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: 0-14206
CABLE TV FUND 12-D, LTD.
------------------------
(Exact name of registrant as specified in its charter)
Colorado 84-1010423
-------- ----------
(State of Organization) (IRS Employer Identification No.)
P.O. Box 3309, Englewood, Colorado 80155-3309 (303) 792-3111
- ---------------------------------------------------- --------------
(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
--- ---
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
---
DOCUMENTS INCORPORATED BY REFERENCE: None
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, the Venture 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.
-------
ITEM 1. BUSINESS
-----------------
THE PARTNERSHIP. Cable TV Fund 12-D, 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-A, Ltd. ("Fund 12-A"), Cable TV Fund 12-B,
Ltd. ("Fund 12-B") and Cable TV Fund 12-C, Ltd. ("Fund 12-C") are the other
partnerships that were formed pursuant to that Program. In 1986, the
Partnership, Fund 12-B and Fund 12-C formed a general partnership known as Cable
TV Fund 12-BCD Venture (the "Venture"), in which the Partnership owns a 76
percent interest, Fund 12-B owns a 9 percent interest and Fund 12-C owns a 15
percent interest. The Partnership and the Venture were formed for the purpose
of acquiring and operating cable television systems.
The Partnership does not directly own any cable television systems.
The Partnership's sole asset is its 76 percent interest in the Venture. The
Venture owns the cable television systems serving Palmdale, Lancaster and Rancho
Vista and the military installation of Edwards Air Force Base, all in California
(the "Palmdale/Lancaster System") and Albuquerque, New Mexico (the "Albuquerque
System"). See Item 2. The Palmdale/Lancaster System and the Albuquerque System
may collectively be referred to as the "Systems."
DISPOSITION OF CABLE TELEVISION SYSTEM. On February 28, 1996, the
Venture sold the cable television system serving areas in and around Tampa,
Florida (the "Tampa System") to Jones Cable Holdings, Inc. ("JCH"), a subsidiary
of the General Partner, for a sales price of $110,395,667, subject to normal
working capital closing adjustments. This price represented the average of three
separate, independent appraisals of the fair market value of the Tampa System.
Because the Venture's debt arrangements did not allow the Venture to make
distributions on the sale of Venture assets, in February 1996 the Venture's debt
arrangements were amended to permit a $55,000,000 distribution to the Venture's
partners from the sale proceeds, and the balance of the sale proceeds were used
to reduce Venture indebtedness. The Partnership's portion of this distribution
was approximately $41,457,000. Because the limited partners of the Partnership
have not yet received distributions in an amount equal to 100 percent of the
capital initially contributed to the Partnership by them, the entire portion of
the Partnership's distribution was distributed to the limited partners in March
1996. This distribution gave the Partnership's limited partners an approximate
return of $350 for each $1,000 invested in the Partnership. Because the Tampa
System did not constitute all or substantially all of the Venture's assets, no
vote of the limited partners of the Partnership was required in connection with
this transaction.
On February 29, 1996, JCH consummated an agreement with Time Warner
Entertainment-Advance/Newhouse Partnership ("TWEAN"), an unaffiliated cable
television system operator, pursuant to which JCH conveyed the Tampa System,
along with certain other cable television systems owned by JCH, and cash in the
amount of $3,500,000 to TWEAN in exchange for the cable television systems
serving Andrews Air Force Base, Capitol Heights, Cheltenham, District Heights,
Fairmount Heights, Forest Heights, Morningside, Seat Pleasant, Upper Marlboro,
and portions of Prince George's County, all in Maryland, and a portion of
Fairfax County, Virginia.
2
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 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 $19.80, monthly
basic and tier ("basic plus") service rates ranged from $16.50 to $24.77 and
monthly premium services ranged from $3.00 to $12.95 per premium service. In
addition, the Venture earns revenues from the Systems' pay-per-view programs and
advertising fees. Related charges may include a nonrecurring installation fee
that ranges from $1.90 to $35.54; 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 64% of total
revenues, premium service fees accounted for approximately 13% of total
revenues, pay-per-view fees were approximately 3% of total revenues, advertising
fees were approximately 9% of total revenues and the remaining 11% of total
revenues came principally from equipment rentals, installation fees and program
guide sales. The Venture 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.
3
The Venture holds 9 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 Venture has never had a franchise revoked. The Venture does not
have any franchises that will expire prior to December 31, 1997. 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 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 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 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-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 by local telephone companies into the cable television business. The 1996
Telecommunications Act (the "1996 Telecom Act") eliminated this
4
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
-------------
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 some cases, the Venture 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 Venture 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
----
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
Venture has not lost a significant number of subscribers, nor a significant
amount of revenue, to MMDS operators competing with the Venture'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.
5
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
- --------------------------
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 Venture's operations. This section briefly summarizes key laws and
regulations affecting the operation of the Venture's cable systems and does not
purport to describe all present, proposed, or possible laws and regulations
affecting the Venture.
Cable Rate Regulation. The 1992 Cable Act imposed an extensive rate
---------------------
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.
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
6
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 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 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 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 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
---------------------------------
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
7
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 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 Venture'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.
Access Channels. LFAs can include franchise provisions requiring
---------------
cable 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
---------------------
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, 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.
8
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
---------
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 Venture'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
--------------------------
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 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 Venture'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 Venture'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 the Systems
is not significant. The Venture's policy with regard to past due accounts is
basically one of disconnecting service before a past due account becomes
material.
9
The Venture 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. Neither the Venture nor the Partnership
has 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 Venture'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
Venture.
ITEM 2. PROPERTIES
-------------------
The cable television systems owned by the Venture are described below:
Ownership SYSTEM ACQUISITION DATE
--------- ------ ----------------
Cable TV Fund 12-B, Ltd., Cable TV Palmdale System April 1986
Fund 12-C, Ltd. and Cable TV Fund 12-D, Albuquerque System August 1986
Ltd. own a 9%, 15% and 76% interest,
respectively, through their interest
in Cable TV Fund 12-BCD Venture
The following sets forth (i) the monthly basic plus service rates
charged to subscribers and (ii) the number of basic subscribers and pay units
for the Systems. The monthly basic service rates set forth herein represent,
with respect to systems with multiple headends, the basic service rate charged
to the majority of the subscribers within the system. In cable television
systems, basic subscribers can subscribe to more than one pay TV service. Thus,
the total number of pay services subscribed to by basic subscribers are called
pay units. As of December 31, 1996, the Palmdale System operated cable plant
passing approximately 92,900 homes, with an approximate 68% penetration rate,
and the Albuquerque System operated cable plant passing approximately 231,300
homes, with an approximate 48% 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,
-------------------------
PALMDALE SYSTEM 1996 1995 1994
- --------------- ------- ------- -------
Monthly basic plus service rate $ 24.77 $ 23.27 $ 21.77
Basic subscribers 63,188 61,993 59,702
Pay units 45,108 46,699 46,214
10
At December 31,
----------------------------
ALBUQUERQUE SYSTEM 1996 1995 1994
- ------------------ -------- -------- --------
Monthly basic plus service rate $ 23.95 $ 22.85 $ 21.35
Basic subscribers 112,460 109,911 106,835
Pay units 61,210 57,189 58,838
ITEM 3. LEGAL PROCEEDINGS
--------------------------
David Hirsch, derivatively on behalf of Cable TV Fund 12-B, Ltd.,
-----------------------------------------------------------------
Cable TV Fund 12-C, Ltd. and Cable TV Fund 12-D, Ltd. v. Jones Intercable, Inc.
- -------------------------------------------------------------------------------
(Arapahoe County District Court, Colorado, Case No. 95-CV-1800, Division 3)
("Hirsch"); Jonathan Fussner and Eileen Fussner, derivatively on behalf of Cable
- -------- --------------------------------------------------------------------
TV Fund 12-B, Ltd., Cable TV Fund 12-C, Ltd. and Cable TV Fund 12-D, Ltd. v.
- ----------------------------------------------------------------------------
Jones Intercable, Inc. (Arapahoe County District Court, Colorado, Case No. 96-
- ----------------------
CV-1672, Division 3) ("Fussner").
-------
On September 20, 1995, the General Partner was named as a defendant in
a Complaint filed by David Hirsch, who is a limited partner in the Partnership.
On January 25, 1996, the General Partner was served with an Amended Class Action
Complaint and Request for Jury Trial. On February 19, 1996, the General Partner
filed a Motion to Dismiss the Amended Complaint arguing that the action was
improperly brought as a class action. The General Partner argued that the
plaintiff could only bring the action as a derivative claim and that because the
elements of a derivative claim had not been properly pleaded, the Amended
Complaint should be dismissed. After briefing on this motion, the Court entered
an Order on June 24, 1996 granting the General Partner's Motion to Dismiss, and
on July 25, 1996, the Court entered a further Order allowing plaintiff to file
another Amended Complaint. On July 31, 1996, plaintiff Hirsch filed a Second
Amended Complaint.
Plaintiff Hirsch's Second Amended Complaint alleges that he is a
limited partner in the Partnership and that he now purports to bring this case
as a derivative action on behalf of the Partnership, Fund 12-B and Fund 12-C.
The suit relates to the purchase by JCH from the Venture of the Tampa System and
subsequent trade of the Tampa System, along with other cable systems, to Time
Warner for certain of Time Warner's cable systems. JCH was authorized to
purchase the Tampa System from the Venture pursuant to the terms of the limited
partnership agreements of the Partnership, Fund 12-B and Fund 12-C.
Also on July 31, 1996, the same lawyers who represent Mr. Hirsch filed
a Verified Complaint on behalf of Jonathan Fussner and Eileen Fussner as
referenced above. The Fussners are joint owners of limited partnership
interests in the Partnership and their Verified Complaint is identical in all
substantive respects to the Hirsch Second Amended Complaint. On December 13,
------
1996, the Court consolidated the Hirsch and Fussner actions.
------ -------
The Second Amended Complaint in Hirsch and the Verified Complaint in
------
Fussner allege that the General Partner breached its fiduciary duty to the
- -------
plaintiffs and the other limited partners of the Partnership, Fund 12-B, and
Fund 12-C and the Venture in connection with JCH's purchase of the Tampa System
and the trade of that system to Time Warner. The Hirsch and Fussner Complaints
------ -------
also set forth a claim for unjust enrichment and for breach of the implied
covenant of good faith and fair dealing. Among other things, the plaintiffs
assert that JCH paid an inadequate price for the Tampa System, even though the
agreed-upon price was the average of three separate appraisals, as required by
the applicable partnership agreements. The Hirsch and Fussner cases are now
------ -------
styled as derivative actions and also seek a trial by jury. The plaintiffs in
Hirsch and Fussner seek an unspecified amount of damages, including punitive
- ------ -------
damages, an award of attorneys' fees and certain equitable relief.
On August 13, 1996, the General Partner filed a Motion to Dismiss the
breach of fiduciary duty and unjust enrichment claims in the Hirsch and Fussner
------ -------
actions. On February 6, 1997, after briefing on this motion, the Court denied
the General Partner's Motion to Dismiss. The General Partner's Answer to the
Complaints in
11
Hirsch and Fussner was filed on February 25, 1997 and generally denied the
- ------ -------
substantive allegations in the Complaint and asserted a number of affirmative
defenses. There is no trial date set in these cases, and there has been no
discovery conducted by the parties to date.
Martin Ury, derivatively on behalf of Cable TV Fund 12-B, Ltd., Cable
---------------------------------------------------------------------
TV Fund 12-C, Ltd. and Cable TV Fund 12-D, Ltd. v. Jones Intercable, Inc.,
- --------------------------------------------------------------------------
Defendant, and Cable TV Fund 12-BCD Venture, Cable TV Fund 12-B, Ltd., Cable TV
- -------------------------------------------------------------------------------
Fund 12-C, Ltd. and Cable TV Fund 12-D, Ltd., Nominal Defendants (Arapahoe
- ----------------------------------------------------------------
County District Court, Colorado, Case No. 95-CV-2212, Division 5) ("Ury").
---
On November 17, 1995, plaintiff Martin Ury filed a Complaint against
the General Partner in the above-referenced action in Arapahoe County District
Court. Plaintiff Ury is a limited partner in the Partnership. He purports to
bring this case as a derivative action on behalf of the Partnership, Fund 12-B
and Fund 12-C. As in Hirsch and Fussner, discussed above, this case relates to
------ -------
JCH's purchase of the Tampa System and the Time Warner exchange.
The substantive allegations of the Ury Complaint are substantially
---
similar to the allegations in the Hirsch Second Amended Complaint and the
------
Fussner Verified Complaint. The plaintiff in Ury alleges that the General
- ------- ---
Partner breached its fiduciary duties to the limited partnerships and their
limited partners in connection with JCH's purchase of the Tampa System from the
Venture. Specifically, the plaintiff alleges that JCH paid an inadequate price
for the Tampa System, even though the agreed upon price was the average of three
separate appraisals, as required by the applicable limited partnership
agreements. The Complaint seeks damages in an unspecified amount on behalf of
the three limited partnerships and an award of attorneys' fees. The Complaint
does not seek a jury trial or punitive damages.
On February 1, 1996, the General Partner filed a Motion to Dismiss the
Complaint on the ground that it fails to state a claim against the General
Partner upon which relief can be granted. The thrust of the General Partner's
motion was that the General Partner cannot be liable for breach of fiduciary
duty because it acted in accordance with the terms of the limited partnership
agreements in arranging for JCH's purchase of the Tampa System. The General
Partner also argued that plaintiff does not have standing to assert a derivative
claim on behalf of Fund 12-B or Fund 12-C, since he is only a limited partner in
the Partnership. On July 12, 1996, the Court denied the General Partner's
Motion to Dismiss. The General Partner filed its Answer in this case on July
29, 1996, generally denying the substantive allegations in the Complaint,
asserting a number of affirmative defenses and requesting a trial by jury. A
Case Management Order has been entered by the Court, setting the case for a two-
week jury trial commencing on September 22, 1997. The parties have made certain
voluntary disclosures pursuant to Rule 26 of the Colorado Rules of Civil
Procedure, and discovery has begun, although no depositions have been taken to
date.
Because these cases are in their very early stages, it is not possible
at this time to present a realistic evaluation of the probability of a favorable
or unfavorable outcome.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
None.
12
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 $316 to $335 per interest. As of February 14, 1997, the number of
equity security holders in the Partnership was 17,294.
13
Item 6. Selected Financial Data
- -------------------------------
For the Year Ended December 31,
----------------------------------------------------------------------------
Cable TV Fund 12-D, Ltd./(a)/ 1996 1995 1994 1993 1992
- ----------------------------- ---------------- ------------- ------------- ------------- -------------
Revenues $ 82,363,752 $101,399,697 $ 92,823,076 $ 89,131,530 $ 83,567,527
Depreciation & Amortization 21,993,546 26,666,735 24,809,654 25,772,299 26,764,820
Operating Income (Loss) 2,029,571 4,127,622 289,904 779,887 (1,087,963)
Minority Interest in Consolidated
(Income) Loss (15,248,079) 2,720,847 3,149,271 2,833,316 3,640,418
Net Income (Loss) 47,090,757/(b)/(8,403,720) (9,726,971) (8,751,100) (11,243,947)
Net Income (Loss) per Limited
Partnership Unit 193.47/(b)/ (35.05) (40.57) (36.50) (46.90)
Weighted Average Number of Limited
Partnership Units Outstanding 237,339 237,339 237,339 237,339 237,339
General Partner's Deficit (72,334) (1,244,562) (1,160,525) (1,063,255) (975,744)
Limited Partners' Capital (Deficit) (16,586,766) (20,958,295) (12,638,612) (3,008,911) 5,654,678
Total Assets 120,899,336 163,486,029 170,675,914 169,670,552 175,554,620
Debt 138,345,878 180,770,267 180,402,748 167,698,697 160,440,488
General Partner Advances - 4,198,739 616,810 188,430 511,646
(a) The above financial information represents the consolidated operations of
Cable TV Fund 12-BCD Venture, in which Cable TV Fund 12-D, Ltd. has a 76
percent equity interest.
(b) Net income resulted primarily from the sale of the Tampa System by Cable
TV Fund 12-BCD Venture in February 1996.
13
Item 7. Management's Discussion and Analysis of Financial Condition and
- -------------------------------------------------------------------------
Results of Operations
- ---------------------
The following discussion of the financial condition and results of
operations of Cable TV Fund 12-D, Ltd. (the "Partnership") and Cable TV Fund 12-
BCD Venture (the "Venture") contain, in addition to historical information,
forward-looking statements that are based upon certain assumptions and are
subject to a number of risks and uncertainties. The Partnership's and Venture's
actual results may differ significantly from the results predicted in such
forward-looking statements.
FINANCIAL CONDITION
- -------------------
Cable TV Fund 12-D, Ltd. -
- ------------------------
The Partnership's investment in the Venture has increased by $5,543,757
when compared to the December 31, 1995 balance representing a deficit of
$16,659,100. This deficit is due to the Partnership's share of Venture losses,
which are principally the result of depreciation and amortization charges being
greater than equity invested. These losses are expected to be recovered upon
liquidation of the Venture.
On February 28, 1996, the Venture sold the cable television system
serving areas in and around Tampa, Florida (the "Tampa System") to Jones Cable
Holdings, Inc.,("JCH") a wholly owned subsidiary of the General Partner, for a
sales price of $110,395,667, subject to normal working capital closing
adjustments. This price represented the average of three separate, independent
appraisals of the fair market value of the Tampa System. Because the Venture's
debt arrangements did not originally allow the Venture to make distributions on
the sale of Venture assets, in February 1996 the Venture's debt arrangements
were amended to permit a $55,000,000 distribution to the Venture's partners from
the sale proceeds, and the balance of the sale proceeds were used to reduce
Venture indebtedness. Fund 12-D's portion of this distribution was approximately
$41,457,000. Because the limited partners of the Partnership have not yet
received distributions in an amount equal to 100 percent of the capital
initially contributed to the Partnership by them, the entire portion of the
Partnership's distribution was distributed to the limited partners in March
1996. This distribution will give the Partnership's limited partners an
approximate return of $350 for each $1,000 invested in the Partnership. Because
the Tampa System did not constitute all or substantially all of the Venture's
assets, no vote of the limited partners of the Partnership was required in
connection with this transaction.
Cable TV Fund 12-BCD Venture -
- ----------------------------
It is the General Partner's publicly announced policy that it intends to
liquidate its managed limited partnerships, including the partnerships that
comprise the Venture, 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 Venture sold the Tampa System in February
1996. No specific dates or terms have yet been set for the sale of the
remainder of the Venture's systems.
On February 28, 1996, the Venture sold the Tampa System to JCH. The
sales price of the Tampa System was $110,395,667, subject to normal working
capital closing adjustments. This price represented the average of three
separate, independent appraisals of the fair market value of the Tampa System.
In February 1996, the Venture's debt arrangements were amended to permit a
$55,000,000 distribution to the Venture's partners from the sale proceeds, and
the balance of the sale proceeds were used to reduce Venture indebtedness. The
net sales proceeds were distributed as follows: Fund 12-B received $5,049,000;
Fund 12-C received $8,404,000 and the Partnership received $41,547,000.
For the year ended December 31, 1996, the Venture generated net cash from
operating activities totaling 4,632,835, which was available to fund capital
expenditures and non-operating costs. Capital expenditures for the Venture
totaled approximately $17,474,000 during 1996. New plant construction accounted
for approximately 46 percent of the capital expenditures. Service drops to homes
accounted for approximately 29 percent of the capital expenditures. The
remaining expenditures related to various system enhancements. These capital
expenditures were funded primarily from cash generated from operations, advances
from Jones Intercable, Inc. and borrowings from the Venture's credit facility.
Expected capital expenditures for 1997 are approximately $16,052,000. Service
drops to homes are anticipated to account for approximately 27 percent. Rebuild
construction is anticipated to account for 21 percent. New plant construction is
anticipated to account for 17 percent. The remainder of the expenditures are for
various system enhancements in all of the Venture's systems. These capital
expenditures are necessary to maintain the value of the Venture's systems.
Funding for
14
these expenditures is expected to be provided by cash on hand, cash generated
from operations and borrowings from the Venture's credit facility.
The Venture's debt arrangements at December 31, 1996 consisted of
$55,393,187 of Senior Notes placed with a group of institutional lenders and a
$120,000,000 credit facility with a group of commercial bank lenders. The
Senior Notes and credit facility are equal in standing with the other, and both
are equally secured by the assets of the Venture.
The Senior Notes have a fixed interest rate of 8.64 percent and a final
maturity date of March 31, 2000. The Senior Notes required payments of interest
only to March 1996, with interest and accelerating principal payments required
for the four years thereafter, payable semi-annually in March and September.
Principal payments of approximately $7,385,758 due in 1997 are expected to be
funded from cash on hand, cash generated from operations and borrowings from the
Venture's credit facility. In February 1996, the Venture was required to make a
principal repayment of approximately $33,650,000 from proceeds received from the
sale of the Tampa System. The Senior Notes carry a "make-whole" payment, which
is a prepayment penalty, in the event the notes are prepaid prior to maturity.
The make-whole payment protects the lenders in the event that prepaid funds are
reinvested at a rate below 8.64 percent. The Venture was required to pay a make-
whole payment in February 1996 of approximately $2,217,000.
In February 1996, the Venture was required by the terms of its then-
existing $87,000,000 credit facility to make a principal repayment of
$22,000,000 from proceeds received from the sale of the Tampa System.
Simultaneously with the sale of the Tampa System, the Venture amended this
credit facility to increase the amount available to $120,000,000 to meet the
Venture's long-term financing requirements. The balance outstanding on the
Venture's amended credit facility at December 31, 1996 was $82,130,620, leaving
$37,869,380 available for future needs. At the Venture's option, the credit
facility is payable in full on December 31, 1999 or converts to a term loan that
matures on December 31, 2004 and is payable in consecutive quarterly amounts.
Interest on the amended credit facility is at the Venture's option of the London
Interbank Offered Rate plus 1.25 percent, the Prime Rate plus .125 percent or
the Certificate of Deposit Rate plus 1.125 percent. The effective interest rates
on amounts outstanding on the Venture's credit facility as of December 31, 1996
and 1995 were 6.90 percent and 7.41 percent, respectively.
The Venture has sufficient sources of capital available through its
ability to generate cash from operations and borrowings under its credit
facility to meet its presently anticipated operating needs.
RESULTS OF OPERATIONS
- ---------------------
Cable TV Fund 12-D, Ltd. -
- ------------------------
All of the Partnership's operations are represented by its 76 percent
interest in the Venture. Thus, Management's Discussion and Analysis of Financial
Condition and Results of Operations of the Venture should be consulted for
pertinent comments regarding the Partnershp's performance.
Cable TV Fund 12-BCD Venture -
- ----------------------------
1996 compared to 1995
---------------------
Revenues of the Venture decreased $19,035,945, or approximately 19
percent, to $82,363,752 in 1996 from $101,399,697 in 1995. This decrease was
due to the sale of the Tampa System. Disregarding the effect of the Tampa
System sale, revenues increased $4,778,991, or approximately 7 percent, to
$77,478,560 in 1996 from $72,699,569 in 1995. Basic service rate increases
implemented in the Venture's systems combined with an increase in the number of
basic service subscribers primarily accounted for the increase in revenues.
Basic service rate increases accounted for approximately 39 percent of the
increase in basic service revenues in 1996. An increase in the number of basic
service subscribers in the Albuquerque System and the Palmdale System accounted
for approximately 31 percent of the increase in basic service revenues for 1996.
The number of basic service subscribers increased by 3,744 subscribers, or
approximately 2 percent, to 175,648 subscribers in 1996 from 171,904 subscribers
in 1995. No other individual factors were significant to the increases in
revenues.
Operating expenses consist primarily of costs associated with the
operation and administration of the Venture's cable television systems. The
principal cost components are salaries paid to system personnel, programming
expenses,
15
professional fees, subscriber billing costs, rent for leased facilities, cable
system maintenance expenses and marketing expenses.
Operating expenses decreased $9,620,510, or approximately 17 percent, to
$48,731,182 in 1996 from $58,351,692 in 1995. This decrease was due to the sale
of the Tampa System. Disregarding the effect of this sale, operating expenses
increased $3,608,831, or approximately 9 percent, to $44,278,384 in 1996 from
$40,669,553 in 1995. Operating expenses represented 57 percent and 56 percent,
respectively, of revenues for 1996 and 1995. An increase in programming fees
primarily accounted for the increase in operating expenses. No other factor
contributed significantly to the increase in operating expenses.
Management fees and allocated overhead from Jones Intercable, Inc.
decreased $2,644,195, or approximately 22 percent, to $9,609,453 in 1996 from
$12,253,648 in 1995. This decrease was due to the sale of the Tampa System.
Disregarding the effect of this sale, management fees and allocated overhead
from Jones Intercable, Inc. increased $230,923, or approximately 3 percent, to
$9,032,388 in 1996 from $8,801,465 in 1995. This increase was due to the
increase in revenues, upon which such management fees are based.
Depreciation and amortization expense decreased $4,673,189, or
approximately 18 percent, to $21,993,546 in 1996 from $26,666,735 in 1995. This
decrease was due to the sale of the Tampa System. Disregarding the effect of
this sale, depreciation and amortization expense increased $810,250, or
approximately 4 percent, to $21,001,808 in 1996 from $20,191,558 in 1995. This
increase was due to capital additions in 1996.
The Venture's operating income decreased $2,098,051, or approximately 51
percent, to $2,029,571 in 1996 from $4,127,622 in 1995. This decrease was due
to the sale of the Tampa System. Disregarding the effect of this sale,
operating income increased $128,987, or approximately 4 percent, to $3,165,980
in 1996 from $3,036,993 in 1995. This increase was due to the increase in
revenues exceeding the increases in operating expenses, management fees and
allocated overhead from Jones Intercable, Inc. and depreciation and amortization
expense.
The cable television industry generally measures the financial
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 decreased $6,771,240, or approximately 22 percent,
to $24,023,117 in 1996 from $30,794,357 in 1995. This decrease was due to the
sale of the Tampa System. Disregarding the effect of this sale, operating
income before depreciation and amortization increased $939,237, or approximately
4 percent, to $24,167,788 in 1996 from $23,228,551 in 1995. This increase was
due to the increase in revenue exceeding the increases in operating expenses and
management fees and allocated overhead from Jones Intercable, Inc.
Interest expense decreased $4,127,956, or approximately 27 percent, to
$11,219,294 in 1996 from $15,347,250 in 1995. This decrease in interest expense
was primarily due to the lower outstanding balance and lower effective interest
rates on the Venture's interest bearing obligations. A portion of the proceeds
from the sale of the Tampa System was used to repay a portion of the Venture's
debt.
The Venture recognized a gain of $71,914,391 related to the sale of the
Tampa System in February 1996. No similar gain was recognized in 1995.
The Venture recognized net income of $62,338,836 in 1996 compared to a
net loss of $11,124,567 in 1995. This changes was due to the gain on the sale
of the Tampa System.
1995 compared to 1994
---------------------
Revenues increased $8,576,621, or approximately 9 percent, to
$101,399,697 in 1995 from $92,823,076 in 1994. At December 31, 1995, the
Venture's systems had 236,866 basic subscribers compared to 227,950 basic
subscribers at December 31, 1994, an increase of approximately 4 percent. This
increase in basic subscribers accounted for approximately 39 percent of the
increase in revenues. Basic service rate increases accounted for approximately
37 percent of the increase in revenues. No other single factor significantly
affected the increase in revenues.
Operating expenses in the Venture's systems increased $2,220,438, or
approximately 4 percent, to $58,351,692 in 1995 from $56,131,254 in 1994.
Operating expenses represented approximately 57 percent and approximately 60
percent
16
of revenues in 1995 and in 1994, respectively. The increase in operating
expenses was due to increases in subscriber related costs, programming fees,
property tax expenses and advertising related costs, which were partially offset
by decreases in personnel related costs. No other single factor significantly
affected the increase in operating expenses.
Management fees and allocated overhead from Jones Intercable, Inc.
increased $661,384, or approximately 6 percent, to $12,253,648 in 1995 from
$11,592,264 in 1994 due to the increase in revenues, upon which such fees and
allocations are based.
Depreciation and amortization expense increased $1,857,081, or
approximately 7 percent, to $26,666,735 in 1995 from $24,809,654 in 1994. This
increase was due to the increase in the Venture's depreciable asset base.
The Venture's operating income increased $3,837,718 to $4,127,622 in 1995
from $289,904 in 1994. This increase was the result of the increase in revenue
exceeding the increases in operating expenses, management fees and allocated
overhead from Jones Intercable, Inc. and depreciation and amortization expenses.
Operating income before depreciation and amortization increased
$5,694,799, or approximately 23 percent, to $30,794,357 in 1995 from $25,099,558
in 1994. This increase was due to the increase in revenues exceeding the
increase in operating expenses and management fees and allocated overhead from
Jones Intercable, Inc.
Interest expense increased $2,190,557, or approximately 17 percent, to
$15,347,250 in 1995 from $13,156,693 in 1994 due to higher interest rates and
higher outstanding balances on interest bearing obligations in 1995.
Net loss decreased $1,751,675, or approximately 14 percent, to
$11,124,567 in 1995 from $12,876,242 in 1994 due to the factors discussed above.
17
Item 8. Financial Statements
- -----------------------------
CABLE TV FUND 12-D, LTD.
------------------------
CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
AS OF DECEMBER 31, 1996 AND 1995
--------------------------------
INDEX
-----
Page
------
Report of Independent Public Accountants 19
Consolidated Balance Sheets 20
Consolidated Statements of Operations 22
Consolidated Statements of Partners' Deficit 23
Consolidated Statements of Cash Flows 24
Notes to Consolidated Financial Statements 25
18
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Partners of Cable TV Fund 12-D, Ltd.:
We have audited the accompanying consolidated balance sheets of CABLE TV
FUND 12-D, LTD. (a Colorado limited partnership) and subsidiary as of December
31, 1996 and 1995, and the related consolidated statements of operations,
partners' 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-D,
Ltd. and subsidiary as of December 31, 1996 and 1995, and the results of their
operations and their 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.
19
CABLE TV FUND 12-D, LTD.
------------------------
(A Limited Partnership)
CONSOLIDATED BALANCE SHEETS
---------------------------
December 31,
----------------------------
ASSETS 1996 1995
------ ------------ -------------
CASH AND CASH EQUIVALENTS $ 1,514,773 $ 1,384,794
RECEIVABLES:
Trade receivables, less allowance for doubtful receivables of
$417,017 and $486,392 at December 31, 1996 and 1995,
respectively 2,676,246 4,464,773
Affiliated entity - 159,137
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 198,322,316 294,472,892
Less- accumulated depreciation (95,040,023) (155,826,572)
------------ -------------
103,282,293 138,646,320
Franchise costs and other intangible assets, net of accumulated
amortization of $60,652,010 and $56,248,743 at
December 31, 1996 and 1995, respectively 10,389,144 16,856,328
------------ -------------
Total investment in cable television properties 113,671,437 155,502,648
DEPOSITS, PREPAID EXPENSES AND DEFERRED
CHARGES 3,036,880 1,974,677
------------ -------------
Total assets $120,899,336 $ 163,486,029
============ =============
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
20
CABLE TV FUND 12-D, LTD.
------------------------
(A Limited Partnership)
CONSOLIDATED BALANCE SHEETS
---------------------------
December 31,
----------------------------
LIABILITIES AND PARTNERS' DEFICIT 1996 1995
--------------------------------- ------------ -------------
LIABILITIES:
Debt $138,345,878 $ 180,770,267
Advances from Jones Intercable, Inc. - 4,198,739
Trade accounts payable and accrued liabilities 4,499,549 7,729,433
Subscriber prepayments 445,391 517,908
------------ -------------
Total liabilities 143,290,818 193,216,347
------------ -------------
COMMITMENTS AND CONTINGENCIES (Note 7)
MINORITY INTEREST IN JOINT VENTURE (5,732,382) (7,527,461)
------------ -------------
PARTNERS' DEFICIT:
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (73,334) (1,245,562)
------------ -------------
(72,334) (1,244,562)
------------ -------------
Limited Partners-
Net contributed capital (237,339 units outstanding
at December 31, 1996 and 1995) 102,198,175 102,198,175
Accumulated deficit (77,237,941) (123,156,470)
Distributions (41,547,000) -
------------ -------------
(16,586,766) (20,958,295)
------------ -------------
Total liabilities and partners' deficit $120,899,336 $ 163,486,029
============ =============
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
21
CABLE TV FUND 12-D, LTD.
------------------------
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
For the Year Ended December 31,
------------------------------------------
1996 1995 1994
------------ ------------ ------------
REVENUES $ 82,363,752 $101,399,697 $ 92,823,076
COSTS AND EXPENSES:
Operating expenses 48,731,182 58,351,692 56,131,254
Management fees and allocated overhead from
Jones Intercable, Inc. 9,609,453 12,253,648 11,592,264
Depreciation and amortization 21,993,546 26,666,735 24,809,654
------------ ------------ ------------
OPERATING INCOME 2,029,571 4,127,622 289,904
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (11,219,294) (15,347,250) (13,156,693)
Gain on sale of cable television system 71,914,391 - -
Other, net (385,832) 95,061 (9,453)
------------ ------------ ------------
Total other income (expense), net 60,309,265 (15,252,189) (13,166,146)
------------ ------------ ------------
CONSOLIDATED NET INCOME (LOSS) 62,338,836 (11,124,567) (12,876,242)
MINORITY INTEREST IN CONSOLIDATED NET
(INCOME) LOSS (15,248,079) 2,720,847 3,149,271
------------ ------------ ------------
NET INCOME (LOSS) 47,090,757 $ (8,403,720) $ (9,726,971)
============ ============ ============
ALLOCATION OF NET INCOME (LOSS):
General Partner $ 1,172,228 $ (84,037) $ (97,270)
============ ============ ============
Limited Partners $ 45,918,529 $ (8,319,683) $ (9,629,701)
============ ============ ============
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $193.47 $(35.05) $(40.57)
============ ============ ============
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 237,339 237,339 237,339
============ ============ ============
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
22
CABLE TV FUND 12-D, LTD.
------------------------
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT
--------------------------------------------
For the Year Ended December 31,
-------------------------------------------
1996 1995 1994
------------- ------------- -------------
GENERAL PARTNER:
Balance, beginning of year $ (1,244,562) $ (1,160,525) $ (1,063,255)
Net income (loss) for year 1,172,228 (84,037) (97,270)
------------ ------------ ------------
Balance, end of year $ (72,334) $ (1,244,562) $ (1,160,525)
============ ============ ============
LIMITED PARTNERS:
Balance, beginning of year $(20,958,295) $(12,638,612) $ (3,008,911)
Net income (loss) for year 45,918,529 (8,319,683) (9,629,701)
Distributions (41,547,000) - -
------------ ------------ ------------
Balance, end of year $(16,586,766) $(20,958,295) $(12,638,612)
============ ============ ============
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
23
CABLE TV FUND 12-D, LTD.
------------------------
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
For the Year Ended December 31,
--------------------------------------------
1996 1995 1994
-------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 47,090,757 $ (8,403,720) $ (9,726,971)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 21,993,546 26,666,735 24,809,654
Gain on sale of cable television system (71,914,391) - -
Minority interest in consolidated income (loss) 15,248,079 (2,720,847) (3,149,271)
Decrease (increase) in trade receivables 1,788,527 (657,502) (852,784)
Increase in deposits, prepaid expenses and
deferred charges (2,072,543) (351,579) (694,816)
Increase (decrease) in trade accounts payable and
accrued liabilities and subscriber prepayments (3,302,401) (14,766) 749,173
Increase (decrease) in amount due Jones Intercable,
Inc. (4,198,739) 3,581,929 428,380
------------- ------------ ------------
Net cash provided by operating activities 4,632,835 18,100,250 11,563,365
------------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (17,474,134) (21,474,577) (21,338,471)
Proceeds from sale of cable television system 110,395,667 - -
Franchise costs - - (500,000)
------------- ------------ ------------
Net cash provided by (used in)
investing activities 91,921,533 (21,474,577) (21,838,471)
------------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 72,365,824 882,431 16,268,610
Repayment of debt (114,790,213) (514,912) (3,564,559)
Distributions to Limited Partners (41,547,000) - -
Distributions to Joint Venture Partners (13,453,000) - -
------------- ------------ ------------
Net cash provided by (used in)
financing activities (97,424,389) 367,519 12,704,051
------------- ------------ ------------
Increase (decrease) in cash and cash equivalents 129,979 (3,006,808) 2,428,945
Cash and cash equivalents, beginning of year 1,384,794 4,391,602 1,962,657
------------- ------------ ------------
Cash and cash equivalents, end of year $ 1,514,773 $ 1,384,794 $ 4,391,602
============= ============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 12,370,892 $ 15,331,071 $ 12,450,869
============= ============ ============
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
24
CABLE TV FUND 12-D, LTD.
------------------------
(A Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(1) ORGANIZATION AND PARTNERS' INTERESTS
------------------------------------
Formation and Business
----------------------
Cable TV Fund 12-D, Ltd. ("Fund 12-D"), a Colorado limited partnership,
was formed on February 5, 1986, under a public program sponsored by Jones
Intercable, Inc. Fund 12-D was formed to acquire, construct, develop and
operate cable television systems. Jones Intercable, Inc. ("Intercable"), is the
"General Partner" and manager of Fund 12-D. The General Partner and its
subsidiaries also own and operate cable television systems. In addition, the
General Partner manages cable television systems for other limited partnerships
for which it is general partner and, also, for affiliated entities.
Contributed Capital
-------------------
The capitalization of Fund 12-D is set forth in the accompanying
consolidated statements of partners' deficit. No limited partner is obligated
to make any additional contributions to partnership capital. The General
Partner purchased its interest in Fund 12-D by contributing $1,000 to
partnership capital.
All profits and losses of Fund 12-D 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 Fund 12-
D of a cable television system, which was allocated 100 percent to the limited
partners.
Formation of Joint Venture and Venture Sale of Cable Television Systems
-----------------------------------------------------------------------
On March 17, 1986, Cable TV Fund 12-B, Ltd. ("Fund 12-B"), Cable TV Fund
12-C, Ltd. ("Fund 12-C") and Fund 12-D formed Cable TV Fund 12-BCD Venture (the
"Venture"). The Venture was formed for the purpose of acquiring certain cable
television systems. At December 31, 1996, the Venture owned and operated the
cable television systems serving certain areas in and around Albuquerque, New
Mexico and Palmdale, California. As discussed below, the Venture's cable
television system serving the areas in and around Tampa, Florida (the "Tampa
System") was sold on February 28, 1996.
On February 28, 1996, the Venture sold the Tampa System to JCH. The
sales price of the Tampa System was $110,395,667, subject to normal working
capital closing adjustments. This price represented the average of three
separate, independent appraisals of the fair market value of the Tampa System.
In February 1996, the Venture's debt arrangements were amended to permit a
$55,000,000 distribution to the Venture's partners from the sale proceeds, and
the balance of the sale proceeds were used to reduce Venture indebtedness. Of
this total distribution, Fund 12-B received approximately $5,049,000, Fund 12-C
received approximately $8,404,000 and Fund 12-D received approximately
$41,547,000. Because the limited partners of Fund 12-D have not yet received
distributions in an amount equal to 100 percent of the capital initially
contributed to Fund 12-D by them, the entire portion of Fund 12-D's distribution
was distributed to the limited partners in March 1996. This distribution has
given Fund 12-D's limited partners an approximate return of $350 for each $1,000
invested in Fund 12-D. Because the Tampa System did not constitute all or
substantially all of the Venture's assets, no vote of the limited partners of
the Partnership was required in connection with this transaction.
25
The pro forma effect of the sale of the Tampa System on the results of
the Venture's operations for the years ended December 31, 1996 and 1995,
assuming the transaction had occurred at the beginning of the years, is
presented in the following unaudited tabulation:
For the Year Ended December 31, 1996
----------------------------------------
Pro Forma
As Reported Adjustments Pro Forma
----------- ------------- ------------
Revenues $82,363,752 $ (4,885,192) $77,478,560
=========== ============ ===========
Operating Income $ 2,029,571 $ 1,136,409 $ 3,165,980
=========== ============ ===========
Net Income (Loss) $62,338,836 $(66,983,544) $(4,644,708)
=========== ============ ===========
For the Year Ended December 31, 1995
------------------------------------------
Pro Forma
As Reported Adjustments Pro Forma
------------- ------------- ------------
Revenues $101,399,697 $(28,700,128) $72,699,569
============ ============ ===========
Operating Income $ 4,127,622 $ (1,090,629) $ 3,036,993
============ ============ ===========
Net Loss $(11,124,567) $ 2,947,184 $(8,177,383)
============ ============ ===========
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Accounting Records
------------------
The accompanying consolidated financial statements have been prepared on
the accrual basis of accounting in accordance with generally accepted accounting
principles. Fund 12-D'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.
Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include 100 percent of
the accounts of Fund 12-D and those of the Venture reduced by the approximate 24
percent minority interest in the Venture. All inter-partnership accounts and
transactions have been eliminated.
Property, Plant and Equipment
-----------------------------
Depreciation is provided using the straight-line method over the
following estimated service lives:
Cable distribution systems 5 - 15 years
Equipment and tools 3 - 5 years
Office furniture and equipment 5 years
Buildings 20 years
Vehicles 3 years
26
Replacements, renewals and improvements are capitalized and maintenance
and repairs are charged to expense as incurred.
Property, plant and equipment and the corresponding accumulated
depreciation are written off as certain assets become fully depreciated and are
no longer in service.
Intangible Assets
-----------------
Costs assigned to franchises and costs in excess of interests in net
assets purchased are amortized using the straight-line method over the following
remaining estimated useful lives:
Franchise costs 1 - 4 years
Costs in excess of interests in net assets purchased 29 - 30 years
Revenue Recognition
-------------------
Subscriber prepayments are initially deferred and recognized as revenue
when earned.
Cash and Cash Equivalents
-------------------------
For purposes of the Statements of Cash Flows, the Venture considers all
highly liquid investments purchased with an original maturity of three months or
less to be cash equivalents.
Reclassifications
-----------------
Certain prior year amounts have been reclassified to conform with the
1996 presentation.
(3) TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
----------------------------------------------------
Management Fees, Distribution Ratios and Reimbursements
-------------------------------------------------------
The General Partner manages Fund 12-D and the Venture and receives a fee
for its services equal to 5 percent of the gross revenues of the Venture,
excluding revenues from the sale of cable television systems or franchises.
Management fees paid to the General Partner by the Venture were $4,118,188,
$5,069,985 and $4,641,154 during 1996, 1995 and 1994, respectively.
Any partnership distributions made from cash flow (defined as cash
receipts derived from routine operations, less debt principal and interest
payments and cash expenses) are allocated 99 percent to the limited partners and
1 percent to the General Partner. Any distributions other than interest income
on limited partnership subscriptions earned prior to the acquisition of Fund 12-
D's first cable television system or from cash flow, such as from the sale or
refinancing of a system or upon dissolution of the Partnership, will be made as
follows: first, to the limited partners in an amount which, together with all
prior distributions, will equal the amount initially contributed by the limited
partners; the balance, 75 percent to the limited partners and 25 percent to the
General Partner.
The Venture reimburses the General Partner for certain allocated overhead
and administrative expenses. These expenses represent the salaries and related
benefits paid for corporate personnel, rent, data processing services and other
corporate facilities costs. Such personnel provide engineering, marketing,
administrative, accounting, legal and investor relations services to the
Venture. Such services, and their related costs, are necessary to the operation
of the Venture and would have been incurred by the Venture if it was a stand
alone entity. Allocations of personnel costs are based primarily on actual time
spent by employees of the General Partner with respect to each entity managed.
Remaining expenses are allocated based on the pro rata relationship of the
Venture's revenues to the total revenues of all systems owned or managed by the
General Partner and certain of its subsidiaries. Systems owned by the General
Partner and all other systems owned by partnerships for which Intercable is the
general partner are also allocated a proportionate share of these expenses. The
General Partner believes that the methodology used in allocating overhead and
administrative expenses is reasonable. Overhead and administrative expenses
allocated to the Venture by the General Partner were $5,491,265, $7,183,663 and
$6,951,110 in 1996, 1995 and 1994, respectively.
The Venture was charged interest during 1996 at an average interest rate
of 8.58 percent on the amounts due the General Partner, which approximated the
General Partner's weighted average cost of borrowing. Total interest charged to
the Venture by the General Partner was $-0-, $220,743 and $33,627 in 1996, 1995
and 1994, respectively.
27
Payments to/from Affiliates for Programming Services
----------------------------------------------------
The Venture receives programming from Superaudio, Jones Education
Company, Great American Country, Inc. and Product Information Network, all of
which are affiliates of the General Partner.
Payments to Superaudio totaled $116,710, $135,861 and $135,346 in 1996,
1995 and 1994, respectively. Payments to Jones Education Company totaled
$374,709, $428,937 and $196,004 in 1996, 1995 and 1994, respectively. Payments
to Great American Country, Inc., which initiated service in 1996, totaled
$141,753 in 1996.
The Venture receives a commission from Product Information Network based
on a percentage of advertising sales and number of subscribers. Product
Information Network paid commissions to the Venture totaling $191,011, $212,844
and $81,592 in 1996, 1995 and 1994, respectively.
(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 $182,058,124 $ 267,586,574
Equipment and tools 4,853,010 8,630,758
Office furniture and equipment 2,189,497 3,402,683
Buildings 5,925,072 8,262,351
Vehicles 2,345,643 5,639,556
Land 950,970 950,970
------------ -------------
198,322,316 294,472,892
Less-accumulated depreciation (95,040,023) (155,826,572)
------------ -------------
$103,282,293 $138,646,320
============ =============
(5) DEBT
----
Debt consists of the following:
December 31,
----------------------------
1996 1995
------------ ------------
Lending institutions-
Revolving credit and term loan $ 82,130,620 $ 87,000,000
Senior secured notes 55,393,187 93,000,000
Capital lease obligations 822,071 770,267
------------ -------------
$138,345,878 $180,770,267
============ =============
The Venture's debt arrangements at December 31, 1996 consisted of
$55,393,187 of Senior Notes placed with a group of institutional lenders and a
$120,000,000 credit facility with a group of commercial bank lenders. The
Senior Notes and credit facility are equal in standing with the other, and both
are equally secured by the assets of the Venture.
The Senior Notes have a fixed interest rate of 8.64 percent and a final
maturity date of March 31, 2000. The Senior Notes required payments of interest
only to March 1996, with interest and accelerating principal payments required
for the four years thereafter, payable semi-annually in March and September. In
February 1996, the Venture was required to make a principal repayment of
approximately $33,650,000 from proceeds received from the sale of the Tampa
System. The Senior Notes carry a "make-whole" payment, which is a prepayment
penalty, in the event the notes are prepaid prior to maturity. The make-whole
payment protects the lenders in the event that prepaid funds are reinvested at a
rate below 8.64 percent. The Venture was required to pay a make-whole payment
in February 1996 of approximately $2,217,000. Principal payments due for each of
the five years in the period ending December 31, 2001 and thereafter, are:
$7,385,758, $11,078,637, $36,928,792, $-0-, $-0- and $-0-, respectively.
28
In February 1996, the Venture was required by the terms of its then-
existing $87,000,000 credit facility to make a principal repayment of
$22,000,000 from proceeds received from the sale of the Tampa System.
Simultaneously with the sale of the Tampa System, the Venture amended this
credit facility to increase the amount available to $120,000,000 to meet the
Venture's long-term financing requirements. The balance outstanding on the
Venture's amended credit facility at December 31, 1996 was $82,130,620, leaving
$37,869,380 available for future needs. At the Venture's option, the credit
facility is payable in full on December 31, 1999 or converts to a term loan that
matures on December 31, 2004 and is payable in consecutive quarterly amounts.
Installments due on debt principal of the credit facility for each of the five
years in the period ending December 31, 2001 and thereafter, respectively, are:
$-0-, $-0-, $-0-, $8,213,062, $20,532,655 and $53,384,903, respectively.
Interest on the amended credit facility is at the Venture's option of the London
Interbank Offered Rate plus 1.25 percent, the Prime Rate plus .125 percent or
the Certificate of Deposit Rate plus 1.125 percent. The effective interest rates
on amounts outstanding on the Venture's credit facility as of December 31, 1996
and 1995 were 6.90 percent and 7.41 percent, respectively.
During 1992, 1994 and 1996, the Venture incurred costs associated with
renegotiating its debt arrangements. These costs were capitalized and are being
amortized using the straight-line method over the life of the debt agreements.
At December 31, 1996, the carrying amount of the Venture's long-term debt
did not differ significantly from the estimated fair value of the financial
instruments. The fair value of the Venture's long-term debt is estimated based
on the discounted amount of future debt service payments using rates of
borrowing for a liability of similar risk.
(6) INCOME TAXES
------------
Income taxes have not been recorded in the accompanying consolidated
financial statements because they accrue directly to the partners. The federal
and state income tax returns of Fund 12-D are prepared and filed by the General
Partner.
Fund 12-D's tax returns, the qualification of the Partnership as such for
tax purposes, and the amount of distributable income or loss are subject to
examination by federal and state taxing authorities. If such examinations
result in changes with respect to Fund 12-D's qualification as such, or in
changes with respect to Fund 12-D's recorded income or loss, the tax liability
of the general and limited partners would likely be changed accordingly.
Taxable losses reported to the partners is different from that reported
in the consolidated statements of operations due to the difference in
depreciation allowed 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 or losses and the losses reported in the consolidated statements of
operations.
(7) COMMITMENTS AND CONTINGENCIES
-----------------------------
David Hirsch, derivatively on behalf of Cable TV Fund 12-B, Ltd., Cable
-----------------------------------------------------------------------
TV Fund 12-C, Ltd. and Cable TV Fund 12-D, Ltd. v. Jones Intercable, Inc.
- ------------------------------------------------------------------------
(Arapahoe County District Court, Colorado, Case No. 95-CV-1800, Division 3)
("Hirsch"); Jonathan Fussner and Eileen Fussner, derivatively on behalf of Cable
- -------- --------------------------------------------------------------------
TV Fund 12-B, Ltd., Cable TV Fund 12-C, Ltd. and Cable TV Fund 12-D, Ltd. v.
- ----------------------------------------------------------------------------
Jones Intercable, Inc. (Arapahoe County District Court, Colorado, Case No. 96-
- ----------------------
CV-1672, Division 3) ("Fussner").
-------
On September 20, 1996, Intercable was named as a defendant in a Complaint
filed by David Hirsch, who is a limited partner in the Partnership. On January
25, 1996, Intercable was served with an Amended Class Action Complaint and
Request for Jury Trial. On February 19, 1996, Intercable filed a Motion to
Dismiss the Amended Complaint arguing that the action was improperly brought as
a class action. Intercable argued that the plaintiff could only bring the
action as a derivative claim and that because the elements of a derivative claim
had not been properly pleaded, the Amended Complaint should be dismissed. After
briefing on this motion, the Court entered an Order on June 24, 1996 granting
29
Intercable's Motion to Dismiss, and on July 25, 1996, the Court entered a
further Order allowing plaintiff to file another Amended Complaint. On July 31,
1996, plaintiff Hirsch filed a Second Amended Complaint.
Plaintiff Hirsch's Second Amended Complaint alleges that he is a limited
partner in the Partnership and that he now purports to bring this case as a
derivative action on behalf of the Partnership, Fund 12-B and Fund 12-C. The
suit relates to the purchase by JCH from the Venture of the Tampa System and
trade of the Tampa System, along with other cable systems, to Time Warner for
certain of Time Warner's cable systems. JCH was authorized to purchase the Tampa
System from the Venture pursuant to the terms of the limited partnership
agreements of the Partnership, Fund 12-B and Fund 12-C.
Also on July 31, 1996, the same lawyers who represent Mr. Hirsch filed a
Verified Complaint on behalf of Jonathan Fussner and Eileen Fussner as
referenced above. The Fussners are joint owners of limited partnership units in
the Partnership and their Verified Complaint is identical in all substantive
respects to the Hirsch Second Amended Complaint. On December 13, 1996, the
------
Court consolidated the Hirsch and Fussner actions.
------ -------
The Second Amended Complaint in Hirsch and the Verified Complaint in
------
Fussner allege that Intercable breached its fiduciary duty to the plaintiff and
- -------
the other limited partners of the Partnership, Fund 12-B and Fund 12-C and the
Venture in connection with JCH's purchase of the Tampa System and the trade of
that system to Time Warner. The Hirsch and Fussner Complaints also set forth a
------ -------
claim for unjust enrichment and for breach of the implied covenant of good faith
and fair dealing. Among other things, the plaintiffs assert that JCH paid an
inadequate price for the Tampa System, even though the agreed-upon price was the
average of three separate appraisals, as required by the applicable partnership
agreements. The Hirsch and Fussner cases are now styled as derivative actions
------ -------
and also seek a trial by jury. The plaintiffs in Hirsch and Fussner seek an
------ -------
unspecified amount of damages, including punitive damages, an award of
attorneys' fees, and certain equitable relief.
On August 13, 1996, Intercable filed a Motion to Dismiss the breach of
fiduciary duty and unjust enrichment claims in the Hirsch and Fussner actions.
------ -------
On February 6, 1997, after briefing on this motion, the Court denied
Intercable's Motion to Dismiss. Intercable's Answer to the Complaints in Hirsch
------
and Fussner was filed on February 25, 1997 and generally denied the substantive
-------
allegations in the Complaint and asserted a number of affirmative defenses.
There is no trial date set in these cases, and there has been no discovery
conducted by the parties to date.
Martin Ury, derivatively on behalf of Cable TV Fund 12-B, Ltd., Cable TV
------------------------------------------------------------------------
Fund 12-C, Ltd. and Cable TV Fund 12-D, Ltd. v. Jones Intercable, Inc.,
- -----------------------------------------------------------------------
Defendant and Cable TV Fund 12-BCD Venture, Cable TV Fund 12-B, Ltd., Cable TV
- ------------------------------------------------------------------------------
Fund 12-C, Ltd. and Cable TV Fund 12-D, Ltd., Nominal Defendants (Arapahoe
- ----------------------------------------------------------------
County District Court, Colorado, Case No. 95-CV-2212, Division 5) ("Ury").
---
On November 17, 1995, plaintiff Martin Ury filed a Complaint against
Intercable in the above-referenced action in Arapahoe County District Court.
Plaintiff Ury is a limited partner in the Partnership. He purports to bring
this case as a derivative action on behalf of the Partnership, Fund 12-B and
Fund 12-C. As in Hirsch and Fussner, discussed above, this case relates to
------ -------
JCH's purchase of the Tampa System and the Time Warner exchange.
The substantive allegations of the Ury Complaint are substantially
---
similar to the allegations in the Hirsch Second Amended Complaint and Fussner
------ -------
Verified Complaint. The plaintiff in Ury alleges that Intercable breached its
---
fiduciary duties to the limited partnership and its limited partners in
connection with JCH's purchase of the Tampa System from the Venture.
Specifically, the plaintiff alleges that JCH paid an inadequate price for the
Tampa System, even though the agreed upon price was the average of three
separate appraisals, as required by the applicable limited partnership
agreements. The Complaint seeks damages in an unspecified amount on behalf of
the three limited partnerships and an award of attorneys fees. The Complaint
does not seek a jury trial or punitive damages.
On February 1, 1996, Intercable filed a Motion to Dismiss the Complaint
on the ground that it fails to state a claim against Intercable upon which
relief can be granted. The thrust of Intercable's motion was that Intercable
cannot be liable for breach of fiduciary duty because it acted in accordance
with the terms of the limited partnership agreements in arranging for JCH's
purchase of the Tampa System. Intercable also argued that plaintiff does not
have standing to assert a derivative claim on behalf of Fund 12-B or Fund 12-C,
since he is only a limited partner in the Partnership. On July 12, 1996, the
Court denied Intercable's Motion to Dismiss. Intercable filed its Answer in
this case on July 29, 1996, generally
30
denying the substantive allegations in the Complaint, asserting a number of
affirmative defenses, and requesting a trial by jury. A Case Management Order
has been entered by the Court, setting the case for a two-week jury trial
commencing on September 22, 1997. The parties have made certain voluntary
disclosures pursuant to Rule 26 of the Colorado Rules of Civil Procedure, and
discovery is at the very early stages, although no depositions have been taken
to date.
Pursuant to the indemnification provisions of Section 9.6 of the limited
partnership's agreements of each of the three partnerships that comprise the
Venture, Intercable may be entitled to indemnification from the partnerships for
its legal fees and expenses, and for any amounts paid in settlement, in
defending the above-described lawsuits. Intercable cannot determine at this time
whether such amounts will be material.
Office and other facilities are rented under various long-term lease
arrangements. Rent paid under such lease arrangements totaled $373,169,
$331,963 and $345,531, respectively, for the years ended December 31, 1996, 1995
and 1994. Minimum commitments under operating leases for the five years in the
period ending December 31, 2001 and thereafter are as follows:
1997 $518,779
1998 531,324
1999 396,315
2000 345,715
2001 345,046
Thereafter 911,200
----------
$3,048,379
==========
(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 $ 1,104,878 $ 1,182,963 $ 1,214,978
=========== =========== ===========
Taxes, other than income
and payroll taxes $ 895,669 $ 1,286,357 $ 1,380,350
=========== =========== ===========
Advertising $ 1,183,565 $ 1,298,497 $ 1,275,772
=========== =========== ===========
Depreciation of property,
plant and equipment $15,727,639 $20,285,166 $18,362,998
=========== =========== ===========
Amortization of intangible
assets $ 6,265,907 $ 6,381,569 $ 6,446,656
=========== =========== ===========
31
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
33
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 a director of the Cable Television
Administration and Marketing Association and as a director and a member of the
Executive Committee of the Walter Kaitz Foundation, a foundation that places
people of ethnic minority groups in positions with cable television systems,
networks and vendor companies.
Ms. Ruth E. Warren joined the General Partner in August 1980 and has
served in various operational capacities, including system 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.,
34
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.
35
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 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
36
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 Venture. The General Partner believes that the terms of such
transactions are generally as favorable as could be obtained by the Venture from
unaffiliated parties. This determination has been made by the General Partner
in good faith, but none of the terms were or will be negotiated at arm's-length
and there can be no assurance that the terms of such transactions have been or
will be as favorable as those that could have been obtained by the Venture 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 Venture. Allocations of personnel costs are based
primarily on actual time spent by employees of the General Partner with respect
to each partnership managed. Remaining expenses are allocated based on the pro
rata relationship of the Venture's revenues to the total revenues of all systems
owned or managed by the General Partner and certain of its subsidiaries.
Systems owned by the General Partner and all other systems owned by partnerships
for which Jones Intercable, Inc. is the general partner are also allocated a
proportionate share of these expenses.
The General Partner 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.
37
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 Venture from the PIN Venture relating to the
Venture's owned cable television systems totaled approximately $191,011 for the
year ended December 31, 1996.
The charges to the Venture for related party transactions are as
follows for the periods indicated:
For the Year Ended December 31,
-------------------------------------
Cable TV Fund 12-BCD 1996 1995 1994
- -------------------- ---- ---- ----
Management fees $4,118,188 $5,069,985 $4,461,154
Allocation of expenses 5,491,265 7,183,663 6,951,110
Interest expense 0 220,743 33,627
Amount of advances outstanding 0 4,198,739 616,810
Highest amount of advances outstanding 0 4,574,572 929,508
Programming fees:
Jones Education Company 374,709 428,937 196,004
Great American Country 141,753 0 0
Superaudio 116,710 135,861 135,346
38
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 for Cable
TV Fund 12-C. (1)
4.2 Joint Venture Agreement of Cable TV
Fund 12-BCD Venture dated as of March
17, 1986, among Cable TV Fund 12-B,
Ltd., Cable TV Fund 12-C, Ltd. and
Cable TV Fund 12-D, Ltd. (2)
10.1.1 Copy of a franchise and related
documents thereto granting a community
antenna television system franchise for
Edwards Air Force Base, California
(Fund 12-BCD). (3)
10.1.2 Copy of a franchise and related
documents thereto granting a community
antenna television system franchise for
the City of Lancaster, California (Fund
12-BCD). (4)
10.1.3 Copy of a franchise and related
documents thereto granting a community
antenna television system franchise for
Unincorporated portions of Los Angeles
County, California (Fund 12-BCD). (4)
10.1.4 Copy of Los Angeles County Code
regarding cable tv system franchises
(Fund 12-BCD). (5)
10.1.5 Copy of Ordinance 90-0118F dated
10/29/90 granting a cable television
franchise to Fund 12-BCD (Fund 12-BCD).
(5)
10.1.6 Copy of a franchise and related
documents thereto granting a community
antenna television system franchise for
the Green Valley/Elizabeth Lake/Leona
Valley unincorporated areas of Los
Angeles County, California (Fund
12-BCD). (2)
10.1.7 Ordinance 88-0166F dated 10/4/88
amending the franchise described in
10.1.5 (Fund 12-BCD). (5)
10.1.8 Copy of a franchise and related
documents thereto granting a community
antenna television system franchise for
the City of Palmdale, California (Fund
12-BCD). (5)
10.1.9 Copy of a franchise and related
documents thereto granting a community
antenna television system franchise for
the City of Albuquerque, New Mexico
(Fund 12-BCD). (4)
10.1.10 Copy of a franchise and related
documents thereto granting a community
antenna television system franchise for
the County of Bernalillo, New Mexico
(Fund 12-BCD). (4)
10.1.11 Copy of a franchise and related
documents thereto granting a community
antenna television system franchise for
the Town of Bernalillo, New Mexico
(Fund 12-BCD). (4)
39
10.1.12 Resolution No. 12-14-87 dated 12/14/87
authorizing the assignment of the
franchise to Fund 12-BCD. (5)
10.1.13 Copy of a franchise and related
documents thereto granting a community
antenna television system franchise for
the Village of Bosque Farms, New Mexico
(Fund 12-BCD). (4)
10.1.14 Copy of a franchise and related
documents thereto granting a community
antenna television system franchise for
the Village of Corrales, New Mexico
(Fund 12-BCD). (4)
10.1.15 Copy of a franchise and related
documents thereto granting a community
antenna television system franchise for
the Kirtland Air Force Base, New Mexico
(Fund 12-BCD). (5)
10.1.16 Copy of a franchise and related
documents thereto granting a community
antenna television system franchise for
the Village of Los Ranchos, New Mexico
(Fund 12-BCD). (4)
10.1.17 Copy of a franchise and related
documents thereto granting a community
antenna television system franchise for
the County of Sandoval, New Mexico
(Fund 12-BCD). (4)
10.1.18 Copy of a franchise and related
documents thereto granting a community
antenna television system franchise for
the County of Valencia, New Mexico
(Fund 12-BCD). (4)
10.1.19 Resolution No. 88-23 dated 2/14/88
authorizing assignment of the franchise
to Fund 12-BCD. (5)
10.2.1 Note Purchase Agreement dated as of
March 31, 1992 between Cable TV Fund
12-BCD Venture and the Noteholders (9)
10.2.2 Amendment No. 1 dated as of March 31,
1994 to the Note Purchase Agreement
dated as of March 31, 1992 between
Cable TV Fund 12-BCD Venture and the
Noteholders (9)
10.2.3 Amendment No. 2 dated as of September
30, 1994 to the Note Purchase Agreement
dated as of March 31, 1992 between
Cable TV Fund 12-BCD Venture and the
Noteholders (9)
10.2.4 Amendment No. 3 dated as of February
12, 1996 to the Note Purchase Agreement
dated as of March 31, 1992 between
Cable TV Fund 12-BCD Venture and the
Noteholders (9)
10.2.5 Second Amended and Restated Credit
Agreement by and among Cable TV Fund
12-BCD Venture, various banks,
Corestates Bank, N.A. and Societe
Generale, as Managing Agents and
Corestates Bank, N.A., as
Administrative Agent dated February 12,
1996. (9)
10.3.1 Purchase and Sale Agreement dated as of
March 29, 1988 by and between Cable TV
Fund 12-BCD Venture as Buyer and Video
Company as Seller. (6)
40
10.3.2 Purchase and Sale Agreement dated
9/20/91 and amendments thereto between
Cable TV Fund 12-BCD Venture as Seller
and Falcon Classic Cable Income
Properties, L.P. (Fund 12-BCD). (7)
10.3.3 Purchase and Sale Agreement dated as of
August 11, 1995 between Cable TV Fund
12-BCD Venture and Jones Intercable,
Inc. (8)
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 Nos. 0-13193, 0-13807,
0-13964 and 0-14206).
(2) Incorporated by reference from
Registrant's Report on Form 10-K for
the fiscal year ended December 31, 1987
(Commission File Nos. 0-13193, 0-13807,
0-13964 and 0-14206).
(3) Incorporated by reference from
Registrant's Report on Form 10-K for
the fiscal year ended December 31, 1994
(Commission File No. 0-13193).
(4) Incorporated by reference from
Registrant's Report on Form 10-K for
the fiscal year ended December 31, 1986
(Commission File Nos. 0-13193, 0-13807,
0-13964 and 0-14206).
(5) Incorporated by reference from
Registrant's Report on Form 10-K for
the fiscal year ended December 31, 1992
(Commission File Nos. 0-13193, 0-13807,
0-13964 and 0-14206).
(6) Incorporated by reference from
Registrant's Report on Form 10-K for
the fiscal year ended December 31, 1988
(Commission File Nos. 0-13193, 0-13807,
0-13964 and 0-14206).
(7) Incorporated by reference from the
Forms 8-K of Fund 12-B, Fund 12-C and
Fund 12-D dated 4/6/92 (Commission File
Nos. 0-13193, 0-13964 and 0-14206,
respectively).
(8) Incorporated by reference from the
Annual Report on Form 10-K for fiscal
year ended May 31, 1995 of Jones
Intercable, Inc. (Commission File No.
1-9953).
(9) Incorporated by reference from
Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31,
1995.
(b) Reports on Form 8-K.
None.
41
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-D, 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
42
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
43