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FORM 10-K 405
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, 1994
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
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(State of Organization) (IRS Employer Identification No.)
P.O. Box 3309, Englewood, Colorado 80155-3309 (303) 792-3111
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(Address of principal executive office and Zip Code) (Registrant's telephone no. including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited
Partnership Interests
Indicate by check mark whether the registrants, (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days:
Yes X No
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Aggregate market value of the voting stock held by non-affiliates of the
registrant: N/A
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. X
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DOCUMENTS INCORPORATED BY REFERENCE: None
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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 the 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
75 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
Venture owns the cable television systems serving Palmdale, Lancaster and
Rancho Vista and the military installation of Edwards Airforce Base, all in
California (the "Palmdale/Lancaster System"); Albuquerque, New Mexico (the
"Albuquerque System") and Tampa, Florida (the "Tampa System"). See Item 2.
The Palmdale/Lancaster System, Albuquerque System and Tampa System may
collectively be referred to as the "Systems."
CABLE TELEVISION SERVICES. The Systems offer to their 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 their 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 their 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. In addition,
advertising sales are becoming a significant source of revenues for the
Systems. As a result of the adoption by the FCC of new rules under the Cable
Television Consumer Protection and Competition Act of 1992 (the "1992 Cable
Act"), and several rate regulation orders, the Systems' rate structures for
cable programming services and equipment have been revised. See Regulation and
Legislation. At December 31, 1994, the Systems' monthly basic service rates
ranged from $7.95 to $14.25, monthly basic and
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tier ("basic plus") service rates ranged from $15.00 to $21.77 and monthly
premium services ranged from $3.00 to $10.95 per premium service. Charges for
additional outlets have been eliminated, and charges for remote controls and
converters have been "unbundled" from the programming service rates. In
addition, the Partnership earns revenues from the Systems' pay-per-view
programs and advertising fees. Related charges may include a nonrecurring
installation fee that ranges from $1.99 to $50.00; 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, 1994, of the total fees
received by the Systems, basic service and tier service fees accounted for
approximately 62% of total revenues, premium service fees accounted for
approximately 16% of total revenues, pay-per-view fees were approximately 3% of
total revenues, advertising fees were approximately 7% of total revenues and
the remaining 12% of total revenues came principally from equipment rentals,
installation fees and program guide sales. The Partnership is dependent upon
the timely receipt of service fees to provide for maintenance and replacement
of plant and equipment, current operating expenses and other costs of the
Systems.
The Partnership's business consists of providing cable television services
to a large number of customers, the loss of any one of which would have no
material effect on the Partnership's business. Each of the Systems has 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 General Partner's policy with regard to
past due accounts is basically one of disconnecting service before a past due
account becomes material.
The Partnership does not depend to any material extent on the availability
of raw materials; it carries no significant amounts of inventory and it has no
material backlog of customer orders. The Partnership has no employees because
all properties are managed by employees of the General Partner. The General
Partner has engaged in research and development activities relating to the
provision of new services but the amount of the Partnership's funds expended
for such research and development has never been material.
Compliance with Federal, state and local provisions that have been enacted
or adopted regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment has had no material
effect upon the capital expenditures, earnings or competitive position of the
Partnership.
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.
The Systems' franchises require that franchise fees ranging from 3% of basic
and installation revenues to 5% of gross revenues of the cable system be paid
to the governmental authority that granted the franchise, that certain channels
be dedicated to municipal use, that municipal facilities, hospitals and schools
be provided cable service free of charge and that any new cable plant be
substantially constructed within specific periods. (See Item 2 for a range of
franchise expiration dates of the Systems.)
The responsibility for franchising of cable television systems generally is
left to state and local authorities. There are, however, several provisions in
the Communications Act of 1934, as amended, that govern the terms and
conditions under which cable television systems provide service, including the
standards applicable to cable television operators seeking renewal of a cable
television franchise. In addition, the 1992 Cable Act also made several
procedural changes to the process under which a cable operator seeks to enforce
its renewal rights which could make it easier in some cases for a franchising
authority to deny renewal. Generally, the franchising authority can finally
decide not to renew a franchise only if it finds that the cable operator has
not substantially complied with the material terms of the franchise, has not
provided reasonable service in light of the community's needs, does not have
the financial, legal and technical ability to provide the services being
proposed for the future, or has not presented a reasonable proposal for future
service. A final decision of non-renewal by the franchising
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authority is appealable in court. The General Partner and its affiliates
recently have experienced lengthy negotiations with some franchising
authorities for the granting of franchise renewals and transfers. Some of the
issues involved in recent renewal negotiations include rate reregulation,
customer service standards, cable plant upgrade or replacement and shorter
terms of franchise agreements. The inability of the Partnership to renew a
franchise, or lengthy negotiations or litigation involving the renewal process
could have an adverse impact on the business of the Partnership.
COMPETITION. Cable television systems currently experience competition
from several sources, but two technologies, Multichannel Multipoint
Distribution Service ("MMDS") systems, commonly called wireless cable systems,
and Direct Broadcast Satellite ("DBS") systems, which distribute programming to
home satellite dishes, currently pose the greatest potential threat to the
cable television industry.
MMDS systems will likely focus on providing service to residents of rural
areas that are not served by cable television systems, but providers of
programming via MMDS systems will generally have the potential to compete
directly with cable television systems in urban areas as well, and in some
areas of the country, MMDS systems are now in direct competition with cable
television systems. To date, the Partnership has not lost a significant number
of subscribers, nor a significant amount of revenue, to MMDS operators
competing with its cable television systems.
DBS operators deliver premium channel services and specialized programming
to subscribers by high-powered DBS satellites on a wide-scale basis, and two
major companies began operations in 1994. Subscribers are able to receive DBS
services virtually anywhere in the United States with a rooftop or wall-mounted
antenna. In some instances, DBS systems may serve as a complement to cable
television operations by enabling cable television operators to offer
additional channels of programming without the construction of additional cable
plant. DBS companies use video compression technology to increase the channel
capacity of their satellite systems to provide a wide variety of program
services that are competitive with those of cable television systems.
Cable television systems also compete with broadcast television, private
cable television systems known as Master Antenna Television ("MATV"),
Satellite Master Antenna Television ("SMATV") and Television Receive-Only Earth
Stations ("TVRO"). MATV and SMATV generally serve multi-unit dwellings such as
condominiums, apartment complexes and private residential communities, and
TVROs are satellite receiving antenna dishes that are used by "backyard users."
There is also potential competition from an emerging technology, Local
Multipoint Distribution Service ("LMDS"). When it is authorized for service,
the LMDS, sometimes referred to as cellular television, could have the
capability of delivering approximately 50 channels, or if two systems were
combined 100 channels, of video programming to a subscriber's home, which
capacity could be increased by using video compression technology. The General
Partner believes that there are not any current fully operational LMDS systems.
Although the Systems have not yet encountered competition from a telephone
company entering into the business of providing video services to subscribers,
the Systems could potentially face competition from telephone companies doing
so. A Federal cross-ownership restriction has historically limited entry into
the cable television business by potentially strong competitors such as
telephone companies. This restriction, which is contained in the 1984 Cable
Act, has generally prohibited telephone companies from owning or operating
cable television systems within their own telephone service areas, but several
recent court decisions have eliminated this restriction. In addition, the FCC
is authorizing telephone companies to provide video dialtone service within
their service areas. Legislation is also pending in Congress that would
permit telephone companies to provide video programming thorough separate
subsidiaries. The General Partner cannot predict at this time to what extent
current restrictions will be modified to permit telephone companies to provide
cable television services within their own service areas in competition with
cable television systems. See Regulation and Legislation, Ownership and Market
Structure for a description of the potential participation of the telephone
industry in the delivery of cable television services. Entry into the market
by telephone companies as direct competitors of the Systems could
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adversely impact the profitability of the Systems. If a telephone company were
to become a direct competitor of the Venture in an area served by a Venture
System, the Venture could be at a competitive disadvantage because of the
relative financial strength of a telephone company compared to the Venture.
Such competition could also result in cable television systems providing the
same types of services now provided by the telephone industry.
The FCC has established a new wireless telecommunications service known as
Personal Communications Service ("PCS"). It is envisioned that PCS would
provide portable non-vehicular mobile communications services similar to that
available from cellular telephone companies, but at a lower cost. PCS would be
delivered by placing numerous microcells in a particular area to be covered,
accessible to both residential and business customers. Because of the need to
link the many microcells necessary to deliver this service economically, many
parties are investigating integration of PCS with cable television operations.
Several cable television multiple systems operators and others, including
affiliates of the General Partner, hold or have requested experimental licenses
from the FCC to test PCS technology. The FCC has established spectrum
auctioning procedures for PCS licenses and the licenses are being auctioned in
a series of auction events.
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 Systems currently face no direct competition from other cable
television operators.
COMPETITION FOR SUBSCRIBERS IN THE SYSTEMS. Following is a summary of
current competition from DBS, MMDS, SMATV and TVRO operators in the Systems'
franchise areas:
Albuquerque System There is one MMDS operator who has not as yet launched, but is
believed to be in the position to launch, a 15 channel MMDS
service in the system's service area. There are two SMATV
operators that provide minimal competition. One operator serves
about 2,000 residential and mobile home park units, and the
second serves 3 apartment complexes of approximately 1,000 units.
Albuquerque was a test market for DBS, and approximately 100
customers have been lost to DBS.
Palmdale/Lancaster System There are no MMDS operators in the system's service area. There
are 6 SMATV operators that service 7,000 units and 8 TVRO
operators that provide moderate competition. There are two DBS
operators that are marketing aggressively; however, at this time
they do not provide significant competition.
Tampa System There is one MMDS operator, a few SMATV operators that primarily
serve multi-unit dwellings and several TVRO dealers in the Tampa
System's service area. These operators provide minimal
competition. DBS marketing has begun in the Tampa System's
service area but provides minimal competition at this time.
REGULATION AND LEGISLATION. The cable television industry is regulated
through a combination of the Federal Communications Commission ("FCC"), some
state governments, and most local governments. In addition, the Copyright Act
of 1976 imposes copyright liability on all cable television systems. Cable
television operations are subject to local regulation insofar as systems
operate under franchises granted by local authorities.
Cable Television Consumer Protection and Competition Act of 1992. On
October 5, 1992, Congress enacted the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act"), which
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became effective on December 4, 1992. This legislation has caused significant
changes to the regulatory environment in which the cable television industry
operates. The 1992 Cable Act generally allows for a greater degree of
regulation of the cable television industry. Under the 1992 Cable Act's
definition of effective competition, nearly all cable television systems in the
United States, including those owned and managed by the General Partner, are
subject to rate regulation of basic cable services. In addition, the 1992
Cable Act allows the FCC to regulate rates for non-basic service tiers other
than premium services in response to complaints filed by franchising
authorities and/or cable subscribers. In April 1993, the FCC adopted
regulations governing rates for basic and non-basic services. The FCC's rules
became effective on September 1, 1993.
In compliance with these rules, the General Partner reduced rates charged
for certain regulated services effective September 1, 1993. These reductions
resulted in some decrease in revenues and operating income before depreciation
and amortization; however, the decrease was not as severe as originally
anticipated. The General Partner has undertaken actions to mitigate a portion
of these reductions primarily through (a) new service offerings in some
systems, (b) product re-marketing and re-packaging and (c) marketing efforts
directed at non-subscribers.
On February 22, 1994, however, the FCC adopted several additional rate
orders including an order which revised its earlier-announced regulatory
scheme with respect to rates. The FCC's new regulations generally require rate
reductions, absent a successful cost-of-service showing, of 17% of September
30, 1992 rates, adjusted for inflation, channel modifications, equipment costs,
and increases in programming costs. However, the FCC held rate reductions in
abeyance in certain systems. The new regulations became effective on May 15,
1994, but operators could elect to defer rate reductions to July 14, 1994, so
long as they made no changes in their rates and did not restructure service
offerings between May 15 and July 14.
On February 22, 1994, the FCC also adopted interim cost-of-service
regulations. Rate reductions will not be required where it is successfully
demonstrated that rates for basic and other regulated programming services are
justified and reasonable using cost-of-service standards. The FCC established
an interim industry-wide 11.25% permitted rate of return, and requested
comments on whether this standard and other interim cost-of-service standards
should be made permanent. The FCC also established a presumption that
acquisition costs above a system's book value should be excluded from the rate
base, but the FCC will consider individual showings to rebut this presumption.
The need for special rate relief will also be considered by the FCC if an
operator demonstrates that the rates set by a cost-of-service proceeding would
constitute confiscation of investment, and that, absent a higher rate, the
return necessary to operate and to attract investment could not be maintained.
The FCC will establish a uniform system of accounts for operators that elect
cost-of-service rate regulation, and the FCC has adopted affiliate transaction
regulations. After a rate has been set pursuant to a cost-of-service showing,
rate increases for regulated services will be indexed for inflation, and
operators will also be permitted to increase rates in response to increases in
costs beyond their control, such as taxes and increased programming costs.
After analyzing the effects of the two methods of rate regulation, the
Venture elected to file cost-of-service showings in all of its systems. The
General Partner anticipates no further reduction in revenues or operating
income before depreciation and amortization resulting from the FCC's rate
regulations. At this time, the regulatory authorities have not aproved the
cost-of-service showings and there can be no assurance that the Venture's
cost-of-service showings will prevent further rate reductions until such final
approval is received.
Among other issues addressed by the FCC in its February rate orders was the
treatment of packages of a la carte channels. The FCC in its rate regulations
adopted April 1, 1993, exempted from rate regulation the price of packages of a
la carte channels upon the fulfillment of certain conditions. On November 10,
1994, the FCC reversed its policy regarding rate regulation of packages of a la
carte services. A la carte services that are offered in a package will now be
subject to rate regulation by the FCC, although the FCC indicated that it
cannot envision circumstances in which any price for a collective offering of
premium channels that have traditionally been offered on a per-channel basis
would be found to be unreasonable.
On November 10, 1994, the FCC also announced a revision to its regulations
governing the manner in which cable operators may charge subscribers for new
cable programming services. In addition to the present
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formula for calculating the permissible rate for new services, the FCC
instituted a three-year flat fee mark-up plan for charges relating to new
channels of cable programming services. Commencing on January 1, 1995,
operators may charge for new channels of cable programming services added after
May 14, 1994 at a rate of up to 20 cents per channel, but may not make
adjustments to monthly rates totaling more than $1.20 plus an additional 30
cents for programming license fees per subscriber over the first two years of
the three-year period for these new services. Operators may charge an
additional 20 cents in the third year only for channels added in that year plus
the costs for the programming. Operators electing to use the 20 cent per
channel adjustment may not also take a 7.5% mark-up on programming cost
increases, which is permitted under the FCC's current rate regulations. The
FCC has requested further comment as to whether cable operators should continue
to receive the 7.5% mark-up on increases in license fees on existing
programming services.
The FCC also announced that it will permit operators to offer a "new
product tier" ("NPT"). Operators will be able to price this tier as they elect
so long as, among other conditions, other channels that are subject to rate
regulation are priced in conformity with applicable regulations and operators
do not remove programming services from existing tiers and offer them on the
NPT.
There have been several lawsuits filed by cable operators and programmers
in Federal court challenging various aspects of the 1992 Cable Act, including
provisions relating to mandatory broadcast signal carriage, retransmission
consent, access to cable programming, rate regulations, commercial leased
channels and public access channels. On April 8, 1993, a three-judge Federal
district court panel issued a decision upholding the constitutionality of the
mandatory signal carriage requirements of the 1992 Cable Act. That decision
was appealed directly to the United States Supreme Court. The United States
Supreme Court vacated the lower court decision on June 27, 1994 and remanded
the case to the district court for further development of a factual record.
The Supreme Court's majority determined that the must-carry rules were content
neutral, but that it was not yet proven that the rules were needed to preserve
the economic health of the broadcasting industry. In the interim, the
must-carry rules will remain in place during the pendency of the proceedings in
district court. In 1993, a Federal district court for the District of Columbia
upheld provisions of the 1992 Cable Act concerning rate regulation,
retransmission consent, restrictions on vertically integrated cable television
operators and programmers, mandatory carriage of programming on commercial
leased channels and public, educational and governmental access channels and
the exemption for municipalities from civil damage liability arising out of
local regulation of cable services. The 1992 Cable Act's provisions providing
for multiple ownership limits for cable operators and advance notice of free
previews for certain programming services have been found unconstitutional. In
November 1993, the United States Court of Appeals for the District of Columbia
held that the FCC's regulations implemented pursuant to Section 10 of the 1992
Cable Act, which permit cable operators to ban indecent programming on public,
educational or governmental access channels or leased access channels, were
unconstitutional, but the court has agreed to reconsider its decision. All of
these decisions construing provisions of the 1992 Cable Act and the FCC's
implementing regulations have been or are expected to be appealed.
Ownership and Market Structure. The FCC rules and Federal law generally
prohibit the direct or indirect common ownership, operation, control or
interest in a cable television system, on the one hand, and a local television
broadcast station whose television signal reaches any portion of the community
served by the cable television system, on the other hand. The FCC recently
lifted its ban on the cross-ownership of cable television systems by broadcast
networks. The FCC revised its regulations to permit broadcast networks to
acquire cable television systems serving up to 10% of the homes passed in the
nation, and up to 50% of the homes passed in a local market. Neither the
Partnership nor the General Partner has any direct or indirect ownership,
operation, control or interest in a television broadcast station, or a
telephone company, and they are thus presently unaffected by the
cross-ownership rules.
The Cable Communications Policy Act of 1984 (the "1984 Cable Act") and FCC
regulations generally prohibit the common operation of a cable television
system and a telephone company within the same service area. Until recently, a
provision of a Federal court antitrust consent decree also prohibited the
regional Bell operating companies ("RBOCs") from engaging in cable television
operations. This prohibition was recently removed when the court retaining
jurisdiction over the consent decree ruled that the RBOCs could provide
information services
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over their facilities. This decision permits the RBOCs to acquire or construct
cable television systems outside of their own service areas.
The 1984 Cable Act prohibited local exchange carriers, including the RBOCs,
from providing video programming directly to subscribers within their local
exchange telephone service areas, except in rural areas or by specific waiver
of FCC rules. Several Federal district courts have struck down the 1984 Cable
Act's telco/cross-ownership provision as facially invalid and inconsistent with
the First Amendment. The United States Courts of Appeals for the Fourth and
the Ninth Circuits have upheld the appeals of two of these district court
decisions, and the United States Justice Department is expected to request the
United States Supreme Court to review these two decisions. This Federal
cross-ownership rule is particularly important to the cable industry since
these telephone companies already own certain facilities needed for cable
television operation, such as poles, ducts and associated rights-of-way.
The FCC amended its rules in 1992 to permit local telephone companies to
offer "video dialtone" service for video programmers, including channel
capacity for the carriage of video programming and certain noncommon carrier
activities such as video processing, billing and collection and joint marketing
arrangements. In its video dialtone order, which was part of a comprehensive
proceeding examining whether and under what circumstances telephone companies
should be allowed to provide cable television services, including video
programming to their customers, the FCC concluded that neither the 1984 Cable
Act nor its rules apply to prohibit the interexchange carriers (i.e., long
distance telephone companies such as AT&T) from providing such services to
their customers. Additionally, the FCC also concluded that where a local
exchange carrier ("LEC") makes its facilities available on a common carrier
basis for the provision of video programming to the public, the 1984 Cable Act
does not require the LEC or its programmer customers to obtain a franchise to
provide such service. This aspect of the FCC's video dialtone order was upheld
on appeal by the United States Court of Appeals for the D.C. Circuit. The FCC
recently issued an order reaffirming its initial decision, and this order has
been appealed. Because cable operators are required to bear the costs of
complying with local franchise requirements, including the payment of franchise
fees, the FCC's decision could place cable operators at a competitive
disadvantage vis-a-vis services offered on a common carrier basis over local
telephone company provided facilities. In its Reconsideration Order, the FCC,
among other actions, refused to require telephone companies to justify cost
allocations prior to the construction of video dialtone facilities, and
indicated that it would provide guidance on costs that must be included in
proposed video dialtone tariffs. The FCC also established dual Federal/state
jurisdiction over video dialtone services based on the origination point of the
video dialtone programming service. In a separate proceeding, the FCC has
proposed to increase the numerical limit on the population of areas qualifying
as "rural" and in which LECs can provide cable service without a FCC waiver.
On January 12, 1995, the FCC adopted a Fourth Further Notice of Proposed
Rulemaking in its video dialtone docket. The FCC tentatively concluded that it
should not ban telephone companies from providing their own video programming
over their video dialtone platforms in those areas in which the cable/telephone
cross-ownership rules have been found unconstitutional. The FCC requested
comments on this issue and on further refinements of its video dialtone
regulatory framework concerning, among other issues, telephone programmer
affiliation standards, the establishment of structural safeguards to prevent
cross-subsidization of video dialtone and programming activities, and the
continuation of the FCC's ban prohibiting telephone companies from acquiring
cable systems within their telephone service areas for the provision of video
dialtone services. The FCC will also consider whether a LEC offering video
dialtone service must secure a local franchise if that LEC also engages in the
provision of video programming carried on its video dialtone platform. The FCC
has also proposed to broadly interpret its authority to waive the
cable/telephone cross-ownership ban upon a showing by telephone companies that
they comply with the safeguards which the FCC establishes as a condition of
providing video programming.
A number of bills that would have permitted telephone companies to provide
cable television service within their own service areas were considered during
the last Congress, but none were adopted. These bills would have permitted the
provision of cable television service by telephone companies in their own
service areas conditioned on the establishment of safeguards to prevent
cross-subsidization between telephone and cable television operations and the
provision of telecommunication services by cable television systems. Similar
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legislation is expected to be considered by Congress during its current
session. The outcome of these FCC, legislative or court proceedings and
proposals or the effect of such outcome on cable system operations cannot be
predicted.
ITEM 2. PROPERTIES
The cable television systems owned by the Venture at December 31, 1994 are
described below:
Fund SYSTEM ACQUISITION DATE
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Cable TV Fund 12-B, Ltd., Cable TV Palmdale/Lancaster System April 1986
Fund 12-C, Ltd. and Cable TV Fund Albuquerque System August 1986
12-D, Ltd. own a 9%, 15% and 76% Tampa System December 1986
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, (ii) the number of basic subscribers and pay units and (iii)
the range of franchise expiration dates 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. While the charge for basic plus service may have increased
in 1993 in some cases as a result of the FCC's rate regulations, overall
revenues may have decreased due to the elimination of charges for additional
outlets and certain equipment. 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, 1994, the Venture's Systems operated approximately 4,400 miles of
cable plant, passing approximately 424,000 homes, representing an approximate
55% penetration rate. Figures for numbers of subscribers, miles of cable plant
and homes passed are compiled from the General Partner's records and may be
subject to adjustments.
At December 31,
---------------
PALMDALE/LANCASTER, CALIFORNIA 1994 1993 1992
------------------------------ ---- ---- ----
Monthly basic plus service rate $21.77 $21.77 $20.00
Basic subscribers 59,702 56,372 53,947
Pay units 46,214 39,928 39,793
Franchise expiration dates range from February 1999 to October 2005.
At December 31,
---------------
ALBUQUERQUE, NEW MEXICO 1994 1993 1992
----------------------- ---- ---- ----
Monthly basic plus service rate $21.35 $21.00 $20.00
Basic subscribers 106,835 98,555 92,916
Pay units 58,838 67,462 62,919
Franchise expiration dates range from January 1999 to August 2001.
At December 31,
---------------
TAMPA, FLORIDA 1994 1993 1992
-------------- ---- ---- ----
Monthly basic plus service rate $18.77 $21.63 $19.25
Basic subscribers 61,413 58,145 58,711
Pay units 50,123 47,771 45,419
The Tampa franchise expires in December 1997. In 1990, the City of Tampa
notified the Venture of its belief that the Venture was not in compliance with
certain provisions of the franchise agreement. In September 1994,
9
10
the City of Tampa and the Venture entered into a Second Amendment to Franchise
Agreement providing for modifications to the franchise agreement as full and
satisfactory resolution of the outstanding issues.
PROGRAMMING SERVICES
Programming services provided by the Systems include local affiliates of
the national broadcast networks, local independent broadcast channels, the
traditional satellite services (e.g., American Movie Classics, Arts &
Entertainment, Black Entertainment Network, C-SPAN, The Discovery Channel,
Lifetime, Entertainment Sports Network, Home Shopping Network, Mind Extension
University, Music Television, Nickelodeon, Turner Network Television, The
Nashville Network, Video Hits One, and superstations WOR, WGN and TBS. The
Partnership's Systems also provide a selection, which varies by system, of
premium channel programming (e.g., Cinemax, Encore, Home Box Office, Showtime
and The Movie Channel).
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. As of February 15, 1995, the approximate number of
equity security holders in the Partnership was 18,242.
10
11
Item 6. Selected Financial Data
For the Year Ended December 31,
----------------------------------------------------------------------------
Cable TV Fund 12-D** 1994 1993 1992 1991 1990
- -------------------- ----------- ----------- ------------ ----------- ----------
Revenues $ 92,823,076 $ 89,131,530 $ 83,567,527 $78,049,505 $69,945,109
Depreciation & Amortization 24,658,274 25,651,237 26,764,820 30,793,053 29,972,282
Operating Income (Loss) 441,284 900,949 (1,087,963) (4,930,588) (6,260,721)
Minority Interest in Consolidated Loss 3,149,271 2,833,316 3,640,418 4,360,519 5,248,658
Net Loss (9,726,971) (8,751,100) (11,243,947) (13,468,081) (16,211,227)
Net Loss per Limited
Partnership Unit (40.57) (36.50) (46.90) (56.18) (67.62)
Weighted Average Number of Limited
Partnership Units Outstanding 237,339 237,339 237,339 237,339 237,339
General Partner's Deficit (1,160,525) (1,063,255) (975,744) (863,305) (728,624)
Limited Partners' Capital (Deficit) (12,638,612) (3,008,911) 5,654,678 16,786,188 30,119,586
Total Assets 170,675,914 169,670,552 175,554,620 185,834,366 196,991,456
Debt 180,402,748 167,698,697 160,440,488 156,131,618 151,051,428
General Partner Advances 616,810 188,430 511,646 4,606,840 1,228,418
** The above financial information represents the consolidated operations
of Cable TV Fund 12-BCD Venture, in which Cable TV Fund 12-D has an
approximate 76 percent equity interest.
11
12
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
CABLE TV FUND 12-D
Results of Operations
All of Cable TV Fund 12-D's ("Fund 12-D's") operations are
represented by its approximate 76 percent interest in Cable TV Fund 12-BCD
Venture (the " Venture"). Thus, Management's Discussion and Analysis of the
Venture should be consulted for pertinent comments regarding Partnership
performance.
Financial Condition
Fund 12-D's investment in the Venture has decreased by
$9,726,971 when compared to the December 31, 1993 balance representing a
deficit of $13,799,137. This deficit is due to Fund 12-D'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.
CABLE TV FUND 12-BCD VENTURE
Results of Operations
1994 Compared to 1993
Revenues of Cable TV Fund 12-BCD Venture (the "Venture") increased
$3,691,546, or approximately 4 percent, from $89,131,530 in 1993 to $92,823,076
in 1994. Between December 31, 1993 and 1994, the Venture added 14,878 basic
subscribers, an increase of approximately 7 percent. This increase in basic
subscribers accounted for approximately 37 percent of the increase in revenues.
Increases in advertising sales revenue accounted for approximately 28 percent
of the increase in revenues. Increases in premium service and pay-per-view
revenues accounted for approximately 27 percent of the increase. The increase
in revenues would have been greater but for the reduction in basic rates due to
new basic rate regulations issued by the FCC in May 1993 with which the Venture
complied effective September 1, 1993. No other single factor significantly
affected the increase in revenues.
Operating, general and administrative expenses in the Venture's
systems increased $4,057,270, or approximately 8 percent, from $52,073,984 in
1993 to $56,131,254 in 1994. Operating, general and administrative expense
represented 58 percent and 60 percent of revenue in 1993 and in 1994,
respectively. The increase in operating, general and administrative expense
was due to increases in subscriber related costs, programming fees and
marketing related costs. No other single factor significantly affected the
increase in operating, general and administrative expenses. Management fees
and allocated overhead from Jones Intercable, Inc. increased $1,086,904, or
approximately 10 percent, from $10,505,360 in 1993 to $11,592,264 in 1994 due
to the increase in revenues, upon which such fees and allocations are based,
and an increase in allocated expenses from Jones Intercable, Inc. Depreciation
and amortization expense decreased $992,963, or approximately 4 percent, from
$25,651,237 in 1993 to $24,658,274 in 1994. The decrease is due to the
maturation of the Venture's asset base.
The Venture's operating income decreased $459,665 or approximately 51
percent, from $900,949 in 1993 to $441,284 in 1994. This decrease is the
result of increases in operating, general and administrative expenses and
management fees and allocated overhead from Jones Intercable, Inc. exceeding
the increases in revenue and offset by the decreases in depreciation and
amortization expenses. Operating income before depreciation and amortization
decreased $1,452,628, or approximately 5 percent, from $26,552,186 in 1993 to
$25,099,558 in 1994. This decrease is due to the increase in operating,
general and administrative expenses and management fees and allocated overhead
from Jones Intercable, Inc. exceeding the increase in revenues.
Interest expense increased $1,318,943, or 11 percent, from
$11,989,130 in 1993 to $13,308,073 in 1994 due to higher interest rates and
higher outstanding balances on interest bearing obligations.
12
13
Net loss increased $1,291,826, or approximately 11 percent, from
$11,584,416 in 1993 to $12,876,242 in 1994 due to the factors discussed above.
1993 Compared to 1992
Revenues of the Venture increased $5,564,003, or approximately 7
percent, from $83,567,527 in 1992 to $89,131,530 in 1993. Between December 31,
1992 and 1993, the Venture added 7,498 basic subscribers, an increase of
approximately 4 percent. This increase in basic subscribers accounted for
approximately 32 percent of the increase in revenues. Basic service rate
adjustments were responsible for approximately 38 percent of the increase in
revenues. Increases in advertising sales revenue accounted for approximately
12 percent of the increase in revenues. Increases in pay-per-view revenue
accounted for approximately 14 percent of the increase. The increase in
revenues would have been greater but for the reduction in basic rates due to
the basic rate regulations issued by the FCC in May 1993 with which the Venture
complied effective September 1, 1993. No other single factor significantly
affected the increase in revenues.
Operating, general and administrative expenses in the Venture's
systems increased $3,941,804, or approximately 8 percent, from $48,132,180 in
1992 to $52,073,984 in 1993. Operating, general and administrative expense
represented 58 percent of revenue in 1993 and in 1992. The increase in
operating, general and administrative expense was due to increases in
subscriber related costs, programming fees and marketing related costs. No
other single factor significantly affected the increase in operating, general
and administrative expenses. Management fees and allocated overhead from Jones
Intercable, Inc. increased $746,870, or approximately 8 percent, from
$9,758,490 in 1992 to $10,505,360 in 1993 due to the increase in revenues, upon
which such fees and allocations are based, and an increase in allocated
expenses from Jones Intercable, Inc. Depreciation and amortization expense
decreased $1,113,583, or approximately 4 percent, from $26,764,820 in 1992 to
$25,651,237 in 1993. The decrease was due to the maturation of the Venture's
asset base.
The Venture recorded operating income of $900,949 for 1993 compared
to an operating loss of $1,087,963 for 1992. This change is the result of
increases in revenue and the decreases in depreciation and amortization
expenses exceeding the increases in operating, general and administrative
expenses and management fees and allocated overhead from Jones Intercable, Inc.
Operating income before depreciation and amortization increased $875,329, or
approximately 3 percent, from $25,676,857 in 1992 to $26,552,186 in 1993. This
increase was due to the increase in revenues exceeding the increase in
operating, general and administrative expenses and administrative fees and
allocated overhead from Jones Intercable, Inc.
Interest expense decreased $33,744, or less than 1 percent, from
$12,022,874 in 1992 to $11,989,130 in 1993 due to lower interest rates on
interest bearing obligations, which were offset, in part, by higher balances on
such obligations. The 1992 expense primarily represented the Sunbelt
litigation settlement. The settlement was accrued by the Venture in 1992 and
paid by the Venture in March 1993.
Net loss decreased $3,299,949, or approximately 22 percent, from
$14,884,365 in 1992 to $11,584,416 in 1993 due to the factors discussed above.
These losses are expected to continue in the future.
Financial Condition
Capital expenditures for the Venture totaled approximately
$21,000,000 during 1994. Service drops to homes accounted for approximately 30
percent of the capital expenditures. New plant construction accounted for
approximately 19 percent of the capital expenditures. Approximately 7 percent
of capital expenditures was for converters. The upgrade of the Venture's
Albuquerque, New Mexico system accounted for approximately 5 percent of capital
expenditures. The remaining expenditures related to various system
enhancements. These capital expenditures were funded primarily from cash
generated from operations and borrowings under the Venture's credit facility.
Expected capital expenditures for 1995 are approximately $20,000,000. Service
drops to homes are anticipated to account for approximately 32 percent.
Approximately 23 percent of budgeted capital expenditures is for new plant
construction. The remainder of the expenditures are for various system
enhancements in all of the Venture's systems. Funding for 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 has sufficient
sources of capital available in its ability to generate cash from operations
and to borrow under its credit facility to meet its presently anticipated
needs.
The Venture's debt arrangements consist of $93,000,000 of Senior
Notes placed with a group of institutional lenders and a revolving credit
agreement with a group of commercial bank lenders.
13
14
The Senior Notes have a fixed interest rate of 8.64 percent and a
final maturity date of March 31, 2000. The Senior Notes call for interest only
payments for the first four years, with interest and accelerating amortization
of principal payments for the next four years. Interest is payable
semi-annually. The Senior Notes carry a "make-whole" premium, which is a
prepayment penalty, if the notes are prepaid prior to maturity. The make-whole
premium protects the lenders in the event that prepaid funds are reinvested at
a rate below 8.64 percent, and is calculated per the note agreement.
The revolving credit period on the Venture's $90,000,000 credit
facility expired on March 31, 1994. The then-outstanding balance of $84,300,000
converted to a term loan payable in quarterly installments which began June 30,
1994. The Venture repaid $758,700 of this loan in the second quarter. In
September 1994, however, the General Partner completed negotiations to extend
the revolving credit period and revised the commitment to $87,000,000. The
balance outstanding at December 31, 1994 was $86,541,300. Under the new terms
of this credit facility, the loan will convert to a term loan on March 31, 1996
with quarterly installments beginning June 30, 1996 and a final payment due
March 31, 2000. Interest is at the Venture's option of LIBOR plus 1.25 percent
to 1.75 percent, the CD rate plus 1.375 percent to 1.875 percent or the Base
Rate plus 0 percent to .50 percent. The effective interest rates on amounts
outstanding on the Venture's term credit facility as of December 31, 1994 and
1993 were 7.26 percent and 5.08 percent, respectively.
Both lending facilities are equal in standing with the other, and
both are equally secured by the assets of the Venture.
Regulation and Legislation
On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act") which became
effective on December 4, 1992. The 1992 Cable Act generally allows for a
greater degree of regulation in the cable television industry. In April 1993,
the FCC adopted regulations governing rates for basic and non-basic services.
These regulations became effective on September 1, 1993. Such regulations
caused reductions in rates for certain regulated services. On February 22,
1994, the FCC adopted several additional rate orders including an order which
revised its earlier-announced regulatory scheme with respect to rates. The
Venture has filed cost-of-service showings for its systems and thus anticipates
no further reductions in rates. The cost-of-service showings have not yet
received final approval from franchising authorities, however, and there can be
no assurance that the Partnership's cost-of-service showing will prevent further
rate reductions until such final approval is received. See Item 1 for further
discussion of the provisions of the 1992 Cable Act and the FCC regulations
promulgated thereunder.
14
15
Item 8. Financial Statements
CABLE TV FUND 12-D
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1994 AND 1993
INDEX
Page
--------
Report of Independent Public Accountants 16
Balance Sheets 17
Statements of Operations 19
Statements of Partners' Capital (Deficit) 20
Statements of Cash Flows 21
Notes to Financial Statements 22
15
16
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Cable TV Fund 12-D:
We have audited the accompanying consolidated balance sheets of
CABLE TV FUND 12-D (a Colorado limited partnership) and subsidiary as of
December 31, 1994 and 1993, and the related consolidated statements of
operations, partners' capital (deficit) and cash flows for each of the three
years in the period ended December 31, 1994. 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 and subsidiary as of December 31, 1994 and 1993, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 8, 1995.
16
17
CABLE TV FUND 12-D
(A Limited Partnership)
CONSOLIDATED BALANCE SHEETS
December 31,
----------------------------------------
ASSETS 1994 1993
------ ---------------- ---------------
CASH AND CASH EQUIVALENTS $ 4,391,602 $ 1,962,657
RECEIVABLES:
Trade receivables, less allowance for doubtful receivables of $339,139
and $265,542 at December 31, 1994 and 1993, respectively 3,807,271 2,954,487
Affiliated entity 159,137 159,137
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 272,998,315 251,810,225
Less-accumulated depreciation (135,711,082) (117,498,465)
------------ ------------
137,287,233 134,311,760
Franchise costs, net of accumulated amortization of $48,828,848 and
$43,008,846 at December 31, 1994 and 1993, respectively 18,219,795 23,539,797
Subscriber lists, net of accumulated amortization of $32,743,306 and
$32,420,504 at December 31, 1994 and 1993, respectively - 322,802
Cost in excess of interests in net assets purchased, net of accumulated
amortization of $1,280,756 and $1,128,284 at December 31, 1994
and 1993, respectively 4,775,672 4,928,144
------------ ------------
Total investment in cable television properties 160,282,700 163,102,503
DEPOSITS, PREPAID EXPENSES AND DEFERRED
CHARGES 2,035,204 1,491,768
------------ ------------
Total assets $170,675,914 $169,670,552
============ ============
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
17
18
CABLE TV FUND 12-D
(A Limited Partnership)
CONSOLIDATED BALANCE SHEETS
December 31,
----------------------------------------
LIABILITIES AND PARTNERS' DEFICIT 1994 1993
--------------------------------- ---------------- ----------------
LIABILITIES:
Debt $ 180,402,748 $ 167,698,697
Accounts payable-
Trade 491,846 830,408
General Partner 616,810 188,430
Accrued liabilities 7,125,482 6,003,390
Subscriber prepayments 644,779 679,136
-------------- -------------
Total liabilities 189,281,665 175,400,061
-------------- -------------
COMMITMENTS AND CONTINGENCIES (Note 7)
MINORITY INTEREST IN JOINT VENTURE (4,806,614) (1,657,343)
-------------- -------------
PARTNERS' DEFICIT:
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (1,161,525) (1,064,255)
-------------- -------------
(1,160,525) (1,063,255)
-------------- -------------
Limited Partners-
Net contributed capital (237,339 units outstanding
at December 31, 1994 and 1993) 102,198,175 102,198,175
Accumulated deficit (114,836,787) (105,207,086)
-------------- -------------
(12,638,612) (3,008,911)
-------------- -------------
Total liabilities and partners' deficit $ 170,675,914 $ 169,670,552
============= =============
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
18
19
CABLE TV FUND 12-D
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
---------------------------------------------------------
1994 1993 1992
------------- -------------- --------------
REVENUES $ 92,823,076 $ 89,131,530 $ 83,567,527
COSTS AND EXPENSES:
Operating, general and administrative 56,131,254 52,073,984 48,132,180
Management fees and allocated overhead from
Jones Intercable, Inc. 11,592,264 10,505,360 9,758,490
Depreciation and amortization 24,658,274 25,651,237 26,764,820
------------ ------------- -----------
OPERATING INCOME (LOSS) 441,284 900,949 (1,087,963)
------------ ------------- -----------
OTHER INCOME (EXPENSE):
Interest expense (13,308,073) (11,989,130) (12,022,874)
Gain on sale of assets - - 935,305
Other, net (9,453) (496,235) (2,708,833)
------------ ------------- -----------
Total other income (expense), net (13,317,526) (12,485,365) (13,796,402)
------------ ------------- -----------
CONSOLIDATED LOSS (12,876,242) (11,584,416) (14,884,365)
MINORITY INTEREST IN CONSOLIDATED
LOSS 3,149,271 2,833,316 3,640,418
------------ ------------- -----------
NET LOSS $ (9,726,971) $ (8,751,100) $(11,243,947)
============ ============= ============
ALLOCATION OF NET LOSS:
General Partner $ (97,270) $ (87,511) $ (112,439)
============ ============= ============
Limited Partners $ (9,629,701) $ (8,663,589) $(11,131,508)
============ ============= ============
NET LOSS PER LIMITED PARTNERSHIP UNIT $ (40.57) $ (36.50) $ (46.90)
============ ============= ============
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.
19
20
CABLE TV FUND 12-D
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
Year Ended December 31,
----------------------------------------------------------
1994 1993 1992
--------------- ---------------- --------------
GENERAL PARTNER:
Balance, beginning of year $ (1,063,255) $ (975,744) $ (863,305)
Net loss for year (97,270) (87,511) (112,439)
------------ ------------ ------------
Balance, end of year $ (1,160,525) $(1,063,255) $ (975,744)
============ =========== ============
LIMITED PARTNERS:
Balance, beginning of year $ (3,008,911) $ 5,654,678 $16,786,186
Net loss for year (9,629,701) (8,663,589) (11,131,508)
------------ ------------ ------------
Balance, end of year $(12,638,612) $(3,008,911) $ 5,654,678
============ =========== ============
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
20
21
CABLE TV FUND 12-D
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
---------------------------------------------------------
1994 1993 1992
--------------- --------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (9,726,971) $(8,751,100) $ (11,243,947)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 24,658,274 25,651,237 26,764,820
Gain on sale of cable television system - - (935,305)
Minority interest in consolidated loss (3,149,271) (2,833,316) (3,640,418)
Amortization of interest rate protection contract - - 263,574
Amortization of loan fees 151,380 121,062 90,797
Increase in trade receivables (852,784) (147,286) (457,715)
Increase in deposits, prepaid expenses and
deferred charges (694,816) (434,700) (2,155,866)
Increase (decrease) in trade accounts payable,
accrued liabilities and subscriber prepayments 749,173 (1,234,645) 4,390,946
Increase (decrease) in amount due General Partner 428,380 (323,216) (4,095,194)
------------ ------------ -------------
Net cash provided by operating activities 11,563,365 12,048,036 8,981,692
----------- ----------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (21,338,471) (18,711,639) (15,777,221)
Proceeds from the sale of cable television system - - 2,620,000
Franchise settlement (500,000) - -
------------- ---------------- -----------------
Net cash used in investing activities (21,838,471) (18,711,639) (13,157,221)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 16,268,610 11,954,437 164,830,973
Repayment of debt (3,564,559) (4,696,228) (160,522,104)
----------- ------------ ------------
Net cash provided by financing activities 12,704,051 7,258,209 4,308,869
----------- ------------ --------------
Increase in cash and cash equivalents 2,428,945 594,606 133,340
Cash and cash equivalents, beginning of year 1,962,657 1,368,051 1,234,711
----------- ------------ --------------
Cash and cash equivalents, end of year $ 4,391,602 $ 1,962,657 $ 1,368,051
============ ============ ==============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 12,450,869 $ 12,141,838 $ 9,805,956
=========== =========== ==============
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
21
22
CABLE TV FUND 12-D
(A Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND PARTNERS' INTERESTS
Formation and Business
Cable TV Fund 12-D ("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., 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' capital (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 Acquisitions and Sales
On March 17, 1986, Funds 12-B, 12-C and 12-D formed Cable TV
Fund 12-BCD Venture (the "Venture"). The Venture was formed for the purpose of
acquiring certain cable television systems. The Venture owns and operates the
cable television systems serving certain areas in and around Albuquerque, New
Mexico; Palmdale, California; and Tampa, Florida.
On September 20, 1991, the Venture entered into a purchase and
sale agreement with an unaffiliated party to sell the cable television system
serving the area in and around California City, California for $2,620,000.
Closing on this transaction occurred on April 1, 1992. The proceeds were used
to repay a portion of the amounts outstanding under the Venture's credit
facility.
The Venture's acquisitions were accounted for as purchases with
the individual purchase prices allocated to tangible and intangible assets
based upon an independent appraisal. The method of allocation of purchase
price was as follows: first, to the fair value of the net tangible assets
acquired; second, to the value of subscriber lists; third, to franchise costs;
and fourth, to cost in excess of interests in net assets purchased. Brokerage
fees paid to an affiliate of the General Partner and other system acquisition
costs were capitalized and included in the cost of intangible assets.
22
23
(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.
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
Replacements, renewals and improvements are capitalized and
maintenance and repairs are charged to expense as incurred.
Intangible Assets
Costs assigned to franchises and cost in excess of interests in
net assets purchased are amortized using the straight-line method over the
following remaining estimated useful lives:
Franchise costs 2 - 10 years
Costs in excess of interests in
net assets purchased 31 years
Revenue Recognition
Subscriber prepayments are initially deferred and
recognized as revenue when earned.
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 1994 presentation.
(3) TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
Brokerage Fees
The Jones Group, Ltd., an affiliate of the General Partner,
performs brokerage services for the Venture in connection with Venture
acquisitions and sales. For brokering two acquisitions in the Tampa system for
the Venture, The Jones Group, Ltd. was paid fees totaling $13,120, or 4 percent
of the transaction prices, during 1992. Additionally, The Jones Group, Ltd.
received $65,500, or 2.5 percent of the transaction price, during 1992 for
brokering a sale in the Palmdale system. There were no brokerage fees paid
during the years ended December 31, 1994 and 1993.
23
24
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
$4,641,154, $4,456,577 and $4,178,376 during 1994, 1993 and 1992, 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 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 entity managed. Remaining overhead costs are allocated based on total
revenues and/or assets managed for the partnership. Effective December 1,
1993, the allocation method was changed to be based only on revenue, which the
General Partner believes provides a more accurate method of allocation. 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 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 $6,951,110, $6,048,783 and $5,580,114 in 1994, 1993
and 1992, respectively.
The Venture was charged interest during 1994 at an average
interest rate of 10 percent on the amounts due the General Partner, which
approximated the General Partner's weighted average cost of borrowing. Total
interest charged the Venture by the General Partner was $33,627, $15,477 and
$126,073 in 1994, 1993 and 1992, respectively.
Payments to/from Affiliates for Programming Services
The Venture receives programming from Superaudio, The Mind
Extension University and Jones Computer Network, affiliates of the General
Partner. Payments to Superaudio totaled $135,346, $134,179 and $132,091 in
1994, 1993 and 1992, respectively. Payments to The Mind Extension University
totaled $124,043, $79,002 and $76,676, in 1994, 1993 and 1992, respectively.
Payments to Jones Computer Network, which initiated service in 1994, totaled
$71,961.
The Venture receives a commission from Product Information
Network, an affiliate of Intercable, based on a percentage of advertising sales
and number of subscribers. Product Information Network, which initiated
service in 1994, paid commissions to the Venture totalling $81,592.
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of December 31, 1994 and 1993,
consisted of the following:
December 31,
-------------------------------
1994 1993
-------------- --------------
Cable distribution system $ 248,337,681 $230,055,817
Equipment and tools 7,721,861 6,943,636
Office furniture and equipment 3,014,125 2,490,235
Buildings 7,695,925 6,405,512
Vehicles 5,277,753 4,963,768
Land 950,970 951,257
-------------- --------------
272,998,315 251,810,225
Less-accumulated depreciation (135,711,082) (117,498,465)
-------------- --------------
$ 137,287,233 $ 134,311,760
============== ==============
24
25
(5) DEBT
Debt consists of the following:
December 31,
------------------------------------
1994 1993
------------ -------------
Lending institutions-
Revolving credit and term loan $ 86,541,300 $ 73,800,000
Senior secured notes 93,000,000 93,000,000
Capital lease obligations 861,448 898,697
------------ -------------
$180,402,748 $167,698,697
============ ============
The Venture's debt arrangements consist of $93,000,000 of Senior
Notes placed with a group of institutional lenders and a revolving credit
agreement with a group of commercial bank lenders.
The Senior Notes have a fixed interest rate of 8.64 percent and
a final maturity date of March 31, 2000. The Senior Notes call for interest
only payments for the first four years, with interest and accelerating
amortization of principal payments for the next four years. Interest is
payable semi-annually. The Senior Notes carry a "make-whole" premium, which is
a prepayment penalty, if the notes are prepaid prior to maturity. The
make-whole premium protects the lenders in the event that prepaid funds are
reinvested at a rate below 8.64 percent, and is calculated per the note
agreement.
The revolving credit period on the Venture's $90,000,000 credit
facility expired on March 31, 1994. The then-outstanding balance of
$84,300,000 converted to a term loan payable in quarterly installments which
began June 30, 1994. The Venture repaid $758,700 of this loan in the second
quarter. In September 1994, however, the General Partner completed
negotiations to extend the revolving credit period and revised the commitment
to $87,000,000. The balance outstanding at December 31, 1994 was $86,541,300.
Under the new terms of this credit facility, the loan will convert to a term
loan on March 31, 1996 with quarterly installments beginning June 30, 1996 and
a final payment due March 31, 2000. Interest is at the Venture's option of
LIBOR plus 1.25 percent to 1.75 percent, the CD rate plus 1.375 percent to
1.875 percent or the Base Rate plus 0 percent to .50 percent. The effective
interest rates on amounts outstanding on the Venture's term credit facility as
of December 31, 1994 and 1993 were 7.26 percent and 5.08 percent, respectively.
Both lending facilities are equal in standing with the other, and
both are equally secured by the assets of the Venture.
During 1992 and 1994, the Venture incurred costs associated with
renegotiating its debt arrangements. These fees were capitalized and are being
amortized using the straight-line method over the life of the debt agreements.
During 1988, the Venture entered into an interest rate cap
agreement covering outstanding debt obligations of an additional $25,000,000.
The Venture paid a fee of $957,500. The agreement protects the Venture from
interest rates that exceed 10 percent for five years from the date of the
agreement. The fee was charged to interest expense over the life of this
agreement using the straight-line method.
Installments due on debt principal for each of the five years in
the period ending December 31, 1999 and thereafter, respectively, are:
$258,434, $14,247,151, $18,716,325, $25,176,742, $31,723,304 and $90,280,792,
respectively.
(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.
25
26
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 the Fund 12-D's qualification as
such, or in changes with respect to the 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
On October 5, 1992, Congress enacted the Cable Television
Consumer Protection and Competition Act of 1992 (the "1992 Cable Act") which
became effective on December 4, 1992. The 1992 Cable Act generally allows for
a greater degree of regulation in the cable television industry. In April
1993, the FCC adopted regulations governing rates for basic and non-basic
services. These regulations became effective on September 1, 1993. Such
regulations caused reductions in rates for certain regulated services. On
February 22, 1994, the FCC adopted several additional rate orders including an
order which revised its earlier-announced regulatory scheme with respect to
rates. The Venture has filed cost-of-service showings in its systems and
anticipates no further reductions in rates. The cost-of-service showings have
not received final approval from franchising authorities.
Office and other facilities are rented under various long-term
lease arrangements. Rent paid under such lease arrangements totaled $345,531,
$454,229 and $450,295, respectively, for the years ended December 31, 1994,
1993 and 1992. Minimum commitments under operating leases for the five years
in the period ending December 31, 1999 and thereafter are as follows:
1995 $ 475,957
1996 463,812
1997 461,839
1998 464,903
1999 341,973
Thereafter 1,585,751
-----------
$ 3,794,235
===========
(8) SUPPLEMENTARY PROFIT AND LOSS INFORMATION
Supplementary profit and loss information is presented below:
Year Ended December 31,
-------------------------------------------------
1994 1993 1992
---------- ----------- ----------
Maintenance and repairs $ 1,214,978 $ 1,119,086 $ 1,146,319
=========== ============ ===========
Taxes, other than income
and payroll taxes $ 1,380,350 $ 1,470,476 $ 1,369,852
=========== ============ ===========
Advertising $ 1,275,772 $ 1,022,289 $ 1,090,075
=========== ============ ===========
Depreciation of property,
plant and equipment $18,362,998 $18,772,872 $18,570,055
=========== ============ ===========
Amortization of intangible
assets $ 6,295,276 $ 6,878,365 $ 8,194,765
=========== ============ ===========
26
27
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.
Name Age Positions with the General Partner
---- --- ----------------------------------
Glenn R. Jones 65 Chairman of the Board and Chief Executive Officer
Derek H. Burney 55 Vice Chairman of the Board
James B. O'Brien 45 President, Chief Operating Officer and Director
Ruth E. Warren 45 Group Vice President/Operations
Kevin P. Coyle 43 Group Vice President/Finance
Christopher J. Bowick 40 Group Vice President/Technology
Timothy J. Burke 44 Group Vice President/Taxation/Administration
Raymond L. Vigil 48 Group Vice President/Human Resources and Director
Cynthia A. Winning 43 Group Vice President/Marketing
Elizabeth M. Steele 43 Vice President/General Counsel/Secretary
Larry W. Kaschinske 35 Controller
James J. Krejci 53 Director
Christine Jones Marocco 39 Director
Daniel E. Somers 47 Director
Robert S. Zinn 58 Director
David K. Zonker 41 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 was elected a
member of the Executive Committee of the Board of Directors in April 1985. 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 past and present member of the Board of
Directors of the National Cable Television Association, and is a former member
of its Executive Committee. Mr. Jones is a past director and member of the
Executive Committee of C-Span. 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 Chairman's Award from the
Investment Partnership Association, which is an association of sponsors of
public syndications; the cable television industry's Public Affairs Association
President's Award in 1990, the Donald G. McGannon award for the advancement of
minorities and women in cable; 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; and the Women in Cable Accolade in 1990 in
recognition of support of this organization. Mr. Jones is also a founding
member of the James Madison Council of the Library of Congress and is on the
Board of Governors of the American Society of Training and Development.
Mr. Derek H. Burney was appointed a Director of the General Partner in
December 1994 and Vice Chairman of the Board of Directors in January 1995. He
is also a member of the Executive Committee of the Board of Directors. 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
27
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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 chairman of Bell Cablemedia plc. He is a
director of Mercury Communications Limited, Videotron Holdings plc, Tele-Direct
(Publications) Inc., Teleglobe Inc., Bimcor Inc., Maritime Telegraph and
Telephone Company, Limited, Moore Corporation Limited and Northbridge
Programming Inc.
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 also President and a Director of Jones
Cable Group, Ltd., Jones Global Funds, Inc. and Jones Global Management, Inc.,
all affiliates of 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 a director of the Cable Television Administration and Marketing
Association and as a director of the Walter Kaitz Foundation, a foundation that
places people of any ethnic minority group 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. Timothy J. Burke joined the General Partner in August 1982 as corporate
tax manager, was elected Vice President/Taxation in November 1986 and Group
Vice President/Taxation/Administration in October 1990.
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., 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.
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29
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 and named Controller in August 1994.
Mr. James J. Krejci is currently President of the International Division of
International Gaming Technology International headquartered in Reno, Nevada.
Prior to joining IGT in May 1994, Mr. Krejci was Group Vice President of Jones
International, Ltd. and a Group Vice President of the General Partner. Prior
to May 1994, he also served as Group Vice President of Jones Futurex, Inc., an
affiliate of the General Partner engaged in manufacturing and marketing data
encryption devices, Jones Interactive, Inc., a subsidiary of Jones
International, Ltd. providing computer data and billing processing facilities
and Jones Lightwave, Ltd., a company owned by Jones International, Ltd. and Mr.
Jones, which is engaged in the provision of telecommunications services. Mr.
Krejci has been a Director of the General Partner since August 1987.
Ms. Christine Jones Marocco was appointed a Director of the General Partner
in December 1994. She is the daughter of Glenn R. Jones. Ms. Marocco is also
a director of Jones International, Ltd.
Mr. Daniel E. Somers was appointed a Director of the General Partner in
December 1994 and also serves on the General Partner's Audit Committee. From
January 1992 to January 1995, Mr. Somers worked as Senior Vice President and
Chief Financial Officer of Bell Canada International Inc. and was appointed
Executive Vice President and Chief Financial Officer on February 1, 1995. He
is also a Director of certain of its affiliates. Prior to joining Bell Canada
International Inc. and since January 1989, Mr. Somers was the President and
Chief Executive Officer of Radio Atlantic Holdings Limited. Mr. Somers is a
member of the North American Society of Corporate Planning, the Financial
Executives Institution and the Financial Analysts Federation.
Mr. Robert S. Zinn was appointed a Director of the General Partner in
December 1994. Mr. Zinn joined the General Partner in January 1991 and is a
member of its Legal Department. He is also Vice President/Legal Affairs of
Jones International, Ltd. Prior to joining the General Partner, Mr. Zinn was
in private law practice in Denver, Colorado for over 25 years.
Mr. David K. Zonker was appointed a Director of the General Partner in
December 1994. Mr. Zonker has been the President of Jones International
Securities, Ltd., a subsidiary of Jones International, Ltd. since January 1984
and he has been its Chief Executive Officer since January 1988. From October
1980 until joining Jones International Securities, Ltd. in January 1984, Mr.
Zonker was employed by the General Partner. Mr. Zonker is a member of the
Board of Directors of various affiliates of the General Partner, including
Jones International Securities, Ltd. Mr. Zonker is licensed by the National
Association of Securities Dealers, Inc. and he is a past chairman of the
Investment Program Association, a trade organization based in Washington, D.C.
that promotes direct investments. He is a member of the Board of Trustees of
Graceland College, Lamoni, Iowa; the International Association of Financial
Planners and the American and Colorado Institutes of Certified Public
Accountants.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no employees; however, various personnel are required
to operate the cable television systems owned by the Partnership. 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.
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30
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
No person or entity owns more than 5 percent of the limited partnership
interests of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The General Partner and its affiliates engage in certain transactions with
the Partnership as contemplated by the limited partnership agreement of the
Partnership. The General Partner believes that the terms of such transactions
are generally as favorable as could be obtained by the Partnership from
unaffiliated parties. This determination has been made by the General Partner
in good faith, but none of the terms were or will be negotiated at
arm's-length and there can be no assurance that the terms of such transactions
have been or will be as favorable as those that could have been obtained by the
Partnership from unaffiliated parties.
The General Partner charges the Partnership a management fee, and the
Partnership reimburses the General Partner for certain allocated overhead and
administrative expenses in accordance with the terms of the limited partnership
agreement of the Partnership. These expenses consist primarily of salaries and
benefits paid to corporate personnel, rent, data processing services and other
facilities costs. Such personnel provide engineering, marketing,
administrative, accounting, legal and investor relations services to the
Partnership. Allocations of personnel costs are based primarily on actual time
spent by employees of the General Partner with respect to the partnership
managed. Remaining overhead costs are allocated based on revenues and/or the
costs of assets managed for the Partnership. 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 from the Partnership. The interest rate charged the Partnership
approximates the General Partner's weighted average cost of borrowing.
From time to time, The Jones Group, Ltd., an affiliate of the General
Partner, performs brokerage services for the Venture in connection with Venture
acquisitions and sales from or to unaffiliated entities.
The Systems receive stereo audio programming from Superaudio, a joint
venture owned 50% by an affiliate of the General Partner and 50% by an
unaffiliated party, educational video programming from Mind Extension
University, Inc., an affiliate of the General Partner, and computer video
programming from Jones Computer Network, Ltd., an affiliate of the General
Partner, for fees based upon the number of subscribers receiving the
programming.
Product Information Network ("PIN"), an affiliate of the General Partner,
provides advertising time for third parties on the Systems. In consideration,
the revenues generated from the third parties are shared two-thirds and
one-third between PIN and the Venture. During the year ended December 31,
1994, the Venture received revenues from PIN of $81,592.
The activities of Fund 12-C and Fund 12-D are limited to their equity
ownership in the Venture. See the following related party disclosure for the
Venture. The charges to the Venture for related party transactions are as
follows for the periods indicated:
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31
At December 31,
-----------------------------------------------------
Cable TV Fund 12-BCD 1994 1993 1992
-------------------- ----------- ---------- ----------
Management fees $4,641,154 $4,456,577 $4,178,376
Brokerage fees -0- -0- 78,620
Allocation of expenses 6,951,110 6,048,783 5,580,114
Interest expense 33,627 15,477 126,073
Amount of notes and advances outstanding 616,810 188,430 511,646
Highest amount of notes and advances outstanding 929,508 511,646 5,660,955
Programming fees:
Superaudio 135,346 134,179 132,091
Mind Extension University 124,043 79,002 76,676
Jones Computer Network 71,961 -0- -0-
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32
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.
2. 12-BCD Venture
Schedule V - Property, Plant and Equipment
Schedule VI - Accumulated Depreciation of Property, Plant and Equipment
3. The following exhibits are filed herewith.
4.1 Limited Partnership Agreements for Cable TV Funds 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).
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).
(3)
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). (3)
10.1.4 Copy of Los Angeles County Code regarding cable tv system franchises (Fund 12-BCD).
(4)
10.1.5 Copy of Ordinance 90-0118F dated 10/29/90 granting a cable television franchise to
Fund 12-BCD (Fund 12-BCD). (4)
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). (4)
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).
(4)
10.1.9 Copy of a franchise and related documents thereto granting a community antenna
television system franchise for the City of Tampa, Florida (Fund 12-BCD). (1)
10.1.10 Resolution No. 1153 dated 10/2/86 authorizing consent to transfer of the Tampa
franchise and amendment to the franchise agreement (Fund 12-BCD). (4)
10.1.11 Amendment to Tampa franchise agreement dated 10/6/86 (Fund 12-BCD). (4)
32
33
10.1.12 Tampa franchise transfer, acceptance and consent to transfer dated 10/6/86 (Fund
12-BCD). (4)
10.1.13 Second Amendment to Tampa Franchise Agreement dated September 1, 1994 (Fund 12-
BCD).
10.1.14 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).
(3)
10.1.15 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).
(3)
10.1.16 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).
(3)
10.1.17 Resolution No. 12-14-87 dated 12/14/87 authorizing the assignment of the franchise
to Fund 12-BCD. (4)
10.1.18 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). (3)
10.1.19 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).
(3)
10.1.20 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). (4)
10.1.21 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). (3)
10.1.22 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).
(3)
10.1.23 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).
(3)
10.1.24 Resolution No. 88-23 dated 2/14/88 authorizing assignment of the franchise to Fund
12-BCD. (4)
10.2.1 Credit Agreement dated as of March 31, 1992 among Fund 12-BCD Venture and
Corestates Bank, N.A., individually and as agent for various lenders. (4)
33
34
10.2.2 Amendment No. 1 dated September 30, 1994 to Credit Agreement dated March 31, 1992
among Fund 12-BCD Venture and Corestates Bank, N.A., individually and as agent for
various lenders.
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. (5)
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). (6)
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, 1986 (Commission File Nos. 0-13193, 0-13807, 0-13964 and 0-14206).
(4) 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).
(5) 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).
(6) 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).
(b) Reports on Form 8-K.
None.
34
35
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-C, LTD.,
a Colorado limited partnership
By: Jones Intercable, Inc.
By: /s/ Glenn R. Jones
---------------------------
Glenn R. Jones
Chairman of the Board and Chief
Executive Officer
Dated: March 13, 1995
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 13, 1995 (Principal Executive Officer)
By: /s/ Kevin P. Coyle
---------------------------
Kevin P. Coyle
Group Vice President/Finance
Dated: March 13, 1995 (Principal Financial Officer)
By: /s/ Larry Kaschinske
---------------------------
Larry Kaschinske
Controller
Dated: March 13, 1995 (Principal Accounting Officer)
By: /s/ James B. O'Brien
---------------------------
James B. O'Brien
Dated: March 13, 1995 President and Director
By: /s/ Raymond L. Vigil
---------------------------
Raymond L. Vigil
Dated: March 13, 1995 Group Vice President and Director
By: /s/ Robert S. Zinn
---------------------------
Robert S. Zinn
Dated: March 13, 1995 Director
35
36
By: /s/ David K. Zonker
-----------------------
David K. Zonker
Dated: March 13, 1995 Director
By:
-----------------------
Derek H. Burney
Dated: Director
By:
-----------------------
James J. Krejci
Dated: Director
By:
-----------------------
Christine Jones Marocco
Dated: Director
By:
-----------------------
Daniel E. Somers
Dated: Director
36
37
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
(a)1. See index to financial statements for list of financial statements and exhibits
thereto filed as a part of this report.
2. 12-BCD Venture
Schedule V - Property, Plant and Equipment
Schedule VI - Accumulated Depreciation of Property, Plant and Equipment
3. The following exhibits are filed herewith.
4.1 Limited Partnership Agreements for Cable TV Funds 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).
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).
(3)
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). (3)
10.1.4 Copy of Los Angeles County Code regarding cable tv system franchises (Fund 12-BCD).
(4)
10.1.5 Copy of Ordinance 90-0118F dated 10/29/90 granting a cable television franchise to
Fund 12-BCD (Fund 12-BCD). (4)
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). (4)
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).
(4)
10.1.9 Copy of a franchise and related documents thereto granting a community antenna
television system franchise for the City of Tampa, Florida (Fund 12-BCD). (1)
10.1.10 Resolution No. 1153 dated 10/2/86 authorizing consent to transfer of the Tampa
franchise and amendment to the franchise agreement (Fund 12-BCD). (4)
10.1.11 Amendment to Tampa franchise agreement dated 10/6/86 (Fund 12-BCD). (4)
10.1.12 Tampa franchise transfer, acceptance and consent to transfer dated 10/6/86 (Fund
12-BCD). (4)
10.1.13 Second Amendment to Tampa Franchise Agreement dated September 1, 1994 (Fund 12-
BCD).
10.1.14 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).
(3)
10.1.15 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).
(3)
10.1.16 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).
(3)
10.1.17 Resolution No. 12-14-87 dated 12/14/87 authorizing the assignment of the franchise
to Fund 12-BCD. (4)
10.1.18 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). (3)
10.1.19 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).
(3)
10.1.20 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). (4)
10.1.21 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). (3)
10.1.22 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).
(3)
10.1.23 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).
(3)
10.1.24 Resolution No. 88-23 dated 2/14/88 authorizing assignment of the franchise to Fund
12-BCD. (4)
10.2.1 Credit Agreement dated as of March 31, 1992 among Fund 12-BCD Venture and
Corestates Bank, N.A., individually and as agent for various lenders. (4)
10.2.2 Amendment No. 1 dated September 30, 1994 to Credit Agreement dated March 31, 1992
among Fund 12-BCD Venture and Corestates Bank, N.A., individually and as agent for
various lenders.
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. (5)
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). (6)
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, 1986 (Commission File Nos. 0-13193, 0-13807, 0-13964 and 0-14206).
(4) 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).
(5) 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).
(6) 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).