FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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, 1998
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: 0-16939
JONES SPACELINK INCOME/GROWTH FUND 1-A, LTD.
--------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 84-1069504
-------- ----------
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 registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
----- -----
State the 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
(39363)
Certain information contained in this Form 10-K Report contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. All statements, other than statements of
historical facts, included in this Form 10-K Report that address activities,
events or developments that the Partnership or the General Partner expects,
believes or anticipates will or may occur in the future are forward-looking
statements. These forward-looking statements are based upon certain assumptions
and are subject to risks and uncertainties. Actual events or results may differ
from those discussed in the forward-looking statements as a result of various
factors.
PART I.
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ITEM 1. BUSINESS
-----------------
The Partnership. Jones Spacelink Income/Growth Fund 1-A, Ltd. (the
"Partnership") is a Colorado limited partnership that was formed pursuant to the
public offering of limited partnership interests in the Jones Spacelink
Income/Growth Fund 1 Limited Partnership Program (the "Program"). Jones
Intercable, Inc., a Colorado corporation, is the general partner of the
Partnership (the "General Partner"). The Partnership was formed for the purpose
of acquiring and operating cable television systems. The Partnership owned the
cable television systems serving the areas in and around the communities of
Bluffton, Decatur, Monroe, Auburn, Butler, Uniondale, Waterloo, Poneto, Vera
Cruz and Garrett and certain unincorporated areas of Wells, Allen, Noble, Adams
and DeKalb Counties, all in the State of Indiana (the "Northeast Indiana
Systems") until they were sold on June 30, 1998. See Disposition of Cable
Television System below.
It is anticipated that Comcast Corporation ("Comcast") will acquire a
controlling interest in the General Partner during April 1999. As a result of
this transaction, it is expected that the current management of the General
Partner and a majority of the Board of Directors of the General Partner will be
replaced by Comcast.
Disposition of Cable Television System. On June 30, 1998, the
Partnership sold its Northeast Indiana Systems to an unaffiliated party for a
sales price of $23,500,000, subject to normal closing adjustments. From the
sale proceeds, the Partnership repaid all of its indebtedness, including the
$7,500,000 borrowed under its credit facility and capital lease obligations
totaling $120,042, settled working capital adjustments, and then deposited
$1,000,000 into an interest-bearing indemnity escrow account. The remaining net
sale proceeds of $14,915,500 were distributed in August 1998 to its limited
partners of record as of June 30, 1998. The distribution from the sale of the
Northeast Indiana Systems provided the Partnership's limited partners, as a
group, $14,915,500, or an approximate return of $291 for each $500 limited
partnership interest, or $582 for each $1,000 invested in the Partnership. The
sale of the Northeast Indiana Systems was approved by the holders of a majority
of the limited partnership interests in the Partnership.
Taking into account prior distributions to limited partners from the
Partnership's operating cash flow and from the net proceeds of prior system
sales and the sale of the Northeast Indiana Systems (excluding escrowed
proceeds), the limited partners of the Partnership have received a total return
of $589 for each $500 limited partnership interest, or $1,178 for each $1,000
invested in the Partnership.
For a period of one year following the closing date of June 30, 1998,
$1,000,000 of the sale proceeds will remain in escrow as security for the
Partnership's agreement to indemnify the buyer under the asset purchase
agreement. The Partnership's primary exposure, if any, will relate to the
representations and warranties made about the Northeast Indiana Systems in the
asset purchase agreement. Any amounts remaining in this interest-bearing
indemnity escrow account and not claimed by the buyer at the end of the one-year
period, plus interest earned on the escrowed funds, will be returned to the
Partnership. From this amount, the Partnership will pay any remaining
liabilities and the Partnership will then distribute the balance to the limited
partners. The Partnership will continue in existence at least until any amounts
remaining from the indemnity escrow account have been distributed. Since the
Northeast Indiana Systems represented the only remaining operating asset of the
Partnership, the Partnership will be liquidated and dissolved upon the final
distribution of any amounts remaining from the indemnity escrow account, most
likely in the third quarter of 1999. If any disputes with respect to the
indemnification arise, the
2
Partnership would not be dissolved until such disputes were resolved, which
could result in the Partnership continuing beyond 1999.
Because transferees of limited partnership interests following the
record date for the distribution of the proceeds from the sale of the Northeast
Indiana Systems (June 30, 1998) would not be entitled to any distributions from
the Partnership, a transfer of limited partnership interests following such
record date would have no economic value. The General Partner therefore has
determined that, pursuant to the authority granted to it by the Partnership's
limited partnership agreement, the General Partner will approve no transfers of
limited partnership interests after June 30, 1998.
ITEM 2. PROPERTIES
-------------------
As of December 31, 1998, the Partnership does not own any cable
television systems.
ITEM 3. LEGAL PROCEEDINGS
--------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
None.
PART II.
--------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
-------------------------------------------------
AND RELATED SECURITY HOLDER MATTERS
-----------------------------------
While the Partnership is publicly held, there is no public market for
the limited partnership interests, and it is not expected that a market will
develop in the future. During 1998, a limited partner of the Partnership
conducted a "limited tender offer" for interests in the Partnership at a price
of $175 per interest. As of February 16, 1999, the number of equity security
holders in the Partnership was 2,153.
3
ITEM 6. SELECTED FINANCIAL DATA
- -------------------------------
For the Year Ended December 31,
-----------------------------------------------------------------------
1998 1997 1996 1995 1994
------------- ------------ -------------- ------------ ------------
Revenues $2,919,556 $ 5,522,807 $ 5,724,538 $ 6,838,837 $ 6,440,941
Depreciation and Amortization 893,029 1,680,105 1,930,748 3,161,861 3,074,711
Operating Income (Loss) (49,096) 396,470 (110,944) (630,272) (714,065)
Net Income (Loss) 12,794,204/(a)/ (281,375) 3,711,661/(b)/ (1,495,469) (1,459,114)
Net Income (Loss) per
Limited Partnership Unit 249.18/(a)/ (5.43) 69.26/(b)/ (28.87) (28.17)
Weighted Average Number of Limited
Partnership Units Outstanding 51,276 51,276 51,276 51,276 51,276
General Partner's Deficit - (17,258) (14,444) (161,832) (134,377)
Limited Partners' Capital 864,304 3,002,858 3,281,419 5,992,398 8,710,412
Total Assets 1,000,000 10,944,711 11,477,059 18,237,340 19,865,099
Credit Facility and Capitalized
Lease Obligations - 7,620,042 7,467,645 11,605,582 10,787,551
General Partner Advances - - - - 44,786
(a) Net income resulted primarily from the sale of the Northeast Indiana Systems
by Jones Spacelink Income/Growth Fund 1-A, Ltd. in June 1998.
(b) Net income resulted primarily from the sale of the Lake Geneva and Ripon
Systems by Jones Spacelink Income/Growth Fund 1-A, Ltd. in April 1996.
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 Jones Spacelink Income/Growth Fund 1-A, Ltd. (the "Partnership")
contains, in addition to historical information, forward-looking statements that
are based upon certain assumptions and are subject to a number of risks and
uncertainties. The Partnership's actual results may differ significantly from
the results predicted in such forward-looking statements.
FINANCIAL CONDITION
- -------------------
On June 30, 1998, the Partnership sold its cable television systems
serving the areas in and around the communities of Bluffton, Decatur, Monroe,
Auburn, Butler, Uniondale, Waterloo, Poneto, Vera Cruz and Garrett, and the
unincorporated areas of Wells, Allen, Noble, Adams and DeKalb Counties, all in
the State of Indiana (the "Northeast Indiana Systems") to an unaffiliated party
for a sales price of $23,500,000, subject to normal closing adjustments. From
the sale proceeds, the Partnership repaid all of its indebtedness, including the
$7,500,000 borrowed under its credit facility and capital lease obligations
totaling $120,042, settled working capital adjustments, and then deposited
$1,000,000 into an interest-bearing indemnity escrow account. The remaining net
sale proceeds of $14,915,500 were distributed to its limited partners of record
as of June 30, 1998, in August 1998. The distribution from the sale of the
Northeast Indiana Systems provided the Partnership's limited partners, as a
group, $14,915,500, or an approximate return of $291 for each $500 limited
partnership interest, or $582 for each $1,000 invested in the Partnership. The
sale of the Northeast Indiana Systems was approved by the holders of a majority
of the limited partnership interests in the Partnership.
Taking into account prior distributions to limited partners from the
Partnership's operating cash flow and from the net proceeds of prior system
sales and the sale of the Northeast Indiana Systems (excluding escrowed
proceeds), the limited partners of the Partnership have received a total return
of $589 for each $500 limited partnership interest, or $1,178 for each $1,000
invested in the Partnership.
4
For a period of one year following the closing date of June 30, 1998,
$1,000,000 of the sale proceeds will remain in escrow as security for the
Partnership's agreement to indemnify the buyer under the asset purchase
agreement. The Partnership's primary exposure, if any, will relate to the
representations and warranties made about the Northeast Indiana Systems in the
asset purchase agreement. Any amounts remaining in this interest-bearing
indemnity escrow account and not claimed by the buyer at the end of the one-year
period, plus interest earned on the escrowed funds, will be returned to the
Partnership. From this amount, the Partnership will pay any remaining
liabilities and it will then distribute the balance to the Partnership's limited
partners. The Partnership will continue in existence at least until any amounts
remaining from the interest-bearing indemnity escrow account have been
distributed. Since the Northeast Indiana Systems represented the only operating
asset of the Partnership, the Partnership will be liquidated and dissolved upon
the final distribution of any amounts remaining from the interest-bearing
indemnity escrow account, most likely in the third quarter of 1999.
RESULTS OF OPERATIONS
- ---------------------
Due to the Northeast Indiana Systems sale on June 30, 1998, which were the
Partnership's last remaining operating assets, a full discussion of the results
of operations would not be comparable. For the year ended December 31, 1998, the
Partnership had total revenues of $2,919,556 and generated an operating loss of
$49,096. Because of the gain of $13,106,602 on the sale of the Northeast Indiana
Systems, the Partnership realized net income of $12,794,204, or $249.18 per
limited partnership unit, in 1998.
Year 2000 Issue
- ---------------
The Year 2000 issue is the result of many computer programs being written
such that they will malfunction when reading a year of "00." This problem could
cause system failure or miscalculations causing disruptions of business
processes. Due to the Northeast Indiana Systems sale on June 30, 1998, and the
planned liquidation and dissolution of the Partnership in 1999, the Year 2000
issue will not have a material effect on the Partnership.
ITEM 8. FINANCIAL STATEMENTS
- -----------------------------
The audited financial statements of the Partnership for the year ended
December 31, 1998 follow.
5
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Partners of Jones Spacelink Income/Growth Fund 1-A, Ltd.:
We have audited the accompanying balance sheets of Jones Spacelink
Income/Growth Fund 1-A, Ltd. (a Colorado limited partnership) as of December 31,
1998 and 1997, and the related statements of operations, partners' capital
(deficit) and cash flows for each of the three years in the period ended
December 31, 1998. 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 Jones Spacelink
Income/Growth Fund 1-A, Ltd. as of December 31, 1998 and 1997, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 12, 1999.
6
JONES SPACELINK INCOME/GROWTH FUND 1-A, LTD.
--------------------------------------------
(A Limited Partnership)
BALANCE SHEETS
--------------
ASSETS
------
December 31,
-----------------------
1998 1997
---------- -----------
CASH $ - $ 146,657
TRADE RECEIVABLES, less allowance for doubtful
receivables of $-0- and $12,965 at December 31, 1998
and 1997, respectively - 182,946
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost - 12,139,015
Less- accumulated depreciation - (6,056,785)
---------- -----------
- 6,082,230
Franchise costs and other intangible assets, net of
accumulated amortization of $-0- and $9,112,732
at December 31, 1998 and 1997, respectively - 4,455,263
---------- -----------
Total investment in cable television properties - 10,537,493
DEPOSITS, PREPAID EXPENSES AND OTHER ASSETS 1,000,000 77,615
---------- -----------
Total assets $1,000,000 $10,944,711
========== ===========
The accompanying notes to financial statements
are an integral part of these balance sheets.
7
JONES SPACELINK INCOME/GROWTH FUND 1-A, LTD.
--------------------------------------------
(A Limited Partnership)
BALANCE SHEETS
--------------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
December 31,
---------------------------
1998 1997
------------- ------------
LIABILITIES:
Credit facility and capitalized lease
obligations $ - $ 7,620,042
Trade accounts payable and accrued liabilities 135,696 307,207
Subscriber prepayments and deposits - 31,862
------------ ------------
Total liabilities 135,696 7,959,111
------------ ------------
COMMITMENTS AND CONTINGENCIES (NOTE 7)
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Distributions (103,950) (103,950)
Accumulated earnings 102,950 85,692
------------ ------------
- (17,258)
------------ ------------
Limited Partners-
Contributed capital, net of
related commissions, syndication
costs and interest (51,276 units
outstanding at December 31, 1998
and 1997) 21,875,852 21,875,852
Distributions (30,206,680) (15,291,180)
Accumulated earnings (deficit) 9,195,132 (3,581,814)
------------ ------------
864,304 3,002,858
------------ ------------
Total partners' capital (deficit) 864,304 2,985,600
------------ ------------
Total liabilities and partners'
capital (deficit) $ 1,000,000 $ 10,944,711
============ ============
The accompanying notes to financial statements
are an integral part of these balance sheets.
8
JONES SPACELINK INCOME/GROWTH FUND 1-A, LTD.
--------------------------------------------
(A Limited Partnership)
STATEMENTS OF OPERATIONS
------------------------
For the Year Ended
December 31,
---------------------------------------------
1998 1997 1996
------------ ------------ ----------
REVENUES $ 2,919,556 $5,522,807 $5,724,538
COSTS AND EXPENSES:
Operating expenses 1,747,814 2,844,900 3,224,895
Management fees and allocated administrative
costs from the General Partner 327,809 601,332 679,839
Depreciation and amortization 893,029 1,680,105 1,930,748
----------- ---------- ----------
OPERATING INCOME (LOSS) (49,096) 396,470 (110,944)
----------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest expense (288,157) (664,204) (635,375)
Gain on sale of cable television system 13,106,602 - 4,550,867
Other, net 24,855 (13,641) (92,887)
----------- ---------- ----------
Total other income (expense), net 12,843,300 (677,845) 3,822,605
----------- ---------- ----------
NET INCOME (LOSS) $12,794,204 $ (281,375) $3,711,661
=========== ========== ==========
ALLOCATION OF NET INCOME (LOSS):
General Partner $ 17,258 $ (2,814) $ 160,140
=========== ========== ==========
Limited Partners $12,776,946 $ (278,561) $3,551,521
=========== ========== ==========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $249.18 $(5.43) $69.26
=========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
LIMITED PARTNERSHIP UNITS
OUTSTANDING 51,276 51,276 51,276
=========== ========== ==========
The accompanying notes to financial statements
are an integral part of these statements.
9
JONES SPACELINK INCOME/GROWTH FUND 1-A, LTD.
--------------------------------------------
(A Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
-----------------------------------------
For the Year Ended
December 31,
-----------------------------------------
1998 1997 1996
------------- ------------- -----------
GENERAL PARTNER:
Balance, beginning of year $ (17,258) $ (14,444) $ (161,958)
Cash flow distributions - - (12,626)
Net income (loss) for the year 17,258 (2,814) 160,140
------------ ------------ -----------
Balance, end of year $ - $ (17,258) $ (14,444)
============ ============ ===========
LIMITED PARTNERS:
Balance, beginning of year $ 3,002,858 $ 3,281,419 $ 5,979,898
Cash flow distributions - - (1,250,000)
Distribution from sale of cable television system (14,915,500) - (5,000,000)
Net income (loss) for the year 12,776,946 (278,561) 3,551,521
------------ ------------ -----------
Balance, end of year $ 864,304 $ 3,002,858 $ 3,281,419
============ ============ ===========
The accompanying notes to financial statements
are an integral part of these statements.
10
JONES SPACELINK INCOME/GROWTH FUND 1-A, LTD.
--------------------------------------------
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
------------------------
For the Year Ended
December 31,
----------------------------------------
1998 1997 1996
------------- ----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 12,794,204 $ (281,375) $ 3,711,661
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 893,029 1,680,105 1,930,748
Gain on sale of cable television system (13,106,602) - (4,550,867)
Decrease (increase) in trade accounts receivable, net 182,946 (60,942) 104,612
Increase in deposits, prepaid expenses and other assets (163,568) (91,318) (22,669)
Decrease in trade accounts payable and accrued liabilities
and subscriber prepayments and deposits (203,373) (87,713) (78,005)
------------ ---------- ------------
Net cash provided by operating activities 396,636 1,158,757 1,095,480
------------ ---------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (386,202) (905,705) (1,009,939)
Proceeds from sale of cable television system, net of escrow 22,378,451 - 10,058,334
------------ ---------- ------------
Net cash provided by (used in) investing activities 21,992,249 (905,705) 9,048,395
------------ ---------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings - 687,618 5,930,512
Repayment of borrowings (7,620,042) (535,221) (10,068,449)
Decrease in accrued distributions - (315,657) -
Distributions to partners (14,915,500) - (6,262,626)
------------ ---------- ------------
Net cash used in financing activities (22,535,542) (163,260) (10,400,563)
------------ ---------- ------------
INCREASE (DECREASE) IN CASH (146,657) 89,792 (256,688)
CASH, BEGINNING OF YEAR 146,657 56,865 313,553
------------ ---------- ------------
CASH, END OF YEAR $ - $ 146,657 $ 56,865
============ ========== ============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 326,494 $ 719,176 $ 638,714
============ ========== ============
The accompanying notes to financial statements
are an integral part of these statements.
11
JONES SPACELINK INCOME/GROWTH FUND 1-A, LTD.
--------------------------------------------
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(1) ORGANIZATION AND PARTNERS' INTERESTS:
------------------------------------
Formation and Business
----------------------
Jones Spacelink Income/Growth Fund 1-A, Ltd. (the "Partnership"), a
Colorado limited partnership, was formed on May 12, 1988, pursuant to a public
offering of limited partner interests. The Partnership was formed to acquire,
construct, develop and operate cable television systems. Jones Intercable, Inc.
("Intercable"), a Colorado corporation, is the "General Partner," and manager of
the Partnership. Intercable and certain of its subsidiaries also own and
operate cable television systems for their own account and for the account of
other managed limited partnerships.
Cable Television System Acquisitions
------------------------------------
In November 1988, the Partnership purchased the cable television systems
serving the areas in and around the communities of Bluffton, Decatur, Monroe,
Auburn, Butler, Uniondale, Waterloo, Poneto, Vera Cruz and Garrett, and the
unincorporated areas of Wells, Allen, Noble, Adams and DeKalb counties, all in
the State of Indiana (the "Northeast Indiana Systems"). Such systems were sold
on June 30, 1998 as discussed below.
In March 1991, the Partnership purchased the cable television system
serving the communities of Lake Geneva and areas of Walworth County, all in the
State of Wisconsin (the "Lake Geneva System") and the cable television system
serving the communities of Ripon and areas of Fond-du-Lac County, all in the
State of Wisconsin (the "Ripon System"). Such systems were sold in 1996.
Contributed Capital, Commissions and Syndication Costs
------------------------------------------------------
The capitalization of the Partnership is set forth in the accompanying
statements of partners' capital (deficit). No limited partner was obligated to
make any additional contribution to Partnership capital. The General Partner
purchased its general partner interest in the Partnership by contributing $1,000
to partnership capital.
All profits and losses of the Partnership were allocated 99 percent to the
limited partners and one percent to the General Partner, except for income or
gain from the sale or disposition of cable television properties, which was
allocated to the partners based upon the formula set forth in the partnership
agreement, and interest income earned prior to the first acquisition by the
Partnership of a cable television system, which was allocated 100 percent to the
limited partners.
Sales of Cable Television Systems
---------------------------------
On June 30, 1998, the Partnership sold its Northeast Indiana Systems to an
unaffiliated party for a sales price of $23,500,000, subject to normal closing
adjustments. From the sale proceeds, the Partnership repaid all of its
indebtedness, including the $7,500,000 borrowed under its credit facility and
capital lease obligations totaling $120,042, settled working capital
adjustments, and then deposited $1,000,000 into an interest-bearing indemnity
escrow account. The remaining net sale proceeds of $14,915,500 were distributed
to its limited partners of record as of June 30, 1998, in August 1998. The
distribution from the sale of the Northeast Indiana Systems provided the
Partnership's limited partners, as a group, $14,915,500, or an approximate
return of $291 for each $500 limited partnership interest, or $582 for each
$1,000 invested in the Partnership. The sale of the Northeast Indiana Systems
was approved by the holders of a majority of the limited partnership interests
in the Partnership.
Taking into account prior distributions to limited partners from the
Partnership's operating cash flow and from the net proceeds of prior system
sales and the sale of the Northeast Indiana Systems (excluding escrowed
proceeds), the limited partners of the Partnership have received a total return
of $589 for each $500 limited partnership interest, or $1,178 for each $1,000
invested in the Partnership.
12
For a period of one year following the closing date of June 30, 1998,
$1,000,000 of the sale proceeds will remain in escrow as security for the
Partnership's agreement to indemnify the buyer under the asset purchase
agreement. The Partnership's primary exposure, if any, will relate to the
representations and warranties made about the Northeast Indiana Systems in the
asset purchase agreement. Any amounts remaining in this interest-bearing
indemnity escrow account and not claimed by the buyer at the end of the one-year
period, plus interest earned on the escrowed funds, will be returned to the
Partnership. From this amount, the Partnership will pay any remaining
liabilities and it will then distribute the balance to the Partnership's limited
partners. The Partnership will continue in existence at least until any amounts
remaining from the interest-bearing indemnity escrow account have been
distributed. Since the Northeast Indiana Systems represented the only operating
asset of the Partnership, the Partnership will be liquidated and dissolved upon
the final distribution of any amounts remaining from the interest-bearing
indemnity escrow account, most likely in the third quarter of 1999.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
Accounting Records
------------------
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting principles.
The Partnership's tax returns are also prepared on the accrual basis.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the General Partner's management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Property, Plant and Equipment
-----------------------------
Depreciation of property, plant and equipment was provided using the
straight-line method over the following estimated service lives:
Cable distribution systems 5 - 15 years
Equipment and tools 5 - 7 years
Office furniture and equipment 3 - 5 years
Buildings 30 years
Vehicles 3 - 4 years
Replacements, renewals and improvements were capitalized and maintenance
and repairs were charged to expense as incurred.
Property, plant and equipment and the corresponding accumulated
depreciation were written off as certain assets became fully depreciated and
were no longer in service.
Intangible Assets
-----------------
Costs assigned to intangible assets were amortized using the straight-line
method over remaining estimated useful lives ranging from 2 to 33 years.
Revenue Recognition
-------------------
Subscriber prepayments were initially deferred and recognized as revenue
when earned.
13
(3) PROPERTY, PLANT AND EQUIPMENT:
-----------------------------
Property, plant and equipment as of December 31, 1998 and 1997, consisted
of the following:
1998 1997
---------- -----------
Cable distribution systems $ - $11,182,336
Equipment and tools - 504,417
Office furniture and equipment - 179,632
Buildings - 12,002
Vehicles - 255,628
Land - 5,000
---------- -----------
- 12,139,015
Less- accumulated depreciation - (6,056,785)
---------- -----------
$ - $ 6,082,230
========== ===========
(4) DEBT:
-----
At December 31, 1998 and 1997, debt consisted of the following:
1998 1997
---------- -----------
Revolving credit and term loan facility $ - $ 7,500,000
Capital lease obligations - 120,042
---------- -----------
$ - $ 7,620,042
========== ===========
The Partnership had an $8,000,000 credit facility, which was paid in full
on June 30, 1998 upon the sale of the Northeast Indiana Systems. Interest on
the outstanding principal balance was at the Partnership's option of the Prime
Rate plus 1/4 percent or the London Interbank Offered Rate plus 1-1/4 percent.
The effective interest rate on outstanding obligations as of December 31, 1997
was 7.17 percent.
The Partnership's capital lease obligations were paid in June 1998 from
proceeds from the sale of the Northeast Indiana Systems.
At December 31, 1997, the carrying amount of the Partnership's long-term
debt did not differ significantly from the estimated fair value of the financial
instruments. The fair value of the Partnership's long-term debt was estimated
based on the discounted amount of future debt service payments using rates of
borrowing for a liability of similar risk.
(5) SIGNIFICANT TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES:
----------------------------------------------------------------
Management Fees, Distribution Ratios and Reimbursements
-------------------------------------------------------
The General Partner managed the Partnership and received a fee for its
services equal to 5 percent of the gross revenues of the Partnership, excluding
revenues from the sale of cable television systems or franchises. Management
fees paid to the General Partner by the Partnership for the years ended December
31, 1998, 1997 and 1996 were $145,978, $276,140 and $286,227, respectively. The
General Partner has not received and will not receive a management fee after
June 30, 1998.
Any partnership distributions made from cash flow (defined as cash receipts
derived from routine operations and interest income, less debt principal and
interest payments and cash expenses) are allocated 99 percent to the limited
partners and one percent to the General Partner. The Partnership may distribute
any proceeds from the sale or refinancing
14
of a cable television system generally as follows: first, to the Partners until
they have received an amount equal to their initial capital contributions (as
reduced by all prior distributions other than distributions from cash flow);
second, to the limited partners until they have received a liquidation
preference equal to 12 percent per annum, cumulative and noncompounded, on an
amount equal to their initial capital contributions, less any portion of such
capital contributions which has been returned to the limited partners from prior
sale or refinancing proceeds, as determined for any particular year; provided
that such cumulative return will be reduced by all prior distributions of cash
flow from operations and prior distributions of proceeds of sales or
refinancings of the Partnership's cable television systems. The balance will be
allocated 75 percent to the limited partners' and 25 percent to the General
Partner. See Note 6 for discussion of cash flow distributions.
The Partnership reimbursed the General Partner and certain of its
subsidiaries for certain allocated overhead and administrative expenses. These
expenses represented the salaries and related benefits paid for corporate
personnel, rent, data processing services and other corporate facilities costs.
Such personnel provided engineering, marketing, accounting, administrative,
legal, and investor relations services to the Partnership. Such services, and
their related costs, were necessary to the operation of the Partnership and
would have been incurred by the Partnership if it was a stand alone entity.
Allocations of personnel costs were based primarily on actual time spent by
employees of the General Partner with respect to each entity managed. Remaining
expenses were allocated based on the pro rata relationship of the Partnership's
revenues to the total revenues of all systems owned or managed by the General
Partner and certain of its subsidiaries. Systems owned by the General Partner
and all other systems owned by partnerships for which Intercable is the general
partner were also allocated a proportionate share of these expenses. The
General Partner believes that the methodology used in allocating overhead and
administrative expenses was reasonable. Reimbursements made to the General
Partner by the Partnership for allocated overhead and administrative expenses
were $181,831, $325,192 and $393,612 for the years ended December 31, 1998, 1997
and 1996, respectively. The Partnership will continue to reimburse the General
Partner for actual time spent on Partnership business by employees of the
General Partner until the Partnership is liquidated and dissolved, but the
Partnership will not bear a revenue-based allocation of overhead and
administrative expenses beyond June 30, 1998.
The Partnership was charged interest during 1998 at an average interest
rate of approximately 7.05 percent per annum on the amounts due the General
Partner, which approximated the General Partner's weighted average cost of
borrowing. Total interest charged to the Partnership by the General Partner was
$17,600, $2,796 and $67,530 for the years ended December 31, 1998, 1997 and
1996, respectively.
Payments to/from Affiliates for Programming Services
----------------------------------------------------
The Partnership received programming from Superaudio, Knowledge TV, Inc.,
Jones Computer Network, Ltd., Great American Country, Inc. and Product
Information Network, all of which are affiliates of the General Partner.
Payments to Superaudio by the Partnership for the years ended December 31,
1998, 1997 and 1996 totaled $5,345, $9,775 and $9,979, respectively. Payments
to Knowledge TV, Inc. by the Partnership for the years ended December 31, 1998,
1997 and 1996 totaled $6,025, $10,870 and $10,882, respectively. Payments to
Jones Computer Network, Ltd., whose service was discontinued in April 1996,
totaled $1,557 for the year ended December 31, 1996. Payments to Great American
Country, Inc. totaled $5,891, $11,313 and $3,039 in 1998, 1997 and 1996,
respectively.
The Partnership received a commission from Product Information Network,
based on a percentage of advertising revenue and number of subscribers. Product
Information Network paid commissions to the Partnership for the years ended
December 31, 1998, 1997 and 1996 totaling $12,420, $18,248, $12,295,
respectively.
(6) DISTRIBUTIONS FROM CASH FLOW:
----------------------------
A primary objective of the Partnership was to provide quarterly cash
distributions to the partners, principally from cash flow from operations
remaining after principal and interest payments and the creation of any reserves
necessary for the operation of the Partnership. The Partnership made no such
distributions in 1998 and 1997 because funds from cash flow were used to pay for
necessary capital additions to the Northeast Indiana Systems as a result of
limited borrowing capacity under the Partnership's credit facility. The
Partnership declared such distributions totaling $1,262,626 in 1996.
15
(7) COMMITMENTS AND CONTINGENCIES:
-----------------------------
For a period of one year following the Northeast Indiana Systems closing
date of June 30, 1998, $1,000,000 of the sale proceeds will remain in escrow as
security for the Partnership's agreement to indemnify the buyer under the asset
purchase agreement. The Partnership's primary exposure, if any, will relate to
the representations and warranties made about the Northeast Indiana Systems in
the asset purchase agreement. Any amounts remaining in this interest-bearing
indemnity escrow account and not claimed by the buyer at the end of the one-year
period, plus interest earned on the escrowed funds, will be returned to the
Partnership. From this amount, the Partnership will pay any remaining
liabilities and it will then distribute the balance to the Partnership's limited
partners.
(8) INCOME TAXES:
------------
Income taxes have not been recorded in the accompanying financial
statements because they accrue directly to the partners. The federal and state
income tax returns of the Partnership are prepared and filed by the General
Partner.
The Partnership'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 the Partnership's qualification as such, or in
changes with respect to the Partnership's recorded income or loss, the tax
liability of the general and limited partners would likely be changed
accordingly.
Taxable income (loss) to the Partners is different from that reported in
the statements of operations due to the difference in depreciation recognized
under generally accepted accounting principles and the expense allowed for tax
purposes under the Modified Accelerated Cost Recovery System (MACRS). There are
no other significant differences between taxable income (loss) and the net
income reported in the statements of operations.
(9) SUPPLEMENTARY PROFIT AND LOSS INFORMATION:
-----------------------------------------
Supplementary profit and loss information for the respective years are
presented below:
Year Ended December 31,
------------------------------
1998 1997 1996
-------- -------- ----------
Maintenance and repairs $ 25,100 $ 25,266 $ 37,948
======== ======== ==========
Taxes, other than income and payroll taxes $ 27,598 $ 85,447 $ 76,760
======== ======== ==========
Advertising $ 9,717 $ 33,297 $ 56,746
======== ======== ==========
Depreciation of property, plant and equipment $521,777 $915,602 $ 910,553
======== ======== ==========
Amortization of intangible assets $371,252 $764,503 $1,020,195
======== ======== ==========
16
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 69 Chairman of the Board and
Chief Executive Officer
James B. O'Brien 49 President and Director
Ruth E. Warren 49 Group Vice President/Operations
Kevin P. Coyle 47 Group Vice President/Finance
Cynthia A. Winning 47 Group Vice President/Marketing
Elizabeth M. Steele 47 Vice President/General Counsel/Secretary
Wayne H. Davis 45 Vice President/Engineering
Larry W. Kaschinske 39 Vice President/Controller
Robert E. Cole 66 Director
William E. Frenzel 70 Director
Josef J. Fridman 53 Director
Donald L. Jacobs 60 Director
Robert Kearney 62 Director
James J. Krejci 57 Director
Raphael M. Solot 65 Director
Howard O. Thrall 51 Director
Siim A. Vanaselja 42 Director
Sanford Zisman 59 Director
Robert B. Zoellick 45 Director
Mr. Glenn R. Jones has served as Chairman of the Board of Directors
and Chief Executive Officer of the General Partner since its formation in 1970,
and he was President from June 1984 until April 1988. Mr. Jones is the sole
shareholder, President and Chairman of the Board of Directors of Jones
International, Ltd. He is also Chairman of the Board of Directors of the
subsidiaries of the General Partner and of certain other affiliates of the
General Partner. Mr. Jones has been involved in the cable television business in
various capacities since 1961, and he is a member of the Board of Directors and
of the Executive Committee of the National Cable Television Association. In
addition, Mr. Jones is a member of the Board and 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
17
by the Denver chapter of the Achievement Rewards for College Scientists; and in
1994 Mr. Jones was inducted into Broadcasting and Cable's Hall of Fame.
Mr. James B. O'Brien, the General Partner's President, joined the
General Partner in January 1982. Prior to being elected President and a director
of the General Partner in December 1989, Mr. O'Brien served as a division
manager, director of operations planning/assistant to the CEO, Fund Vice
President and Group Vice President/Operations. Mr. O'Brien was appointed to the
General Partner's Executive Committee in August 1993. As President, he is
responsible for the day-to-day operations of the cable television systems
managed and owned by the General Partner. Mr. O'Brien is a board member of Cable
Labs, Inc., the research arm of the U.S. cable television industry. He also
serves as Chairman of the Board of Directors of CTAM: The Marketing Society for
the Cable Telecommunications Industry and as an executive director of the Walter
Kaitz Foundation, a foundation that places people of ethnic minority groups in
positions with cable television systems, networks and vendor companies. Mr.
O'Brien's numerous industry recognitions include a CTAM Tami Award for marketing
excellence, a Women In Cable and Telecommunications Accolade Award recognizing
his leadership efforts on behalf of women in the telecommunications industry,
The President's Award for Leadership from the Illinois Cable and
Telecommunications Association and a Lifetime Achievement Award from The
National Association of Minorities in Communications. Additionally, Mr. O'Brien
is a member of The Society of UK Cable Pioneers.
Ms. Ruth E. Warren joined the General Partner in August 1980 and has
served in various operational capacities, including system marketing manager,
director of marketing, assistant division manager, regional vice president and
Fund Vice President, since then. Ms. Warren was elected Group Vice
President/Operations of the General Partner in September 1990. Ms. Warren is a
past president of Women in Cable & Telecommunications and past Chairman of the
Women in Cable Foundation. She serves as the Vice Chair of Five Points Media
Center Board and on the Corporate Advisory Board of Planned Parenthood of the
Rocky Mountains and the Advisory Board for Girls Count. In 1995, Ms. Warren
received the Corporate Business Woman of the Year Award from the Colorado
Women's Chamber of Commerce, and in 1998 Ms. Warren received the Vanguard Award
for Distinguished Leadership from the National Cable Television Association.
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. From 1978 to 1981
Mr. Coyle was employed by American Television and Communications (now Time
Warner Cable), and from 1974 to 1978 he was an associate at Haskins & Sells (now
Deloitte & Touche LLP).
Ms. Cynthia A. Winning joined the General Partner as Group Vice
President/Marketing in December 1994. Previous to joining the General Partner,
Ms. Winning served since 1994 as the President of PRS Inc., Denver, Colorado, a
sports and event marketing company. From 1979 to 1981 and from 1986 to 1994,
Ms. Winning served as the Vice President and Director of Marketing for Citicorp
Retail Services, Inc., a provider of private-label credit cards for ten national
retail department store chains. From 1981 to 1986, Ms. Winning was the Director
of Marketing Services for Daniels & Associates cable television operations, as
well as the Western Division Marketing Director for Capital Cities Cable.
Ms. 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. Wayne H. Davis joined the General Partner in August 1983 and has
served in various technical operations positions, including System Engineering
Manager, Fund Engineering Manager, Senior Director/Technical Operations, and
Vice President/Technical Operations since then. Mr. Davis was elected Vice
President/Engineering in June 1998. He is past Vice President of the Upstate New
York Chapter of the Society of Cable Telecommunications Engineers. Mr. Davis has
received certification from the Society of Cable Telecommunications Engineers,
Broadband Cable Telecommunications Engineering Program and the National Cable
Television Institute's Technology Program.
18
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 Vice Chairman of the
Eurasia Foundation, a Board Member of the U.S.-Japan Foundation, the Close-Up
Foundation, Sit Mutual Funds, Logistics Management Institute and Chairman of the
Japan-America Society of Washington.
Mr. Josef J. Fridman was appointed a director of the General Partner
in February 1998. Mr. Fridman is currently Chief Legal Officer of Bell Canada
and of BCE Inc., Canada's largest telecommunications company. Mr. Fridman joined
Bell Canada, a wholly owned subsidiary of BCE Inc., in 1969, and has held
increasingly senior positions with Bell Canada and BCE Inc. since such time. Mr.
Fridman has held his current position since March 1998. Mr. Fridman's
directorships include Alouette Telecommunications Inc., Telesat Canada, TMI
Communications, Inc., Telebec Itee, BCI Telecom Holding Inc. and BCE Corporate
Services Inc. He is a member of the Quebec Bar Association, the Canadian,
American and International Bar Associations and the Lord Reading Law Society.
Mr. Fridman is a governor of the Quebec Bar Foundation.
Mr. Donald L. Jacobs was appointed a director of the General Partner
in April 1995. Mr. Jacobs is a retired executive officer of TRW. Prior to his
retirement, he was Vice President and Deputy Manager of the Space and Defense
Sector; prior to that appointment, he was the Vice President and General Manager
of the Defense Systems Group and prior to his appointment as Group General
Manager, he was President of ESL, Inc., a wholly owned subsidiary of TRW. During
his career, Mr. Jacobs served on several corporate, professional and civic
boards.
Mr. Robert Kearney was appointed a director and a member of the
Executive Committee of the General Partner in July 1997. Mr. Kearney is a
retired executive officer of Bell Canada. Prior to his retirement in December
1993, Mr. Kearney was the President and Chief Executive Officer of Bell Canada.
He served as Chairman of BCE Canadian Telecom Group in 1994 and as Deputy
Chairman of BCI Management Limited in 1995. He currently serves as a Director of
MPACT, a Canadian electronic commerce company. During his career, Mr. Kearney
served in a variety of capacities in the Canadian, American and International
Standards organizations, and he has served on several corporate, professional
and civic boards.
Mr. James J. Krejci is President and CEO of Comtect International,
Inc., a company in the specialized mobile radio services business, headquartered
in Denver, Colorado. Prior to joining Comtec International, Inc. in February
1998, Mr. Krejci was President and CEO of Imagelink Technologies, Inc.,
headquartered in Boulder, Colorado, from June 1996 to February 1998, and prior
to that, he was President of the International Division of
19
International Gaming Technology, the world's largest gaming equipment
manufacturer, with headquarters in Reno, Nevada from May 1994 to February 1995.
Prior to joining IGT, 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.
Mr. Raphael M. Solot was appointed a director of the General Partner
in March 1996 and he was elected Vice Chairman of the Board of Directors in
November 1997. Mr. Solot is an attorney and has practiced law for 34 years with
an emphasis on franchise, corporate and partnership law and complex litigation.
Mr. Howard O. Thrall was appointed a director of the General Partner
in March 1996. Mr. Thrall had previously served as a Director of the General
Partner from December 1988 to December 1994. Mr. Thrall is a management and
international marketing consultant, having active assignments with First
National Net, Inc., LEP Technologies, Cheong Kang Associates (Korea), Aero
Investment Alliance, Inc. and Western Real Estate Partners, among others. From
September 1993 through July 1996, Mr. Thrall served as Vice President of Sales,
Asian Region, for World Airways, Inc. headquartered at the Washington Dulles
International Airport. From 1984 until August 1993, Mr. Thrall was with the
McDonnell Douglas Corporation, where he concluded as a Regional Vice President,
Commercial Marketing with the Douglas Aircraft Company subsidiary.
Mr. Siim A. Vanaselja was appointed a director of the General Partner
in August 1996. He is the Chief Financial Officer of BCI Telecom Holding Inc.
Mr. Vanaselja joined BCE Inc., Canada's largest telecommunications company, in
February 1994 as Assistant Vice-President, International Taxation. In June 1994,
he was appointed Assistant Vice-President and Director of Taxation, and in
February 1995, Mr. Vanaselja was appointed Vice-President, Taxation. On August
1, 1996, Mr. Vanaselja was appointed the Executive Vice President and Chief
Financial Officer of Bell Canada International Inc., a subsidiary of BCE Inc.
Prior to joining BCE Inc. and since August 1989, Mr. Vanaselja was a partner in
the Toronto office of KPMG Peat Marwick Thorne. Mr. Vanaselja has been a member
of the Institute of Chartered Accountants of Ontario since 1982 and is a member
of the Canadian Tax Foundation, the Tax Executives Institute and the
International Fiscal Association.
Mr. Sanford Zisman was appointed a director of the General Partner in
June 1996. Mr. Zisman is a principal in the law firm of Zisman & Ingraham, P.C.
of Denver, Colorado and he has practiced law for 33 years, specializing in the
areas of tax, business and estate planning and probate administration. Mr.
Zisman was a member of the Board of Directors of Saint Joseph Hospital, the
largest hospital in Colorado, from 1991 to 1997, serving at various times as
Chairman of the Board, Chairman of the Finance Committee and Chairman of the
Strategic Planning Committee. Since 1982, he has also served on the Board of
Directors of Maxim Series Fund, Inc., a subsidiary of Great-West Life Assurance
Company.
Mr. Robert B. Zoellick was appointed a director of the General Partner
in April 1995. Mr. Zoellick is the President and CEO of the Center for Strategic
and International Studies (CSIS), an independent, non-profit policy institution
with a staff of 180 people and a $17 million budget. He was the John M. Olin
Professor at the U.S. Naval Academy for the 1997-1998 term. From 1993 through
1997, he was Executive Vice President at Fannie Mae, a federally chartered and
stockholder-owned corporation that is the largest housing finance investor in
the United States. From August 1992 to January 1993, Mr. Zoellick served as
Deputy Chief of Staff of the White House and Assistant to the President. From
May 1991 to August 1992, Mr. Zoellick served concurrently as the Under Secretary
of State for Economic and Agricultural Affairs and as Counselor of the
Department of State, a post he assumed in March 1989. From 1985 to 1988, Mr.
Zoellick served at the Department of Treasury in a number of capacities,
including Counselor to the Secretary. Mr. Zoellick currently serves on the
boards of Alliance Capital and Said Holdings and the Advisory Council of Enron
Corp.
20
ITEM 11. EXECUTIVE COMPENSATION
--------------------------------
The Partnership has no employees; however, various personnel were
required to operate the systems. Such personnel were employed by the General
Partner and, pursuant to the terms of the limited partnership agreement of the
Partnership, the cost of such employment was 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 February 16, 1999, no person or entity owned more than 5 percent
of the limited partnership interests of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------
Prior to selling the Partnership's Northeast Indiana Systems on June
30, 1998, the General Partner and its affiliates engaged in certain transactions
with the Partnership as contemplated by the limited partnership agreement of the
Partnership. The General Partner believes that the terms of such transactions
were generally as favorable as could be obtained by the Partnership from
unaffiliated parties. This determination has been made by the General Partner in
good faith, but none of the terms were negotiated at arm's-length and there can
be no assurance that the terms of such transactions have been as favorable as
those that could have been obtained by the Partnership from unaffiliated
parties. Following the sale of the Northeast Indiana Systems on June 30, 1998,
the General Partner does not anticipate engaging in such transactions.
Transactions with the General Partner
The General Partner manages the Partnership and until June 30, 1998,
the date of the sale of the Partnership's last remaining cable television
system, the General Partner received a fee for its services equal to 5 percent
of the gross revenues of the Partnership, excluding revenues from the sale of
cable television systems or franchises. The General Partner has not received a
management fee after June 30, 1998.
The Partnership reimbursed the General Partner for certain allocated
overhead and administrative expenses. These expenses represented the salaries
and benefits paid to corporate personnel, rent, data processing services and
other corporate facilities costs. Such personnel provided engineering,
marketing, administrative, accounting, legal and investor relations services to
the Partnership. Such services, and their related costs, were necessary to the
operations of the Partnership and would have been incurred by the Partnership if
it was a stand alone entity. Allocations of personnel costs were based
primarily on actual time spent by employees of the General Partner with respect
to each partnership managed. Remaining expenses were allocated based on the pro
rata relationship of the Partnership's revenues to the total revenues of all
systems owned or managed by the General Partner and certain of its subsidiaries.
Systems owned by the General Partner and all other systems owned by partnerships
for which Jones Intercable, Inc. is the general partner were also allocated a
proportionate share of these expenses. The Partnership will continue to
reimburse the General Partner for actual time spent on Partnership business by
employees of the General Partner until the Partnership is liquidated and
dissolved, but the Partnership will not bear a revenue-based allocation of
overhead and administrative expenses beyond June 30, 1998.
The General Partner from time to time advanced funds to the
Partnership and charged interest on the balance payable. The interest rate
charged approximated the General Partner's weighted average cost of borrowing.
Transactions with Affiliates
Jones International, Ltd. ("International"), a company owned by Glenn
R. Jones, and certain of its subsidiaries have provided various services to the
Partnership, including affiliation agreements for the distribution
21
of programming owned by affiliated companies on cable television systems owned
by the Partnership, as described below.
Until June 30, 1998, the date of the Partnership's sale of the
Northeast Indiana Systems, the Partnership engaged in transactions with the
following affiliates:
Knowledge TV, Inc., a company jointly owned by Mr. Jones, affiliates
of International, the General Partner and BCI Telecom Holdings Inc., a principal
shareholder of the General Partner, operates the television network Knowledge
TV. Knowledge TV provides programming related to computers and technology;
business, careers and finance; health and wellness; and global culture and
languages.
The Great American Country network provided country music video
programming to the Northeast Indiana Systems. This network is owned and operated
by Great American Country, Inc., a subsidiary of Jones International Networks,
Ltd., an affiliate of the General Partner.
Jones Galactic Radio, Inc. is a subsidiary of Jones International
Networks, Ltd., an affiliate of the General Partner. Superaudio, a joint venture
between Jones Galactic Radio, Inc. and an unaffiliated entity, provided audio
programming to the Northeast Indiana Systems.
The Product Information Network Venture (the "PIN Venture") is a
venture among a subsidiary of Jones International Networks, Ltd., an affiliate
of the General Partner, and two unaffiliated cable system operators. The PIN
Venture operates the Product Information Network ("PIN"), which is a 24-hour
network that airs long-form advertising generally known as "infomercials." The
PIN Venture generally makes incentive payments of approximately 60 percent of
its net advertising revenue to the cable systems that carry its programming. The
Partnership's Northeast Indiana Systems carried PIN for all or part of each day.
Revenues received by the Partnership from the PIN Venture relating to the
Northeast Indiana Systems totaled approximately $12,420 for the year ended
December 31, 1998.
The charges to the Partnership for related party transactions were as
follows for the periods indicated:
For the Year Ended December 31,
-------------------------------
1998 1997 1996
---- ---- ----
Management fees $145,978 $276,140 $286,227
Allocation of expenses 181,831 325,192 393,612
Interest expense 17,600 2,796 67,530
Amount of advances outstanding 0 0 0
Highest amount of advances outstanding 0 156,929 111,692
Programming fees:
Knowledge TV, Inc. 6,025 10,870 10,882
Great American Country 5,891 11,313 3,039
Superaudio 5,345 9,775 9,979
22
PART IV.
--------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------
(a) 1. See index to financial statements for a list of financial statements and exhibits thereto
filed as part of this report.
3. The following exhibits are filed herewith:
4.1 Limited Partnership Agreement for Jones Spacelink Income/Growth Fund 1-A, Ltd. (1)
10.1 Asset Purchase Agreement dated December 17, 1997 between Triax Midwest Associates, L.P. and
Jones Spacelink Income/Growth Fund 1-A, Ltd. (2)
27 Financial Data Schedule
__________
(1) Incorporated by reference from the Partnership's Annual Report on Form 10-K for fiscal year
ended 12/31/88.
(2) Incorporated by reference from the Partnership's Annual Report on Form 10-K for fiscal year
ended 12/31/97.
(b) Reports on Form 8-K
-------------------
None.
23
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.
JONES SPACELINK INCOME/
GROWTH FUND 1-A, LTD.
a Colorado limited partnership
By: Jones Intercable, Inc.
By: /s/ Glenn R. Jones
------------------
Glenn R. Jones
Chairman of the Board and Chief
Dated: March 24, 1999 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, 1999 (Principal Executive Officer)
By: /s/ Kevin P. Coyle
------------------
Kevin P. Coyle
Group Vice President/Finance
Dated: March 24, 1999 (Principal Financial Officer)
By: /s/ Larry Kaschinske
--------------------
Larry Kaschinske
Vice President/Controller
Dated: March 24, 1999 (Principal Accounting Officer)
By: /s/ James B. O'Brien
--------------------
James B. O'Brien
Dated: March 24, 1999 President and Director
By: /s/ Robert E. Cole
------------------
Robert E. Cole
Dated: March 24, 1999 Director
By: /s/ William E. Frenzel
----------------------
William E. Frenzel
Dated: March 24, 1999 Director
24
By: /s/ Josef J. Fridman
--------------------
Josef J. Fridman
Dated: March 24, 1999 Director
By:
--------------------
Donald L. Jacobs
Dated: March 24, 1999 Director
By: /s/ Robert Kearney
------------------
Robert Kearney
Dated: March 24, 1999 Director
By: /s/ James J. Krejci
-------------------
James J. Krejci
Dated: March 24, 1999 Director
By: /s/ Raphael M. Solot
--------------------
Raphael M. Solot
Dated: March 24, 1999 Director
By: /s/ Howard O. Thrall
--------------------
Howard O. Thrall
Dated: March 24, 1999 Director
By: /s/ Siim A. Vanaselja
---------------------
Siim A. Vanaselja
Dated: March 24, 1999 Director
By: /s/ Sanford Zisman
------------------
Sanford Zisman
Dated: March 24, 1999 Director
By: /s/ Robert B. Zoellick
----------------------
Robert B. Zoellick
Dated: March 24, 1999 Director
25