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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 March 31, 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)
Delaware 38-2778219
Michigan 38-3182724
(State or Other Jurisdiction of Incorporation (I.R.S. Employer
or Organization) Identification 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
May 12, 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
<TABLE>
<CAPTION>
PAGE NO.
PART I. FINANCIAL INFORMATION
<S> <C> <C>
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 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 17
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
JAMES CABLE PARTNERS, L.P. AND SUBSIDIARY
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
-------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
------
Cash & Cash Equivalents $ 516,947 $ 5,342,420
Accounts Receivable - Subscribers (Net of allowance for
doubtful accounts of $4,987 in 2000 and $28,141 in 1999) 3,385,705 3,356,444
Prepaid Expenses & Other 109,753 180,635
Property & Equipment:
Cable television distribution systems and equipment 89,856,069 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 96,903,529 94,495,637
Less accumulated depreciation (72,266,020) (70,686,387)
-------------- --------------
Total 24,637,509 23,809,250
Deferred Financing Costs (Net of accumulated amortization of
$1,632,115 in 2000 and $1,474,393 in 1999) 2,579,047 2,736,769
Intangible Assets, Net 15,807,027 16,353,084
Deposits 20,842 20,842
-------------- --------------
Total Assets $ 47,056,830 $ 51,799,444
============== ==============
LIABILITIES & PARTNERS' DEFICIT
-------------------------------
Liabilities:
Debt $ 100,000,000 $ 100,000,000
Accounts payable 57,188 272,588
Accrued expenses 2,220,295 2,584,667
Accrued interest on 10-3/4% Senior Notes 1,343,749 4,031,249
Unearned revenue 3,070,505 3,072,305
Subscriber deposits 20,842 21,451
-------------- --------------
Total 106,712,579 109,982,260
Commitments and Contingencies (Note 2)
Partners' Deficit:
Limited partners (53,718,036) (52,314,823)
General partner (5,937,713) (5,867,993)
-------------- --------------
Total (59,655,749) (58,182,816)
-------------- --------------
Total Liabilities & Partners' Deficit $ 47,056,830 $ 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
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
March 31, March 31,
2000 1999
------------- -------------
(Unaudited)
<S> <C> <C>
Revenues $ 9,414,965 $ 9,810,688
System Operating Expenses (Excluding
Depreciation and Amortization) 5,394,131 5,186,050
Non-System Operating Expenses:
Management fee 465,836 499,857
Other 176,433 290,117
------------- -------------
Total non-system operating
expenses 642,269 789,974
Depreciation and Amortization 2,125,690 1,901,073
------------- -------------
Operating Income 1,252,875 1,933,591
Interest and Other:
Interest expense (2,732,956) (2,917,910)
Interest income 35,586 9,745
Other (28,438) (24,880)
------------- -------------
Total interest and other (2,725,808) (2,933,045)
------------- -------------
Loss before gains on sales of cable systems (1,472,933) (999,454)
Gains on sales of cable systems 0 15,887,169
------------- -------------
Net (loss) income $ (1,472,933) $ 14,887,715
============= =============
</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, 1999 $ (52,314,823) $ (5,867,993) $ (58,182,816)
Net loss (unaudited) (1,403,213) (69,720) (1,472,933)
---------------------- ------------------- --------------------
Balance, March 31, 2000 (unaudited) $ (53,718,036) $ (5,937,713) $ (59,655,749)
====================== =================== ====================
</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 Three For the Three
Months Ended Months Ended
March 31, March 31,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net (loss) income $(1,472,933) $14,887,715
Adjustments to reconcile net (loss) income to net cash
flow used in operating activities:
Depreciation 1,579,633 1,165,981
Amortization 546,057 735,092
Noncash interest expense 157,722 157,722
Gains on sales of cable systems 0 (15,887,169)
(Increase) Decrease in assets:
Accounts receivable (29,261) 311,073
Prepaid expenses 70,882 (303,257)
Deposits 0 3,400
(Decrease) Increase in liabilities:
Accounts payable (215,400) (306,438)
Accrued expenses (364,372) (335,383)
Accrued interest on 10-3/4% Senior Notes (2,687,500) (2,687,500)
Unearned revenue (1,800) (250,939)
Subscriber deposits (609) (647)
------------ ------------
Total adjustments (944,648) (17,398,065)
------------ ------------
Cash flows used in operating activities (2,417,581) (2,510,350)
Cash Flows (used in) from Investing Activities:
Additions to property and equipment (2,407,892) (1,555,719)
Increase in intangible assets 0 (415,000)
Net proceeds from sales of systems 0 16,753,000
------------ ------------
Cash flows (used in) from investing activities (2,407,892) 14,782,281
Cash Flows used in Financing Activities:
Principal payments on debt 0 (3,500,000)
------------ ------------
Cash flows used in financing activities 0 (3,500,000)
------------ ------------
Net (Decrease) Increase in Cash and Cash Equivalents (4,825,473) 8,771,931
Cash and Cash Equivalents, Beginning of Period 5,342,420 1,465,193
------------ ------------
Cash and Cash Equivalents, End of Period $ 516,947 $ 10,237,124
============ ============
Supplemental Disclosure of Cash Flow Information -
Cash paid for interest during the period
(net of amounts capitalized) $ 5,262,734 $ 5,464,835
============ ============
</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 became 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, and even
though the FCC recently issued a report to Congress finding no immediate need
to impose such
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regulation, this could change in the future as cable systems expand their
broadband delivery of Internet services. In 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. 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
<TABLE>
<CAPTION>
March 31, 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 March 31, 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 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. Other
revenues are 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 March 31, 2000, the Company had 70,914 basic
subscribers and 22,528 premium subscriptions, representing basic penetration of
54.7% 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 March 31, 2000 the Company was offering its high-speed Internet
service to approximately 40% of its cable subscribers and currently has nearly
1,600 high-speed Internet customers. In addition, the Company was offering its
dial-up Internet service to approximately 50% of its cable subscribers and
currently has over 3,200 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 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
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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. 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
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 used in Operating Activities. Net cash used in operating
activities was $2.4 million for the three months ended March 31, 2000 as
compared to $2.5 million for the three months ended March 31, 1999.
Cash Flows used in / from Investing Activities. Net cash used in
investing activities was $2.4 million for the three months ended March 31, 2000
as compared to net cash from investing activities of $14.8 million for the three
months ended March 31, 1999. This change in investing cash flow is primarily
attributable to the $16.8 million of net proceeds received upon the sales of the
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. There were no cash flows
from or used in financing activities for the three months ended March 31, 2000.
Cash flows used in financing activities for the three months ended March 31,
1999 amounted to $3.5 million of principal payments on the Company's credit
facility.
Balance Sheet. Cash decreased by $4.8 million from $5.3 million at
December 31, 1999 to $500,000 at March 31, 2000. The primary reason for this
decrease was the $5.4 million interest payment made on February 15, 2000.
Property & Equipment increased by $2.4 million during the first quarter of 2000
primarily due to capital spending made as a part of the Company's ongoing
selective system upgrade and rebuild program.
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.
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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
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 March 31, 2000, this covenant
limited the Company's maximum borrowings thereunder to approximately $1 million.
The Credit Facility requires payments of accrued interest on a monthly basis
throughout the term, with principal payment due at maturity. There was no
indebtedness outstanding under the Credit Facility at March 31, 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, 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.
At March 31, 2000, the Company's total indebtedness was $100.0 million,
its total assets were $47.1 million and its partners' deficit was $59.7 million.
Due to the Company's high degree of leverage: (a) a substantial portion of its
cash flow from operations will be committed to the payment of its interest
expense and will not be available for other purposes; (b) the Company's ability
to obtain additional financing in the future for working capital, capital
expenditures, acquisitions or other purposes may be limited; and (c) the Company
is more highly leveraged than many cable television companies and certain direct
broadcast satellite ("DBS") and telephone companies, which may limit the
Company's flexibility in reacting to changes in its business.
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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 March 31,
2000 1999
---- ----
Amount % Amount %
------ - ------ -
(Dollars in thousands)
<S> <C> <C> <C> <C>
Revenues $ 9,415 100.0 % $ 9,811 100.0 %
System operating expenses 5,394 57.3 5,186 52.9
Non-System operating expenses 642 6.8 790 8.0
Depreciation and amortization 2,126 22.6 1,901 19.4
---------- ---------- ---------- ----------
Operating income 1,253 13.3 1,934 19.7
Interest expense, net 2,697 28.6 2,908 29.6
Other expenses 29 0.3 25 0.3
---------- ---------- ---------- ----------
Loss before gains on sales of cable systems (1,473) (15.6) (999) (10.2)
Gains on sales of cable systems 0 0.0 15,887 161.9
---------- ---------- ---------- ----------
Net (loss) income $ (1,473) (15.6)% $ 14,888 151.7 %
========== ========== ========== ==========
EBITDA (1) $ 3,379 35.9 % $ 3,835 39.1 %
</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 MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Revenues. Revenues for the three months ended March 31, 2000 decreased by
$400,000, or 4.0%, to $9.4 million from $9.8 million for the three months ended
March 31, 1999. This decrease is primarily the result of a reduction in the
Company's basic and premium revenues of $700,000 from 1999 to 2000 as partially
offset by a $300,000 increase in its Internet revenues for the same periods. The
decrease in the basic and premium revenues are a result of the sale of the
Company's Tennessee and Forsyth and Monroe County, Georgia cable systems, both
of which occurred in the first quarter of 1999, and the decrease in the
Company's subscriber base discussed below. Average monthly total revenues per
subscriber for the three months ending March 31, 2000 were $44.27, as compared
to $40.22 for the same period last year. This increase is primarily the result
of rate increases which the Company implemented during the fourth quarter of
1999 and during the first quarter of 2000 and the increase in Internet
revenues discussed above.
Subscribers. At March 31, 2000 the Company had 70,914 subscribers which
represents a decrease of 3,391, or 4.6%, from the 74,305 subscribers at March
31, 1999. Included in the 70,914 subscribers at March 31, 2000 were 842
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
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subscriber base fell by 4,233 from March 31, 1999 to March 31, 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 March 31, 2000 were $5.4 million, an increase of $200,000, or 4.0%, over
the three months ended March 31, 1999. As a percentage of revenues, system
operating expenses increased 4.4% from 52.9% in 1999 to 57.3% in 2000. The
primary reasons 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 launched
in conjunction with rate increases.
Non-System Operating Expenses. Non-system operating expenses decreased by
$150,000, or 18.7%, from the three months ended March 31, 1999 to the three
months ended March 31, 2000. The primary reason for this decrease was a
reduction in legal and other professional fees.
EBITDA. As a result of the foregoing, EBITDA decreased from $3.8 million
for the three months ended March 31, 1999 to $3.4 million for the three months
ended March 31, 2000.
Depreciation and Amortization. Depreciation and amortization increased
$200,000, or 11.8%, from $1.9 million for the three months ended March 31, 1999
to $2.1 million for the three months ended March 31, 2000 due primarily to the
capital expenditures made as a part of the Company's ongoing selective upgrade
program.
Interest Expense, Net. Interest expense, net decreased $200,000, or 7.2%,
from $2.9 million for the three months ended March 31, 1999 to $2.7 million for
the three months ended March 31, 2000. This decrease was primarily the result of
two factors. First, the Company paid $100,000 in interest on borrowings against
its credit facility during the quarter ended March 31, 1999 while no borrowings
against its credit facility were outstanding during the quarter ended March 31,
2000. And second, the Company capitalized $100,000 of interest expense in the
quarter ended March 31, 2000 while no interest was capitalized for the quarter
ended March 31, 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
by $500,000 from $1.0 million for the three months ended March 31, 1999 to
$1.5 million for the three months ended March 31, 2000.
Net (loss) / income. During the three months ended March 31, 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 $14.9 million as compared to a net loss of $1.5 million for the three months
ended March 31, 2000.
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
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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.
YEAR 2000 COMPLIANCE
The Year 2000 issue had the potential of impacting the Company in three
different areas: (1) The technical aspects of the Company's business, (2) the
Company's accounting and billing and (3) programming reception. However, the
Company did not experience any significant malfunctions or errors in its
operating or business systems when the date changed from 1999 to 2000. Moreover,
based on its operations since January 1, 2000, the Company does not expect any
significant impact on its continuing business as a result of the "Year 2000
issues."
It is possible that the full impact of the Year 2000 change has not yet
been recognized. For example, it is possible that a problem or problems may
occur at some specific interval, such as year-end 2000, with either the
Company's systems or those of its suppliers. However, the Company believes that
any such problems, should they arise, will be minor and correctable. To date,
the Company is not aware of any significant Year 2000 problems that have arisen
for its suppliers.
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 three months ended March 31, 2000 and 1999, or
at March 31, 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 legal proceedings will not, in the aggregate, have a
material adverse effect on the financial condition or results of operations of
the Company.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of James' limited partners or
Finance Corp.'s sole shareholder during the first quarter of 2000.
16
<PAGE> 17
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)
17
<PAGE> 18
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.
18
<PAGE> 19
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: May 12, 2000 By: /s/ William R. James
---------------------------------
William R. James
President
By: James Communications Partners
General Partner
By: DKS Holdings, Inc.
Partner
Date: May 12, 2000 By: /s/ Daniel K. Shoemaker
-------------------------------
Daniel K. Shoemaker
President (Principal financial
officer and chief accounting
officer)
JAMES CABLE FINANCE CORP.
Date: May 12, 2000 By: /s/ William R. James
---------------------------------
William R. James
President
Date: May 12, 2000 By: /s/ Daniel K. Shoemaker
-------------------------------
Daniel K. Shoemaker
Treasurer (Principal financial
officer and chief accounting
officer)
19
<PAGE> 20
Exhibit Index
-------------
Exhibit No. Description
- ----------- -----------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000926283
<NAME> JAMES CABLE FINANCE CORP.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 516,947
<SECURITIES> 0
<RECEIVABLES> 3,390,692
<ALLOWANCES> 4,987
<INVENTORY> 0
<CURRENT-ASSETS> 4,012,405
<PP&E> 96,903,529
<DEPRECIATION> 72,266,020
<TOTAL-ASSETS> 47,056,830
<CURRENT-LIABILITIES> 6,712,579
<BONDS> 100,000,000
0
0
<COMMON> 0
<OTHER-SE> (59,655,749)
<TOTAL-LIABILITY-AND-EQUITY> 47,056,830
<SALES> 0
<TOTAL-REVENUES> 9,414,965
<CGS> 0
<TOTAL-COSTS> 8,162,090
<OTHER-EXPENSES> (7,148)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,732,956
<INCOME-PRETAX> (1,472,933)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,472,933)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,472,933)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
