<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
[X] THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
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 each Registrant as specified in its charter)
Delaware 38-2778219
Michigan 38-3182724
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) No.)
710 North Woodward Avenue, Suite 180 48304
Bloomfield Hills, Michigan (Zip Code)
(Address of principal executive
offices)
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.
[X] Yes [ ] No
Number of shares of common stock of James Cable Finance Corp. outstanding
as of August 7, 1998: 1,000. James Cable Partners, L.P. does not have a
class of common stock.
* 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.
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TABLE OF CONTENTS
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements of James
Cable Partners, L.P. and Subsidiary 3
Notes to Consolidated Financial Statements 7
Balance Sheet of James Cable Finance Corp. 10
Notes to Balance Sheet 11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities and Use of Proceeds 18
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 20
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ -------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash & Cash Equivalents $ 9,706,473 $ 9,902,842
Accounts Receivable - Subscribers (Net of allowance for
doubtful accounts of $24,461 in 1998 and $20,872 in 1997) 3,452,187 3,344,345
Prepaid Expenses & Other 73,376 213,816
Property & Equipment:
Cable television distribution systems and equipment 82,394,012 79,248,360
Land and land improvements 229,704 229,704
Buildings and improvements 932,760 932,760
Office furniture & fixtures 1,216,867 1,216,867
Vehicles 3,126,367 3,126,367
------------ -------------
Total 87,899,710 84,754,058
Less accumulated depreciation (73,699,922) (72,086,368)
------------ -------------
Total 14,199,788 12,667,690
Deferred Financing Costs (Net of accumulated amortization of
$530,150 in 1998 and $227,206 in 1997) 3,581,012 3,883,956
Intangible Assets, Net 11,926,988 13,883,699
Deposits 10,232 15,782
------------ -------------
Total Assets $ 42,950,056 $ 43,912,130
============ =============
LIABILITIES & PARTNERS' DEFICIT
Liabilities:
Debt $ 100,000,000 $ 100,000,000
Accounts payable 51,831 245,835
Accrued expenses 2,644,920 2,333,228
Accrued interest on 10-3/4% Senior Notes 4,031,249 4,031,249
Unearned revenue 3,053,852 2,987,979
Subscriber deposits 24,284 25,279
------------ -------------
Total 109,806,136 109,623,570
Commitments and Contingencies (Notes 2 and 3)
Partners' Deficit:
Limited partners (60,589,359) (59,500,005)
General partner (6,266,721) (6,211,435)
------------ -------------
Total (66,856,080) (65,711,440)
------------ -------------
Total Liabilities & Partners' Deficit $ 42,950,056 $ 43,912,130
============ =============
</TABLE>
See notes to consolidated financial statements.
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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 Six For the Six
Months Ended Months Ended Months Ended Months Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
------------- ------------- ------------ ------------
(Unaudited)
<S> <C> <C> <C> <C>
Revenues $ 9,447,808 $ 8,955,970 $ 18,726,780 $ 17,805,775
System Operating Expenses
(Excluding Depreciation
and Amortization) 4,703,402 4,323,835 9,295,765 8,494,228
Non-System Operating Expenses:
Management fee 474,747 455,754 940,485 906,695
Other 226,152 159,428 536,719 332,738
Total non-system operating ----------- ------------- ------------ ------------
expenses 700,899 615,182 1,477,204 1,239,433
Depreciation and Amortization 1,809,928 1,797,148 3,570,265 3,594,296
----------- ------------- ------------ ------------
Operating Income 2,233,579 2,219,805 4,383,546 4,477,818
Interest and Other:
Interest expense (2,838,972) (2,150,892) (5,677,944) (4,268,461)
Interest income 103,949 1,331 206,321 3,675
Other (28,438) (158,847) (56,563) (186,526)
----------- ------------ ------------- ------------
Total interest and other (2,763,461) (2,308,408) (5,528,186) (4,451,312)
----------- ------------ ------------- ------------
Net (Loss) Income $ (529,882) $ (88,603) $ (1,144,640) $ 26,506
=========== ============ ============= ============
</TABLE>
See notes to consolidated financial statements.
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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, 1997 $ (59,500,005) $ (6,211,435) $ (65,711,440)
Net loss (unaudited) (1,089,354) (55,286) (1,144,640)
------------ ------------ ------------
Balance, June 30, 1998 (unaudited) $ (60,589,359) $ (6,266,721) $ (66,856,080)
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
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JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six For the Six
Months Ended Months Ended
June 30, June 30,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net (loss) income $ (1,144,640) $ 26,506
Adjustments to reconcile net (loss) income to cash
flows from operating activities:
Depreciation 1,613,554 1,095,596
Amortization 1,956,711 2,498,700
Noncash interest expense 302,944 336,334
(Increase) Decrease in assets:
Accounts receivable (107,842) 39,235
Prepaid expenses 140,440 154,046
Deposits 5,550 2,000
(Decrease) Increase in liabilities:
Accounts payable (194,004) 102,539
Accrued expenses 311,692 (909,719)
Unearned revenue 65,873 19,492
Subscriber deposits (995) (1,231)
----------- ----------
Total adjustments 4,093,923 3,336,992
----------- ----------
Cash flows from operating activities 2,949,283 3,363,498
Cash Flows used in Investing Activities:
Additions to property and equipment (3,145,652) (3,643,085)
Increase in intangible assets 0 (72,188)
----------- ----------
Cash flows used in investing activities (3,145,652) (3,715,273)
Cash Flows from Financing Activities:
Proceeds from debt borrowings 0 542,178
Payments on capital lease obligation 0 (42,412)
----------- ----------
Cash flows from financing activities 0 499,766
----------- ----------
Net (Decrease) Increase in Cash and Cash Equivalents (196,369) 147,991
Cash and Cash Equivalents, Beginning of Period 9,902,842 100,813
----------- ----------
Cash and Cash Equivalents, End of Period $ 9,706,473 $ 248,804
=========== ==========
Supplemental Disclosure of Cash Flow Information -
Cash paid for interest during the period $ 5,375,000 $ 4,493,578
=========== ==========
</TABLE>
See notes to consolidated financial statements.
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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., ("Finance
Corp."), a Michigan corporation, is a wholly-owned subsidiary of the Partnership
and was organized on June 19, 1997 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. 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.
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,
1997 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 interim financial statements
should be read in conjunction with the audited financial statements and related
notes for the year ended December 31, 1997 included in the Company's 1997 Form
10-K/A (Amendment No. 1) filed with the Securities and Exchange Commission. The
results for interim periods are not necessarily indicative of the results for a
full year.
IMPACT OF RECENTLY ADOPTED ACCOUNTING PRINCIPLES - In June 1997,
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosure about
Segments of an Enterprise and Related Information" was issued. SFAS No. 131
establishes standards for the way that public business enterprises report
financial and descriptive information about their reporting operating segments.
The Company has not determined the impact on its financial statement disclosure.
SFAS No. 131 is effective for the Company's financial statements for the year
ending December 31, 1998.
(2) REGULATORY MATTERS
The cable television industry is subject to extensive governmental
regulation on the federal, state and local levels (but principally by the
Federal Communications Commission ("FCC") and by local franchising authorities).
Many aspects of such regulation have recently been extensively revised and are
currently the subject of judicial proceedings and administrative rulemakings,
which are potentially significant to the Company. In this regard, the Company
believes that the regulation of cable television systems, including the rates
charged for cable services, remains a matter of interest to Congress, the FCC
and local regulatory officials. There has been a recent increase in calls by
certain members of Congress and FCC officials to maintain or even tighten cable
regulation in the absence of widespread effective competition. Accordingly, no
assurance can be given as to what future actions such parties or the courts may
take or the effect thereof on the Company.
Under the FCC's rate regulations, most cable systems were required to
reduce their basic service and cable programming service tiers ("CPST") rates in
1993 and 1994, and have since had their rate increases governed by a complicated
price cap scheme. Operators also have the opportunity of bypassing this
"benchmark" regulatory scheme in favor of traditional "cost-of-service" in cases
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where the latter methodology appears favorable. The FCC also established a
vastly simplified cost of service methodology for small cable companies.
The Company, which qualifies as a small cable company under FCC rules, has
elected to rely on the cost-of-service rules as and when the Systems are
required to justify their rates for regulated services and, therefore, has not
implemented the rate reductions that would otherwise have been required if it
were subject to the FCC's benchmarks. Under the cost-of-service rules applicable
to small cable companies, eligible systems can establish permitted rates under a
simple formula that considers total operating expenses (including amortization
expenses), net rate base, rate of return, channel count and subscribers. If the
per channel rate resulting from these inputs for a cable system is no more than
$1.24, the cable system's rates will be presumed reasonable. If the formula
generated rate exceeds the $1.24, the burden is on the cable operator to
establish the reasonableness of its calculations.
Substantially all of the Company's rates are currently under the $1.24 per
channel level, and the Company believes that all of its rates in excess of the
$1.24 per channel level are reasonable using the formula described above.
However, FCC rules permit local franchise authorities to review basic service
rates, and under certain circumstances, challenge CPST rates at the FCC. An
adverse ruling in any such proceeding could require the Company to reduce its
rates and pay refunds. A reduction in the rates it charges for regulated
services or the requirement that it pay refunds could have a material adverse
effect on the Company. Once the maximum permitted rate allowed by FCC rules is
being charged by the Company in regulated communities, future rate increases may
not exceed an inflation-indexed amount, plus increases in certain costs beyond
the cable operator's control, such as taxes, franchise fees and increased
programming costs. The 1996 Telecommunications Act provides for regulation of
the CPST to expire for all cable systems on March 31, 1999. However, certain
members of Congress and FCC officials have called for the delay of this
regulatory sunset and further have urged more rigorous rate regulation
(including limits on programming cost pass-throughs to cable subscribers) until
a greater degree of competition to incumbent cable operators has developed.
In addition, certain provisions of the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act") could in the
future have a material adverse effect on the Company's business. In particular,
the 1992 Cable Act conveyed to broadcasters the right generally to elect either
to require (i) the local cable operator to carry their signal or (ii) that such
operator obtain the broadcaster's consent before doing so. To date, compliance
with these provisions has not had a material effect on the Company, although
this result may change in the future depending on such factors as market
conditions, channel capacity and similar matters when such arrangements are
renegotiated.
(3) LEGAL PROCEEDINGS
On October 7, 1997, the City Council of Forsyth, Georgia ("Forsyth"), a
community in which the Company provides service, voted to spend $2.7 million to
build a broadband telecommunications plant in competition with the Company. On
December 2, 1997, Forsyth passed a resolution to sell $3 million in revenue
bonds to finance the proposed project. In order to protect its customer base in
Forsyth and surrounding Monroe County, Georgia, the Company sued Forsyth under
the Georgia Open Records Act to force the public disclosure of various documents
concerning, among other things, the feasibility and risk of Forsyth's proposed
project. Forsyth responded by counterclaiming to
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preliminarily enjoin the Company from seeking further information under the
Georgia Open Records Act and from making further statements to the public
concerning Forsyth's proposed project. At a hearing before the Superior Court
for Monroe County on January 27, 1998, the court denied Forsyth's motion for
preliminary injunction. After the Company moved to have Forsyth's counterclaim
dismissed, Forsyth voluntarily dismissed its counterclaim. The Company has filed
a motion with the court to recover its legal costs related to Forsyth's
counterclaim. A hearing on this motion is pending.
In February 1998, Forsyth filed an application with the Public Service
Commission ("PSC") of Georgia seeking certification to operate as a competitive
local exchange carrier ("CLEC"). The facilities and services as to which Forsyth
seeks certification would be competitive with the Company's existing and planned
facilities and services. The Company intervened before the PSC to oppose
Forsyth's CLEC application, and appeared at a hearing and filed a brief in
opposition to Forsyth's application. Forsyth's application remains pending
before the PSC.
On July 14, 1998, Forsyth appeared before the Monroe County Development
Authority (the "Authority") to request the Authority to consider preliminarily
the issuance by the Authority of $4.2 million in debt securities to finance
Forsyth's planned broadband telecommunications plant. The Authority has agreed
to preliminary consideration of Forsyth's request.
At June 30, 1998, the Company had 1,750 basic subscribers in the City of
Forsyth and Monroe County franchise areas. This represents approximately 2% of
the Company's total basic subscribers and, thus, approximately 2% of the
Company's total cash flow and EBITDA. If the current plans for a competing
system ultimately are implemented, this competition likely would result in a
loss of subscribers to the Company's system and/or make it more difficult for
the Company to maintain its prices for subscriptions to the system.
(4) SUBSEQUENT EVENTS
On July 31, 1998, the Company and Rapid Communications Partners, L.P.
("Rapid") entered into an Asset Purchase Agreement (the "Agreement"), pursuant
to which the Company has agreed to sell its cable television systems in
Tennessee (which encompasses Pickett County, Scott County, Morgan County, Roane
County, Fentress County and Cumberland County) to Rapid for approximately $14.7
million in cash. Consummation of the transactions contemplated by the
Agreement, which is expected to occur no later than February 28, 1999, is
subject to certain conditions (including the approvals of certain cable
franchise authorities). The Company also entered into an amendment to its
Credit Agreement that is expected to facilitate borrowings by the Company
thereunder. Among other things, the amendment increases the Company's permitted
total debt coverage.
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JAMES CABLE FINANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF JAMES CABLE PARTNERS, L.P., A DELAWARE LIMITED
PARTNERSHIP)
BALANCE SHEET
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $1,000 $1,000
============ ============
SHAREHOLDER'S EQUITY
Shareholder's equity - Common stock (1,000 shares issued
and outstanding) $1,000 $1,000
============ ============
</TABLE>
See notes to balance sheet.
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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 BALANCE SHEET (UNAUDITED)
(1) ORGANIZATION
James Cable Finance Corp. ("Finance Corp."), a Michigan corporation, is a
wholly-owned subsidiary of James Cable Partners, L.P., a Delaware limited
partnership (the "Partnership"), and was organized on June 19, 1997 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 currently does not have (and it is not expected to have) any material
operations.
(2) STATEMENTS OF OPERATIONS, SHAREHOLDER'S EQUITY AND CASH FLOWS
Since there were no operations in the Finance Corp. for the three months
or six months ended June 30, 1998, a Statement of Operations, a Statement of
Shareholder's Equity and a Statement of Cash Flows have 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 condition 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 difference or changes include those
discussed in the Company's Annual Report on Form 10-K/A (Amendment No. 1) for
the fiscal year ended December 31, 1997 under "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations."
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 and Internet
service) as well as monthly charges for customer equipment rental. Premium
revenues consist of monthly subscription fees for programming provided on a
per-channel basis. Internet revenues consist of monthly subscription fees for
Internet access, modem installation fees and fees for leased lines. In addition,
other revenues are primarily derived from installation and reconnection fees
charged to subscribers to commence or discontinue cable service, late payment
fees, franchise fees, advertising revenues and commissions related to the sale
of goods by home shopping services. At June 30, 1998, the Company had 78,879
basic subscribers and 25,491 premium subscriptions, representing basic
penetration of 61.0% and premium penetration of 32.3% as compared to December
31, 1997 at which time the Company had 78,197 basic subscribers and 24,076
premium subscriptions which represented basic penetration of 60.5% and premium
penetration of 30.8%. At June 30, 1998 the Company had 148 Internet customers in
Durant, OK(which was the only system of the Company providing Internet service
at June 30)which represents a penetration rate of approximately 4% of Durant's
basic cable subscribers.
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 accrual for the General Managers of the Company's
systems and amounts paid to its general partner for management expenses.
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LIQUIDITY AND CAPITAL RESOURCES
General. Liquidity describes the ability to generate sufficient cash
flows to meet the cash requirements of continuing operations which for the
Company includes both day-to-day operating costs (e.g. programming fees,
salaries and marketing) and capital costs (e.g. 750 Mhz upgrades in certain
systems) which allow the Company to remain competitive. In order to provide
enough cash to meet these requirements, the Company relies on both operating
revenues (e.g. monthly fees paid by subscribers for basic and pay services) as
well as the debt financing discussed below. The Company continuously monitors
available cash and cash equivalents in relation to projected cash needs to
maintain adequate balances for current payments while maximizing cash available
for investment opportunities.
Cash Flows from Operating Activities. Cash flows from operating
activities were $2.9 million for the six months ended June 30, 1998 as compared
to $3.4 million for the six months ended June 30, 1997.
Cash Flows used in Investing Activities. Cash flows used in investing
activities decreased $600,000 to $3.1 million for the six months ended June 30,
1998 as compared to $3.7 million for the six months ended June 30, 1997. The
primary reason for this decrease relates to the Company's system upgrade
schedule. During the six months ended June 30, 1997 the Company had several
system upgrades in progress while during the six months ended June 30, 1998 the
Company was mostly in between system upgrade projects.
Cash Flows from / used in Financing Activities. There were no cash flows
from or used in financing activities for the six months ended June 30, 1998.
Cash flows from financing activities for the six months ended June 30, 1997 were
$500,000 which was primarily attributable to proceeds received on long-term debt
borrowings.
Exchange Notes. Pursuant to an Indenture dated August 15, 1997, the
Company issued, and has outstanding, $100 million of unsecured 10-3/4% Senior
Notes due 2004 (the "Exchange Notes"). The Exchange Notes are general senior
unsecured obligations of the Company that mature on August 15, 2004 and rank
equally in right of payment with all other existing and future unsubordinated
indebtedness of the Company and senior in right of payment to any subordinated
obligations of the Company. Interest on the Exchange Notes accrues at the rate
of 10-3/4% per annum and is payable semi-annually in cash arrears on February 15
and August 15, which commenced on February 15, 1998, to holders of record on the
immediately preceding February 1 and August 1. Interest on the Exchange Notes
accrues from the most recent date to which interest has been paid. Interest is
computed on the basis of a 360-day year comprised of twelve 30-day months. See
also the disclosure appearing herein under "Part II - Other Information - Item
2. Changes in Securities and Use of Proceeds."
The Bank Credit Facility. Simultaneously with the sale of the Exchange
Notes, the Company entered into the Bank Credit Facility with Canadian Imperial
Bank of Commerce (an affiliate of CIBC Wood Gundy Securities Corp., an
underwriter of the Exchange Notes), and NBD Bank (an affiliate of First Chicago
Capital Markets, Inc., an underwriter of the Exchange Notes) acting as the
lenders. The Bank Credit Facility is a $20 million revolving credit facility
(with an option to increase the amount of credit available thereunder to $30
million) that matures on August 15, 2002. Proceeds under the Bank Credit
Facility will be available (i) to provide for working capital and general
corporate purposes, (ii)
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to fund certain permitted acquisitions of cable television systems, (iii) to
provide for certain permitted repurchases of up to $5 million in the aggregate
of limited partnership interests in the Company, and (iv) to pay transaction
fees and expenses. The Bank Credit Facility requires payments of accrued
interest on a monthly basis throughout the term, with principal due at maturity.
The Bank Credit Facility is secured by a first priority lien on and
security interest in substantially all of the assets of the Company. The Bank
Credit 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 Bank Credit Facility to annualized
six-month EBITDA) of no more than 2.5 to 1; and (c) maintain a ratio of its
total debt to annualized six-month EBITDA of no more than 7.0 to 1. The Company
is in compliance with each of these covenants. As of June 30, 1998 the covenants
contained in the Bank Credit Facility would have limited the Company's maximum
borrowings thereunder to approximately $11 million. As of June 30, 1998 there
was no indebtedness outstanding under the Bank Credit Facility.
At June 30, 1998, the Company's total indebtedness was $100.0 million,
its total assets were $43.0 million and its partners' deficit was $66.9 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 of
the Exchange Notes.
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 June 30,
1998 1997
---- ----
Amount % Amount %
------ - ------ -
(Dollars in thousands)
<S> <C> <C> <C> <C>
Revenues $9,448 100.0% $8,956 100.0%
System operating expenses 4,703 49.8% 4,324 48.3%
Non-System operating expenses 701 7.4% 615 6.8%
Depreciation and amortization 1,810 19.2% 1,797 20.1%
------ ------ ------ ------
Operating income 2,234 23.6% 2,220 24.8%
Interest expense, net 2,735 28.9% 2,150 24.0%
Other expenses 29 0.3% 159 1.8%
------ ------ ------ ------
Net (loss) income $ (530) (5.6%) $ (89) (1.0%)
====== ====== ====== ======
EBITDA (1) $4,044 42.8% $4,017 44.9%
</TABLE>
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<TABLE>
<CAPTION>
For the Six Months ended June 30,
1998 1997
---- ----
Amount % Amount %
------ - ------ -
(Dollars in thousands)
<S> <C> <C> <C> <C>
Revenues $18,727 100.0% $17,806 100.0%
System operating expenses 9,296 49.6% 8,494 47.7%
Non-System operating expenses 1,477 7.9% 1,240 7.0%
Depreciation and amortization 3,570 19.1% 3,594 20.2%
------- ------- ------- ------
Operating income 4,384 23.4% 4,478 25.1%
Interest expense, net 5,472 29.2% 4,265 24.0%
Other expenses 57 0.3% 186 1.0%
------- ------- ------- ------
Net (loss) income $(1,145) (6.1%) $ 27 0.1%
======= ======= ======= =======
EBITDA (1) $7,954 42.5% $8,072 45.3%
</TABLE>
(1) EBITDA represents operating income before depreciation and amortization. The
Company has included EBITDA data (which are not a measure of financial
performance under Generally Accepted Accounting Principles ("GAAP")) because it
understands such data are used by certain investors to determine a company's
historical ability to service its indebtedness. EBITDA should not be considered
as an alternative to net income as an indicator of the Company's performance or
as an alternative to cash flow as a measure of liquidity as determined in
accordance with GAAP.
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
Revenues. Revenues for the three months ended June 30, 1998 increased by
$500,000, or 5.5%, to $9.5 million from $9.0 million for the three months ended
June 30, 1997. Average monthly total revenues per subscriber for the three
months ending June 30, 1998 were $39.91, as compared to $37.99 for the same
period last year. These increases are primarily the result of rate increases
which the Company implemented during the fourth quarter of 1997.
Subscribers. At June 30, 1998 the Company had 78,879 subscribers which
represents an increase of 542 over the 78,337 subscribers at June 30, 1997. The
Company believes this increase is due to a concentrated marketing effort as well
as strategic capital improvements within certain of the Company's systems.
System Operating Expenses. System operating expenses for the three months
ended June 30, 1998 were $4.7 million, an increase of $400,000, or 8.8%, over
the three months ended June 30, 1997. As a percentage of revenues, system
operating expenses increased 1.5% from 48.3% in 1997 to 49.8% in 1998. 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.
Non-System Operating Expenses. Non-system operating expenses increased
$86,000, or 13.9%, from the three months ended June 30, 1997 to the three months
ended June 30, 1998. This increase is primarily due to increases in legal and
other professional fees.
EBITDA. As a result of the foregoing, EBITDA was $4.0 million for
each of the three months
15
<PAGE> 16
ended June 30, 1997 and June 30, 1998.
Depreciation and Amortization. Depreciation and amortization remained
constant at $1.8 million for the three months ended June 30, 1997 and for the
three months ended June 30, 1998. Decreases in depreciation and amortization
resulting from certain assets becoming fully depreciated or amortized were
offset by capital expenditures made as a part of the Company's ongoing selective
upgrade program.
Interest Expense, Net. Interest expense, net increased $600,000, or 27.2%,
from $2.1 million for the three months ended June 30, 1997 to $2.7 million for
the three months ended June 30, 1998. This is primarily the result of a change
in the Company's debt structure. During the three months ended June 30, 1997 the
Company had an average debt balance of approximately $82 million and an average
interest rate of approximately 9.5%. For the three months ended June 30, 1998
the Company's average debt balance had increased to $100 million with an
interest rate of 10.75%. These changes in debt resulted in an increase in
interest expense of approximately $700,000 from 1997 to 1998. This was partially
offset by an increase in interest revenues of $100,000 from the three months
ended June 30, 1997 to the three months ended June 30, 1998.
Net Loss. As a result of the foregoing factors, the Company's net loss was
$89,000 for the three months ended June 30, 1997 as compared to $530,000 for the
three months ended June 30, 1998.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Revenues. Revenues for the six months ended June 30, 1998 increased by
$900,000, or 5.2%, to $18.7 million from $17.8 million for the six months ended
June 30, 1997. Average monthly total revenues per subscriber for the six months
ending June 30, 1998 were $39.67, as compared to $37.85 for the same period last
year. These increases are primarily the result of rate increases which the
Company implemented during the fourth quarter of 1997.
System Operating Expenses. System operating expenses for the six months
ended June 30, 1998 were $9.3 million, an increase of $800,000, or 9.4%, over
the six months ended June 30, 1997. As a percentage of revenues, system
operating expenses increased 1.9% from 47.7% in 1997 to 49.6% in 1998. 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.
Non-System Operating Expenses. Non-system operating expenses increased
$240,000, or 19.2%, from the six months ended June 30, 1997 to the six months
ended June 30, 1998. This increase is primarily due to increases in legal and
other professional fees.
EBITDA. As a result of the foregoing, EBITDA decreased from $8.1 million
for the six months ended June 30, 1997 to $8.0 million for the six months ended
June 30, 1998.
Depreciation and Amortization. Depreciation and amortization remained
constant at $3.6 million for each of the six months ended June 30, 1997 and June
30, 1998. Decreases in depreciation and amortization resulting from certain
assets becoming fully depreciated or amortized are offset by capital
expenditures made as a part of the Company's ongoing selective upgrade program.
Interest Expense, Net. Interest expense, net increased $1.2 million,
or 28.3%,from $4.3 million
16
<PAGE> 17
for the six months ended June 30, 1997 to $5.5 million for the six months ended
June 30, 1998. This is primarily the result of a change in the Company's debt
structure. During the six months ended June 30, 1997 the Company had an average
debt balance of approximately $82 million and an average interest rate of
approximately 9.5%. For the six months ended June 30, 1998 the Company's average
debt balance had increased to $100 million with an interest rate of 10.75%.
These changes in debt resulted in an increase in interest expense of
approximately $1.4 million from 1997 to 1998. This was partially offset by an
increase in interest revenues of $200,000 from the six months ended June 30,
1997 to the six months ended June 30, 1998.
Net (Loss) / Income. As a result of the foregoing factors, the Company had
a net loss of $1.1 million for the six months ended June 30, 1998 as compared to
net income of $27,000 for the six months ended June 30, 1997.
EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, Statement of Financial Accounting Standards ("SFAS") No.
131, "Disclosure about Segments of an Enterprise and Related Information" was
issued. SFAS No. 131 establishes standards for the way that public business
enterprises report financial and descriptive information about their reporting
operating segments. The Company has not determined the impact on its financial
statement disclosure. SFAS No. 131 is effective for the Company's financial
statements for the year ending December 31, 1998.
Item 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
By virtue of General Instruction 1 to Item 305 of Regulation S-K, and
because it is neither a bank nor a thrift and its market capitalization on
January 28, 1997 did not exceed $2.5 billion, the Company is not required at
this time to provide disclosures under this Item 3.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On October 7, 1997, the City Council of Forsyth, Georgia ("Forsyth"), a
community in which the Company provides service, voted to spend $2.7 million to
build a broadband telecommunications plant in competition with the Company. On
December 2, 1997, Forsyth passed a resolution to sell $3 million in revenue
bonds to finance the proposed project. In order to protect its customer base in
Forsyth and surrounding Monroe County, Georgia, the Company sued Forsyth under
the Georgia Open Records Act to force the public disclosure of various documents
concerning, among other things, the feasibility and risk of Forsyth's proposed
project. Forsyth responded by counterclaiming to preliminarily enjoin the
Company from seeking further information under the Georgia Open Records Act and
from making further statements to the public concerning Forsyth's proposed
project. At a hearing before the Superior Court for Monroe County on January 27,
1998, the court denied Forsyth's motion for preliminary injunction. After the
Company moved to have Forsyth's counterclaim dismissed, Forsyth voluntarily
dismissed its counterclaim. The Company has filed a motion with the court to
recover its legal costs related to Forsyth's counterclaim. A hearing on this
motion is pending.
In February 1998, Forsyth filed an application with the Public Service
Commission ("PSC") of
17
<PAGE> 18
Georgia seeking certification to operate as a competitive local exchange carrier
("CLEC"). The facilities and services as to which Forsyth seeks certification
would be competitive with the Company's existing and planned facilities and
services. The Company intervened before the PSC to oppose Forsyth's CLEC
application, and appeared at a hearing and filed a brief in opposition to
Forsyth's application. Forsyth's application remains pending before the PSC.
On July 14, 1998, Forsyth appeared before the Monroe County Development
Authority (the "Authority") to request the Authority to consider preliminarily
the issuance by the Authority of $4.2 million in debt securities to finance
Forsyth's planned broadband telecommunications plant. The Authority has agreed
to preliminary consideration of Forsyth's request.
At June 30, 1998, the Company had 1,750 basic subscribers in the City of
Forsyth and Monroe County franchise areas. This represents approximately 2% of
the Company's total basic subscribers and, thus, approximately 2% of the
Company's total cash flow and EBITDA. If the current plans for a competing
system ultimately are implemented, this competition likely would result in a
loss of subscribers to the Company's system and/or make it more difficult for
the Company to maintain its prices for subscriptions to the system.
Item 2. Changes in Securities and Use of Proceeds
During the fourth quarter of 1997, the Company exchanged an aggregate
principal amount of $100,000,000 of its 10-3/4% Series B Senior Notes due 2004
(the "Notes") for an equal principal amount of its outstanding 10-3/4% Senior
Notes due 2004 (the "Exchange Notes"). The Notes were initially sold by the
Company for cash on August 15, 1997 in transactions not registered under the
Securities Act of 1933, as amended (the "Securities Act") in reliance upon the
exemption provided in Section 4(2) of the Securities Act. The Notes were sold to
CIBC Wood Gundy Securities Corp. and First Chicago Capital Markets, Inc. and
then subsequently resold to qualified institutional buyers in reliance upon Rule
144A under the Securities Act and to a limited number of institutional
accredited investors in a manner exempt from registration under the Securities
Act.
The proceeds to the Company from the sale of the Notes, net of the
initial purchasers' discount of $3.0 million, was $97.0 million (before
deducting expenses payable by the Company, estimated to be $1.1 million). These
net proceeds were used (i) to repay all indebtedness outstanding under the
Company's then existing bank credit facility (approximately $66.7 million), (ii)
to repay the Company's then existing subordinated debt, including additional
interest (approximately $18.1 million), (iii) to repurchase certain warrants
previously issued by the Company in conjunction with its then existing
subordinated debt ($4.4 million), and (iv) for general corporate purposes
(including capital expenditures to upgrade certain systems) (approximately $6.7
million). Of the amount allocated to general corporate purposes, approximately
$5.9 million has been spent on capital expenditures (including upgrading certain
systems).
The Exchange Notes were registered by the Company under the Securities
Act on November 5, 1997 (registration nos. 333-35183 and 333-35183-01). The
Exchange Notes are substantially identical (including principal amount, interest
rate, maturity and redemption rights) to the Notes for which they were
exchanged, except that (i) the offer and sale of the Exchange Notes was
registered under the Securities Act, and (ii) holders of the Exchange Notes are
not entitled to certain rights of holders of the Notes under the Registration
Rights Agreement of the Company dated as of August 15, 1997 (which terminated
upon the exchange of the Exchange Notes for the Notes). Each of the Notes and
Exchange
18
<PAGE> 19
Notes were issued under an indenture dated as of August 15, 1997 among the
Company and United States Trust Company of New York, as trustee. The Company did
not receive any proceeds from the exchange.
The Exchange Notes are general senior unsecured obligations of the
Company that mature on August 15, 2004 and rank equally in right of payment with
all other existing and future unsubordinated indebtedness of the Company and
senior in right of payment to any subordinated obligations of the Company.
Interest on the Exchange Notes accrues at the rate of 10-3/4% per annum and is
payable semi-annually in cash arrears on February 15 and August 15, which
commenced on February 15, 1998, to holders of record on the immediately
preceding February 1 and August 1. Interest on the Exchange Notes accrues from
the most recent date to which interest has been paid.
Item 5. Other Information
On July 31, 1998, the Company and Rapid Communications Partners, L.P.
("Rapid") entered into an Asset Purchase Agreement (the "Agreement"), pursuant
to which the Company has agreed to sell its cable television systems in
Tennessee (which encompasses Pickett County, Scott County, Morgan County, Roane
County, Fentress County and Cumberland County) to Rapid for approximately $14.7
million in cash. Consummation of the transactions contemplated by the Agreement,
which is expected to occur no later than February 28, 1999, is subject to
certain conditions (including the approvals of certain cable franchise
authorities). The Company also entered into an amendment to its Credit Agreement
that is expected to facilitate borrowings by the Company thereunder. Among other
things, the amendment increases the Company's permitted total debt coverage.
19
<PAGE> 20
Item 6.
(a) Exhibits.
EXHIBIT NO. DESCRIPTION
- ----------- -----------
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*
4.7 -- First Amendment to Credit Agreement dated as of August 5,
1998 among James Cable Partners, L.P., the lenders party
thereto, NBD Bank, as documentation agent, and Canadian
Imperial Bank of Commerce, as administrative 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 Schedule**
- --------------------------------
* Incorporated by reference to the corresponding exhibits to the
Registrants' Registration Statement on Form S-4 (Registration No.
333-35183).
** Filed herewith.
(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: August 7, 1998 By: /s/ William R. James
--------------------------------
William R. James
President
By: James Communications Partners
General Partner
By: DKS Holdings, Inc.
Partner
Date: August 7, 1998 By: /s/ Daniel K. Shoemaker
--------------------------------
Daniel K. Shoemaker
President (Principal
financial officer and
chief accounting officer)
Date: August 7, 1998
JAMES CABLE FINANCE CORP.
Date: August 7, 1998 By: /s/ William R. James
------------------------------
William R. James
President
Date: August 7, 1998 By: /s/ Daniel K. Shoemaker
--------------------------------
Daniel K. Shoemaker
Treasurer (Principal
financial officer and
chief accounting officer)
<PAGE> 22
Exhibit Index
-------------
EXHIBIT NO. DESCRIPTION
- ----------- -----------
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*
4.7 -- First Amendment to Credit Agreement dated as of August __,
1998 among James Cable Partners, L.P., the lenders party
thereto, NBD Bank, as documentation agent, and Canadian
Imperial Bank of Commerce, as administrative 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 Schedule**
- --------------------------------
* Incorporated by reference to the corresponding exhibits to the
Registrants' Registration Statement on Form S-4 (Registration No.
333-35183).
** Filed herewith.
<PAGE> 1
EXHIBIT 4.7
Execution Copy
JAMES CABLE PARTNERS, L.P.
FIRST AMENDMENT TO CREDIT AGREEMENT
This FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is dated as of
August 5, 1998 and entered into by and among JAMES CABLE PARTNERS, L.P., a
Delaware limited partnership ("Company"), THE FINANCIAL INSTITUTIONS LISTED ON
THE SIGNATURE PAGES HEREOF (each individually referred to herein as a "Lender"
and collectively as "Lenders"), NBD BANK ("NBD"), as documentation agent for
Lenders (in such capacity, "Documentation Agent") and CANADIAN IMPERIAL BANK OF
COMMERCE ("CIBC"), as administrative agent for Lenders (in such capacity,
"Administrative Agent").
WITNESSETH:
WHEREAS, the parties hereto are parties to a Credit Agreement dated as of August
15, 1997 (the "Agreement"); and
WHEREAS, the Agreement amended and restated the Original Credit Agreement in its
entirety; and
WHEREAS, the parties desire to amend the Agreement.
NOW, THEREFORE, in consideration of the premises and the agreements, provisions
and covenants herein contained, Company, Lenders and Agents agree that the
Agreement and the Original Credit Agreement, as amended and restated by the
Agreement, shall be amended as follows:
1. The definition of "Loans" set forth in the Agreement shall be amended and
restated in its entirety to read and provide as follows:
"Loans" means the Loans made by Lenders to Company pursuant to subsection
2.1A(i).
2. The following definitions are hereby added to Section 1.1 of the Agreement
in appropriate alphabetical order:
"RCP Assets" shall mean that certain cable system and related
assets of the Company described on Schedule A-1 hereto.
"RCP Asset Sale Date" shall mean the date the sale of the RCP
Assets is closed as determined by the Documentation Agent.
<PAGE> 2
"RCP Sale Documents" shall mean all agreements, instruments
and other documents executed or to be executed in connection with the sale of
the RCP Assets.
"Tennessee Acquisition" shall mean the acquisition by the
Company of the cable system and related assets in Tennessee further described on
Schedule A-2 hereto.
"Tennessee Acquisition Date" shall mean the date the Tennessee
Acquisition is closed as determined by the Documentation Agent.
"Tennessee Acquisition Documents" shall mean all agreements,
instruments and other documents executed or to be executed in connection with
the Tennessee Acquisition.
3. Section 2.1A(i) of the Agreement shall be amended by deleting the following
clause from such Section: ";provided that each Lender's Commitment shall expire
immediately and without further action on August 15, 1997 if the initial Loans
are not made on or before that date".
4. Sections 6.6 A and B of the Agreement shall be restated as follows:
"6.6 Financial Covenants
A. Total Debt Coverage. Company will not permit the ratio of (y) Consolidated
Total Debt as of any day during the periods set forth below to (z) Consolidated
Adjusted EBITDA for the most recently ended six consecutive month period ended
as of such day multiplied by 2 to be greater than the correlative ratio
indicated in the table below:
Period
Consolidated
Total Debt
to
Consolidated
Adjusted EBITDA
From and including August 6, 1998 through but excluding March 31, 2000 7.50:1.00
From and including March 31, 2000 and thereafter 7.25:1.00
From and including September 30, 2000 and thereafter 7.00:1.00
<PAGE> 3
From and including December 31, 2001 and thereafter 6.75:1.00
B. Senior Debt Coverage. Company will not permit the ratio of (y) Consolidated
Senior Debt as of any day during the period set forth below to (z) Consolidated
Adjusted EBITDA for the six (6) consecutive month period ended as of such day
multiplied by 2 to be greater than the correlative ratio indicated:
Period
Consolidated
Senior Debt
to
Consolidated
Adjusted EBITDA
December 31, 1995 through July 31, 1998 2.50:1.00
August 1, 1998 and thereafter 1.75:1.00
5. Section 6.7 is amended by deleting the period at the end of clause (iii)
thereof and replacing it with "; and" and adding two new clauses (iv) and (v) to
the end thereof as follows:
(iv) As long as (w) no Event of Default or Potential Event of Default
shall have occurred and be continuing or would result therefrom, (x) the Company
delivers all Tennessee Acquisition Documents as either Agent may reasonably
request, and the Tennessee Acquisition shall be substantially on the terms as
described to the Agents prior to August 5, 1998, (y) the Company delivers an
Officers Certificate to the Agents and the Lenders, in form and substance
reasonably satisfactory to the Agents, confirming that it
<PAGE> 4
will be in compliance, on a Pro Form Basis after giving effect to the Tennessee
Acquisition, with all covenants set forth in subsection 6.6 hereof and all other
covenants contained in the Loan Documents and that the Tennessee Acquisition has
been completed in conformance with the terms and provisions of the Tennessee
Acquisition Documents and all laws and regulations, and (z) the aggregate
consideration paid or payable for the Tennessee Acquisition does not exceed
$8,000,000, the Company may complete the Tennessee Acquisition; and
(v) As long no Event of Default or Potential Event of Default shall
have occurred and be continuing or result therefrom and the Company delivers all
RCP Asset Sale Documents to the Agent, and the sale of the RCP Assets shall be
substantially on the terms as described to the Agents prior to August 5, 1998,
and the aggregate consideration paid or payable for the RCP Assets is not less
than $14,000,000, the Company may sell the RCP Assets provided that (x) the
proceeds thereof are used to prepay the Loans and all other obligations owing
pursuant to the Loan Documents until paid in full, and the Company shall use any
remaining proceeds thereof for capital expenditures or for other purposes to the
maximum extent possible to avoid any prepayment under the Senior Unsecured Notes
and (y) notwithstanding anything in Section 2.4A(iii)(a) to the contrary, the
prepayment from the proceeds of the sale of the RCP Assets shall not reduce the
Commitments.
6. Schedules A-1 and A-2 attached hereto are added to the Credit Agreement as
Schedules A-1 and A-2.
7. The Company represents and warrants to the Lenders that:
(a) The execution, delivery and performance of this Amendment
is within its powers, has been duly authorized and is not in contravention with
any law, of the terms of its partnership agreement or any undertaking to which
it is a party or by which it is bound.
(b) This Amendment is the legal, valid and binding obligation
of the Company enforceable against it in accordance with the terms hereof.
(c) After giving effect to the amendments herein contained,
the representations and warranties contained in Section 4 of the Credit
Agreement and in the other Loan Documents are true on and as of the date hereof
with the same force and effect as if made on and as of the date hereof.
(d) No Event of Default or Potential Event of Default exists
or has occurred and is continuing on the date hereof.
8. This Amendment shall not become effective until each of the following has
been satisfied:
(a) This Amendment shall be signed by the Company and the
Lenders.
<PAGE> 5
(b) Each of the Guarantors shall have executed the Consent and
Agreement at the end of this Amendment.
9. Except as expressly amended hereby, the Company agrees that the Loan
Documents are ratified and confirmed and shall remain in full force and effect
and that it has not setoff, counterclaim, defense or other claim or dispute with
respect to any of the Loan Documents or the transactions contemplated thereby.
10. It is expressly acknowledged and agreed that all parties have been
represented by counsel and have participated in the negotiation and drafting of
this Amendment and the Agreement, and that there shall be no presumption against
any party on the ground that such party was responsible for preparing this
Amendment and the Agreement or any part of it.
11. This Amendment may be executed in counterparts, all of which shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each of the parties and delivered to the other
parties, it being understood that all parties need not sign the same
counterpart.
12. This Amendment amends the Agreement. It is the intent and purpose of the
parties to this Amendment, by executing this Amendment, to ratify, confirm and
reaffirm the Agreement and all of its terms and provisions as amended by this
Amendment. This Amendment and the Agreement (including the documents and the
instruments referred to in this Amendment and the Agreement) constitute the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter of this
Amendment and the Agreement. All capitalized terms not otherwise defined in this
Amendment shall be defined in this Amendment as in the Agreement.
13. THIS AMENDMENT AND THE AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MICHIGAN, WITHOUT REGARD TO ANY
APPLICABLE CONFLICTS OF LAW PRINCIPLES.
14. Any term or provision of this Amendment which is invalid or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Amendment or affecting
the validity or enforceability of any of the terms or provisions of this
Amendment in any other jurisdiction. If any provision of this Amendment is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their respective officers hereunto duly authorized as
of the date
<PAGE> 6
first written above.
COMPANY:
JAMES CABLE PARTNERS, L.P.
By: James Communications Partners,
a General Partner
By: Jamesco, Inc.,
a General Partner
By: /s/ William R. James
-------------------------------------------------
Name: William R. James
Title: President
Notice Address:
James Cable Partners, L.P.
710 North Woodward Avenue, Suite 180
Bloomfield Hills, MI 48304
Attention: William R. James
Telephone: (248) 647-1080
Telecopy: (248) 647-1321
CANADIAN IMPERIAL BANK OF COMMERCE,
as Lender and as Administrative Agent
By: /s/ Colleen Risorto
----------------------------------------------------
Name: Colleen Risorto
Title: Executive Director
Notice Address:
Canadian Imperial Bank of Commerce
425 Lexington Avenue 8th Floor
New York, New York 10017
Attention: Lorain Granberg
Telephone: (212) 856-3630
Telecopy: (212) 856-3558
NBD BANK, as Lender and as
Documentation Agent
By: /s/ William H. Canney
--------------------------------------------------
Name: William H. Canney
<PAGE> 7
Title: Vice President
Notice Address:
NBD Bank
611 Woodward
Detroit, Michigan 48226
Attention: William Canney
Telephone: (313) 225-3489
Telecopy: (313) 225-2290
<PAGE> 8
CONSENT AND AGREEMENT
As of the date and year first above written, each of the undersigned
hereby:
(a) fully consents to the terms and provisions of the above Amendment and the
consummation of the transactions contemplated hereby and agrees to all terms and
provisions of the above Amendment applicable to it;
(b) agrees that each Guaranty and all other agreements executed by any of the
undersigned in connection with the Credit Agreement or otherwise in favor of the
Agents or the Lenders (collectively, the "Guarantor Documents") are hereby
ratified and confirmed and shall remain in full force and effect, and each of
the undersigned acknowledges that it has no setoff, counterclaim, defense or
other claim or dispute with respect to any Guarantor Document; and
(c) acknowledges that its consent and agreement hereto is a condition to the
Lenders' obligation under this Amendment and it is in its interest and to its
financial benefit to execute this consent and agreement.
JAMES CABLE FINANCE CORP.
By: /s/ William R. James
--------------------------------------
Its: William R. James, President
<PAGE> 9
SCHEDULE A-1
Those certain assets of James Cable Partners, L.P. comprising the cable
television system(s) of the Company in and around Pickett County, Scott County,
Morgan County, Roane County, Fentress County and Cumberland County, Tennessee
that are to be sold pursuant to the RCP Sale Documents.
<PAGE> 10
SCHEDULE A-2
Those certain assets of Fannon Cable T.V., Inc. comprising the cable television
system(s) of Fannon Cable T.V., Inc. in and around New Tazewell, Tazewell,
Harrogate and Cumberland Gap, Tennessee and Claiborne County, Tennessee that are
to be acquired pursuant to the Tennessee Acquisition Documents.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000926283
<NAME> JAMES CABLE FINANCE CORP.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 9,706,473
<SECURITIES> 0
<RECEIVABLES> 3,476,648
<ALLOWANCES> 24,461
<INVENTORY> 0
<CURRENT-ASSETS> 13,232,036
<PP&E> 87,899,710
<DEPRECIATION> 73,699,922
<TOTAL-ASSETS> 42,950,056
<CURRENT-LIABILITIES> 9,806,136
<BONDS> 100,000,000
0
0
<COMMON> 0
<OTHER-SE> (66,856,080)
<TOTAL-LIABILITY-AND-EQUITY> 42,950,056
<SALES> 0
<TOTAL-REVENUES> 18,726,780
<CGS> 0
<TOTAL-COSTS> 14,343,234
<OTHER-EXPENSES> (149,758)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,677,944
<INCOME-PRETAX> (1,144,640)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,144,640)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,144,640)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
