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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: 0-16200
CABLE TV FUND 14-B, LTD.
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(Exact name of registrant as specified in its charter)
Colorado 84-1024658
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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
(15772)
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PART I.
ITEM 1. BUSINESS
THE PARTNERSHIP. Cable TV Fund 14-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 14 Limited Partnership
Program (the "Program"), which was sponsored by Jones Intercable, Inc. (the
"General Partner"). Cable TV Fund 14-A, Ltd. ("Fund 14-A") is the other
partnership that was formed pursuant to the Program. The Partnership and Fund
14-A formed a general partnership known as Cable TV Fund 14-A/B Venture (the
"Venture"), in which the Partnership owns a 73 percent interest and Fund 14-A
owns a 27 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 areas in
and around Surfside, South Carolina (the "Surfside System") and Little Rock,
California (the "Little Rock System"). The Venture owns the cable television
system serving certain areas in Broward County, Florida (the "Broward County
System"). See Item 2. The Surfside System, the Little Rock System and the
Broward County System may collectively be referred to as the "Systems."
CABLE TELEVISION SERVICES. The Systems offer to their subscribers various
types of programming, which include basic service, tier service, premium
service, pay-per-view programs and packages including several of these services
at combined rates.
Basic cable television service usually consists of signals of all four
national television networks, various independent and educational television
stations (both VHF and UHF) and certain signals received from satellites.
Basic service also usually includes programs originated locally by the system,
which may consist of music, news, weather reports, stock market and financial
information and live or videotaped programs of a public service or
entertainment nature. FM radio signals are also frequently distributed to
subscribers as part of the basic service.
The Systems offer tier services on an optional basis to their subscribers.
A tier generally includes most of the cable networks such as Entertainment and
Sports Programming Network (ESPN), Cable News Network (CNN), Turner Network
Television (TNT), Family Channel, Discovery and others, and the cable
television operators buy tier programming from these networks. The Systems
also offer a package that includes the basic service channels and the tier
services.
The Systems also offer premium services to their subscribers, which consist
of feature films, sporting events and other special features that are presented
without commercial interruption. The cable television operators buy premium
programming from suppliers such as HBO, Showtime, Cinemax or others at a cost
based on the number of subscribers the cable operator serves. Premium service
programming usually is significantly more expensive than the basic service or
tier service programming, and consequently cable operators price premium
service separately when sold to subscribers.
The Systems also offer to subscribers pay-per-view programming.
Pay-per-view is a service that allows subscribers to receive single programs,
frequently consisting of motion pictures that have recently completed their
theatrical exhibitions and major sporting events, and to pay for such service
on a program-by-program basis.
REVENUES. Monthly service fees for basic, tier and premium services
constitute the major source of revenue for the Systems. In addition,
advertising sales are becoming a significant source of revenues for the
Systems. As a result of the adoption by the FCC of new rules under the Cable
Television Consumer Protection and Competition Act of 1992 (the "1992 Cable
Act"), and several rate regulation orders, the Systems' rate structures for
cable programming services and equipment have been revised. See Regulation and
Legislation. At December 31, 1994, the Systems' monthly basic service rates
ranged from $7.75 to $12.06, monthly basic and tier ("basic plus") service
rates ranged from $19.59 to $23.25 and monthly premium services ranged from
$3.00 to $10.00 per premium service. Charges for additional outlets have been
eliminated, and charges for remote
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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 $5.00 to $40.00; 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 69% of total revenues, premium service fees
accounted for approximately 14% of total revenues, pay-per-view fees were
approximately 3% of total revenues, advertising fees were approximately 2% of
total revenues and the remaining 12% of total revenues came principally from
equipment rentals, installation fees and program guide sales. The Partnership
is dependent upon the timely receipt of service fees to provide for maintenance
and replacement of plant and equipment, current operating expenses and other
costs of the Systems.
The Partnership's business consists of providing cable television services
to a large number of customers, the loss of any one of which would have no
material effect on the Partnership's business. Each of the Systems has had
some subscribers who later terminated the service. Terminations occur
primarily because people move to another home or to another city. In other
cases, people terminate on a seasonal basis or because they no longer can
afford or are dissatisfied with the service. The amount of past due accounts
in the Systems is not significant. The General Partner's policy with regard to
past due accounts is basically one of disconnecting service before a past due
account becomes material.
The Partnership does not depend to any material extent on the availability
of raw materials; it carries no significant amounts of inventory and it has no
material backlog of customer orders. The Partnership has no employees because
all properties are managed by employees of the General Partner. The General
Partner has engaged in research and development activities relating to the
provision of new services but the amount of the Partnership's funds expended
for such research and development has never been material.
Compliance with Federal, state and local provisions that have been enacted
or adopted regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment has had no material
effect upon the capital expenditures, earnings or competitive position of the
Partnership.
FRANCHISES. The Systems are constructed and operated under non-exclusive,
fixed-term franchises or other types of operating authorities (referred to
collectively herein as "franchises") granted by local governmental authorities.
The Systems' franchises require that franchise fees ranging from 3% of basic
revenues to 10% of basic and premium 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
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issues involved in recent renewal negotiations include rate reregulation,
customer service standards, cable plant upgrade or replacement and shorter
terms of franchise agreements. The inability of the Partnership to renew a
franchise, or lengthy negotiations or litigation involving the renewal process
could have an adverse impact on the business of the Partnership.
COMPETITION. Cable television systems currently experience competition
from several sources, but two technologies, Multichannel Multipoint
Distribution Service ("MMDS") systems, commonly called wireless cable systems,
and Direct Broadcast Satellite ("DBS") systems, which distribute programming to
home satellite dishes, currently pose the greatest potential threat to the
cable television industry.
MMDS systems will likely focus on providing service to residents of rural
areas that are not served by cable television systems, but providers of
programming via MMDS systems will generally have the potential to compete
directly with cable television systems in urban areas as well, and in some
areas of the country, MMDS systems are now in direct competition with cable
television systems. To date, the Partnership has not lost a significant number
of subscribers, nor a significant amount of revenue, to MMDS operators
competing with its cable television systems.
DBS operators deliver premium channel services and specialized programming
to subscribers by high-powered DBS satellites on a wide-scale basis, and two
major companies began operations in 1994. Subscribers are able to receive DBS
services virtually anywhere in the United States with a rooftop or wall-mounted
antenna. In some instances, DBS systems may serve as a complement to cable
television operations by enabling cable television operators to offer
additional channels of programming without the construction of additional cable
plant. DBS companies use video compression technology to increase the channel
capacity of their satellite systems to provide a wide variety of program
services that are competitive with those of cable television systems.
Cable television systems also compete with broadcast television, private
cable television systems known as Master Antenna Television ("MATV"),
Satellite Master Antenna Television ("SMATV") and Television Receive-Only Earth
Stations ("TVRO"). MATV and SMATV generally serve multi-unit dwellings such as
condominiums, apartment complexes and private residential communities, and
TVROs are satellite receiving antenna dishes that are used by "backyard users."
There is also potential competition from an emerging technology, Local
Multipoint Distribution Service ("LMDS"). When it is authorized for service,
the LMDS, sometimes referred to as cellular television, could have the
capability of delivering approximately 50 channels, or if two systems were
combined 100 channels, of video programming to a subscriber's home, which
capacity could be increased by using video compression technology. The General
Partner believes that there are not any current fully operational LMDS systems.
Although the Systems have not yet encountered competition from a telephone
company entering into the cable television business, 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 or the Venture in an area served by a
Partnership or Venture System, the Partnership or the Venture could be at a
competitive disadvantage
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because of the relative financial strength of a telephone company compared to
the Partnership or the Venture. Such competition could also result in cable
television systems providing the same types of services now provided by the
telephone industry.
The FCC has established a new wireless telecommunications service known as
Personal Communications Service ("PCS"). It is envisioned that PCS would
provide portable non-vehicular mobile communications services similar to that
available from cellular telephone companies, but at a lower cost. PCS would be
delivered by placing numerous microcells in a particular area to be covered,
accessible to both residential and business customers. Because of the need to
link the many microcells necessary to deliver this service economically, many
parties are investigating integration of PCS with cable television operations.
Several cable television multiple systems operators and others, including
affiliates of the General Partner,hold or have requested experimental licenses
from the FCC to test PCS technology. The FCC has established spectrum
auctioning procedures for PCS licenses and the licenses are being auctioned in
a series of auction events.
Cable television franchises are not exclusive, so that more than one cable
television system may be built in the same area (known as an "overbuild"), with
potential loss of revenues to the operator of the original cable television
system. The Systems currently face no direct competition from other cable
television operators.
COMPETITION FOR SUBSCRIBERS IN THE SYSTEMS. Following is a summary of
competition from DBS, MMDS, SMATV and TVRO operators in the Systems' franchise
areas:
Little Rock System: There are no MMDS or SMATV operators in the system's service
area. There are eight TVRO operators that provide moderate
competition. There are two DBS operators that are aggressively
marketing their services but do not provide significant
competition at this time.
Surfside System: The General Partner is not aware of any MDS operators in the
system's service area. There are SMATV and TVRO operators
throughout the system's service area; however, they provide
minimal competition. DBS service is available in the system's
service area, but it does not provide significant competition at
this time. There is an overbuilder in the Surfside System that
continues to make proposals at lower rates to existing Surfside
System bulk accounts. They do not represent significant
competition at this time. The Partnership's penetration rate in
the Surfside System is 61%. There is another small cable
television operator in the system's service area that provides
minimal competition.
Broward County System: There are no MMDS or TVRO operators in the system's service area.
There are three SMATV operators in the service area that do not
provide significant 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
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competition, nearly all cable television systems in the United States,
including those owned and managed by the General Partner, are subject to rate
regulation of basic cable services. In addition, the 1992 Cable Act allows the
FCC to regulate rates for non-basic service tiers other than premium services
in response to complaints filed by franchising authorities and/or cable
subscribers. In April 1993, the FCC adopted regulations governing rates for
basic and non-basic services. The FCC's rules became effective on September 1,
1993.
In compliance with these rules, the General Partner reduced rates charged
for certain regulated services effective September 1, 1993. These reductions
resulted in some decrease in revenues and operating income before depreciation
and amortization; however, the decrease was not as severe as originally
anticipated. The General Partner has undertaken actions to mitigate a portion
of these reductions primarily through (a) new service offerings in some
systems, (b) product re-marketing and re-packaging and (c) marketing efforts
directed at non-subscribers.
On February 22, 1994, however, the FCC adopted several additional rate
orders including an order which revised its earlier-announced regulatory scheme
with respect to rates. The FCC's new regulations generally require rate
reductions, absent a successful cost-of-service showing, of 17% of September
30, 1992 rates, adjusted for inflation, channel modifications, equipment costs,
and increases in programming costs. However, the FCC held rate reductions in
abeyance in certain systems. The new regulations became effective on May 15,
1994, but operators could elect to defer rate reductions to July 14, 1994, so
long as they made no changes in their rates and did not restructure service
offerings between May 15 and July 14.
On February 22, 1994, the FCC also adopted interim cost-of-service
regulations. Rate reductions will not be required where it is successfully
demonstrated that rates for basic and other regulated programming services are
justified and reasonable using cost-of-service standards. The FCC established
an interim industry-wide 11.25% permitted rate of return, and requested
comments on whether this standard and other interim cost-of-service standards
should be made permanent. The FCC also established a presumption that
acquisition costs above a system's book value should be excluded from the rate
base, but the FCC will consider individual showings to rebut this presumption.
The need for special rate relief will also be considered by the FCC if an
operator demonstrates that the rates set by a cost-of-service proceeding would
constitute confiscation of investment, and that, absent a higher rate, the
return necessary to operate and to attract investment could not be maintained.
The FCC will establish a uniform system of accounts for operators that elect
cost-of-service rate regulation, and the FCC has adopted affiliate transaction
regulations. After a rate has been set pursuant to a cost-of-service showing,
rate increases for regulated services will be indexed for inflation, and
operators will also be permitted to increase rates in response to increases in
costs beyond their control, such as taxes and increased programming costs.
After analyzing the effects of the two methods of rate regulation, the
Partnership elected to file cost-of-service showings for its Surfside System
and Little Rock System. The General Partner anticipates no further reductions
in revenues or operating income before depreciation and amortization resulting
from the FCC's rate regulations. At this time, however, 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 reduced rates in its Broward County
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.
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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 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
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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.
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
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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.
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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
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Cable TV Fund 14-B, Ltd. Surfside System September 1988
Little Rock System November 1989
Cable TV Fund 14-A/B Venture Broward County System March 1988
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 700 miles
of cable plant, passing approximately 40,000 homes, representing an approximate
63% penetration rate, and the Venture's systems operated approximately 1,000
miles of cable plant, passing approximately 91,000 homes, representing an
approximate 60% penetration rate. Figures for numbers of subscribers, miles of
cable plant and homes passed are compiled from the General Partner's records
and may be subject to adjustments.
CABLE TV FUND 14-B, LTD.
At December 31,
---------------
SURFSIDE, SOUTH CAROLINA 1994 1993 1992
------------------------ ---- ---- ----
Monthly basic plus service rate $21.09 $23.23 $20.60
Basic subscribers 18,969 17,770 17,275
Pay units 12,424 10,168 10,422
Franchise expiration dates range from June 2006 to December 2013.
At December 31,
---------------
LITTLE ROCK, CALIFORNIA 1994 1993 1992
----------------------- ---- ---- ----
Monthly basic plus service rate $21.77 $21.77 $20.00
Basic subscribers 5,336 4,875 4,859
Pay units 4,605 4,171 3,717
Franchise expiration date is October 2000.
CABLE TV FUND 14-A/B VENTURE
At December 31,
---------------
BROWARD COUNTY, FLORIDA 1994 1993 1992
----------------------- ---- ---- ----
Monthly basic plus service rate $23.56 $24.00 $23.95
Basic subscribers 47,819 45,515 42,945
Pay units 41,270 37,684 33,735
Franchise expiration dates range from March 1998 to December 2024.
10
11
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
In April 1989, a few months after it had acquired the Surfside System, Fund
14-B acquired a small cable television system in the Surfside Beach area from
Tritek/Southern Communications, Ltd. At the time of the acquisition, this
system served approximately 1,450 subscribers in the same area as the Surfside
System. In May 1990, the Federal Trade Commission ("FTC") commenced an
investigation into the effect of this acquisition on competition in the
Surfside Beach area. Fund 14-B submitted its response to the FTC's request for
information concerning the acquisition in July 1990. The FTC conducted
recorded interviews with certain employees of the General Partner in September
1991. No further action has been taken by the FTC, although to the best of the
General Partner's knowledge the investigation is still pending.
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 16,842.
11
12
Item 6. Selected Financial Data
For the Year Ended December 31,
--------------------------------------------------------------------------------------
Cable TV Fund 14-B* 1994 1993 1992 1991 1990
------------------- ------------ ----------- ------------ ------------ -------------
Revenues $ 32,084,279 $31,735,048 $ 29,559,867 $ 27,027,603 $ 24,220,522
Depreciation and
Amortization 15,037,554 15,812,869 16,645,383 16,986,839 15,332,874
Operating Loss (5,677,171) (5,755,811) (7,021,107) (8,651,048) (7,302,913)
Minority Interest in
Consolidated Loss 1,468,218 1,277,358 1,676,435 2,178,493 2,224,512
Net Loss (7,903,005) (7,637,593) (9,183,119) (11,408,064) (10,650,390)
Net Loss per Limited
Partnership Unit (29.94) (28.93) (34.79) (43.21) (40.34)
Weighted average number of
Limited Partnership
Units outstanding 261,353 261,353 261,353 261,353 261,353
General Partner's
Deficit (608,182) (529,152) (452,776) (360,945) (246,864)
Limited Partners'
Capital 52,399,548 60,223,523 67,784,740 76,876,028 88,170,011
Total Assets 118,867,757 128,779,941 141,753,537 151,427,141 162,670,302
Debt 57,376,558 58,881,755 62,752,746 61,639,568 57,485,054
General Partner
Advances 297,956 29,182 119,337 - -
* Cable TV Fund 14-B's selected financial data includes 100 percent of the
accounts of Cable TV Fund 14-A/B on a consolidated basis.
For the Year Ended December 31,
-----------------------------------------------------------------------------------
Cable TV Fund 14-A/B 1994 1993 1992 1991 1990
-------------------- ----------- ----------- ------------ ------------ ------------
Revenues $22,183,524 $22,068,952 $20,212,867 $18,366,881 $16,681,752
Depreciation and
Amortization 9,188,994 9,352,808 9,971,915 10,472,621 9,562,081
Operating Loss (2,661,198) (2,324,939) (3,293,133) (4,361,200) (3,939,561)
Net Loss (5,417,779) (4,713,500) (6,186,107) (8,038,720) (8,208,530)
Partners' Capital 22,063,963 27,481,742 32,195,242 38,381,349 46,420,069
Total Assets 66,597,460 72,315,816 80,404,133 85,533,244 92,742,834
Debt 42,271,921 43,461,730 46,908,409 46,037,691 43,533,847
Jones Intercable, Inc.
Advances 354,179 57,920 125,873 16,705 74,393
12
13
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
CABLE TV FUND 14-B
Results of Operations
The results of operations for Cable TV Fund 14-B, Ltd. (the
"Partnership") are summarized below:
Year Ended December 31, 1994
-------------------------------------------------------
Partnership Venture
Owned Owned Consolidated
------------- ------------ ---------------
Revenues $ 9,900,755 $22,183,524 $32,084,279
Operating, general and administrative expense $ 5,796,460 $12,878,438 $18,674,898
Management fees and allocated overhead from
General Partner $ 1,271,708 $ 2,777,290 $ 4,048,998
Depreciation and amortization $ 5,848,560 $ 9,188,994 $15,037,554
Operating loss $(3,015,973) $(2,661,198) $(5,677,171)
Interest expense $ (935,926) $(2,728,034) $(3,663,960)
Consolidated loss before minority interest $(3,953,444) $(5,417,779) $(9,371,223)
Minority interest in consolidated loss $ - $ 1,468,218 $ 1,468,218
Net loss $(3,953,444) $(3,949,561) $(7,903,005)
Year Ended December 31, 1993
--------------------------------------------------
Partnership Venture
Owned Owned Consolidated
------------ ------------ -------------
Revenues $ 9,666,096 $22,068,952 $31,735,048
Operating, general and administrative expense $ 5,311,242 $12,339,515 $17,650,757
Management fees and allocated overhead from
General Partner $ 1,325,665 $ 2,701,568 $ 4,027,233
Depreciation and amortization $ 6,460,061 $ 9,352,808 $15,812,869
Operating loss $(3,430,872) $(2,324,939) $(5,755,811)
Interest expense $ (759,151) $(2,450,672) $(3,209,823)
Consolidated loss before minority interest $(4,201,451) $(4,713,500) $(8,914,951)
Minority interest in consolidated loss $ - $ 1,277,358 $ 1,277,358
Net loss $(4,201,451) $(3,436,142) $(7,637,593)
1994 Compared to 1993 -
Partnership owned -
Revenues in the Partnership's wholly owned Surfside System and
Little Rock System cable television systems increased $234,659, or approximately
2 percent, from $9,666,096 in 1993 to $9,900,755 in 1994. Increases in
revenues from advertising
13
14
sales and pay-per-view were primarily responsible for the increase in revenues.
In addition, 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 1993.
Operating, general and administrative expenses increased $485,218, or
approximately 9 percent, from $5,311,242 in 1993 to $5,796,460 in 1994.
Operating, general and administrative expenses represented approximately 59
percent and 55 percent of revenue for 1994 and 1993, respectively. Increases
in programming fees were primarily responsible for the increase in operating,
general and administrative expense. No other individual factor significantly
affected the increase in operating, general and administrative expenses.
Management fees and allocated overhead from the General Partner decreased
$53,957, or approximately 4 percent, from $1,325,665 in 1993 to $1,271,708 in
1994 due to a decrease in allocated expenses from the General Partner caused by
a change in allocation methods. Depreciation and amortization expense
decreased $611,501, or approximately 9 percent, from $6,460,061 in 1993 to
$5,848,560 in 1994. This decrease is due to the maturation of the
Partnership's asset base.
Operating loss decreased $414,899, or approximately 12 percent, from
$3,430,872 in 1993 to $3,015,973 in 1994. This decrease is due to the increase
in revenues and the decreases in management fees and allocated overhead from
the General Partner and depreciation and amortization exceeding the increase in
operating, general and administrative expense. Operating income before
depreciation and amortization expense decreased $196,602, or approximately 6
percent, from $3,029,189 in 1993 to $2,832,587 in 1994 due to the increase in
operating, general and administrative expenses exceeding the increase in
revenues and the decrease in management fees and allocated overhead from the
General Partner. 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 be 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
in prior years. 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 the Partnership, 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 the Partnership and the General Partner incur cost increases due
to, among other things, increases in programming fees, compliance costs
associated with 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 targeted at non-subscribers.
Interest expense increased $176,775, or approximately 23 percent, from
$759,151 in 1993 to $935,926 in 1994. This increase is due to higher effective
interest rates on interest bearing obligations. Net loss decreased $248,007,
or approximately 6 percent, from $4,201,451 in 1993 to $3,953,444 in 1994.
These losses were primarily the result of the factors discussed above and are
expected to continue in the future.
Venture owned -
In addition to its wholly owned systems, the Partnership owns an
approximate 73 percent interest in the Venture.
Revenues of the Venture's Broward County System increased $114,572, or
less than l percent, from $22,068,952 in 1993 to $22,183,524 in 1994.
Increases in advertising sales revenues and home shopping revenues were
primarily responsible for the increase in revenues. The increase in revenues
would have been greater but for the reduction in basic rates due to the basic
rate regulations issued by the FCC in April 1993 and February 1994 with which
the Venture complied effective September 1993 and July 1994, respectively.
No other individual factor significantly affected the increase in revenues.
Operating, general and administrative expense increased $538,923, or
approximately 4 percent, from $12,339,515 in 1993 to $12,878,438 in 1994.
Operating, general and administrative expenses represented 58 percent of
revenue in 1994, compared to 56 percent in 1993. The increase in operating,
general and administrative expenses was due primarily to increases in
programming fees and advertising sales expenses. No other individual factor
significantly affected the increase in operating, general and administrative
expense. Management fees and allocated overhead from Jones Intercable, Inc.
increased $75,722, or approximately 3 percent, from $2,701,568 in 1993 to
$2,777,290 in 1994 primarily due to an increase in allocated expenses from Jones
Intercable, Inc. Jones Intercable, Inc. has experienced increases in expenses,
including personnel costs and reregulation costs, a portion of which is
allocated to the Venture. Depreciation and amortization expense decreased
$163,814, or approximately 2 percent, from $9,352,808 in 1993 to $9,188,994 in
1994. The decrease in depreciation and amortization expense is attributable
to the maturation of the Venture's asset base.
Operating loss increased $336,259, or approximately 14 percent, from
$2,324,939 in 1993 to $2,661,198 in 1994. This increase is due to the increase
in operating, general and administrative expenses and management fees and
allocated overhead from Jones Intercable, Inc. exceeding the increase in
revenues and the decrease in depreciation and amortization expense. Operating
14
15
income before depreciation and amortization expense decreased $500,073, or
approximately 7 percent, from $7,027,869 in 1993 to $6,527,796 in 1994 due to
the increases in operating, general and administrative expenses and management
fees and allocated overhead from Jones Intercable, Inc. 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 in prior years. However, other operating costs such as
programming fees, salaries and benefits, and marketing costs as well as other
costs incurred by Jones Intercable, Inc., which are allocated to the
Partnership, 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 the Partnership and Jones Intercable, Inc.
incur cost increases due to, among other things, increases in programming fees,
compliance costs associated with reregulation and competition, that exceed
increases in revenue. Jones Intercable, Inc. 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 targeted at
non-subscribers.
Interest expense increased $277,362, or approximately 11 percent, from
$2,450,672 in 1993 to $2,728,034 in 1994 due to higher effective interest rates
on interest bearing obligations. Net loss increased $704,279, or approximately
15 percent, from $4,713,500 in 1993 to $5,417,779 in 1994. The increase was
primarily attributable to the increase in operating loss and the increase in
interest expense. These losses were primarily the result of the factors
discussed above and are expected to continue in the future.
1993 Compared to 1992 -
Partnership owned -
Revenues in the Partnership's wholly owned Surfside System and
Little Rock System increased $319,096, or approximately 3 percent, from
$9,347,000 in 1992 to $9,666,096 in 1993. Basic service rate adjustments as
well as increases in revenues from advertising sales and pay-per-view were
primarily responsible for the increase in revenues. Such increases were
offset, in part, by decreases in premium service revenue. In addition, the
increase in revenues would have been greater but for the reduction in basic
rates due to new basic rate regulations issued by the FCC in April 1993 with
which the Partnership complied effective September 1993.
Operating, general and administrative expenses increased $180,421, or
approximately 4 percent, from $5,130,821 in 1992 to $5,311,242 in 1993.
Operating, general and administrative expenses represented 55 percent of
revenue in both 1993 and 1992. Increases in programming fees were primarily
responsible for the increase in operating, general and administrative expense.
No other individual factor significantly affected the increase in operating,
general and administrative expenses. Management fees and allocated overhead
from the General Partner increased $54,980, or approximately 4 percent, from
$1,270,685 in 1992 to $1,325,665 in 1993 due to the increase in revenues, upon
which such fees and allocations are based, and an increase in allocated expense
from the General Partner. Depreciation and amortization expense decreased
$213,407, or approximately 3 percent, from $6,673,468 in 1992 to $6,460,061 in
1993. This decrease was due to the maturation of the Partnership's asset base.
Operating loss decreased $297,102, or approximately 8 percent, from
$3,727,974 in 1992 to $3,430,872 in 1993. This decrease 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 as well as the decrease in depreciation and amortization
expense. Operating income before depreciation and amortization expense
increased $83,695, or approximately 3 percent, from $2,945,494 in 1992 to
$3,029,189 in 1993 due to the increase in revenues exceeding the increases in
operating, general and administrative expenses and management fees and
allocated overhead from the General Partner.
Interest expense decreased $164,771, or approximately 18 percent, from
$923,922 in 1992 to $759,151 in 1993. This decrease was due to lower effective
interest rates and lower outstanding balances on interest bearing obligations.
Net loss decreased $471,996, or approximately 10 percent, from $4,673,447 in
1992 to $4,201,451 in 1993. These losses were primarily the result of the
factors discussed above.
Venture owned -
In addition to its wholly owned systems, the Partnership owns an
approximate 73 percent interest in the Venture.
Revenues of the Venture's Broward County System increased $1,856,065,
or approximately 9 percent, from $20,212,867 in 1992 to $22,068,952 in 1993.
Increases in basic subscribers and premium subscriptions accounted for
approximately 48 percent of the increase in revenue. Basic subscribers and
premium subscriptions increased 6 percent and 14 percent, respectively, during
15
16
1993. Advertising sales accounted for approximately 19 percent of the increase
in revenues. Basic service rate adjustments accounted for approximately 15
percent of the increase in revenues. The increase in revenues would have been
greater but for the reduction in basic rates due to the basic rate regulations
issued by the FCC in April 1993 with which the Venture complied effective
September 1993. No other individual factor significantly affected the
increase in revenues.
Operating, general and administrative expense increased $1,287,088, or
approximately 12 percent, from $11,052,427 in 1992 to $12,339,515 in 1993.
Operating, general and administrative expenses represented 56 percent of
revenue in 1993, compared to 55 percent in 1992. The increase in operating,
general and administrative expenses was due primarily to increases in
programming fees and marketing expenses. No other individual factor
significantly affected the increase in operating, general and administrative
expense. Management fees and allocated overhead from Jones Intercable, Inc.
increased $219,910, or approximately 9 percent, from $2,481,658 in 1992 to
$2,701,568 in 1993 due to the increase in revenues, upon which such fees and
allocations are based, and an increase in allocated expenses from Jones
Intercable, Inc. Depreciation and amortization expense decreased $619,107, or
approximately 6 percent, from $9,971,915 in 1992 to $9,352,808 in 1993. The
decrease in depreciation and amortization expense was attributable to the
maturation of the Venture's intangible asset base.
Operating loss decreased $968,164, or approximately 29 percent, from
$3,293,133 in 1992 to $2,324,939 in 1993. This decrease was due to the increase
in revenues exceeding the increases in operating, general and administrative
expenses and management fees and allocated overhead from Jones Intercable,
Inc. as well as the decrease in depreciation and amortization expense.
Operating income before depreciation and amortization expense increased
$349,087, or approximately 5 percent, from $6,678,782 in 1992 to $7,027,869 in
1993 due to the increase in revenues exceeding the increases in operating,
general and administrative expenses and management fees and allocated overhead
from Jones Intercable, Inc.
Interest expense decreased $114,318, or approximately 4 percent, from
$2,564,990 in 1992 to $2,450,672 in 1993 due to lower effective interest rates
and lower outstanding balances on interest bearing obligations. Net loss
decreased $1,472,607, or approximately 24 percent, from $6,186,107 in 1992 to
$4,713,500 in 1993. The decrease was primarily attributable to the decrease in
operating loss and the decrease in interest expense. These losses were
primarily the result of the factors discussed above.
Financial Condition
In addition to the Surfside System and the Little Rock System owned
directly by it, the Partnership owns an approximate 73 percent interest in the
Venture. The accompanying consolidated financial statements include 100
percent of the accounts of the Partnership and those of the Venture reduced by
the Partnership's 27 percent minority interest in the Venture.
The Partnership expended approximately $1,400,000 on capital additions
during 1994 in its Surfside System and Little Rock System. Approximately 43
percent of these expenditures were for the construction of cable plant
extensions. Approximately 25 percent of the expenditures were for the
construction of drops to subscribers' homes. The remainder of the expenditures
were for various enhancements in the Partnership's cable television systems.
Funding for these expenditures was provided by cash generated by operations.
Anticipated capital expenditures for 1995 are approximately $2,000,000.
Approximately 25 percent of these expenditures are expected to be used for new
plant construction in the Partnership's systems. Approximately 22 percent are
for service drops to homes. The remainder of these expenditures are for
various enhancements in each of the Partnership's systems. Funding for these
improvements will be provided by cash generated from operations and borrowings
under the Partnership's credit facility.
The Partnership's credit agreement had an original commitment of
$20,000,000. Such commitment consisted of a $10,000,000 reducing revolving
credit facility and a $10,000,000 term loan. The reducing revolving credit
commitment reduced to $9,500,000 on December 31, 1993, reduced to $8,500,000 on
December 31, 1994 and is payable in full at December 31, 1995. At December 31,
1994, $5,800,000 was outstanding under the revolving credit facility, leaving
$2,700,000 of borrowings available until December 31, 1995 for the needs of the
Partnership. The $10,000,000 term loan is payable in quarterly installments
which began March 31, 1993 and matures December 31, 1995. As of December 31,
1994, $9,250,000 was outstanding on this term loan. Installment payments made
during 1994 totaled $500,000. The Partnership plans on renegotiating its debt
arrangements prior to the maturity of its current revolving credit facility and
term loan. If successful, the proceeds would be used to repay amounts
outstanding under the current debt arrangements. Currently, interest on the
outstanding principal balance on each loan is at the Partnership's option of
Prime plus .20 percent, LIBOR plus 1.20 percent or the CD rate plus 1.325
percent.
In January 1993, the Partnership entered into an interest rate cap
agreement covering outstanding debt obligations of $8,000,000. The Partnership
paid a fee of $77,600. The agreement protected the Partnership from LIBOR
interest rates that exceeded seven percent for three years from the date of the
agreement.
The General Partner believes that the Partnership has sufficient
sources of capital to service its presently anticipated needs, subject to
successful renegotiation of its credit facility, as discussed above.
16
17
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 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 cost-of-service showings for the Surfside
System and Little Rock System and thus anticipates no further reductions in
rates in its systems. The cost-of-service showings have not yet received final
approvals from franchising authorities, however, and there can be no assurance
that the Partnership's cost-of-service showings will prevent further rate
reductions until such final approvals are received.
The Venture complied with the February 1994 benchmark regulations and
further reduced rates in the Broward County System effective July 1994. See
Item 1 for further discussion of the provisions of the 1992 Cable Act and the
FCC regulations promulgated thereunder.
The Venture expended approximately $3,600,000 on capital additions
during 1994. Cable television plant extensions accounted for approximately 22
percent of these expenditures. The construction of service drops to homes,
rebuilds and upgrades, and the purchase of converters accounted for
approximately 22 percent, 9 percent and 9 percent, respectively, of the
expenditures. The remainder of these expenditures related to various
enhancements in the Broward County System. These capital expenditures were
funded from cash on hand and cash generated from operations. The Venture plans
to expend approximately $3,200,000 for capital additions in 1995. Of this
total, approximately 30 percent is for cable television plant extensions.
Approximately 28 percent will relate to the construction of service drops to
homes. Approximately 14 percent will relate to upgrades and rebuild of the
Broward County System. The remainder of the anticipated expenditures are for
various enhancements in the Broward County System. These capital expenditures
are expected to be funded from cash on hand and cash generated from operations.
On December 31, 1992, the then-outstanding balance of $46,800,000 on
the Venture's revolving credit facility converted to a term loan. The balance
outstanding on the term loan at December 31, 1994 was $42,120,468. The term
loan is payable in quarterly installments which began March 31, 1993 and is
payable in full by December 31, 1999. In June 1994, Jones Intercable, Inc.
completed negotiations to lower the level of principal payments in order to
provide liquidity for capital expenditures. Installments paid during 1994
totalled $1,169,532. Installments due during 1995 total $2,340,000. Funding
for these installments is expected to come from cash on hand and cash generated
from operations. Interest is at the Venture's option of Prime plus 1/2
percent, LIBOR plus 1-1/2 percent or the CD rate plus 1-5/8 percent.
In January 1993, the Venture entered into an interest rate cap
agreement covering outstanding debt obligations of $25,000,000. The Venture
paid a fee of $246,250. The agreement protects the Venture from LIBOR interest
rates that exceeded 7 percent for three years from the date of the agreement.
Jones Intercable, Inc. believes that the Venture has sufficient sources
of capital to service its presently anticipated needs.
17
18
Item 8. Financial Statements
CABLE TV FUND 14-B AND
CABLE TV FUND 14-A/B
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1994 AND 1993
INDEX
Page
----------------
14-B 14-A/B
---- ------
Report of Independent Public Accountants 19 31
Balance Sheets 20 32
Statements of Operations 22 34
Statements of Partners' Capital (Deficit) 23 35
Statements of Cash Flows 24 36
Notes to Financial Statements 25 37
18
19
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Cable TV Fund 14-B:
We have audited the accompanying consolidated balance sheets of CABLE
TV FUND 14-B (a Colorado limited partnership) and subsidiary as of December 31,
1994 and 1993, and the related consolidated statements of operations, partners'
capital (deficit) and cash flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility of
the General Partner's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Cable TV Fund 14-B
and subsidiary as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 8, 1995.
19
20
CABLE TV FUND 14-B
(A Limited Partnership)
CONSOLIDATED BALANCE SHEETS
December 31,
---------------------------------
ASSETS 1994 1993
-------------- -------------
CASH $ 648,379 $ 410,238
TRADE RECEIVABLES, less allowance for doubtful receivables of
$118,967 and $90,753 at December 31, 1994 and 1993, respectively 944,373 1,331,434
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 85,658,550 80,586,783
Less-accumulated depreciation (37,569,000) (31,708,982)
------------- ------------
48,089,550 48,877,801
Franchise costs, net of accumulated amortization of $43,864,245 and
$37,174,465 at December 31, 1994 and 1993, respectively 42,066,552 48,756,332
Subscriber lists, net of accumulated amortization of $13,916,352 and
$12,258,896 at December 31, 1994 and 1993, respectively 3,606,588 5,264,044
Costs in excess of interests in net assets purchased, net of accumulated
amortization of $4,572,555 and $3,882,714 at December 31, 1994
and 1993, respectively 23,014,006 23,703,847
------------- ------------
Total investment in cable television properties 116,776,696 126,602,024
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 498,309 436,245
------------- ------------
Total assets $ 118,867,757 $128,779,941
============= ============
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
20
21
CABLE TV FUND 14-B
(A Limited Partnership)
CONSOLIDATED BALANCE SHEETS
December 31,
--------------------------------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1994 1993
------------ ------------
LIABILITIES:
Debt $ 57,376,558 $ 58,881,755
Accounts payable-
Trade 62,146 32,339
General Partner 297,956 29,182
Deferred brokerage fee 920,000 920,000
Accrued liabilities 1,954,453 1,314,361
Subscriber prepayments 582,203 556,640
------------ ------------
Total liabilities 61,193,316 61,734,277
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 7)
MINORITY INTEREST IN CABLE TELEVISION
JOINT VENTURE 5,883,075 7,351,293
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (609,182) (530,152)
------------ ------------
(608,182) (529,152)
------------ ------------
Limited Partners-
Net contributed capital (261,353 units
outstanding at December 31, 1994 and 1993) 112,127,301 112,127,301
Accumulated deficit (59,727,753) (51,903,778)
------------ ------------
52,399,548 60,223,523
------------ ------------
Total liabilities and partners' capital (deficit) $118,867,757 $128,779,941
============ ============
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
21
22
CABLE TV FUND 14-B
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
--------------------------------------------------
1994 1993 1992
------------ ------------- --------------
REVENUES $ 32,084,279 $ 31,735,048 $ 29,559,867
COSTS AND EXPENSES:
Operating, general and administrative 18,674,898 17,650,757 16,183,248
Management fees and allocated overhead from
General Partner 4,048,998 4,027,233 3,752,343
Depreciation and amortization 15,037,554 15,812,869 16,645,383
------------ ------------- -------------
OPERATING LOSS (5,677,171) (5,755,811) (7,021,107)
------------ ------------- -------------
OTHER INCOME (EXPENSE):
Interest expense (3,663,960) (3,209,823) (3,488,912)
Other, net (30,092) 50,683 (349,535)
------------ ------------- -------------
Total other income (expense) (3,694,052) (3,159,140) (3,838,447)
CONSOLIDATED LOSS BEFORE MINORITY INTEREST (9,371,223) (8,914,951) (10,859,554)
MINORITY INTEREST IN CONSOLIDATED LOSS 1,468,218 1,277,358 1,676,435
------------ ------------- -------------
NET LOSS $ (7,903,005) $ (7,637,593) $ (9,183,119)
============ ============= =============
ALLOCATION OF NET LOSS:
General Partner $ (79,030) $ (76,376) $ (91,831)
============ ============= =============
Limited Partners $ (7,823,975) $ (7,561,217) $ (9,091,288)
============ ============= =============
NET LOSS PER LIMITED
PARTNERSHIP UNIT $ (29.94) $ (28.93) $ (34.79)
============ ============= =============
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 261,353 261,353 261,353
============ ============= =============
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
22
23
CABLE TV FUND 14-B
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
Year Ended December 31,
------------------------------------------------------
1994 1993 1992
------------- --------------- --------------
GENERAL PARTNER:
Balance, beginning of year $ (529,152) $ (452,776) $ (360,945)
Net loss for year (79,030) (76,376) (91,831)
------------ ------------- ------------
Balance, end of year $ (608,182) $ (529,152) $ (452,776)
============ ============= ============
LIMITED PARTNERS:
Balance, beginning of year $ 60,223,523 $ 67,784,740 $ 76,876,028
Net loss for year (7,823,975) (7,561,217) (9,091,288)
------------ ------------- ------------
Balance, end of year $ 52,399,548 $ 60,223,523 $ 67,784,740
============ ============= ============
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
23
24
CABLE TV FUND 14-B
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
-------------------------------------------------
1994 1993 1992
------------ ------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(7,903,005) $ (7,637,593) $ (9,183,119)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 15,037,554 15,812,869 16,645,383
Amortization of interest rate protection contract 108,711 108,708 -
Minority interest in consolidated loss (1,468,218) (1,277,358) (1,676,435)
Decrease (increase) in trade receivables 387,061 (490,713) (370,755)
Decrease (increase) in deposits, prepaid expenses and
deferred charges (311,234) 8,891 (228,444)
Increase (decrease) in accounts payable, accrued
liabilities and subscriber prepayments 695,462 (97,499) (46,564)
Increase (decrease) in advances from General Partner 268,774 (90,155) 119,337
----------- ------------ --------------
Net cash provided by operating activities 6,815,105 6,337,150 5,259,403
----------- ------------ --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (5,071,767) (4,678,400) (3,771,339)
----------- ------------ --------------
Net cash used in investing activities (5,071,767) (4,678,400) (3,771,339)
----------- ------------ --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 290,797 319,562 2,286,081
Repayment of debt (1,795,994) (4,190,553) (1,172,903)
Purchase of interest rate protection contracts - (323,850) -
----------- ------------ --------------
Net cash provided by (used in) financing activities (1,505,197) (4,194,841) 1,113,178
----------- ------------ --------------
Increase (decrease) in cash 238,141 (2,536,091) 2,601,242
Cash, beginning of year 410,238 2,946,329 345,087
----------- ------------ --------------
Cash, end of year $ 648,379 $ 410,238 $ 2,946,329
=========== ============ ==============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 3,257,869 $ 3,098,987 $ 3,370,866
=========== ============ ==============
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
24
25
CABLE TV FUND 14-B
(A Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND PARTNERS' INTERESTS
Formation and Business
Cable TV Fund 14-B, Ltd. (the "Partnership"), a Colorado
limited partnership, was formed on September 9, 1987, under a public program
sponsored by Jones Intercable, Inc. ("Intercable"). The Partnership was formed
to acquire, construct, develop and operate cable television systems.
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, also, for other affiliated entities.
Contributed Capital, Commissions and Syndication Costs
The capitalization of the Partnership is set forth in the
accompanying statements of partners' capital (deficit). No limited partner 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.
Formation of Joint Venture
On January 8, 1988, Cable TV Fund 14-A and the Partnership
formed Cable TV Fund 14-A/B Venture (the "Venture"), to acquire the cable
television system serving areas in and around Broward County, Florida (the
"Broward County System"). Cable TV Fund 14-A contributed $18,975,000 to the
capital of the Venture for an approximate 27 percent ownership interest and the
Partnership contributed $51,025,000 to the capital of the Venture for an
approximate 73 percent ownership interest.
Cable Television System Acquisitions
The Partnership acquired the cable television system serving
Surfside, South Carolina (the "Surfside System") in 1988 and the cable
television system serving Little Rock, California (the "Little Rock System") in
1989.
The above acquisitions were accounted for as purchases with
the individual purchase prices allocated to tangible and intangible assets
based upon an independent appraisal. The method of allocation of purchase
price was as follows: first, to the fair value of net tangible assets
acquired; second, to the value of subscriber lists and noncompete agreements
with previous owners; third, to franchise costs; and fourth, to costs in excess
of interests in net assets purchased. Brokerage fees paid to an affiliate of
Intercable (Note 3) and other system acquisition costs were capitalized and
included in the cost of intangible assets.
25
26
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Records
The accompanying consolidated financial statements have been
prepared on the accrual basis of accounting in accordance with generally
accepted accounting principles. The Partnership's tax returns are also
prepared on the accrual basis.
Principles of Consolidation
As a result of the Partnership's ownership interest in the
Venture of approximately 73 percent, the accompanying consolidated financial
statements present the Partnership's and the Venture's financial condition and
results of operations on a consolidated basis with the ownership interest of
Cable TV Fund 14-A in the Venture shown as a minority interest. The Venture
does not have any ownership interest in the Surfside System or Little Rock
System. These systems are owned 100 percent by the Partnership. All
interpartnership accounts and transactions have been eliminated.
Property, Plant and Equipment
Depreciation is provided using the straight-line method over
the following estimated service lives:
Cable distribution systems 5 - 15 years
Equipment and tools 5 years
Office furniture and equipment 5 years
Buildings 20 years
Vehicles 3 years
Replacements, renewals and improvements are capitalized and
maintenance and repairs are charged to expense as incurred.
Intangible Assets
Costs assigned to franchises, subscriber lists and costs in
excess of interests in net assets purchased are amortized using the
straight-line method over the following remaining estimated useful lives:
Franchise costs 1 - 30 years
Subscriber lists 2 years
Costs in excess of interests in net assets purchased 34 years
Revenue Recognition
Subscriber prepayments are initially deferred and recognized
as revenue when earned.
(3) TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
Brokerage Fees
The Jones Group, Ltd., a subsidiary of Intercable, performs
brokerage services for the Partnership. For brokering the acquisition of the
Surfside System for the Partnership, The Jones Group, Ltd. earned a fee
totalling $1,920,000, or 4 percent of the purchase price, during the year ended
December 31, 1988. Approximately $920,000 of such fee has been deferred until
the sale of the Surfside System.
Management Fees, Distribution Ratios and Reimbursements
Intercable manages the Partnership and the Venture and
receives a fee for its services equal to five percent of the gross revenues of
the Partnership and the Venture, excluding revenues from the sale of cable
television systems or franchises. Management fees paid to Intercable by the
Partnership and the Venture for the years ended December 31, 1994, 1993 and
1992 were $1,604,214, $1,586,750 and $1,477,993, respectively.
26
27
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 the
sale or refinancing of a system or upon dissolution of the Partnership, will be
made as follows: first, to the limited partners in an amount which, together
with all prior distributions, will equal 125 percent of the amount initially
contributed to the Partnership capital by the limited partners; the balance, 75
percent to the limited partners and 25 percent to Intercable.
The Partnership and the Venture reimburse Intercable for
certain allocated overhead and administrative expenses. These expenses include
salaries and benefits paid for corporate personnel, rent, data processing
services and other corporate facilities costs. Such personnel provide
engineering, marketing, accounting, administrative, legal, and investor
relations services to the Partnership and to the Venture. Allocations of
personnel costs are based primarily on actual time spent by employees of
Intercable with respect to each Partnership managed. Remaining overhead costs
are allocated based on revenues and/or the cost of 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 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 expense is
reasonable. Reimbursements made to Intercable for allocated overhead and
administrative expenses during the years ended December 31, 1994, 1993 and
1992 were $2,444,784, $2,440,481 and $2,274,350, respectively.
The Partnership and the Venture were 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 borrowing. Total
interest charged the Partnership and the Venture by Intercable was $960, $2,361
and $7,219 for the years ended December 31, 1994, 1993 and 1992, respectively.
Payments to/from Affiliates for Programming Services
The Partnership and the Venture receive programming from
Product Information Network, Superaudio, The Mind Extension University and
Jones Computer Network, affiliates of Intercable. Payments to Superaudio
totalled approximately $46,768, $46,177 and $45,603, in 1994, 1993 and 1992,
respectively. Payments to The Mind Extension University totalled approximately
$42,373, $26,824 and $26,131 in 1994, 1993 and 1992, respectively. Payments
to Jones Computer Network, which initiated service in 1994, totalled $14,957 in
1994. The Partnership and the Venture received commissions 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 and the Venture totalling $31,126 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 $ 76,988,622 $ 72,268,005
Equipment and tools 2,448,874 2,500,445
Office furniture and equipment 1,538,279 1,290,847
Buildings 2,149,823 2,101,921
Vehicles 1,346,651 1,239,264
Land 1,186,301 1,186,301
------------ ------------
85,658,550 80,586,783
Less - accumulated depreciation (37,569,000) (31,708,982)
------------ ------------
Total $ 48,089,550 $ 48,877,801
============ ============
27
28
(5) DEBT
Debt consists of the following: December 31,
--------------------------------
1994 1993
----------- -----------
Lending institutions-
Term loan for the Venture $42,120,468 $43,290,000
Revolving credit and term loan for the Partnership 15,050,000 15,350,000
----------- -----------
Capital lease obligations 206,090 241,755
----------- -----------
Total $57,376,558 $58,881,755
=========== ===========
On December 31, 1992, the then-outstanding balance of
$46,800,000 on the Venture's revolving credit facility converted to a term
loan. The balance outstanding on the term loan at December 31, 1994 was
$42,120,468. The term loan is payable in quarterly installments which began
March 31, 1993 and is payable in full by December 31, 1999. In June 1994,
Intercable completed negotiations to lower the level of principal payments in
order to provide liquidity for capital expenditures. Installments paid during
1994 totalled $1,169,532. Installments due during 1995 total $2,340,000.
Funding for these installments is expected to come from cash on hand and cash
generated from operations. Interest is at the Venture's option of Prime plus
1/2 percent, LIBOR plus 1-1/2 percent or CD rate plus 1-5/8 percent. The
effective interest rates on amounts outstanding as of December 31, 1994 and
1993 were 7.17 percent and 5.0 percent, respectively.
In January 1993, the Venture entered into an interest rate cap
agreement covering outstanding debt obligations of $25,000,000. The Venture
paid a fee of $246,250. The agreement protects the Venture from LIBOR interest
rates that exceeded 7 percent for three years from the date of the agreement.
The fee is being charged to interest expense over the life of the agreement
using the straight-line method.
The Partnership's credit agreement had an original commitment
of $20,000,000. Such commitment consisted of a $10,000,000 reducing revolving
credit facility and a $10,000,000 term loan. The reducing revolving credit
commitment reduced to $9,500,000 on December 31, 1993, reduced to $8,500,000 on
December 31, 1994 and is payable in full at December 31, 1995. At December 31,
1994, $5,800,000 was outstanding under the revolving credit facility, leaving
$2,700,000 of borrowings available until December 31, 1995 for the needs of the
Partnership. The $10,000,000 term loan is payable in quarterly installments
which began March 31, 1993 and matures on December 31, 1995. As of December
31, 1994, $9,250,000 was outstanding on this term loan. The Partnership plans
on renegotiating its debt arrangements prior to the maturity of its current
revolving credit facility and term loan. Currently, interest is payable on
each loan at the Partnership's option of Prime plus .20 percent, LIBOR plus
1.20 percent or the CD rate plus 1.325 percent. The effective interest rates
on amounts outstanding on the Partnership's credit facility as of December 31,
1994 and 1993 were 6.97 percent and 4.71 percent, respectively.
In January 1993, the Partnership entered into an interest rate
cap agreement covering outstanding debt obligations of $8,000,000. The
Partnership paid a fee of $77,600. The agreement protected the Partnership
from LIBOR interest rates that exceeded 7 percent for three years from the date
of the agreement. The fee is being charged to interest expense over the life
of this agreement using the straight-line method.
Installments due on debt principal for each of the five years
in the period ending December 31, 1999 and thereafter, respectively, are:
Venture Fund 14-B Total
----------- ----------- -----------
1995 $ 2,385,436 $15,066,391 $17,451,827
1996 3,555,436 16,391 3,571,827
1997 4,725,436 16,391 4,741,827
1998 4,695,145 5,464 4,700,609
1999 26,910,468 - 26,910,468
Thereafter - - -
----------- ----------- -----------
Total $42,271,921 $15,104,637 $57,376,558
=========== =========== ===========
At December 31, 1994, substantially all of the Partnership's
and the Venture's property, plant and equipment secured their respective
indebtedness.
28
29
(6) INCOME TAXES
Income taxes have not been recorded in the accompanying
consolidated financial statements because they accrue directly to the partners.
The Federal and state income tax returns of the Partnership are prepared and
filed by Intercable.
The Partnership's tax returns, the qualification of the
Partnership as such for tax purposes, and the amount of distributable
Partnership income or loss are subject to examination by Federal and state
taxing authorities. If such 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 loss reported to the partners is different from that
reported in the consolidated statements of operations due to the difference in
depreciation recognized under generally accepted accounting principles and the
expense allowed for tax purposes under the Modified Accelerated Cost Recovery
System (MACRS). There are no other significant differences between taxable
loss and the net loss reported in the consolidated statements of operations.
(7) COMMITMENTS AND CONTINGENCIES
On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act"), which became
effective on December 4, 1992. The 1992 Cable Act generally allows for a
greater degree of regulation in the cable television industry. In April 1993,
the 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 cost-of-service
showings for the Surfside System and the Little Rock System and thus
anticipates no further reductions in rates in its systems. The
cost-of-service showings have not yet received final approvals from
franchising authorities, however, and there can be no assurance that the
Partnership's cost-of-service showings will prevent further rate reductions
until such final approvals are received.
Office and other facilities are rented under various long-term lease
arrangements. Rent paid under such lease arrangements totalled $90,993,
$97,288 and $86,704, respectively, for the years ended December 31, 1994, 1993
and 1992. Minimum commitments under operating leases for each of the five
years in the period ending December 31, 1999 and thereafter are as follows:
1995 $ 75,740
1996 54,125
1997 29,740
1998 9,110
1999 7,944
Thereafter 22,754
---------
$ 199,413
=========
(8) SUPPLEMENTARY PROFIT AND LOSS INFORMATION
Supplementary profit and loss information is presented below:
For the Year Ended December 31,
--------------------------------------------------
1994 1993 1992
----------- ------------ -----------
Maintenance and repairs $ 442,368 $ 405,046 $ 385,911
=========== =========== ===========
Taxes, other than income and payroll taxes $ 386,906 $ 390,126 $ 356,548
=========== =========== ===========
Advertising $ 228,144 $ 188,715 $ 248,868
=========== =========== ===========
Depreciation of property, plant and equipment $ 6,000,478 $ 6,765,143 $ 7,390,485
=========== =========== ===========
Amortization of intangible assets $ 9,037,076 $ 9,047,726 $ 9,254,898
=========== =========== ===========
29
30
(9) OPERATING RESULTS OF SURFSIDE AND LITTLE ROCK SYSTEMS
The results of operations of the Partnership's wholly owned
Surfside System and Little Rock System on a stand-alone basis are presented
below. The Partnership's share of the Venture owned Broward County System
operations is also presented.
For the Year Ended December 31,
-------------------------------------------------
1994 1993 1992
----------- ----------- -----------
Revenues $ 9,900,755 $ 9,666,096 $ 9,347,000
Operating, general and administrative expenses (5,796,460) (5,311,242) (5,130,821)
Management fees and allocated overhead from General Partner (1,271,708) (1,325,665) (1,270,685)
Depreciation and amortization (5,848,560) (6,460,061) (6,673,468)
----------- ----------- -----------
Operating loss (3,015,973) (3,430,872) (3,727,974)
Interest expense (935,926) (759,151) (923,922)
Other, net (1,545) (11,428) (21,551)
----------- ----------- -----------
Loss of the Surfside System and the Little Rock System (3,953,444) (4,201,451) (4,673,447)
The Partnership's share of the loss of the Broward County System (3,949,561) (3,436,142) (4,509,672)
----------- ----------- -----------
Net loss $(7,903,005) $(7,637,593) $(9,183,119)
=========== =========== ===========
30
31
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Cable TV Fund 14-A/B Venture:
We have audited the accompanying balance sheets of CABLE TV FUND
14-A/B VENTURE (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 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
14-A/B Venture 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.
31
32
CABLE TV FUND 14-A/B VENTURE
(A General Partnership)
BALANCE SHEETS
December 31,
--------------------------------
ASSETS 1994 1993
------------- --------------
CASH $ 254,974 $ 313,701
TRADE RECEIVABLES, less allowance for doubtful receivables of
$95,444 and $60,902 at December 31, 1994 and 1993, respectively 601,185 826,776
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 48,109,168 44,478,623
Less- accumulated depreciation (20,972,255) (17,707,316)
------------- --------------
27,136,913 26,771,307
Franchise costs, net of accumulated amortization of $30,414,475 and
$25,903,735 at December 31, 1994 and 1993, respectively 17,228,025 21,738,765
Subscriber lists, net of accumulated amortization of $8,745,434 and
$7,923,218 at December 31, 1994 and 1993, respectively 2,974,966 3,797,182
Costs in excess of interests in net assets purchased, net of accumulated
amortization of $3,649,056 and $3,108,456 at December 31, 1994
and 1993, respectively 17,975,010 18,515,610
------------- --------------
Total investment in cable television properties 65,314,914 70,822,864
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 426,387 352,475
------------- --------------
Total assets $ 66,597,460 $ 72,315,816
============= ==============
The accompanying notes to financial statements
are an integral part of these balance sheets.
32
33
CABLE TV FUND 14-A/B VENTURE
(A General Partnership)
BALANCE SHEETS
December 31,
-------------------------------
LIABILITIES AND PARTNERS' CAPITAL 1994 1993
------------- -------------
LIABILITIES:
Debt $ 42,271,921 $ 43,461,730
Accounts payable-
Trade 60,525 14,063
Jones Intercable, Inc. 354,179 57,920
Accrued liabilities 1,350,465 832,382
Subscriber prepayments 496,407 467,979
------------ ------------
Total liabilities 44,533,497 44,834,074
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 7)
PARTNERS' CAPITAL:
Contributed capital 70,000,000 70,000,000
Accumulated deficit (47,936,037) (42,518,258)
------------ ------------
22,063,963 27,481,742
------------ ------------
Total liabilities and partners' capital $ 66,597,460 $ 72,315,816
============ ============
The accompanying notes to financial statements
are an integral part of these balance sheets.
33
34
CABLE TV FUND 14-A/B VENTURE
(A General Partnership)
STATEMENTS OF OPERATIONS
Year Ended December 31,
------------------------------------------------
1994 1993 1992
------------ ------------ ------------
REVENUES $22,183,524 $22,068,952 $20,212,867
COSTS AND EXPENSES:
Operating, general and administrative 12,878,438 12,339,515 11,052,427
Management fees and allocated overhead from
Jones Intercable, Inc. 2,777,290 2,701,568 2,481,658
Depreciation and amortization 9,188,994 9,352,808 9,971,915
----------- ----------- -----------
OPERATING LOSS (2,661,198) (2,324,939) (3,293,133)
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (2,728,034) (2,450,672) (2,564,990)
Other, net (28,547) 62,111 (327,984)
----------- ----------- -----------
Total other income (expense) (2,756,581) (2,388,561) (2,892,974)
----------- ----------- -----------
NET LOSS $(5,417,779) $(4,713,500) $(6,186,107)
=========== =========== ===========
The accompanying notes to financial statements
are an integral part of these statements.
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35
CABLE TV FUND 14-A/B VENTURE
(A General Partnership)
STATEMENTS OF PARTNERS' CAPITAL
Year Ended December 31,
------------------------------------------------
1994 1993 1992
------------ ------------ ------------
CABLE TV FUND 14-A (27%):
Balance, beginning of year $ 7,351,293 $ 8,628,651 $10,305,086
Net loss for year (1,468,218) (1,277,358) (1,676,435)
----------- ----------- -----------
Balance, end of year $ 5,883,075 $ 7,351,293 $ 8,628,651
=========== =========== ===========
CABLE TV FUND 14-B (73%):
Balance, beginning of year $20,130,449 $23,566,591 $28,076,263
Net loss for year (3,949,561) (3,436,142) (4,509,672)
----------- ----------- -----------
Balance, end of year $16,180,888 $20,130,449 $23,566,591
=========== =========== ===========
TOTAL:
Balance, beginning of year $27,481,742 $32,195,242 $38,381,349
Net loss for year (5,417,779) (4,713,500) (6,186,107)
----------- ----------- -----------
Balance, end of year $22,063,963 $27,481,742 $32,195,242
=========== =========== ===========
The accompanying notes to financial statements
are an integral part of these statements.
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36
CABLE TV FUND 14-A/B VENTURE
(A General Partnership)
STATEMENTS OF CASH FLOWS
Year Ended December 31,
-----------------------------------------------
1994 1993 1992
----------- ----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(5,417,779) $(4,713,500) $(6,186,107)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 9,188,994 9,352,808 9,971,915
Amortization of interest rate protection agreement 82,080 82,080 -
Decrease (increase) in trade receivables 225,591 (253,001) (332,245)
Decrease (increase) in deposits, prepaid expenses
and deferred charges (206,491) 13,218 (215,681)
Increase in accounts payable, accrued
liabilities and subscriber prepayments 592,973 139,815 77,110
Increase (decrease) in advances from Jones Intercable, Inc. 296,259 (67,953) 109,168
----------- ----------- -----------
Net cash provided by operating activities 4,761,627 4,553,467 3,424,160
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (3,630,545) (3,040,155) (2,094,077)
----------- ----------- -----------
Net cash used in investing activities (3,630,545) (3,040,155) (2,094,077)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 71,380 159,493 2,286,081
Repayment of debt (1,261,189) (3,606,172) (1,415,363)
Purchase of interest rate protection contract - (246,250) -
----------- ----------- -----------
Net cash provided by (used in)
financing activities (1,189,809) (3,692,929) 870,718
----------- ----------- -----------
Increase (decrease) in cash (58,727) (2,179,617) 2,200,801
Cash, beginning of year 313,701 2,493,318 292,517
----------- ----------- -----------
Cash, end of year $ 254,974 $ 313,701 $ 2,493,318
============ =========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 2,454,391 $ 2,333,869 $ 2,502,294
============ =========== ===========
The accompanying notes to financial statements
are an integral part of these statements.
36
37
CABLE TV FUND 14-A/B VENTURE
(A General Partnership)
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION AND PARTNERS' INTERESTS
Formation and Business
On January 8, 1988, Cable TV Fund 14-A, Ltd. and Cable TV Fund
14-B, Ltd. (the "Venture Partners") formed a Colorado general partnership known
as Cable TV Fund 14-A/B Venture (the "Venture") by contributing $18,975,000 and
$51,025,000, respectively, for approximate 27 percent and 73 percent ownership
interests, respectively. The Venture was formed for the purpose of acquiring
the cable television system serving areas in and around Broward County, Florida
(the "Broward County System").
Jones Intercable, Inc. ("Intercable"), general partner of each
of the Venture Partners, manages the Venture. 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 other affiliated entities.
Contributed Capital
The capitalization of the Venture is set forth in the
accompanying statements of partners' capital.
All Venture distributions, including those made from cash
flow, from the sale or refinancing of Venture property and on dissolution of
the Venture, shall be made to the Venture Partners in proportion to their
approximate 27 and 73 percent interests in the Venture.
Cable Television System Acquisition
The Broward County System acquisition was accounted for as a
purchase with the purchase price allocated to tangible and intangible assets
based upon an independent appraisal. The method of allocation of purchase
price was as follows: first, to the fair value of net tangible assets
acquired; second, to the value of subscriber lists and noncompete agreements
with previous owners; third, to franchise costs; and fourth, to costs in excess
of interests in net assets purchased. Brokerage fees paid to an affiliate of
the General Partner and other system acquisition costs were capitalized and
included in the cost of intangible assets.
(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 Venture's tax returns are also prepared on the
accrual basis.
Property, Plant and Equipment
Depreciation is provided using the straight-line method over
the following estimated service lives:
Cable distribution systems 5 - 15 years
Equipment and tools 5 years
Office furniture and equipment 5 years
Buildings 10 - 20 years
Vehicles 3 years
Replacements, renewals and improvements are capitalized and
maintenance and repairs are charged to expense as incurred.
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38
Intangible Assets
Costs assigned to franchises, subscriber lists and costs in
excess of interests in net assets purchased are amortized using the
straight-line method over the following remaining estimated useful lives:
Franchise costs 1 - 8 years
Subscriber lists 4 years
Costs in excess of interests in net assets purchased 34 years
Revenue Recognition
Subscriber prepayments are initially deferred and recognized
as revenue when earned.
(3) TRANSACTIONS WITH AFFILIATES
Brokerage Fees
The Jones Group, Ltd., a subsidiary of Intercable, performs
brokerage services in connection with the acquisition of systems for the
Venture. For brokering the acquisition of a SMATV system in the Broward County
System for the Venture, The Jones Group, Ltd. was paid a fee of $2,456, or 4
percent of the purchase price, during 1992. There were no brokerage fees paid
in 1994 or 1993.
Management Fees and Reimbursements
Intercable manages the Venture and receives a fee for its
services equal to five percent of the gross revenues of the Venture, excluding
revenues from the sale of cable television systems or franchises. Management
fees paid to Intercable by the Venture for the years ended December 31, 1994,
1993 and 1992 were $1,109,176, $1,103,448 and $1,010,643, respectively.
The Venture reimburses Intercable for allocated overhead and
administrative expenses. These expenses include salaries and related benefits
paid for corporate personnel, rent, data processing services and other
corporate facilities costs. Such personnel provide engineering, marketing,
accounting, administrative, legal, and investor relations services to the
Venture. Allocations of personnel costs are based primarily on actual time
spent by employees of Intercable with respect to each entity managed.
Remaining overhead costs are allocated based on revenues and/or the cost of
assets managed for the entity. 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. Reimbursements made to Intercable by the Venture for
allocated overhead and administrative expenses during the years ended December
31, 1994, 1993 and 1992 were $1,668,114, $1,598,120 and $1,471,015,
respectively.
The Venture was charged interest during 1994 at an average
interest rate of 10 percent on the amounts due Intercable, such rate
approximated Intercable's weighted average cost of borrowing. Total interest
charged the Venture by Intercable was $960, $2,361 and $10,475 for the years
ended December 31, 1994, 1993 and 1992, respectively.
Payments to/from Affiliates for Programming Services
The Venture receives programming from Product Information
Network, Superaudio, The Mind Extension University and Jones Computer Network,
affiliates of Intercable. Payments to Superaudio totalled $30,631, $30,018 and
$28,679 in 1994, 1993 and 1992, respectively. Payments to The Mind Extension
University totalled $27,751, $17,451 and $16,434 in 1994, 1993 and 1992,
respectively. Payments to Jones Computer Network, which initiated service in
1994, totalled $5,694 in 1994. The Venture 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 Venture totalling $23,856 in 1994.
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(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of December 31, 1994 and
1993, consisted of the following:
December 31,
---------------------------------
1994 1993
------------ ------------
Cable distribution systems $ 41,905,039 $ 38,564,773
Equipment and tools 1,676,058 1,667,051
Office furniture and equipment 1,117,198 977,462
Buildings 1,865,476 1,820,966
Vehicles 814,530 717,504
Land 730,867 730,867
------------ ------------
48,109,168 44,478,623
Less - accumulated depreciation (20,972,255) (17,707,316)
------------ ------------
$ 27,136,913 $ 26,771,307
============ ============
(5) DEBT
Debt consists of the following: December 31,
---------------------------------
1994 1993
------------ ------------
Lending institutions-
Revolving credit and term loan $42,120,468 $43,290,000
Capital lease obligations 151,453 171,730
----------- -----------
$42,271,921 $43,461,730
=========== ===========
On December 31, 1992, the then outstanding balance of
$46,800,000 on the Venture's revolving credit facility converted to a term
loan. The balance outstanding on the term loan at December 31, 1994 was
$42,120,468. The term loan is payable in quarterly installments which began
March 31, 1993 and is payable in full by December 31, 1999. In June 1994,
Intercable completed negotiations to lower the level of principal payments in
order to provide liquidity for capital expenditures. Installments paid during
1994 totalled $1,169,532. Installments due during 1995 total $2,340,000.
Funding for these installments is expected to come from cash on hand and cash
generated from operations. Interest is at the Venture's option of Prime plus
1/2 percent, LIBOR plus 1-1/2 percent or the CD rate plus 1-5/8 percent. The
effective interest rates on amounts outstanding as of December 31, 1994 and
1993 were 7.17 percent and 5.0 percent, respectively.
In January 1993, the Venture entered into an interest rate cap
agreement covering outstanding debt obligations of $25,000,000. The Venture
paid a fee of $246,250. The agreement protects the Venture from LIBOR interest
rates that exceed 7 percent for three years from the date of the agreement.
The fee is being charged to interest expense over the life of the agreement
using the straight-line method.
Installments due on debt principal for each of the five years
in the period ending December 31, 1999 and thereafter, respectively, are:
$2,385,436, $3,555,436, $4,725,436, $4,695,145, $26,910,468 and $-0-. At
December 31, 1994, substantially all of the Venture's property, plant and
equipment secured the above indebtedness.
(6) INCOME TAXES
Income taxes have not been recorded in the accompanying
financial statements because they accrue directly to the partners of Cable TV
Fund 14-A, Ltd. and Cable TV Fund 14-B, Ltd.
The Venture's tax returns, the qualification of the Venture as
such for tax purposes, and the amount of distributable Venture income or loss
are subject to examination by Federal and state taxing authorities. If such
examinations result
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40
in changes with respect to the Venture's qualification as such, or in changes
with respect to the Venture's recorded income or loss, the tax liability of the
Venture's general partners would likely be changed accordingly.
Taxable loss reported to the partners is different from that
reported in the statements of operations due to the difference in depreciation
recognized under generally accepted accounting principles and the expense
allowed for tax purposes under the Modified Accelerated Cost Recovery System
(MACRS). There are no other significant differences between taxable loss and
the net loss 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 in 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 Venture complied with the
February 1994 benchmark regulations and further reduced rates in the Broward
County System effective July 1994.
Office and other facilities are rented under various long-term
lease arrangements. Rent paid under such lease arrangements totalled $49,856,
$46,521 and $45,406, respectively for the years ended December 31, 1994, 1993
and 1992. Minimum commitments under operating leases for each of the five
years in the period ending December 31, 1999 and thereafter are as follows:
1995 $50,997
1996 31,381
1997 6,996
1998 1,166
1999 -
Thereafter -
-------
$90,540
=======
(8) SUPPLEMENTARY PROFIT AND LOSS INFORMATION
Supplementary profit and loss information is presented below:
Year Ended December 31,
-------------------------------------------------
1994 1993 1992
---------- ----------- -----------
Maintenance and repairs $ 238,893 $ 238,163 $ 222,104
========== =========== ==========
Taxes, other than income and payroll taxes $ 258,369 $ 265,331 $ 259,575
========== =========== ==========
Advertising $ 157,998 $ 95,211 $ 155,137
========== =========== ==========
Depreciation of property, plant and equipment $3,315,438 $3,468,602 $4,055,759
========== =========== ==========
Amortization of intangible assets $5,873,556 $5,884,206 $5,916,156
========== =========== ==========
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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
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subsidiary of BCE, since January 1993 and, in addition, has been Chief
Executive Officer of BCI since July 1993. Prior to joining BCE, Mr. Burney
served as Canada's ambassador to the United States from 1989 to 1992. Mr.
Burney also served as chief of staff to the Prime Minister of Canada from March
1987 to January 1989 where he was directly involved with the negotiation of the
U.S. - Canada Free Trade Agreement. In July 1993, he was named an Officer of
the Order of Canada. Mr. Burney is chairman of Bell Cablemedia plc. He is a
director of Mercury Communications Limited, Videotron Holdings plc, Tele-Direct
(Publications) Inc., Teleglobe Inc., Bimcor Inc., Maritime Telegraph and
Telephone Company, Limited, Moore Corporation Limited and Northbridge
Programming Inc.
Mr. James B. O'Brien, the General Partner's President, joined the
General Partner in January 1982. Prior to being elected President and a
Director of the General Partner in December 1989, Mr. O'Brien served as a
Division Manager, Director of Operations Planning/Assistant to the CEO, Fund
Vice President and Group Vice President/Operations. Mr. O'Brien was appointed
to the General Partner's Executive Committee in August 1993. As President, he
is responsible for the day-to-day operations of the cable television systems
managed and owned by the General Partner. Mr. O'Brien is also President and a
Director of Jones Cable Group, Ltd., Jones Global Funds, Inc. and Jones Global
Management, Inc., all affiliates of the General Partner. Mr. O'Brien is a
board member of Cable Labs, Inc., the research arm of the U.S. cable
television industry. He also serves as a director of the Cable Television
Administration and Marketing Association and as a director of the Walter Kaitz
Foundation, a foundation that places people of any ethnic minority group in
positions with cable television systems, networks and vendor companies.
Ms. Ruth E. Warren joined the General Partner in August 1980 and has
served in various operational capacities, including system manager and Fund
Vice President, since then. Ms. Warren was elected Group Vice
President/Operations of the General Partner in September 1990.
Mr. Kevin P. Coyle joined The Jones Group, Ltd. in July 1981 as Vice
President/Financial Services. In September 1985, he was appointed Senior Vice
President/Financial Services. He was elected Treasurer of the General Partner
in August 1987, Vice President/Treasurer in April 1988 and Group Vice
President/Finance and Chief Financial Officer in October 1990.
Mr. Christopher J. Bowick joined the General Partner in September 1991
as Group Vice President/Technology and Chief Technical Officer. Previous to
joining the General Partner, Mr. Bowick worked for Scientific Atlanta's
Transmission Systems Business Division in various technical management
capacities since 1981, and as Vice President of Engineering since 1989.
Mr. Timothy J. Burke joined the General Partner in August 1982 as
corporate tax manager, was elected Vice President/Taxation in November 1986 and
Group Vice President/Taxation/Administration in October 1990.
Mr. Raymond L. Vigil joined the General Partner in June 1993 as Group
Vice President/Human Resources. Previous to joining the General Partner, Mr.
Vigil served as Executive Director of Learning with USWest. Prior to USWest,
Mr. Vigil worked in various human resources posts over a 14-year term with the
IBM Corporation.
Ms. Cynthia A. Winning joined the General Partner as Group Vice
President/Marketing in December 1994. Previous to joining the General Partner,
Ms. Winning served since 1994 as the President of PRS Inc., Denver, Colorado, a
sports and event marketing company. From 1979 to 1981 and from 1986 to 1994,
Ms. Winning served as the Vice President and Director of Marketing for Citicorp
Retail Services, Inc., a provider of private-label credit cards for ten
national retail department store chains. From 1981 to 1986, Ms. Winning was
the Director of Marketing Services for Daniels & Associates cable television
operations, as well as the Western Division Marketing Director for Capital
Cities Cable. Ms. Winning also serves as a board Member of Cities in Schools,
a dropout intervention/prevention program.
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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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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
No person or entity owns more than 5 percent of the limited
partnership interests of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The General Partner and its affiliates engage in certain transactions
with the Partnership as contemplated by the limited partnership agreement of
the Partnership. The General Partner believes that the terms of such
transactions are generally as favorable as could be obtained by the Partnership
from unaffiliated parties. This determination has been made by the General
Partner in good faith, but none of the terms were or will be negotiated at
arm's-length and there can be no assurance that the terms of such transactions
have been or will be as favorable as those that could have been obtained by the
Partnership from unaffiliated parties.
The General Partner charges the Partnership a management fee, and the
Partnership reimburses the General Partner for certain allocated overhead and
administrative expenses in accordance with the terms of the limited partnership
agreement of the Partnership. These expenses consist primarily of salaries and
benefits paid to corporate personnel, rent, data processing services and other
facilities costs. Such personnel provide engineering, marketing,
administrative, accounting, legal and investor relations services to the
Partnership. Allocations of personnel costs are based primarily on actual time
spent by employees of the General Partner with respect to the partnership
managed. Remaining overhead costs are allocated based on revenues and/or the
costs of assets managed for the Partnership. Systems owned by the General
Partner and all other systems owned by partnerships for which Jones Intercable,
Inc. is the general partner, are also allocated a proportionate share of these
expenses.
The General Partner also advances funds and charges interest on the
balance payable from the Partnership. The interest rate charged the
Partnership approximates the General Partner's weighted average cost of
borrowing.
From time to time, The Jones Group, Ltd., an affiliate of the General
Partner, performs brokerage services for the Partnership and the Venture in
connection with Partnership and Venture acquisitions and sales from or to
unaffiliated parties.
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 or the Venture.
During the year ended December 31, 1994, the Partnership received revenues from
PIN of $31,126, and the Venture received revenues from PIN of $23,856.
The charges to the Partnership and the Venture for related party
transactions are as follows for the periods indicated:
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At December 31,
----------------
Cable TV Fund 14-B 1994 1993 1992
------------------ ---- ---- ----
Management fees $1,604,214 $1,586,750 $1,477,993
Brokerage fees -0- -0- 2,456
Allocation of expenses 2,444,784 2,440,481 2,274,350
Interest expense 960 2,361 7,219
Amount of notes and advances outstanding 297,956 29,182 119,337
Highest amount of notes and advances outstanding 297,956 119,337 858,096
Programming fees:
Superaudio 46,768 46,177 45,603
Mind Extension University 42,373 26,824 26,131
Jones Computer Network 14,957 -0- -0-
At December 31,
----------------
Cable TV Fund 14-A/B Venture 1994 1993 1992
---------------------------- ---- ---- ----
Management fees $1,109,176 $1,103,448 $1,010,643
Brokerage fees -0- -0- 2,456
Allocation of expenses 1,668,114 1,598,120 1,471,015
Interest expense 960 2,361 10,475
Amount of notes and advances outstanding 354,179 57,920 125,873
Highest amount of notes and advances outstanding 354,179 125,873 580,654
Programming fees:
Superaudio 30,631 30,018 28,679
Mind Extension University 27,751 17,451 16,434
Jones Computer Network 5,694 -0- -0-
45
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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 Agreements for Cable TV Fund 14-B. (1)
4.2 Joint Venture Agreement of Cable TV Fund 14-A/B Venture, dated as of January 8, 1988,
between Cable TV Fund 14-A, Ltd. and Cable TV Fund 14-B, Ltd. (1)
10.1.1 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for Little Rock, California (Fund 14-B). (2)
10.1.2 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Big Cypress Seminole Indian Reservation, Florida (Fund 14-A/B).
(3)
10.1.3 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Brighton Seminole Indian Reservation, Florida (Fund 14-A/B). (3)
10.1.4 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the unincorporated portions of Broward County, Florida (Fund 14-A/B).
(2)
10.1.5 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for Cooper City, Florida (Fund 14-A/B).
10.1.6 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for Dania, Florida (Fund 14-A/B). (2)
10.1.7 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for Davie, Florida (Fund 14-A/B). (2)
10.1.8 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Hollywood Seminole Indian Reservation, Florida (Fund 14-A/B).
(3)
10.1.9 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Immokalee Seminole Indian Reservation, Florida (Fund 14-A/B).
(3)
10.1.10 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for Lauderdale Lakes, Florida (Fund 14-A/B). (2)
10.1.11 Copy of Ordinance No. 1200 dated 3/5/90 relating to the City of Big Lake franchise. (4)
10.1.12 Copy of Ordinance dated 4/16/90 relating to the Buffalo franchise. (4)
46
47
10.1.13 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the County of Georgetown, South Carolina (Fund 14-B). (4)
10.1.14 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the County of Horry, South Carolina (Fund 14-B). (5)
10.1.15 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for Myrtle Beach Air Force Base, South Carolina (Fund 14-B). (5)
10.1.16 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Town of Pawley's Island, South Carolina (Fund 14-B). (5)
10.1.17 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Town of Surfside Beach, South Carolina (Fund 14-B). (4)
10.2.1 Credit Agreement dated as of June 28, 1991 among Cable TV Fund 14-B, Ltd. and Canadian
Imperial Bank of Commerce, as agent for various lenders. (Fund 14-B) (6)
10.2.2 Credit Agreement dated as of September 30, 1988 among Cable TV Fund 14-A/B Venture and The
Bank of Nova Scotia, as agent for various lenders. (Fund 14-A/B) (6)
10.2.3 First Letter Amendment dated June 11, 1990 to Credit Agreement dated as of September 30,
1988 among Cable TV Fund 14-A/B Venture and The Bank of Nova Scotia, as agent for various
lenders. (Fund 14-A/B) (7)
10.2.4 Second Letter Amendment dated May 28, 1992 to Credit Agreement dated as of September 30,
1988 among Cable TV Fund 14-A/B Venture and The Bank of Nova Scotia, as agent for various
lenders. (Fund 14-A/B) (7)
10.2.5 Third Letter Amendment dated June 30, 1994 to Credit Agreement dated as of September 30,
1988 among Cable TV Fund 14-A/B Venture and The Bank of Nova Scotia, as agent for various
lenders. (Fund 14-A/B)
10.3.1 Purchase and Sale Agreement dated as of March 31, 1988 by and between Cable TV Fund 14-A/B
Venture as Buyer and Jones Intercable, Inc. as Seller. (Fund 14-A/B) (8)
27 Financial Data Schedule
__________
(1) Incorporated by reference from Registrant's Report on Form
10-K for fiscal year ended December 31, 1987 (Commission File
Nos. 0-15378 and 0-16200)
(2) Incorporated by reference from Registrant's Report on Form
10-K for fiscal year ended December 31, 1989 (Commission File
Nos. 0-15378 and 0-16200)
(3) Incorporated by reference from Registrant's Report on Form
10-K for fiscal year ended December 31, 1990 (Commission File
Nos. 0-15378 and 0-16200)
(4) Incorporated by reference from Registrant's Report on Form
10-K for fiscal year ended December 31, 1992.
(5) Incorporated by reference from Registrant's Report on Form
10-K for fiscal year ended December 31, 1988 (Commission File
Nos. 0-15378 and 0-16200)
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48
(6) Incorporated by reference from Registrant's Report on Form
10-K for fiscal year ended December 31, 1991 (Commission File
Nos. 0-15378 and 0-16200)
(7) Incorporated by reference from Registrants' Reports on Form
8-K dated March 31, 1993 (Commission File Nos. 0-15378 and
0-16200)
(8) Incorporated by reference from Registrants' Reports on Form
8-K dated March 31, 1988 (Commission File Nos. 0-15378 and
0-16200)
(b) Reports on Form 8-K
None.
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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 14-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 22, 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 22, 1995 (Principal Executive Officer)
By: /s/ Kevin P. Coyle
------------------
Kevin P. Coyle
Group Vice President/Finance
Dated: March 22, 1995 (Principal Financial Officer)
By: /s/ Larry Kaschinske
--------------------
Larry Kaschinske
Controller
Dated: March 22, 1995 (Principal Accounting Officer)
By: /s/ James B. O'Brien
--------------------
James B. O'Brien
Dated: March 22, 1995 President and Director
By: /s/ Raymond L. Vigil
--------------------
Raymond L. Vigil
Dated: March 22, 1995 Group Vice President and Director
By: /s/ Robert S. Zinn
------------------
Robert S. Zinn
Dated: March 22, 1995 Director
49
50
By: /s/ David K. Zonker
-----------------------
David K. Zonker
Dated: March 22, 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
50
51
INDEX TO EXHIBITS
Exhibit Decription
------- ----------
4.1 Limited Partnership Agreements for Cable TV Fund 14-B. (1)
4.2 Joint Venture Agreement of Cable TV Fund 14-A/B Venture, dated as of January 8, 1988,
between Cable TV Fund 14-A, Ltd. and Cable TV Fund 14-B, Ltd. (1)
10.1.1 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for Little Rock, California (Fund 14-B). (2)
10.1.2 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Big Cypress Seminole Indian Reservation, Florida (Fund 14-A/B).
(3)
10.1.3 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Brighton Seminole Indian Reservation, Florida (Fund 14-A/B). (3)
10.1.4 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the unincorporated portions of Broward County, Florida (Fund 14-A/B).
(2)
10.1.5 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for Cooper City, Florida (Fund 14-A/B).
10.1.6 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for Dania, Florida (Fund 14-A/B). (2)
10.1.7 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for Davie, Florida (Fund 14-A/B). (2)
10.1.8 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Hollywood Seminole Indian Reservation, Florida (Fund 14-A/B).
(3)
10.1.9 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Immokalee Seminole Indian Reservation, Florida (Fund 14-A/B).
(3)
10.1.10 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for Lauderdale Lakes, Florida (Fund 14-A/B). (2)
10.1.11 Copy of Ordinance No. 1200 dated 3/5/90 relating to the City of Big Lake franchise. (4)
10.1.12 Copy of Ordinance dated 4/16/90 relating to the Buffalo franchise. (4)
10.1.13 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the County of Georgetown, South Carolina (Fund 14-B). (4)
10.1.14 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the County of Horry, South Carolina (Fund 14-B). (5)
10.1.15 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for Myrtle Beach Air Force Base, South Carolina (Fund 14-B). (5)
10.1.16 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Town of Pawley's Island, South Carolina (Fund 14-B). (5)
10.1.17 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Town of Surfside Beach, South Carolina (Fund 14-B). (4)
10.2.1 Credit Agreement dated as of June 28, 1991 among Cable TV Fund 14-B, Ltd. and Canadian
Imperial Bank of Commerce, as agent for various lenders. (Fund 14-B) (6)
10.2.2 Credit Agreement dated as of September 30, 1988 among Cable TV Fund 14-A/B Venture and The
Bank of Nova Scotia, as agent for various lenders. (Fund 14-A/B) (6)
10.2.3 First Letter Amendment dated June 11, 1990 to Credit Agreement dated as of September 30,
1988 among Cable TV Fund 14-A/B Venture and The Bank of Nova Scotia, as agent for various
lenders. (Fund 14-A/B) (7)
10.2.4 Second Letter Amendment dated May 28, 1992 to Credit Agreement dated as of September 30,
1988 among Cable TV Fund 14-A/B Venture and The Bank of Nova Scotia, as agent for various
lenders. (Fund 14-A/B) (7)
10.2.5 Third Letter Amendment dated June 30, 1994 to Credit Agreement dated as of September 30,
1988 among Cable TV Fund 14-A/B Venture and The Bank of Nova Scotia, as agent for various
lenders. (Fund 14-A/B)
10.3.1 Purchase and Sale Agreement dated as of March 31, 1988 by and between Cable TV Fund 14-A/B
Venture as Buyer and Jones Intercable, Inc. as Seller. (Fund 14-A/B) (8)
27 Financial Data Schedule