<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: 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
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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
----- -----
Units outstanding as of the close of the period covered by this report.
8,322,632 Class A Units
<PAGE> 2
JONES INTERCABLE INVESTORS, L. P.
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
------------- ------------
<S> <C> <C>
ASSETS
------
CASH $ 380,190 $ 366,508
TRADE RECEIVABLES, less allowance for doubtful
receivables of $77,056 and $66,380 at June 30, 1994
and December 31, 1993, respectively 662,673 754,318
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 54,282,185 51,833,995
Less-accumulated depreciation (23,626,681) (21,838,729)
------------- ------------
30,655,504 29,995,266
Franchise costs, net of accumulated amortization of
$34,078,922 and $32,364,488 at June 30, 1994 and
December 31, 1993, respectively 13,772,387 15,486,821
Subscriber lists, net of accumulated amortization of
$22,600,000 and $21,332,901 at June 30, 1994 and
December 31, 1993, respectively - 1,267,099
Costs in excess of interests in net assets purchased, net of
accumulated amortization of $44,436 and $41,310 at
June 30, 1994 and December 31, 1993, respectively 205,565 208,691
------------- ------------
Total investment in cable television properties 44,633,456 46,957,877
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 172,574 84,728
------------- ------------
Total assets $ 45,848,893 $ 48,163,431
============= ============
</TABLE>
The accompanying notes to unaudited financial
statements are an integral part of these unaudited balance sheets.
2
<PAGE> 3
JONES INTERCABLE INVESTORS, L. P.
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
------------ ------------
<S> <C> <C>
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
LIABILITIES:
Credit facility $ 19,000,000 $ 18,400,000
Other debt 488,805 629,472
Trade accounts payable 192,405 86,490
Accrued distribution to Class A unitholders 1,248,395 1,248,395
Accrued liabilities 1,101,259 1,249,896
Subscriber prepayments 133,281 134,233
------------ ------------
Total liabilities 22,164,145 21,748,486
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (25,803) (23,469)
------------ ------------
(24,803) (22,469)
------------ ------------
Class A unitholders-
Net contributed capital
(8,322,632 units outstanding at
June 30, 1994 and December 31, 1993) 116,433,492 116,433,492
Accumulated deficit (2,554,527) (2,323,454)
Distributions to unitholders (90,169,414) (87,672,624)
------------ ------------
23,709,551 26,437,414
------------ ------------
Total liabilities and partners' capital (deficit) $ 45,848,893 $ 48,163,431
============ ============
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
3
<PAGE> 4
JONES INTERCABLE INVESTORS, L. P.
(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 $6,823,587 $ 6,869,211 $13,627,193 $13,595,671
COSTS AND EXPENSES:
Operating, general and administrative 3,431,439 3,177,806 6,785,735 6,402,072
Management fees and allocated overhead
from General Partner 843,084 799,103 1,707,490 1,569,360
Depreciation and amortization 2,210,776 2,408,457 4,772,611 4,862,389
---------- ----------- ----------- -----------
OPERATING INCOME 338,288 483,845 361,357 761,850
---------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (286,392) (241,368) (538,844) (489,139)
Other, net (57,846) 10,096 (55,920) 28,035
---------- ----------- ----------- -----------
Total other income (expense), net (344,238) (231,272) (594,764) (461,104)
---------- ----------- ----------- -----------
NET INCOME (LOSS) $ (5,950) $ 252,573 $ (233,407) $ 300,746
========== =========== =========== ===========
ALLOCATION OF NET INCOME (LOSS):
General Partner $ (60) $ 2,526 $ (2,334) $ 3,007
========== =========== =========== ===========
Class A Unitholders $ (5,890) $ 250,047 $ (231,073) $ 297,739
========== =========== =========== ===========
NET INCOME (LOSS) PER CLASS A UNIT: $ .00 $ .03 $ (.03) $ .04
========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
CLASS A UNITS OUTSTANDING 8,322,632 8,322,632 8,322,632 8,322,632
========== =========== =========== ===========
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
4
<PAGE> 5
JONES INTERCABLE INVESTORS, L. P.
(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 (loss) $ (233,407) $ 300,746
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 4,772,611 4,862,389
Decrease (increase) in trade receivables 91,645 (39,786)
Increase in deposits, prepaid expenses
and deferred charges (87,846) (5,518)
Decrease in accounts payable, accrued
liabilities and subscriber prepayments (43,674) (281,791)
------------ -----------
Net cash provided by operating activities 4,499,329 4,836,040
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (2,448,190) (1,791,085)
------------ -----------
Net cash used in investing activities (2,448,190) (1,791,085)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 2,400,000 831,524
Repayment of debt (1,940,667) (1,102,590)
Distributions to unitholders (2,496,790) (2,496,790)
------------ -----------
Net cash used in financing activities (2,037,457) (2,767,856)
------------ -----------
Increase in cash 13,682 277,099
Cash, beginning of period 366,508 43,546
------------ -----------
Cash, end of period $ 380,190 $ 320,645
============ ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 448,031 $ 443,246
============ ===========
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
5
<PAGE> 6
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, 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
areas in and around Independence, Missouri.
(2) Jones Intercable, Inc., a publicly held Colorado corporation (the
"General Partner"), manages the Partnership and receives a fee for its services
equal to 5 percent of the gross revenues of the Partnership, excluding revenues
from the sale of cable television systems or franchises. Management fees for
the three and six month periods ended June 30, 1994 were $341,179 and $681,360,
respectively, as compared to $343,461 and $679,784, respectively, for the
similar 1993 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. Other overhead costs are allocated primarily based on total revenues
and/or the cost of partnership assets managed. Effective December 1, 1993, the
allocation method was changed to be based only on revenue, which the General
Partner believes provides a more accurate method of allocation. Systems owned
by the General Partner and all other systems owned by partnerships for which
Jones Intercable, Inc. is the general partner are also allocated a
proportionate share of these expenses. The General Partner believes that the
methodology used in allocating overhead and administrative expenses is
reasonable. Amounts charged the Partnership by the General Partner for
allocated overhead and administrative expenses for the three and six month
periods ended June 30, 1994 were $501,905 and $1,026,130, respectively, as
compared to $455,642 and $889,576, respectively, for the similar 1993 periods.
(3) On February 22, 1994, the General Partner and The Jones Group, Ltd., an
affiliate of the General Partner engaged in the cable brokerage business, were
named as defendants in a lawsuit brought by three individuals who are Class A
Unitholders in the Partnership. The litigation, entitled Luva Vaughan et al v.
Jones Intercable, Inc. et al, Case No. CV 94-3652 was filed in the Circuit
Court for Jackson County, Missouri, and purports to be "for the use and benefit
of" the Partnership. The suit seeks 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
seeks a constructive trust on the profits derived from the operation of the
Alexandria System since the date of the sale, and seeks an accounting and other
equitable relief. The plaintiffs also allege that the $1,830,850 commission
paid to The Jones Group, Ltd. by the Partnership in connection with such sale
was improper, and ask 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. A portion of the net proceeds received by
the Partnership upon such sale was used to repay a portion of debt outstanding
under the Partnership's credit facility and to make distributions to Class A
Unitholders. The remaining net proceeds were retained by the Partnership for
working capital purposes. The General Partner believes both that the
appraisals were properly obtained and that the brokerage commission was
properly paid to The Jones Group, Ltd. 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.
Both the General Partner and The Jones Group, Ltd. have filed motions to
dismiss the litigation on various grounds and such motions are awaiting ruling
by the court.
6
<PAGE> 7
JONES INTERCABLE INVESTORS, L.P.
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
Capital expenditures in the Partnership's Independence System totalled
approximately $2,448,000 during the first six months of 1994. Approximately 41
percent of these expenditures were for the extension and rebuild of cable
plant. Approximately 21 percent of these expenditures were for the
construction of service drops to subscriber homes. The remaining expenditures
were for various enhancements in the Independence System. Funding for these
expenditures was provided by cash generated from operations. Subject to the
regulatory matters discussed below, budgeted capital expenditures for the
remainder of 1994 are approximately $9,164,000. The rebuild of the
Independence System is expected to account for approximately 69 percent of the
anticipated remaining capital expenditures. Service drops connecting new
subscribers are expected to account for approximately 5 percent. The remainder
of the expenditures will relate to various enhancements in the Independence
System. The actual level of capital expenditures will depend, in part, upon
the General Partner's determination as to the proper scope and timing of such
expenditures in light of the FCC's further rulemaking regarding the 1992 Cable
Act, and the Partnership's liquidity position. 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 partnership agreement's leverage limitations
discussed below. Upon completion of the Alexandria System sale, the maximum
amount available under the Partnership's revolving credit facility was reduced
to $35,000,000. As of June 30, 1994, $19,000,000 was outstanding on this
credit facility, leaving $16,000,000 of available borrowings for future needs.
Although the revolving credit period was scheduled to expire on December 31,
1993, the General Partner completed negotiations in February 1994 to extend the
revolving credit period to December 31, 1994. Interest on outstanding
principal balances is at the Partnership's option of the prime rate plus .25
percent, the CD rate plus 1.25 percent or the Euro-rate plus 1.25 percent. In
addition, a fee of 1/2 percent per annum is required on the unused portion of
the commitment. The effective interest rates on amounts outstanding as of June
30, 1994 and 1993 were 5.36 percent and 4.50 percent, respectively.
The level of borrowings allowed by the terms of the Partnership's
partnership agreement is limited to 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 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 value of the Independence System was $141,022,000. Based upon
this appraised value, the Partnership has additional borrowing capacity of
approximately $16,256,000, which would allow the Partnership to borrow the
maximum amount currently available under its credit facility. The next
appraisal of the Independence System is scheduled for November 1994. The FCC
regulations discussed below could have an adverse impact on the appraised value
of the Independence System and this may limit the Partnership's ability to
borrow funds under its credit facility.
The Partnership has declared a $.15 per unit distribution for both the
first and second quarters of 1994. 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
will determine the level of distributions on a quarter-by-quarter basis.
Subject to the regulatory matters discussed below, the General Partner believes
the Partnership has sufficient sources of capital in its ability to generate
cash from operations and to borrow under its credit facility to meet its
presently anticipated needs.
7
<PAGE> 8
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 television systems in the United States, including those owned and
managed by the General Partner, are subject to rate regulation of basic cable
services. In addition, the 1992 Cable Act allows the FCC to regulate rates for
non-basic service tiers other than premium services in response to complaints
filed by franchising authorities and/or cable subscribers. In April 1993, the
FCC adopted regulations governing rates for basic and non-basic services. The
FCC's rules became effective on September 1, 1993.
In compliance with these rules, the Partnership reduced rates charged for
certain regulated services effective on 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 repackaging 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 change 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.
The Partnership has elected to file cost-of-service showings in the
Independence System. The General Partner anticipates no further reduction in
revenues or operating income before depreciation and amortization.
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.
8
<PAGE> 9
The retransmission consent rules went into effect on October 6, 1993.
In the Independence System 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 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 decreased $45,624, or approximately 1
percent, from $6,869,211 for the three months ended June 30, 1993 to $6,823,587
for the three months ended June 30, 1994. This decrease in revenue was
primarily due to decreases in basic service revenue due to the reduction in
basic rates due to regulations issued by the FCC in May 1993, with which the
Partnership complied effective September 1, 1993. Such rate reductions were
partially offset by increases in subscribers, premium service revenue,
advertising revenue and installation revenue. Revenues of the Partnership
increased $31,522, or less than 1 percent, from $13,595,671 for the six months
ended June 30, 1993 to $13,627,193 for the six months ended June 30, 1994.
This increase in revenue was primarily due to increases in basic subscribers,
premium service revenue and advertising revenue. Basic subscribers increased
4,301, or approximately 6 percent, from 72,689 at June 30, 1993 to 76,990 at
June 30, 1994. The increase in revenues would have been greater but for the
reduction in basic rates discussed above.
Operating, general and administrative expenses increased $253,633, or
approximately 8 percent, from $3,177,806 for the three month period ending June
30, 1993 to $3,431,439 for the three month period ending June 30, 1994. This
increase was primarily due to increases in programming costs and personnel
costs, which accounted for approximately 60 percent and 33 percent,
respectively, of the total increase in operating, general and administrative
expense. For the six month periods ended June 30, these expenses increased
$383,663, or approximately 6 percent, from $6,402,072 in 1993 to $6,785,735 in
1994. This increase was primarily due to increases in programming costs, which
accounted for approximately 69 percent of the total increase in operating,
general and administrative expense. No other individual factor was
significant to the increases in operating, general and administrative expense
in the Partnership's Independence System. Operating, general and
administrative expense represented 50 percent and 47 percent, respectively,
of revenue for the six months periods and 50 percent and 46 percent,
respectively, of revenue for the three month periods ended June 30, 1994 and
1993.
9
<PAGE> 10
Management fees and allocated overhead from the General Partner increased
$43,981, or approximately 6 percent, from $799,103 for the second quarter of
1993 to $843,084 for the comparable 1994 period. For the six months ended June
30, management fees and allocated overhead increased $138,130, or approximately
9 percent, from $1,569,360 in 1993 to $1,707,490 in 1994. These increases were
due primarily to increases in allocated expenses from the General Partner. The
General Partner has experienced increases in expenses, including personnel
expenses and reregulation expenses, a portion of which is allocated to the
Partnership.
For the three month periods, depreciation and amortization expense
decreased $197,681, or approximately 8 percent, from $2,408,457 in 1993 to
$2,210,776 in 1994. For the six month periods, depreciation and amortization
expense decreased $89,778, or approximately 2 percent, from $4,862,389 in 1993
to $4,772,611 in 1994. These decreases were due to the maturation of the
Independence System's depreciable asset base.
Operating income decreased $145,557, or approximately 30 percent, to
$338,288 for the three month period ended June 30, 1994 compared to $483,845
for the similar period in 1993. Operating income decreased $400,493, or
approximately 53 percent, to $361,357 for the six month period ended June 30,
1994 compared to $761,850 for the similar period in 1993. These changes are
due to the factors discussed above. Operating income before depreciation and
amortization decreased $343,238, or approximately 12 percent, from $2,892,302
for the three months ended June 30, 1993 to $2,549,064 for the similar period
in 1994, due to the decrease in revenue as well as the increases in operating,
general and administrative expense and management fees and allocated overhead
from the General Partner exceeding the decrease in depreciation and
amortization expense. Operating income before depreciation and amortization
decreased $490,271, or approximately 9 percent, from $5,624,239 for the six
months ended June 30, 1993 to $5,133,968 for the similar period in 1994, due to
the increases in operating, general and administrative expense and allocated
overhead from the General Partner exceeding the increase in revenue and the
decrease in depreciation and amortization expense. 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 increase more slowly than in prior
years. In turn, this has caused certain expenses which are a function of
revenue, such as franchise fees, copyright fees and management fees to increase
more slowly than in prior years. 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 Parternship 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.
For the three month periods, interest expense increased $45,024, or
approximately 19 percent, from $241,368 in 1993 to $286,392 in 1994. For the
six month periods, interest expense increased $49,705, or approximately 10
percent, from $489,139 in 1993 to $538,844 in 1994. These increases are due to
higher outstanding balances on interest-bearing obligations and to higher
interest rates. The effective interest rates on amounts outstanding as of June
30, 1994 and 1993 were 5.36 percent and 4.50 percent, respectively.
The Partnership recorded net income of $252,573 for the three months ended
June 30, 1993 compared to a net loss of $5,950 for the similar period in 1994.
The Partnership recorded net income of $300,746 for the six months ended June
30, 1993 compared to a net loss of $233,407 for the similar period in 1994.
These changes are primarily due to the decreases in operating income and the
increases in interest expense.
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PART II - OTHER INFORMATION
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 11, 1994
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