FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number: 0-13193
CABLE TV FUND 12-A, LTD.
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(Exact name of registrant as specified in its charter)
Colorado 84-098104
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(State of Organization) (IRS Employer Identification No.)
P.O. Box 3309, Englewood, Colorado 80155-3309 (303) 792-3111
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(Address of principal executive office and Zip Code) (Registrant's telephone
no. including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited Partnership
Interests
Indicate by check mark whether the registrants, (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days:
Yes [X] No [_]
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Aggregate market value of the voting stock held by non-affiliates of the
registrant: N/A
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S)229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
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DOCUMENTS INCORPORATED BY REFERENCE: None
(27611)
Information contained in this Form 10-K Report contains "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. All statements, other than statements of historical facts, included in
this Form 10-K Report that address activities, events or developments that the
Partnership or the General Partner expects, believes or anticipates will or may
occur in the future are forward-looking statements. These forward-looking
statements are based upon certain assumptions and are subject to a number of
risks and uncertainties. Actual results could differ materially from the
results predicted by these forward-looking statements.
PART I.
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ITEM 1. BUSINESS
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THE PARTNERSHIP. Cable TV Fund 12-A, 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 12 Limited Partnership
Program (the "Program"), which was sponsored by Jones Intercable, Inc. (the
"General Partner"). Cable TV Fund 12-B, Ltd. ("Fund 12-B"), Cable TV Fund 12-C,
Ltd. ("Fund 12-C") and Cable TV Fund 12-D, Ltd. ("Fund 12-D") are the other
partnerships that were formed pursuant to the Program. The Partnership was
formed for the purpose of acquiring and operating cable television systems.
The Partnership owns the cable television systems serving areas in and
around Fort Myers, Florida (the "Fort Myers System"), Lake County, Illinois (the
"Lake County System"), and Orland Park and Park Forest, Illinois (the "Orland
Park System"). The Fort Myers System, the Lake County System and the
Orland Park System may hereinafter collectively be referred to as the
"Systems."
It is the General Partner's publicly announced policy that it intends to
liquidate its managed limited partnerships, including the Partnership, as
opportunities for sales of partnership cable television systems arise in the
marketplace over the next several years. In accordance with the General
Partner's policy, the Lake County System and the Orland Park System, along
with other Chicago-area systems owned or managed by the General Partner and its
affiliates, were marketed for sale in 1996. The deadline set by the General
Partner for receipt of indications of interest for such systems from prospective
buyers was October 15, 1996. The General Partner did not receive any offer for
the Lake County System or the Orland Park System. The General Partner
will continue to explore other alternatives for sale. There is no assurance as
to the timing or terms of any sales.
CABLE TELEVISION SERVICES. The Systems offer to subscribers various types
of programming, which include basic service, tier service, premium service, pay-
per-view programs and packages including several of these services at combined
rates.
Basic cable television service usually consists of signals of all four
national television networks, various independent and educational television
stations (both VHF and UHF) and certain signals received from satellites. Basic
service also usually includes programs originated locally by the system, which
may consist of music, news, weather reports, stock market and financial
information and live or videotaped programs of a public service or entertainment
nature. FM radio signals are also frequently distributed to subscribers as part
of the basic service.
The Systems offer tier services on an optional basis to its subscribers. A
tier generally includes most of the cable networks such as Entertainment and
Sports Programming Network (ESPN), Cable News Network (CNN), Turner Network
Television (TNT), Family Channel, Discovery and others, and the cable television
operators buy tier programming from these networks. The Systems also offer a
package that includes the basic service channels and the tier services.
The Systems also offer premium services to subscribers, which consist of
feature films, sporting events and other special features that are presented
without commercial interruption. The cable television operators buy premium
programming from suppliers such as HBO, Showtime, Cinemax or others at a cost
based on the number
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of subscribers the cable operator serves. Premium service programming usually is
significantly more expensive than the basic service or tier service programming,
and consequently cable operators price premium service separately when sold to
subscribers.
The Systems also offer to subscribers pay-per-view programming. Pay-per-
view is a service that allows subscribers to receive single programs, frequently
consisting of motion pictures that have recently completed their theatrical
exhibitions and major sporting events, and to pay for such service on a program-
by-program basis.
REVENUES. Monthly service fees for basic, tier and premium services
constitute the major source of revenue for the Systems. At December 31, 1996,
the Systems' monthly basic service rates ranged from $7.99 to $11.86, monthly
basic and tier ("basic plus") service rates ranged from $19.99 to $25.16 and
monthly premium services ranged from $2.00 to $12.95 per premium service. In
addition, the Partnership earns revenues from the Systems' pay-per-view programs
and advertising fees. Related charges may include a nonrecurring installation
fee that ranges from $1.99 to $35.73; however, from time to time the Systems
have followed the common industry practice of reducing or waiving the
installation fee during promotional periods. Commercial subscribers such as
hotels, motels and hospitals are charged a nonrecurring connection fee that
usually covers the cost of installation. Except under the terms of certain
contracts with commercial subscribers and residential apartment and condominium
complexes, the subscribers are free to discontinue the service at any time
without penalty. For the year ended December 31, 1996, of the total fees
received by the Systems, basic service and tier service fees accounted for
approximately 69% of total revenues, premium service fees accounted for
approximately 12% of total revenues, pay-per-view fees were approximately 2% of
total revenues, advertising fees were approximately 8% of total revenues and
the remaining 9% of total revenues came principally from equipment rentals,
installation fees and program guide sales. The Partnership is dependent upon
the timely receipt of service fees to provide for maintenance and replacement of
plant and equipment, current operating expenses and other costs of the Systems.
FRANCHISES. The Systems are constructed and operated under non-exclusive,
fixed-term franchises or other types of operating authorities (referred to
collectively herein as "franchises") granted by local governmental authorities.
These franchises typically contain many conditions, such as time limitations on
commencement and completion of construction, conditions of service, including
the number of channels, types of programming and the provision of free service
to schools and certain other public institutions, and the maintenance of
insurance and indemnity bonds. The provisions of local franchises are subject
to federal regulation.
The Partnership holds 10 franchises relating to the Systems. These
franchises provide for the payment of fees to the issuing authorities and
generally range from 3% to 5% of the gross revenues of a cable television
system. The 1984 Cable Act prohibits franchising authorities from imposing
annual franchise fees in excess of 5% of gross revenues and also permits the
cable television system operator to seek renegotiation and modification of
franchise requirements if warranted by changed circumstances.
The Partnership has never had a franchise revoked. The Partnership is
currently negotiating the renewal of five franchises that are either operating
under extensions or will expire prior to December 31, 1997. The General Partner
has no reason to believe that such franchises will not be renewed in due course.
The General Partner recently has experienced lengthy negotiations with some
franchising authorities for the granting of franchise renewals. Some of the
issues involved in recent renewal negotiations include rate regulation, customer
service standards, cable plant upgrade or replacement and shorter terms of
franchise agreements.
COMPETITION. Cable television systems currently experience competition
from several sources.
Broadcast Television. Cable television systems have traditionally competed
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with broadcast television, which consists of television signals that the viewer
is able to receive directly on his television without charge using an "off-air"
antenna. The extent of such competition is dependent in part upon the quality
and quantity of signals available by such antenna reception as compared to the
services provided by the local cable system. Accordingly, it has generally been
less difficult for cable operators to obtain higher penetration rates in rural
areas where
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signals available off-air are limited, than in metropolitan areas where
numerous, high quality off-air signals are often available without the aid of
cable television systems.
Traditional Overbuild. Cable television franchises are not exclusive, so
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that more than one cable television system may be built in the same area (known
as an "overbuild"), with potential loss of revenues to the operator of the
original cable television system. The General Partner has experienced overbuilds
in connection with certain systems that it has owned or managed for limited
partnerships, and currently there are overbuilds in the systems owned or managed
by the General Partner. Constructing and developing a cable television system
is a capital intensive process, and it is often difficult for a new cable system
operator to create a marketing edge over the existing system. Generally, an
overbuilder would be required to obtain franchises from the local governmental
authorities, although in some instances, the overbuilder could be the local
government itself. In any case, an overbuilder would be required to obtain
programming contracts from entertainment programmers and, in most cases, would
have to build a complete cable system, including headends, trunk lines and drops
to individual subscribers homes, throughout the franchise areas.
DBS. High-powered direct-to-home satellites have made possible the wide-
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scale delivery of programming to individuals throughout the United States using
small roof-top or wall-mounted antennas. Several companies began offering
direct broadcast satellite ("DBS") service over the last few years and
additional entrants are expected. Companies offering DBS service use video
compression technology to increase channel capacity of their systems to 100 or
more channels and to provide packages of movies, satellite network and other
program services which are competitive to those of cable television systems.
DBS cannot currently offer its subscribers local programming, although at least
one future DBS entrant is attempting to offer customers regional delivery of
local broadcast signals. In addition to emerging high-powered DBS competition,
cable television systems face competition from a major medium-powered satellite
distribution provider and several low-powered providers, whose service requires
use of much larger home satellite dishes. Not all subscribers terminate cable
television service upon acquiring a DBS system. The General Partner has
observed that there are DBS subscribers that also elect to subscribe to cable
television service in order to obtain the greatest variety of programming on
multiple television sets, including local programming not available through DBS
service. The ability of DBS service providers to compete successfully with the
cable television industry will depend on, among other factors, the ability of
DBS providers to overcome certain legal and technical hurdles and the
availability of equipment at reasonable prices.
Telephone. Federal cross-ownership restrictions historically limited entry
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by local telephone companies into the cable television business. The 1996
Telecommunications Act (the "1996 Telecom Act") eliminated this cross-ownership
restriction, making it possible for companies with considerable resources to
overbuild existing cable operators and enter the business. Several telephone
companies have begun seeking cable television franchises from local governmental
authorities and constructing cable television systems. Ameritech, one of the
seven regional Bell Operating Companies ("BOCs"), which provides telephone
service in a multi-state region including Illinois, has been the most active BOC
in seeking local cable franchises within its service area. It has already begun
cable service in Naperville, Illinois and has also obtained franchises for Glen
Ellyn and Vernon Hills, Illinois, all of which are currently served by cable
systems owned by three partnerships managed by the General Partner. The General
Partner cannot predict at this time the extent of telephone company competition
that will emerge to owned or managed cable television systems. The entry of
telephone companies as direct competitors, however, is likely to continue over
the next several years and could adversely affect the profitability and market
value of the General Partner's owned and managed systems. The entry of electric
utility companies into the cable television business, as now authorized by the
1996 Telecom Act, could have a similar adverse effect.
Private Cable. Additional competition is provided by private cable
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television systems, known as Satellite Master Antenna Television (SMATV),
serving multi-unit dwellings such as condominiums, apartment complexes, and
private residential communities. These private cable systems may enter into
exclusive agreements with apartment owners and homeowners associations, which
may preclude operators of franchised systems from serving residents of such
private complexes. Private cable systems that do not cross public rights of way
are free from the federal, state and local regulatory requirements imposed on
franchised cable television operators. In
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some cases, the Partnership has been unable to provide cable television service
to buildings in which private operators have secured exclusive contracts to
provide video and telephony services. The Partnership is interested in providing
these same services, but expects that the market to install and provide these
services in multi-unit buildings will continue to be highly competitive.
MMDS. Cable television systems also compete with wireless program
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distribution services such as multichannel, multipoint distribution service
("MMDS") systems, commonly called wireless cable, which are licensed to serve
specific areas. MMDS uses low-power microwave frequencies to transmit
television programming over-the-air to paying subscribers. The MMDS industry is
less capital intensive than the cable television industry, and it is therefore
more practical to construct MMDS systems in areas of lower subscriber
penetration. Wireless cable systems are now in direct competition with cable
television systems in several areas of the country, including the system in Pima
County, Arizona owned by the General Partner. Telephone companies have recently
acquired or invested in wireless companies, and may use MMDS systems to provide
services within their service areas in lieu of wired delivery systems.
Enthusiasm for MMDS has waned in recent months, however, as Bell Atlantic and
NYNEX have suspended their investment in two major MMDS companies. To date, the
Partnership has not lost a significant number of subscribers, nor a significant
amount of revenue, to MMDS operators competing with the Partnership's cable
television systems. A series of actions taken by the FCC, however, including
reallocating certain frequencies to the wireless services, are intended to
facilitate the development of wireless cable television systems as an
alternative means of distributing video programming. The FCC recently held
auctions for spectrum that will be used by wireless operators to provide
additional channels of programming over larger distances. In addition, an
emerging technology, Local Multipoint Distribution services ("LMDS"), could also
pose a significant threat to the cable television industry, if and when it
becomes established. LMDS, sometimes referred to as cellular television, could
have the capability of delivering more than 100 channels of video programming to
a subscriber's home. The potential impact, however, of LMDS is difficult to
assess due to the newness of the technology and the absence of any current fully
operational LMDS systems.
Cable television systems are also in competition, in various degrees with
other communications and entertainment media, including motion pictures and home
video cassette recorders.
REGULATION AND LEGISLATION
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The operation of cable television systems is extensively regulated by the
FCC, some state governments and most local governments. The new 1996 Telecom
Act alters the regulatory structure governing the nation's telecommunications
providers. It removes barriers to competition in both the cable television
market and the local telephone market. Among other things, it also reduces the
scope of cable rate regulation.
The 1996 Telecom Act requires the FCC to undertake a host of implementing
rulemakings, the final outcome of which cannot yet be determined. Moreover,
Congress and the FCC have frequently revisited the subject of cable regulation.
Future legislative and regulatory changes could adversely affect the
Partnership's operations. This section briefly summarizes key laws and
regulations affecting the operation of the Partnership's cable systems and does
not purport to describe all present, proposed, or possible laws and regulations
affecting the Partnership.
Cable Rate Regulation. The 1992 Cable Act imposed an extensive rate
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regulation regime on the cable television industry. Under that regime, all
cable systems are subject to rate regulation, unless they face "effective
competition" in their local franchise area. Federal law now defines "effective
competition" on a community-specific basis as requiring either low penetration
(less than 30%) by the incumbent cable operator, appreciable penetration (more
than 15%) by competing multichannel video providers ("MVPs"), or the presence of
a competing MVP affiliated with a local telephone company.
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Although the FCC rules control, local government units (commonly referred
to as local franchising authorities or "LFAs") are primarily responsible for
administering the regulation of the lowest level of cable -- the basic service
tier ("BST"), which typically contains local broadcast stations and public,
educational, and government ("PEG") access channels. Before an LFA begins BST
rate regulation, it must certify to the FCC that it will follow applicable
federal rules, and many LFAs have voluntarily declined to exercise this
authority. LFAs also have primary responsibility for regulating cable equipment
rates. Under federal law, charges for various types of cable equipment must be
unbundled from each other and from monthly charges for programming services.
The 1996 Telecom Act allows operators to aggregate costs for broad categories of
equipment across geographic and functional lines. This change should facilitate
the introduction of new technology.
The FCC itself directly administers rate regulation of any cable
programming service tiers ("CPST"), which typically contain satellite-delivered
programming. Under the 1996 Telecom Act, the FCC can regulate CPST rates only
if an LFA first receives at least two rate complaints from local subscribers and
then files a formal complaint with the FCC. When new CPST rate complaints are
filed, the FCC now considers only whether the incremental increase is justified
and will not reduce the previously established CPST rate.
Under the FCC's rate regulations, most cable systems were required to
reduce their BST and CPST rates in 1993 and 1994, and have since had their rate
increases governed by a complicated price cap scheme that allows for the
recovery of inflation and certain increased costs, as well as providing some
incentive for expanding channel carriage. The FCC has modified its rate
adjustment regulations to allow for annual rate increases and to minimize
previous problems associated with regulatory lag. Operators also have the
opportunity of bypassing this "benchmark" regulatory scheme in favor of
traditional "cost-of-service" regulation in cases where the latter methodology
appears favorable. Premium cable services offered on a per-channel or per-
program basis remain unregulated, as do affirmatively marketed packages
consisting entirely of new programming product. Federal law requires that the
BST be offered to all cable subscribers, but limits the ability of operators to
require purchase of any CPST before purchasing premium services offered on a
per-channel or per-program basis.
The 1996 Telecom Act sunsets FCC regulation of CPST rates for all systems
(regardless of size) on March 31, 1999. It also relaxes existing uniform rate
requirements by specifying that uniform rate requirements do not apply where the
operator faces "effective competition," and by exempting bulk discounts to
multiple dwelling units, although complaints about predatory pricing still may
be made to the FCC.
Cable Entry Into Telecommunications. The 1996 Telecom Act provides that no
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state or local laws or regulations may prohibit or have the effect of
prohibiting any entity from providing any interstate or intrastate
telecommunications service. States are authorized, however, to impose
"competitively neutral" requirements regarding universal service, public safety
and welfare, service quality, and consumer protection. State and local
governments also retain their authority to manage the public rights-of-way and
may require reasonable, competitively neutral compensation for management of the
public rights-of-way when cable operators provide telecommunications service.
The favorable pole attachment rates afforded cable operators under federal law
can be gradually increased by utility companies owning the poles (beginning in
2001) if the operator provides telecommunications service, as well as cable
service, over its plant.
Cable entry into telecommunications will be affected by the regulatory
landscape now being fashioned by the FCC and state regulators. One critical
component of the 1996 Telecom Act to facilitate the entry of new
telecommunications providers (including cable operators) is the interconnection
obligation imposed on all telecommunications carriers. Review of the FCC's
initial interconnection order is now pending before the Eighth Circuit Court of
Appeals.
Telephone Company Entry Into Cable Television. The 1996 Telecom Act allows
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telephone companies to compete directly with cable operators by repealing the
historic telephone company/cable cross-ownership ban. Local exchange carriers
("LECs"), including the BOCs, can now compete with cable operators both inside
and outside their telephone service areas. Because of their resources, LECs
could be formidable competitors to
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traditional cable operators, and certain LECs have begun offering cable service.
As described above, the General Partner is now witnessing the beginning of LEC
competition in a few of its cable communities.
Under the 1996 Telecom Act, a LEC providing video programming to
subscribers will be regulated as a traditional cable operator (subject to local
franchising and federal regulatory requirements), unless the LEC elects to
provide its programming via an "open video system" ("OVS"). To qualify for OVS
status, the LEC must reserve two-thirds of the system's activated channels for
unaffiliated entities.
Although LECs and cable operators can now expand their offerings across
traditional service boundaries, the general prohibition remains on LEC buyouts
(i.e., any ownership interest exceeding 10 percent) of co-located cable systems,
cable operator buyouts of co-located LEC systems, and joint ventures between
cable operators and LECs in the same market. The 1996 Telecom Act provides a
few limited exceptions to this buyout prohibition, including a carefully
circumscribed "rural exemption." The 1996 Telecom Act also provides the FCC
with the limited authority to grant waivers of the buyout prohibition (subject
to LFA approval).
Electric Utility Entry Into Telecommunications/Cable Television. The 1996
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Telecom Act provides that registered utility holding companies and subsidiaries
may provide telecommunications services (including cable television)
notwithstanding the Public Utilities Holding Company Act. Electric utilities
must establish separate subsidiaries, known as "exempt telecommunications
companies" and must apply to the FCC for operating authority. Again, because of
their resources, electric utilities could be formidable competitors to
traditional cable systems.
Additional Ownership Restrictions. The 1996 Telecom Act eliminates
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statutory restrictions on broadcast/cable cross-ownership (including broadcast
network/cable restrictions), but leaves in place existing FCC regulations
prohibiting local cross-ownership between co-located television stations and
cable systems. The 1996 Telecom Act also eliminates the three year holding
period required under the 1992 Cable Act's "anti-trafficking" provision. The
1996 Telecom Act leaves in place existing restrictions on cable cross-ownership
with SMATV and MMDS facilities, but lifts those restrictions where the cable
operator is subject to effective competition. In January 1995, however, the FCC
adopted regulations which permit cable operators to own and operate SMATV
systems within their franchise area, provided that such operation is consistent
with local cable franchise requirements.
Pursuant to the 1992 Cable Act, the FCC adopted rules precluding a cable
system from devoting more than 40% of its activated channel capacity to the
carriage of affiliated national program services. A companion rule establishing
a nationwide ownership cap on any cable operator equal to 30% of all domestic
cable subscribers has been stayed pending further judicial review.
There are no federal restrictions on non-U.S. entities having an ownership
interest in cable television systems or the FCC licenses commonly employed by
such systems. Section 310(b)(4) of the Communications Act does, however,
prohibit foreign ownership of FCC broadcast and telephone licenses, unless the
FCC concludes that such foreign ownership is consistent with the public
interest. BCI's investment in the General Partner could, therefore, adversely
affect any plan to acquire FCC broadcast or common carrier licenses. The
Partnership, however, does not currently plan to acquire such licenses.
Must Carry/Retransmission Consent. The 1992 Cable Act contains broadcast
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signal carriage requirements that allow local commercial television broadcast
stations to elect once every three years between requiring a cable system to
carry the station ("must carry") or negotiating for payments for granting
permission to the cable operator to carry the station ("retransmission
consent"). Less popular stations typically elect "must carry," and more popular
stations typically elect "retransmission consent." Must carry requests can
dilute the appeal of a cable system's programming offerings, and retransmission
consent demands may require substantial payments or other concessions. Either
option has a potentially adverse affect on the Partnership's business.
Additionally, cable systems are required to obtain retransmission consent for
all "distant" commercial television stations (except for satellite-delivered
independent "superstations" such as WTBS). The constitutionality of the must
carry requirements has been challenged and is awaiting a decision from the U.S.
Supreme Court.
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Access Channels. LFAs can include franchise provisions requiring cable
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operators to set aside certain channels for public, educational and governmental
access programming. Federal law also requires cable systems to designate a
portion of their channel capacity (up to 15% in some cases) for commercial
leased access by unaffiliated third parties. The FCC has adopted rules
regulating the terms, conditions and maximum rates a cable operator may charge
for use of the designated channel capacity, but use of commercial leased access
channels has been relatively limited. The FCC released revised rules in
February 1997 which mandate a modest rate reduction and could make commercial
leased access a more attractive option to third party programmers.
Access to Programming. To spur the development of independent cable
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programmers and competition to incumbent cable operators, the 1992 Cable Act
imposed restrictions on the dealings between cable operators and cable
programmers. Of special significance from a competitive business posture, the
1992 Cable Act precludes video programmers affiliated with cable companies from
favoring cable operators over competitors and requires such programmers to sell
their programming to other multichannel video distributors. This provision
limits the ability of vertically integrated cable programmers to offer exclusive
programming arrangements to cable companies.
Other FCC Regulations. In addition to the FCC regulations noted above,
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there are other FCC regulations covering such areas as equal employment
opportunity, subscriber privacy, programming practices (including, among other
things, syndicated program exclusivity, network program nonduplication, local
sports blackouts, indecent programming, lottery programming, political
programming, sponsorship identification, and children's programming
advertisements), registration of cable systems and facilities licensing,
maintenance of various records and public inspection files, frequency usage,
lockbox availability, antenna structure notification, tower marking and
lighting, consumer protection and customer service standards, technical
standards, and consumer electronics equipment compatibility. The FCC is
expected to impose new Emergency Alert System requirements on cable operators
this year. The FCC has the authority to enforce its regulations through the
imposition of substantial fines, the issuance of cease and desist orders and/or
the imposition of other administrative sanctions, such as the revocation of FCC
licenses needed to operate certain transmission facilities used in connection
with cable operations.
Two pending FCC proceedings of particular competitive concern involve
inside wiring and navigational devices. The former rulemaking is considering
ownership of cable wiring located inside multiple dwelling unit complexes. If
the FCC concludes that such wiring belongs to, or can be unilaterally acquired
by the complex owner, it will become easier for complex owners to terminate
service from the incumbent cable operator in favor of a new entrant. The latter
rulemaking is considering whether cable customers must be allowed to purchase
cable converters from third party vendors. If the FCC concludes that such
distribution is required, and does not make appropriate allowances for signal
piracy concerns, it may become more difficult for cable operators to combat
theft of service.
Copyright. Cable television systems are subject to federal copyright
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licensing covering carriage of television and radio broadcast signals. In
exchange for filing certain reports and contributing a percentage of their
revenues to a federal copyright royalty pool (that varies depending on the size
of the system and the number of distant broadcast television signals carried),
cable operators can obtain blanket permission to retransmit copyrighted material
on broadcast signals. The possible modification or elimination of this
compulsory copyright license is the subject of continuing legislative review and
could adversely affect the Partnership's ability to obtain desired broadcast
programming. In addition, the cable industry pays music licensing fees to BMI
and is negotiating a similar arrangement with ASCAP. Copyright clearances for
nonbroadcast programming services are arranged through private negotiations.
State and Local Regulation. Cable television systems generally are
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operated pursuant to nonexclusive franchises granted by a municipality or other
state or local government entity in order to cross public rights-of-way.
Federal law now prohibits franchise authorities from granting exclusive
franchises or from unreasonably refusing to award additional franchises. Cable
franchises generally are granted for fixed terms and in many cases
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include monetary penalties for non-compliance and may be terminable if the
franchisee fails to comply with material provisions.
The terms and conditions of franchises vary materially from jurisdiction to
jurisdiction. Each franchise generally contains provisions governing cable
operations, service rates, franchise fees, system construction and maintenance
obligations, system channel capacity, design and technical performance, customer
service standards, and indemnification protections. A number of states subject
cable television systems to the jurisdiction of centralized state governmental
agencies, some of which impose regulation of a character similar to that of a
public utility. Although LFAs have considerable discretion in establishing
franchise terms, there are certain federal limitations. For example, LFAs
cannot insist on franchise fees exceeding 5% of the system's gross revenues,
cannot dictate the particular technology used by the system, and cannot specify
video programming other than identifying broad categories of programming.
Federal law contains renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. Even if a franchise is
renewed, the franchise authority may seek to impose new and more onerous
requirements such as significant upgrades in facilities and services or
increased franchise fees as a condition of renewal. Similarly, if a franchise
authority's consent is required for the purchase or sale of a cable system or
franchise, such authority may attempt to impose more burdensome or onerous
franchise requirements in connection with a request for consent. Historically,
franchises have been renewed for cable operators that have provided satisfactory
services and have complied with the terms of their franchises.
GENERAL. The Partnership's business consists of providing cable television
services to a large number of customers, the loss of any one of which would have
no material effect on the Partnership's business. The Systems have had some
subscribers who later terminated the service. Terminations occur primarily
because people move to another home or to another city. In other cases, people
terminate on a seasonal basis or because they no longer can afford or are
dissatisfied with the service. The amount of past due accounts in Systems is
not significant. The Partnership's policy with regard to past due accounts is
basically one of disconnecting service before a past due account becomes
material.
The Partnership does not depend to any material extent on the availability
of raw materials; it carries no significant amounts of inventory and it has no
material backlog of customer orders. The Partnership does not have any
employees because all properties are managed by employees of the General
Partner. The General Partner has engaged in research and development activities
relating to the provision of new services but the amount of the Partnership's
funds expended for such research and development has never been material.
Compliance with federal, state and local provisions that have been enacted
or adopted regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment has had no material
effect upon the capital expenditures, earnings or competitive position of the
Partnership.
ITEM 2. PROPERTIES
-------------------
The cable television systems owned by the Partnership are described below:
SYSTEM ACQUISITION DATE
------ ----------------
Fort Myers System May 1985
Orland Park May 1985
Lake County System May 1985
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
9
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, 1996, the Lake County System operated cable plant passing approximately
27,800 homes, with an approximate 70% penetration rate; the Orland Park
System operated cable plant passing approximately 30,600 homes, with an
approximate 68% penetration rate; and the Fort Myers System operated cable plant
passing approximately 69,200 homes, with an approximate 56% penetration rate.
Figures for numbers of subscribers and homes passed are compiled from the
General Partner's records and may be subject to adjustments.
At December 31,
-------------------------
LAKE COUNTY SYSTEM 1996 1995 1994
- ------------------ ---- ---- ----
Monthly basic plus service rate $ 23.38 $ 22.52 $ 21.26
Basic subscribers 19,745 18,611 17,021
Pay units 12,122 12,375 11,671
At December 31,
-------------------------
ORLAND PARK SYSTEM 1996 1995 1994
- ------------------------ ---- ---- ----
Monthly basic plus service rate $ 25.16 $ 24.01 $ 22.51
Basic subscribers 20,853 19,730 18,375
Pay units 14,887 14,418 14,996
At December 31,
-------------------------
FT. MYERS SYSTEM 1996 1995 1994
- ---------------- ---- ---- ----
Monthly basic plus service rate $ 23.51 $ 20.52 $ 19.52
Basic subscribers 38,944 38,306 37,144
Pay units 23,122 23,425 25,052
ITEM 3. LEGAL PROCEEDINGS
--------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
None.
PART II.
--------
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 1996, several partners of the Partnership conducted
"limited tender offers" for interests in the Partnership at prices ranging from
$570 to $600 per interest. As of February 14, 1997, the number of equity
security holders in the Partnership was 7,151.
10
Item 6. Selected Financial Data
- --------------------------------
For the Year Ended December 31,
--------------------------------------------------------------------
Cable TV Fund 12-A, Ltd. 1996 1995 1994 1993 1992
- ------------------------------------ ------------ ------------ ------------ ------------ ------------
Revenues $34,485,280 $32,080,534 $29,378,010 $28,963,726 $26,693,028
Depreciation and Amortization 7,198,642 7,134,956 7,032,177 7,840,193 7,528,805
Operating Income (Loss) 2,830,368 2,381,418 1,377,680 1,196,824 514,394
Net Income (Loss) 988,478 379,266 (492,539) (409,726) (1,583,447)
Net Income (Loss) per Limited
Partnership Unit 9.41 3.61 (4.69) (3.90) (15.07)
Weighted Average Number of Limited
Partnership Units Outstanding 104,000 104,000 104,000 104,000 104,000
General Partner's Deficit (358,455) (368,340) (372,133) (367,208) (363,111)
Limited Partners' Capital 9,263,710 8,285,117 7,909,644 8,397,258 8,802,887
Total Assets 38,472,570 36,825,106 36,725,141 39,297,990 43,071,609
Debt 27,179,908 26,736,382 26,402,399 29,724,530 32,813,067
General Partner Advances - 373,311 1,305,933 220,722 261,348
11
Item 7. Management's Discussion and Analysis of Financial Condition and
- -------------------------------------------------------------------------
Results of Operations
- ---------------------
CABLE TV FUND 12-A, LTD.
------------------------
The following discussion of the financial condition and results of
operations of Cable TV Fund 12-A, Ltd. (the "Partnership") 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 actual results may differ significantly from the results
predicted in such forward-looking statements.
FINANCIAL CONDITION
- -------------------
It is the General Partner's publicly announced policy that it intends
to liquidate its managed limited partnerships, including the Partnership, as
opportunities for sales of partnership cable television systems arise in the
marketplace over the next several years. In accordance with the General
Partner's policy, the cable television systems serving the areas in and around
Orland Park and Park Forest, Illinois (the "Orland Park System") and Lake
County, Illinois (the "Lake County System"), along with other Chicago-area
systems owned or managed by the General Partner and its affiliates, were
marketed for sale in 1996. The deadline set by the General Partner for receipt
of indications of interest for such systems from prospective buyers was October
15, 1996. The General Partner did not receive any offer for the Orland Park
System or the Lake County System. The General Partner will continue to explore
other alternatives for sale. There is no assurance as to the timing or terms of
any sales.
For the year ended December 31, 1996, the Partnership generated net
cash from operating activities totaling approximately $8,605,000, which is
available to fund capital expenditures and non-operating costs. Capital
expenditures totaled approximately $6,322,000 during 1996. Approximately 43
percent of these expenditures related to the construction of service drops to
subscribers' homes. Approximately 24 percent of these expenditures related to
the construction of cable plant associated with new homes passed and
approximately 12 percent of these expenditures was for converters. The
remaining expenditures were used for various enhancements in the Partnership's
systems. Funding for these expenditures was provided by cash on hand, cash
generated from operations and borrowings under the Partnership's credit
facility. Anticipated capital expenditures for 1997 are approximately
$6,336,000. Approximately 37 percent is expected to be used to continue
construction of new cable plant and approximately 32 percent will be used for
the construction of service drops to subscribers' homes. The remainder of
anticipated expenditures is expected to be used for various enhancements in all
of the Partnership's systems. These capital expenditures are necessary to
maintain the value of the Partnership's systems. Funding for these expenditures
is expected to be provided by cash on hand and cash generated from operations.
The Partnership was a party to a $30,000,000 revolving credit facility, the
revolving feature of which expired on December 31, 1996, at which time the then-
outstanding balance of $27,000,000 converted to a term loan. The term loan is
payable in 20 consecutive quarterly installments that will commence on March 31,
1997. Installments due during 1997 total $4,050,000 and will be funded by cash
on hand and cash generated from operations. Generally, interest payable on
amounts borrowed under the revolving credit facility is at the Partnership's
option of Prime or a fixed rate defined as the London Interbank Offered Rate
plus 1 percent. The effective interest rate on outstanding obligations as of
December 31, 1996 and 1995 were approximately 6.73 percent and approximately
6.94 percent, respectively.
The General Partner believes that the Partnership has sufficient sources of
capital from cash on hand and cash generated from operations to meet its
presently anticipated needs.
RESULTS OF OPERATIONS
- ---------------------
1996 compared to 1995
---------------------
Revenues of the Partnership increased $2,404,746, or approximately 7
percent, to $34,485,280 in 1996 from $32,080,534 in 1995. An increase in the
number of basic subscribers accounted for approximately 40 percent of the
increase in revenues. The Partnership added 2,895 basic subscribers in 1996, an
increase of approximately 4 percent. The number of basic subscribers totaled
79,542 at December 31, 1996, compared to 76,647 at December 31, 1995. Basic
service rate increases implemented in all of the Partnership's systems accounted
for approximately 34 percent of the increase in revenues. An increase in
advertising sales revenue also contributed to the increase in revenues. No
other individual factor was significant to the increase in revenues.
12
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 $1,824,805, or approximately 10 percent,
to $20,473,736 in 1996 from $18,648,931 in 1995. Operating expenses represented
approximately 59 percent of revenues in 1996 compared to approximately 58
percent of revenues in 1995. This increase was primarily due to an increase in
programming fees which was due, in part, to the increase in the subscriber base.
No other individual factor contributed significantly to the increase in
operating expenses.
Management fees and allocated overhead from the General Partner
increased $67,305, or approximately 2 percent, to $3,982,534 in 1996 from
$3,915,229 in 1995. This increase was due to an increase in management fees.
Management fees, which are based on a percentage of revenues, increase when
revenues increase.
Depreciation and amortization expense increased $63,686, or
approximately 1 percent, to $7,198,642 in 1996 from $7,134,956 in 1995. This
increase was due to additions to the Partnership's depreciable asset base in
1996 and 1995.
Operating income increased $448,950, or approximately 19 percent, to
$2,830,368 in 1996 from $2,381,418 in 1995. This increase was due to the
increase in revenues exceeding the increases in operating expenses, management
fees and allocated overhead from the General Partner and depreciation and
amortization expense.
The cable television industry generally measures the performance of a
cable television system in terms of operating income before depreciation and
amortization. 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 income before depreciation and
amortization increased $512,636, or approximately 5 percent, to $10,029,010 in
1996 from $9,516,374 in 1995. This increase was due to the increase in revenues
exceeding increases in operating expenses and management fees and allocated
overhead from the General Partner.
Interest expense decreased $305,175, or approximately 15 percent, to
$1,713,677 in 1996 from $2,018,852 in 1995. This decrease was due to lower
outstanding balances during the year and lower effective interest rates on
interest bearing obligations.
Net income increased $609,212, to $988,478 in 1996 from $379,266 in
1995. This increase was due to the factors discussed above.
1995 compared to 1994
---------------------
Revenues of the Partnership increased $2,702,524, or approximately 9
percent, to $32,080,534 in 1995 from $29,378,010 in 1994. An increase in the
number of basic subscribers accounted for approximately 48 percent of the
increase in revenues. The Partnership added 4,107 basic subscribers in 1995, an
increase of approximately 6 percent. The number of basic subscribers totaled
76,647 at December 31, 1995, compared to 72,540 at December 31, 1994. Basic
service rate increases implemented in all of the Partnership's systems accounted
for approximately 32 percent of the increase in revenues. No other individual
factor was significant to the increase in revenues.
Operating expenses increased $1,399,936, or approximately 8 percent,
to $18,648,931 in 1995 from $17,248,995 in 1994. Operating expenses represented
approximately 58 percent of revenues in 1995 compared to approximately 59
percent of revenues in 1994. An increase in programming fees accounted for
approximately 65 percent of the increase in operating expenses and was due, in
part, to the increase in the subscriber base. In addition, increases in
marketing and plant-related expenses were partially offset by a decrease in
personnel expense. No other individual factors contributed significantly to the
increase in operating expenses.
Management fees and allocated overhead from the General Partner
increased $196,071, or approximately 5 percent, to $3,915,229 in 1995 from
$3,719,158 in 1994 due primarily to the increase in revenues, upon which such
fees and allocations are based.
13
Depreciation and amortization expense increased $102,779, or
approximately 1 percent, to $7,134,956 in 1995 from $7,032,177 in 1994 due to
additions to the Partnership's depreciable asset base in 1995 and 1994.
Operating income increased $1,033,738, or approximately 73 percent, to
$2,381,418 in 1995 from $1,377,680 in 1994. This increase was due to the
increase in revenues exceeding the increases in operating expenses, management
fees and allocated overhead from the General Partner and depreciation and
amortization expense.
Operating income before depreciation and amortization increased
$1,106,517, or approximately 13 percent, to $9,516,374 in 1995 from $8,409,857
in 1994. This increase was due to the increase in revenues exceeding the
increases in operating expenses and management fees and allocated overhead from
the General Partner.
Interest expense increased $279,858, or approximately 16 percent, to
$2,018,852 in 1995 from $1,738,994 in 1994 due to higher outstanding balances on
interest bearing obligations.
The Partnership reported net income of $379,266 in 1995 compared to a
net loss of $492,539 in 1994. This change was due to the factors discussed
above.
14
Item 8. Financial Statements
- -----------------------------
CABLE TV FUND 12-A, LTD.
------------------------
FINANCIAL STATEMENTS
--------------------
AS OF DECEMBER 31, 1996 AND 1995
--------------------------------
INDEX
-----
Page
------------
Report of Independent Public Accountants 16
Balance Sheets 17
Statements of Operations 19
Statements of Partners' Capital (Deficit) 20
Statements of Cash Flows 21
Notes to Financial Statements 22
15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Partners of Cable TV Fund 12-A, Ltd.:
We have audited the accompanying balance sheets of CABLE TV FUND 12-A,
LTD. (a Colorado limited partnership) as of December 31, 1996 and 1995, and the
related statements of operations, partners' capital (deficit) and cash flows for
each of the three years in the period ended December 31, 1996. 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 12-A,
Ltd. as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 7, 1997.
16
CABLE TV FUND 12-A, LTD.
------------------------
(A Limited Partnership)
BALANCE SHEETS
--------------
December 31,
----------------------------
ASSETS 1996 1995
------ ------------ ------------
CASH $ 4,034,642 $ 1,307,723
TRADE RECEIVABLES, less allowance for doubtful receivables of
$35,573 and $100,732 at December 31, 1996 and 1995, respectively 685,452 914,397
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 80,190,860 78,674,556
Less- accumulated depreciation (48,417,981) (46,771,823)
------------ ------------
31,772,879 31,902,733
Franchise costs and other intangible assets, net of accumulated
amortization of $33,336,216 and $32,573,148 at December 31, 1996
and 1995, respectively 1,688,873 2,389,839
------------ ------------
Total investment in cable television properties 33,461,752 34,292,572
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 290,724 310,414
------------ ------------
Total assets $ 38,472,570 $ 36,825,106
============ ============
The accompanying notes to financial statements
are an integral part of these balance sheets.
17
CABLE TV FUND 12-A, LTD.
------------------------
(A Limited Partnership)
BALANCE SHEETS
--------------
December 31,
---------------------------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1996 1995
- ------------------------------------------- ------------ ------------
LIABILITIES:
Debt $ 27,179,908 $ 26,736,382
Advances from General Partner - 373,311
Trade accounts payable and accrued liabilities 2,261,358 1,674,946
Subscriber prepayments 126,049 123,690
------------ ------------
Total liabilities 29,567,315 28,908,329
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 7)
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (359,455) (369,340)
------------ ------------
(358,455) (368,340)
------------- ------------
Limited Partners-
Net contributed capital (104,000 units outstanding at
December 31, 1996 and 1995) 44,619,655 44,619,655
Accumulated deficit (35,355,945) (36,334,538)
------------ ------------
9,263,710 8,285,117
------------ ------------
Total liabilities and partners' capital (deficit) $ 38,472,570 $ 36,825,106
============ ============
The accompanying notes to financial statements
are an integral part of these balance sheets.
18
CABLE TV FUND 12-A, LTD.
------------------------
(A Limited Partnership)
STATEMENTS OF OPERATIONS
------------------------
For the Year Ended December 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
REVENUES $34,485,280 $32,080,534 $29,378,010
COSTS AND EXPENSES:
Operating expenses 20,473,736 18,648,931 17,248,995
Management fees and allocated overhead
from General Partner 3,982,534 3,915,229 3,719,158
Depreciation and amortization 7,198,642 7,134,956 7,032,177
----------- ----------- -----------
OPERATING INCOME 2,830,368 2,381,418 1,377,680
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (1,713,677) (2,018,852) (1,738,994)
Other, net (128,213) 16,700 (131,225)
----------- ----------- -----------
Total other income (expense), net (1,841,890) (2,002,152) (1,870,219)
----------- -----------
NET INCOME (LOSS) $ 988,478 $ 379,266 $ (492,539)
=========== =========== ===========
ALLOCATION OF NET INCOME (LOSS):
General Partner $ 9,885 $ 3,793 $ (4,925)
=========== =========== ===========
Limited Partners $ 978,593 $ 375,473 $ (487,614)
=========== =========== ===========
NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT $9.41 $3.61 $(4.69)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 104,000 104,000 104,000
=========== =========== ===========
The accompanying notes to financial statements
are an integral part of these statements.
19
CABLE TV FUND 12-A, LTD.
------------------------
(A Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
-----------------------------------------
For the Year Ended December 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
GENERAL PARTNER:
Balance, beginning of year $ (368,340) $ (372,133) $ (367,208)
Net income (loss) for year 9,885 3,793 (4,925)
---------- ---------- ----------
Balance, end of year $ (358,455) $ (368,340) $ (372,133)
========== ========== ==========
LIMITED PARTNERS:
Balance, beginning of year $8,285,117 $7,909,644 $8,397,258
Net income (loss) for year 978,593 375,473 (487,614)
---------- ---------- ----------
Balance, end of year $9,263,710 $8,285,117 $7,909,644
========== ========== ==========
The accompanying notes to financial statements
are an integral part of these statements.
20
CABLE TV FUND 12-A, LTD.
------------------------
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
------------------------
For the Year Ended December 31,
-----------------------------------------
1996 1995 1994
------------ ------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 988,478 $ 379,266 $ (492,539)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 7,198,642 7,134,956 7,032,177
Amortization of interest rate protection contract - 50,004 50,004
Decrease (increase) in trade receivables 228,945 (539,580) 118,079
Increase in deposits, prepaid expenses and deferred charges (26,434) (233,483) (43,411)
Increase (decrease) in amount due General Partner (373,311) (932,622) 1,085,211
Increase in trade accounts payable, accrued liabilities and
subscriber prepayments 588,771 319,338 156,610
----------- ------------ -----------
Net cash provided by operating activities 8,605,091 6,177,879 7,906,131
----------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (6,321,698) (5,782,796) (5,615,530)
----------- ------------ -----------
Net cash used in investing activities (6,321,698) (5,782,796) (5,615,530)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 2,260,619 28,612,825 192,155
Repayment of debt (1,817,093) (28,278,842) (3,514,286)
----------- ------------ -----------
Net cash provided by (used in) financing activities 443,526 333,983 (3,322,131)
----------- ------------ -----------
Increase (decrease) in cash 2,726,919 729,066 (1,031,530)
Cash, beginning of year 1,307,723 578,657 1,610,187
----------- ------------ -----------
Cash, end of year $ 4,034,642 $ 1,307,723 $ 578,657
=========== ============ ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 1,746,102 $ 1,850,342 $ 1,691,031
=========== ============ ===========
The accompanying notes to financial statements
are an integral part of these statements.
21
CABLE TV FUND 12-A, LTD.
------------------------
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(1) ORGANIZATION AND PARTNERS' INTERESTS
------------------------------------
Formation and Business
----------------------
Cable TV Fund 12-A, Ltd. (the "Partnership"), a Colorado limited
partnership, was formed on January 2, 1985, under a public program sponsored by
Jones Intercable, Inc. ("Intercable"). The Partnership was formed to acquire,
construct, develop and operate cable television systems. The Partnership owns
and operates the cable television systems serving areas in and around Fort
Myers, Florida and Lake County, Orland Park and Park Forest, Illinois.
Intercable, a publicly held Colorado corporation, is the "General Partner" and
manages 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 affiliated entities.
Contributed Capital
-------------------
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 contributions to partnership capital.
The General Partner 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 the General Partner, 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
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.
(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 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.
Property, Plant and Equipment
-----------------------------
Depreciation of property, plant and equipment is provided primarily
using the straight-line method over the following estimated service lives:
Cable distribution system 5 - 15 years
Equipment and tools 3 - 5 years
Office furniture and equipment 5 years
Buildings 20 years
Vehicles 3 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.
22
Intangible Assets
-----------------
Costs assigned to franchises are being amortized using the straight-line
method over remaining estimated useful lives ranging from one to four years.
Revenue Recognition
-------------------
Subscriber prepayments are initially deferred and recognized as revenue
when earned.
Reclassification
----------------
Certain prior year amounts have been reclassified to conform to the 1996
presentation.
(3) TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
----------------------------------------------------
Management Fees, Distribution Ratios and Reimbursements
-------------------------------------------------------
Intercable manages the Partnership and receives a fee for its services
equal to 5 percent of the gross revenues of the Partnership, excluding revenues
from the sale of cable television systems or franchises. Management fees for
the years ended December 31, 1996, 1995 and 1994 were $1,724,264, $1,604,027 and
$1,468,900, respectively.
Any 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 the
General Partner. Any distributions other than 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 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 reimburses 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
facilities costs. Such personnel provide engineering, marketing,
administrative, accounting, legal and investor relations services to the
Partnership. Such services, and their related costs, are necessary to the
operation of the Partnership and would have been incurred by the Partnership, 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 partnership
managed. Remaining expenses are allocated based on the pro rata relationship of
the Partnership'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 by the Partnership to Intercable for
allocated overhead and administrative expenses were $2,258,270, $2,311,202 and
$2,250,258 in 1996, 1995 and 1994, respectively.
The Partnership was charged interest during 1996 at an average
interest rate of 8.58 percent on the amounts due Intercable, which approximated
Intercable's weighted average cost of borrowing. Total interest charged to the
Partnership by Intercable was $15,139, $16,426 and $32,220 in 1996, 1995 and
1994, respectively.
Payments to/from Affiliates for Programming Services
----------------------------------------------------
The Partnership receives programming from Superaudio, Jones Education
Company, Great American Country, Inc. and Product Information Network, all of
which are affiliates of Intercable.
Payments to Superaudio totaled $51,583, $45,536 and $45,861 in 1996, 1995
and 1994, respectively. Payments to Jones Education Company totaled $114,521,
$101,804 and, $54,750 in 1996, 1995 and 1994, respectively. Payments to Great
American Country, Inc., which initiated service in 1996, totaled $34,642 in
1996.
The Partnership 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 Partnership totaling $60,794,
$44,608 and $16,302 in 1996, 1995 and 1994, respectively.
23
(4) PROPERTY, PLANT AND EQUIPMENT
-----------------------------
Property, plant and equipment as of December 31, 1996 and 1995, consisted
of the following:
December 31,
----------------------------
1996 1995
------------ ------------
Cable distribution system $ 73,282,202 $ 70,573,280
Equipment and tools 2,330,714 2,847,574
Office furniture and equipment 1,538,832 1,646,703
Buildings 1,627,424 1,620,275
Vehicles 987,194 1,562,360
Land 424,494 424,364
------------ ------------
80,190,860 78,674,556
Less: accumulated depreciation (48,417,981) (46,771,823)
------------ ------------
$ 31,772,879 $ 31,902,733
============ ============
(5) DEBT
----
Debt consists of the following: December 31,
---------------------------
1996 1995
------------ ------------
Lending institutions-
Revolving credit and term loan $27,000,000 $26,500,000
Capital lease obligations 179,908 236,382
------------ ------------
$27,179,908 $26,736,382
============ ============
The Partnership was a party to a $30,000,000 revolving credit
facility, the revolving feature of which expired on December 31, 1996, at which
time the then-outstanding balance of $27,000,000 converted to a term loan. The
term loan is payable in 20 consecutive quarterly installments that will commence
on March 31, 1997. Installments due in 1997 total $4,050,000. Generally,
interest payable on amounts borrowed under the revolving credit facility is at
the Partnership's option of Prime or a fixed rate defined as the London
Interbank Offered Rate plus 1 percent. The effective interest rate on
outstanding obligations as of December 31, 1996 and 1995 were approximately 6.73
percent and approximately 6.94 percent, respectively.
Installments due on all debt principal for each of the five years in
the period ending December 31, 2001, respectively, are: $4,103,972, $4,103,972,
$5,453,972, $6,767,992 and $6,750,000. At December 31, 1996, substantially all
of the Partnership's property, plant and equipment secured the above
indebtedness.
At December 31, 1996, 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 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
24
examinations result 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 income (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
income (loss) and the net income (loss) reported in the statements of
operations.
(7) COMMITMENTS AND CONTINGENCIES
----------- --- -------------
The Partnership rents office and other facilities under various long-term
operating lease arrangements. Rent paid under such lease arrangements totaled
$83,191, $74,376 and $79,337, respectively, for the years ended December 31,
1996, 1995 and 1994. Minimum commitments under operating leases for each of the
five years ended December 31, 2001 and thereafter total $107,034, $61,652,
$11,299, $11,299, $2,825 and $-0-, respectively.
(8) SUPPLEMENTARY PROFIT AND LOSS INFORMATION
-----------------------------------------
Supplementary profit and loss information is presented below:
For the Year Ended December 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
Maintenance and repairs $ 311,696 $ 248,042 $ 315,149
========== ========== ==========
Taxes, other than income and payroll taxes $ 502,687 $ 364,657 $ 306,902
========== ========== ==========
Advertising $ 448,330 $ 520,795 $ 485,911
========== ========== ==========
Depreciation of property, plant and equipment $6,435,574 $6,055,408 $5,636,122
========== ========== ==========
Amortization of intangible assets $ 763,068 $1,079,548 $1,396,055
========== ========== ==========
25
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
---------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
None.
PART III.
---------
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 67 Chairman of the Board and Chief Executive Officer
Derek H. Burney 57 Vice Chairman of the Board
James B. O'Brien 47 President and Director
Ruth E. Warren 47 Group Vice President/Operations
Kevin P. Coyle 45 Group Vice President/Finance
Christopher J. Bowick 41 Group Vice President/Technology
George H. Newton 62 Group Vice President/Telecommunications
Raymond L. Vigil 50 Group Vice President/Human Resources
Cynthia A. Winning 45 Group Vice President/Marketing
Elizabeth M. Steele 45 Vice President/General Counsel/Secretary
Larry W. Kaschinske 37 Vice President/Controller
Robert E. Cole 64 Director
William E. Frenzel 68 Director
Donald L. Jacobs 58 Director
James J. Krejci 55 Director
John A. MacDonald 43 Director
Raphael M. Solot 63 Director
Howard O. Thrall 49 Director
Siim A. Vanaselja 40 Director
Sanford Zisman 57 Director
Robert B. Zoellick 43 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, is a member of the Board of Directors and the
Executive Committee of the National Cable Television Association. Additionally,
Mr. Jones is a member of the Board of Governors for the American Society for
Training and Development, and 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
26
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. Derek H. Burney was appointed a Director of the General Partner in
December 1994 and Vice Chairman of the Board of Directors on January 31, 1995.
Mr. Burney joined BCE Inc., Canada's largest telecommunications company, in
January 1993 as Executive Vice President, International. He has been the
Chairman of Bell Canada International Inc., a subsidiary of BCE, since January
1993 and, in addition, has been Chief Executive Officer of BCI since July 1993.
Prior to joining BCE, Mr. Burney served as Canada's ambassador to the United
States from 1989 to 1992. Mr. Burney also served as chief of staff to the Prime
Minister of Canada from March 1987 to January 1989 where he was directly
involved with the negotiation of the U.S. - Canada Free Trade Agreement. In July
1993, he was named an Officer of the Order of Canada. Mr. Burney is also a
director of Bell Cablemedia plc, Mercury Communications Limited, Videotron
Holdings plc, Tele-Direct (Publications) Inc., Teleglobe Inc., Bimcor Inc.,
Maritime Telegraph and Telephone Company, Limited, Moore Corporation Limited,
Northbridge Programming Inc. and certain subsidiaries of Bell Canada
International.
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 Vice
Chairman and as a director of the Cable Television Administration and Marketing
Association and as a director and 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 manager 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. Previous 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. George H. Newton joined the General Partner in January 1996 as Group
Vice President/Telecommunications. Prior to joining the General Partner, Mr.
Newton was President of his own consulting business, Clear Solutions, and since
1994 Mr. Newton has served as a Senior Advisor to Bell Canada International.
From 1990 to 1993, Mr. Newton served as the founding Chief Executive Officer and
Managing Director of Clear Communications, New Zealand, where he established an
alternative telephone company in New Zealand. From 1964 to 1990, Mr. Newton
held a wide variety of operational and business assignments with Bell Canada
International.
Mr. Raymond L. Vigil joined the General Partner in June 1993 as Group Vice
President/Human Resources. Previous to joining the General Partner, Mr. Vigil
served as Executive Director of Learning with USWest. Prior to USWest, Mr.
Vigil worked in various human resources posts over a 14-year term with the IBM
Corporation.
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.,
27
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. 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. James J. Krejci was President of the International Division of
International Gaming Technology, International headquartered in Reno, Nevada,
until March 1995. 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 has been a Director of the General Partner since August 1987.
28
Mr. John A. MacDonald was appointed a Director of the General Partner in
November 1995. Mr. MacDonald is Executive Vice President of Business
Development and Chief Technology Officer of Bell Canada International Inc.
Prior to joining Bell Canada in November 1994, Mr. MacDonald was President and
Chief Executive Officer of The New Brunswick Telephone Company, Limited, a post
he had held since March of that year. Prior to March 1994, Mr. MacDonald was
with NBTel for 17 years serving in various capacities, including Market Planning
Manager, Corporate Planning Manager, Manager of Systems Planning and Development
and General Manager, Chief Engineer and General Manager of Engineering and
Information Systems and Vice President of Planning. Mr. MacDonald was the
former Chairman of the New Brunswick section of the Institute of Electrical and
Electronic Engineers and also served on the Federal Government's Information
Highway Advisory Council. Mr. MacDonald is Chairman of MediaLinx Interactive
Inc. and Stentor Canadian Network Management and is presently a Governor of the
Montreal Exchange. He also serves on the Board of Directors of Tele-Direct
(Publications) Inc., Bell-Northern Research, Ltd., SRCI, Bell Sygma, Canarie
Inc., and is a member of the University of New Brunswick Venture Campaign
Cabinet.
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 31 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 Senior Vice
President - Corporate Development for First National Net, Inc., a leading
service provider for the mortgage banking industry, and he heads First National
Net's Washington, D.C. regional office. From September 1993 through July 1996,
Mr. Thrall has 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. Thrall is also an active management and
international marketing consultant, having completed assignments with McDonnell
Douglas Aerospace, JAL Trading, Inc., Technology Solutions Company, Cheong Kang
Associated (Korea), Aero Investment Alliance, Inc. and Western Real Estate
Partners, among others.
Mr. Siim A. Vanaselja was appointed a Director of the General Partner in
August 1996. 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 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 member of the law firm, Zisman & Ingraham, P.C. of
Denver, Colorado and has practiced law for 31 years, with an emphasis on tax,
business and estate planning and probate administration. Mr. Zisman currently
serves as a member of the Board of Directors of Saint Joseph Hospital, the
largest hospital in Colorado, and he has served as Chairman of the Board,
Chairman of the Finance Committee and Chairman of the Strategic Planning
Committee of the hospital. Since 1992, 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 Executive Vice President for Housing and Law of
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 received the Alexander Hamilton and Distinguished Service Awards,
highest honors of the Departments of Treasury and State, respectively. The
German Government awarded him the Knight Commanders Cross for his work on
Germany unification. Mr. Zoellick currently serves on the boards of Alliance
Capital, Said
29
Holdings, the Council on Foreign Relations, the Congressional Institute, the
German Marshall Fund of the U.S., the European Institute, the National Bureau of
Asian Research, the American Council on Germany, the American Institute for
Contemporary German Studies and the Overseas Development Council.
ITEM 11. EXECUTIVE COMPENSATION
--------------------------------
The Partnership has no employees; however, various personnel are required
to operate the Systems. Such personnel are employed by the General Partner and,
pursuant to the terms of the limited partnership agreement of the Partnership,
the cost of such employment is charged by the General Partner to the Partnership
as a direct reimbursement item. See Item 13.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
----------------------------------------------------------------------
As of March 4, 1997, no person or entity owned more than 5 percent of the
limited partnership interests of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------
The General Partner and its affiliates engage in certain transactions with
the Partnership. The General Partner believes that the terms of such
transactions are generally as favorable as could be obtained by the Partnership
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 from unaffiliated parties.
TRANSACTIONS WITH THE GENERAL PARTNER
The General Partner charges a 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. 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 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 also advances funds and charges interest on the balance
payable. The interest rate charged approximates the General Partner's weighted
average cost of borrowing.
TRANSACTIONS WITH AFFILIATES
Jones Education Company ("JEC") is owned 63% by Jones International, Ltd.
("International"), an affiliate of the General Partner, 9% by Glenn R. Jones,
12% by Bell Canada International Inc. ("BCI") and 16% by the General Partner.
JEC operates two television networks, JEC Knowledge TV and Jones Computer
Network. JEC Knowledge TV provides programming related to computers and
technology; business, careers and finance; health and wellness; and global
culture and languages. Jones Computer Network provides programming focused
primarily on computers and technology. JEC sells its programming to certain
cable television systems owned or managed by the General Partner.
30
The Great American Country network provides country music video programming
to certain cable television systems owned or managed by the General Partner.
This network is owned and operated by Great American Country, Inc., a subsidiary
of Jones International Networks, Ltd., an affiliate of International.
Jones Galactic Radio, Inc. is a company now owned by Jones International
Networks, Ltd., an affiliate of International. Superaudio, a joint venture
between Jones Galactic Radio, Inc. and an unaffiliated entity, provides
satellite programming to certain cable television systems owned or managed by
the General Partner.
The Product Information Network Venture (the "PIN Venture") is a venture
among a subsidiary of Jones International Networks, Ltd., an affiliate of
International, 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% of its net
advertising revenue to the cable systems that carry its programming. Most of
the General Partner's owned and managed 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 $50,794
for the year ended December 31, 1996.
The charges to the Partnership for related party transactions are as
follows for the periods indicated:
Cable TV Fund 12-A, Ltd. For the Year Ended December 31,
- ------------------------ -------------------------------
1996 1995 1994
---- --- ----
Management fees $1,724,624 $1,604,027 $1,468,900
Allocation of expenses 2,258,270 2,311,202 2,250,258
Interest expense 15,139 16,426 32,220
Amount of advances outstanding 0 373,311 1,305,933
Highest amount of advances outstanding 27,647 373,311 1,305,933
Programming fees:
Jones Education Company 114,521 101,804 54,750
Great American Country 34,642 0 0
Superaudio 51,583 45,536 45,861
31
PART IV.
--------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------
(a)1. See index to financial statements for list of financial
statements and exhibits thereto filed as a part of this report.
3. The following exhibits are filed herewith.
4.1 Limited Partnership Agreement of Cable TV Fund 12-A. (1)
10.1.1 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the City of
Fort Myers, Florida (Fund 12-A). (1)
10.1.2 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for Lee County,
Florida (Fund 12-A). (1)
10.1.3 Renewal of Permit dated 3/4/92 (Fund 12-A). (2)
10.1.4 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the
Unincorporated portions of Cook County, Illinois (Fund 12-A). (3)
10.1.5 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Village of
Grayslake, Illinois (Fund 12-A). (1)
10.1.6 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the
Unincorporated Area of Lake County, Illinois (Fund 12-A). (1)
10.1.7 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Village of
Libertyville, Illinois (Fund 12-A). (1)
10.1.8 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Village of
Mundelein, Illinois (Fund 12-A). (1)
10.1.9 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Village of
Orland Park, Illinois (Fund 12-A).
10.1.10 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Village of
Park Forest, Illinois (Fund 12-A).
10.1.11 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Village of
Wauconda, Illinois (Fund 12-A). (1)
10.2.1 Credit Agreement, dated as of January 30, 1995, between Cable TV
Fund 12-A, Ltd. and Toronto Dominion (Texas), Inc., for itself
and as agent for various lenders. (4)
27 Financial Data Schedule
__________
(1) Incorporated by reference from Registrant's Report on Form 10-K
for the fiscal year ended December 31, 1985 (Commission File No.
0-13193).
32
(2) Incorporated by reference from Registrant's Report on Form 10-K
for the fiscal year ended December 31, 1992 (Commission File No.
0-13193).
(3) Incorporated by reference from Registrant's Report on Form 10-K
for the fiscal year ended December 31, 1987 (Commission File Nos.
0-13192, 0-13807, 0-13964 and 0-14206).
(4) Incorporated by reference from Registration's Report on Form 10-K
for the fiscal year ended December 31, 1994.
(b) Reports on Form 8-K.
None.
33
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 12-A, 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 24, 1997 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 24, 1997 (Principal Executive Officer)
By: /s/ Kevin P. Coyle
_____________________________________
Kevin P. Coyle
Group Vice President/Finance
Dated: March 24, 1997 (Principal Financial Officer)
By: /s/ Larry Kaschinske
_____________________________________
Larry Kaschinske
Vice President/Controller
Dated: March 24, 1997 (Principal Accounting Officer)
By: /s/ James B. O'Brien
_____________________________________
James B. O'Brien
Dated: March 24, 1997 President and Director
By: /s/ Derek H. Burney
_____________________________________
Derek H. Burney
Dated: March 24, 1997 Director
By: /s/ Robert E. Cole
_____________________________________
Robert E. Cole
Dated: March 24, 1997 Director
34
By: /s/ William E. Frenzel
_____________________________________
William E. Frenzel
Dated: March 24, 1997 Director
By: /s/ Donald L. Jacobs
_____________________________________
Donald L. Jacobs
Dated: March 24, 1997 Director
By: /s/ James J. Krejci
_____________________________________
James J. Krejci
Dated: March 24, 1997 Director
By:
_____________________________________
John A. MacDonald
Dated: March 24, 1997 Director
By: /s/ Raphael M. Solot
_____________________________________
Raphael M. Solot
Dated: March 24, 1997 Director
By:
_____________________________________
Howard O. Thrall
Dated: March 24, 1997 Director
By: /s/ Siim A. Vanaselja
_____________________________________
Siim A. Vanaselja
Dated: March 24, 1997 Director
By: /s/ Sanford Zisman
_____________________________________
Sanford Zisman
Dated: March 24, 1997 Director
By: /s/ Robert B. Zoellick
_____________________________________
Robert B. Zoellick
Dated: March 24, 1997 Director
35