<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
-------------------------
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 0-18266
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Falcon Classic Cable Income Properties, L.P.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
California 95-4200409
- -------------------------------------------------- -----------------------------------
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification
organization) Number)
10900 Wilshire Boulevard - 15th Floor
Los Angeles, California 90024
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(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (310) 824-9990
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Former name, former address and former fiscal year,
if changed since last report.
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
PART I - FINANCIAL INFORMATION
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
CONDENSED BALANCE SHEETS
===========================================
<TABLE>
<CAPTION>
December 31, September 30,
1996* 1997
------------ -------------
(Unaudited)
(Dollars in Thousands)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 7,126 $ 3,293
Receivables, less allowance of $31,000 and
$43,000 for possible losses 660 346
Prepaid expenses and other assets 1,516 1,218
Property, plant and equipment, less accumulated
depreciation and amortization of $19,128,000 and $22,036,000 30,655 30,924
Franchise cost and goodwill, less accumulated
amortization of $15,029,000 and $17,040,000 17,409 15,438
Customer lists and other intangible costs, less
accumulated amortization of $2,684,000 and $2,331,000 1,968 1,778
-------- --------
$ 59,334 $ 52,997
======== ========
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Notes payable $ 24,300 $ 17,763
Accounts payable 542 424
Accrued expenses 2,509 3,270
Payable to general partner 1,006 293
Customer deposits and prepayments 144 158
-------- --------
TOTAL LIABILITIES 28,501 21,908
-------- --------
COMMITMENTS AND CONTINGENCIES
PARTNERS' EQUITY:
General partner 401 404
Limited partners 30,654 30,907
Notes receivable from general partner (222) (222)
-------- --------
TOTAL PARTNERS' EQUITY 30,833 31,089
-------- --------
$ 59,334 $ 52,997
======== ========
</TABLE>
*As presented in the audited financial statements.
See accompanying notes to condensed financial statements.
2
<PAGE> 3
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
CONDENSED STATEMENTS OF OPERATIONS
===========================================
<TABLE>
<CAPTION>
Unaudited
-----------------------
Three months ended
September 30,
-----------------------
1996 1997
-------- --------
(Dollars in thousands
except per unit information)
<S> <C> <C>
REVENUES $ 4,918 $ 4,796
-------- --------
EXPENSES:
Service costs 1,510 1,717
General and administrative expenses 676 569
Management fees and reimbursed expenses 393 384
Depreciation and amortization 1,789 1,920
-------- --------
Total Expenses 4,368 4,590
-------- --------
Operating income 550 206
INTEREST EXPENSE, NET (442) (370)
OTHER EXPENSE - (20)
-------- --------
NET INCOME (LOSS) $ 108 $ (184)
======== ========
Net income (loss) allocated to General Partner $ 1 $ (1)
======== ========
Net income (loss) allocated to Limited Partners $ 107 $ (183)
======== ========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ 1.49 $ (2.53)
======== ========
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 71,879 71,879
======== ========
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE> 4
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
CONDENSED STATEMENTS OF OPERATIONS
===========================================
<TABLE>
<CAPTION>
Unaudited
-----------------------
Nine months ended
September 30,
-----------------------
1996 1997
-------- --------
(Dollars in thousands
except per unit information)
<S> <C> <C>
REVENUES $ 14,436 $ 15,187
-------- --------
EXPENSES:
Service costs 4,547 4,859
General and administrative expenses 2,042 2,178
Management fees and reimbursed expenses 1,155 1,215
Depreciation and amortization 5,888 5,533
-------- --------
Total Expenses 13,632 13,785
-------- --------
Operating income 804 1,402
INTEREST EXPENSE, NET (1,381) (1,168)
OTHER INCOME - 21
-------- --------
NET INCOME (LOSS) $ (577) $ 255
======== ========
Net income (loss) allocated to General Partner $ (6) $ 3
======== ========
Net income (loss) allocated to Limited Partners $ (571) $ 252
======== ========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ (7.95) $ 3.51
======== ========
AVERAGE LIMITED PARTNERSHIP
UNITS OUTSTANDING DURING PERIOD 71,879 71,879
======== ========
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE> 5
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
STATEMENTS OF CASH FLOWS
===========================================
<TABLE>
<CAPTION>
Unaudited
-----------------------
Nine months ended
September 30,
-----------------------
1996 1997
-------- --------
(Dollars in thousands)
<S> <C> <C>
Net cash provided by operating activities $ 5,449 $ 6,343
-------- --------
Cash flows from investing activities:
Capital expenditures (2,498) (3,491)
Increase in intangible assets (55) (151)
Proceeds on sale of cable assets 54 4
-------- --------
Net cash used in investing activities (2,499) (3,638)
-------- --------
Cash flows from financing activities:
Repayment of borrowings (2,025) (6,538)
-------- --------
Increase (decrease) in cash and cash equivalents 925 (3,833)
Cash and cash equivalents at beginning of period 6,137 7,126
-------- --------
Cash and cash equivalents at end of period $ 7,062 $ 3,293
======== =======
</TABLE>
See accompanying notes to condensed financial statements.
5
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FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
NOTES TO CONDENSED FINANCIAL STATEMENTS
===========================================
NOTE 1 - INTERIM FINANCIAL STATEMENTS
The interim condensed financial statements for the three and nine months
ended September 30, 1997 and 1996 are unaudited. In the opinion of management,
such statements reflect all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the results of such periods.
It is suggested that these condensed interim financial statements be read in
conjunction with the audited financial statements and notes thereto included in
the Partnership's latest Annual Report on Form 10-K. The results of operations
for the three and nine months ended September 30, 1997 are not necessarily
indicative of the results for the entire year.
NOTE 2 - NOTES RECEIVABLE
In accordance with the Partnership Agreement, the capital contribution
of the General Partner was contributed one-half in cash and one-half in General
Partner's notes. The notes are non-interest bearing and are payable on demand of
the holder.
NOTE 3 - EARNINGS PER EQUIVALENT UNIT
Earnings per equivalent limited partnership unit are based on the
average number of limited partnership units outstanding during the periods
presented. For this purpose, earnings have been allocated 99% to the limited
partners and 1% to the general partner. The General Partner does not own units
of partnership interest in the Partnership, but rather holds a participation
interest in the income, losses and distributions of the Partnership.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
On or about September 2, 1997, Paul J. Issac, a Unitholder of the
Partnership, purporting to act on behalf of himself and other similarly situated
Unitholders, filed a putative class action suit in Los Angeles County Superior
Court against the Partnership, its general partner and certain of its directors
and officers alleging "Breach of Fiduciary Duty, Breach of Contract, [and]
Breach of the Implied Covenant of Good Faith and Fair Dealing" in connection
with the pending sale of the Partnership's assets to affiliates of its general
partner pursuant to the terms of the Partnership Agreement (the "Lawsuit").
Although apparently filed on or about September 2, 1997, the Partnership was not
served with the complaint until September 22, 1997.
The Partnership believes the Lawsuit lacks merit and intends to
vigorously defend itself and to proceed with the sale transaction. There can be,
however, no assurance that the pendency of the Lawsuit will not delay, or lead
to the termination of, the pending sale transaction.
NOTE 5 - RECLASSIFICATIONS
Certain 1996 amounts have been reclassified to conform to the 1997
presentation.
6
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FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The Cable Television Consumer Protection and Competition Act of 1992
(the "1992 Cable Act") required the Federal Communications Commission ("FCC")
to, among other things, implement extensive regulation of the rates charged by
cable television systems for basic and programming service tiers, installation,
and customer premises equipment leasing. Compliance with those rate regulations
has had a negative impact on the Partnership's revenues and cash flow. The
Telecommunications Act of 1996 (the "1996 Telecom Act") substantially changed
the competitive and regulatory environment for cable television and
telecommunications service providers. Among other changes, the 1996 Telecom Act
provides that the regulation of programming service tiers will be phased out
altogether in 1999. The regulatory environment will continue to change pending,
among other things, the outcome of legal challenges and FCC rulemaking and
enforcement activity in respect of the 1992 Cable Act and the 1996 Telecom Act.
There can be no assurance as to what, if any, further action may be taken by the
FCC, Congress or any other regulatory authority or court, or the effect thereof
on the Partnership's business. Accordingly, the Partnership's historical
financial results as described below are not necessarily indicative of future
performance.
This Report includes certain forward looking statements regarding, among
other things, future results of operations, regulatory requirements,
competition, capital needs, the proposed sale of assets by, and liquidation of,
the Partnership and general business conditions applicable to the Partnership.
Such forward looking statements involve risks and uncertainties including,
without limitation, the uncertainty of legislative and regulatory changes and
the rapid developments in the competitive environment facing cable television
operators such as the Partnership, as discussed more fully elsewhere in this
Report. In addition to the information set forth in this Report, reference is
made to the Partnership's Annual Report on Form 10-K for the year ended December
31, 1996, its Quarterly Reports on Form 10-Q for the quarter ended March 31,
1997 and June 30, 1997 and its Current Reports on Form 8-K dated February 6,
1997, June 4, 1997, June 24, 1997 and September 2, 1997 for additional
information regarding such matters and the effect thereof on the Partnership's
business.
RECENT DEVELOPMENTS
Pursuant to the terms of the "Appraisal Process" provided for in the
Partnership Agreement, the Partnership may, in the sole discretion of the
General Partner, sell individual cable systems and may also sell all or
substantially all of the Partnership's assets to the General Partner or its
affiliates. Any such sale must be made in cash at the median of appraisals
undertaken by three nationally recognized experts in the cable television field.
As previously reported, the Partnership commenced the "Appraisal Process" in
August 1996 and received the results of the related appraisals in February 1997.
The full text of these appraisals has previously been filed with the Securities
and Exchange Commission. By letter dated June 24, 1997, the General Partner
advised the Partnership that it intended to exercise its purchase right to
acquire all of the Partnership's cable systems pursuant to the Appraisal Process
for cash consideration equal to the median appraised value of $82.0 million (the
"Appraised Value"). The General Partner further advised the Partnership that, as
permitted by the Partnership Agreement, it intended that the cable systems be
acquired (the "Sale") by certain affiliates of the General Partner (the
"Purchasers"). On June 27, 1997, the General
7
<PAGE> 8
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
RECENT DEVELOPMENTS (CONTINUED)
Partner caused the Partnership to enter into an Asset Purchase Agreement with
the Purchasers, and the parties began to seek the necessary regulatory and other
consents. The Asset Purchase Agreement is filed as an exhibit to the
Partnership's Report on Form 8-K dated June 24, 1997.
The Partnership Agreement provides that the Partnership shall be
dissolved upon the occurrence of the sale or distribution of all or
substantially all of the assets of the Partnership, which will occur upon
consummation of the Sale. The Partnership Agreement also provides that upon the
dissolution of the Partnership, the General Partner shall take such actions as
are necessary for the winding up of the affairs of the Partnership and the
distribution of its assets to the partners pursuant to the provisions of the
Partnership Agreement. Accordingly, following the consummation of the Sale, the
General Partner will wind-up the affairs of the Partnership in accordance with
the terms of the Partnership Agreement, including the liquidation of the assets
of the Partnership, the discharge of all of the liabilities of the Partnership,
and the distribution of the remaining assets of the Partnership to its partners
as appropriate.
Based upon the Appraised Value of $82.0 million and assuming a
hypothetical liquidation of the Partnership on September 30, 1997, the estimated
cash distribution to unitholders would have been approximately $873 per limited
partnership unit (the "Hypothetical Estimated Per Unit Distribution") (based
upon 71,879 units outstanding). This Hypothetical Estimated Per Unit
Distribution was calculated assuming net liabilities on the balance sheet of the
Partnership, net of current assets ("Net Liabilities"), of approximately $18.6
million (as of September 30, 1997), including the Partnership's outstanding bank
indebtedness of $17.8 million as of September 30, 1997. As with other
liabilities, the Partnership's bank indebtedness must be repaid prior to the
payment of any liquidating distribution to the partners. Such Hypothetical
Estimated Per Unit Distribution also assumes that the Net Liabilities as of
September 30, 1997 represent the only payments, other than certain reserved
expenses, that would have been required to be made by the Partnership prior to
the distribution of cash to the unitholders. Accordingly, the Hypothetical
Estimated Per Unit Distribution is presented for illustrative purposes only and
does not necessarily represent amounts the Partnership could have distributed to
unitholders on September 30, 1997 or any date thereafter. The actual
distribution will vary depending on, among other things, the date of the actual
dissolution and related distribution to unitholders.
The consummation of the Sale is conditioned upon the receipt of the
necessary regulatory approvals, principally including those required pursuant to
certain cable television system franchises and federal communications law. There
can be no assurance that the receipt of such approvals will occur in a timely
manner, if at all. As of the date of this Report, a number of these approvals
have not yet been obtained, and if not obtained, may jeopardize the ultimate
consummation of the Sale. The Appraisal Process and Sale are further discussed
in the Partnership's Annual Report on Form 10-K for the year ended December 31,
1996, its Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 and
its Current Reports on Form 8-K dated August 27, 1996, October 17, 1996,
February 6, 1997, June 4, 1997, June 24, 1997 and September 2, 1997. Unitholders
are urged to review the referenced materials carefully.
8
<PAGE> 9
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
RECENT DEVELOPMENTS (CONTINUED)
On or about September 2, 1997, Paul J. Issac, a Unitholder of the
Partnership, purporting to act on behalf of himself and other similarly situated
Unitholders, filed the Lawsuit discussed in Note 4 of Notes to Condensed
Financial Statements. Although apparently filed on or about September 2, 1997,
the Partnership was not served with the complaint until September 22, 1997. The
Partnership believes the Lawsuit lacks merit and intends to vigorously defend
itself and to proceed with the sale transaction. There can be, however, no
assurance that the pendency of the Lawsuit will not delay, or lead to the
termination of, the pending sale transaction.
RESULTS OF OPERATIONS
The Partnership's revenues decreased from $4.9 million to $4.8 million,
or by 2.5%, for the three months ended September 30, 1997 and increased from
$14.4 million to $15.2 million, or by 5.2%, for the nine months ended September
30, 1997 as compared to the corresponding periods in 1996. The $122,000 decrease
in revenues for the three months ended September 30, 1997 as compared to the
corresponding period in 1996, was primarily due to reductions in the number of
subscriptions for services. Of the $751,000 increase in revenues for the nine
months ended September 30, 1997, approximately $727,000 was due to increases in
regulated service rates, $189,000 was due to the restructuring of The Disney
Channel, $113,000 was due to increases in advertising sales and $54,000 was due
to increases in programmer incentives. These increases were partially offset by
revenue decreases of $332,000 due primarily to reductions in the number of
subscriptions for premium cable services. As of September 30, 1997, the
Partnership had approximately 47,900 homes subscribing to cable service and
15,700 premium service units.
Service costs increased from $1.5 million to $1.7 million, or by 13.7%,
and from $4.5 million to $4.9 million, or by 6.9%, for the three and nine months
ended September 30, 1997 as compared to the corresponding periods in 1996.
Service costs represent costs directly attributable to providing cable services
to customers. The $207,000 net increase for the three months ended September 30,
1997 was due to a $96,000 decrease in capitalized labor, an increase of $77,000
in programming fees charged by program suppliers (including primary satellite
fees) and an increase of $57,000 in franchise fees. These increases were
partially offset by a $23,000 decrease in copyright fees. The $312,000 net
increase in service costs for the nine months ended September 30, 1997 was
primarily due to an increase of $381,000 in programming fees charged by program
suppliers (including primary satellite fees), which included a $73,000 increase
related to the restructuring of The Disney Channel discussed above, and to
increases of $138,000 in franchise fees and $21,000 in property taxes. These
increases were partially offset by a $198,000 increase in capitalized labor,
primarily related to upgrading the cable television system in Maryland and to
decreases of $30,000 in copyright fees and other expenses.
9
<PAGE> 10
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
RESULTS OF OPERATIONS (CONTINUED)
General and administrative expenses decreased from $676,000 to $569,000,
or by 15.8%, for the three months ended September 30, 1997 and increased from
$2.0 million to $2.2 million, or by 6.7%, for the nine months ended September
30, 1997 as compared to the corresponding periods in 1996. Of the $107,000
decrease for the three months ended September 30, 1997, $143,000 was due to a
reduction in workers' compensation insurance expense and $46,000 was due to
decreases in other expenses. The decreases discussed above for the three months
ended September 30, 1997 were partially offset by an $82,000 increase in bad
debt expense. Of the $136,000 increase for the nine months ended September 30,
1997, $128,000 was due to increases in bad debt expense and $34,000 was due to
increases in insurance costs. These increases were partially offset by a $26,000
decrease in other expenses.
General Partner management fees and reimbursed expenses remained
constant as a percent of revenues at 8.0%, and decreased from $393,000 to
$384,000 for the three months ended September 30, 1997, and remained relatively
unchanged at approximately $1.2 million, for the nine months ended September 30,
1997 as compared to the corresponding periods in 1996.
Operating income before income taxes, depreciation and amortization
(EBITDA) is a commonly used financial analysis tool for measuring and comparing
cable television companies in several areas, such as liquidity, operating
performance and leverage. EBITDA as a percentage of revenues decreased from
47.6% to 44.3% and from 46.4% to 45.7% for the three and nine months ended
September 30, 1997 as compared to the corresponding periods in 1996. The
decrease was primarily caused by increased programming fees and bad debt
expense, as described above. EBITDA decreased from $2.3 million to $2.1 million,
or by 9.1%, for the three months ended September 30, 1997 and increased from
$6.7 million to $6.9 million, or by 3.6%, for the nine months ended September
30, 1997 as compared to the corresponding periods in 1996. EBITDA should be
considered in addition to and not as a substitute for net income and cash flows
determined in accordance with generally accepted accounting principles as an
indicator of financial performance and liquidity.
Depreciation and amortization expenses increased from $1.8 million to
$1.9 million, or by 7.3%, for the three months ended September 30, 1997 and
decreased from $5.9 million to $5.5 million, or by 6.0%, for the nine months
ended September 30, 1997 as compared to the corresponding periods in 1996. The
increase for the three months was due to asset additions related to various
projects in the Burke, North Carolina cable systems. The decrease for the nine
months was due primarily to certain assets becoming fully amortized in 1996.
Operating income decreased from $550,000 to $206,000 for the three
months ended September 30, 1997 and increased from $804,000 to $1.4 million for
the nine months ended September 30, 1997 as compared to the corresponding
periods in 1996. The $344,000 decrease for the three months was due primarily to
decreased revenues as discussed above. The $598,000 increase in operating income
for the nine months was due primarily to increased revenues as discussed above.
Net interest expense, including the effects of interest rate hedging
agreements, decreased from $442,000 to $370,000, or by 16.3%, and from $1.4
million to $1.2 million, or by 15.4%, for the three and nine months ended
September 30, 1997 as compared to the corresponding periods in 1996. The $72,000
and
10
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FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
RESULTS OF OPERATIONS (CONTINUED)
$213,000 decreases were due primarily to lower average debt balances and lower
interest rates. The hedging agreements resulted in higher interest expense of
$28,000 and $12,000 for the three months ended September 30, 1996 and 1997,
respectively, and $88,000 and $61,000 for the nine months ended September 30,
1996 and 1997, respectively.
Other expense of $20,000 for the three months ended September 30, 1997
as compared to the corresponding period in 1996 was due primarily to legal costs
related to the sale of the Partnership as discussed above in "Recent
Developments." Other income of $21,000 for the nine months ended September 30,
1997 as compared to the corresponding period in 1996 was due primarily to the
sale of an easement in Somerset, Kentucky to the Commonwealth of Kentucky for
the purpose of improving U.S. Highway 27 partially offset by the legal costs
related to the sale of the Partnership as discussed above.
Due to the factors described above, the Partnership's net income of
$108,000 changed to a net loss of $184,000, and a net loss of $577,000 changed
to net income of $255,000, respectively, for the three and nine months ended
September 30, 1997 as compared to the corresponding periods in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's primary objective, having invested its net offering
proceeds in cable systems, has been to distribute to its partners all available
cash flow generated from operations and proceeds from the sale of cable systems,
if any, after providing for expenses, debt service and capital requirements
relating to possible improvement and upgrade of its systems. The Partnership has
relied upon the availability of cash generated from operations and possible
borrowings to fund its ongoing capital requirements. As previously reported, in
response to the FCC's amended rate regulation rules, distributions to
Unitholders were discontinued subsequent to the April 15, 1994 payment in order
to preserve cash resources. The Partnership also delayed the majority of its
rebuild and upgrade capital expenditure programs that had been scheduled for
1994, 1995, 1996 and 1997 in order to preserve liquidity. As discussed above in
"Recent Developments," certain affiliates of the General Partner have exercised
their right to acquire all of the Partnership's cable systems, and the
Partnership will be liquidated shortly after the completion of that Sale.
During 1997, capital expenditures have been and will continue to be
limited to those expenditures which management believes are necessary, in the
short term, to comply with franchise authorities and FCC technical requirements.
The Partnership's management believes that the Partnership's cash
resources and cash flow from operations for the remainder of 1997 will be
sufficient to fund its remaining capital expenditure requirements and the
December 31, 1997 mandatory principal payment on its debt.
As of September 30, 1997, the amount outstanding under the Partnership's
amended Bank Credit Agreement was $17.8 million. The Partnership had no
additional borrowings available to it because the revolving credit portion of
its Bank Credit Agreement converted to a term loan on December 31, 1995. At
September 30, 1997, such borrowings bore interest at an average rate of 8.1%
(including the effect of interest rate swap transactions). The Bank Credit
Agreement also contains various restrictions relating to, among
11
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FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
other things, mergers and acquisitions, investments, capital expenditures, a
change in control and the incurrence of additional indebtedness and also
requires compliance with certain financial covenants. Management believes that
the Partnership was in compliance with all such requirements as of September 30,
1997. The Bank Credit Agreement mandates principal repayments of $1.0 million on
December 31, 1997 and $5.4 million in 1998. The Partnership made its scheduled
principal repayments of $1.0 million on March 31, 1997, June 30, 1997 and
September 30, 1997, and on July 11, 1997 made an additional unscheduled
repayment of $3.5 million.
The Partnership's management agreement with the General Partner requires
deferral of the payment of up to 50% of the management fees, without interest,
unless Adjusted Operating Cash (as defined) for such month exceeds a 10%
annualized return calculated with respect to outstanding Partnership Units. To
the extent that Adjusted Operating Cash exceeds such amount, the General Partner
may recover previously deferred fees, without interest. In compliance with these
provisions, the General Partner received its standard management fee for the
nine months ended September 30, 1997 and recovered $276,000 in previously
deferred management fees.
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Cash provided by operating activities increased from $5.4 million to
$6.3 million, or by $894,000, for the nine months ended September 30, 1997 as
compared to the corresponding period in 1996. The increase resulted from an
increase in net income of $832,000, of which $355,000 resulted from a decrease
in non-cash depreciation and amortization, and from an increase of $417,000 in
other operating items (receivables, prepaid expenses and other assets, cable
materials, equipment and supplies, payables, accrued expenses and customer
deposits and prepayments).
Cash used in investing activities increased by $1.1 million in the nine
months ended September 30, 1997 as compared to the corresponding period in 1996,
primarily due to an increase in capital expenditures. Cash used by financing
activities increased by $4.5 million due to the increased principal repayment of
debt in 1997, including the July 11, 1997 unscheduled repayment of $3.5 million.
INFLATION
Certain of the Partnership's expenses, such as those for wages and
benefits, equipment repair and replacement, and billing and marketing generally
increase with inflation. However, the Partnership does not believe that its
financial results have been, or will be, adversely affected by inflation in a
material way.
12
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FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
PART II. OTHER INFORMATION
ITEMS 1-5. Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K
(a) None
(b) The Registrant filed a Form 8-K dated July 22,
1997, and a Form 8-K dated September 17, 1997, in
which it reported under Item 5 that an unsolicited
offer to purchase partnership units had been made
without the consent of the Corporate General
Partner.
The Registrant filed a Form 8-K dated September 2,
1997, in which it reported under Item 5 that a
putative class action suit was filed against the
Registrant, its General Partner and certain of its
directors and officers in connection with the
pending sale of the Registrant's assets to
affiliates of its General Partner. The Registrant
believes the Lawsuit lacks merit and intends to
vigorously defend itself and to proceed with the
sale transaction.
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FALCON CLASSIC CABLE INCOME PROPERTIES, L.P.
a CALIFORNIA LIMITED PARTNERSHIP
--------------------------------
(Registrant)
By: Falcon Classic Cable Investors, L.P.
Managing General Partner
By: Falcon Holding Group, L.P.
General Partner
By: Falcon Holding Group, Inc.
General Partner
Date: November 13, 1997 By: /s/ Michael K. Menerey
------------------------------------
Michael K. Menerey, Secretary
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT SEPTEMBER 30, 1997, AND THE STATEMENTS OF OPERATIONS FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
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<SECURITIES> 0
<RECEIVABLES> 389,000
<ALLOWANCES> 43,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 52,960,000
<DEPRECIATION> 22,036,000
<TOTAL-ASSETS> 52,997,000
<CURRENT-LIABILITIES> 4,145,000
<BONDS> 17,763,000
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 52,997,000
<SALES> 0
<TOTAL-REVENUES> 15,187,000
<CGS> 0
<TOTAL-COSTS> 13,785,000
<OTHER-EXPENSES> (21,000)
<LOSS-PROVISION> 273,000
<INTEREST-EXPENSE> 1,168,000
<INCOME-PRETAX> 255,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 255,000
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 255,000
<EPS-PRIMARY> 3.51
<EPS-DILUTED> 0
</TABLE>
