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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: 0-11911
CABLE TV FUND 11-B, LTD.
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(Exact name of registrant as specified in its charter)
Colorado 84-0908730
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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 11-B, Ltd. (the "Partnership") is a
Colorado limited partnership that was formed pursuant to the public offering of
limited partnership interests in the Cable TV Fund 11 Limited Partnership
Program (the "Program"), which was sponsored by Jones Intercable, Inc. (the
"General Partner"). Cable TV Fund 11-A, Ltd. ("Fund 11-A"), Cable TV Fund
11-C, Ltd. ("Fund 11-C") and Cable TV Fund 11- D, Ltd. ("Fund 11-D") are the
other partnerships that were formed pursuant to the Program. The Partnership,
Fund 11-A, Fund 11-C and Fund 11-D formed a general partnership known as Cable
TV Joint Fund 11 (the "Venture") in which the Partnership owns an 8 percent
interest, Fund 11-A owns an 18 percent interest, Fund 11-C owns a 27 percent
interest and Fund 11-D owns a 47 percent interest. The Partnership and the
Venture were formed for the purpose of acquiring and operating cable television
systems.
The Partnership directly owns cable television systems serving the
communities of Lancaster, Lockport and Orchard Park, New York (the "New York
Systems"), and the Venture operates a cable television system in Manitowoc,
Wisconsin (the "Manitowoc System"). See Item 2. The New York Systems and the
Manitowoc System may collectively hereinafter be referred to as the "Systems."
The General Partner is currently soliciting indications of interest in the
New York Systems. Pursuant to the terms of the Partnership's limited
partnership agreement, the General Partner may purchase the New York Systems,
provided that the General Partner submits the highest acceptable bid in a
public bidding process and the bid is no less than the average of three
separate independent appraisals of the New York Systems. Any sale of the New
York Systems will be subject to the approval of the holders of a majority of
the Partnership's limited partnership interests.
On June 29, 1990, the Venture sold its Wisconsin cable television systems,
except for the Manitowoc System. The Manitowoc System was not sold because the
City of Manitowoc (the "City") did not consent to the transfer of the
franchise. The City of Manitowoc franchise contained a provision that the City
claimed allowed the City to acquire the Manitowoc System upon expiration of the
franchise in 1995. On April 9, 1991, the Venture took legal action, seeking a
declaration as to whether the buyout right was enforceable under Federal law.
In February 1993, the court ruled in favor of the Venture and found that the
buyout right would not be triggered upon the expiration of the franchise,
assuming the franchise is renewed. The court did not determine the question of
whether the buyout right was enforceable per se under Federal law. The City
appealed the decision. In October 1993, the City and the Venture settled the
legal action, and the appeal has been dismissed. In the settlement, the City
conceded that its buyout right was not applicable in the event the franchise is
renewed, and represented to the Venture that it knew of no reason for
non-renewal of the franchise. The City also agreed that the term of the
renewal franchise would be 12 years and that the applicable franchise fee would
be 5 percent. The Venture paid the City $1,850,000, which will be returned to
the Venture, with interest, in the event that the City does not renew the
franchise. The franchise renewal process has begun, and the General Partner
expects that it will be completed in 1995.
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.
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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 $7.75 to $10.78, monthly basic and tier ("basic plus") service
rates ranged from $15.37 to $19.86. and monthly premium services ranged from
$4.50 to $9.95 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
$6.10 to $35.00; 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 72% of
total revenues, premium service fees accounted for approximately 14% of total
revenues, pay-per-view fees were approximately 1% of total revenues,
advertising fees were approximately 4% of total revenues and the remaining 9%
of total revenues came principally from equipment rentals, installation fees
and program guide sales. The Partnership is dependent upon the timely receipt
of service fees to provide for maintenance and replacement of plant and
equipment, current operating expenses and other costs of the Systems.
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.
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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% 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 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
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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 Partnership's 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
adversely impact the profitability of the Systems. If a telephone company were
to become a direct competitor of the Partnership in an area served by a
Partnership System, the Partnership could be at a competitive disadvantage
because of the relative financial strength of a telephone company compared to
the Partnership. Depending on a number of factors, 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 PARTNERSHIP'S SYSTEMS. Following is a
summary of current competition from DBS, MMDS, SMATV and TVRO operators in the
Systems' franchise areas:
Manitowoc System There are two MMDS operators in the Manitowoc System
that have just begun operation in the Manitowoc System's
service area and provide minimal competition, and there
are four TVRO dealers that provide minimal competition.
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New York Systems There are no MMDS operators competing with the New York
Systems. There are approximately 5 SMATV operators that
target motels and provide minimal competition. There
are several TVRO operators that primarily service areas
not served by the New York Systems. There is one DBS
operator very active in marketing its services; however,
to date DBS has provided minimal competition.
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 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
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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
Partnership elected to file cost-of-service showings for the New York System.
The General Partner anticipates no further reduction of revenues or operating
income before depreciation and amortization resulting from the FCC's rate
regulations. At this time, the regulatory authorities have not approved the
cost-of-service showings, and there can be no assurance that the Partnership's
cost-of-service showings will prevent further rate reductions until such final
approval is received. The Venture complied with the new benchmark regulations
and further reduced rates in its Manitowoc System. The Venture will continue
its efforts to mitigate the effect of such rate reductions.
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 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
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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 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.
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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
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 Partnership and the Venture at
December 31, 1994 are described below:
Fund System Acquisition Date
---- ------ ----------------
Cable TV Fund 11-B, Ltd. New York Systems January 1988
Cable TV Fund 11-A, Ltd., Cable TV Manitowoc System April 1984
Fund 11-B, Ltd., Cable TV Fund
11-C, Ltd. and Cable TV Fund 11-D,
Ltd. own an 18%, 8%, 27% and 47%
interest, respectively, through
their general partner interest in
Cable TV Joint Fund 11
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 Partnership's Systems operated approximately 842 miles
of cable plant, passing approximately 57,000 homes, representing an approximate
69% penetration rate, and the Venture's Systems operated approximately 200
miles of cable plant, passing approximately 15,000 homes, representing an
approximate 67% penetration rate. Figures for numbers of
9
10
subscribers, miles of cable plant and homes passed are compiled from the
General Partner's records and may be subject to adjustments.
CABLE TV FUND 11-B, LTD.
At December 31,
------------------------------------------------
NEW YORK SYSTEMS 1994 1993 1992
---------------- ------ ------ ------
Monthly basic plus service rate $21.95 $21.95 $23.95
Basic subscribers 37,619 35,877 33,552
Pay units 22,755 21,502 19,666
Franchise expiration dates range from May 1993 to August 2003. The Village of
Lancaster franchise has been operating under a temporary operating authority.
The General Partner and the franchise authorities are currently in the process
of negotiating a longer term franchise.
CABLE TV JOINT FUND 11
At December 31,
------------------------------------------------
MANITOWOC, WISCONSIN 1994 1993 1992
-------------------- ------ ------ ------
Monthly basic plus service rate $19.86 $21.95 $21.95
Basic subscribers 10,834 9,768 9,417
Pay units 7,091 5,296 4,313
The franchise expiration date is November 1995. The franchise renewal process
has begun, and the General Partner expects that it will be completed in 1995.
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 3,156.
10
11
Item 6. Selected Financial Data
For the Year Ended December 31,
---------------------------------------------------------------------------------
Cable TV Fund 11-B 1994 1993 1992 1991 1990
- ------------------ ------------ ----------- ------------ ------------ ------------
Revenues $12,791,832 $11,922,307 $11,817,424 $11,434,838 $10,250,125
Depreciation and
Amortization 2,359,467 1,874,101 1,737,457 1,781,846 1,914,119
Operating Income 1,344,185 1,150,419 1,733,870 2,130,580 1,541,156
Net Income 136,953 480,661 12,900,586(b) 600,619 8,605,597(a)
Net Income
per Limited
Partnership Unit 3.57 12.51 335.86(b) 15.64 224.05(a)
Weighted average
number of Limited
Partnership units
outstanding 38,026 38,026 38,026 38,026 38,026
General Partner's
Capital (Deficit) 54,810 53,440 48,633 (80,373) (86,379)
Limited Partners'
Capital (Deficit) 2,860,111 2,724,528 2,248,674 (663,525) (1,258,138)
Total Assets 26,514,695 22,298,044 14,496,416 14,672,979 14,036,122
Debt 20,790,529 18,089,150 10,624,649 13,585,067 13,553,412
General Partner
Advances 1,305,421 42,288 177,673 569,634 905,295
(a) Net income resulted primarily from the sale of the Wisconsin Systems by
Joint Fund 11.
(b) Net income resulted primarily from the sale of the Grand Island System by
Cable TV Fund 11-B.
For the Year Ended December 31,
-----------------------------------------------------------------------------
Cable TV Joint Fund 11 1994 1993 1992 1991 1990
- ---------------------- ---------- ---------- ----------- ------------ ------------
Revenues $3,296,103 $3,292,675 $3,244,023 $ 3,019,516 $ 18,199,911
Depreciation and
Amortization 522,593 517,441 499,110 481,071 5,264,737
Operating Income 309,189 416,589 426,058 333,948 1,616,728
Net Income 373,181 246,536 325,547 457,909 112,255,314(a)
Partners' Capital 6,597,845 6,224,664 5,978,128 5,652,581 5,194,672
Total Assets 7,099,110 6,610,142 6,723,916 6,137,193 6,032,609
Debt 26,385 20,129 29,188 28,738 15,994
Advances from
Jones Intercable, Inc. 72,764 32,825 52,745 227,810 438,353
(a) The sale of Joint Fund 11's Wisconsin systems, except the City of
Manitowoc area, in June 1990 resulted in a gain of $112,939,662.
11
12
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
CABLE TV FUND 11-B
Results of Operations
1994 Compared to 1993
Revenues of the Partnership increased $869,525, or approximately 7
percent, from $11,922,307 in 1993 to $12,791,832 in 1994. An increase in basic
subscribers primarily accounted for the increase in revenues. Basic
subscribers increased 1,742, or approximately 5 percent, from 35,877 at
December 31, 1993 to 37,619 at December 31, 1994. The increase in revenues
would have been greater but for the reduction in basic rates due to basic rate
regulations issued by the FCC in April 1993 with which the Partnership complied
effective September 1, 1993. No other factors individually were significant to
the increase in revenues.
Operating, general and administrative expenses decreased $17,759, less
than 1 percent, from $7,476,761 in 1993 to $7,459,002 in 1994. The decrease in
operating, general and administrative expense was due primarily to decreases in
personnel related and marketing related expenses. These decreases were
partially offset by increases in programming fees and plant maintenance costs.
No other factors individually were significant to the decrease in operating,
general and administrative expenses. Operating, general and administrative
expense represented 58 percent of revenues in 1994 compared to 63 percent in
1993. Management fees and allocated overhead from the General Partner
increased $208,152, or approximately 15 percent, from $1,421,026 in 1993 to
$1,629,178 in 1994 due to the increase in revenues, upon which such fees and
allocations are based, and an increase in expenses allocated from the General
Partner. The General Partner has experienced increases in expenses, including
personnel costs and reregulation costs, a portion of which are allocated to the
Partnership.
Depreciation and amortization increased $485,366, or approximately 26
percent, from $1,874,101 in 1993 to $2,359,467 in 1994 due to capital additions
in 1993 and 1994.
Operating income increased $193,766, or approximately 17 percent, from
$1,150,419 in 1993 to $1,344,185 in 1994 due to the increase in revenues
exceeding the increases in operating, general and administrative expenses,
management fees and allocated overhead from the General Partner and
depreciation and amortization expense. Operating income before depreciation
and amortization increased $679,132, or approximately 22 percent, from
$3,024,520 in 1993 to $3,703,652 in 1994 due to the increase in revenues
exceeding the increases in operating, general and administrative expense and
management fees and allocated overhead from the General Partner.
Interest expense increased $485,096, or approximately 73 percent, from
$661,307 in 1993 to $1,146,403 in 1994 due to higher outstanding balances on
interest bearing obligations and higher effective interest rates. Income
before equity in net income of cable television joint venture decreased
$353,561, or approximately 77 percent, from $461,481 in 1993 to $107,920 in
1994 due to the increase in interest expense exceeding the increase in
operating income.
1993 Compared to 1992
Revenues of the Partnership increased $104,883, or approximately 1
percent, from $11,817,424 in 1992 to $11,922,307 in 1993. Disregarding the
effect of the Grand Island System sale on July 1, 1992, revenues increased
approximately 9 percent. An increase in basic subscribers in the New York
Systems accounted for approximately 52 percent of the increase in revenues.
Basic subscribers increased 2,325, or approximately 7 percent, from 33,552 at
December 31, 1992 to 35,877 at December 31, 1993. Basic service rate
adjustments in the New York Systems in July 1992 accounted for approximately 19
percent of the increase in revenues. An increase in advertising sales revenues
primarily accounted for the remainder of the increase in revenues. The
increase in revenues would have been greater but for the reduction in basic
rates due to basic rate regulations issued by the FCC in April 1993 with which
the Partnership complied effective September 1, 1993. No other factors
individually were significant to the increase in revenues.
Operating, general and administrative expenses increased $535,184, or
approximately 8 percent, from $6,941,577 in 1992 to $7,476,761 in 1993.
Operating, general and administrative expense represented 63 percent of
revenues in 1993 compared to 59 percent in 1992. Increases in programming
fees, personnel expense, advertising sales cost and marketing expense primarily
accounted for the increase in expenses. No other factors individually were
significant to the increase in
12
13
operating, general and administrative expenses. Management fees and allocated
overhead from the General Partner increased $16,506, or approximately 1
percent, from $1,404,520 in 1992 to $1,421,026 in 1993 due to the increase in
revenues, upon which such fees and allocations are based, as well as an
increase in expenses allocated from the General Partner.
Depreciation and amortization increased $136,644, or approximately 8
percent, from $1,737,457 in 1992 to $1,874,101 in 1993 due to capital additions
in 1992 and 1993.
Operating income decreased $583,451, or approximately 34 percent, from
$1,733,870 in 1992 to $1,150,419 in 1993. This decrease was due primarily to
the increases in operating, general and administrative expenses, management
fees and allocated overhead from the General Partner and depreciation and
amortization expense exceeding the increase in revenues.
Interest expense decreased $71,972, or approximately 10 percent, from
$733,279 in 1992 to $661,307 in 1993. This decrease was due to lower average
balances on interest bearing obligations and lower effective interest rates.
The Partnership used a portion of the proceeds from the sale of the Grand
Island System to reduce indebtedness in 1992. Income before equity in net
income of cable television joint venture decreased $12,413,777 from $12,875,258
in 1992 to $461,481 in 1993. This decrease was due primarily to the gain on
sale of assets of $11,884,967 recognized in 1992.
In addition to the New York Systems owned by it, the Partnership also
owns an approximate 8 percent interest in Joint Fund 11. Refer to Management's
Discussion and Analysis of Financial Condition and Results of Operations for
Joint Fund 11 for details pertaining to its operations.
Financial Condition
The General Partner is currently soliciting indications of interest in
the New York Systems. Pursuant to the terms of the Partnership's limited
partnership agreement, the General Partner may purchase the New York Systems,
provided that the General Partner submits the highest acceptable bid in a
public bidding process and the bid is no less than the average of three
separate independent appraisals of the New York Systems. Any sale of the New
York Systems will be subject to the approval of the holders of a majority of
the Partnership's limited partnership interests.
The Partnership expended approximately $7,371,000 on capital
improvements during 1994. Of this total, approximately 75 percent related to
the continuation of the rebuild and upgrade of the New York Systems as required
by the terms of the New York System's franchises, and the construction of a new
operations facility. The remainder of the expenditures were for plant
extensions and various other enhancements in the New York Systems. Funding for
these expenditures was provided by cash generated from operations, cash on hand
and borrowings under the Partnership's credit facility. Anticipated capital
additions for 1995 are approximately $3,797,000. The continuation of the
rebuild and upgrade of the New York Systems will account for approximately 43
percent of the expected capital expenditures. Approximately 28 percent of the
expected capital expenditures will relate to plant extensions and service drops
to homes. The remainder of the capital expenditures will be used for various
other enhancements in the New York Systems. Depending upon the timing of the
potential sale of the New York Sysems as discussed above, the Partnership will
likely only make the portion of the budgeted capital expenditures scheduled to
be made during the Partnership's continued ownership of the New York Systems.
Funding for these expenditures is expected to be provided by cash generated
from operations and borrowings from the Partnership's existing credit facility.
During March 1992, the Partnership entered into a $25,000,000
revolving credit and term loan agreement. As a result of the subsequent sale
of the Partnership's cable television system serving Grand Island, New York (the
"Grand Island System"), the maximum amount available was reduced to $20,000,000
in July 1992. The revolving credit period expired December 31, 1994, at which
time the outstanding balance converted to a term loan payable in 24 consecutive
quarterly installments commencing March 31, 1995. As of December 31, 1994,
$20,000,000 was outstanding under this agreement. On February 28, 1995, the
term loan was renegotiated and the Partnership entered into a new $25,000,000
revolving credit and term loan agreement. The revolving credit period expires
December 31, 1996, at which time the outstanding balance converts to a term
loan payable in 24 consecutive quarterly installments commencing March 31,
1997. Interest payable on outstanding amounts under the new credit facility is
at the Partnership's option of the base rate plus 1/2 percent or LIBOR plus
1-3/8 percent. The Partnership paid a loan facility fee of $75,000 upon
closing of the credit facility renegotiation.
The Partnership has sufficient sources of capital available to meet
its presently anticipated needs from its ability to generate cash from
operations and from borrowings available under its new credit facility.
13
14
In addition to the New York Systems owned by it, the Partnership owns
an interest of approximately 8 percent in Joint Fund 11. This investment is
accounted for under the equity method. When compared to the December 31, 1993
balance, this investment has increased by $29,033 from $521,450 at December 31,
1993 to $550,483 at December 31, 1994. This increase represents the
Partnership's proportionate share of income generated by Joint Fund 11. Refer
to Management's Discussion and Analysis of Financial Condition and Results of
Operations for Joint Fund 11 for details pertaining to its financial condition.
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 of 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 Partnership has filed a cost-of-service showing for the New York
Systems and thus anticipates no further reductions in rates. The
cost-of-service showing has 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
CABLE TV JOINT FUND 11
Results of Operations
1994 compared to 1993
Revenues in Joint Fund 11's Manitowoc System increased $3,428 from
$3,292,675 in 1993 to $3,296,103 in 1994. An increase in the subscriber base
primarily accounted for the increase in revenues. Basic subscribers increased
1,066, or approximately 11 percent, from 9,768 at December 31, 1993 to 10,834
at December 31, 1994. Premium service subscriptions increased 1,795, or
approximately 34 percent, from 5,296 at December 31, 1993 to 7,091 at December
31, 1994. The increase in revenues would have been greater but for reductions
in basic rates due to basic rate regulations issued by the FCC in April 1993 and
February 1994. See Item 1. No other individual factor was significant to the
increase in revenues.
Operating, general and administrative expense in the Manitowoc System
increased $79,695, or approximately 4 percent, from $1,947,068 in 1993 to
$2,026,763 in 1994. The increase in expense was due primarily to increases in
programming fees and marketing related costs due to increases in basic
subscribers and premium service subscriptions. These increases were partially
offset by a decrease in copyright fees. No other individual factors
contributed significantly to the increase in expense. Operating, general and
administrative expense represented 59 percent of revenues in 1993 compared to
61 percent of revenues in 1994. Management fees and allocated overhead from
the General Partner increased $25,981, or approximately 6 percent, from
$411,577 in 1993 to $437,558 in 1994. The increase was due to an increase in
allocated expenses from the General Partner. The General Partner has
experienced increases in expenses, including personnel costs and reregulation
costs, a portion of which is allocated to Joint Fund 11.
Depreciation and amortization expense in the Manitowoc System
increased $5,152, or approximately 1 percent, from $517,441 in 1993 to $522,593
in 1994 due to capital additions in 1993 and 1994.
Operating income in the Manitowoc System decreased $107,400, or
approximately 26 percent, from $416,589 in 1993 compared to $309,189 in 1994.
The decrease was due to the increases in operating, general and administrative
expense, allocated overhead from the General Partner and depreciation and
amortization expense exceeding the increase in revenues. Operating income
before depreciation and amortization for the Manitowoc System decreased
$102,248, or approximately 11 percent, from $934,030 in 1993 to $831,782 in
1994. The decrease was due to the increases in operating, general and
administrative expense and allocated overhead from the General Partner
exceeding the increase in revenues. The decrease in operating income before
depreciation and amortization reflects the current operating environment of the
cable television industry. The FCC rate regulations under the 1992 Cable Act
have caused revenues to increase more slowly than otherwise would have been the
case. In turn, this has caused certain expenses which are a function of
revenue, such as franchise fees, copyright fees and management fees to increase
more slowly than otherwise would have been the case. However, other operating
costs such as programming fees, salaries and benefits, and marketing costs as
well as other costs incurred by the General Partner, which are allocated to
Joint Fund 11, continue to increase at historical rates. This situation has
led to reductions in operating income before depreciation and amortization as a
percent of revenue ("Operating Margin"). Such reductions in Operating Margins
may continue in the near term as Joint Fund 11 and the General Partner incur
cost increases due to, among other things, programming fees, reregulation and
competition, that exceed increases in revenue. The General Partner will
attempt to mitigate a portion of these reductions through (a) new service
offerings; (b) product re-marketing and re-packaging and (c) marketing efforts
directed at non-subscribers.
Interest expense for Joint Fund 11 decreased $7,196, or approximately
31 percent, from $22,912 in 1993 to $15,716 in 1994 due to a lower outstanding
balance on interest bearing obligations. Other expense decreased from $248,912
in 1993 to $7,426 in 1994, primarily as a result of Joint Fund 11 incurring
costs associated with the litigation with the City of Manitowoc during 1993.
No such costs were incurred in 1994. Net income for Joint Fund 11 increased
$126,645, or approximately 51 percent, from $246,536 in 1993 to $373,181 in
1994 due primarily to the decrease in litigation costs discussed above.
1993 compared to 1992
Revenues in the Manitowoc System increased $48,652, or approximately 2
percent, from $3,244,023 in 1992 to $3,292,675 in 1993. An increase in basic
subscribers primarily accounted for the increase in revenues. The system added
15
16
approximately 350 basic subscribers in 1993, an increase of 4 percent. The
increase in revenues would have been greater but for the reduction in basic
rates due to basic rate regulations issued by the FCC in April 1993 with which
Joint Fund 11 complied effective September 1, 1993. No other individual factor
contributed significantly to the increase in revenues.
Operating, general and administrative expense in the Manitowoc System
increased $32,175, or approximately 2 percent, from $1,914,893 in 1992 to
$1,947,068 in 1993. The increase in expense was due primarily to increases in
programming fees and marketing related expense. No other individual factors
contributed significantly to the increase in expense. Operating, general and
administrative expense represented 59 percent of revenues in both 1992 and
1993. Management fees and allocated overhead from Jones Intercable, Inc.
increased $7,615, or approximately 2 percent, from $403,962 in 1992 to $411,577
in 1993. The increase was due to the increase in revenues, upon which such
fees and allocations are based, and increases in allocated expenses from the
General Partner. Depreciation and amortization expense in the Manitowoc System
increased $18,331, or approximately 4 percent, from $499,110 in 1992 to
$517,441 in 1993. This increase was due to capital additions in 1992 and 1993.
Operating income in the Manitowoc System decreased $9,469, or
approximately 2 percent, from $426,058 in 1992 compared to $416,589 in 1993.
The decrease was due to the increases in operating, general and administrative
expense and management fees and allocated overhead from the General Partner and
depreciation and amortization expense exceeding the increase in revenues.
Operating income before depreciation and amortization for the Manitowoc System
increased $8,862, or approximately 1 percent, from $925,168 in 1992 to $934,030
in 1993. The increase was due to the increase in revenues exceeding the
increases in operating, general and administrative expense and management fees
and allocated overhead from the General Partner.
Interest expense for Joint Fund 11 increased from $14,803 in 1992 to
$22,912 in 1993. Other expense, due primarily to costs associated with the
litigation with the City of Manitowoc in 1993, totalled $248,912 compared to
$184,118 in 1992. Net income for Joint Fund 11 decreased $79,011, or
approximately 24 percent, from $325,547 in 1992 to $246,536 in 1993. The
decrease was due primarily to the aforementioned litigation costs.
Financial Condition
On June 29, 1990, Joint Fund 11 completed the sale of all of its
Wisconsin cable television systems, except for the system serving the City of
Manitowoc (the "Manitowoc System"). The Manitowoc System was not sold because
the City of Manitowoc (the "City") did not consent to the transfer of the
franchise. The City of Manitowoc franchise contains a provision that the City
claimed allowed the City to acquire the Manitowoc System upon expiration of the
franchise. On April 9, 1991, Joint Fund 11 took legal action, seeking a
declaration as to whether the buy-out right was enforceable under Federal law.
In October 1993, the City and Joint Fund 11 settled the legal action. In the
settlement, the City conceded that its buy-out right was not applicable in the
event the franchise is renewed, and represented to Joint Fund 11 that it knew
of no reason for non-renewal of the franchise. The City also agreed that the
term of the renewal franchise would be 12 years and that the applicable
franchise fee would be 5 percent. Joint Fund 11 paid the City $1,850,000,
which will be returned, with interest, in the event that the City does not
renew the franchise. If the franchise is renewed, the $1,850,000 will be
amortized over the life of the franchise. The franchise renewal process has
begun and the General Partner expects that it will be completed in 1995.
Joint Fund 11 had no bank debt outstanding at December 31, 1994.
During 1994, Joint Fund 11 expended approximately $380,000 for capital
expenditures in the Manitowoc System. These expenditures were used for various
projects to maintain the value of the system. These expenditures were funded
from cash generated from operations.
Budgeted capital expenditures in 1995 for the Manitowoc System are
approximately $273,000. These expenditures will relate to various enhancements
to maintain the value of the Manitowoc System. It is expected that these
capital expenditures will be funded from cash on hand and cash generated from
operations. Joint Fund 11 has sufficient liquidity and capital resources,
including cash on hand and its ability to generate cash from operations, to
meet its anticipated needs.
16
17
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 of 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. Joint
Fund 11 complied with the February 1994 benchmark regulations and further
reduced rates in its Manitowoc System effective July 1994. See Item 1 for
further discussion of the provisions of the 1992 Cable Act and the FCC
regulations promulgated thereunder.
17
18
Item 8. Financial Statements
CABLE TV FUND 11-B AND
CABLE TV JOINT FUND 11
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1994 AND 1993
INDEX
Page
----------------------------------
11-B Joint Fund 11
---- -------------
Report of Independent Public Accountants 19 30
Balance Sheets 20 31
Statements of Operations 22 33
Statements of Partners' Capital (Deficit) 23 34
Statements of Cash Flows 24 35
Notes to Financial Statements 25 36
18
19
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Cable TV Fund 11-B:
We have audited the accompanying balance sheets of CABLE TV FUND 11-B
(a Colorado limited partnership) as of December 31, 1994 and 1993, and the
related statements of operations, partners' capital 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 11-B
as of December 31, 1994 and 1993, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1994,
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 8, 1995.
19
20
CABLE TV FUND 11-B
(A Limited Partnership)
BALANCE SHEETS
December 31,
---------------------------------
ASSETS 1994 1993
------ ------------ ------------
CASH $ 139,532 $ 1,171,764
TRADE RECEIVABLES, less allowance for doubtful
receivables of $72,936 and $79,607 at
December 31, 1994 and 1993, respectively 472,417 392,119
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 40,659,024 33,288,508
Less-accumulated depreciation (16,361,119) (14,068,966)
------------ ------------
24,297,905 19,219,542
Investment in cable television joint venture 550,483 521,450
------------ ------------
Total investment in cable television
properties 24,848,388 19,740,992
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 1,054,358 993,169
------------ ------------
Total assets $ 26,514,695 $ 22,298,044
============ ============
The accompanying notes to financial statements
are an integral part of these balance sheets.
20
21
CABLE TV FUND 11-B
(A Limited Partnership)
BALANCE SHEETS
December 31,
----------------------------------
LIABILITIES AND PARTNERS' CAPITAL 1994 1993
------------ ------------
LIABILITIES:
Debt $ 20,790,529 $ 18,089,150
Accounts payable-
Trade 368,624 284,471
General Partner 1,305,421 42,288
Accrued liabilities 1,084,907 1,051,821
Subscriber prepayments 50,293 52,346
------------ ------------
Total liabilities 23,599,774 19,520,076
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 7)
PARTNERS' CAPITAL:
General Partner-
Contributed capital 1,000 1,000
Accumulated earnings 53,810 52,440
------------ ------------
54,810 53,440
------------ ------------
Limited Partners-
Net contributed capital
(38,026 units outstanding at
December 31, 1994 and 1993) 15,661,049 15,661,049
Distributions (19,013,121) (19,013,121)
Accumulated earnings 6,212,183 6,076,600
------------ ------------
2,860,111 2,724,528
------------ ------------
Total liabilities and partners'
capital $ 26,514,695 $ 22,298,044
============ ============
The accompanying notes to financial statements
are an integral part of these balance sheets.
21
22
CABLE TV FUND 11-B
(A Limited Partnership)
STATEMENTS OF OPERATIONS
Year Ended December 31,
-----------------------------------------------
1994 1993 1992
----------- ----------- -----------
REVENUES $12,791,832 $11,922,307 $11,817,424
COSTS AND EXPENSES:
Operating, general and administrative 7,459,002 7,476,761 6,941,577
Management fees and allocated
overhead from General Partner 1,629,178 1,421,026 1,404,520
Depreciation and amortization 2,359,467 1,874,101 1,737,457
----------- ----------- -----------
OPERATING INCOME 1,344,185 1,150,419 1,733,870
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (1,146,403) (661,307) (733,279)
Gain on sale of assets - - 11,884,967
Other, net (89,862) (27,631) (10,300)
----------- ----------- -----------
Total other income
(expense) (1,236,265) (688,938) 11,141,388
----------- ----------- -----------
INCOME BEFORE EQUITY IN
NET INCOME OF CABLE
TELEVISION JOINT VENTURE 107,920 461,481 12,875,258
EQUITY IN NET INCOME OF CABLE
TELEVISION JOINT VENTURE 29,033 19,180 25,328
----------- ----------- -----------
NET INCOME $ 136,953 $ 480,661 $12,900,586
=========== =========== ===========
ALLOCATION OF NET INCOME:
General Partner $ 1,370 $ 4,807 $ 129,006
=========== =========== ===========
Limited Partners $ 135,583 $ 475,854 $12,771,580
=========== =========== ===========
NET INCOME PER LIMITED
PARTNERSHIP UNIT $ 3.57 $ 12.51 $ 335.86
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 38,026 38,026 38,026
=========== =========== ===========
The accompanying notes to financial statements
are an integral part of these statements.
22
23
CABLE TV FUND 11-B
(A Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Year Ended December 31,
-----------------------------------------------
1994 1993 1992
----------- ----------- -----------
GENERAL PARTNER:
Balance, beginning of period $ 53,440 $ 48,633 $ (80,373)
Net income for period 1,370 4,807 129,006
----------- ----------- -----------
Balance, end of period $ 54,810 $ 53,440 $ 48,633
=========== =========== ===========
LIMITED PARTNERS:
Balance, beginning of period $ 2,724,528 $ 2,248,674 $ (663,525)
Net income for period 135,583 475,854 12,771,580
Distributions - - (9,859,381)
----------- ----------- -----------
Balance, end of period $ 2,860,111 $ 2,724,528 $ 2,248,674
=========== =========== ===========
The accompanying notes to financial statements
are an integral part of these statements.
23
24
CABLE TV FUND 11-B
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
Year Ended December 31,
-----------------------------------------------
1994 1993 1992
----------- ----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 136,953 $ 480,661 $ 12,900,586
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 2,359,467 1,874,101 1,737,457
Gain on sale of assets - - (11,884,967)
Amortization of capitalized loan fees 20,004 25,044 19,200
Equity in net income of cable
television joint venture (29,033) (19,180) (25,328)
Increase in trade receivables (80,298) (82,789) (46,853)
Decrease (increase) in deposits,
prepaid expenses and deferred charges (148,507) (630,171) 22,285
Increase (decrease) in accounts
payable, accrued liabilities and
subscriber prepayments 115,186 (8,149) 134,611
Increase (decrease) in amount due
General Partner 1,263,133 (135,385) (391,961)
----------- ----------- ------------
Net cash provided by
operating activities 3,636,905 1,504,132 2,465,030
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of cable television system - - 14,013,880
Purchase of property and equipment (7,370,516) (7,984,770) (3,369,543)
----------- ----------- ------------
Net cash provided by (used in)
investing activities (7,370,516) (7,984,770) 10,644,337
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 2,815,472 7,544,156 25,293,789
Repayment of debt (114,093) (79,655) (28,254,207)
Loan fees capitalized - - (175,000)
Distribution to limited partners - - (9,859,381)
----------- ----------- ------------
Net cash provided by (used in)
financing activities 2,701,379 7,464,501 (12,994,799)
----------- ----------- ------------
Increase (decrease) in cash (1,032,232) 983,863 114,568
Cash, beginning of period 1,171,764 187,901 73,333
----------- ----------- ------------
Cash, end of period $ 139,532 $ 1,171,764 $ 187,901
=========== =========== ============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 916,971 $ 693,276 $ 691,114
=========== =========== ============
The accompanying notes to financial statements
are an integral part of these statements.
24
25
CABLE TV FUND 11-B
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION AND PARTNERS' INTERESTS
Formation and Business
Cable TV Fund 11-B, Ltd. (the "Partnership"), a Colorado limited
partnership, was formed on June 17, 1983, under a public program sponsored by
Jones Intercable, Inc. The Partnership was formed to acquire, construct,
develop and operate cable television systems. Jones Intercable,
Inc. ("Intercable"), a publicly held Colorado corporation, is the "General
Partner" and manager of the Partnership. Intercable and its subsidiaries also
own and operate cable television systems. In addition, Intercable manages
cable television systems for other limited partnerships for which it is general
partner and for affiliated entities.
The Partnership owns and operates the cable television systems serving
the municipalities of Lancaster, Lockport and Orchard Park, New York (the "New
York Systems"). On July 1, 1992, the Partnership sold the Grand Island System
to Adelphia Communications Corporation for a purchase price of $14,500,000,
subject to normal closing adjustments. The Partnership recognized a gain of
$11,884,967 on this sale. Proceeds from the sale of the Grand Island System
were used to reduce debt, and a distribution was made to the limited partners
of the Partnership in July 1992 in the aggregate amount of $9,859,381, which
represented $518.56 per $1,000 investment in the Partnership. Such
distribution, together with prior distributions, represents the return of an
amount equal to capital initially contributed to the Partnership by the limited
partners. In addition to the New York Systems, the Partnership owns an interest
of approximately 8 percent in Cable TV Joint Fund 11 ("Joint Fund 11") through
capital contributions made during 1984 of $3,500,000.
Contributed Capital
The capitalization of the Partnership is set forth in the accompanying
statements of partners' capital. No limited partner is obligated to make any
additional contribution to partnership capital.
Intercable purchased its interest in the Partnership by contributing
$1,000 to partnership capital.
All profits and losses of the Partnership are allocated 99 percent to
the limited partners and 1 percent to Intercable, except for income or gain
from the sale or disposition of cable television properties, which will be
allocated to the partners based upon the formula set forth in the partnership
agreement and interest income earned prior to the first acquisition by the
Partnership of a cable television system, which was allocated 100 percent to
the limited partners.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Records
The accompanying financial statements have been prepared on the
accrual basis of accounting in accordance with generally accepted accounting
principles. The Partnership's tax returns are also prepared on the accrual
basis.
Investment in Cable Television Joint Venture
The Partnership's investment in Joint Fund 11 is accounted for under
the equity method due to the Partnership's influence on Joint Fund 11 as a
general partner. When compared to the December 31, 1993 balance, this
investment has increased by $29,033. This increase represents the
Partnership's proportionate share of income generated by Joint Fund 11 during
1994. The operations of Joint Fund 11 are significant to the Partnership and
should be reviewed in conjunction with these financial statements. Reference
is made to the accompanying financial statements of Joint Fund 11 on pages 30
to 39.
25
26
Property, Plant and Equipment
Depreciation of property, plant and equipment 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
Buildings 10-31 years
Office furniture and equipment 5 years
Vehicles 3 years
Replacements, renewals and improvements are capitalized and
maintenance and repairs are charged to expense as incurred.
Allocation of Cost of Purchased Cable Television Systems
The Partnership allocated the total contract purchase price of cable
television systems acquired as follows: first, to the fair value of net
tangible assets acquired; second, to the value of subscriber lists; and third,
to franchise costs. Brokerage fees paid to an affiliate of Intercable and
other system acquisition costs were capitalized and charged to distribution
systems.
Revenue Recognition
Subscriber prepayments are initially deferred and recognized as
revenue when earned.
(3) TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
Management Fees, Distribution Ratios and Reimbursement
Intercable manages the Partnership and receives a fee for its services
equal to 5 percent of the gross revenues of the Partnership, excluding revenues
from the sale of cable television systems or franchises. For the years ended
December 31, 1994, 1993 and 1992 management fees paid to Intercable, excluding
the Partnership's approximate 8 percent interest in Joint Fund 11, were
$639,592, $596,115, and $590,871, respectively.
Any partnership distributions made from cash flow (defined as cash
receipts derived from routine operations, less debt principal and interest
payments and cash expenses) are allocated 99 percent to the limited partners
and 1 percent to Intercable. Any distributions other than interest income on
limited partner subscriptions earned prior to the acquisition of the
Partnership's first cable television system or from cash flow, such as from
sale or refinancing of the system or upon dissolution of the Partnership, will
be made as follows: first, to the limited partners in an amount which,
together with all prior distributions, will equal the amount initially
contributed to the Partnership capital by the limited partners; the balance, 75
percent to the limited partners and 25 percent to Intercable. In July 1990,
$9,153,740 of the limited partners' initial capital contributions was
distributed to the limited partners from funds received from Joint Fund 11. In
July 1992, the remaining amount of limited partners' initial capital
($9,859,381) was distributed to the limited partners from funds received from
the sale of the Grand Island System. Any future distributions will be made 75
percent to the limited partners and 25 percent to Intercable.
The Partnership reimburses Intercable for certain allocated overhead
and administrative expenses. These expenses represent the salaries and related
benefits paid to corporate personnel, rent, data processing services and other
corporate facilities costs. Such personnel provide engineering, marketing,
administrative, accounting, legal and investor relations services to the
Partnership. These reimbursements are limited to 25 percent of the gross
revenues of the Partnership. Allocations of personnel costs are primarily
based upon actual time spent by employees of Intercable with respect to each
partnership managed. Remaining overhead costs are allocated based on revenues
and/or assets managed for the partnership. Effective December 1, 1993, the
allocation method was changed to be based only on revenue, which Intercable
believes provides a more accurate method of allocation. Systems owned by the
Intercable 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.
Reimbursements by the Partnership to the General Partner for allocated overhead
and
26
27
administrative expenses, excluding the Partnership's approximate 8 percent
interest in Joint Fund 11, were $989,586, $824,911 and $813,649 for the years
ended December 31, 1994, 1993 and 1992, respectively.
The Partnership was charged interest during 1994 at an average
interest rate of 10 percent on amounts due Intercable, which approximated
Intercable's weighted average cost of borrowings. Total interest charged by
the General Partner was $14,287, $13,350 and $20,961 in 1994, 1993 and 1992,
respectively.
Payments to/from Affiliates for Programming Services
The Partnership receives programming from Product Information Network,
Superaudio and The Mind Extension University, affiliates of Intercable.
Payments to Superaudio totalled approximately $21,977, $21,590 and $22,651 in
1994, 1993 and 1992, respectively. Payments to The Mind Extension University
totalled approximately $19,914, $12,565 and $12,981 in 1994, 1993 and 1992,
respectively. The Partnership receives a commission from Product Information
Network based on a percentage of advertising revenue and number of subscribers.
Product Information Network, which initiated service in 1994, paid commissions
to the Partnership totalling $186 during 1994.
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of December 31, 1994 and 1993,
consisted of the following:
1994 1993
------------ ------------
Cable distribution systems $ 34,068,538 $ 28,907,150
Equipment and tools 1,586,646 1,285,647
Office furniture and equipment 479,991 464,271
Buildings 3,441,156 1,663,399
Vehicles 988,273 873,621
Land 94,420 94,420
------------ ------------
40,659,024 33,288,508
Less - accumulated depreciation (16,361,119) (14,068,966)
------------ ------------
$ 24,297,905 $ 19,219,542
============ ============
(5) DEBT
Debt consists of the following:
December 31,
----------------------------
1994 1993
----------- -----------
Lending institutions-
Term loan $20,000,000 $17,250,000
Capital lease obligations 790,529 839,150
----------- -----------
$20,790,529 $18,089,150
=========== ===========
During March 1992, the Partnership entered into a $25,000,000
revolving credit and term loan agreement. As a result of the subsequent sale
of the Grand Island System, the maximum amount available was reduced to
$20,000,000 in July 1992. The revolving credit period expired December 31,
1994, at which time the outstanding balance converted to a term loan payable in
24 consecutive quarterly installments commencing March 31, 1995. As of
December 31, 1994, $20,000,000 was outstanding under this agreement. On
February 28, 1995, the term loan was renegotiated and the Partnership entered
into a new $25,000,000 revolving credit and term loan agreement. The revolving
credit period expires December 31, 1996, at which time the outstanding balance
converts to a term loan payable in 24 consecutive quarterly installments
commencing March 31, 1997. Interest payable on outstanding amounts under the
new credit facility is at the
27
28
Partnership's option of the base rate plus 1/2 percent or LIBOR plus 1-3/8
percent. The Partnership paid a loan facility fee of $75,000 upon closing of
the credit facility renegotiation. The effective interest rates on outstanding
obligations as of December 31, 1994 and 1993 were 6.77 percent and 4.66
percent, respectively.
Installments due on debt principal for each of the five years in the
period ending December 31, 1999 and thereafter, respectively, are $2,637,159,
$3,237,159, $3,437,159, $3,679,052, $3,800,000 and $4,000,000. Substantially
all of the Partnership's property, plant and equipment are pledged as security
for the above indebtedness.
(6) INCOME TAXES
Income taxes have not been recorded in the accompanying financial
statements because they accrue directly to the partners. The Federal and state
income tax returns of the Partnership are prepared and filed by Intercable.
The Partnership's tax returns, the qualification of the partnership as
such for tax purposes, and the amount of distributable income or loss are
subject to examination by Federal and state taxing authorities. If such
examinations result in changes with respect to the Partnership's qualification
as such, or in changes with respect to the Partnership's recorded income or
loss, the tax liability of the general and limited partners would likely be
changed accordingly.
Taxable income reported to the partners is different from that
reported in the 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 net income or losses reported in the 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 of the cable television industry. In April 1993,
the Federal Communications Commission (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 Partnership has filed a cost-of-service
showing for the New York Systems and thus anticipates no further reductions in
rates. The cost-of-service showing has not 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.
The Partnership rents office and other facilities under various
long-term lease arrangements. Rent expense paid under such lease arrangements
totalled $16,093, $31,480 and $37,468, 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 $ 7,427
1996 7,640
1997 1,424
1998 -
1999 -
Thereafter -
--------
$ 16,491
========
28
29
(8) SUPPLEMENTARY PROFIT AND LOSS INFORMATION
Supplementary profit and loss information is presented below:
Year Ended December 31,
--------------------------------------------
1994 1993 1992
---------- ----------- -----------
Maintenance and repairs $ 169,070 $ 223,569 $ 286,110
========== =========== ===========
Taxes, other than income and
payroll taxes $ 175,771 $ 137,070 $ 152,810
========== =========== ===========
Advertising $ 114,475 $ 208,035 $ 174,632
========== =========== ===========
Depreciation of property, plant
and equipment $2,359,467 $1,874,101 $1,703,362
========== ========== ==========
Amortization of intangible
assets $ - $ - $ 34,095
========== ========== ==========
29
30
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Cable TV Joint Fund 11:
We have audited the accompanying balance sheets of CABLE TV JOINT FUND
11 (a Colorado general partnership) as of December 31, 1994 and 1993, and the
related statements of operations, partners' capital 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 Partners' 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 Joint Fund
11 as of December 31, 1994 and 1993, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1994,
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 8, 1995.
30
31
CABLE TV JOINT FUND 11
(A General Partnership)
BALANCE SHEETS
December 31,
--------------------------------
ASSETS 1994 1993
-------- ----------- -----------
CASH $ 2,429,603 $ 1,840,984
TRADE RECEIVABLES, less allowance for doubtful
receivables of $4,412 and $3,735 at
December 31, 1994 and 1993, respectively 92,110 50,470
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 7,646,689 7,266,759
Less- accumulated depreciation (5,051,015) (4,671,198)
----------- -----------
2,595,674 2,595,561
Franchise costs, net of accumulated amortization
of $1,287,891 and $1,167,363 at
December 31, 1994 and 1993, respectively 108,334 228,862
Subscriber lists, net of accumulated amortization
of $237,741 and $215,493 at December 31, 1994
and 1993, respectively 20,034 42,282
----------- -----------
Total investment in cable television
properties 2,724,042 2,866,705
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 1,853,355 1,851,983
----------- -----------
Total assets $ 7,099,110 $ 6,610,142
=========== ===========
The accompanying notes to financial statements
are an integral part of these balance sheets.
31
32
CABLE TV JOINT FUND 11
(A General Partnership)
BALANCE SHEETS
December 31,
-----------------------------------
LIABILITIES AND PARTNERS' CAPITAL 1994 1993
--------------------------------- ------------- ---------------
LIABILITIES:
Capital lease obligations $ 26,385 $ 20,129
Accounts payable-
Trade 16,340 2,523
Jones Intercable, Inc. 72,764 32,825
Accrued liabilities 368,106 317,249
Subscriber prepayments 17,670 12,752
------------- -------------
Total liabilities 501,265 385,478
------------- -------------
PARTNERS' CAPITAL:
Contributed capital 45,000,000 45,000,000
Distributions (118,914,493) (118,914,493)
Accumulated earnings 80,512,338 80,139,157
------------- -------------
6,597,845 6,224,664
------------- -------------
Total liabilities and
partners' capital $ 7,099,110 $ 6,610,142
============= =============
The accompanying notes to financial statements
are an integral part of these balance sheets.
32
33
CABLE TV JOINT FUND 11
(A General Partnership)
STATEMENTS OF OPERATIONS
Year Ended December 31,
--------------------------------------------
1994 1993 1992
---------- ---------- ----------
REVENUES $3,296,103 $3,292,675 $3,244,023
COSTS AND EXPENSES:
Operating, general and
administrative 2,026,763 1,947,068 1,914,893
Management fees and allocated
expenses from Jones Intercable, Inc. 437,558 411,577 403,962
Depreciation and amortization 522,593 517,441 499,110
---------- ---------- ----------
OPERATING INCOME 309,189 416,589 426,058
---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest expense (15,716) (22,912) (14,803)
Interest income 87,134 101,771 98,410
Other, net (7,426) (248,912) (184,118)
---------- ---------- ----------
Total other income (expense), net 63,992 (170,053) (100,511)
---------- ---------- ----------
NET INCOME $ 373,181 $ 246,536 $ 325,547
========== ========== ==========
The accompanying notes to financial statements
are an integral part of these statements.
33
34
CABLE TV JOINT FUND 11
(A General Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Year Ended December 31,
---------------------------------------------
1994 1993 1992
----------- ----------- -----------
CABLE TV FUND 11-A (18%):
Balance, beginning of period $ 1,163,806 $ 1,118,887 $ 1,059,572
Net income for period 67,994 44,919 59,315
----------- ----------- -----------
Balance, end of period $ 1,231,800 $ 1,163,806 $ 1,118,887
----------- ----------- -----------
CABLE TV FUND 11-B (8%):
Balance, beginning of period $ 521,450 $ 502,270 $ 476,942
Net income for period 29,033 19,180 25,328
----------- ----------- -----------
Balance, end of period $ 550,483 $ 521,450 $ 502,270
----------- ----------- -----------
CABLE TV FUND 11-C (27%):
Balance, beginning of period $ 2,215,168 $ 2,148,332 $ 2,060,076
Net income for period 101,169 66,836 88,256
----------- ----------- -----------
Balance, end of period $ 2,316,337 $ 2,215,168 $ 2,148,332
----------- ----------- -----------
CABLE TV FUND 11-D (47%):
Balance, beginning of period $ 2,324,240 $ 2,208,639 $ 2,055,991
Net income for period 174,985 115,601 152,648
----------- ----------- -----------
Balance, end of period $ 2,499,225 $ 2,324,240 $ 2,208,639
----------- ----------- -----------
TOTAL:
Balance, beginning of period $ 6,224,664 $ 5,978,128 $ 5,652,581
Net income for period 373,181 246,536 325,547
----------- ----------- -----------
Balance, end of period $ 6,597,845 $ 6,224,664 $ 5,978,128
=========== =========== ===========
The accompanying notes to financial statements
are an integral part of these statements.
34
35
CABLE TV JOINT FUND 11
(A General Partnership)
STATEMENTS OF CASH FLOWS
Year Ended December 31,
----------------------------------------------
1994 1993 1992
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 373,181 $ 246,536 $ 325,547
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 522,593 517,441 499,110
Decrease (increase) in trade receivables (41,640) (14,686) 29,253
Decrease (increase) in deposits, prepaid
expenses and deferred charges (1,372) (1,625) 19,057
Increase (decrease) in trade accounts
payable, accrued liabilities and
subscriber prepayments 69,592 (331,331) 435,791
Increase (decrease) in amount due Jones
Intercable, Inc. 39,939 (19,920) (175,065)
----------- ----------- -----------
Net cash provided by operating activities 962,293 396,415 1,133,693
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (379,930) (248,223) (210,745)
Franchise renewal deposit - (1,850,000) -
Proceeds from sale of assets - - 122,500
----------- ----------- -----------
Net cash used in investing activities (379,930) (2,098,223) (88,245)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 18,264 - 14,454
Repayment of debt (12,008) (9,059) (14,004)
----------- ----------- -----------
Net cash provided by (used in)
financing activities 6,256 (9,059) 450
----------- ----------- -----------
Increase (decrease) in cash 588,619 (1,710,867) 1,045,898
Cash, beginning of period 1,840,984 3,551,851 2,505,953
----------- ----------- -----------
Cash, end of period $ 2,429,603 $ 1,840,984 $ 3,551,851
=========== =========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 15,716 $ 22,912 $ 14,803
=========== =========== ===========
The accompanying notes to financial statements
are an integral part of these statements.
35
36
CABLE TV JOINT FUND 11
(A General Partnership)
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION AND PARTNERS' INTERESTS
Formation and Business
Cable TV Joint Fund 11 ("Joint Fund 11"), a Colorado general
partnership, was formed on February 1, 1984, through a joint venture agreement
made by and among Fund 11-A, Fund 11-B, Fund 11-C, and Fund 11-D, all Colorado
limited partnerships (the "Joint Venturers"). Joint Fund 11 was formed to
acquire, construct, develop and operate cable television systems. Jones
Intercable, Inc. ("Intercable"), general partner of each of the Joint
Venturers, manages Joint Fund 11. Intercable and its subsidiaries also own
and operate other cable television systems. In addition, Intercable manages
cable television systems for limited partnerships for which it is general
partner and for affiliated entities.
On June 29, 1990, Joint Fund 11 completed the sale of all of its
Wisconsin cable television systems, except for the system serving the City of
Manitowoc (the "Manitowoc System"). The Manitowoc System was not sold because
the City of Manitowoc (the "City") did not consent to the transfer of the
franchise. The City of Manitowoc franchise contains a provision that the City
claimed allowed the City to acquire the Manitowoc System upon expiration of the
franchise. On April 9, 1991, Joint Fund 11 took legal action, seeking a
declaration as to whether the buy-out right was enforceable under Federal law.
In October 1993, the City and Joint Fund 11 settled the legal action. In the
settlement, the City conceded that its buy-out right was not applicable in the
event the franchise is renewed, and represented to Joint Fund 11 that it knew
of no reason for non-renewal of the franchise. The City also agreed that the
term of the renewal franchise would be 12 years and that the applicable
franchise fee would be 5 percent. Joint Fund 11 paid the City $1,850,000,
which will be returned, with interest, in the event that the City does not
renew the franchise. If the franchise is renewed, the $1,850,000 will be
amortized over the life of the franchise. The franchise renewal process has
begun and the General Partner expects that it will be completed in 1995.
Contributed Capital, Sharing Ratios and Distribution
The capitalization of Joint Fund 11 is set forth in the accompanying
statements of partners' capital. Profits and losses of Joint Fund 11 are
allocated to the partners in proportion to their respective partnership
interests.
All partnership distributions, including those made from cash flow
(defined as cash receipts derived from routine operations, less debt principal
and interest payments and cash expenses), from the sale or refinancing of
partnership property and on dissolution of Joint Fund 11, are made to the
partners also in proportion to their approximate respective interests in Joint
Fund 11 as follows:
Cable TV Fund 11-A, Ltd. 18%
Cable TV Fund 11-B, Ltd. 8%
Cable TV Fund 11-C, Ltd. 27%
Cable TV Fund 11-D, Ltd. 47%
----
100%
====
36
37
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Records
The accompanying financial statements have been prepared on the
accrual basis of accounting in accordance with generally accepted accounting
principles. Joint Fund 11's tax returns are also prepared on the accrual
basis.
Property, Plant and Equipment
Depreciation is determined using the straight-line method over the
following estimated service lives:
Cable distribution systems 5 - 15 years
Equipment and tools 3 - 5 years
Buildings 20 years
Office furniture and equipment 5 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 subscriber lists are amortized using
the straight-line method over the following remaining estimated useful lives:
Franchise costs 1 year
Subscriber lists 1 year
Revenue Recognition
Subscriber prepayments are initially deferred and recognized as
revenue when earned.
(3) TRANSACTIONS WITH JONES INTERCABLE, INC. AND AFFILIATES
Management Fees and Reimbursements
Intercable manages Joint Fund 11 and receives a fee for its services
equal to 5 percent of the gross revenues, excluding revenues from the sale of
the cable television systems or franchises. Management fees paid to Intercable
during 1994, 1993 and 1992 were $164,805, $164,634 and $162,201, respectively.
Intercable is reimbursed 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 Joint Fund
11. Allocations of personnel costs are primarily based upon actual time spent
by employees of Intercable with respect to each partnership managed. Remaining
overhead costs are allocated based on total revenues and/or the cost of the
partnership assets managed. Effective December 1, 1993, the allocation method
was changed to be based only on revenue, which Intercable believes provides a
more accurate method of allocation. Systems owned by Intercable and all other
systems owned by partnerships for which Intercable is the general partner are
also allocated a proportionate share of these expenses. Intercable believes
that the methodology used in allocating overhead and administrative expenses is
reasonable. The amount of allocated overhead and administrative expenses
charged to Joint Fund 11 during 1994, 1993 and 1992 was $272,753, $246,943 and
$241,761, respectively.
Joint Fund 11 was charged interest during 1994 at an average interest
rate of 10 percent on the amounts due Intercable, which approximated
Intercable's weighted average cost of borrowings. Total interest charged
during 1994, 1993 and 1992 was $13,306, $21,071 and $12,369, respectively.
37
38
Payments to/from Affiliates for Programming Services
Joint Fund 11 receives programming from Product Information Network,
Superaudio, The Mind Extension University and Jones Computer Network,
affiliates of Intercable. Payments to Superaudio totalled $6,105, $6,040 and
$6,007 in 1994, 1993 and 1992, respectively. Payments to The Mind Extension
University totalled $5,532, $3,515 and $3,442 in 1994, 1993 and 1992,
respectively. Payments to Jones Computer Network, which initiated service in
1994, totalled $3,316 during 1994. Joint Fund 11 receives a commission from
Product Information Network based on a percentage of advertising revenue and
number of subscribers. Product Information Network, which initiated service in
1994, paid commissions to Joint Fund 11 totalling $510 in 1994.
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of December 31, 1994 and 1993,
consisted of the following:
1994 1993
----------- -----------
Cable distribution systems $ 6,957,103 $ 6,653,184
Equipment and tools 249,348 202,684
Office furniture and equipment 146,463 138,014
Buildings 113,431 113,431
Vehicles 180,344 159,446
----------- -----------
7,646,689 7,266,759
Less - accumulated depreciation (5,051,015) (4,671,198)
----------- -----------
$ 2,595,674 $ 2,595,561
=========== ===========
(5) DEBT
Debt consists of capital lease obligations with maturities of 1 to 4
years. Installments due on debt principal for the five years in the period
ending December 31, 1999, respectively, are: $7,916, $7,916, $7,916, $2,637,
and $-0-.
(6) INCOME TAXES
Income taxes have not been recorded in the accompanying financial
statements because they accrue to the partners of Funds 11-A, 11-B, 11-C and
11-D, which are general partners in Joint Fund 11.
Joint Fund 11's tax returns, the qualification of the partnership as
such for tax purposes, and the amount of distributable partnership income or
loss are subject to examination by Federal and state taxing authorities. If
such examinations result in changes with respect to the Joint Fund 11's
qualification as such, or in changes with respect to the Joint Fund 11's
recorded income or loss, the tax liability of the general and limited partners
would likely be changed accordingly.
Taxable income reported to the partners is different from that
reported in the 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 and the net
income reported in the statements of operations.
38
39
(7) SUPPLEMENTARY PROFIT AND LOSS INFORMATION
Supplementary profit and loss information is presented below:
Year Ended December 31,
------------------------------------------
1994 1993 1992
--------- -------- ---------
Maintenance and repairs $ 41,329 $ 34,813 $ 41,221
========= ======== =========
Taxes, other than income and
payroll taxes $ 52,294 $ 57,152 $ 64,563
========= ======== =========
Advertising $ 81,763 $ 56,930 $ 34,400
========= ======== =========
Depreciation of property,
plant and equipment $ 379,817 $374,665 $ 356,334
========= ======== =========
Amortization of intangible assets $ 142,776 $142,776 $ 142,776
========= ======== =========
39
40
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
40
41
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.
41
42
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 was President of the International Division of
International Gaming Technology International headquartered in Reno, Nevada,
until March 1995. Prior to joining IGT in May 1994, Mr. Krejci was Group Vice
President of Jones International, Ltd. and 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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43
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.
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 Partnership. During the year ended December 31,
1994, the Partnership received revenues from PIN of $186, and the Venture
received revenues from PIN of $510.
The charges to the Partnership for related party transactions are as
follows for the periods indicated:
At December 31,
--------------------------------------------------------
Cable TV Fund 11-B 1994 1993 1992
------------------ ------------- ------------ -------------
Management fees $ 639,592 $ 596,115 $ 590,871
Allocation of expenses 989,586 824,911 813,649
Interest on advances paid to the General Partner 14,287 13,350 20,961
Amount of notes and advances outstanding 1,305,421 42,288 177,673
Highest amount of notes and advances outstanding 1,305,421 177,673 802,840
Programming fees:
Superaudio 21,977 21,590 22,651
Mind Extension University 19,914 12,565 12,981
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44
At December 31,
--------------------------------------------------------
Cable TV Joint Fund 11 1994 1993 1992
---------------------- ------------- ------------ -------------
Management fees $ 164,805 $ 164,634 $ 162,201
Allocation of expenses 272,753 246,943 241,761
Interest on advances paid to the General Partner 13,306 21,071 12,369
Amount of notes and advances outstanding 72,764 32,825 52,745
Highest amount of notes and advances outstanding 72,764 52,745 491,389
Programming fees:
Superaudio 6,105 6,040 6,007
Mind Extension University 5,532 3,515 3,442
Jones Computer Network 3,316 -0- -0-
44
45
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. See index to financial statements for the list of
financial statements and exhibits thereto filed as
part of this report.
3. The following exhibits are filed herewith.
4.1 Limited Partnership Agreement of Cable TV Fund 11-B. (1)
10.1.1 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Manitowoc, Wisconsin. (Joint
Fund 11) (1)
10.1.2 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for Barker, New York. (Fund 11-B) (2)
10.1.3 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the Town of Clarence, New York. (Fund
11-B) (1)
10.1.4 Copy of order renewing franchise adopted 12/11/91.
(Fund 11-B) (3)
10.1.5 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the Town of Cheektowaga, New York. (Fund
11-B) (4)
10.1.6 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the Town of Elma, New York. (Fund 11-B)
(1)
10.1.7 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the Town of Lancaster, New York. (Fund
11-B) (1)
10.1.8 Copy of renewal order adopted 12/11/91. (Fund 11-B) (3)
10.1.9 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the Village of Lancaster, New York. (Fund
11-B) (1)
10.1.10 Copy of renewal order adopted 5/4/88. (Fund 11-B) (3)
10.1.11 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Lockport, New York. (Fund
11-B) (3)
10.1.12 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the Town of Newfane, New York. (Fund
11-B) (1)
10.1.13 Copy of renewal order adopted 12/11/91. (Fund 11-B) (3)
10.1.14 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the Town and Village of Orchard Park, New
York. (Fund 11-B) (1)
10.1.15 Resolution #1 dated 3/7/90 authorizing renewal of
franchise term. (Fund 11-B) (3)
10.1.16 Letter dated 5/2/90 extending operating rights. (Fund
11-B) (3)
45
46
10.1.17 Order approving renewal adopted 12/11/91.
(Fund 11-B) (3)
10.1.18 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for Somerset, New York. (Fund 11-B) (2)
10.2.1 Copy of Loan Agreement between Fund 11-B and The
Connecticut National Bank, dated as of 3/31/92.
(Fund 11-B) (3)
10.2.2 Copy ofletter amendment to Loan Agreement dated as
7/1/92. (Fund 11-B) (3)
27 Financial Data Schedule
- -----------------
(1) Incorporated by reference from Registrant's Report on
Form 10-K for the fiscal year ended December 31, 1985.
(2) Incorporated by reference from Registrant's Report on
Form 10-K for the fiscal year ended December 31, 1989.
(3) Incorporated by reference from Registrant's Report on
Form 10-K for the fiscal year ended December 31, 1992.
(4) Incorporated by reference from Registrant's Report on
Form 10-K for the fiscal year ended December 31, 1990.
(b) Reports on Form 8-K.
None
46
47
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 11-B, LTD.
a Colorado limited partnership
By: Jones Intercable, Inc.
By: /s/ Glenn R. Jones
------------------
Glenn R. Jones
Chairman of the Board and Chief
Dated: March 20, 1995 Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ Glenn R. Jones
------------------
Glenn R. Jones
Chairman of the Board and Chief
Executive Officer
Dated: March 20, 1995 (Principal Executive Officer)
By: /s/ Kevin P. Coyle
------------------
Kevin P. Coyle
Group Vice President/Finance
Dated: March 20, 1995 (Principal Financial Officer)
By: /s/ Larry Kaschinske
--------------------
Larry Kaschinske
Controller
Dated: March 20, 1995 (Principal Accounting Officer)
By: /s/ James B. O'Brien
--------------------
James B. O'Brien
Dated: March 20, 1995 President and Director
By: /s/ Raymond L. Vigil
--------------------
Raymond L. Vigil
Dated: March 20, 1995 Group Vice President and Director
By: /s/ Robert S. Zinn
------------------
Robert S. Zinn
Dated: March 20, 1995 Director
47
48
By: /s/ David K. Zonker
--------------------------
David K. Zonker
Dated: March 20, 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
48
49
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
4.1 Limited Partnership Agreement of Cable TV Fund 11-B. (1)
10.1.1 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Manitowoc, Wisconsin. (Joint
Fund 11) (1)
10.1.2 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for Barker, New York. (Fund 11-B) (2)
10.1.3 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the Town of Clarence, New York. (Fund
11-B) (1)
10.1.4 Copy of order renewing franchise adopted 12/11/91.
(Fund 11-B) (3)
10.1.5 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the Town of Cheektowaga, New York. (Fund
11-B) (4)
10.1.6 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the Town of Elma, New York. (Fund 11-B)
(1)
10.1.7 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the Town of Lancaster, New York. (Fund
11-B) (1)
10.1.8 Copy of renewal order adopted 12/11/91. (Fund 11-B) (3)
10.1.9 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the Village of Lancaster, New York. (Fund
11-B) (1)
10.1.10 Copy of renewal order adopted 5/4/88. (Fund 11-B) (3)
10.1.11 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Lockport, New York. (Fund
11-B) (3)
10.1.12 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the Town of Newfane, New York. (Fund
11-B) (1)
10.1.13 Copy of renewal order adopted 12/11/91. (Fund 11-B) (3)
10.1.14 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the Town and Village of Orchard Park, New
York. (Fund 11-B) (1)
10.1.15 Resolution #1 dated 3/7/90 authorizing renewal of
franchise term. (Fund 11-B) (3)
10.1.16 Letter dated 5/2/90 extending operating rights. (Fund
11-B) (3)
10.1.17 Order approving renewal adopted 12/11/91.
(Fund 11-B) (3)
10.1.18 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for Somerset, New York. (Fund 11-B) (2)
10.2.1 Copy of Loan Agreement between Fund 11-B and The
Connecticut National Bank, dated as of 3/31/92.
(Fund 11-B) (3)
10.2.2 Copy ofletter amendment to Loan Agreement dated as
7/1/92. (Fund 11-B) (3)
27 Financial Data Schedule
- -----------------
(1) Incorporated by reference from Registrant's Report on
Form 10-K for the fiscal year ended December 31, 1985.
(2) Incorporated by reference from Registrant's Report on
Form 10-K for the fiscal year ended December 31, 1989.
(3) Incorporated by reference from Registrant's Report on
Form 10-K for the fiscal year ended December 31, 1992.
(4) Incorporated by reference from Registrant's Report on
Form 10-K for the fiscal year ended December 31, 1990.