<PAGE> 1
UNITED STATES
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 numbers 333-35183 and 333-35183-01
JAMES CABLE PARTNERS, L.P.
JAMES CABLE FINANCE CORP.
(Exact name of Registrants as specified in its charter)
<TABLE>
<S> <C>
Delaware 38-2778219
Michigan 38-3182724
(State of Organization) (I.R.S. Employer Identification No.)
710 North Woodward Avenue, Suite 180
Bloomfield Hills, Michigan 48304
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrants' telephone number, including area code: (248) 647-1080
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 / / No /X/
Number of shares of common stock of James Cable Finance Corp. outstanding as of
November 30, 1997: 1,000.
* James Cable Finance Corp. meets the conditions set forth in General
Instruction H(1)(a) and (b) to the Form 10-Q and is therefore filing with
the reduced disclosure format.
1
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Consolidated Financial Statements of James Cable
Partners, L.P. and Subsidiary 3
Notes to Consolidated Financial Statements 7
Financial Statements of James Cable Finance Corp. 10
Notes to Financial Statements 13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
PART II. OTHER INFORMATION 19
</TABLE>
2
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PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements
JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30 December 31,
1997 1996
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
------
Cash & Cash Equivalents $ 8,204,862 $ 100,813
Accounts Receivable - Subscribers (Net of allowance for
doubtful accounts of $12,376 in 1997 and $14,688 in 1996) 3,290,941 3,307,074
Prepaid Expenses & Other 247,657 215,944
Property & Equipment:
Cable television distribution systems and equipment 77,458,873 71,802,231
Land and land improvements 229,704 229,704
Buildings and improvements 932,760 932,760
Office furniture & fixtures 1,147,281 1,147,281
Vehicles 3,046,103 3,046,103
-------------- ------------
Total 82,814,721 77,158,079
Less accumulated depreciation (71,279,455) (69,153,781)
-------------- ------------
Total 11,535,266 8,004,298
Deferred Financing Costs (Net of accumulated amortization of
$76,610 in 1997 and $5,210,047 in 1996) (Note 1) 3,983,237 2,314,896
Intangible Assets, Net 15,133,047 18,881,070
Deposits 18,037 20,037
-------------- ------------
Total Assets $ 42,413,047 $ 32,844,132
============== ============
LIABILITIES & PARTNERS' DEFICIT
-------------------------------
Liabilities:
Debt (Note 2) $ 100,020,322 $ 82,494,236
Accounts payable 80,800 362,636
Accrued expenses 4,048,000 3,428,776
Unearned revenue 2,898,178 2,877,029
Subscriber deposits 25,883 27,673
-------------- ------------
Total 107,073,183 89,190,350
Commitments and Contingencies (Note 3)
Partners' Deficit:
Limited partners (58,499,479) (50,587,123)
General partner (6,160,657) (5,759,095)
-------------- ------------
Total (64,660,136) (56,346,218)
-------------- ------------
Total Liabilities & Partners' Deficit $ 42,413,047 $ 32,844,132
============== ============
</TABLE>
See notes to consolidated financial statements.
3
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JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three For the Three For the Nine For the Nine
Months Ended Months Ended Months Ended Months Ended
September 30, September 30, September 30, September 30,
1997 1996 1997 1996
------------- ------------- ------------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
Revenues $ 8,922,617 $ 8,689,812 $ 26,728,392 $ 26,250,896
System Operating Expenses (Excluding
Depreciation and Amortization) 4,356,719 4,126,388 12,850,947 12,065,292
Non-System Operating Expenses:
Management fee 454,097 444,680 1,360,792 1,348,495
Other 142,858 161,366 475,596 524,699
------------ ------------ ------------ ------------
Total nonsystem operating
expenses 596,955 606,046 1,836,388 1,873,194
Depreciation and Amortization 2,279,428 2,318,005 5,873,724 6,954,012
------------ ------------ ------------ ------------
Operating Income 1,689,515 1,639,373 6,167,333 5,358,398
Interest and Other:
Interest expense (2,539,786) (2,103,596) (6,808,247) (6,708,394)
Interest income 52,584 2,296 56,259 22,690
Other (17,725) (16,721) (204,251) (176,757)
------------ ------------ ------------ ------------
Total interest and other (2,504,927) (2,118,021) (6,956,239) (6,862,461)
------------ ------------ ------------ ------------
Loss before Extraordinary Item (815,412) (478,648) (788,906) (1,504,063)
Extraordinary Loss due to Debt
Refinancing (3,125,012) 0 (3,125,012) 0
------------ ------------ ------------ ------------
Net Loss $ (3,940,424) $ (478,648) $ (3,913,918) $ (1,504,063)
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
4
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JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
-------------- --------------- --------------
<S> <C> <C> <C>
Balance, December 31, 1996 $ (50,587,123) $ (5,759,095) $ (56,346,218)
Net loss (unaudited) (3,724,876) (189,042) (3,913,918)
Repurchase of warrants (unaudited) (4,187,480) (212,520) (4,400,000)
-------------- -------------- --------------
Balance, September 30, 1997 (unaudited) $ (58,499,479) $ (6,160,657) $ (64,660,136)
============== ============== ==============
</TABLE>
See notes to consolidated financial statements.
5
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JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine For the Nine
Months Ended Months Ended
September 30, September 30,
1997 1996
------------- -------------
(Unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (3,913,918) $ (1,504,063)
Adjustments to reconcile net loss to net cash flows
from operating activities:
Depreciation 2,125,674 2,287,557
Amortization 3,748,050 4,666,455
Noncash interest expense 2,391,478 504,504
Decrease (Increase) in assets:
Accounts receivable 16,133 (53,533)
Prepaid expenses (31,713) 10,711
Deposits 2,000 61,495
(Decrease) Increase in liabilities:
Accounts payable (281,836) 104,474
Accrued expenses 619,224 135,557
Unearned revenue 21,149 92,095
Subscriber deposits (1,790) (2,522)
------------- -------------
Total adjustments 8,608,369 7,806,793
------------- -------------
Cash flows from operating activities 4,694,451 6,302,730
Cash Flows used in Investing Activities:
Additions to property and equipment (5,656,642) (2,761,338)
------------- -------------
Cash flows used in investing activities (5,656,642) (2,761,338)
Cash Flows from (used in) Financing Activities:
Principal payments on debt (82,407,796) (4,236,187)
Proceeds from debt borrowings 100,000,000 0
Payments on capital lease obligation (66,117) (88,876)
Deferred financing costs (4,059,847) 0
Repurchase of warrants (4,400,000) 0
------------- -------------
Cash flows from (used in) financing activities 9,066,240 (4,325,063)
------------- -------------
Net Increase (Decrease) in Cash and Cash Equivalents 8,104,049 (783,671)
Cash and Cash Equivalents, Beginning of Period 100,813 1,055,916
------------- -------------
Cash and Cash Equivalents, End of Period $ 8,204,862 $ 272,245
============= =============
Supplemental Disclosure of Cash Flow Information -
Cash paid for interest during the period $ 5,650,675 $ 5,691,838
============= =============
</TABLE>
See notes to consolidated financial statements.
6
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JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL - James Cable Partners, L.P. (the "Partnership") was organized as
a Delaware limited partnership in 1988. James Cable Finance Corp., a Michigan
corporation ("Finance Corp."), was organized on June 19, 1997 and became a
wholly-owned subsidiary of the Partnership for the sole purpose of acting as
co-issuer with the Partnership of the Notes and Exchange Notes referred to
below (Note 2). References to the "Company" herein are to the Partnership and
Finance Corp. consolidated, or to the Partnership prior to the organization of
Finance Corp., as appropriate.
DEFERRED FINANCING COSTS in connection with the refinancing that was
effective June 30, 1995 were being amortized on the straight-line method over a
5 year life. These costs were written-off in connection with the new
refinancing that occurred through the issuance of the Notes which was effective
August 15, 1997. Deferred financing costs in connection with the new
refinancing are being amortized on the straight-line method over 5 years for
the new bank credit facility and 7 years for the 10-3/4% Senior Notes due 2004
(Note 2).
UNAUDITED INTERIM STATEMENTS - The accompanying interim financial
statements and related notes are unaudited, and reflect all adjustments
(consisting only of normal recurring adjustments) which, in the opinion of
management, are necessary for a fair presentation of the financial position and
results of operations of the Company for the interim periods. The December 31,
1996 balance sheet data is derived from audited financial statements, but the
notes do not include all disclosures required for audited statements by
generally accepted accounting principles. These financial statements should be
read in conjunction with the audited financial statements and related notes for
the year ended December 31, 1996 included in the Company's Form S-4
Registration Statement concerning the Exchange Notes on file with the
Securities and Exchange Commission (File No. 333-35183). The results for
interim periods are not necessarily indicative of the results for a full year.
(2) DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
Sept. 30, Dec. 31,
1997 1996
---- ----
(unaudited)
<S> <C> <C>
New Bank Credit Facility $ --- $ ---
10-3/4% Senior Notes due 2004 100,000,000 ---
Prior Bank Credit Facility --- 66,254,437
Subordinated notes --- 16,153,359
Capital lease obligation 20,322 86,440
-------------- ------------
Total $ 100,020,322 $ 82,494,236
============== ============
</TABLE>
10-3/4% Notes - The $100 million principal amount 10-3/4% Senior Notes due
2004 (the "Notes")
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were issued by the Company on August 15, 1997 pursuant to a contract entered
into on August 12, 1997. The Notes are unsecured and bear interest at 10.75% per
annum, payable semi-annually on February 15 and August 15. The Notes were
issued in transactions exempt from the registration requirements of the
Securities Act of 1933 (the "Securities Act") and consequently are subject to
certain transfer restrictions; however, in accordance with a Registration Rights
Agreement entered into in connection with the issuance of the Notes, on November
5, 1997, the Company registered under the Securities Act $100 million principal
amount of 10-3/4% Series B Senior Notes due 2004 (the "Exchange Notes"), and
shortly thereafter commenced an offer to holders of the Notes to exchange the
Notes for the Exchange Notes in equal principal amounts (the "Exchange Offer").
The Exchange Offer is scheduled to expire on December 9, 1997, but may be
extended by the Company. Except for the absence of transfer restrictions, the
terms of the Exchange Notes will be substantially identical to those of the
Notes.
Retirement of Prior Debt and Warrants - A portion of the proceeds from the
issuance of the Notes was used to repay $66.4 million principal, plus interest,
that was then outstanding under the Company's prior bank credit facility and
$16.6 million principal, plus interest, that was then outstanding under the
subordinated notes. In addition, $4.4 million of the Note proceeds were used
to purchase warrants that had been issued to the subordinated noteholders
in conjunction with the subordinated notes.
The subordinated notes bore interest at the rate of 14% per annum and were
not redeemable by the Company prior to June 30, 1998. In order to retire the
subordinated notes, the Company was required to pay the subordinated
noteholders an additional amount agreed by them to be the equivalent of the
additional interest that would have been payable to them had the subordinated
notes remained outstanding until June 30, 1998. This amount has been treated
as an extraordinary item by the Company in the third quarter of 1997 (see
calculation of extraordinary item below).
Had the warrants become exercisable, they would have entitled the
subordinated noteholders to purchase a percentage of equity in the Partnership,
when and if certain criteria were met. They also had certain put and call
features with repurchase amounts to be calculated pursuant to specific
formulas, which would have become exercisable under certain conditions.
Neither the warrants nor the put and call features had become exercisable by
the time the Notes were issued, but the subordinated noteholders were unwilling
to permit prepayment of the subordinated notes at that time unless the warrants
were also purchased by the Company. Consequently, the Company agreed to
purchase them at the $4.4 million price required by the subordinated
noteholders. This payment has been treated as an equity transaction by the
Company in the third quarter of 1997.
New Bank Credit Facility - In conjunction with the issuance of the Notes,
the Company entered into a new bank credit facility (the "New Facility"). The
New Facility provides for additional borrowings of up to $20 million (with an
option to increase the amount to $30 million), subject to maintaining a
specified ratio of total debt to annualized six-month EBITDA and maintaining
certain other specified ratios. The New Facility is secured by a first
priority lien and security interest in substantially all the assets of the
Company. The interest rate on the New Facility is based on one to six month
LIBOR rates plus a certain percentage based on provisions related to debt to
earnings ratios and events of default, as defined. At September 30, 1997 no
borrowings under the New Facilities had occurred. Due to ratio requirements,
the maximum borrowings then permissible under the New Facility were
approximately $12 million.
Extraordinary Loss - In connection with the prepayment of the prior bank
credit facility and the subordinated notes, the Company realized an
extraordinary loss as follows:
8
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<TABLE>
<S> <C>
Write-off deferred financing costs $1,894,451
Additional interest $1,230,561
----------
Total extraordinary loss $3,125,012
==========
</TABLE>
(3) REGULATORY MATTERS
In October, 1992, Congress enacted the Cable Television Consumer and
Competition Act of 1992 (the "1992 Cable Act") which greatly expanded federal
and local regulation of the cable television industry. In April 1993, the
Federal Communications Commission ("FCC") adopted comprehensive regulations,
effective September 1, 1993, governing rates charged to subscribers for basic
cable and cable programming services which allowed cable operators to justify
regulated rates in excess of the FCC benchmarks through cost of service
showings at both the franchising authority level for basic service and to the
FCC in response to complaints on rates for cable programming services.
On February 22, 1994, the FCC issued further regulations which modified
the FCC's previous benchmark approach, adopted interim rules to govern cost of
service proceedings initiated by cable operators and lifted the stay of rate
regulations for small cable systems.
On November 10, 1994, the FCC adopted "going forward" rules that provided
cable operators with the ability to offer new product tiers priced as operators
elect, provided certain limited conditions are met, permit cable operators to
add new channels at reasonable prices to existing cable programming service
tiers and created an additional option pursuant to which small cable operators
may add channels to cable programming service tiers.
In May 1995, the FCC adopted small company rules that provided small
systems regulatory relief by implementing an abbreviated cost of service rate
calculation method. Using this methodology, for small systems seeking to
establish rates no higher than $1.24 per channel, the rates are deemed to be
reasonable.
In February 1996, the Telecommunications Act of 1996 was enacted which,
among other things, deregulated cable rates for small systems on their
programming tiers.
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JAMES CABLE FINANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF JAMES CABLE PARTNERS, L.P., A DELAWARE LIMITED
PARTNERSHIP)
BALANCE SHEET SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
------
Cash and cash equivalents $1,000
======
SHAREHOLDER'S EQUITY
--------------------
Shareholder's equity - Common stock (1,000 shares issued and outstanding) $1,000
======
</TABLE>
See notes to financial statements.
10
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JAMES CABLE FINANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF JAMES CABLE PARTNERS,
L.P., A DELAWARE LIMITED PARTNERSHIP)
STATEMENT OF SHAREHOLDER'S EQUITY
<TABLE>
<S> <C>
Balance, at June 19, 1997 (date of inception) $ ----
Issuance of Common Stock 1,000
Net Income (Unaudited) ----
--------
Balance, September 30, 1997 (Unaudited) $ 1,000
========
</TABLE>
See notes to financial statements.
11
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JAMES CABLE FINANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF JAMES CABLE PARTNERS, L.P., A DELAWARE LIMITED
PARTNERSHIP)
STATEMENT OF CASH FLOWS
PERIOD OF JUNE 19, 1997 (DATE OF INCEPTION) TO SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
Cash Flows from Operating Activities:
Net income $ ----
--------
Cash flows from operating activities ----
Cash Flows from Investing Activities ----
Cash Flows from Financing Activities:
Issuance of common stock 1,000
--------
Cash flows from financing activities 1,000
--------
Net Increase in Cash and Cash Equivalents 1,000
Cash and Cash Equivalents, Beginning of Period ----
--------
Cash and Cash Equivalents, End of Period $ 1,000
========
</TABLE>
See notes to financial statements.
12
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JAMES CABLE FINANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF JAMES CABLE
PARTNERS, L.P., A DELAWARE LIMITED PARTNERSHIP)
NOTES TO THE FINANCIAL STATEMENTS (Unaudited)
(1) ORGANIZATION
James Cable Finance Corp. ("Finance Corp."), a Michigan corporation, is a
wholly-owned subsidiary of James Cable Partners, L.P. (the "Partnership"), a
Delaware Limited Partnership, and was organized on June 19, 1997 (the "Date of
Inception") for the sole purpose of acting as co-issuer with the Partnership of
$100 million aggregate principal amount of the 10-3/4% Senior Notes.
Finance Corp. has nominal assets and will not have any material operations.
(2) STATEMENT OF OPERATIONS
Since there were no operations in the Finance Corp. from the Date of
Inception through September 30, 1997, a Statement of Operations has not been
presented.
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PART I. FINANCIAL INFORMATION
Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion of the financial condition and results of
operations of the Company contains certain forward-looking statements relating
to anticipated future financial conditions and operating results of the Company
and its current business plans. In the future, the financial conditions and
operating results of the Company could differ materially from those discussed
herein and its current business plans could be altered in response to market
conditions and other factors beyond the Company's control. Important factors
that could cause or contribute to such differences or changes include those
discussed under "Risk Factors" in the Company's Form S-4 Registration Statement
filed September 8, 1997 (File No. 333-35183).
OVERVIEW
Revenues. The Company's revenues are primarily attributable to
subscription fees charged to subscribers to the Company's basic and premium
cable television programming services. Basic revenues consist of monthly
subscription fees for all services (other than premium programming) as well as
monthly charges for customer equipment rental. Premium revenues consist of
monthly subscription fees for programming provided on a per-channel basis. In
addition, other revenues are derived from installation and reconnection fees
charged to subscribers to commence or discontinue service, late payment fees,
franchise fees, advertising revenues and commissions related to the sale of
goods by home shopping services. At September 30, 1997, the Company had 78,171
basic subscribers and 26,060 premium subscriptions, representing basic
penetration of 60.5% and premium penetration of 33.3%.
System Operating Expenses. System operating expenses are comprised of
variable operating expenses and fixed selling, service and administrative
expenses directly attributable to the Company's systems. Variable operating
expenses consist of costs directly attributable to providing cable services to
customers and therefore generally vary directly with revenues. Variable
operating expenses include programming fees paid to suppliers of programming
the Company includes in its basic and premium cable television services, as
well as expenses related to copyright fees, franchise operating fees and bad
debt expenses. Selling, service and administrative expenses directly
attributable to the Company's systems include the salaries and wages of the
field and office personnel, plant operating expenses, office and administrative
expenses and sale costs.
Non-System Operating Expenses. Non-system operating expenses consist
primarily of general overhead expenses which are not directly attributable to
any one of the Company's systems. These expenses include all legal, audit and
tax fees, an incentive bonus pool accrual for the General Managers of the
Company's systems and amounts paid to its general partner for management
expenses.
LIQUIDITY AND CAPITAL RESOURCES
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In August 1997 the Company issued $100 million of unsecured 10-3/4%
Senior Notes due 2004 (the "Notes"). Concurrently with the issuance of the
Notes, the Company repaid all of its then existing indebtedness under its prior
bank credit facility and its then outstanding subordinated debt and entered
into a new bank credit facility (the "New Facility" and, together with the
Notes, the "Refinancing"). The Refinancing is expected to provide the Company
with greater flexibility by extending the maturities of its long-term debt and
imposing less restrictive covenants. As no borrowings under the New Facility
were necessary to complete the Refinancing, upon completion of the Refinancing
(and subject to the terms of the New Facility and the Company's Partnership
Agreement) the Company had the ability to borrow up to $20 million (with an
option to increase the amount to $30 million) under the New Facility. The New
Facility requires the Company to maintain the ratio of its total debt to
annualized six-month EBITDA at no more than 7.0 to 1.0. As of October 31, 1997
the covenants contained in the New Facility would have limited the Company's
maximum borrowings thereunder to approximately $11 million.
The New Facility is secured by a first priority lien on and security
interest in substantially all of the assets of the Issuers. The New Facility
contains certain covenants and provides for certain events of default
customarily contained in facilities of a similar type. The financial covenants
which the Company considers most significant require it to: (a) maintain an
interest coverage ratio (that is, the ratio of annualized six-month EBITDA to
interest expense) of at least 1.1 to 1; (b) maintain a senior debt ratio (that
is, the ratio of debt under the New Facility to annualized six-month EBITDA) of
no more than 2.5 to 1; and (c) maintain the total debt ratio described above.
The Company is in compliance with each of these covenants.
At September 30, 1997 the Company's total indebtedness was $100.0 million,
its total assets were $42.4 million and its partners' deficit was $64.7
million. Due to the Company's high degree of leverage: (a) a substantial
portion of its cash flow from operations will be committed to the payment of
its interest expense and will not be available for other purposes; (b) the
Company's ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions or other purposes may be limited;
and (c) the Company is more highly leveraged than many cable television
companies and certain direct broadcast satellite ("DBS") and telephone
companies, which may limit the Company's flexibility in reacting to changes in
its business. However, the Company believes that it will continue to generate
cash or obtain financing sufficient to meet its requirements for debt service,
working capital and capital expenditures contemplated in the near term and
through the maturity date of the Notes.
Cash Flows from Operating Activities. Net cash from operating activities
was $4.7 million for the nine months ended September 30, 1997 as compared to
$6.3 million for the nine months ended September 30, 1996.
Cash Flows from Investing Activities. Net cash used in investing
activities was $5.7 million for the nine months ended September 30, 1997 as
compared to $2.8 million for the nine months ended September 30, 1996. This
increase was primarily due to capital expenditures associated with the
Company's selective upgrades during 1997.
Cash Flows from Financing Activities. Cash flows from financing
activities were $9.1 million for the nine months ended September 30, 1997 as
compared to cash flows used in financing activities of $4.3
15
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million for the nine months ended September 30, 1996. The primary reason for
this substantial increase was the issuance of the $100 million Notes on August
15, 1997. Amounts paid from the $100 million proceeds included $82.4 million to
repay the existing bank credit facility and the then outstanding subordinated
notes, $4.4 million to repurchase certain warrants attached to the subordinated
notes and $4.1 million in deferred financing costs associated with the
Refinancing. This left approximately $9 million for additional working capital
needed for the Company's new business strategies.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship that the various
items bear to revenues for the periods indicated:
<TABLE>
<CAPTION>
For the Three Months ended September 30,
1997 1996
---- ----
Amount %age Amount %age
------ ---- ------ ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Revenues $ 8,923 100.0% $ 8,690 100.0%
System operating expenses 4,357 48.8% 4,127 47.5%
Non-System operating expenses 597 6.7% 606 7.0%
Depreciation and amortization 2,279 25.5% 2,318 26.7%
-------- -------- ------- -------
Operating income 1,690 19.0% 1,639 18.8%
Interest expense, net 2,487 27.9% 2,101 24.2%
Other expenses 18 0.2% 17 0.2%
-------- -------- ------- -------
Loss before extraordinary item (815) (9.1%) (479) (5.6%)
Extraordinary loss due to debt
refinancing 3,125 35.0% 0 0.0%
-------- -------- ------- -------
Net loss $ (3,940) (44.1%) $ (479) (5.6%)
======== ======== ======= =======
EBITDA (1) $ 3,969 44.5% $ 3,957 45.5%
<CAPTION>
For the Nine Months ended September 30,
1997 1996
---- ----
Amount %age Amount %age
------ ---- ------ ----
(Dollars in thousands)
<S> <C> <C> <C> <C>
Revenues $ 26,728 100.0% $26,251 100.0%
System operating expenses 12,851 48.1% 12,065 46.0%
Non-System operating expenses 1,836 6.9% 1,873 7.1%
Depreciation and amortization 5,874 22.0% 6,954 26.5%
---------- ------- ------- -------
Operating income 6,167 23.0% 5,359 20.4%
Interest expense, net 6,752 25.3% 6,686 25.5%
Other expenses 204 0.8% 177 0.7%
---------- ------- ------- -------
Loss before extraordinary item (789) (3.1%) (1,504) (5.8%)
Extraordinary loss due to debt
refinancing 3,125 11.7% 0 0.0%
---------- ------- ------- -------
Net loss $ (3,914) (14.8%) $(1,504) (5.8%)
========== ======= ======= =======
EBITDA (1) $ 12,041 45.0% $12,313 46.9%
</TABLE>
(1) EBITDA represents operating income before depreciation and amortization.
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1996
Revenues. Revenues for the three months ended September 30, 1997
increased by $200,000 to $8.9 million from $8.7 million for the three months
ended September 30, 1996. Average monthly total revenues per subscriber
increased for the three months ended September 30, 1997, as compared to the
same period last year, from $36.59 to $38.08. These improvements were due to
increases in subscription rates in certain of the Company's systems beginning
in the fourth quarter of 1996. The Company has historically increased
subscriber rates in certain of its systems during the fourth quarter to offset
increases in its operating costs. Revenue growth generated by the rate
increases was adversely affected by a reduction in the number of basic
subscribers (1,038 or 1.3%) from September 30, 1996 to September 30, 1997. The
Company believes this reduction in subscribers is due to the increased
availability and affordability of competitive video services and generally
reflects the cable industry's experience as a whole with respect to increased
competition from DBS and wireless cable services. The Company has responded
with certain strategic capital improvement projects, along with an increased
and more concentrated marketing emphasis in each of its systems.
System Operating Expenses. System operating expenses for the three months
ended September 30, 1997 were $4.4 million, an increase of $200,000, or 5.6%,
over the three months ended September 30, 1996. As a percentage of revenues,
system operating expenses increased 1.3% from 47.5% in 1996 to 48.8% in 1997.
The majority of this increase is due to variable cost increases associated with
higher programming rates and new programming launched in conjunction with rate
increases. The remaining variance is primarily due to increased spending
associated with the Company's marketing initiative launched in the fourth
quarter of 1996.
Non-System Operating Expenses. Non-system operating expenses decreased
$9,000, or 1.5%, from the three months ended September 30, 1996 to the three
months ended September 30, 1997. This decrease was due to normal fluctuations
in certain corporate overhead accounts.
EBITDA. As a result of the foregoing, EBITDA remained constant at $4.0
million for the three months ended September 30, 1997 and the three months
ended September 30, 1996.
16
<PAGE> 17
Depreciation and Amortization. Depreciation and amortization remained
constant at $2.3 million for the three months ended September 30, 1997 and for
the three months ended September 30, 1996. Decreases in depreciation and
amortization resulting from certain assets becoming fully depreciated or
amortized were offset by the capital expenditures made in 1997 as a part of the
Company's ongoing selective upgrade program.
Interest Expense, Net. Interest expense, net increased $400,000, or
18.4%, from $2.1 million for the three months ended September 30, 1996 to $2.5
million for the three months ended September 30, 1997. This is primarily the
result of the increase in the Company's debt from $84 million at September 30,
1996 to $100 million at September 30, 1997.
Net Loss. Net loss increased $3.4 million from $500,000 for the three
months ended September 30, 1996 to $3.9 million for the three months ended
September 30, 1997. Approximately $3.1 million of this increase is due to
extraordinary losses relating to the Refinancing, with the remaining $300,000
attributable to the change in interest expense, net discussed above.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996
Revenues. Revenues for the nine months ended September 30, 1997 increased
by $500,000 to $26.7 million from $26.2 million for the nine months ended
September 30, 1996. Average monthly total revenues per subscriber increased
for the nine months ended September 30, 1997, to $37.93 from $36.53 for the
nine months ended September 30, 1996. These improvements were due to
increases in subscription rates in certain of the Company's systems beginning
in the fourth quarter of 1996. The Company has historically increased
subscriber rates in certain of its systems during the fourth quarter in order
to offset increases in its operating costs. Revenue growth generated by the
rate increases was adversely affected by a reduction in the number of basic
subscribers (1,038 or 1.3%) from September 30, 1996 to September 30, 1997. The
Company believes this reduction in subscribers is due to the increased
availability and affordability of competitive video services and generally
reflects the cable industry's experience as a whole with respect to increased
competition from DBS and wireless cable services. The Company has responded
with certain strategic capital improvement projects, along with an increased
and more concentrated marketing emphasis in each of its systems.
System Operating Expenses. System operating expenses for the nine months
ended September 30, 1997 were $12.9 million, an increase of $800,000, or 6.5%,
over the nine months ended September 30, 1996. As a percentage of revenues,
system operating expenses increased 2.1% from 46.0% in 1996 to 48.1% in 1997.
Approximately one-half of this increase is due to increased spending associated
with the Company's marketing initiative launched in the fourth quarter of
1996. The remaining variance is primarily due to variable cost increases
associated with increased programming rates and new programming launched in
conjunction with rate increases.
Non-System Operating Expenses. Non-system operating expenses decreased
$37,000, or 2.0%, from $1.9 million for the nine months ended September 30,
1996 to $1.8 million for the nine months ended September 30, 1997. Non-system
operating expenses were higher in 1996 due to certain non-recurring costs
aggregating nearly $40,000.
EBITDA. As a result of the foregoing, EBITDA decreased $300,000, or 2.2%,
from $12.3 million for the nine months ended September 30, 1996 to $12.0
million for the nine months ended September 30,
17
<PAGE> 18
1997.
Depreciation and Amortization. Depreciation and amortization decreased
$1.1 million, or 15.5%, from $7.0 million for the nine months ended September
30, 1996 to $5.9 million for the nine months ended September 30, 1997 primarily
due to certain assets becoming fully depreciated or amortized. The decrease
was partially offset by substantial capital expenditures made in 1997 as a part
of the Company's ongoing selective upgrade program.
Interest Expense, Net. Interest expense, net increased $100,000, or 1.0%,
from $6.7 million for the nine months ended September 30, 1996 to $6.8 million
for the nine months ended September 30, 1997. This is primarily the result of
the increase in the Company's debt from $84 million at September 30, 1996 to
$100 million at September 30, 1997.
Net Loss. As a result of the foregoing, and due to the extraordinary loss
of $3.1 million in 1997 in connection with the Refinancing, net loss increased
from $1.5 million for the nine months ended September 30, 1996 to $3.9 million
for the nine months ended September 30, 1997.
NEW DEVELOPMENT
The Company recently learned that the City of Forsyth, Georgia has voted
to build and operate a cable television system in Forsyth, and potentially in
the surrounding area of Monroe County, which would then compete directly with
the Company's existing franchises. Although the Company has initiated a local
campaign against the project, the Company cannot predict whether or not it will
be successful in its efforts to stop the construction.
At October 31, 1997, the Company had 1,700 basic subscribers in the City
of Forsyth and Monroe County franchise areas. This represents approximately 2%
of the Company's total basic subscribers and approximately 2% of the Company's
total cash flow and EBITDA. If the current plans for a competing system
ultimately are implemented, this competition would likely result in a loss of
subscribers to the Company's system and make it more difficult for the Company
to maintain its prices for subscriptions to the system.
18
<PAGE> 19
PART II. OTHER INFORMATION
Item 6.
(a) Exhibits.
<TABLE>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
3.1 -- Amended and Restated Agreement of Limited Partnership of James Cable
Partners, L.P. dated as of June 30, 1995*
3.2 -- Certificate of Limited Partnership of James Cable Partners, L.P.*
3.3 -- Articles of Incorporation of James Cable Finance Corp.*
3.4 -- Bylaws of James Cable Finance Corp.*
4.1 -- Indenture dated as of August 15, 1997 among James Cable Partners, L.P., James Cable Finance Corp., and United
States Trust Company of New York, as Trustee*
4.3 -- Credit Agreement dated as of August 15, 1997 among James Cable Partners, L.P., the lenders party thereto, NBD Bank
as documentation agent and Canadian Imperial Bank of Commerce as co-agent*
4.4 -- Company Security Agreement dated as of August 15, 1997 between James Cable Partners, L.P. and NBD Bank as
documentation agent*
4.5 -- Guaranty Agreement dated as of August 15, 1997 by James Cable Finance Corp. in favor of the Lenders and Agents
named therein*
4.6 -- Guarantor Security Agreement dated as of August 15, 1997 between James Cable Finance Corp. and NBD Bank as
documentation agent*
10.1 -- Securities Purchase Agreement dated as of August 12, 1997 among James Cable Partners, L.P., James Cable Finance
Corp. and the Initial Purchasers*
10.2 -- Registration Rights Agreement dated as of August 15, 1997 among James Cable Partners, L.P., James Cable Finance
Corp. and the Initial Purchasers*
27.1 -- Financial Data Schedules**
</TABLE>
___________________________
* Incorporated by reference to the exhibits to the Registrants'
Registration Statement on Form S-4, File No. 333-35183.
** Filed herewith.
19
<PAGE> 20
(b) Reports on Form 8-K
None.
20
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by the
undersigned, thereunto duly authorized.
JAMES CABLE PARTNERS, L.P.
By: James Communications Partners
General Partner
By: Jamesco, Inc.
Partner
Date: December 2, 1997 By: /s/ William R. James
-------------------------------
William R. James
President
By: James Communications Partners
General Partner
By: DKS Holdings, Inc.
Partner
Date: December 2, 1997 By: /s/ Daniel R. Shoemaker
--------------------------------
Daniel R. Shoemaker
President (Principal account
officer)
Date: December 2, 1997
JAMES CABLE FINANCE CORP.
Date: December 2, 1997 By: /s/ William R. James
--------------------------------
William R. James
President
Date: December 2, 1997 By: /s/ Daniel K. Shoemaker
--------------------------------
Daniel K. Shoemaker
Treasurer (Principal
accounting officer)
21
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
22
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000926283
<NAME> JAMES CABLE FINANCE CORP.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 8,204,862
<SECURITIES> 0
<RECEIVABLES> 3,303,317
<ALLOWANCES> 12,376
<INVENTORY> 0
<CURRENT-ASSETS> 11,743,460
<PP&E> 82,814,721
<DEPRECIATION> 71,279,455
<TOTAL-ASSETS> 42,413,047
<CURRENT-LIABILITIES> 7,052,861
<BONDS> 100,020,322
0
0
<COMMON> 0
<OTHER-SE> (64,660,136)
<TOTAL-LIABILITY-AND-EQUITY> 42,413,047
<SALES> 0
<TOTAL-REVENUES> 26,728,392
<CGS> 0
<TOTAL-COSTS> 20,561,059
<OTHER-EXPENSES> 147,992
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,808,247
<INCOME-PRETAX> (788,906)
<INCOME-TAX> 0
<INCOME-CONTINUING> (788,906)
<DISCONTINUED> 0
<EXTRAORDINARY> (3,125,012)
<CHANGES> 0
<NET-INCOME> (3,913,918)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
