<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
or
( ) 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 0-16200
CABLE TV FUND 14-B, LTD.
- - --------------------------------------------------------------------------------
Exact name of registrant as specified in charter
Colorado #84-1024658
- - --------------------------------------------------------------------------------
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 14-B
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
------------ ------------
<S> <C> <C>
ASSETS
------
CASH $ 1,011,989 $ 410,238
TRADE RECEIVABLES, less allowance for
doubtful receivables of $59,194 and $90,753 at
June 30, 1994 and December 31, 1993, respectively 1,021,102 1,331,434
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 82,860,297 80,586,783
Less- accumulated depreciation (34,576,252) (31,708,982)
------------ ------------
48,284,045 48,877,801
Franchise costs, net of accumulated amortization of
$40,519,355 and $37,174,465 at June 30, 1994
and December 31, 1993, respectively 45,411,442 48,756,332
Subscriber lists, net of accumulated amortization of
$13,087,624 and $12,258,896 at June 30, 1994
and December 31, 1993, respectively 4,435,316 5,264,044
Costs in excess of interests in net assets
purchased, net of accumulated amortization of
$4,227,635 and $3,882,714 at June 30, 1994
and December 31, 1993, respectively 23,358,926 23,703,847
------------ ------------
Total investment in cable television properties 121,489,729 126,602,024
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 577,898 436,245
------------ ------------
Total assets $124,100,718 $128,779,941
============ ============
</TABLE>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these consolidated balance sheets.
2
<PAGE> 3
CABLE TV FUND 14-B
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
------------ ------------
<S> <C> <C>
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
LIABILITIES:
Debt $ 58,377,014 $ 58,881,755
Accounts payable-
General Partner - 29,182
Trade 196,388 32,339
Deferred brokerage fee 920,000 920,000
Accrued liabilities 1,315,395 1,314,361
Subscriber prepayments 575,255 556,640
------------ ------------
Total liabilities 61,384,052 61,734,277
------------ ------------
MINORITY INTEREST IN CABLE TELEVISION
JOINT VENTURE 6,694,497 7,351,293
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (566,874) (530,152)
------------ -------------
(565,874) (529,152)
------------ -------------
Limited Partners-
Net contributed capital (261,353 units outstanding at
June 30, 1994 and December 31, 1993) 112,127,301 112,127,301
Accumulated deficit (55,539,258) (51,903,778)
------------ ------------
56,588,043 60,223,523
------------ ------------
Total liabilities and partners' capital (deficit) $124,100,718 $128,779,941
============ ============
</TABLE>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these consolidated balance sheets.
3
<PAGE> 4
CABLE TV FUND 14-B
(A Limited Partnership)
UNAUDITED CONSOLIDATED 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 $ 7,941,145 $ 8,042,892 $15,858,641 $15,888,853
COSTS AND EXPENSES:
Operating, general and administrative 4,490,049 4,373,577 9,007,121 8,767,217
Management fees and allocated overhead
from General Partner 985,378 1,010,144 1,988,600 1,979,891
Depreciation and amortization 3,749,423 3,911,503 7,526,268 8,119,068
----------- ----------- ----------- -----------
OPERATING LOSS (1,283,705) (1,252,332) (2,663,348) (2,977,323)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (858,102) (806,116) (1,628,020) (1,678,617)
Other, net (48,580) 20,693 (37,630) 40,537
----------- ----------- ----------- -----------
Total other income (expense), net (906,682) (785,423) (1,665,650) (1,638,080)
----------- ----------- ----------- -----------
CONSOLIDATED LOSS (2,190,387) (2,037,755) (4,328,998) (4,615,403)
MINORITY INTEREST IN
CONSOLIDATED LOSS 350,075 261,698 656,796 648,818
----------- ----------- ----------- -----------
NET LOSS $(1,840,312) $(1,776,057) $(3,672,202) $(3,966,585)
=========== =========== =========== ===========
ALLOCATION OF NET LOSS:
General Partner $ (18,403) $ (17,761) $ (36,722) $ (39,666)
=========== =========== =========== ===========
Limited Partners $(1,821,909) $(1,758,296) $(3,635,480) $(3,926,919)
=========== =========== =========== ===========
NET LOSS PER LIMITED
PARTNERSHIP UNIT $ (6.97) $ (6.73) $ (13.91) $ (15.03)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF LIMITED PARTNERSHIP
UNITS OUTSTANDING 261,353 261,353 261,353 261,353
=========== =========== =========== ===========
</TABLE>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these consolidated statements.
4
<PAGE> 5
CABLE TV FUND 14-B
(A Limited Partnership)
UNAUDITED CONSOLIDATED 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 $ (3,672,202) $(3,966,585)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 7,526,268 8,119,068
Amortization of interest rate protection contract 54,356 53,970
Minority interest in consolidated net loss (656,796) (648,818)
Decrease in trade receivables 310,332 77,519
Increase in deposits, prepaid expenses and deferred charges (336,469) (249,796)
Decrease in advances from General Partner (29,182) (119,337)
Increase in accounts payable, accrued liabilities and
subscriber prepayments 183,699 138,864
------------ -----------
Net cash provided by operating activities 3,380,006 3,404,885
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (2,273,514) (2,245,048)
------------ -----------
Net cash used in investing activities (2,273,514) (2,245,048)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 200,000 69,632
Repayment of debt (704,741) (2,238,693)
------------ -----------
Net cash used in financing activities (504,741) (2,169,061)
------------ -----------
Increase (decrease) in cash 601,751 (1,009,224)
Cash, beginning of period 410,238 2,946,329
------------ -----------
Cash, end of period $ 1,011,989 $ 1,937,105
============ ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 1,451,133 $ 1,632,612
============ ===========
</TABLE>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these consolidated statements.
5
<PAGE> 6
CABLE TV FUND 14-B
(A Limited Partnership)
NOTES TO UNAUDITED CONSOLIDATED 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 14-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.
As a result of the Partnership's ownership interest in Cable TV Fund
14-A/B Venture (the "Venture") of approximately 73 percent, the accompanying
financial statements present the Partnership's and the Venture's financial
condition and results of operations on a consolidated basis, with the ownership
interest of Cable TV Fund 14-A in the Venture shown as a minority interest.
The Venture owns and operates the cable television system serving certain areas
in Broward County, Florida. The Venture does not have any ownership interest
in the cable television systems serving Surfside, South Carolina (the "Surfside
System") or Little Rock, California (the "Little Rock System"). These systems
are owned 100 percent by the Partnership. All interpartnership accounts and
transactions have been eliminated.
(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 $397,057 and $792,932,
respectively, as compared to $402,145 and $794,443, respectively, for the
similar 1993 periods.
The Partnership and the Venture reimburse the General Partner for
certain allocated overhead and administrative expenses. These expenses include
salaries and benefits paid to corporate personnel, rent, data processing
services and other corporate facilities costs. Such personnel provide
engineering, marketing, accounting, administrative, legal and investor
relations services to the Partnership and Venture. 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 partnership assets managed by
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 made to the General
Partner by the Partnership and the Venture for allocated overhead and
administrative expenses for the three and six month periods ended June 30, 1994
were $588,321 and $1,195,668, respectively, as compared to $607,999 and
$1,185,448, 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 $ 1,141,627 $ 1,140,477
Investment in cable television properties 67,948,800 70,822,864
Other assets 518,795 352,475
------------ ------------
Total assets $ 69,609,222 $ 72,315,816
============ ============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Debt $ 43,021,190 $ 43,461,730
Payables and accrued liabilities 1,529,893 1,372,344
Partners' contributed capital 70,000,000 70,000,000
Accumulated deficit (44,941,861) (42,518,258)
------------ ------------
Total liabilities and partners' capital $ 69,609,222 $ 72,315,816
============ ============
</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 $ 5,478,181 $ 5,639,679 $10,973,921 $11,145,602
Operating, general and administrative expense (3,136,788) (3,108,203) (6,197,201) (6,154,479)
Management fees and allocated overhead
from General Partner (674,876) (677,430) (1,363,167) (1,326,516)
Depreciation and amortization (2,286,350) (2,253,311) (4,590,370) (4,804,047)
----------- ----------- ----------- -----------
Operating loss (619,833) (399,265) (1,176,817) (1,139,440)
Interest expense (639,272) (584,442) (1,215,522) (1,285,600)
Other, net (32,687) 18,037 (31,264) 30,881
----------- ----------- ----------- -----------
Net loss $(1,291,792) $ (965,670) $(2,423,603) $(2,394,159)
=========== =========== =========== ===========
</TABLE>
Management fees paid to the General Partner by the Venture totalled
$273,909 and $548,696 respectively, for the three and six month periods ended
June 30, 1994, as compared to $281,984 and $557,280, respectively, for the
similar 1993 periods. Reimbursements for overhead and administrative expenses
paid to the General Partner by the Venture totalled $400,967 and $814,471,
respectively, for the three and six month periods ended June 30, 1994, as
compared to $395,446 and $769,236 for the similar 1993 periods.
7
<PAGE> 8
CABLE TV FUND 14-B
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Partnership owns an approximate 73 percent interest in the
Venture. The accompanying financial statements include 100 percent of the
accounts of the Partnership and those of the Venture system, reduced by the 27
percent minority interest in the Venture.
During the first six months of 1994, capital expenditures of the
Venture-owned Broward County System totalled approximately $1,665,000. The
construction of service drops to homes and plant extensions accounted for
approximately 24 percent and 19 percent, respectively, of the expenditures.
Rebuild and upgrade projects accounted for approximately 11 percent of the
expenditures. The remainder of the capital expenditures was for various
enhancements in the Broward County System. Such expenditures were funded
primarily from cash generated from operations. Budgeted capital expenditures
for the remainder of 1994 are approximately $1,200,000. Of this total, 33
percent is for cable television plant extensions and 32 percent is for the
construction of service drops to homes. The remainder of the expenditures is
for various enhancements in the Broward County System. Such capital
expenditures are expected to be funded from cash generated from operations and
cash on hand. 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 1992 Cable Act and the Venture's liquidity
position.
On December 31, 1992, the then outstanding balance of $46,800,000 on
the Venture's credit facility converted to a term loan. The balance
outstanding on the term loan at June 30, 1994 was $42,900,156. The term loan
is payable in quarterly installments which began March 31, 1993 and is payable
in full by December 31, 1999. In June 1994, the General Partner completed
negotiations to adjust the level of principal payments in order to provide
liquidity for capital expenditures. The Venture repaid principal of $389,844
on June 30, 1994. Principal payments for the remainder of 1994 total $779,688.
Interest is at the Venture's option of prime plus 1/2 percent, LIBOR plus 1-1/2
percent or CD rate plus 1-5/8 percent. The effective interest rates on amounts
outstanding as of June 30, 1994 and 1993 were 6.0 percent and 4.79 percent,
respectively. In January 1993, the Venture entered into an interest rate cap
agreement covering outstanding debt obligations of $25,000,000. The Venture
paid a fee of $246,250 for this coverage. The agreement protects the Venture
from interest rates that exceeded 7 percent for three years from the date of
the agreement.
Subject to regulatory matters discussed below, the General Partner
believes that the Venture has sufficient sources of capital to service its
presently anticipated needs.
The Partnership expended approximately $609,000 on capital additions
in its wholly-owned Surfside and Little Rock systems during the first six
months of 1994. New plant construction accounted for approximately 35 percent
and service drops to homes accounted for approximately 30 percent of these
expenditures. Upgrades of the cable plant accounted for approximately 11
percent of the expenditures. Funding for these expenditures was provided by
cash on hand and cash generated from operations. Anticipated capital
expenditures for the remainder of 1994 are approximately $1,075,000. Of this
total, approximately 30 percent is for the construction of cable television
plant extensions. Service drops to homes are expected to account for
approximately 17 percent of the anticipated expenditures. The remainder of
these expenditures are for various enhancements in the Partnership's Systems.
Funding for these expenditures is expected to come from cash generated from
operations and borrowings under the Partnership's credit facility. 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 1992 Cable Act, and the Partnership's liquidity position.
The Partnership's credit agreement had an original commitment of
$20,000,000. Such commitment consisted of a $10,000,000 reducing revolving
credit facility and a $10,000,000 term loan. The revolving credit reduced to
$9,500,000 on December 31, 1993, reduces to $8,500,000 on December 31, 1994 and
is payable in full on December 31, 1995. At June 30, 1994, $5,800,000 was
outstanding under this revolving credit facility, leaving $4,200,000 available
until year end for the needs of the Partnership. The $10,000,000 term loan is
payable in quarterly installments which began
8
<PAGE> 9
March 31, 1993 and the term loan matures on December 31, 1995. As of June 30,
1994, $9,500,000 was outstanding on this term loan. Installment payments made
in the first six months of 1994 totalled $250,000. Installments due for the
remainder of 1994 total $250,000. Currently, interest on the outstanding
principal balance on each loan is at the Partnership's option of prime plus .20
percent, LIBOR plus 1.20 percent or CD rate plus 1.325 percent. The effective
interest rates on amounts outstanding as of June 30, 1994 and 1993 were 5.89
percent and 4.49 percent, respectively. In January 1993, the Partnership
entered into an interest rate cap agreement covering outstanding debt
obligations of $8,000,000 for a fee of $77,600. The agreement protects the
Partnership from interest rates that exceed 7 percent for three years from the
date of the agreement.
Subject to regulatory matters discussed below, the General Partner
believes that the Partnership has sufficient sources of capital to service its
presently 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 those
owned 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 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 its
Surfside and Littlerock systems. The General Partner anticipates no reduction
in revenues or operating income before depreciation and amortization.
9
<PAGE> 10
The Venture complied with the new bencharmark regulations and reduced
rates in the Broward County System. The annualized reduction in operating
income before depreciation and amortization is approximately $160,000, or
approximately 2 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 station 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.
Throughout the cable television systems owned by the Partnership and the
Venture, no television stations withheld their consent to retransmission of its
signal, and were no longer carried on October 6, 1993. Certain broadcast
signals were carried on October 6, 1993 pursuant to extensions, and the General
Partner expects to finally conclude retransmission consent negotiations with
those remaining stations whose signals are being carried pursuant to extensions
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.
10
<PAGE> 11
RESULTS OF OPERATIONS
The results of operations for the Partnership are summarized in below:
<TABLE>
<CAPTION>
For the Three Months Ended June 30, 1994
---------------------------------------------------------
Partnership Venture
Owned Owned Consolidated
---------- ------------ ------------
<S> <C> <C> <C>
Revenues $ 2,462,964 $ 5,478,181 $ 7,941,145
Operating, general and administrative 1,353,261 3,136,788 4,490,049
Management fees and allocated
overhead from General Partner 310,502 674,876 985,378
Depreciation and amortization 1,463,073 2,286,350 3,749,423
----------- ------------ -----------
Operating loss $ (663,872) $ (619,833) $(1,283,705)
----------- ------------ -----------
Interest expense $ (218,830) $ (639,272) $ (858,102)
Consolidated loss before minority interest $ (898,595) $ (1,291,792) $(2,190,387)
Minority interest in consolidated loss $ - $ 350,075 $ 350,075
Net loss $ (898,595) $ (941,717) $(1,840,312)
</TABLE>
<TABLE>
<CAPTION>
For the Three Months Ended June 30, 1993
---------------------------------------------------------
Partnership Venture
Owned Owned Consolidated
---------- ------------ ------------
<S> <C> <C> <C>
Revenues $ 2,403,213 $ 5,639,679 $ 8,042,892
Operating, general and administrative 1,265,374 3,108,203 4,373,577
Management fees and allocated
overhead from General Partner 332,714 677,430 1,010,144
Depreciation and amortization 1,658,192 2,253,311 3,911,503
----------- ------------ -----------
Operating loss $ (853,067) $ (399,265) $(1,252,332)
----------- ------------ -----------
Interest expense $ (221,674) $ (584,442) $ (806,116)
Consolidated loss before minority interest $(1,072,085) $ (965,670) $(2,037,755)
Minority interest in consolidated loss $ - $ 261,698 $ 261,698
Net loss $(1,072,085) $ (703,972) $(1,776,057)
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 1994
---------------------------------------------------------
Partnership Venture
Owned Owned Consolidated
---------- ------------ ------------
<S> <C> <C> <C>
Revenues $ 4,884,720 $10,973,921 $15,858,641
Operating, general and administrative 2,809,920 6,197,201 9,007,121
Management fees and allocated
overhead from General Partner 625,433 1,363,167 1,988,600
Depreciation and amortization 2,935,898 4,590,370 7,526,268
----------- ----------- -----------
Operating loss $(1,486,531) $(1,176,817) $(2,663,348)
----------- ----------- -----------
Interest expense $ (412,498) $(1,215,522) $(1,628,020)
Consolidated loss before minority interest $(1,905,395) $(2,423,603) $(4,328,998)
Minority interest in consolidated loss $ - $ 656,796 $ 656,796
Net loss $(1,905,395) $(1,766,807) $(3,672,202)
Partnership owned -
</TABLE>
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 1993
---------------------------------------------------------
Partnership Venture
Owned Owned Consolidated
---------- ------------ ------------
<S> <C> <C> <C>
Revenues $ 4,743,251 $11,145,602 $15,888,853
Operating, general and administrative 2,612,738 6,154,479 8,767,217
Management fees and allocated
overhead from General Partner 653,375 1,326,516 1,979,891
Depreciation and amortization 3,315,021 4,804,047 8,119,068
----------- ----------- -----------
Operating loss $(1,837,883) $(1,139,440) $(2,977,323)
----------- ----------- -----------
Interest expense $ (393,017) $(1,285,600) $(1,678,617)
Consolidated loss before minority interest $(2,221,244) $(2,394,159) $(4,615,403)
Minority interest in consolidated loss $ - $ 648,818 $ 648,818
Net loss $(2,221,244) $(1,745,341) $(3,966,585)
</TABLE>
Revenues in the Partnership's wholly owned cable television systems
increased $59,751, or approximately 2 percent, from $2,403,213 in 1993 to
$2,462,964 for the three months ended June 30, 1994. For the six months ended
June 30, 1994 and 1993, revenues increased $141,469, or approximately 3
percent, from $4,743,251 in 1993 to $4,884,720 in 1994. Such increases in
revenue are due primarily to increases in the subscriber base. Basic
subscribers increased 1,146, or approximately 5 percent, from 22,718 at June
30, 1993 to 23,864 at June 30, 1994. Pay Units increased 3,058, or
approximately 23 percent, from 13,087 at June 30, 1993 to 16,145 at June 30,
1994. The increase in revenue would have been greater but for the reduction in
basic rates due to new basic rate regulations issued by the FCC in May 1993,
with which the Partnership complied effective September 1, 1993.
12
<PAGE> 13
Operating, general and administrative expense for the three month
periods increased $87,887, or approximately 7 percent, from $1,265,374 to
$1,353,261. This increase is due primarily to increases in personnel costs and
programming fees. For the six month periods ended June 30, operating, general
and administrative expenses increased $197,182, or approximately 8 percent,
from $2,612,738 at June 30, 1993 to $2,809,920 at June 30, 1994. This increase
was due primarily to increases in programming costs. No other individual
factor significantly affected the increase in operating, general and
administrative expense. 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 55
percent, respectively, in 1993. Management fees and allocated overhead from
the General Partner decreased $22,212, or approximately 7 percent, from
$332,714 to $310,502 for the three month period ended June 30, 1994, as
compared to 1993. For the six month periods ended June 30, 1994 and 1993,
management fees and allocated overhead from the General Partner decreased
$27,942, or approximately 4 percent, from $653,375 at June 30, 1993 to $625,433
at June 30, 1994. These decreases are due to a decrease in expense allocated
from the General Partner which resulted from an adjustment in allocation
methods.
Depreciation and amortization expense decreased $195,119, or
approximately 12 percent, from $1,658,192 to $1,463,073 for the three month
period ended June 30, 1994 as compared to 1993. For the six month periods
ended June 30, 1994 and 1993, depreciation and amortization expense decreased
$379,123, or approximately 11 percent, from $3,315,021 at June 30, 1993 to
$2,935,898 at June 30, 1994. These decreases are due to the maturation of the
partnership's tangible asset base.
Operating loss decreased $189,195, or approximately 22 percent, from
$853,067 to $663,872 for the three month periods ended June 30, 1994 and 1993.
For the six month periods ended June 30, 1994 and 1993, operating loss
decreased $351,352, or approximately 19 percent, from $1,837,883 at June 30,
1993 to $1,486,531 at June 30, 1994. These decreases are due primarily to the
decreases in depreciation and amortization expense. Operating income before
depreciation and amortization expense decreased $5,924, or approximately 1
percent, from $805,125 to $799,201 for the three month periods ended June 30,
1994 as compared to 1993. For the six month periods ended June 30, 1994 and
1993, operating income before depreciation and amortization expense decreased
$27,771, or approximately 2 percent, from $1,477,138 in 1993 to $1,449,367 in
1994. These decreases are due to the increases in operating, general and
administrative expense exceeding the increase in revenue and the decrease in
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 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 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 decreased $2,844, or approximately 1 percent, from
$221,674 to $218,830 for the three month periods ended June 30, 1994 and 1993
due to lower outstanding balances on interest-bearing obligations. For the six
month periods ended June 30, 1994 and 1993, interest expense increased $19,481,
or approximately 5 percent, from $393,017 at June 30, 1993 to $412,498 at June
30, 1994. This increase is due to higher effective interest rates on interest
bearing obligations. Net loss decreased $173,490, or approximately 16 percent,
from $1,072,085 to $898,595 for the three month periods ended June 30, 1994 and
1993. For the six month periods ended June 30, 1994 and 1993, net loss
decreased $315,849, or approximately 14 percent, from $2,221,244 at June 30,
1993 to $1,905,395 at June 30, 1994. These losses are primarily the result of
the factors discussed above and are expected to continue in the future.
13
<PAGE> 14
Venture owned
In addition to its wholly owned systems, the Partnership owns an
approximate 73 percent interest in the Venture. The Venture's revenues
decreased $161,498, or approximately 3 percent, from $5,639,679 to $5,478,181
for the three month period ended June 30, 1994 as compared to 1993. Revenues
for the six month periods ended June 30, 1993 and 1994 decreased $171,681, or
approximately 2 percent, from $11,145,602 in 1993 to $10,973,921 in 1994.
These decreases in revenue are due to the reduction in basic rates due to basic
rate regulations issued by the FCC in May 1993 with which the Venture complied
effective September 1, 1993. In addition, on February 22, 1994, the FCC
announced a further rulemaking which, when implemented on July 14, 1994 reduced
rates further. The decrease in revenue due to rate reductions was offset, in
part, by increases in basic subscribers and pay units. The Broward System has
added 2,242 basic subscribers since June 30, 1993, an increase of 5 percent.
Basic subscribers totalled 45,324 at June 30, 1994 compared to 43,082 at June
30, 1993. Pay units totalled 38,691 at June 30, 1994 compared to 35,169 at
March 31 1993, an approximate increase of 10 percent. No other individual
factor significantly affected the decrease in revenues.
Operating, general and administrative expense increased $28,585, or
approximately 1 percent, from $3,108,203 to $3,136,788 for the three month
period ended June 30, 1994 as compared to 1993. For the six month periods
ended June 30, 1994 and 1993, operating, general and administrative expense
increased $42,722, or approximately 1 percent, from $6,154,479 at June 30, 1993
to $6,197,201 at June 30, 1994. Operating, general and administrative expense
represented 57 percent of revenue for both the three and six month periods
ended June 30, 1994 compared to 55 percent for both the three and six month
periods ended June 30, 1993. These increases in operating, general and
administrative expense are due to increases in personnel related costs and
programming fees which were offset by decreases in franchise fee expense and
copyright expense caused by the decreases in revenues. No other individual
factor significantly affected the increases. Management fees and allocated
overhead from the General Partner decreased $2,554, or less than 1 percent,
from $677,430 to $674,876 for the three month periods ended June 30, 1994 and
1993. For the six month periods ended June 30, 1994 and 1993, management fees
and allocated overhead from the General Partner increased $36,651 or
approximately 3 percent, from $1,326,516 at June 30, 1993 to $1,363,167 at June
30, 1994 due to an increase in expenses allocated from the General Partner.
Depreciation and amortization expense increased $33,039, or approximately 1
percent, from $2,253,311 in 1993 to $2,286,350 for the three month period ended
June 30, 1994, due to capital additions in 1993. For the six month periods
ended June 30, 1994 and 1993, depreciation and amortization expense decreased
$213,677, or approximately 4 percent, from $4,804,047 at June 30, 1993 to
$4,590,370 at June 30, 1994. This decrease in depreciation and amortization
expense are attributable to the maturation of the Venture's asset base.
In the Broward County System, operating loss for the three month
period increased $220,568 or approximately 55 percent, from $399,265 at June
30, 1993 to $619,833 at June 30, 1994, due primarily to the decrease in revenue
and the increase in operating, general and administrative expense. For the six
month periods ended June 30, 1994 and 1993, operating loss increased $37,377 or
approximately 3 percent from $1,139,440 at June 30, 1993 to $1,176,817 at June
30, 1994. This increase is due to the increases in operating, general and
administrative expense and the decrease in revenues exceeding the decrease in
depreciation and amortization expense.
Interest expense increased $54,830, or approximately 9 percent, from
$584,442 to $639,272 for the three month periods ended June 30, 1994 and 1993.
This increase is due to higher effective interest rates on interest-bearing
obligations. For the six month periods ended June 30, 1994 and 1993, interest
expense decreased $70,078, or approximately 5 percent from $1,285,600 at June
30, 1993 to $1,215,522 at June 30, 1994, due to outstanding balances on
interest-bearing obligations. Net loss increased $326,122, or approximately 34
percent, from $965,670 to $1,291,792 for the three month periods ended June 30,
1994 and 1993. For the six month periods ended June 30, 1994 and 1993, net
loss increased $29,444, or approximately 1 percent, from $2,394,159 at June 30,
1993 to $2,423,603 at June 30, 1994. These losses are the result of the
factors discussed above and are expected to continue.
14
<PAGE> 15
Part II - OTHER INFORMATION
NONE
15
<PAGE> 16
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 14-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
16
