38,437,534 38,402,847
------------ ------------
1,354,407 1,319,720
------------ ------------
Total liabilities and partners'
capital (deficit) $ 1,198,843 $ 1,163,806
============ ============
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these balance sheets.
2
<PAGE> 3
CABLE TV FUND 11-A
(A Limited Partnership)
UNAUDITED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30 June 30,
-------------------------- ------------------------
1994 1993 1994 1993
------- -------- ------- -------
<S> <C> <C> <C> <C>
EQUITY IN NET INCOME (LOSS)
OF CABLE TELEVISION
JOINT VENTURE $16,655 $(6,831) $35,037 $15,976
------- -------- ------- -------
NET INCOME (LOSS) $16,655 $(6,831) $35,037 $15,976
======= ======= ======= =======
ALLOCATION OF NET
INCOME (LOSS):
General Partner $ 166 $ (68) $ 350 $ 160
======= ======= ======= =======
Limited Partners $16,489 $(6,763) $34,687 $15,816
======= ======= ======= =======
NET INCOME (LOSS) PER
LIMITED PARTNERSHIP UNIT $ .34 $ (.14) $ .74 $ .34
======= ======= ======= =======
WEIGHTED AVERAGE NUMBER
OF LIMITED PARTNERSHIP
UNITS OUTSTANDING 46,725 46,725 46,725 46,725
======= ======= ======= =======
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these statements.
3
<PAGE> 4
CABLE TV FUND 11-A
(A Limited Partnership)
UNAUDITED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
-----------------------------
1994 1993
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 35,037 $ 15,976
Adjustments to reconcile net income to
net cash used in operating activities:
Equity in net income of cable
television joint venture (35,037) (15,976)
-------- --------
Net cash used in operating activities - -
-------- --------
Cash, beginning of period - -
-------- --------
Cash, end of period $ - $ -
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ - $ -
======== ========
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these statements
4
<PAGE> 5
CABLE TV FUND 11-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 11-A (the
"Partnership") at June 30, 1994 and December 31, 1993 and its Statements of
Operations and Cash Flows for the three and six month periods ended June 30,
1994 and 1993. Results of operations for these periods are not necessarily
indicative of results to be expected for the full year.
(2) Jones Intercable, Inc., a publicly held Colorado corporation (the
"General Partner"), manages the Partnership and Cable TV Joint Fund 11 (the
"Venture"), in which the Partnership holds an 18 percent interest, and receives
a fee for its services equal to 5 percent of the gross revenues of the Venture,
excluding revenues from the sale of cable television systems or franchises.
The Partnership owns no properties directly, and it holds a cable television
system only through its investment in the Venture. Management fees for the
three and six month periods ended June 30, 1994 (reflecting the Partnership's
approximate 18 percent interest in the Venture) were $7,502 and $14,892,
respectively, as compared to $7,548 and $14,999, 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 based on actual time spent by
employees of the General Partner with respect to each partnership managed.
Remaining overhead costs are allocated based upon 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 to the
General Partner paid by the Venture and attributable to the Partnership for
allocated overhead and administrative expenses for the three and six month
periods ending June 30, 1994 (reflecting the Partnership's approximate 18
percent interest in the Venture) were $12,052 and $24,633, respectively, as
compared to $11,507 and $23,398, respectively, for the similar 1993 periods.
(3) On June 29, 1990, the Venture completed the sale of all of its Wisconsin
cable television systems, except for the system serving the City of Manitowoc
(the "Manitowoc System"). The Manitowoc System was not sold because the City
of Manitowoc (the "City") did not consent to the transfer of the franchise.
The City of Manitowoc franchise contains a provision that the City claimed
allowed the City to acquire the Manitowoc System upon expiration of the
franchise. On April 9, 1991, the Venture took legal action, seeking a
declaration as to whether the buy-out right was enforceable under Federal law.
In October 1993, the City and the Venture settled the legal action. In the
settlement, the City conceded that its buy-out right was not applicable in the
event the franchise is renewed, and represented to the Venture that it knew of
no reason for non-renewal of the franchise. The City also agreed that the term
of the renewal franchise would be 12 years and that the applicable franchise
fee would be 5 percent. The Venture paid the City $1,850,000, which will be
returned, with interest, in the event that the City does not renew the
franchise. If the franchise is renewed, the $1,850,000 will be amortized over
the life of the franchise. The franchise renewal process has begun and the
General Partner expects that it will be completed by year end. Upon completion
of the franchise renewal process, the Venture will consider selling the
Manitowoc System. Otherwise, the Venture will continue to own and operate the
Manitowoc System for the foreseeable future.
5
<PAGE> 6
(4) Financial information regarding the Venture is presented below.
UNAUDITED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
------------- --------------
<S> <C> <C>
ASSETS
------
Cash and accounts receivable $ 2,211,965 $ 1,891,454
Investment in cable television properties 2,807,438 2,866,705
Other assets 1,855,863 1,851,983
------------- -------------
Total assets $ 6,875,266 $ 6,610,142
============= =============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Debt $ 15,596 $ 20,129
Payables and accrued liabilities 442,705 365,349
Partners' contributed capital 45,000,000 45,000,000
Distributions (118,914,493) (118,914,493)
Accumulated earnings 80,331,458 80,139,157
------------- -------------
Total liabilities and partners' capital $ 6,875,266 $ 6,610,142
============= =============
</TABLE>
6
<PAGE> 7
UNAUDITED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
----------------------------- -------------------------
1994 1993 1994 1993
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 823,499 $ 828,536 $1,634,657 $1,646,461
Operating, general and administrative expenses (501,203) (484,224) (982,690) (963,494)
Management fees and allocated overhead from
Jones Intercable, Inc. (107,325) (104,583) (216,930) (205,741)
Depreciation and amortization (129,566) (128,032) (260,056) (256,149)
--------- --------- ----------- ----------
Operating income 85,405 111,697 174,981 221,077
Interest expense (6,169) (1,992) (10,466) (3,745)
Interest income 20,087 27,567 35,562 55,897
Other, net (7,909) (174,765) (7,776) (185,546)
--------- --------- ----------- ----------
Net income (loss) $ 91,414 $ (37,493) $ 192,301 $ 87,683
========= ========= ========== ==========
</TABLE>
Management fees paid to the General Partner by the Venture totalled
$41,175 and $81,733 for the three and six months ended June 30, 1994,
respectively, and $41,427 and $82,323 for the three and six month periods ended
June 30, 1993, respectively. Reimbursements for overhead and administrative
expenses paid to the General Partner by the Venture totalled $66,150 and
$135,197 for the three and six month periods ended June 30, 1994, respectively,
and $63,156 and $128,418 for the three and six month periods ended June 30,
1993, respectively.
7
<PAGE> 8
CABLE TV FUND 11-A
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Partnership owns an approximate 18 percent interest in the
Venture. The investment in this cable television joint venture is accounted
for under the equity method. When compared to the December 31, 1993 balance,
this investment has increased by $35,037. This increase represents the
Partnership's proportionate share of net income generated by the Venture during
the first six months of 1994.
On June 29, 1990, the Venture completed the sale of all of its
Wisconsin cable television systems, except for the system serving the City of
Manitowoc (the "Manitowoc System"). The Manitowoc System was not sold because
the City of Manitowoc (the "City") did not consent to the transfer of the
franchise. The City of Manitowoc franchise contains a provision that the City
claimed allowed the City to acquire the Manitowoc System upon expiration of the
franchise. On April 9, 1991, the Venture took legal action, seeking a
declaration as to whether the buy-out right was enforceable under Federal law.
In October 1993, the City and the Venture settled the legal action. In the
settlement, the City conceded that its buy-out right was not applicable in the
event the franchise is renewed, and represented to the Venture that it knew of
no reason for non-renewal of the franchise. The City also agreed that the term
of the renewal franchise would be 12 years and that the applicable franchise
fee would be 5 percent. The Venture paid the City $1,850,000, which will be
returned, with interest, in the event that the City does not renew the
franchise. If the franchise is renewed, the $1,850,000 will be amortized over
the life of the franchise. The franchise renewal process has begun and the
General Partner expects that it will be completed by year end. Upon completion
of the franchise renewal process, the Venture will consider selling the
Manitowoc System. Otherwise, the Venture will continue to own and operate the
Manitowoc System for the foreseeable future.
During the first six months of 1994, the Venture expended
approximately $201,000 for capital expenditures in the Manitowoc System. These
expenditures were used for various projects to maintain the value of the
system. These expenditures were funded from cash generated from operations.
Anticipated capital expenditures for the remainder of 1994 are approximately
$100,000. These expenditures will relate to various projects to maintain the
value of the system. It is expected that these capital expenditures will be
funded from cash on hand and cash generated from operations.
The Venture had no bank debt outstanding at June 30, 1994.
Subject to regulatory matters discussed below, the Venture has
sufficient liquidity and capital resources, including cash on hand and its
ability to generate cash from operations, to meet its anticipated needs.
Regulation and Legislation.
Congress enacted the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act"), which became effective on
December 4, 1992. This legislation has caused significant changes to the
regulatory environment in which the cable television industry operates. The
1992 Cable Act generally allows for a greater degree of regulation of the cable
television industry. Under the 1992 Cable Act's definition of effective
competition, nearly all cable systems in the United States, including the
Manitowoc System, are subject to rate regulation of basic cable services. In
addition, the 1992 Cable Act allows the FCC to regulate rates for non-basic
service tiers other than premium services in response to complaints filed by
franchising authorities and/or cable subscribers. In April 1993, the FCC
adopted regulations governing rates for basic and non-basic services. The
FCC's rules became effective on September 1, 1993.
8
<PAGE> 9
In compliance with these rules, the Venture reduced rates charged for
certain regulated services effective September 1, 1993. These 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 has undertaken 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. To the extent such reductions are not mitigated,
the value of the Manitowoc System, which is calculated based on cash flow,
could be adversely impacted.
On February 22, 1994, 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 and July 14.
The Venture complied with the new benchmark regulations and reduced
rates in the Manitowoc System. The annualized reduction of operating income
before depreciation and amortization is $250,000, or approximately 10 percent.
The Venture will continue its efforts to mitigate the effect of such rate
reductions.
The 1992 Cable Act contains new broadcast signal carriage
requirements, and the FCC has adopted regulations implementing the statutory
requirements. These new rules allow a local commercial broadcast television
station to elect whether to demand that a cable system carry its signal or to
require the cable system to negotiate with the station for "retransmission
consent." A cable system is generally required to devote up to one-third of
its activated channel capacity for the mandatory carriage of local commercial
broadcast television stations, and non-commercial television stations are also
given mandatory carriage rights, although such stations are not given the
option to negotiate retransmission consent for the carriage of their signals by
cable systems. Additionally, cable systems also are required to obtain
retransmission consent from all commercial television stations (except for
commercial satellite-delivered independent "superstations"), which do not elect
mandatory carriage, commercial radio stations and, in some instances, low-power
television stations carried by cable systems.
The retransmission consent rules went into effect on October 6, 1993.
In the cable television system owned by the Venture no television stations
withheld their consent to retransmission of their signal. Certain broadcast
signals are being carried pursuant to extensions, and the General Partner
expects to finally conclude retransmission consent negotiations with those
remaining stations without having to terminate the distribution of any of those
signals. However, there can be no assurance that such will occur. If any
broadcast station currently being carried pursuant to an extension is dropped,
there could be a negative effect on the system in which it is dropped if a
significant number of subscribers in such system were to disconnect their
service. However, in most cases, only one broadcaster in any market is being
carried pursuant to an extension arrangement, and the dropping of such
broadcaster, were that to occur, is not expected to have a negative effect on
the system.
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
9
<PAGE> 10
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.
RESULTS OF OPERATIONS
All of the Partnership's operations are generated through its
approximate 18 percent interest in the Venture. Revenues of the Venture
decreased $5,037, or approximately 1 percent, from $828,536 for the three month
period ended June 30, 1993 to $823,499 for the comparable 1994 period.
Revenues decreased $11,804, or approximately 1 percent, from $1,646,461 for the
six month period ended June 30, 1993 to $1,634,657 for the comparable 1994
period. Revenues decreased due to the reduction in basic rates due to new
basic rate regulations issued by the FCC in May 1993, with which the Venture
complied effective September 1, 1993. In addition, February 22, 1994, the FCC
announced a further rulemaking which, when implemented on July 14, 1994,
reduced rates further. See regulation and legislation discussion above. The
decrease in revenues was offset, in part, by an increase in basic subscribers
of approximately 5 percent. Basic subscribers totalled 10,123 at June 30,
1994, compared to 9,634 at June 30, 1993. No other individual factor
contributed significantly to the increase in revenues.
Operating, general and administrative expense in the Manitowoc System
increased $16,979, or approximately 4 percent, from $484,224 for the three
month period ended June 30, 1993 to $501,203 for the comparable 1994 period.
Operating, general and administrative expense increased $19,196, or
approximately 2 percent, from $963,494 for the six month period ended June 30,
1993 to $982,690 for the comparable 1994 period. Operating, general and
administrative expense represented 58 percent and 59 percent, respectively, of
revenues for the three and six months periods of 1993 and 61 percent and 60
percent, respectively, for the comparable 1994 periods. The increases in
operating, general and administrative expense for the three and six month
periods were due to increases in programming fees, personnel related costs and
office related costs which were partially offset by decreases in plant
maintenance costs, advertising sales expense and copyright fees. No other
individual factor significantly affected the increases in operating, general
and administrative expenses. Management fees and allocated overhead from the
General Partner increased $2,742, or approximately 3 percent, from $104,583 for
the three month period ended June 30, 1993 to $107,325 for the comparable 1994
period. Management fees and allocated overhead from the General Partner
increased $11,189, or approximately 5 percent, from $205,741 for the six month
period ended June 30, 1993 to $216,930 for the comparable 1994 period. The
increases for the three and six month periods were due to 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 increased $1,534, or
approximately 1 percent, from $128,032 for the three month period ended June
30, 1993 to $129,566 for the comparable 1994 period. Depreciation and
amortization expense increased $3,907, or approximately 2 percent, from
$256,149 for the six month period ended June 30, 1993 to $260,056 for the
comparable 1994 period. The increases for the three and six month periods were
due to capital additions in 1993.
Operating income decreased $26,292, or approximately 24 percent, from
$111,697, for the three month period ended June 30, 1993 compared to $85,405
for the comparable 1994 period. Operating income decreased $46,096, or
approximately 21 percent, from $221,077 for the six month period ended June 30,
1993 to $174,981 for the comparable 1994 period. The decreases for the three
and six month periods were due to the decrease in revenues as well as the
increases in operating, general and administrative expenses, management fees
and allocated overhead from the General Partner and depreciation and
amortization expense. Operating income before depreciation and amortization
decreased $24,758, or approximately 10 percent, from $239,729 for the three
month period ended June 30, 1993 compared to $214,971 for the comparable 1994
period. Operating income before depreciation and amortization decreased
$42,189, or approximately 9 percent, from $477,226 for the six month period
ended June 30, 1993 compared to $435,037 for the comparable 1994 period. The
decreases for both periods were due to the decrease in revenues as well as the
increases in
10
<PAGE> 11
operating, general and administrative expense and management fees and allocated
overhead from the General Partner. The decreases in operating income before
depreciation and amortization reflect the current operating environment of the
cable television industry. The FCC rate regulations under the 1992 Cable Act
have caused revenues to decrease. In turn, this has caused certain expenses
which are a function of revenue, such as franchise fees, copyright fees and
management fees to decrease. However, other operating costs such as
programming fees, salaries and benefits, and marketing costs as well as costs
incurred by the General Partner, which are allocated to the 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, programming fees, 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) targeted non-subscriber
acquisition marketing.
Interest expense for the Venture increased $4,177 from $1,992 for the
three month period ended June 30, 1993 to $6,169 for the comparable 1994
period. Interest expense for the Venture increased $6,721 from $3,745 for the
six month period ended June 30, 1993 to $10,466 for the comparable 1994 period.
The Venture incurred no costs associated with the litigation with the City of
Manitowoc during the first six months of 1994 compared to $186,000 in 1993.
The Venture recognized net loss of $37,493 for the three month period ended
June 30, 1993 compared to net income of $91,414 for the comparable 1994 period
due primarily to the litigation costs incurred in the three month period ended
June 30, 1993. Net income of the Venture increased $33,494, or approximately
38 percent, from $87,683 for the six month period ended June 30, 1993 to
$121,177 for the comparable 1994 period due primarily to the litigation costs
incurred in the six month period ended June 30, 1993.
11
<PAGE> 12
PART II - OTHER INFORMATION
NONE
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CABLE TV FUND 11-A
BY: JONES INTERCABLE, INC.
General Partner
By: /s/ KEVIN P. COYLE
Kevin P. Coyle
Group Vice President/Finance
(Principal Financial Officer)
Dated: August 10, 1994
13
