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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, 2000
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)
<TABLE>
<S> <C>
Delaware 38-2778219
Michigan 38-3182724
(State or Other Jurisdiction of Incorporation (I.R.S. Employer Identification No. of
or Organization of each Registrant) each Registrant)
38710 Woodward Avenue, Suite 180 48304
Bloomfield Hills, Michigan (Zip Code)
(Address of principal executive offices)
</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. /x/ Yes / / No
Number of shares of common stock of James Cable Finance Corp. outstanding as of
November 13, 2000: 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.
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TABLE OF CONTENTS
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PAGE NO.
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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 Sheets of James Cable Finance Corp. 9
Notes to Balance Sheets 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 6. Exhibits and Reports on Form 8-K 20
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
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September 30, December 31,
2000 1999
------------------ ------------------
(Unaudited)
<S> <C> <C>
ASSETS
------
Cash & Cash Equivalents $ 1,386,344 $ 5,342,420
Accounts Receivable - Subscribers (Net of allowance for
doubtful accounts of $12,879 in 2000 and $28,141 in 1999) 3,500,275 3,356,444
Prepaid Expenses & Other 235,062 180,635
Property & Equipment:
Cable television distribution systems and equipment 94,561,708 87,448,177
Land and land improvements 296,681 296,681
Buildings and improvements 988,121 988,121
Office furniture & fixtures 2,169,720 2,169,720
Vehicles 3,592,938 3,592,938
------------------ ------------------
Total 101,609,168 94,495,637
Less accumulated depreciation (75,802,079) (70,686,387)
------------------ ------------------
Total 25,807,089 23,809,250
Deferred Financing Costs (Net of accumulated amortization of
$1,947,559 in 2000 and $1,474,393 in 1999) 2,263,603 2,736,769
Intangible Assets, Net 14,874,272 16,353,084
Deposits 9,942 20,842
------------------ ------------------
Total Assets $ 48,076,587 $ 51,799,444
================== ==================
LIABILITIES & PARTNERS' DEFICIT
-------------------------------
Liabilities:
Debt $ 104,000,000 $ 100,000,000
Accounts payable 6,577 272,588
Accrued expenses 2,608,830 2,584,667
Accrued interest on 10-3/4% Senior Notes 1,343,749 4,031,249
Unearned revenue 3,056,245 3,072,305
Subscriber deposits 20,032 21,451
------------------ ------------------
Total 111,035,433 109,982,260
Commitments and Contingencies (Note 2)
Partners' Deficit:
Limited partners (56,864,784) (52,314,823)
General partner (6,094,062) (5,867,993)
------------------ ------------------
Total (62,958,846) (58,182,816)
------------------ ------------------
Total Liabilities & Partners' Deficit $ 48,076,587 $ 51,799,444
================== ==================
</TABLE>
See notes to consolidated financial statements.
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JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
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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,
2000 1999 2000 1999
------------------ ----------------- ----------------- -----------------
(Unaudited)
<S> <C> <C> <C> <C>
Revenues $ 9,406,644 $ 9,144,068 $ 28,343,884 $ 28,080,610
System Operating Expenses (Excluding
Depreciation and Amortization) 5,520,607 5,042,265 16,331,114 15,224,818
Non-System Operating Expenses:
Management fee 362,948 456,748 1,197,427 1,414,797
Other 126,134 198,955 461,577 676,275
------------------ ----------------- ----------------- -----------------
Total non-system operating
expenses 489,082 655,703 1,659,004 2,091,072
Depreciation and Amortization 2,376,749 1,853,331 6,732,504 5,565,448
------------------ ----------------- ----------------- -----------------
Operating Income 1,020,206 1,592,769 3,621,262 5,199,272
Interest and Other:
Interest expense (2,878,099) (2,845,222) (8,395,130) (8,608,354)
Interest income 28,835 41,915 80,780 82,832
Other (26,917) (28,749) (82,942) (89,567)
------------------ ----------------- ----------------- -----------------
Total interest and other (2,876,181) (2,832,056) (8,397,292) (8,615,089)
------------------ ----------------- ----------------- -----------------
Loss before gains on sales of cable systems (1,855,975) (1,239,287) (4,776,030) (3,415,817)
Gains on sales of cable systems 0 0 0 15,887,169
------------------ ----------------- ----------------- -----------------
Net (Loss) Income $ (1,855,975) $ (1,239,287) $ (4,776,030) $ 12,471,352
================== ================= ================= =================
</TABLE>
See notes to consolidated financial statements.
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JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY
Consolidated Statements of Partners' Deficit
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Limited General
Partners Partner Total
------------------ ------------------ ------------------
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Balance, December 31, 1999 $ (52,314,823) $ (5,867,993) $ (58,182,816)
Net loss (unaudited) (4,549,961) (226,069) (4,776,030)
------------------ ------------------ ------------------
Balance, September 30, 2000 (unaudited) $ (56,864,784) $ (6,094,062) $ (62,958,846)
================== ================== ==================
</TABLE>
See notes to consolidated financial statements.
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JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
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For the Nine For the Nine
Months Ended Months Ended
September 30, September 30,
2000 1999
----------------- -----------------
(Unaudited)
<S> <C> <C>
Cash Flows used in Operating Activities:
Net (loss) income $ (4,776,030) $ 12,471,352
Adjustments to reconcile net (loss) income to cash
flows used in operating activities:
Depreciation 5,115,692 3,627,153
Amortization 1,616,812 1,938,295
Noncash interest expense 473,166 473,166
Gains on sales of cable systems 0 (15,887,169)
(Increase) Decrease in assets:
Accounts receivable (143,831) 77,171
Prepaid expenses (54,427) 43,854
Deposits 10,900 (8,350)
(Decrease) Increase in liabilities:
Accounts payable (266,011) (265,924)
Accrued expenses 24,163 22,377
Accrued interest on 10-3/4% Senior Notes (2,687,500) (2,687,500)
Unearned revenue (16,060) (155,868)
Subscriber deposits (1,419) (1,598)
----------------- -----------------
Total adjustments 4,071,485 (12,824,393)
----------------- -----------------
Cash flows used in operating activities (704,545) (353,041)
Cash Flows (used in) from Investing Activities:
Additions to property and equipment (7,113,531) (7,060,279)
Increase in intangible assets (138,000) (495,000)
Net proceeds from sales of systems 0 16,753,000
----------------- -----------------
Cash flows (used in) from investing activities (7,251,531) 9,197,721
Cash Flows from (used in) Financing Activities:
Proceeds from debt borrowings 4,000,000 0
Principal payments on debt 0 (3,500,000)
----------------- -----------------
Cash flows from (used in) financing activities 4,000,000 (3,500,000)
----------------- -----------------
Net (Decrease) Increase in Cash and Cash Equivalents (3,956,076) 5,344,680
Cash and Cash Equivalents, Beginning of Period 5,342,420 1,465,193
----------------- -----------------
Cash and Cash Equivalents, End of Period $ 1,386,344 $ 6,809,873
================= =================
Supplemental Disclosure of Cash Flow Information -
Cash paid for interest during the period
(net of amounts capitalized) $ 10,589,140 $ 10,839,835
================= =================
</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., a Michigan
corporation ("Finance Corp."), was organized on June 19, 1997 and is a
wholly-owned subsidiary of the Partnership. 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,
1999 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, 1999 included in the Company's 1999 Form
10-K 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 1998,
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities" was issued. SFAS No. 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure those instruments
at fair value. The standard is effective for the first quarter of the Company's
fiscal year beginning January 1, 2001. The Company does not anticipate that the
adoption of SFAS No. 133 will have a material impact on its financial position
or results of operations.
(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. Critics of the cable television industry
continue to seek to maintain or even tighten cable rate 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.
The Company, in addition to providing cable television services, also
provides Internet access services, both dial-up and high-speed, to a portion of
its subscriber base. While there is no significant federal regulation of cable
system delivery of Internet services at the current time this could change in
the future as cable systems expand their broadband delivery of Internet
services. In
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particular, there have been proposals made to Congress and the FCC which would
allow unaffiliated Internet service providers and online service providers
access to a cable systems distribution network and the FCC has commenced a
proceeding to examine this issue. Thus, while no significant regulations exist
at the current time, there can be no assurances as to what future actions will
be taken or the effects of such actions on the Company.
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JAMES CABLE FINANCE CORP.
(A WHOLLY OWNED SUBSIDIARY OF JAMES CABLE PARTNERS, L.P.,
A DELAWARE LIMITED PARTNERSHIP)
BALANCE SHEETS
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September 30, December 31,
2000 1999
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
------
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 sheets.
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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 SHEETS (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. from the date of
inception through September 30, 2000, 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 differences or changes include those
discussed in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 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, Internet
service and digital 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. Digital service revenue includes monthly subscription fees for
tiers of digital programming and fees charged for pay-per-view movies, concerts
and sporting events. Other revenues are derived from installation and
reconnection fees charged to subscribers to commence cable service, late payment
fees, franchise fees, advertising revenues and commissions related to the sale
of goods by home shopping services. At September 30, 2000, the Company had
69,757 basic subscribers and 22,193 premium subscriptions, representing basic
penetration of 53.9% and premium penetration of 31.8% as compared to December
31, 1999 at which time the Company had 71,864 basic subscribers and 23,001
premium subscriptions which represented basic penetration of 55.5% and premium
penetration of 32.0%.
As of September 30, 2000 the Company was offering its high-speed Internet
service to approximately 40% of its cable subscribers and had more than 2,600
high-speed Internet customers. In addition, the Company was offering its dial-up
Internet services to approximately 50% of its cable subscribers and had
approximately 3,500 dial-up Internet customers.
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, premium and digital 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.
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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 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.
LIQUIDITY AND CAPITAL RESOURCES
General. Liquidity describes the ability to generate sufficient cash
flows to meet the cash requirements of continuing operations and to pay
obligations as they mature. Liquidity, in the context of the Company's
operations, is typically determined by cash flows from operating activities
(e.g. initial installation charges and monthly service fees paid by subscribers)
and the cash flows used in investing activities (e.g. spending associated with
capital projects). The Company continuously monitors its available cash and cash
equivalents in relation to projected cash needs in an effort to maintain
adequate balances for current payments.
The Company is more highly leveraged than many cable television companies
and certain of its competitors. A substantial portion of its cash flow from
operations must be committed to the payment of its interest expense and is not
available for other purposes. The Company's high degree of leverage limits both
its flexibility in reacting to changes in its business and its cash flows and
its ability to obtain additional financing for working capital and general
corporate purposes.
At September 30, 2000, the Company's total indebtedness was $104.0
million, its total assets were $48.1 million and its partners' deficit was $63.0
million. On July 21, 2000 the Company's corporate credit rating and bank loan
rating, as well as the rating on its Notes, were downgraded. According to the
rating agency's press release, the downgraded ratings, which remain on credit
watch with negative implications, are based on a "very tight liquidity
situation, subscriber and EBITDA declines and a challenging competitive
environment."
The Company is currently in compliance with the debt covenants imposed by
the Notes and the Credit Facility. While the Company's cash flows have been
sufficient to meet its debt service requirements to date, based on the Company's
current holdings of available cash and cash equivalents, its anticipated cash
flows from operating activities and its projected cash needs, (i) the Company
may not be in compliance with a debt ratio covenant under the Credit Facility
after December 30, 2000, and (ii) the Company may not have funds sufficient to
pay in full all interest due and payable with respect to the Notes on
February 15, 2001. In an effort to improve its ability to service its debt, the
Company is attempting to increase its cable and Internet service revenues and is
seeking modifications to the Credit Facility that are intended to facilitate
increased cash flows from financing activities. However, there can be no
assurance that the Company will be successful in these endeavors.
Cash Flows from Operating Activities. Net cash used in operating
activities was $700,000 for the nine months ended September 30, 2000 as compared
to $400,000 for the nine months ended September 30, 1999.
Cash Flows used in / from Investing Activities. Net cash used in investing
activities was $7.3 million for the nine months ended September 30, 2000 as
compared to net cash from investing activities of $9.2 million for the nine
months ended September 30, 1999. This change in investing cash flow is primarily
attributable to the $16.8 million of net proceeds received upon the sales of the
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Tennessee and Forsyth and Monroe County, Georgia cable systems, both of which
occurred during the first quarter of 1999.
Cash Flows from / used in Financing Activities. Cash flows from financing
activities for the nine months ended September 30, 2000 amounted to $4.0 million
of proceeds from debt borrowings while the cash flows used in financing
activities for the nine months ended September 30, 1999 amounted to $3.5 million
of principal payments on debt.
Balance Sheet. Cash decreased by $4.0 million from $5.4 million at
December 31, 1999 to $1.4 million at September 30, 2000. This decrease was
primarily the result of $10.8 million in interest payments that the Company made
during the first nine months of 2000 which was partially offset by the $4.0
million in proceeds from debt borrowings discussed above. Property & Equipment
increased by $7.1 million during the first nine months of 2000 primarily due to
capital spending made as a part of the Company's ongoing selective system
upgrade and rebuild program as well as the launch of its digital services in
many of its systems.
The Notes. The Company has outstanding an aggregate principal amount of
$100 million of its 10-3/4% Series B Senior Notes due 2004 (the "Notes"). The
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. The Notes are subordinated in
right of payment to all secured indebtedness of the Company. Interest on the
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 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.
There is no public market for the Notes. The Company has not and does not
intend to list the Notes on any securities exchange or to seek approval for
quotation through any automated quotation system.
The Credit Facility. The Company has a Credit Facility with two
independent banks acting as the lenders. The 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 Credit Facility will be available (i) to provide for working capital
and general corporate purposes, (ii) 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 Credit Facility
currently requires the Company to maintain the ratio of its total debt to
annualized six-month EBITDA at no more than 7.5 to 1. As of September 30, 2000,
this covenant limited the Company's maximum borrowings thereunder to
approximately $4.5 million. The Credit Facility requires payments of accrued
interest on a monthly basis throughout the term, with principal payment due at
maturity. The Company had $4 million outstanding under the Credit Facility at
September 30, 2000.
The Credit Facility is secured by a first priority lien on and security
interest in substantially all of the assets of the Company. The 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,
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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 Credit
Facility to annualized six-month EBITDA) of no more than 1.75 to 1; and (c)
maintain the total debt ratio described above. In addition, the second amendment
to the Credit Facility, dated December 31, 1999, added certain restrictions to
the amount of capital expenditures that the Company can make for the remainder
of the Credit Facility term. The Company is currently in compliance with each of
these covenants.
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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,
2000 1999
------------------------ -------------------------
Amount % Amount %
----------- --------- ------------ ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Revenues $ 9,407 100.0 % $ 9,144 100.0 %
System operating expenses 5,521 58.7 5,042 55.1
Non-System operating expenses 489 5.2 656 7.2
Depreciation and amortization 2,377 25.2 1,853 20.3
----------- --------- ------------ ----------
Operating income 1,020 10.9 1,593 17.4
Interest expense, net 2,849 30.3 2,803 30.7
Other expenses 27 0.3 29 0.3
----------- --------- ------------ ----------
Net loss $ (1,856) (19.7)% $ (1,239) (13.6)%
=========== ========= ============ ==========
EBITDA (1) $ 3,397 36.1 % $ 3,446 37.7 %
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months ended September 30,
2000 1999
------------------------- -------------------------
Amount % Amount %
----------- --------- ----------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Revenues $ 28,344 100.0 % $ 28,081 100.0 %
System operating expenses 16,331 57.6 15,225 54.2
Non-System operating expenses 1,659 5.9 2,091 7.4
Depreciation and amortization 6,733 23.8 5,566 19.9
----------- --------- ----------- ----------
Operating income 3,621 12.7 5,199 18.5
Interest expense, net 8,314 29.3 8,525 30.4
Other expenses 83 0.3 90 0.3
----------- --------- ----------- ----------
Loss before gains on sales of cable systems (4,776) (16.9) (3,416) (12.2)
Gains on sales of cable systems 0 0.0 15,887 56.6
----------- --------- ----------- ----------
Net (loss) income $ (4,776) (16.9)% $ 12,471 44.4 %
=========== ========= =========== ==========
EBITDA (1) $ 10,354 36.5 % $ 10,765 38.3 %
</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.
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THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1999
Revenues. Revenues for the three months ended September 30, 2000 increased
by $300,000, or 2.9%, to $9.4 million from $9.1 million for the three months
ended September 30, 1999. This increase is primarily attributable to an increase
in the Company's Internet revenues for the same periods. The Company's basic
revenues for the third quarter of 2000 remained fairly consistent with the third
quarter of 1999 as the loss in its basic subscriber base was partially offset by
rate increases implemented since September 30, 1999. Average monthly total
revenues per subscriber for the three months ended September 30, 2000 were
$45.06, as compared to $42.24 for the same period last year.
Subscribers. At September 30, 2000 the Company had 69,757 subscribers
which represents a decrease of 2,141 from the 71,898 subscribers at September
30, 1999. Included in the 69,757 subscribers at September 30, 2000 were
approximately 800 subscribers that the Company purchased from a franchised cable
service competitor in Lafayette, Alabama in November of 1999. Thus, without this
purchase the Company's subscriber base declined by approximately 2,941 from
September 30, 1999 to September 30, 2000. The Company believes that this
decrease is a result of the increased availability and affordability of
competitive video services from satellite dishes and other alternatives to
traditional hard-line cable services. The Company continues to respond to this
competition with the introduction of advanced telecommunications services and
aggressive marketing campaigns.
System Operating Expenses. System operating expenses for the three months
ended September 30, 2000 were $5.5 million, an increase of $500,000, or 9.5%,
over the three months ended September 30, 1999. As a percentage of revenues,
system operating expenses increased 3.6% from 55.1% in 1999 to 58.7% in 2000.
Approximately 40% of this increase in system operating expenses is a result of
variable cost increases associated with higher programming rates and new
programming launches including digital programming. The remaining increase
is attributable to various fixed operating expenses as well as costs associated
with the Company's new marketing strategies.
Non-System Operating Expenses. Non-system operating expenses decreased by
$200,000, or 25.4%, from $700,000 for the three months ended September 30, 1999
to $500,000 for the three months ended September 30, 2000. The reasons for this
decrease include a $100,000 reduction in the management fees paid to the
Company's general partner as well as a reduction in legal and professional fees
paid during the third quarter of 2000.
EBITDA. As a result of the foregoing, EBITDA remained consistent at $3.4
million for the three months ended September 30, 1999 and the three months ended
September 30, 2000.
Depreciation and Amortization. Depreciation and amortization increased by
$500,000, or 28.2%, from the three months ended September 30, 1999 to the three
months ended September 30, 2000. This increase is primarily due to the capital
expenditures made as a part of the Company's ongoing selective upgrade program
as well as the launch of its digital services is many of its systems.
Interest Expense, Net. Interest expense, net remained consistent at
$2.8 million for the three months ended September 30, 1999 and 2000.
Net Loss. As a result of the foregoing factors, the Company's net loss was
$1.9 million for the three months ended September 30, 2000 as compared to $1.2
million for the same period last year.
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NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1999
Revenues. Revenues for the nine months ended September 30, 2000 increased
by $300,000 to $28.4 million from $28.1 million for the nine months ended
September 30, 1999. Increases in the Company's Internet revenues of $800,000 and
digital revenues of $200,000 from the nine months ended September 30, 1999 to
the nine months ended September 30, 2000 were offset by a decrease in the
Company's basic and premium revenues for the same periods. As a result of rate
increases implemented by the Company since September 30, 1999, average monthly
total revenues per subscriber for the nine months ended September 30, 2000 were
$44.82, as compared to $41.24 for the same period last year.
System Operating Expenses. System operating expenses for the nine months
ended September 30, 2000 were $16.3 million, an increase of $1.1 million, or
7.3%, over the nine months ended September 30, 1999. As a percentage of
revenues, system operating expenses increased 3.4% from 54.2% in 1999 to 57.6%
in 2000. The primary reason for this increase are expenses associated with the
launching of the Company's Internet services in many of its systems as well as
variable cost increases associated with higher programming rates and new
programming launches including digital programming.
Non-System Operating Expenses. Non-system operating expenses decreased
from $2.1 million for the nine months ended September 30, 1999 to $1.7 million
for the nine months ended September 30, 2000. This decrease was due to a
reduction in legal and professional fees as well as a $200,000 reduction in the
management fees paid to the Company's general partner.
EBITDA. As a result of the foregoing, EBITDA decreased from $10.8 million
for the nine months ended September 30, 1999 to $10.4 million for the nine
months ended September 30, 2000.
Depreciation and Amortization. Depreciation and amortization increased
from $5.6 million for the nine months ended September 30, 1999 to $6.7 million
for the nine months ended September 30, 2000. This increase is primarily the
result of the capital expenditures made as a part of the Company's ongoing
selective upgrades as well as the launch of its digital services is many of its
systems.
Interest Expense, Net. Interest expense, net decreased from $8.5 million
for the nine months ended September 30, 1999 to $8.3 million for the nine months
ended September 30, 2000. This decrease was a result of $200,000 of interest
which the Company capitalized during the first nine months of 2000. The Company
did not capitalize any interest during the first nine months of 1999.
Loss before Gains on Sales of Cable Systems. As a result of the foregoing
factors, the Company's loss before gains on sales of cable systems increased
from $3.4 million for the nine months ended September 30, 1999 to $4.8 million
for the nine months ended September 30, 2000.
Net income / (loss). During the nine months ended September 30, 1999, the
Company realized $15.9 million in gains on the sales of its Tennessee and
Forsyth and Monroe County, Georgia cable systems, which resulted in net income
of $12.5 million as compared to a net loss of $4.8 million for the nine months
ended September 30, 2000.
17
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EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities" was issued. SFAS
No. 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. The standard is effective for the first quarter
of the Company's fiscal year beginning January 1, 2001. The Company does not
anticipate that the adoption of SFAS No. 133 will have a material impact on its
financial position or results of operations.
Item 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
No disclosures are required with respect to this item because the Company
did not hold, either during the nine months ended September 30, 2000 and 1999,
or at September 30, 2000 and December 31, 1999, any market risk sensitive
instruments.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a party to ordinary and routine litigation proceedings that
are incidental to the Company's business. Management believes that the outcome
of all pending ordinary and routine legal proceedings will not, in the
aggregate, have a material adverse effect on the financial condition or results
of operations of the Company.
The Company, along with numerous other cable operators, is involved in a
proceeding relating to the pole-rental charges affecting its operations in
Alabama. The Company, like other communications companies, attaches its
facilities to poles owned and controlled by utility companies, including
electric companies. The rates, terms and conditions of access to these
utilities' poles are regulated under federal law at the Federal Communications
Commission (the "FCC"). Earlier this year, an Alabama electric utility (the
"Utility")(as part of a larger electric-industry initiative to deregulate
pole-attachment regulation through litigation) notified a number of cable
operators in its service areas, including the Company, of its intent to
impose pole-rental increases many times above the current level.
On September 8, 2000, in Alabama Cable Telecommunications Association v.
Alabama Power Co., file No. P.A. 00-003, DA 00-2078, the FCC's Cable Service
Bureau (the "Bureau") issued an order declaring the Utility's proposed
pole-rental rates void and reinstated the existing pole-rental rates. The order
also required the Utility and the affected cable operators, including the
Company, to negotiate, in good faith, a new rate under the FCC's pole rate
formula and a new pole attachment agreement.
Since the issuance of the Bureau's order, the Utility has appealed the
order to the commissioners of the FCC and has also simultaneously sought relief
from the order in the U.S. Court of Appeals for the 11th Circuit in Atlanta,
Georgia. The FCC has sought dismissal of this judicial appeal. In the interim,
the Utility and the affected cable operators, including the Company, have
initiated the good faith negotiations mandated by the order.
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<PAGE> 19
The pole-rental increases proposed by the Utility, if effective, would
result in a significant increase in the Company's fixed operational costs in the
affected systems. Although the Company is vigorously opposing these increases at
the FCC and other legal forums, there can be no assurance that these efforts
will be successful or that the Company's pole-rental rates will not be
significantly increased. Any significant increase in the Company's pole-rental
rates could have a material adverse effect on its future cash flows from
operating activities and its liquidity.
19
<PAGE> 20
Item 6.
(a) Exhibits.
EXHIBIT NO. DESCRIPTION
3.1 -- Second Amended and Restated Agreement of Limited Partnership
of James Cable Partners, L.P. dated as of December 29, 1999***
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 the 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**
4.8 -- Second Amendment to the Credit Agreement dated as of December
31, 1999 among James Cable Partners, L.P., the lenders party
thereto, Bank One, Michigan (formerly known as NBD Bank), as
documentation agent, and Canadian Imperial Bank of Commerce, as
administrative agent***
4.9 -- Option Agreement / Option Certificate dated as of December 29,
1999 by and between James Cable Partners, L.P. and James
Communications Partners***
21 -- List of subsidiaries of James Cable Partners, L.P.: James Cable
Finance Corp. (James Cable Finance Corp. has no subsidiaries)
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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).
** Incorporated by reference to Exhibit 4.7 of the registrant's Form 10-Q
as filed with the Securities and Exchange Commission for the quarterly
period ended June 30, 1998.
*** Incorporated by reference to Exhibits (3)(a)/(10)(c), (4)(g) and
(4)(h), respectively, of the registrant's Form 10-K as filed with the
Securities and Exchange Commission for the fiscal year ended December
31, 1999.
**** Filed herewith.
(b) Reports on Form 8-K
None.
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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: November 13, 2000 By: /s/ William R. James
----------------------------
William R. James
President
By: James Communications Partners
General Partner
By: DKS Holdings, Inc.
Partner
Date: November 13, 2000 By: /s/ Daniel K. Shoemaker
----------------------------
Daniel K. Shoemaker
President (Principal financial
officer and chief accounting officer)
JAMES CABLE FINANCE CORP.
Date: November 13, 2000 By: /s/ William R. James
----------------------------
William R. James
President
Date: November 13, 2000 By: /s/ Daniel K. Shoemaker
----------------------------
Daniel K. Shoemaker
Treasurer (Principal financial
officer and chief accounting officer)
22
<PAGE> 23
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
27.1 Financial Data Schedule
</TABLE>
