<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: 0-16939
JONES SPACELINK INCOME/GROWTH FUND 1-A, LTD.
- - --------------------------------------------------------------------------------
Exact name of registrant as specified in charter
Colorado #84-1069504
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State of Organization IRS 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) 792-9191
-----------------------------
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
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<PAGE> 2
JONES SPACELINK INCOME/GROWTH FUND 1-A, LTD.
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
------------- -------------
<S> <C> <C>
CASH $ 46,766 $ 87,972
TRADE RECEIVABLES, less allowance for doubtful
receivables of $7,755 and $7,936 at June 30, 1994 and
December 31, 1993, respectively 107,950 113,414
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 13,554,328 12,896,681
Less - accumulated depreciation (4,685,685) (4,158,493)
------------- -------------
8,868,643 8,738,188
Franchise costs, net of accumulated amortization
of $6,004,818 and $5,342,284 at June 30, 1994 and
December 31, 1993, respectively 8,363,383 9,025,917
Subscriber lists, net of accumulated amortization
of $2,258,283 and $2,031,043 at June 30, 1994 and
December 31, 1993, respectively 1,009,066 1,236,306
Noncompete agreements, net of accumulated amortization
of $514,577 and $436,414 at June 30, 1994 and
December 31, 1993, respectively 265,991 344,154
Costs in excess of interests in net assets
purchased, net of accumulated amortization of
$237,677 and $212,827 at June 30, 1994 and
December 31, 1993, respectively 1,788,765 1,813,615
------------- -------------
Total investment in cable
television properties 20,295,848 21,158,180
DEBT PLACEMENT COSTS, net of accumulated
amortization of $84,784 and $71,028 at June 30, 1994
and December 31, 1993, respectively 43,660 57,416
DEPOSITS, PREPAID EXPENSES AND OTHER ASSETS 44,542 18,738
------------- -------------
Total assets $ 20,538,766 $ 21,435,720
============= =============
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
2
<PAGE> 3
JONES SPACELINK INCOME/GROWTH FUND 1-A, LTD.
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
----------- ------------
<S> <C> <C>
LIABILITIES:
Credit facility and capitalized lease
obligations $10,043,640 $10,058,100
Accounts payable to Jones Spacelink, Ltd. 816,671 584,196
Trade accounts payable and accrued liabilities 316,065 331,149
Accrued distributions to partners - 372,916
Subscriber prepayments and deposits 50,605 54,210
----------- -----------
Total liabilities 11,226,981 11,400,571
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partner -
Contributed capital 1,000 1,000
Distributions (78,698) (78,698)
Accumulated deficit (49,322) (42,088)
----------- -----------
(127,020) (119,786)
----------- -----------
Limited Partners -
Contributed capital, net of related commissions, syndication
costs and interest (51,276 units outstanding at
June 30, 1994 and December 31, 1993) 21,875,852 21,875,852
Distributions (7,791,180) (7,791,180)
Accumulated deficit (4,645,867) (3,929,737)
----------- -----------
9,438,805 10,154,935
----------- -----------
Total partners' capital (deficit) 9,311,785 10,035,149
----------- -----------
Total liabilities and partners'
capital (deficit) $20,538,766 $21,435,720
=========== ===========
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
3
<PAGE> 4
JONES SPACELINK INCOME/GROWTH FUND 1-A, LTD.
(A Limited Partnership)
UNAUDITED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For The Three Months For The Six Months
Ended June 30, Ended June 30,
----------------------------- ----------------------------
1994 1993 1994 1993
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
REVENUES $1,595,331 $1,586,323 $3,160,103 $ 3,096,810
COSTS AND EXPENSES:
Operating, general and administrative 745,652 729,972 1,556,081 1,455,979
Management fees and allocated administrative
costs from the General Partner 208,688 203,357 420,224 396,661
Depreciation and amortization 765,812 790,215 1,533,735 1,579,048
---------- ---------- ---------- -----------
OPERATING LOSS (124,821) (137,221) (349,937) (334,878)
---------- ---------- ---------- -----------
OTHER INCOME (EXPENSE):
Interest expense (184,211) (158,022) (362,807) (316,838)
Other, net (11,330) 2,996 (10,620) 4,040
---------- ---------- ---------- -----------
NET LOSS $ (320,362) $ (292,247) $ (723,364) $ (647,676)
========== ========== ========== ===========
ALLOCATION OF NET LOSS:
General Partner $ (3,204) $ (2,923) $ (7,234) $ (6,477)
========== ========== ========== ===========
Limited Partners $ (317,158) $ (289,324) $ (716,130) $ (641,199)
========== ========== ========== ===========
NET LOSS PER LIMITED
PARTNER UNIT $ (6.19) $ (5.64) $ (13.97) $ (12.50)
========== ========== ========== ===========
WEIGHTED AVERAGE NUMBER OF
LIMITED PARTNER UNITS
OUTSTANDING 51,276 51,276 51,276 51,276
========== ========== ========== ===========
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
4
<PAGE> 5
JONES SPACELINK INCOME/GROWTH FUND 1-A, LTD.
(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 $ (723,364) $ (647,676)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 1,533,735 1,579,048
Decrease in trade accounts receivable, net 5,464 12,863
Increase in deposits, prepaid expenses and other assets (25,804) (6,692)
Decrease in trade accounts payable and accrued
liabilities and subscriber prepayments
and deposits (18,689) (51,780)
Increase (decrease) in advances from Jones Spacelink, Ltd. 232,475 (94,111)
----------- -----------
Net cash provided by operating activities 1,003,817 791,652
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment (657,647) (526,304)
----------- -----------
Net cash used in investing activities (657,647) (526,304)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners - (947,829)
Increase (decrease) in accrued distributions to partners (372,916) 10,359
Proceeds from borrowings - 664,178
Repayment of borrowings (14,460) (7,413)
----------- -----------
Net cash used in financing activities (387,376) (280,705)
----------- -----------
DECREASE IN CASH (41,206) (15,357)
CASH, BEGINNING OF PERIOD 87,972 95,090
----------- -----------
CASH, END OF PERIOD $ 46,766 $ 79,733
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest Paid $ 324,279 $ 312,813
=========== ===========
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
5
<PAGE> 6
JONES SPACELINK INCOME/GROWTH FUND 1-A, LTD.
(A Limited Partnership)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) This Form 10-Q is being filed in conformity with the Securities and
Exchange Commission 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 Spacelink Income/Growth Fund 1-A, Ltd. (the "Partnership") at June 30,
1994 and December 31, 1993, and its results 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 systems serving
the areas in and around the communities of Bluffton, Decatur, Monroe, Auburn,
Butler, Uniondale, Waterloo and Garett, and the unincorporated areas of Wells,
Allen, Noble, Adams and DeKalb Counties, all in the State of Indiana (the
"Bluffton Systems"). In addition, the Partnership owns the cable television
system serving the communities of Lake Geneva and areas of Walworth County, all
in the State of Wisconsin (the "Lake Geneva System") and the cable television
system serving the communities of Ripon and areas of Fond-du-Lac County, all in
the State of Wisconsin (the "Ripon System").
(2) Jones Spacelink, Ltd. (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 paid to the General Partner by the
Partnership for the three and six month periods ended June 30, 1994 were
$79,767 and $158,005 respectively, as compared to $79,316 and $154,841 for the
three and six month periods ended June 30, 1993, respectively.
The Partnership reimburses the General Partner and certain of its
subsidiaries for certain allocated general and administrative expenses. These
expenses include salaries and benefits paid to corporate personnel, office rent
and related facilities expense. 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 and certain of its subsidiaries with
respect to each partnership managed. Remaining expenses are allocated based on
the pro rata relationship of the Partnership's revenues to the total revenues
of all systems owned or managed by the General Partner and certain of its
subsidiaries, 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. Included in the costs allocated from the General Partner and
certain of its subsidiaries are expenses allocated to the General Partner from
affiliated entities for information processing and certain other administrative
services. The General Partner believes that the methodology used in allocating
general and administrative costs is reasonable. General and administrative
expenses allocated to the Partnership by the General Partner were $128,921 and
$262,219 for the three and six month periods ended June 30, 1994, respectively,
as compared to $124,041 and $241,820 for the three and six month periods ended
June 30, 1993, respectively.
Accounts payable to the General Partner at June 30, 1994 and December
31, 1993 were $816,671 and $584,196, respectively. Interest was charged to the
Partnership by the General Partner on the outstanding balances at average
interest rates of approximately 6 percent and 5 percent per annum in 1994 and
1993, respectively. The interest rates approximated the General Partner's
weighted average cost of borrowing during the periods. Interest expense
charged by the General Partner totalled $10,675 and $17,451, respectively, for
the three and six month periods ended June 30, 1994 and 1993, respectively, as
compared to $-0- for both the three and six month periods ended June 30, 1993.
6
<PAGE> 7
(3) A primary objective of the Partnership is to provide quarterly cash
distributions to the partners, principally from cash flow from operations and
interest income remaining after principal and interest payments and the
creation of any reserves necessary for the operation of the Partnership. In
February 1994, the Partnership paid a distribution in the amount of $372,916 to
the partners, which was declared in December 1993. The distribution was
primarily from fourth quarter 1993 cash flow. The distribution was paid as
follows: $3,729 to the General Partner and $369,187 to the limited partners.
The Partnership did not declare a quarterly cash distribution to be paid to the
partners from first or second quarter 1994 cash flow and has suspended
quarterly cash flow distributions to the partners. In addition, the
Partnership's longer term liquidity will be adversely impacted by the
regulations and legislation discussed in Management's Discussion and Analysis.
If the Partnership is successful in amending its credit facility, the
Partnership will attempt to provide some level of distributions to the limited
partners but the rate regulations will negatively affect cash flow and thus
will dictate what funds will be available for distribution. The General
Partner will distribute funds only after adequate provisions are made for debt
service, capital expenditures and prudent reserves.
(4) Certain prior year amounts have been reclassified to conform to the
1994 presentation.
7
<PAGE> 8
JONES SPACELINK INCOME/GROWTH FUND 1-A, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
During the first six months of 1994, the Partnership purchased plant
and equipment for its cable television systems totalling approximately
$658,000. Approximately 66 percent of the expenditures related to cable plant
extensions, cable, hardware and labor for new subscriber installations, and
equipment replacements. Approximately 26 percent related to upgrades in the
Indiana system. The remainder of these expenditures were for various
enhancements throughout all of the Partnership's cable television systems. The
capital expenditures were funded primarily from cash flow from operations and
advances from the General Partner. Anticipated capital expenditures for the
remainder of 1994 are estimated to be approximately $746,000, and will be
financed primarily from borrowings if the General Partner is successful in
renegotiating the terms of the Partnership's credit facility as discussed
below. It is estimated that approximately 56 percent of these expenditures
will be for cable plant extensions. However, if the Partnership is unable to
amend its credit facility it will be required to modify its capital expenditure
plans in order to satisfy its debt service and other liquidity needs.
In March 1991, the Partnership entered into a $10,000,000 revolving
credit facility (the "Credit Facility") with a commercial bank to finance the
purchase of the Lake Geneva System and the Ripon System and to provide
financing for capital expenditures. The revolving aspect of the Credit
Facility expired on December 31, 1993, at which time the outstanding principal
converted to a term loan with a maturity date of December 31, 1996. 1994
principal payments are $3,000,000 on the term loan. In March 1994, the
commercial bank agreed to defer the loan amortization payments due March 31 and
June 30, 1994 until September 30, 1994. At June 30, 1994, $10,000,000 was
outstanding. The effective interest rates on the term loan as of June 30, 1994
and 1993 were 5.58 percent and 4.49 percent, respectively. During the third
quarter of 1994, the General Partner will attempt to amend the terms of the
Credit Facility to allow for additional borrowings, to convert its term loan
status to a revolving credit facility and to restructure the timing and amount
of the loan amortization payments. If all of these modifications to the Credit
Facility do not occur, it will be necessary for the Partnership to modify its
capital expenditure plans. The basic subscriber rate reductions implemented on
September 1, 1993 pursuant to the FCC rate regulations and the further basic
rate reductions that the Partnership will be required to make in 1994, as
discussed below, may adversely affect the Partnership's ability to renegotiate
the Credit Facility.
In September 1991, the Partnership entered into a three-year interest
exchange agreement with a commercial bank. The interest exchange agreement
allows the Partnership to fix the interest rate on the $5,000,000 of
outstanding borrowings at approximately 6.98 percent per year for the three
year term of the interest exchange agreement. The LIBOR rate for the three
month period ending September 12, 1994 is 4.5625 percent.
A primary objective of the Partnership is to provide quarterly cash
distributions to the partners, principally from cash flow from operations and
interest income remaining after principal and interest payments and the
creation of any reserves necessary for the operation of the Partnership. In
February 1994, the Partnership paid a distribution in the amount of $372,916 to
the partners, which was declared in December 1993. The distribution was
primarily from fourth quarter 1993 cash flow. The Partnership did not declare
a quarterly distribution to be paid to the partners from first or second
quarter 1994 cash flow and has suspended quarterly distributions to the
partners. In addition, the Partnership's longer term liquidity will be
adversely impacted by the rate regulations described below. If the Partnership
is successful in amending its Credit Facility, the Partnership will attempt to
provide some level of distributions to limited partners but the rate
regulations described below will negatively affect cash flow and thus will
dictate what funds will be available for distribution. The General Partner
will distribute funds only after adequate provisions are made for debt service,
capital expenditures and prudent reserves.
8
<PAGE> 9
Subject to the effect of the recent legislation, as described below,
and to the successful renegotiation of the Partnership's Credit Facility, the
General Partner presently believes cash flow from operations and borrowings
available under its amended Credit Facility should be sufficient to fund
capital expenditures, interest payments, repayment of advances from the General
Partner, some level of distributions to the partners and other liquidity needs
of the Partnership. However, if the Partnership is unable to amend its Credit
Facility to allow for additional borrowings, convert its term loan status to a
revolving credit facility and to defer the date the Credit Facility begins to
amortize, distributions to the partners will be eliminated and the Partnership
will also be required to modify its capital expenditure plans in order to
satisfy its debt service and other liquidity needs.
REGULATION AND LEGISLATION
On October 5, 1992, 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 effected 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 Spacelink, 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. These regulations, with which the
Partnership complied, became effective on September 1, 1993.
In compliance with these rules, the Partnership 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 the
Bluffton system. The Partnership complied with the new regulations and reduced
rates in the Lake Geneva and Ripon systems, resulting in an annualized
reduction of operating income before depreciation and amortization of $95,000,
or approximately 3 percent. In the systems electing cost-of-service, the
General Partner anticipates no reduction in revenues or operating income before
depreciation and amortization. The Partnership will continue its efforts to
mitigate the effect of such rate reductions.
The 1992 Cable Act contains new broadcast signal carriage
requirements, and the FCC has adopted regulations implementing the statutory
requirements. These new rules allow a local commercial broadcast television
station to elect whether to demand that a cable system carry its signal or to
require the cable system to negotiate with the station for "retransmission
consent." A cable system is generally required to devote up to one-third of
its activated channel capacity for the mandatory carriage of local commercial
broadcast television stations, and non-commercial television stations are also
given mandatory carriage rights, although such stations are not given the
option to negotiate retransmission consent for the carriage of their signals by
cable systems. Additionally, cable systems also are required to obtain
retransmission consent from all commercial television stations (except for
commercial satellite-delivered independent "superstations") which do not elect
mandatory carriage, commercial radio stations and, in some instances, low-power
television stations carried by cable systems.
The retransmission consent rules went into effect on October 6, 1993.
In the cable television systems owned by the Partnership 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 impact 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 impact 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
Revenues of the Partnership increased $9,008, or approximately 1
percent, from $1,586,323 for the three month period ended June 30, 1993 to
$1,595,331 for the comparable period in 1994. This increase in revenues was
primarily the result of increases in premium service revenues and installation
revenues, which were partially offset by a decrease in basic service revenues
due to basic rate regulations issued by the FCC. Revenues of the Partnership
increased $63,293, or approximately 2 percent, from $3,096,810 for the six
month period ended June 30, 1993 to $3,160,103 for the comparable period in
1994. This increase in revenues was primarily the result of increases in
premium service revenues, advertising revenues and installation revenues, which
were partially offset by a decrease in basic service revenues. These increases
in revenues would have been greater if not for the reduction in basic rates due
to new basic rate regulations issued by the FCC, with which the Partnership
complied, effective September 1, 1993. In addition, on February 22, 1994, the
FCC announced a further rulemaking which will be implemented July 15, 1994, and
could reduce rates further. No other individual factor was significant to the
increases in revenues. See Regulation and Legislation above.
Operating, general and administrative expenses increased $15,680, or
approximately 2 percent, from $729,972 for the three month period ended June
30, 1993 to $745,652 for the comparable period in 1994. The increase in
operating, general and administrative expenses was due to increases in
personnel costs and programming costs. These increases were partially offset
by a decrease in marketing costs. Operating, general and administrative
expenses increased $100,102, or approximately 7 percent, from $1,455,979 for
the six month period ended June 30, 1993 to $1,556,081 for the comparable
period in 1994. The increase in operating, general and administrative expenses
was due to increases in personnel costs and programming costs. These increases
were partially offset by a decrease in marketing costs. No other individual
factor significantly affected the increases in operating, general and
administrative expenses. Operating, general and administrative expenses
represented approximately 47 percent and 46 percent, respectively, of revenues
for the three month periods ended June 30, 1994 and 1993, and approximately 49
percent and 47 percent, respectively, of revenues for the six month periods
ended June 30, 1994 and 1993.
Management fees and allocated expenses from the General Partner
increased $5,331, or approximately 3 percent, from $203,357 for the three month
period ended June 30, 1993 to $208,688 for the similar period in 1994.
Management fees and allocated expenses from the General Partner increased
$23,563, or approximately 6 percent from $396,661 for the six month period
ended June 30, 1993 to $420,224 for the similar period in 1994. This increase
was primarily the result of an increase in allocated expenses from the General
Partner.
Depreciation and amortization expense decreased $24,403, or
approximately 3 percent, from $790,215 for the three month period ended June
30, 1993 to $765,812 for the comparable period in 1994. Depreciation and
amortization expense decreased $45,313, or approximately 3 percent, from
$1,579,048 for the six month period ended June 30, 1993 to $1,533,735 for the
comparable period in 1994. These decreases are due to the maturation of the
Partnership's depreciable asset base.
Operating loss decreased $12,400, or approximately 9 percent, from
$137,221 for the three months ended June 30, 1993 to $124,821 for the similar
1994 period. This decrease was primarily due to a decrease in depreciation and
amortization expense. Operating loss increased $15,059, or approximately 5
percent, from $334,878 for the six months ended June 30, 1993 to $349,937 for
the similar 1994 period. This increase is primarily due to increases in
operating, general and administrative expenses and management fees and
allocated overhead from the General Partner exceeding the increase in revenue
and decrease in depreciation and amortization expense.
Operating income before depreciation and amortization expense
decreased $12,003, or approximately 2 percent from $652,994 for the three month
period ended June 30, 1993 to $640,991 for the similar 1994 period. Operating
income before depreciation and amortization expense decreased $60,372, or
approximately 5 percent, from $1,244,170 for the six month period ended June
30, 1993 to $1,183,798 for the similar 1994 period. These decreases are due to
the increases in operating, general and administrative expenses and management
fees and allocated expenses from the General Partner exceeding the increases in
revenues. 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").
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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 $26,189, or approximately 17 percent, from
$158,022 for the three month period ended June 30, 1993 to $184,211 for the
similar period in 1994. Interest expense increased $45,969, or approximately
15 percent, from $316,838 for the six month period ended June 30, 1993 to
$362,807 for the similar 1994 period. These increases are primarily the result
of higher outstanding balances on interest bearing obligations and to higher
interest rates in 1994. The effective interest rates on amounts outstanding as
of June 30, 1994 and 1993 were 5.58 percent and 4.49 percent, respectively.
Net loss increased $28,115, or approximately 10 percent, from $292,247
for the three month period ended June 30, 1993 to $320,362 for the three month
period ended June 30, 1994. Net loss increased $75,688, or approximately 12
percent, from $647,676 for the six month period ended June 30, 1993 to $723,364
for the similar 1994 period. These losses are the result of the factors
discussed above and are expected to continue.
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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 SPACELINK INCOME/GROWTH FUND 1-A, LTD.
BY: JONES SPACELINK, LTD.
General Partner
By: /s/JAY B. LEWIS
Jay B. Lewis
Controller (Principal Financial
and Accounting Officer)
Dated: August 11, 1994
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