<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: 0-14906
JONES CABLE INCOME FUND 1-B, LTD.
- - --------------------------------------------------------------------------------
Exact name of registrant as specified in charter
Colorado 84-1010417
- - --------------------------------------------------------------------------------
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 (l) has filed all reports
required to be filed by Section l3 or l5(d) of the Securities Exchange Act of
l934 during the preceding l2 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
<PAGE> 2
JONES CABLE INCOME FUND 1-B
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
------------ -----------
<S> <C> <C>
ASSETS
------
CASH $ 87,930 $ 44,489
RECEIVABLES:
Trade receivables, less allowance for doubtful receivables
of $9,826 and $12,624 at June 30, 1994 and
December 31, 1993, respectively 132,714 118,799
Distribution receivable from cable television joint venture - 429,500
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 10,355,891 9,900,099
Less-accumulated depreciation (4,500,066) (4,044,575)
------------ -----------
5,855,825 5,855,524
Franchise costs, net of accumulated amortization of $4,671,000 and
$4,585,011 at June 30, 1994 and December 31, 1993, respectively - 85,990
Subscriber lists, net of accumulated amortization of $2,837,198 and
$2,650,130 at June 30, 1994 and December 31, 1993, respectively 1,714,802 1,901,870
Favorable leaseholds, net of accumulated amortization of $90,818
and $84,830 at June 30, 1994 and December 31, 1993, respectively 66,882 72,870
Cost in excess of interests in net assets purchased, net of accumulated
amortization of $9,282 and $8,670 at June 30, 1994
and December 31, 1993, respectively 39,618 40,230
Investment in cable television joint venture 5,103,192 6,036,257
------------ -----------
Total investment in cable television properties 12,780,319 13,992,741
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 9,457 5,279
------------ -----------
Total assets $ 13,010,420 $14,590,808
============ ===========
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these balance sheets.
2
<PAGE> 3
JONES CABLE INCOME FUND 1-B
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
------------ -------------
<S> <C> <C>
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
LIABILITIES:
Debt $ 3,554,479 $ 3,547,767
Accounts payable-
Trade 20,143 5,101
General Partner 2,135,283 1,944,230
Accrued liabilities 284,189 340,275
Accrued distribution to limited partners - 429,500
Subscriber prepayments 44,357 45,971
------------ -------------
Total liabilities 6,038,451 6,312,844
------------ -------------
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (164,791) (151,731)
Distributions (100,119) (100,119)
------------ -------------
(263,910) (250,850)
------------ -------------
Limited Partners-
Net contributed capital
(83,884 units outstanding at
June 30, 1994 and December 31, 1993) 34,449,671 34,449,671
Accumulated deficit (16,196,086) (14,903,151)
Distributions (11,017,706) (11,017,706)
------------ -------------
7,235,879 8,528,814
------------ -------------
Total liabilities and partners'
capital (deficit) $ 13,010,420 $ 14,590,808
============ =============
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these balance sheets.
3
<PAGE> 4
JONES CABLE INCOME FUND 1-B
(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>
REVENUES $1,107,822 $1,106,205 $ 2,189,684 $ 2,190,490
COSTS AND EXPENSES:
Operating, general and) administrative 666,923 629,754 1,314,686 1,279,639
Management fees and allocated
overhead from General Partner 139,375 137,116 278,571 273,153
Depreciation and amortization 340,743 397,228 735,149 873,534
---------- ---------- ----------- -----------
OPERATING LOSS (39,219) (57,893) (138,722) (235,836)
---------- ---------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (97,932) (97,572) (187,464) (207,107)
Other, net (30,769) (11,470) (46,744) (23,740)
---------- ---------- ----------- -----------
Total other income (expense), net (128,701) (109,042) (234,208) (230,847)
---------- ---------- ----------- -----------
LOSS BEFORE EQUITY
IN NET LOSS OF CABLE
TELEVISION JOINT VENTURE (167,920) (166,935) (372,930) (466,683)
EQUITY IN NET LOSS OF
CABLE TELEVISION JOINT
VENTURE (438,950) (329,037) (933,065) (860,422)
---------- ---------- ----------- -----------
NET LOSS $ (606,870) $ (495,972) $(1,305,995) $(1,327,105)
========== ========== =========== ===========
ALLOCATION OF NET LOSS:
General Partner $ (6,069) $ (4,960) $ (13,060) $ (13,271)
========== ========== =========== ===========
Limited Partners $ (600,801) $ (491,012) $(1,292,935) $(1,313,834)
========== ========== =========== ===========
NET LOSS PER LIMITED
PARTNERSHIP UNIT $ (7.16) $ (5.85) $ (15.41) $ (15.66)
========== ========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF LIMITED PARTNERSHIP
UNITS OUTSTANDING 83,884 83,884 83,884 83,884
========== ========== =========== ===========
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these statements.
4
<PAGE> 5
JONES CABLE INCOME FUND 1-B
(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 loss $(1,305,995) $ (1,327,105)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 735,149 873,534
Equity in net loss of cable television
joint venture 933,065 860,422
Decrease (increase) in trade receivables (13,915) (10,473)
Decrease in deposits, prepaid expenses
and deferred charges (4,178) 46,120
Decrease in accounts payable, accrued
liabilities and subscriber prepayments (42,658) (101,108)
----------- ------------
Net cash provided by operating activities (301,468) 341,390
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (455,792) (371,835)
Decrease in distributions receivable from cable television
joint venture 429,500 -
Distributions from cable television joint venture - 859,000
----------- ------------
Net cash provided by (used in) investing activities (26,292) 487,165
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 16,830 30,000
Repayment of debt (10,118) (14,292)
Distributions to limited partners - (859,000)
Increase (decrease) in accrued distributions
to limited partners (429,500) -
Increase (decrease) in advances from General Partner 191,053 (23,638)
----------- ------------
Net cash used in financing activities (231,735) (866,930)
----------- ------------
Increase in cash 43,441 (38,375)
Cash, beginning of period 44,489 83,631
----------- ------------
Cash, end of period $ 87,930 $ 45,256
=========== ============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 186,679 $ 229,109
=========== ============
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these statements.
5
<PAGE> 6
JONES CABLE INCOME FUND 1-B
(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 Cable Income Fund
1-B (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.
The Partnership owns and operates the cable television system serving
the areas in and around Orangeburg, South Carolina (the "Orangeburg System").
In addition, the Partnership owns an approximate 40 percent interest in Jones
Cable Income Fund 1-B/C Venture (the "Venture"). The Venture owns and operates
the cable television systems serving the areas in and around Brighton and
Broomfield, Colorado, Lake County, California, Myrtle Creek, Oregon, South
Sioux City, Nebraska and Three Rivers and Watervliet, Michigan.
(2) Jones Intercable, Inc., a publicly held Colorado corporation (the
"General Partner"), manages the Partnership and receives a fee for its services
equal to five 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, 1994 (exclusive of the
Partnership's approximate 40 percent interest in the Venture) were $55,391 and
$109,484, as compared to $55,310 and $109,525, respectively, for the similar
1993 periods.
The Partnership reimburses the General Partner for certain allocated
overhead and administrative expenses. These expenses represent salaries and
benefits paid to corporate personnel, rent, data processing and other corporate
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 based on revenues and/or the
cost of assets managed for the partnership. 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 ending June 30, 1994 (exclusive of
the Partnership's approximate 40 percent interest in the Venture) were $83,984
and $169,087, as compared to $81,806 and $163,628, respectively, for the
similar 1993 periods.
6
<PAGE> 7
(3) Financial information regarding the Venture is presented below.
UNAUDITED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1994 December 31, 1993
------------- -----------------
<S> <C> <C>
ASSETS
------
Cash and accounts receivable $ 585,890 $ 550,855
Investment in cable television properties 55,165,917 57,237,567
Other assets 466,752 360,412
------------ ------------
Total assets $ 56,218,559 $ 58,148,834
============ ============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Debt $ 41,986,453 $ 36,298,318
Payables and accrued liabilities 1,389,438 6,661,694
Partners' contributed capital 39,504,008 39,504,008
Accumulated deficit (26,661,340) (24,315,186)
------------ ------------
Total liabilities and partners' capital $ 56,218,559 $ 58,148,834
============ ============
</TABLE>
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 $ 5,312,929 $ 5,162,952 $10,492,177 $10,059,800
Operating, general and administrative (2,927,227) (2,761,245) (5,933,130) (5,628,568)
Management fees and allocated overhead from
Jones Intercable, Inc. (668,441) (630,688) (1,346,795) (1,244,465)
Depreciation and amortization (2,144,934) (2,112,347) (4,318,763) (4,383,040)
----------- ----------- ----------- -----------
Operating loss (427,673) (341,328) (1,106,511) (1,196,273)
Interest expense (644,246) (486,808) (1,210,217) (971,499)
Other, net (31,804) 786 (29,426) 4,277
----------- ----------- ----------- -----------
Net loss $(1,103,723) $ (827,350) $(2,346,154) $(2,163,495)
=========== =========== =========== ===========
</TABLE>
Management fees paid to the General Partner by the Venture totalled
$265,646 and $524,609, respectively, for the three and six months ended June
30, 1994 as compared to $258,148 and $502,990, respectively, for the similar
1993 periods. Reimbursements for overhead and administrative expenses
totalled $402,795 and $822,186, respectively, for the three and six months
ended June 30, 1994 as compared to $372,540 and $741,475, respectively, for the
similar 1993 periods. Management fees paid by the Venture and attributable to
the Partnership totalled $105,647 and $208,637, respectively, for the three and
six months ended June 30, 1994 as compared to $102,665 and $200,039,
respectively, for the similar 1993 periods. Reimbursements for overhead and
administrative expenses attributable to the Partnership totalled $160,192 and
$326,983, respectively, for the three and six months ended June 30, 1994 as
compared to $148,159 and $294,885, respectively, for the similar 1993 periods.
7
<PAGE> 8
JONES CABLE INCOME FUND 1-B
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
During the first six months of 1994, approximately $456,000 was
expended for capital improvements within the Partnership's Orangeburg System.
Approximately 31 percent was for cable plant extensions. Approximately 30
percent of these expenditures related to service drops to homes. Approximately
13 percent of these expenditures related to the purchase of converters. The
remainder of these expenditures were for various enhancements in the Orangeburg
System. These expenditures were funded by cash generated from operations and
advances from the General Partner. Anticipated capital expenditures for the
remainder of 1994 are approximately $290,000. Of this total, approximately 11
percent is expected to relate to cable plant extensions, approximately 13
percent is for service drops to homes, approximately 32 percent is for the
purchase of converters and approximately 30 percent is for the rebuild of a
portion of the Orangeburg System. The remainder of the expenditures is
expected to be used for various system enhancements. Funding for these
expenditures is expected to be provided by cash generated from operations and,
in its discretion, advances from the General Partner. The 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 1992 Cable
Act, and the Partnership's liquidity position.
The Partnership's credit facility currently has the maximum amount
available of $3,500,000 outstanding. The facility expires September 30, 1994,
at which time the entire outstanding principal balance is due. The General
Partner will seek to renegotiate the credit facility prior to expiration. In
the event that the General Partner is unable to renegotiate the credit
facility, which is not anticipated, the General Partner would consider selling
assets to repay the loan. Interest on this facility is at the Partnership's
option of the Prime rate plus 1/8 percent, the CD rate plus 1-3/8 percent or
the London Interbank Offered Rate plus 1-1/4 percent. The effective interest
rates on outstanding obligations were 5.57 percent and 4.25 percent,
respectively, at June 30, 1994 and 1993
Since the balance on the Partnership's credit facility is at the
maximum available, the General Partner has advanced funds necessary for capital
expenditures. Interest on such advances is calculated at the General Partner's
weighted average cost of borrowing. At June 30, 1994, such advances totalled
$2,135,283.
In addition to the Orangeburg System, the Partnership owns an
approximate 40 percent interest in Jones Cable Income Fund 1- B/C Venture (the
"Venture"). The investment is accounted for under the equity method. When
compared to the December 31, 1993 balance, this investment has decreased by
$933,065. This decrease represents the Partnership's proportionate share of
losses generated by the Venture during the first six months of 1993. The
Venture's losses, which are principally the result of depreciation and
amortization charges, are expected to continue throughout the remainder of
1993.
During the first six months of 1994, capital improvements within the
Venture's operating systems totalled approximately $2,200,000. Approximately
28 percent of these expenditures related to rebuilding and upgrading the
Venture's Systems, and approximately 21 percent was for service drops to
homes. Approximately 12 percent of these expenditures were for plant
extensions. The remainder of these expenditures related to various
enhancements in all of the Venture's systems. Funding for these improvements
was provided by cash generated from operations and borrowings from the
Venture's credit facility. Anticipated capital expenditures for the remainder
of 1994 are approximately $2,375,000. System upgrades and rebuilds are
expected to account for approximately 49 percent of the expenditures, and plant
extensions are expected to account for approximately 23 percent of the capital
expenditures. Service drops to homes will account for approximately 23
percent. The remainder of the expenditures will relate to various enhancements
in the Venture's systems. The 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 1992 Cable Act and the Venture's
liquidity position. Funding for these expenditures is expected to be provided
by cash generated from operations and borrowings under the Venture's credit
facility.
8
<PAGE> 9
In May 1994, the Venture completed negotiation of its credit facility
to increase the maximum amount available to $45,000,000 and to extend the
revolving credit period to June 30, 1997, at which time the outstanding balance
is payable in full. At June 30, 1994, $41,700,000 was outstanding on the
Venture's credit facility. Interest on outstanding principal is calculated at
the Venture's option of the prime rate plus 1/8 percent, the CD rate plus 1-3/8
percent, or LIBOR plus 1-1/4 percent. The effective interest rates on amounts
outstanding as of June 30 , 1994 and 1993 were 6.16 percent and 4.48 percent,
respectively. In January of 1993, the Venture entered into an interest rate
cap agreement covering outstanding debt obligations of $15,000,000. The
Venture paid a fee of $145,500 for the coverage. The agreement protects the
Venture from interest rates that exceed 7 percent for three years from the date
of the agreement.
Due to the regulatory matters discussed below, and to the Venture's
borrowing limitation of 45 percent of the fair market value of its assets, no
distribution was declared for the second quarter of 1994. The Venture will use
cash flow from operations to fund capital expenditures. Although the General
Partner does not expect to resume distributions in the near term, a
determination of the level of distributions, if any, will be made on a quarter
by quarter basis.
Subject to regulatory matters discussed below, the General Partner
believes that the Venture has sufficient sources of capital to meet its
anticipated needs.
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 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 and the Venture, 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 and 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.
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.
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. The FCC also proposed adopting a productivity factor to be offset
against future inflation increases to be applied regardless of which form of
regulation is used, cost of service or benchmark regulation. 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.
9
<PAGE> 10
The Partnership has elected to file cost-of-service showings in its
Orangeburg system. The Venture has elected cost-of- service showings in its
Brighton and Broomfield, Colorado, Myrtle Creek, Oregon, South Sioux City,
Nebraska and Three Rivers, Michigan systems.
The Venture complied with the new benchmark regulations and reduced
rates in its Clearlake Oaks, California system. The annualized reduction of
the Venture's operating income before depreciation and amortization is
$130,000, or approximately 2 percent. In the systems electing cost-of-service,
the General Partner anticipates no further reduction in revenues or operating
income before depreciation and amortization. The Venture will continue its
efforts to mitigate the effect of such 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 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 and a decision is expected in the next several months. 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.
RESULTS OF OPERATIONS
Revenues of the Partnership's Orangeburg, South Carolina System
increased $1,617, or less than 1 percent, from $1,106,205 for the three months
ended at June 30, 1993 to $1,107,822 at June 30, 1994. This increase is due to
increases in basic subscribers and would have been greater but for the
reduction in basic rates mandated by the FCC. For the six month periods,
revenues decreased $806, or less than 1 percent, from $2,190,490 at June 30,
1993 to $2,189,684 at June 30, 1994. Although basic subscribers increased 361
or approximately 3 percent, from 11,358 at June 30, 1994 to 11,719 at June 30,
1994, revenues decreased due to the reduction in basic rates mandated by the
FCC in May 1993 with which the Partnership complied effective September 1,
1993. No other individual factor was significant to the change in revenues.
Operating, general and administrative expenses increased $37,169, or
approximately 6 percent, from $629,754 for the three months ended June 30,
1993 to $666,923 at June 30, 1994. For the six month periods ended June 30,
1993 and 1994, operating, general and administrative expense increased 35,047,
or approximately 3 percent, from $1,279,639 at June 30, 1993 to $1,314,686 at
June 30, 1994. Operating, general and administrative expense represented 57
percent and 58 percent of revenues for the three and six months periods of 1993
compared to 60 percent and 60 percent, respectively, for the three and six
months ended June 30, 1994. The increases in operating, general and
administrative expenses were primarily due to increases in personnel costs and
programming fees. No other individual factor significantly affected the
increases in expenses. Management fees and allocated overhead from the General
Partner increased $2,259, or approximately 2 percent, from $137,116 at June 30,
1993 to $139,375 at June 30, 1994. For the six months ended June 30, 1993 and
1994, management fees and allocated overhead from the General Partner increased
$5,418, or approximately 2 percent, from $273,153 in 1993 to $278,571 in 1994.
These increases are due to increases in allocated expenses from the General
Partner.
10
<PAGE> 11
Depreciation and amortization expense decreased $56,485, or
approximately 14 percent, from $397,228 for the three months ended June 30,
1993 to $340,743 at June 30, 1994. For the six months ended June 30, 1993 and
1994, depreciation and amortization expense decreased $138,385, or
approximately 16 percent, from $873,534 in 1993 to $735,149 in 1994. These
decreases are due to the maturation of the intangible asset base.
Operating loss decreased $18,674 from $57,893 for the three months
ended June 30, 1993 to $39,219 at June 30,1994 due primarily to the increase
in operating, general and administrative expense. Operating loss decreased
$97,114, or approximately 41 percent from $235,836 for the six months ended June
30, 1993 to $138,722 at June 30, 1994 due to the decreases in depreciation and
amortization. Operating income before depreciation and amortization decreased
$37,811, or approximately 11 percent, from $339,335 for the three months ended
June 30, 1993 to $301,524 at June 30, 1994. For the six months ended June 30,
1993 and 1994, operating income before depreciation and amortization decreased
$41,271, or approximately 6 percent, from $637,398 in 1993 to $596,427 in
1994. These decreases are due primarily to the increases in operating, general
and administrative expenses. 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 remain constant. In turn, this has caused certain
expenses which are a function of revenue, such as franchise fees, copyright
fees and management fees to remain constant. However, other operating costs
such as programming fees, salaries and benefits, and marketing costs, as well
as certain 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 increased $360, or less than 1 percent, from $97,572
for the three months ended June 30, 1993 to $97,932 at June 30, 1994. For the
six months ended June 30, 1993 and 1994, interest expense decreased $19,643, or
approximately 9 percent, from $207,107 to $187,464 . This decrease is due
primarily to lower outstanding balances on interest bearing obligations. Loss
before equity in net loss of cable television joint venture increased $985, or
approximately 1 percent, from $166,935 for the three months ended June 30, 1993
to $167,920 at June 30, 1994 . For the six months ended June 30, 1993 and
1994, loss before equity in net loss of cable television joint venture
decreased $93,753, or approximately 20 percent, from $466,683 at June 30, 1993
to $372,930 at June 30, 1994 . These decreases are due primarily to decrease
in operating loss and decrease in interest expense.
In addition to its Orangeburg, South Carolina system, the Partnership
owns an approximate 40 percent interest in the Venture.
Revenues of the Venture increased $149,977, or approximately 3
percent, from $5,162,952 to $5,312,929 for the three months ended June 30, 1993
as compared to 1994. For the six month periods ended June 30, 1993 and 1994,
revenues increased $432,377, or approximately 4 percent, from $10,059,800 at
June 30, 1993 to $10,492,177 at June 30, 1994. Since June 30, 1993, the
Venture has added 3,696 basic subscribers representing an increase of
approximately 6 percent. Basic subscribers increased from 57,198 at June 30,
1993 to 60,894 at June 30, 1994. This increase in the subscriber base
accounted for approximately 62 percent and 80 percent, respectively, of the
three and six month increases in revenues. Increases in advertising sales
revenue accounted for approximately 29 percent and 18 percent, respectively, of
the three and six month increases in revenues. No other single factor
significantly affected the of the three and six month increases in revenues.
The increase in revenue would have been greater but for the reduction in
certain rates charged due to new basic rate regulations issued by the FCC in
May 1993 with which the Venture complied effective September 1, 1993.
Operating, general and administrative expense increased $165,982, or
approximately 6 percent, from $2,761,245 to $2,927,227 for the three months
ended June 30, 1994. For the six months ended June 30, 1994 and 1993,
operating, general and administrative expense increased $304,562, or
approximately 5 percent, from $5,628,568 at June 30, 1993 to $5,933,130 at June
30, 1994. Operating, general and administrative expense represented 55 percent
and 57 percent, respectively, of revenue for the three and six month periods
ended June 30, 1994 compared to 53 percent and 56 percent, respectively, for
the similar periods in 1993. Increased programming fees accounted for
approximately 65 percent and 52 percent, respectively, of the increases for the
three and six month periods. Approximately 22 percent of both the three and
11
<PAGE> 12
six month increase in expense was due to advertising sales expenses. No other
individual factors were significant to the increases in operating, general and
administrative expenses. Management fees and allocated overhead from the
General Partner increased $37,753, or approximately 6 percent, from $630,688 to
$668,441 for the three months ended June 30, 1994 as compared to 1993. For the
six months ended June 30, 1994 and 1993, management fees and allocated overhead
from the General Partner increased $102,330, or approximately 8 percent, from
$1,244,465 at June 30, 1993 to $1,346,795 at June 30, 1994. These increases
are due to the increases in revenues, upon which such fees and allocations are
based, and an increase in expenses allocated from the General Partner. The
General Partner has experienced increases in certain expenses, including
personnel costs and reregulation cost; a portion of which is allocated to the
Venture. Depreciation and amortization expense increased $32,587, or
approximately 2 percent, from $2,112,347 to $2,141,934 for the three months
ended June 30, 1994 as compared to 1993, due to capital additions in 1993. For
the six months ended June 30, 1994 and 1993, depreciation and amortization
expense decreased $64,277, or approximately 1 percent, from $4,383,040 at June
30, 1993 to $4,318,763 at June 30, 1994. This decrease is due to the
maturation of the Venture's depreciable asset base.
Operating loss increased $86,345, or approximately 25 percent, from
$341,328 to $427,673 for the three months ended June 30, 1994. This increase
is a result of the increases in operating, general and administrative expense,
management fees and allocated overhead from the General Partner, exceeding the
increase in revenues. Operating loss for the six months ended June 30, 1994
and 1993 decreased $89,762, or approximately 8 percent, from $1,196,273 to
$1,106,511 for the six months ended June 30, 1994. This decrease is a result
of the increase in revenues and the decrease in amortization and depreciation
expense exceeding the increases in operating, general and administrative
expense, management fees and allocated overhead from the General Partner.
Operating income before depreciation and amortization decreased $53,758, or
approximately 3 percent, from $1,771,019 for the three months ended June 30,
1993 to $1,717,261 for the comparable 1994 period, due to the increases in
operating general and administrative expense and management fees and allocated
overhead from the General Partner exceeding the increase in revenue. For the
six month periods, operating income before depreciation and amortization
increased $25,485, or approximately 1 percent, from $3,186,767 in 1993 to
$3,212,252 in 1994, due to the increase in revenues exceeding the increases in
operating, general and administrative expense and management fees and allocated
overhead from the General Partner.
Interest expense increased $157,438, or approximately 32 percent, from
$486,808 to $644,246 for the three months ended June 30, 1994 as compared to
1993. For the six months ended June 30, 1994 and 1993, interest expense
increased $238,718, or approximately 25 percent, from $971,499 in 1993 to
$1,210,217 in 1994. This increase was due to higher effective interest rates
on interest bearing obligations and to higher outstanding balances on interest
bearing obligations.
Net loss increased $166,460, or approximately 33 percent for the three
month periods from $498,313 in 1993 to $664,773 in 1994. For the six month
periods, consolidated loss increased $110,016, or approximately 8 percent, from
$1,303,073 in 1993 to $1,413,089 in 1994. These increases are attributable to
the factors discussed above and are expected to continue.
12
<PAGE> 13
Part II - OTHER INFORMATION
NONE
13
<PAGE> 14
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 CABLE INCOME FUND 1-B
BY: JONES INTERCABLE, INC.
General Partner
By: /s/ KEVIN P. COYLE
Kevin P. Coyle
Group Vice President/Finance
(Principal Financial Officer)
Dated: August 11, 1994
14
