ITEM 1. BUSINESS -----------------
THE PARTNERSHIP. Cable TV Fund 14-B, Ltd. (the "Partnership") is a Colorado limited partnership that was formed pursuant to the public offering of limited partnership interests in the Cable TV Fund 14 Limited Partnership Program (the "Program"), which was sponsored by Jones Intercable, Inc. (the "General Partner"). Cable TV Fund 14-A, Ltd. ("Fund 14-A") is the other partnership that was formed pursuant to the Program. The Partnership and Fund 14-A formed a general partnership known as Cable TV Fund 14-A/B Venture (the "Venture"), in which the Partnership owns a 73 percent interest and Fund 14-A owns a 27 percent interest. The Partnership and the Venture were formed for the purpose of acquiring and operating cable television systems.
The Partnership directly owns cable television systems serving the areas in and around Surfside, South Carolina (the "Surfside System") and Littlerock, California (the "Littlerock System"). The Venture owns the cable television system serving certain areas in Broward County, Florida (the "Broward System"). See Item 2.
ITEM 2. PROPERTIES -------------------
The cable television systems owned by the Partnership and the Venture are described below:
The following sets forth (i) the monthly basic plus service rates charged to subscribers and (ii) the number of basic subscribers and pay units for the Systems. The monthly basic service rates set forth herein represent, with respect to systems with multiple headends, the basic service rate charged to the majority of the subscribers within the system. In cable television systems, basic subscribers can subscribe to more than one pay TV service. Thus, the total number of pay services subscribed to by basic subscribers are called pay units. As of December 31, 1997, the Littlerock System operated cable plant passing approximately 8,200 homes, with an approximate 69 percent penetration rate; the Surfside System operated cable plant passing approximately 26,600 homes, with an approximate 81 percent penetration rate; and the Broward County System operated cable plant passing approximately 89,100 homes, with an approximate 57 percent penetration rate. Figures for numbers of subscribers and homes passed are compiled from the General Partner's records and may be subject to adjustments.
CABLE TV FUND 14-B, LTD. - ------------------------
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS --------------------------
None.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ------------------------------------------------------------
None.
PART II. --------
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK ------------------------------------------------- AND RELATED SECURITY HOLDER MATTERS -----------------------------------
While the Partnership is publicly held, there is no public market for the limited partnership interests, and it is not expected that a market will develop in the future. During 1997, limited partners of the Partnership conducted "limited tender offers" for interests in the Partnership at prices ranging from $165 to $190 per interest. As of February 16, 1998, the number of equity security holders in the Partnership was 15,304.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA - --------------------------------
(a) Cable TV Fund 14-B, Ltd.'s. selected financial data includes 100 percent of the accounts of Cable TV Fund 14-A/B Venture on a consolidated basis.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - ------- ----------------------------------------------------------------------- OF OPERATIONS -------------
The following discussion of the financial condition and results of operations of Cable TV Fund 14-B, Ltd. (the "Partnership") and Cable TV Fund 14- A/B Venture (the "Venture") contains, in addition to historical information, forward-looking statements that are based upon certain assumptions and are subject to a number of risks and uncertainties. The Partnership's and Venture's actual results may differ significantly from the results predicted in such forward-looking statements.
FINANCIAL CONDITION - -------------------
In addition to the Surfside System and the Littlerock System, the Partnership owns a 73 percent interest in the Venture. The accompanying consolidated financial statements include 100 percent of the accounts of the Partnership and those of the Venture reduced by the 27 percent minority interest in the Venture owned by Cable TV Fund 14-A, Ltd. ("Fund 14-A").
It is the General Partner's publicly announced policy that it intends to liquidate its managed partnerships, including the Partnership, as opportunities for sales of partnership cable television systems arise in the marketplace. In accordance with the General Partner's policy, the Partnership's Surfside System and Littlerock System are under contract for sale and the Venture's Broward System is expected to be sold on March 31, 1998.
Cable TV Fund 14-B, Ltd. - - ------------------------
On October 3, 1997, the Venture entered into an asset purchase agreement (the "Agreement") to sell the Broward System to an unaffiliated party (the "Purchaser") for a sales price of $140,000,000. The Partnership will distribute its portion (approximately $68,548,000, or approximately $524 for each $1,000 invested in the Partnership) of the net sales proceeds to its limited partners of record as of the closing date of the sale of the Broward System. Refer to Management's Discussion and Analysis of Financial Condition of the Venture for information pertinent to the Partnership with respect to the sale of the Broward System.
On November 4, 1997, the Partnership entered into an asset purchase agreement to sell the Surfside System to an unaffiliated party for a sales price of $51,500,000, subject to customary closing adjustments. Closing of the sale, which is anticipated to occur in the second quarter of 1998, is subject to several conditions, including necessary governmental and other third party consents. The sale has been approved by over 60 percent of the limited partnership interests of the Partnership.
Upon the consummation of the proposed sale of the Surfside System, the Partnership will retain approximately $380,000 of the sale proceeds as a working capital reserve, repay advances from the General Partner totaling approximately $390,000, repay all of the Partnership's indebtedness (including the approximate $14,400,000 borrowed under its credit facility and capital lease obligations of $155,474), pay a 2.5 percent brokerage fee totaling $1,287,500 to The Jones Group, pay a deferred acquisition fee of $920,000 to The Jones Group and then the $33,821,213 of net sale proceeds will be distributed to the Partnership's limited partners of record as of the closing date of the sale of the Surfside System. Based upon financial information as of December 31, 1997, as a result of the Surfside System's sale, the limited partners of the Partnership, as a group, will receive $33,821,213. Limited partners will receive $129 for each $500 limited partnership interest, or $258 for each $1,000 invested in the Partnership.
Once the Partnership has completed the distributions of its portion of the net proceeds from the sale of the Broward System and the net proceeds from the sale of the Surfside System, limited partners of the Partnership will have received a total of $391 for each $500 limited partnership interest, or $782 for each $1,000 invested in the Partnership. Because the distributions to the limited partners from the sale of the Surfside System and the Broward System will not return 125 percent of the capital initially contributed by the limited partners to the Partnership, the General Partner will not receive a general partner distribution from the Surfside System's sale proceeds.
On March 10, 1998, the Partnership entered into an agreement with the General Partner to sell the cable television system serving areas in and around Littlerock, California (the "Littlerock System") to the General Partner or one of its subsidiaries for a sales price of $10,720,400, subject to customary closing adjustments. The sales price represents the average of three independent appraisals of the fair market value of the Littlerock System. The closing of this transaction is expected to occur in the third quarter of 1998, concurrently with the closing of the purchase by the General Partner from another one of its managed partnerships of the cable television system serving areas in and around Palmdale and Lancaster, California. The closing is subject to a number of conditions including the approval of the transaction by the holders of a majority of the limited partnership interests of the Partnership, the expiration or termination of all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 applicable to the agreement or the transactions contemplated thereby, and the consents of governmental authorities and other third parties. The General Partner expects to conduct a proxy vote on the Littlerock System sale during the summer of 1998.
Upon the consummation of the proposed sale of the Littlerock System, the Partnership will distribute the net sale proceeds of approximately $10,808,000 to the limited partners of the Partnership. This distribution will give the Partnership's limited partners a return of $41 for each $500 limited partner interest, or $82 for each $1,000 invested in the Partnership.
Taking into account the distribution from the sale of the Broward System, the distribution from the sale of the Surfside System, and the distribution from the sale of the Littlerock System, the limited partners of the Partnership can expect to receive a total of $432 for each $500 limited partner interest, or $864 for each $1,000 invested in the Partnership. Because the distributions to the limited partners from the sales of the Littlerock System, the Surfside System and the Broward System will not return 125 percent of the capital initially contributed by the limited partners to the Partnership, the General Partner will not receive a general partner distribution from the Littlerock System sale proceeds. The Partnership will be liquidated and dissolved after the sale of the Littlerock System, which will be the Partnership's last remaining asset at the time of the sale.
For the twelve months ended December 31, 1997, the Surfside System and Littlerock System generated net cash from operating activities totaling $4,157,653, which is available to fund capital expenditures and non-operating costs. The Partnership expended approximately $4,029,000 on capital additions during 1997 in its Surfside System and Littlerock System. Approximately 31 percent of the expenditures was for the upgrade of cable plant. Approximately 29 percent of these expenditures was for the construction of cable plant extensions related to new homes passed. Approximately 22 percent of the expenditures was for the construction of drops to subscribers' homes. The remainder of the expenditures was to maintain the value of the Partnership's cable television systems. Funding for these expenditures was provided by cash generated by operations. Budgeted capital expenditures for all of 1998 are approximately $1,758,246. Approximately 46 percent of these expenditures are expected to be used for the construction of plant extensions related to new homes passed in the Partnership's systems. Approximately 36 percent are expected to be used for service drops to homes. The remainder of these expenditures is necessary to maintain the value of the Partnership's systems until they are sold. Depending upon the timing of the closing of the sale of the Partnership's systems, the Partnership will make only the portion of the budgeted capital expenditures scheduled to be made during the Partnership's continued ownership of its systems. Funding for these improvements will be provided by cash generated from operations and borrowings under the Partnership's credit facility.
The Partnership has a reducing revolving credit facility with an available commitment of $18,000,000. At December 31, 1997, the balance outstanding was $14,400,000, leaving $3,600,000 available for future borrowings. On September 30, 1998, the maximum amount available begins to reduce quarterly until December 31, 2003 when the amount available will be zero. Interest on the reducing revolving credit facility is at the Partnership's option of the Base Rate, the London Interbank Offered Rate ("LIBOR") plus 1 percent, or the Certificate of Deposit Rate ("CD Rate") plus 1-1/8 percent. The effective interest rates on amounts outstanding as of December 31, 1997 and 1996 were 6.85 percent and 6.69 percent, respectively. This credit facility will be paid in full upon the sale of the Surfside System.
The General Partner believes that the Partnership's wholly owned systems have sufficient sources of capital from cash generated from operations and borrowings available under the reducing revolving credit facility to service their presently anticipated needs until its systems are sold.
Year 2000 Issue - ---------------
The Year 2000 issue is the result of many computer programs being written such that they will malfunction when reading a year of "00." This problem could cause system failure or miscalculations causing disruptions of business processes.
The General Partner has initiated an assessment of its computer applications to determine the extent of the problem. Based on this assessment, the General Partner has determined that the majority of its computer applications supporting business processes, including accounting and billing, are designed to handle the Year 2000 appropriately.
The General Partner is currently focusing its efforts on the impact of the Year 2000 issue on service delivery. The General Partner has established an internal team to address this issue. The General Partner is identifying and testing all date-sensitive equipment involved in delivering service to the Venture's and the Partnership's customers. In addition, the General Partner will assess its options regarding repair or replacement of affected equipment during this testing. The General Partner currently has no definitive estimate of the cost or the extent of the impact, if any, this problem will have on service delivery; however, the General Partner does not believe that the impact will be material. The General Partner anticipates completion of its testing in 1998, at which time it will determine the financial impact on the Venture and the Partnership. The General Partner expects that the financial impact on the Venture and the Partnership of the Year 2000 issue likely will not be material because the General Partner anticipates that the Venture and the Partnership will be liquidated before the year 2000.
Cable TV Fund 14-A/B Venture - - ----------------------------
On October 3, 1997, the Venture entered into an agreement to sell the Broward System to an unaffiliated third party for $140,000,000, subject to closing adjustments discussed below. Closing of this sale is scheduled for March 31, 1998, subject to several conditions, including necessary governmental and other third party consents. The General Partner expects that all material consents will be obtained prior to the scheduled closing date. The closing adjustments primarily relate to the number of equivalent basic subscribers at closing. If equivalent basic subscribers are less than 56,637, the sales price will be reduced $2,472 multiplied by the number by which the Broward System's equivalent basic subscribers are less than 56,637, up to a maximum adjustment of $7,000,000. Because it is estimated that the Broward System will have 55,274 equivalent basic subscribers, as defined in the agreement, at March 31, 1998, at closing their will be a sales price reduction of approximately $3,369,000. The General Partner expects that when final closing adjustments are done approximately sixty days after closing, additional equivalent basic subscribers that were not able to be counted at closing because they were relatively recent subscribers at March 31, 1998 will be counted as equivalent basic subscribers when final closing adjustments are done and the sales price will be adjusted accordingly. If the sales price is adjusted upward, the Venture would make an additional distribution to the two constituent partnerships of the Venture in proportion to their ownership interests in the Venture.
Upon closing, the Venture will repay all of its indebtedness, which totaled $39,597,617 at December 31, 1997 and a brokerage fee of approximately $3,500,000 to The Jones Group and then the Venture will distribute the remaining net sales proceeds, or approximately $94,039,000, to the two constituent partnerships of the Venture in proportion to their ownership interests in the Venture. Accordingly, the Partnership will receive 73 percent of the net sales proceeds, or approximately $68,548,000. The Partnership will distribute its net sales proceeds to its limited partners of record as of the closing date of the sale of the Broward System. Such distribution represents approximately $262 for each limited partnership unit or $524 for each $1,000 invested in the Partnership. Because the distribution to the limited partners from the sale of the Broward System will not return 125 percent of the capital initially contributed to the Partnership by the limited partners, the General Partner will not receive any general partner distribution from the Broward System's sale. The sale of the Broward System has been approved by over 60 percent of the limited partnership interests of the Partnership. Because the Broward System represents the only asset of the Venture, the Venture will be liquidated and dissolved upon the completion of the sale of the Broward System.
For the twelve months ended December 31, 1997, the Venture generated net cash from operating activities totaling $5,486,763 which is available to fund capital expenditures and non-operating costs. The Venture expended approximately $3,812,000 on capital additions during 1997. The construction of service drops to homes accounted for approximately 39 percent of the expenditures. Cable television plant extensions related to new homes passed accounted for approximately 38 percent of these expenditures. The remainder of these expenditures was to maintain the value of the Broward System. These capital expenditures were funded primarily from cash on hand and cash generated from operations. Because the closing of the sale of the Broward System is scheduled for March 31, 1998, approximately $886,000 of capital expenditures are expected to be made to maintain the value of the Broward System until it is sold. These capital expenditures are expected to be funded from cash on hand, cash generated from operations and borrowings under its credit facility.
The Venture has a reducing revolving credit facility with an available commitment of $42,500,000. The entire $42,500,000 commitment is available through December 31, 1998, at which time the commitment will begin to reduce quarterly until December 31, 2003 when the amount available will be zero. At December 31, 1997, the balance outstanding was $39,402,968, leaving $3,097,032 available for future borrowings. Interest is at the Venture's option of Prime plus 1/4 percent, LIBOR plus 1-1/4 percent or the CD Rate plus 1-3/8 percent. The effective interest rates on amounts outstanding as of December 31, 1997 and 1996 were 7.10 percent and 6.79 percent, respectively. This credit facility will be paid in full upon the sale of the Broward System.
RESULTS OF OPERATIONS - ---------------------
Cable TV Fund 14-B, Ltd. - - ------------------------
The results of operations for the Partnership are summarized below:
1997 Compared to 1996 -
Revenues of the Partnership's Surfside System and Littlerock System increased $1,174,779, or approximately 10 percent, to $13,424,598 in 1997 from $12,249,819 in 1996. This increase was primarily the result of basic service rate increases, an increase in the number of basic subscribers, an increase in advertising sales and an increase in premium service revenue. Basic service rate increases accounted for approximately 36 percent of the increase in revenues. The number of basic subscribers totaled 27,421 at December 31, 1997 compared to 26,595 at December 31, 1996, an increase of 826, or approximately 3 percent. This increase in basic subscribers accounted for approximately 20 percent of the increase in revenues. Increases in advertising sales and premium service revenue accounted for approximately 21 percent and 9 percent, respectively, of the increase in revenues. No other individual factor contributed significantly to the increase in revenues.
Operating expenses consist primarily of costs associated with the operation and administration of the Partnership's cable television systems. The principal cost components are salaries paid to system personnel, programming expenses, professional fees, subscriber billing costs, rent for leased facilities, cable system maintenance expenses and marketing expenses.
Operating expenses increased $613,663, or approximately 9 percent, to $7,531,859 in 1997 from $6,918,196 in 1996. Increases in programming fees and advertising expenses were primarily responsible for the increase in operating expenses. No other individual factor significantly affected the increase in operating expenses. Operating expenses represented approximately 56 percent of revenue for both 1997 and 1996.
The cable television industry generally measures the financial performance of a cable television system in terms of operating cash flow (revenues less operating expenses). This measure is not intended to be a substitute or improvement upon the items disclosed on the financial statements, rather it is included because it is an industry standard. Operating cash flow increased $561,116, or approximately 11 percent, to $5,892,739 in 1997 from $5,331,623 in 1996. This increase was due to the increase in revenues exceeding the increase in operating expenses.
Management fees and allocated overhead from the General Partner increased $11,175, or approximately 1 percent, to $1,422,955 in 1997 from $1,411,780 in 1996. This increase was due to the increase in revenues, upon which such management fees are based and was partially offset by a decrease in allocated overhead from the General Partner.
Depreciation and amortization expense increased $229,030, or approximately 5 percent, to $5,295,441 in 1997 from $5,066,411 in 1996. This increase was due to capital additions to the Partnership's asset base.
Operating loss decreased $320,911, or approximately 28 percent, to $825,657 in 1997 from $1,146,568 in 1996. This decrease was due to the increase in operating cash flow exceeding the increase in depreciation and amortization.
Interest expense decreased $56,187, or approximately 5 percent, to $1,025,917 in 1997 from $1,082,104 in 1996. This decrease was due to lower outstanding balances on interest bearing obligations during 1997.
Net loss decreased $417,320, or approximately 18 percent, to $1,859,666 in 1997 from $2,276,986 in 1996. These losses were primarily the result of the factors discussed above.
1996 Compared to 1995 -
Revenues of the Partnership's Surfside System and Littlerock System increased $1,275,564, or approximately 12 percent, to $12,249,819 in 1996 from $10,974,255 in 1995. This increase was primarily the result of basic service rate increases and an increase in the number of basic subscribers. Basic service rate increases accounted for approximately 37 percent of the increase in revenues. The number of basic subscribers totaled 26,595 at December 31, 1996 compared to 25,728 at December 31, 1995, an increase of 867, or approximately 3 percent. This increase in basic subscribers accounted for approximately 24 percent of the increase in revenues. Increases in advertising sales and premium service revenue accounted for approximately 13 percent and 8 percent, respectively, of the increase in revenues. No other individual factor contributed significantly to the increase in revenues.
Operating expenses increased $856,592, or approximately 14 percent, to $6,918,196 in 1996 from $6,061,604 in 1995. Increases in programming fees, advertising expenses and marketing expenses were primarily responsible for the increase in operating expenses. No other individual factor significantly affected the increase in operating expenses. Operating expenses represented approximately 56 percent and 55 percent of revenue for 1996 and 1995, respectively.
Operating cash flow increased $418,972, or approximately 9 percent, to $5,331,623 in 1996 from $4,912,651 in 1995. This increase was due to the increase in revenues exceeding the increase in operating expenses.
Management fees and allocated overhead from the General Partner increased $58,322, or approximately 4 percent, to $1,411,780 in 1996 from $1,353,458 in 1995. This increase was due to the increase in revenues, upon which such fees are based.
Depreciation and amortization expense decreased $424,178, or approximately 8 percent, to $5,066,411 in 1996 from $5,490,589 in 1995. This decrease was due to the maturation of the Partnership's asset base.
Operating loss decreased $784,828, or approximately 41 percent, to $1,146,568 in 1996 from $1,931,396 in 1995. This decrease was due to the increase in operating cash flow and the decrease in depreciation and amortization.
Interest expense decreased $107,573, or approximately 9 percent, to $1,082,104 in 1996 from $1,189,677 in 1995. This decrease was due to lower effective interest rates on interest bearing obligations during 1996.
Net loss decreased $862,158, or approximately 27 percent, to $2,276,986 in 1996 from $3,139,144 in 1995. These losses were primarily the result of the factors discussed above.
Cable TV Fund 14-A/B Venture - - ----------------------------
In addition to its ownership of the Surfside System and the Littlerock System, the Partnership owns a 73 percent interest in the Venture.
1997 Compared to 1996-
Revenues of the Venture's Broward System increased $1,985,630, or approximately 8 percent, to $27,504,735 in 1997 from $25,519,105 in 1996. Basic service rate increases accounted for approximately 48 percent of the increase in revenues. Increases in advertising sales accounted for approximately 20 percent of the increase in revenues. No other individual factor significantly affected the increase in revenues.
Operating expenses increased $1,036,786, or approximately 7 percent, to $15,185,319 in 1997 from $14,148,533 in 1996. The increase in operating expenses was due primarily to increases in programming fees and advertising expenses. No other individual factor significantly affected the increase in operating expenses. Operating expenses represented 55 percent of revenue for both 1997 and 1996.
Operating cash flow increased $948,844, or approximately 8 percent, to $12,319,416 in 1997 from $11,370,572 in 1996 due to the increase in revenues exceeding the increase in operating expenses.
Management fees and allocated overhead from Jones Intercable, Inc. decreased $4,214, or less than 1 percent, to $2,976,883 in 1997 from $2,981,097 in 1996. This decrease was due primarily to a decrease in allocated overhead from Jones Intercable, Inc.
Depreciation and amortization expense increased $366,862, or approximately 4 percent, to $8,775,019 in 1997 from $8,408,157 in 1996. The increase in depreciation and amortization expense was attributable to capital additions to the Venture's asset base.
The Venture reported operating income of $567,514 in 1997 compared to an operating loss of $18,682 in 1996. This change was due to the increase in cash flow exceeding the increase in depreciation and amortization expense.
Interest expense decreased $129,510, or approximately 4 percent, to $2,877,337 in 1997 from $3,006,847 in 1996 due to lower outstanding balances on interest bearing obligations during 1997.
Net loss decreased $698,017, or approximately 23 percent, to $2,310,292 in 1997 from $3,008,309 in 1996. These losses were primarily the result of the factors discussed above.
1996 Compared to 1995-
Revenues of the Venture's Broward System increased $2,049,600, or approximately 9 percent, to $25,519,105 in 1996 from $23,469,505 in 1995. Basic service rate increases accounted for approximately 35 percent of the increase in revenue. An increase in the number of basic subscribers accounted for approximately 27 percent of the increases in revenue. The number of basic subscribers totaled 50,957 at December 31, 1996 compared to 49,654 at December 31, 1995, an increase of 1,303, or
approximately 3 percent. Increases in premium service revenue accounted for approximately 16 percent of the increase in revenue. No other individual factor significantly affected the increase in revenues.
Operating expenses increased $1,528,324, or approximately 12 percent, to $14,148,533 in 1996 from $12,620,209 in 1995. Operating expenses represented 55 percent of revenue in 1996, compared to 54 percent in 1995. The increase in operating expenses was due primarily to increases in programming fees, which were partially offset by decreases in personnel and marketing expenses. No other individual factor significantly affected the increase in operating expenses.
Operating cash flow increased $521,276, or approximately 5 percent, to $11,370,572 in 1996 from $10,849,296 in 1995 due to the increase in revenues exceeding the increase in operating expenses.
Management fees and allocated overhead from Jones Intercable, Inc. increased $152,886, or approximately 5 percent, to $2,981,097 in 1996 from $2,828,211 in 1995. This increase was due primarily to the increase in revenues upon which such management fees and allocations are based.
Depreciation and amortization expense decreased $366,350, or approximately 4 percent, to $8,408,157 in 1996 from $8,774,507 in 1995. The decrease in depreciation and amortization expense was attributable to the maturation of a portion of the Venture's asset base.
Operating loss decreased $734,740 to $18,682 in 1996 compared to $753,422 in 1995. This decrease was due to the increase in operating cash flow and the decrease in depreciation and amortization.
Interest expense decreased $364,677, or approximately 11 percent, to $3,006,847 in 1996 from $3,371,524 in 1995 due to lower outstanding balances and lower effective interest rates on interest bearing obligations during 1996.
Net loss decreased $1,065,502, or approximately 26 percent, to $3,008,309 in 1996 from $4,073,811 in 1995. These losses were primarily the result of the factors discussed above.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS - -----------------------------
The audited financial statements of the Partnership and the Venture for the year ended December 31, 1997 follow.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------
To the Partners of Cable TV Fund 14-B, Ltd.:
We have audited the accompanying consolidated balance sheets of CABLE TV FUND 14-B, Ltd.(a Colorado limited partnership) and subsidiary as of December 31, 1997 and 1996, and the related consolidated statements of operations, partners' capital (deficit) and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the General Partner's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cable TV Fund 14-B, Ltd. and subsidiary as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado, March 13, 1998.
CABLE TV FUND 14-B, LTD. ------------------------ (A Limited Partnership)
CONSOLIDATED BALANCE SHEETS ---------------------------
The accompanying notes to consolidated financial statements are an integral part of these consolidated balance sheets.
CABLE TV FUND 14-B, LTD. ------------------------ (A Limited Partnership)
CONSOLIDATED BALANCE SHEETS ---------------------------
The accompanying notes to consolidated financial statements are an integral part of these consolidated balance sheets.
CABLE TV FUND 14-B, LTD. ------------------------ (A Limited Partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS -------------------------------------
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.
CABLE TV FUND 14-B, LTD. ------------------------ (A Limited Partnership)
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT) ------------------------------------------------------
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.
CABLE TV FUND 14-B, LTD. ------------------------ (A Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS -------------------------------------
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.
CABLE TV FUND 14-B, LTD. ------------------------ (A Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------
(1) ORGANIZATION AND PARTNERS' INTERESTS ------------------------------------
Formation and Business ----------------------
Cable TV Fund 14-B, Ltd. (the "Partnership"), a Colorado limited partnership, was formed on September 9, 1987, under a public program sponsored by Jones Intercable, Inc. ("Intercable"). The Partnership was formed to acquire, construct, develop and operate cable television systems. Intercable, a publicly held Colorado corporation, is the "General Partner" and manager of the Partnership. Intercable and its subsidiaries also own and operate cable television systems. In addition, Intercable manages cable television systems for other limited partnerships for which it is general partner and, also, for other affiliated entities.
Contributed Capital, Commissions and Syndication Costs ------------------------------------------------------
The capitalization of the Partnership is set forth in the accompanying Statements of Partners' Capital (Deficit). No limited partner is obligated to make any additional contribution to partnership capital.
Intercable purchased its interest in the Partnership by contributing $1,000 to partnership capital.
All profits and losses of the Partnership are allocated 99 percent to the limited partners and 1 percent to Intercable, except for income or gain from the sale or disposition of cable television properties, which will be allocated to the partners based upon the formula set forth in the Partnership's partnership agreement and interest income earned prior to the first acquisition by the Partnership of a cable television system, which was allocated 100 percent to the limited partners.
Formation of Joint Venture and Joint Venture Cable Television System -------------------------------------------------------------------- Acquisition - -----------
On January 8, 1988, Cable TV Fund 14-A, Ltd. and the Partnership formed Cable TV Fund 14-A/B Venture (the "Venture") to acquire the cable television system serving areas in and around Broward County, Florida (the "Broward System"). Cable TV Fund 14-A, Ltd. contributed $18,975,000 to the capital of the Venture for a 27 percent ownership interest and the Partnership contributed $51,025,000 to the capital of the Venture for a 73 percent ownership interest.
Partnership Cable Television System Acquisitions ------------------------------------------------
The Partnership acquired the cable television system serving Surfside, South Carolina (the "Surfside System") in 1988 and the cable television system serving Littlerock, California (the "Littlerock System") in 1989.
Proposed Cable Television System Sales --------------------------------------
On October 3, 1997, the Venture entered into an agreement to sell the Broward System to an unaffiliated third party for $140,000,000, subject to closing adjustments discussed below. Closing of this sale is scheduled for March 31, 1998, subject to several conditions, including necessary governmental and other third party consents. The General Partner expects that all material consents will be obtained prior to the scheduled closing date. The closing adjustments primarily relate to the number of equivalent basic subscribers at closing. If equivalent basic subscribers are less than 56,637, the sales price will be reduced $2,472 multiplied by the number by which the Broward System's equivalent basic subscribers are less than 56,637, up to a maximum adjustment of $7,000,000. Because it is estimated that the Broward System will have 55,274 equivalent basic subscribers, as defined in the agreement, at March 31, 1998, at closing their will be a sales price reduction of approximately $3,369,000. The General Partner expects that when final closing adjustments are done approximately sixty days after closing, additional equivalent basic subscribers that were not able to be counted at closing because they were relatively recent subscribers at March 31, 1998 will be counted as equivalent basic subscribers when final closing adjustments are done and the sales price will be adjusted accordingly. If the sales price is adjusted upward, the Venture would make an additional distribution to the two constituent partnerships of the Venture in proportion to their ownership interests in the Venture.
Upon closing, the Venture will repay all of its indebtedness, which totaled $39,597,617 at December 31, 1997 and a brokerage fee of approximately $3,500,000 to The Jones Group and then the Venture will distribute the remaining net sales proceeds, or approximately $94,039,000, to the two constituent partnerships of the Venture in proportion to their ownership interests in the Venture. Accordingly, the Partnership will receive 73 percent of the net sales proceeds, or approximately
$68,548,000. The Partnership will distribute its net sales proceeds to its limited partners of record as of the closing date of the sale of the Broward System. Such distribution represents approximately $262 for each limited partnership unit or $524 for each $1,000 invested in the Partnership. Because the distribution to the limited partners from the sale of the Broward System will not return 125 percent of the capital initially contributed to the Partnership by the limited partners, the General Partner will not receive any general partner distribution from the Broward System's sale. The sale of the Broward System has been approved by over 60 percent of the limited partnership interests of the Partnership. Because the Broward System represents the only asset of the Venture, the Venture will be liquidated and dissolved upon the completion of the sale of the Broward System.
On November 4, 1997, the Partnership entered into an asset purchase agreement to sell the Surfside System to an unaffiliated party for a sales price of $51,500,000, subject to customary closing adjustments. Closing of the sale, which is anticipated to occur in the second quarter of 1998, is subject to several conditions, including necessary governmental and other third party consents. The sale has been approved by over 60 percent of the limited partnership interests of the Partnership.
Upon the consummation of the proposed sale of the Surfside System, the Partnership will retain approximately $380,000 of the sale proceeds as a working capital reserve, repay advances from the General Partner totaling approximately $390,000, repay all of the Partnership's indebtedness (including the approximate $14,400,000 borrowed under its credit facility and capital lease obligations of $155,474), pay a 2.5 percent brokerage fee totaling $1,287,500 to The Jones Group, pay a deferred acquisition fee of $920,000 to The Jones Group and then the $33,821,213 of net sale proceeds will be distributed to the Partnership's limited partners of record as of the closing date of the sale of the Surfside System. Based upon financial information as of December 31, 1997, as a result of the Surfside System's sale, the limited partners of the Partnership, as a group, will receive $33,821,213. Limited partners will receive $129 for each $500 limited partnership interest, or $258 for each $1,000 invested in the Partnership.
Once the Partnership has completed the distributions of its portion of the net proceeds from the sale of the Broward System and the net proceeds from the sale of the Surfside System, limited partners of the Partnership will have received a total of $391 for each $500 limited partnership interest, or $782 for each $1,000 invested in the Partnership. Because the distributions to the limited partners from the sale of the Surfside System and the Broward System will not return 125 percent of the capital initially contributed by the limited partners to the Partnership, the General Partner will not receive a general partner distribution from the Surfside System's sale proceeds.
On March 10, 1998, the Partnership entered into an agreement with the General Partner to sell the cable television system serving areas in and around Littlerock, California (the "Littlerock System") to the General Partner or one of its subsidiaries for a sales price of $10,720,400, subject to customary closing adjustments. The sales price represents the average of three independent appraisals of the fair market value of the Littlerock System. The closing of this transaction is expected to occur in the third quarter of 1998, concurrently with the closing of the purchase by the General Partner from another one of its managed partnerships of the cable television system serving areas in and around Palmdale and Lancaster, California. The closing is subject to a number of conditions including the approval of the transaction by the holders of a majority of the limited partnership interests of the Partnership, the expiration or termination of all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 applicable to the agreement or the transactions contemplated thereby, and the consents of governmental authorities and other third parties. The General Partner expects to conduct a proxy vote on the Littlerock System sale during the summer of 1998.
Upon the consummation of the proposed sale of the Littlerock System, the Partnership will distribute the net sale proceeds of approximately $10,808,000 to the limited partners of the Partnership. This distribution will give the Partnership's limited partners a return of $41 for each $500 limited partner interest, or $82 for each $1,000 invested in the Partnership.
Taking into account the distribution from the sale of the Broward System, the distribution from the sale of the Surfside System, and the distribution from the sale of the Littlerock System, the limited partners of the Partnership can expect to receive a total of $432 for each $500 limited partner interest, or $864 for each $1,000 invested in the Partnership. Because the distributions to the limited partners from the sales of the Littlerock System, the Surfside System and the Broward System will not return 125 percent of the capital initially contributed by the limited partners to the Partnership, the General Partner will not receive a general partner distribution from the Littlerock System sale proceeds. The Partnership will be liquidated and dissolved after the sale of the Littlerock System, which will be the Partnership's last remaining asset at the time of the sale.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------
Accounting Records ------------------
The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles. The Partnership's tax returns are also prepared on the accrual basis.
The preparation of financial statements in conformity with generally accepted accounting principles requires the General Partner's management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Purchase Price Allocation -------------------------
Cable television system acquisitions were accounted for as purchases with the individual purchase prices allocated to tangible and intangible assets based upon an independent appraisal. The method of allocation of purchase price was as follows: first, to the fair value of net tangible assets acquired; second, to the value of subscriber lists and non compete agreements with previous owners; third, to franchise costs; and fourth, to costs in excess of interests in net assets purchased. Brokerage fees paid to an affiliate of Intercable (Note 3) and other system acquisition costs were capitalized and included in the cost of intangible assets.
Principles of Consolidation ---------------------------
As a result of the Partnership's ownership interest in the Venture of 73 percent, the accompanying consolidated financial statements present the Partnership's and the Venture's financial condition and results of operations on a consolidated basis with the ownership interest of Cable TV Fund 14-A, Ltd. in the Venture shown as a minority interest. The Venture does not have any ownership interest in the Surfside System or Littlerock System. These systems are owned 100 percent by the Partnership. All interpartnership accounts and transactions have been eliminated.
Property, Plant and Equipment -----------------------------
Depreciation is provided using the straight-line method over the following estimated service lives:
Cable distribution systems 5-15 years Equipment and tools 5- 7 years Office furniture and equipment 3- 5 years Buildings 30 years Vehicles 3- 4 years
Replacements, renewals and improvements are capitalized and maintenance and repairs are charged to expense as incurred.
Property, plant and equipment and the corresponding accumulated depreciation are written off as certain assets become fully depreciated and are no longer in service.
Intangible Assets -----------------
Costs assigned to franchises, costs in excess of interests in net assets purchased and subscriber lists are amortized using the straight-line method over the following remaining estimated useful lives:
Franchise costs 2 - 9 years Costs in excess of interests in net assets purchased 30 - 32 years Subscriber lists 1 year
Revenue Recognition -------------------
Subscriber prepayments are initially deferred and recognized as revenue when earned.
Reclassifications -----------------
Certain prior year amounts have been reclassified to conform to the 1997 presentation.
(3) TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES ----------------------------------------------------
Brokerage Fees --------------
The Jones Group performs brokerage services for the Partnership. For brokering the acquisition of the Surfside System for the Partnership, The Jones Group earned a fee totaling $1,920,000, or 4 percent of the purchase price, during the year ended December 31, 1988 of which $920,000 has been deferred until the sale of the Surfside System.
Management Fees, Distribution Ratios and Reimbursements -------------------------------------------------------
Intercable manages the Partnership and the Venture and receives a fee for its services equal to 5 percent of the gross revenues of the Partnership and the Venture, excluding revenues from the sale of cable television systems or franchises. Management fees paid to Intercable by the Partnership and the Venture for the years ended December 31, 1997, 1996 and 1995 were $2,046,467, $1,888,446 and $1,722,188, respectively.
Any partnership distributions made from cash flow (defined as cash receipts derived from routine operations, less debt principal and interest payments and cash expenses) are allocated 99 percent to the limited partners and 1 percent to Intercable. Any distributions other than interest income on limited partner subscriptions earned prior to the acquisition of the Partnership's first cable television system or from cash flow, such as from the sale or refinancing of a system or upon dissolution of the Partnership, will be made as follows: first, to the limited partners in an amount which, together with all prior distributions, will equal 125 percent of the amount initially contributed to the Partnership capital by the limited partners; the balance, 75 percent to the limited partners and 25 percent to Intercable.
The Partnership and the Venture reimburse Intercable for certain allocated overhead and administrative expenses. These expenses represent the salaries and related benefits paid for corporate personnel, rent, data processing services and other corporate facilities costs. Such personnel provide engineering, marketing, accounting, administrative, legal, and investor relations services to the Partnership and to the Venture. Such services, and their related costs, are necessary to the operation of the Partnership and Venture and would have been incurred by the Partnership if they were stand alone entities. Allocations of personnel costs are based primarily on actual time spent by employees of Intercable with respect to each Partnership managed. Remaining expenses are allocated based on the pro rata relationship of the Partnership's and Venture's revenues to the total revenues of all systems owned or managed by Intercable and certain of its subsidiaries. Systems owned by Intercable and all other systems owned by partnerships for which Intercable is the general partner are also allocated a proportionate share of these expenses. Intercable believes that the methodology used in allocating overhead and administrative expense is reasonable. Reimbursements made to Intercable for allocated overhead and administrative expenses during the years ended December 31, 1997, 1996 and 1995 were $2,353,371, $2,504,431 and $2,459,481, respectively.
The Partnership and the Venture were charged interest during 1997 at an average interest rate of 7.82 percent on the amounts due Intercable, which approximated Intercable's weighted average cost of borrowing. Total interest charged to the Partnership and the Venture by Intercable was $2,678, $106,022 and $145,929 for the years ended December 31, 1997, 1996 and 1995, respectively.
Payments to/from Affiliates for Programming Services ----------------------------------------------------
The Partnership and the Venture receive or have received programming from Superaudio, Knowledge TV, Inc., Jones Computer Network, Ltd., Great American Country, Inc. and Product Information Network, all of which are affiliates of Intercable.
Payments to Superaudio by the Partnership and the Venture totaled $57,469, $52,687 and $46,269 in 1997, 1996 and 1995, respectively. Payments to Knowledge TV, Inc. by the Partnership and Venture totaled $63,921, $56,798 and $49,493 in 1997, 1996 and 1995, respectively. Payments to Jones Computer Network, Ltd., whose service was discontinued in April 1997, totaled $14,633, $39,371 and $34,402 in 1997, 1996 and 1995, respectively. Payments by the Partnership and Venture to Great American Country, Inc., which initiated service in 1996, totaled $22,309 in 1997 and $71,929 in 1996.
The Partnership and the Venture received commissions from Product Information Network based on a percentage of advertising revenue and number of subscribers. Product Information Network paid commissions to the Partnership and the Venture totaling $125,785, $80,474 and $54,759 in 1997, 1996 and 1995, respectively.
(4) PROPERTY, PLANT AND EQUIPMENT -----------------------------
Property, plant and equipment as of December 31, 1997 and 1996, consisted of the following:
The Partnership has a reducing revolving credit facility with an available commitment of $18,000,000. At December 31, 1997, the balance outstanding was $14,400,000, leaving $3,600,000 available for future borrowings. On September 30, 1998, the maximum amount available begins to reduce quarterly until December 31, 2003 when the amount available will be zero. Interest on the reducing revolving credit facility is at the Partnership's option of the Base Rate, the London Interbank Offered Rate ("LIBOR") plus 1 percent, or the Certificate of Deposit Rate ("CD Rate") plus 1-1/8 percent. The effective interest rates on amounts outstanding as of December 31, 1997 and 1996 were 6.85 percent and 6.69 percent, respectively. This credit facility will be paid in full upon the sale of the Surfside System.
The Venture has a reducing revolving credit facility with an available commitment of $42,500,000. The entire $42,500,000 commitment is available through December 31, 1998, at which time the commitment will begin to reduce quarterly until December 31, 2003 when the amount available will be zero. At December 31, 1997, the balance outstanding was $39,402,968, leaving $3,097,032 available for future borrowings. Interest is at the Venture's option of Prime plus 1/4 percent, LIBOR plus 1-1/4 percent or the CD Rate plus 1-3/8 percent. The effective interest rates on amounts outstanding as of December 31, 1997 and 1996 were 7.10 percent and 6.79 percent, respectively. This credit facility will be paid in full upon the sale of the Broward System.
Installments due on debt principal for each of the five years in the period ending December 31, 2002 and thereafter, respectively, are:
Venture Partnership Total ----------- ----------- ----------- 1998 $ 58,394 $ 56,368 $ 114,762 1999 3,761,363 56,369 3,817,732 2000 6,858,395 2,756,369 9,614,764 2001 8,519,465 3,618,790 12,138,255 2002 10,200,000 3,600,000 13,800,000 Thereafter 10,200,000 4,500,000 14,700,000 ----------- ----------- -----------
Total $39,597,617 $14,587,896 $54,185,513 =========== =========== ===========
At December 31, 1997, substantially all of the Partnership's and the Venture's property, plant and equipment secured their respective indebtedness.
At December 31, 1997, the carrying amount of the Partnership's long-term debt did not differ significantly from the estimated fair value of the financial instruments. The fair value of the Partnership's long-term debt is estimated based on the discounted amount of future debt service payments using rates of borrowing for a liability of similar risk.
(6) INCOME TAXES ------------
Income taxes have not been recorded in the accompanying consolidated financial statements because they accrue directly to the partners. The federal and state income tax returns of the Partnership are prepared and filed by Intercable.
The Partnership's tax returns, the qualification of the Partnership as such for tax purposes, and the amount of distributable Partnership income or loss are subject to examination by federal and state taxing authorities. If such examinations result in changes with respect to the Partnership's qualification as such, or in changes with respect to the Partnership's recorded income or loss, the tax liability of the general and limited partners would likely be changed accordingly.
Taxable loss reported to the partners is different from that reported in the consolidated statements of operations due to the difference in depreciation recognized under generally accepted accounting principles and the expense allowed for tax purposes under the Modified Accelerated Cost Recovery System (MACRS). There are no other significant differences between taxable loss and the net loss reported in the consolidated statements of operations.
(7) COMMITMENTS AND CONTINGENCIES -----------------------------
Office and other facilities are rented under various long-term lease arrangements. Rent paid under such lease arrangements totaled $65,387, $40,356 and $62,987, respectively, for the years ended December 31, 1997, 1996 and 1995. Minimum commitments under operating leases for each of the five years in the period ending December 31, 2002 and thereafter are as follows:
1998 $ 84,516 1999 83,350 2000 82,950 2001 40,175 2002 39,300 Thereafter 293,378 -------- $623,669 ========
(8) SUPPLEMENTARY PROFIT AND LOSS INFORMATION -----------------------------------------
(9) OPERATING RESULTS OF SURFSIDE AND LITTLEROCK SYSTEMS ----------------------------------------------------
The results of operations of the Partnership's Surfside System and Littlerock System on a stand-alone basis are presented below. The Partnership's share of the Venture-owned Broward System's operations is also presented.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------
To the Partners of Cable TV Fund 14-A/B Venture:
We have audited the accompanying balance sheets of CABLE TV FUND 14-A/B VENTURE (a Colorado general partnership) as of December 31, 1997 and 1996, and the related statements of operations, partners' capital and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the General Partner's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cable TV Fund 14-A/B Venture as of December 31, 1997 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado, March 13, 1998.
CABLE TV FUND 14-A/B VENTURE ---------------------------- (A General Partnership)
BALANCE SHEETS --------------
The accompanying notes to financial statements are an integral part of these balance sheets.
CABLE TV FUND 14-A/B VENTURE ---------------------------- (A General Partnership)
BALANCE SHEETS --------------
The accompanying notes to financial statements are an integral part of these balance sheets.
CABLE TV FUND 14-A/B VENTURE ---------------------------- (A General Partnership)
STATEMENTS OF OPERATIONS ------------------------
The accompanying notes to financial statements are an integral part of these statements.
CABLE TV FUND 14-A/B VENTURE ---------------------------- (A General Partnership)
STATEMENTS OF PARTNERS' CAPITAL -------------------------------
The accompanying notes to financial statements are an integral part of these statements.
CABLE TV FUND 14-A/B VENTURE ---------------------------- (A General Partnership)
STATEMENTS OF CASH FLOWS ------------------------
The accompanying notes to financial statements are an integral part of these statements.
CABLE TV FUND 14-A/B VENTURE ---------------------------- (A General Partnership)
NOTES TO FINANCIAL STATEMENTS -----------------------------
(1) ORGANIZATION AND PARTNERS' INTERESTS ------------------------------------
Formation and Business ----------------------
On January 8, 1988, Cable TV Fund 14-A, Ltd. ("Fund 14-A") and Cable TV Fund 14-B, Ltd. ("Fund 14-B") (collectively, the "Venture Partners") formed a Colorado general partnership known as Cable TV Fund 14-A/B Venture (the "Venture") by contributing $18,975,000 and $51,025,000, respectively, for 27 percent and 73 percent ownership interests, respectively. The Venture was formed for the purpose of acquiring the cable television system serving areas in and around Broward County, Florida (the "Broward System").
Jones Intercable, Inc. ("Intercable") is the "General Partner" of each of the Venture Partners and manages the Venture. Intercable and its subsidiaries also own and operate cable television systems. In addition, Intercable manages cable television systems for other limited partnerships for which it is general partner and for other affiliated entities.
Contributed Capital -------------------
The capitalization of the Venture is set forth in the accompanying Statements of Partners' Capital.
All Venture distributions, including those made from cash flow, from the sale or refinancing of Venture property and on dissolution of the Venture, shall be made to the Venture Partners in proportion to their 27 and 73 percent interests in the Venture.
Proposed Sale of a Cable Television System ------------------------------------------
On October 3, 1997, the Venture entered into an agreement to sell the Broward System to an unaffiliated third party for $140,000,000, subject to closing adjustments discussed below. Closing of this sale is scheduled for March 31, 1998, subject to several conditions, including necessary governmental and other third party consents. The General Partner expects that all material consents will be obtained prior to the scheduled closing date. The closing adjustments primarily relate to the number of equivalent basic subscribers at closing. If equivalent basic subscribers are less than 56,637, the sales price will be reduced $2,472 multiplied by the number by which the Broward System's equivalent basic subscribers are less than 56,637, up to a maximum adjustment of $7,000,000. Because it is estimated that the Broward System will have 55,274 equivalent basic subscribers, as defined in the agreement, at March 31, 1998, at closing there will be a sales price reduction of approximately $3,369,000. The General Partner expects that when final closing adjustments are done approximately sixty days after closing, additional equivalent basic subscribers that were not able to be counted at closing because they were relatively recent subscribers at March 31, 1998 will be counted as equivalent basic subscribers when final closing adjustments are done and the sales price will be adjusted accordingly. If the sales price is adjusted upward, the Venture would make an additional distribution to the two constituent partnerships of the Venture in proportion to their ownership interests in the Venture.
Upon closing, the Venture will repay all of its indebtedness, which totaled $39,597,617 at December 31, 1997 and a brokerage fee of approximately $3,500,000 to the Jones Group and then the Venture will distribute the remaining net sales proceeds, or approximately $94,039,000, to the two constituent partnerships of the Venture in proportion to their ownership interests in the Venture. Accordingly, Fund 14-A will receive 27 percent of the net sales proceeds (approximately $25,491,000, or $318 for each $1,000 invested in Fund 14-A) and Fund 14-B will receive 73 percent of the net sales proceeds (approximately $68,548,000, or $524 for each $1,000 invested in Fund 14-B).
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------
Accounting Records ------------------
The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles. The Venture's tax returns are also prepared on the accrual basis.
The preparation of financial statements in conformity with generally accepted accounting principles requires Intercable's management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Purchase Price Allocation -------------------------
The Broward System acquisition was accounted for as a purchase with the purchase price allocated to tangible and intangible assets based upon an independent appraisal. The method of allocation of purchase price was as follows: first, to the fair value of net tangible assets acquired; second, to the value of subscriber lists and noncompete agreements with previous owners; third, to franchise costs; and fourth, to costs in excess of interests in net assets purchased. Brokerage fees paid to an affiliate of Intercable and other system acquisition costs were capitalized and included in the cost of intangible assets.
Property, Plant and Equipment -----------------------------
Depreciation is provided using the straight-line method over the following estimated service lives:
Cable distribution systems 5-15 years Equipment and tools 5- 7 years Office furniture and equipment 3- 5 years Buildings 30 years Vehicles 3- 4 years
Replacements, renewals and improvements are capitalized and maintenance and repairs are charged to expense as incurred.
Property, plant and equipment and the corresponding accumulated depreciation are written off as certain assets become fully depreciated and are no longer in service.
Intangible Assets -----------------
Costs assigned to franchises, subscriber lists and costs in excess of interests in net assets purchased are amortized using the straight-line method over the following remaining estimated useful lives:
Franchise costs 1- 5 years Subscriber lists 1- 5 years Costs in excess of interests in net assets purchased 31 years
Revenue Recognition -------------------
Subscriber prepayments are initially deferred and recognized as revenue when earned.
Reclassifications -----------------
Certain prior year amounts have been reclassified to conform to the 1997 presentation.
(3) TRANSACTIONS WITH AFFILIATES ----------------------------
Management Fees and Reimbursements ----------------------------------
Intercable manages the Venture and receives a fee for its services equal to 5 percent of the gross revenues of the Venture, excluding revenues from the sale of cable television systems or franchises. Management fees paid to Intercable by the Venture for the years ended December 31, 1997, 1996 and 1995 were $1,375,237, $1,275,955 and $1,173,475, respectively.
The Venture reimburses Intercable for allocated overhead and administrative expenses. These expenses represent the salaries and related benefits paid for corporate personnel, rent, data processing services and other corporate facilities costs. Such personnel provide engineering, marketing, accounting, administrative, legal, and investor relations services to the Venture. Such services, and their related costs, are necessary to the operation of the Venture and would have been incurred by the Venture if it was a stand alone entity. Allocations of personnel costs are based primarily on actual time spent by employees of Intercable with respect to each entity managed. Remaining expenses are allocated based on the pro rata relationship of the Venture's revenues to the total revenues of all systems owned or managed by Intercable and certain of its subsidiaries. Systems owned by Intercable and all other systems owned by partnerships for which Intercable is the general partner are also allocated a proportionate share of these
expenses. Intercable believes that the methodology used in allocating overhead and administrative expenses is reasonable. Reimbursements made to Intercable by the Venture for allocated overhead and administrative expenses during the years ended December 31, 1997, 1996 and 1995 were $1,601,646, $1,705,142 and $1,654,736, respectively.
The Venture was charged interest during 1997 at an average interest rate of 7.82 percent on the amounts due Intercable, which approximated Intercable's weighted average cost of borrowing. Total interest charged to the Venture by Intercable was $2,678, $122,224 and $155,659 for the years ended December 31, 1997, 1996 and 1995, respectively.
Payments to/from Affiliates for Programming Services ----------------------------------------------------
The Venture receives or has received programming from Superaudio, Knowledge TV, Inc., Great American Country, Inc. and Product Information Network, all of which are affiliates of Intercable.
Payments to Superaudio totaled $37,459, $34,421 and $30,171 in 1997, 1996 and 1995, respectively. Payments to Knowledge TV, Inc. totaled $41,668, $37,113 and $32,268 in 1997, 1996 and 1995, respectively. Payments to Great American Country, Inc., which initiated service in 1996, totaled $79,127 in 1997 and $47,590 in 1996.
The Venture receives a commission from Product Information Network based on a percentage of advertising revenue and number of subscribers. Product Information Network paid commissions to the Venture totaling $80,297, $49,973 and $23,430 in 1997, 1996 and 1995, respectively.
(4) PROPERTY, PLANT AND EQUIPMENT -----------------------------
Property, plant and equipment as of December 31, 1997 and 1996, consisted of the following:
The Venture has a reducing revolving credit facility with an available commitment of $42,500,000. The entire $42,500,000 commitment is available through December 31, 1998, at which time the commitment will begin to reduce quarterly until December 31, 2003 when the amount available will be zero. At December 31, 1997, the balance outstanding was $39,402,968, leaving $3,097,032 available for future borrowings. Interest is at the Venture's option of Prime plus 1/4 percent, LIBOR plus 1-1/4 percent or the CD Rate plus 1-3/8 percent. The effective interest rates on amounts outstanding as of
December 31, 1997 and 1996 were 7.10 percent and 6.79 percent, respectively. This credit facility will be paid in full upon the sale of the Venture's Broward System.
Installments due on debt principal for each of the five years in the period ending December 31, 2002 and thereafter, respectively, are: $58,394, $3,761,363, $6,858,395, $8,519,465, $10,200,000 and $10,200,000. At December 31, 1997, substantially all of the Venture's property, plant and equipment secured the above indebtedness.
At December 31, 1997, the carrying amount of the Venture's long-term debt did not differ significantly from the estimated fair value of the financial instruments. The fair value of the Venture's long-term debt is estimated based on the discounted amount of future debt service payments using rates of borrowing for a liability of similar risk.
(6) INCOME TAXES ------------
Income taxes have not been recorded in the accompanying financial statements because they accrue directly to the partners of Fund 14-A and Fund 14-B.
The Venture's tax returns, the qualification of the Venture as such for tax purposes, and the amount of distributable Venture income or loss are subject to examination by federal and state taxing authorities. If such examinations result in changes with respect to the Venture's qualification as such, or in changes with respect to the Venture's recorded income or loss, the tax liability of the Venture's general partners would likely be changed accordingly.
Taxable loss reported to the partners is different from that reported in the statements of operations due to the difference in depreciation recognized under generally accepted accounting principles and the expense allowed for tax purposes under the Modified Accelerated Cost Recovery System (MACRS). There are no other significant differences between taxable loss and the net loss reported in the statements of operations.
(7) COMMITMENTS AND CONTINGENCIES -----------------------------
Office and other facilities are rented under various long-term lease arrangements. Rent paid under such lease arrangements totaled $49,301, $21,762 and $22,680, respectively for the years ended December 31, 1997, 1996 and 1995. Minimum commitments under operating leases for each of the five years in the period ending December 31, 2002 and thereafter are as follows:
1998 $ 34,466 1999 33,300 2000 33,300 2001 33,300 2002 33,300 Thereafter 291,378 --------
$459,044 ========
(8) SUPPLEMENTARY PROFIT AND LOSS INFORMATION -----------------------------------------
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON --------------------------------------------------------- ACCOUNTING AND FINANCIAL DISCLOSURE -----------------------------------
None.
PART III. ---------
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ------------------------------------------------------------
The Partnership itself has no officers or directors. Certain information concerning the directors and executive officers of the General Partner is set forth below. Directors of the General Partner serve until the next annual meeting of the General Partner and until their successors shall be elected and qualified.
Glenn R. Jones 68 Chairman of the Board and Chief Executive Officer James B. O'Brien 48 President and Director Ruth E. Warren 48 Group Vice President/Operations Kevin P. Coyle 46 Group Vice President/Finance Christopher J. Bowick 42 Group Vice President/Technology Cheryl M. Sprague 45 Group Vice President/Human Resources Cynthia A. Winning 46 Group Vice President/Marketing Elizabeth M. Steele 46 Vice President/General Counsel/Secretary Larry W. Kaschinske 38 Vice President/Controller Robert E. Cole 65 Director William E. Frenzel 69 Director Josef J. Fridman 52 Director Donald L. Jacobs 59 Director Robert Kearney 61 Director James J. Krejci 56 Director Raphael M. Solot 64 Director Howard O. Thrall 50 Director Siim A. Vanaselja 41 Director Sanford Zisman 58 Director Robert B. Zoellick 44 Director
Mr. Glenn R. Jones has served as Chairman of the Board of Directors and Chief Executive Officer of the General Partner since its formation in 1970, and he was President from June 1984 until April 1988. Mr. Jones is the sole shareholder, President and Chairman of the Board of Directors of Jones International, Ltd. He is also Chairman of the Board of Directors of the subsidiaries of the General Partner and of certain other affiliates of the General Partner. Mr. Jones has been involved in the cable television business in various capacities since 1961, and he is a member of the Board of Directors and of the Executive Committee of the National Cable Television Association. In addition, Mr. Jones is a member of the Board of Education Council of the National Alliance of Business. Mr. Jones is also a founding member of the James Madison Council of the Library of Congress. Mr. Jones has been the recipient of several awards including: the Grand Tam Award in 1989, the highest award from the Cable Television Administration and Marketing Society; the President's Award from the Cable Television Public Affairs Association in recognition of Jones International's educational efforts through Mind Extension University (now Knowledge TV); the Donald G. McGannon Award for the advancement of minorities and women in cable from the United Church of Christ Office of Communications; the STAR Award from American Women in Radio and Television, Inc. for exhibition of a commitment to the issues and concerns of women in television and radio; the Cableforce 2000 Accolade awarded by Women in Cable in recognition of the General Partner's innovative employee programs; the Most Outstanding Corporate Individual Achievement Award from the International Distance Learning Conference for his contributions to distance education; the Golden Plate Award from the American Academy of Achievement for his advances in distance education; the Man of the Year named
by the Denver chapter of the Achievement Rewards for College Scientists; and in 1994 Mr. Jones was inducted into Broadcasting and Cable's Hall of Fame.
Mr. James B. O'Brien, the General Partner's President, joined the General Partner in January 1982. Prior to being elected President and a Director of the General Partner in December 1989, Mr. O'Brien served as a division manager, director of operations planning/assistant to the CEO, Fund Vice President and Group Vice President/Operations. Mr. O'Brien was appointed to the General Partner's Executive Committee in August 1993. As President, he is responsible for the day-to-day operations of the cable television systems managed and owned by the General Partner. Mr. O'Brien is a board member of Cable Labs, Inc., the research arm of the U.S. cable television industry. He also serves as the Chairman of the Board of Directors of the Cable Television Administration and Marketing Association and as a director and a member of the Executive Committee of the Walter Kaitz Foundation, a foundation that places people of ethnic minority groups in positions with cable television systems, networks and vendor companies.
Ms. Ruth E. Warren joined the General Partner in August 1980 and has served in various operational capacities, including system marketing manager, director of marketing, assistant division manager, regional vice president and Fund Vice President, since then. Ms. Warren was elected Group Vice President/Operations of the General Partner in September 1990.
Mr. Kevin P. Coyle joined The Jones Group, Ltd. in July 1981 as Vice President/Financial Services. In September 1985, he was appointed Senior Vice President/Financial Services. He was elected Treasurer of the General Partner in August 1987, Vice President/Treasurer in April 1988 and Group Vice President/Finance and Chief Financial Officer in October 1990.
Mr. Christopher J. Bowick joined the General Partner in September 1991 as Group Vice President/Technology and Chief Technical Officer. Prior to joining the General Partner, Mr. Bowick worked for Scientific Atlanta's Transmission Systems Business Division in various technical management capacities since 1981, and as Vice President of Engineering since 1989. Mr. Bowick also has served since 1995 as President of Jones Futurex, Inc., a wholly owned subsidiary of the General Partner that manufactures and markets data encryption products.
Ms. Cheryl M. Sprague joined the General Partner in November 1997 as Group Vice President/Human Resources. Prior to November 1997 and since December 1995, Ms. Sprague served as Director, Human Resources for Westmoreland Coal Company, where she was responsible for human resources management for said company and three of its subsidiaries. From October 1993 to December 1995, Ms. Sprague served as President of Peak Executive Resources, where she provided consulting services in organizational development and human resources to businesses experiencing organizational transition. From April 1992 to October 1993, Ms. Sprague was Vice President, Human Resources for Penrose-St. Francis Healthcare System, where she was responsible for management of all human resources activities. Ms. Sprague serves as an adjunct instructor at Regis University and has earned the professional designation as a Senior Professional in Human Resources from the Society for Human Resource Management and its affiliate, the Human Resources Certification Board. Ms. Sprague is a past president of the Colorado Human Resource Association and was named by that association as the Colorado Human Resources Administrator of the Year in 1986. Ms. Sprague also serves as a director on the Area VI Board for the Society for Human Resource Management.
Ms. Cynthia A. Winning joined the General Partner as Group Vice President/Marketing in December 1994. Previous to joining the General Partner, Ms. Winning served since 1994 as the President of PRS Inc., Denver, Colorado, a sports and event marketing company. From 1979 to 1981 and from 1986 to 1994, Ms. Winning served as the Vice President and Director of Marketing for Citicorp Retail Services, Inc., a provider of private-label credit cards for ten national retail department store chains. From 1981 to 1986, Ms. Winning was the Director of Marketing Services for Daniels & Associates cable television operations, as well as the Western Division Marketing Director for Capital Cities Cable. Ms. Winning also serves as a board member of Cities in Schools, a dropout intervention/prevention program.
Ms. Elizabeth M. Steele joined the General Partner in August 1987 as Vice President/General Counsel and Secretary. From August 1980 until joining the General Partner, Ms. Steele was an associate and then a partner at the Denver law firm of Davis, Graham & Stubbs, which serves as counsel to the General Partner.
Mr. Larry Kaschinske joined the General Partner in 1984 as a staff accountant in the General Partner's former Wisconsin Division, was promoted to Assistant Controller in 1990, named Controller in August 1994 and was elected Vice President/Controller in June 1996.
Mr. Robert E. Cole was appointed a Director of the General Partner in March 1996. Mr. Cole is currently self-employed as a partner of First Variable Insurance Marketing and is responsible for marketing to National Association of Securities Dealers, Inc. firms in northern California, Oregon, Washington and Alaska. From 1993 to 1995, Mr. Cole was the Director of Marketing for Lamar Life Insurance Company; from 1992 to 1993, Mr. Cole was Senior Vice President of PMI Inc., a third party lender serving the special needs of Corporate Owned Life Insurance (COLI) and from 1988 to 1992, Mr. Cole was the principal and co- founder of a specialty investment banking firm that provided services to finance the ownership and growth of emerging companies, productive assets and real property. Mr. Cole is a Certified Financial Planner and a former United States Naval Aviator.
Mr. William E. Frenzel was appointed a Director of the General Partner in April 1995. Mr. Frenzel has been a Guest Scholar since 1991 with the Brookings Institution, a research organization located in Washington D. C. Until his retirement in January 1991, Mr. Frenzel served for twenty years in the United States House of Representatives, representing the State of Minnesota, where he was a member of the House Ways and Means Committee and its Trade Subcommittee, the Congressional Representative to the General Agreement on Tariffs and Trade (GATT), the Ranking Minority Member on the House Budget Committee and a member of the National Economic Commission. Mr. Frenzel also served in the Minnesota Legislature for eight years. He is a Distinguished Fellow of the Tax Foundation, Vice Chairman of the Eurasia Foundation, a Board Member of the U.S.- Japan Foundation, the Close-Up Foundation, Sit Mutual Funds and Chairman of the Japan-America Society of Washington.
Mr. Josef J. Fridman was appointed a Director of the General Partner in February 1998. Mr. Fridman is currently senior vice-president, law and corporate secretary of BCE Inc., Canada's largest telecommunications company. Mr. Fridman joined Bell Canada, a wholly owned subsidiary of BCE Inc., in 1969, and has held increasingly senior positions with Bell Canada and BCE Inc. since such time. Mr. Fridman has held his current position since January 1991. Mr. Fridman's directorships include Telesat Canada, TMI Communications, Inc., Telebec Itee, BCI Telecom Holding Inc. and BCE Corporate Services Inc. He is a member of the Quebec Bar Association, the Canadian, American and International Bar Associations and the Lord Reading Law Society. Mr. Fridman is a governor of the Quebec Bar Association.
Mr. Donald L. Jacobs was appointed a Director of the General Partner in April 1995. Mr. Jacobs is a retired executive officer of TRW. Prior to his retirement, he was Vice President and Deputy Manager of the Space and Defense Sector; prior to that appointment, he was the Vice President and General Manager of the Defense Systems Group and prior to his appointment as Group General Manager, he was President of ESL, Inc., a wholly owned subsidiary of TRW. During his career, Mr. Jacobs served on several corporate, professional and civic boards.
Mr. Robert Kearney was appointed a director of the General Partner in July 1997. Mr. Kearney is a retired executive officer of Bell Canada. Prior to his retirement in December 1993, Mr. Kearney was the President and Chief Executive Officer of Bell Canada. He served as Chairman of BCE Canadian Telecom Group in 1994 and as Deputy Chairman of BCI Management Limited in 1995. During his career, Mr. Kearney served in a variety of capacities in the Canadian, American and International Standards organizations, and he has served on several corporate, professional and civic boards.
Mr. James J. Krejci is President and CEO of Imagelink Technologies, Inc., a privately financed company with leading technology in the desktop or personal computer videoconferencing market. Prior to joining
Imagelink Technologies in July 1996, Mr. Krejci was President of the International Division of International Gaming Technology, the world's largest gaming equipment manufacturer, with headquarters in Reno, Nevada. Prior to joining IGT in May 1994, Mr. Krejci was Group Vice President of Jones International, Ltd. and was Group Vice President of the General Partner. He also served as an officer of subsidiaries of Jones International, Ltd. until leaving the General Partner in May 1994. Mr. Krejci started his career as an electronics research engineer with the Allen-Bradley Company, then moved to the 3M Company, General Electric and Becton Dickinson until March 1985 when he joined Jones International, Ltd. Mr. Krejci has been a director of the General Partner since August 1987.
Mr. Raphael M. Solot was appointed a Director of the General Partner in March 1996. Mr. Solot is an attorney and has practiced law for 34 years with an emphasis on franchise, corporate and partnership law and complex litigation.
Mr. Howard O. Thrall was appointed a Director of the General Partner in March 1996. Mr. Thrall had previously served as a Director of the General Partner from December 1988 to December 1994. Mr. Thrall is a management and international marketing consultant, having active assignments with First National Net, Inc., LEP Technologies, Cheong Kang Associates (Korea), Aero Investment Alliance, Inc. and Western Real Estate Partners, among others. From September 1993 through July 1996, Mr. Thrall served as Vice President of Sales, Asian Region, for World Airways, Inc. headquartered at the Washington Dulles International Airport. From 1984 until August 1993, Mr. Thrall was with the McDonnell Douglas Corporation, where he concluded as a Regional Vice President, Commercial Marketing with the Douglas Aircraft Company subsidiary.
Mr. Siim A. Vanaselja was appointed a Director of the General Partner in August 1996. He is the Executive Vice President and Chief Financial Officer of Bell Canada International Inc. and Vice President of BCI Telecom Holding Inc. Mr. Vanaselja joined BCE Inc., Canada's largest telecommunications company, in February 1994 as Assistant Vice-President, International Taxation. In June 1994, he was appointed Assistant Vice-President and Director of Taxation, and in February 1995, Mr. Vanaselja was appointed Vice-President, Taxation. On August 1, 1996, Mr. Vanaselja was appointed the Executive Vice President and Chief Financial Officer of Bell Canada International Inc., a subsidiary of BCE Inc. Prior to joining BCE Inc. and since August 1989, Mr. Vanaselja was a partner in the Toronto office of KPMG Peat Marwick Thorne. Mr. Vanaselja has been a member of the Institute of Chartered Accountants of Ontario since 1982 and is a member of the Canadian Tax Foundation, the Tax Executives Institute and the International Fiscal Association.
Mr. Sanford Zisman was appointed a director of the General Partner in June 1996. Mr. Zisman is a principal in the law firm of Zisman & Ingraham, P.C. of Denver, Colorado and he has practiced law for 32 years, specializing in the areas of tax, business and estate planning and probate administration. Mr. Zisman was a member of the Board of Directors of Saint Joseph Hospital, the largest hospital in Colorado, serving at various times as Chairman of the Board, Chairman of the Finance Committee and Chairman of the Strategic Planning Committee. Since 1982, he has also served on the Board of Directors of Maxim Series Fund, Inc., a subsidiary of Great-West Life Assurance Company.
Mr. Robert B. Zoellick was appointed a Director of the General Partner in April 1995. Mr. Zoellick is the John M. Olin Professor at the U.S. Naval Academy for the 1997-1998 term. From 1993 through 1997, he was an Executive Vice President at Fannie Mae, a federally chartered and stockholder-owned corporation that is the largest housing finance investor in the United States. From August 1992 to January 1993, Mr. Zoellick served as Deputy Chief of Staff of the White House and Assistant to the President. From May 1991 to August 1992, Mr. Zoellick served concurrently as the Under Secretary of State for Economic and Agricultural Affairs and as Counselor of the Department of State, a post he assumed in March 1989. From 1985 to 1988, Mr. Zoellick served at the Department of Treasury in a number of capacities, including Counselor to the Secretary. Mr. Zoellick currently serves on the boards of Alliance Capital and Said Holdings.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION --------------------------------
Neither the Partnership nor the Venture has any employees; however, various personnel are required to operate the Systems. Such personnel are employed by the General Partner and, the cost of such employment is charged by the General Partner to the Partnership or the Venture as a direct reimbursement item. See Item 13.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS ----------------------------------------------------------------------
As of February 16, no person or entity owned more than 5 percent of the limited partnership interests of the Partnership.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS --------------------------------------------------------
The General Partner and its affiliates engage in certain transactions with the Partnership and the Venture. The General Partner believes that the terms of such transactions are generally as favorable as could be obtained by the Partnership and the Venture from unaffiliated parties. This determination has been made by the General Partner in good faith, but none of the terms were or will be negotiated at arm's-length and there can be no assurance that the terms of such transactions have been or will be as favorable as those that could have been obtained by the Partnership or the Venture from unaffiliated parties.
TRANSACTIONS WITH THE GENERAL PARTNER
The General Partner charges the Partnership and the Venture a 5 percent management fee, and the General Partner is reimbursed for certain allocated overhead and administrative expenses. These expenses represent the salaries and benefits paid to corporate personnel, rent, data processing services and other corporate facilities costs. Such personnel provide engineering, marketing, administrative, accounting, legal and investor relations services to the Partnership and the Venture. Allocations of personnel costs are based primarily on actual time spent by employees of the General Partner with respect to each partnership managed. Remaining expenses are allocated based on the pro rata relationship of the Partnership's and the Venture's revenues to the total revenues of all systems owned or managed by the General Partner and certain of its subsidiaries. Systems owned by the General Partner and all other systems owned by partnerships for which Jones Intercable, Inc. is the general partner are also allocated a proportionate share of these expenses.
The General Partner from time to time also advances funds to the Partnership and the Venture and charges interest on the balance payable. The interest rate charged approximates the General Partner's weighted average cost of borrowing.
TRANSACTIONS WITH AFFILIATES
Knowledge TV, Inc., a company owned 67 percent by Jones Education Group, Ltd., 7 percent by Mr. Jones and 26 percent by the General Partner, operates the television network JEC Knowledge TV. JEC Knowledge TV provides programming related to computers and technology; business, careers and finance; health and wellness; and global culture and languages. Knowledge TV. Inc. sells its programming to the Systems.
Jones Computer Network, Ltd., a wholly owned subsidiary of Jones Education Group, Ltd., a company owned 64 percent by Jones International, Ltd., 16 percent by the General Partner, 12 percent by BTH and 8 percent by Mr. Jones, operated the television network Jones Computer Network. This network provided programming focused primarily on computers and technology. Jones Computer Network sold its programming to the Partnership's systems. Jones Computer Network, Ltd. terminated its programming in April 1997.
The Great American Country network provides country music video programming to the cable television systems owned by the Partnership and the Venture. This network, owned and operated by Great American
Country, Inc., a subsidiary of Jones International Networks, Ltd., an affiliate of the General Partner, commenced service in 1996 in the Systems.
Jones Galactic Radio, Inc. is a subsidiary of Jones International Networks, Ltd., an affiliate of the General Partner. Superaudio, a joint venture between Jones Galactic Radio, Inc. and an unaffiliated entity, provides audio programming to the Systems.
The Product Information Network Venture (the "PIN Venture") is a venture among a subsidiary of Jones International Networks, Ltd., an affiliate of the General Partner, and two unaffiliated cable system operators. The PIN Venture operates the Product Information Network ("PIN"), which is a 24-hour network that airs long-form advertising generally known as "infomercials." The PIN Venture generally makes incentive payments of approximately 60 percent of its net advertising revenue to the cable systems that carry its programming. The Partnership's and the Venture's systems carry PIN for all or part of each day. Revenues received by the Partnership from the PIN Venture relating to the Partnership's owned cable television systems totaled approximately $125,785 for the year ended December 31, 1997. Revenues received by the Venture from the PIN Venture relating the Venture's owned cable television systems totaled approximately $80,297 for the year ended December 31, 1997.
The charges to the Partnership and to the Venture for related party transactions are as follows for the periods indicated:
PART IV. -------
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES ------------------------------------------------- AND REPORTS ON FORM 10-K405 ---------------------------
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CABLE TV FUND 14-B, LTD. a Colorado limited partnership By: Jones Intercable, Inc.
By: /s/ Glenn R. Jones ------------------ Glenn R. Jones Chairman of the Board and Chief Dated: March 23, 1998 Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ Glenn R. Jones ------------------ Glenn R. Jones Chairman of the Board and Chief Executive Officer Dated: March 23, 1998 (Principal Executive Officer)
By: /s/ Kevin P. Coyle ------------------ Kevin P. Coyle Group Vice President/Finance Dated: March 23, 1998 (Principal Financial Officer)
By: /s/ Larry Kaschinske -------------------- Larry Kaschinske Vice President/Controller Dated: March 23, 1998 (Principal Accounting Officer)
By: /s/ James B. O'Brien -------------------- James B. O'Brien Dated: March 23, 1998 President and Director
By: /s/ Robert E. Cole ------------------ Robert E. Cole Dated: March 23, 1998 Director
By: /s/ William E. Frenzel ---------------------- William E. Frenzel Dated: March 23, 1998 Director
By: ---------------------- Josef J. Fridman Dated: March 23, 1998 Director
By: ---------------------- Donald L. Jacobs Dated: March 23, 1998 Director
By: ---------------------- Robert Kearney Dated: March 23, 1998 Director
By: /s/ James J. Krejci ------------------- James J. Krejci Dated: March 23, 1998 Director
By: /s/ Raphael M. Solot -------------------- Raphael M. Solot Dated: March 23, 1998 Director
By: /s/ Howard O. Thrall ---------------------- Howard O. Thrall Dated: March 23, 1998 Director
By: ---------------------- Siim A. Vanaselja Dated: March 23, 1998 Director
By: /s/ Sanford Zisman ------------------ Sanford Zisman Dated: March 23, 1998 Director
By: /s/ Robert B. Zoellick ---------------------- Robert B. Zoellick Dated: March 23, 1998 Director