<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
RULE 13e-3 TRANSACTION STATEMENT
(Pursuant to Section 13(e) of the
Securities Exchange Act of 1934
and Rule 13e-3 thereunder)
Cable TV Fund 14-B, Ltd.
------------------------
(Name of the Issuer)
Jones Intercable, Inc. (File No. 0-8947),
Cable TV Fund 14-B, Ltd. (File No. 0-16200) and
Jones Communications of California, Inc.
-------------------------------------------
(Name of Person(s) Filing Statement)
Limited Partnership Interests
-----------------------------
(Title of Class of Securities)
Elizabeth M. Steele, Esq.
Vice President and General Counsel
Jones Intercable, Inc.
9697 E. Mineral Avenue
Englewood, Colorado 80112
(303) 784-8400
--------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf
of Person(s) Filing Statement)
This statement is filed in connection with (check the appropriate box):
a. X The filing of solicitation materials or an information statement
_____ subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under
the Securities Exchange Act of 1934.
b. _____ The filing of a registration statement under the Securities Act of
1933.
c. _____ A tender offer.
d. _____ None of the above.
<PAGE>
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: X
_____
Calculation of Filing Fee
TRANSACTION VALUATION AMOUNT OF FILING FEE
- --------------------- --------------------
$10,720,400 $2,144
X Check box if any part of the fee is offset as provided by Rule 0-
----- 11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: $2,144
Form or Registration No.: Schedule 14A
Filing Party: Cable TV Fund 14-B, Ltd.
Commission File No. 0-16200
Date Filed: July 13, 1998
<PAGE>
INTRODUCTION
------------
This Amendment No. 1 to Rule 13e-3 Transaction Statement is being filed
jointly by Cable TV Fund 14-B, Ltd., a Colorado limited partnership, and by
Jones Intercable, Inc., a Colorado corporation that is the general partner of
Cable TV Fund 14-B, Ltd., and by Jones Communications of California, Inc., an
indirect wholly owned subsidiary of Jones Intercable, Inc., in connection with
the sale of assets of Cable TV Fund 14-B, Ltd. to Jones Communications of
California, Inc. upon the terms and subject to the conditions of a Purchase and
Sale Agreement by and between Cable TV Fund 14-B, Ltd. and Jones Communications
of California, Inc. The sale may be a transaction subject to Rule 13e-3 because
it will result in the sale of certain assets of Cable TV Fund 14-B, Ltd. to
Jones Communications of California, Inc.
The transaction also involves a vote of the limited partners of Cable TV
Fund 14-B, Ltd., which is subject to Regulation 14A of the Securities Exchange
Act of 1934, and the information contained in the preliminary proxy statement
filed pursuant thereto is incorporated by reference in answer to the items of
this Amendment No. 1 to Rule 13e-3 Transaction Statement. Attached as an
exhibit to this Amendment No. 1 to Rule 13e-3 Transaction Statement are the
preliminary proxy solicitation materials that have been filed simultaneously
herewith. The cross-reference sheet that follows shows the location in the
preliminary proxy statement of the information incorporated by reference in
response to the items of this Amendment No. 1 to Rule 13e-3 Transaction
Statement, as permitted by General Instruction F to Schedule 13E-3.
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<PAGE>
CROSS-REFERENCE SHEET
---------------------
(Pursuant to General Instruction F to Schedule 13E-3)
<TABLE>
<CAPTION>
Schedule 13E-3 Item Caption in the
Number and Caption Proxy Statement
------------------ ---------------
<S> <C>
1. Issuer and Class of
Security Subject to
the Transaction.
(a)................... Vote of the Limited Partners of Cable TV Fund
14-B, Ltd.; Certain Information About the
Partnership and the General Partner.
(b)-(c)............... Vote of the Limited Partners of Cable TV Fund
14-B, Ltd.
(d)................... Special Factors, Prior Acquisitions and Sales.
(e)................... [Not applicable.]
(f)................... [Not applicable.]
2. Identity and Background.
(a)-(d)............... Vote of the Limited Partners of Cable TV Fund
14-B, Ltd.; Certain Information About the
Partnership and the General Partner.
(e)-(f)............... [The answers to these items are in the negative;
pursuant to the Instruction following Item 2(f),
negative answers to Items 2(e) and 2(f) have not
been furnished to limited partners in the proxy
statement.]
(g)................... Schedule 1.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Schedule 13E-3 Item Caption in the
Number and Caption Proxy Statement
------------------ ---------------
<S> <C>
3. Past Contracts,
Transactions or
Negotiations.
(a)(1)................ Certain Related Party Transactions.
(a)(2)................ [None.]
(b)................... [None.]
4. Terms of the
Transaction.
(a)................... Proposed Sale of Assets.
(b)................... [Not applicable.]
5. Plans or Proposals of
the Issuer or
Affiliate.
(a)................... Vote of the Limited Partners of Cable TV Fund
14-B, Ltd.; Certain Information About the
Partnership and the General Partner.
(b)-(d)............... [Not applicable.]
(e)................... Special Factors, The General Partner's
Objectives.
(f)-(g)............... Vote of the Limited Partners of Cable TV Fund 14-B,
Ltd.; Certain Information About the Partnership
and the General Partner.
6. Source and Amounts of
Funds or Other
Consideration.
(a)................... Proposed Sale of Assets, The Purchase and Sale
Agreement; Proposed Sale of Assets, Sales Price.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Schedule 13E-3 Item Caption in the
Number and Caption Proxy Statement
------------------- ---------------
<S> <C>
(b)................... Special Factors, The Appraisals; Special Factors,
Costs of the Transaction.
(c)................... Proposed Sale of Assets, The Purchase and Sale
Agreement.
(d)................... [Not applicable.]
7. Purpose(s),
Alternatives,
Reasons and Effects.
(a)................... Special Factors, The Partnership's Investment
Objectives; Special Factors, The General Partner's
Objectives; Special Factors, Reasons for the
Timing of the Sale.
(b)................... Special Factors, Reasons for the Timing of the
Sale; Special Factors, Recommendation of the
General Partner and Fairness of the Proposed Sale
of Assets.
(c)................... Special Factors, The Partnership's Investment
Objectives; Special Factors, Reasons for the
Timing of the Sale; Special Factors,
Recommendation of the General Partner and Fairness
of the Proposed Sale of Assets.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Schedule 13E-3 Item Caption in the
Number and Caption Proxy Statement
------------------- ---------------
<S> <C>
(d)................... Special Factors, Certain Effects of the Sale;
Special Factors, Recommendation of the General
Partner and Fairness of the Proposed Sale of
Assets; Federal and State Income Tax Consequences.
8. Fairness of the
Transaction.
(a)-(b)............... Vote of the Limited Partners of Cable TV Fund
14-B, Ltd.; Special Factors, Recommendation of the
General Partner and Fairness of the Proposed Sale
of Assets; Special Factors, The Appraisals.
(c)................... Vote of the Limited Partners of Cable TV Fund
14-B, Ltd.; Special Factors, Relevant Provisions
of the Partnership Agreement; Proposed Sale of
Assets, Conditions to Closing.
(d)-(e)............... Special Factors, Recommendation of the General
Partner and Fairness of the Proposed Sale of
Assets.
(f)................... [Not applicable.]
9. Reports, Opinions,
Appraisals and Certain
Negotiations.
(a)................... Vote of the Limited Partners of Cable TV Fund
14-B, Ltd.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Schedule 13E-3 Item Caption in the
Number and Caption Proxy Statement
------------------- ---------------
<S> <C>
(b)................... Special Factors, Recommendation of the General
Partner and Fairness of the Proposed Sale of
Assets; Special Factors, The Appraisals.
(c)................... Special Factors, The Appraisals; Available
Information.
10. Interest in Securities
of the Issuer
(a)................... Vote of the Limited Partners of Cable TV Fund
14-B, Ltd.; Schedule 1.
(b)................... [None.]
11. Contracts, [None.]
Arrangements or
Understandings with
Respect to the
Issuer's Securities.
12. Present Intention and
Recommendation of
Certain Persons with
Regard to the
Transaction.
(a)................... Vote of the Limited Partners of Cable TV Fund
14-B, Ltd.
(b)................... Vote of the Limited Partners of Cable TV Fund
14-B, Ltd.; Special Factors, Recommendation of the
General Partner and Fairness of the Proposed Sale
of Assets.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Schedule 13E-3 Item Caption in the
Number and Caption Proxy Statement
-------------------- ---------------
<S> <C>
13. Other Provisions of
the Transaction.
(a)................... Special Factors, Certain Effects of the Sale.
(b)................... [Not applicable.]
(c)................... [Not applicable.]
14. Financial Information.
(a)(1)................ [Pursuant to General Instruction D to Schedule 13E-
3, the audited financial statements of Cable TV
Fund 14-B, Ltd. for the fiscal years ended December
31, 1997 and 1996 are incorporated by reference
from Cable TV Fund 14-B, Ltd.'s Annual Report on
Form 10-K for the fiscal year ended December 31,
1997, which is filed as an exhibit to this Schedule
13E-3.]
(a)(2)................ [Pursuant to General Instruction D to Schedule 13E-
3, the unaudited financial statements of Cable TV
Fund 14-B, Ltd. for its first three 1998 fiscal
quarters are incorporated by reference from Cable
TV Fund 14-B, Ltd.'s Quarterly Reports on Form 10-Q
for the fiscal quarters ended March 31, 1998, June
30, 1998 and September 30, 1998, which are filed as
exhibits to this Schedule 13E-3.]
(a)(3)................ [Not applicable.]
(a)(4)................ Special Factors, Recommendation of the General
Partner and Fairness of the Proposed Sale of
Assets.
(b)................... Unaudited Pro Forma Financial Information of Cable
TV Fund 14-B, Ltd.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Schedule 13E-3 Item Caption in the
Number and Caption Proxy Statement
------------------- ---------------
<S> <C>
15. Persons and Assets
Employed,
Retained or Utilized.
(a)................... Vote of the Limited Partners of Cable TV Fund
14-B, Ltd.
(b)................... [None.]
16. Additional Special Factors, Relevant Provisions of the
Information. Partnership Agreement.
- -------------------------------------------------------------------------------
17. Materials
Filed as Exhibits:
*(a)................... Jones Cable Holdings II, Inc.'s Credit Facility.
*(b)(1)................ Appraisal of the Littlerock System by
Strategis Financial Consulting, Inc.
*(b)(2)................ Appraisal of the Littlerock System by Waller
Capital Corporation
*(b)(3)................ Appraisal of the Littlerock System by Bond &
Pecaro, Inc.
(c) [Not applicable.]
*(d)(1)................ Preliminary Proxy Statement to be furnished to the
limited partners of Cable TV Fund 14-B, Ltd.
*(d)(2)................ Cable TV Fund 14-B, Ltd.'s Annual Report on Form
10-K for the fiscal year ended December 31, 1997.
*(d)(3)................ Cable TV Fund 14-B, Ltd.'s Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31,
1998.
(d)(4)................ Revised Preliminary Proxy Statement to be furnished
to the limited partners of Cable TV Fund 14-B, Ltd.
(d)(5)................ Cable TV Fund 14-B, Ltd.'s Quarterly Report on Form
10-Q for the fiscal quarter ended June 30,
1998.
(d)(6)................ Cable TV Fund 14-B, Ltd.'s Quarterly Report on Form
10-Q for the fiscal quarter ended September 30,
1998.
(e)................... [Not applicable.]
(f)................... [Not applicable.]
----------------
*previously filed
</TABLE>
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<PAGE>
SIGNATURES
----------
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
JONES INTERCABLE, INC.,
a Colorado corporation
Dated: November 20, 1998 By: /s/ Elizabeth M. Steele
-----------------------
Elizabeth M. Steele
Vice President
CABLE TV FUND 14-B, LTD.,
a Colorado limited partnership
By: Jones Intercable, Inc.,
a Colorado corporation,
as general partner
Dated: November 20, 1998 By: /s/ Elizabeth M. Steele
------------------------
Elizabeth M. Steele
Vice President
JONES COMMUNICATIONS OF
CALIFORNIA, INC., a
Colorado corporation
Dated: November 20, 1998 By: /s/ Elizabeth M. Steele
-----------------------
Elizabeth M. Steele
Vice President
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<PAGE>
Exhibit 99(D)(4)
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
NOTICE OF VOTE OF THE LIMITED PARTNERS OF CABLE TV FUND 14-B, LTD.
To the Limited Partners of Cable TV Fund 14-B, Ltd.:
A special vote of the limited partners of Cable TV Fund 14-B, Ltd. (the
"Partnership") is being conducted through the mails on behalf of the
Partnership by Jones Intercable, Inc., the general partner of the Partnership
(the "General Partner"), for the purpose of obtaining limited partner approval
of the sale of the Littlerock, California cable television system (the
"Littlerock System") owned by the Partnership for $10,720,400 in cash, subject
to customary working capital closing adjustments that may have the effect of
increasing or decreasing the sales price by a non-material amount. The
Littlerock System is proposed to be sold to Jones Communications of
California, Inc., an indirect wholly owned subsidiary of the General Partner.
Information relating to this matter is set forth in the accompanying Proxy
Statement.
If the limited partners approve the proposed sale of the Littlerock System
and if the transaction is closed, the Partnership will distribute the
approximately $10,259,235 of net sale proceeds to its limited partners of
record as of the closing date of the sale of the Littlerock System. It is
estimated that the limited partners will receive $39 for each $500 limited
partnership interest, or $78 for each $1,000 invested in the Partnership.
Distributions will be net of California non-resident withholding, if
applicable, and distribution checks will be issued to the limited partners'
account registration or pursuant to any special payment instruction of record.
Once the distribution of the net proceeds from the sale of the Littlerock
System has been made, limited partners will have received a total of $433 for
each $500 limited partnership interest, or $866 for each $1,000 invested in
the Partnership, taking into account the prior distributions to limited
partners made earlier in 1998. Because the distributions to the limited
partners from the sales of the Partnership's various cable television systems
will not return to the limited partners all of the capital initially
contributed by the limited partners to the Partnership, the General Partner
will not receive a general partner distribution from the Littlerock System's
sale proceeds. The Partnership will be liquidated and dissolved after the sale
of the Littlerock System, which will be the Partnership's last remaining asset
at the time of its sale.
<PAGE>
In voting on the proposed sale of the Littlerock System, limited partners
should carefully review and consider the Special Factors set forth in detail
on pages 3 through 23 of the accompanying Proxy Statement. These Special
Factors include, but are not limited to, the following:
. It is proposed that the Littlerock System be sold to a subsidiary of the
General Partner on terms and conditions that were not subject to arm's-
length negotiation. The terms of the purchase and sale agreement and the
process by which such terms were negotiated should not be deemed to be free
of conflicts of interest because the Partnership does not have any
employees or management other than the employees and management of the
General Partner who represented both the buyer and the seller in the
proposed sale transaction. The employees and management of the General
Partner owe a fiduciary duty to both the Partnership and its limited
partners and to the shareholders of the General Partner.
. The General Partner has determined that its acquisition of the Littlerock
System is in the best interests of its shareholders and that the
Partnership's sale of the Littlerock System is in the best interests of the
Partnership's limited partners. The General Partner's recommendation that
the limited partners approve the transaction and the General Partner's
determination that the transaction is fair to the limited partners should
not be deemed to be free of conflicts of interest because the General
Partner owes a fiduciary duty to the Partnership and its limited partners
in analyzing the transaction as seller and it owes a fiduciary duty to its
own shareholders in analyzing the transaction as purchaser.
. The General Partner's determination that the Littlerock System would not be
marketed for sale to third party buyers, its decision not to consider
having the Partnership sell the Littlerock System to any cable system
operator other than the General Partner, its contracting with independent
appraisal firms to prepare appraisals of the fair market value of the
Littlerock System and its review and acceptance of the appraisals should
not be deemed to be free of conflicts of interest in light of the General
Partner's decision to acquire the Littlerock System for its own account.
. The General Partner's determination that the Partnership's investment
objectives with respect to the Littlerock System have been achieved, its
consideration of the benefits and risks to the limited partners from a
longer holding period and its conclusion that now is the time for the
Littlerock System to be sold should not be deemed to be free of conflicts
of interest in light of the fact that the General Partner could not
purchase the Littlerock System unless it also determined that now was the
time for the Partnership to sell the Littlerock System.
. The members of the Board of Directors of the General Partner who are not
employees of the General Partner did not vote separately to approve the
transaction. Neither the Board of Directors as a whole nor the independent
directors retained an unaffiliated representative to act solely on behalf
of the limited partners for the purpose of negotiating the terms of the
proposed sale of the Littlerock System and/or preparing a report concerning
the fairness of the proposed sale.
. The proposed $10,720,400 sales price for the Littlerock System is based on
the average of three separate independent appraisals of the Littlerock
System as of December 31, 1997. It is possible that the Littlerock System
could be sold for a higher sales price if it were marketed and sold to an
unaffiliated cable system operator. Strategis Financial Consulting, Inc.
valued the Littlerock System at $11,118,000. Bond & Pecaro, Inc. valued the
Littlerock System at $11,092,200. Waller Capital Corporation valued the
Littlerock System at $9,951,000. Due to the averaging process, two of the
three appraisals valued the Littlerock System at amounts greater than the
proposed sales price.
Only limited partners of record at the close of business on November 18,
1998 are entitled to notice of, and to participate in, this vote of limited
partners. It is very important that all limited partners participate in the
voting. The Partnership's ability to complete the transaction discussed in the
Proxy Statement and the Partnership's ability to make a distribution to its
limited partners of the net proceeds of the sale of the Littlerock System
pursuant to the terms of the Partnership's limited partnership agreement (the
"Partnership Agreement")
<PAGE>
are dependent upon the approval of the transaction by the holders of a
majority of the Partnership's limited partnership interests.
The proposal that is the subject of this proxy solicitation will be adopted
only if approved by the holders of a majority of the limited partnership
interests. Each limited partnership interest entitles the holder thereof to
one vote on the proposal. Because the Partnership Agreement requires that the
proposal to sell the Littlerock System be approved by the holders of a
majority of the limited partnership interests, abstentions and non-votes will
be treated as votes against the proposal. A properly executed consent returned
to the General Partner on which a limited partner does not mark a vote will be
counted as a vote for the proposed sale of the Littlerock System. Because
limited partners do not have dissenters' or appraisal rights in connection
with the proposed sale of the Littlerock System, if the holders of a majority
of the limited partnership interests approve the proposal, all limited
partners will receive a distribution of the net sale proceeds in accordance
with the procedures prescribed by the Partnership Agreement regardless of how
or whether they vote on the proposal.
Jones Intercable, Inc., as the general partner of the Partnership, urges you
to sign and return the enclosed proxy card as promptly as possible. The proxy
card should be returned in the enclosed envelope.
JONES INTERCABLE, INC.
General Partner
[SIGNATURE OF ELIZABETH M. STEELE]
Elizabeth M. Steele
Secretary
Dated: December 1, 1998
<PAGE>
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY STATEMENT
VOTE OF THE LIMITED PARTNERS OF CABLE TV FUND 14-B, LTD.
This Proxy Statement is being furnished in connection with the solicitation
of the written consents of the limited partners of Cable TV Fund 14-B, Ltd.
(the "Partnership") by Jones Intercable, Inc., the general partner of the
Partnership (the "General Partner"), on behalf of the Partnership, for the
purpose of obtaining limited partner approval of the sale of the Littlerock,
California cable television system (the "Littlerock System") owned by the
Partnership for $10,720,400 in cash, subject to customary working capital
closing adjustments that may have the effect of increasing or decreasing the
sales price by a non-material amount. The Littlerock System is proposed to be
sold to Jones Communications of California, Inc., an indirect wholly owned
subsidiary of the General Partner.
Proxies in the form enclosed, properly executed and duly returned, will be
voted in accordance with the instructions thereon. Limited partners are urged
to sign and return the enclosed proxy as promptly as possible. Proxies cannot
be revoked except by delivery of a proxy dated as of a later date. Officers
and other employees of the General Partner may solicit proxies by mail, by
fax, by telephone or by personal interview. The deadline for the receipt of
proxy votes is December 30, 1998, unless extended, but the vote of the
Partnership's limited partners will be deemed to be concluded on the date, at
least 20 business days from the date the proxy materials are sent to limited
partners, that the General Partner, on behalf of the Partnership, is in
receipt of proxies executed by the holders of a majority of the limited
partnership interests either consenting to or disapproving of the proposed
transaction. The General Partner may extend the deadline for receipt of proxy
votes if a majority of the limited partners fail to express an opinion on the
transaction by December 30, 1998. If the General Partner extends the deadline
for receipt of proxy votes, the limited partners will be informed by mail of
the reason for the extension and the new deadline. The cost of the proxy
solicitation will be paid by the General Partner.
The Partnership has only one class of limited partners and no limited
partner has a right of priority over any other limited partner. The
participation of the limited partners is divided into limited partnership
interests and each limited partner owns one limited partnership interest for
each $500 of capital contributed to the Partnership.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS
OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<PAGE>
As of November 18, 1998, the Partnership had 261,353 limited partnership
interests outstanding held by 15,124 persons. There is no established trading
market for such interests. To the best of the General Partner's knowledge, no
person or group of persons beneficially own more than five percent of the
limited partnership interests. During the past several years, Smithtown Bay,
LLC, Madison Partnership Liquidity Investors XIII, LLC and First Trust Co. LP,
three firms unaffiliated with the Partnership, the General Partner and each
other, have conducted tender offers for interests in the Partnership. As of
November 20, 1998, Smithtown Bay, LLC and its affiliates owned 4,883 limited
partnership interests, or 1.9 percent of the limited partnership interests. As
of such date, Madison Partnership Liquidity Investors XIII, LLC and its
affiliates owned 8,806 limited partnership interests, or 3.4 percent of the
limited partnership interests. As of such date, First Trust Co. LP and its
affiliates owned 3,100 limited partnership interests, or 1.2 percent of the
limited partnership interests. Pursuant to the terms of agreements between the
Partnership and the General Partner and such firms, all of the limited
partnership interests held by these firms will be voted in the same manner as
the majority of all other limited partners who vote on the sale of the
Littlerock System. Thus, for example, if the limited partnership interests
voted in favor of the transaction constitute a majority of all limited
partnership interests voted but not a majority of all limited partnership
interests, these firms will be required to vote their limited partnership
interests in favor of the transaction, and in such event the votes of these
firms could be sufficient to cause the transaction to be approved by a
majority of all limited partnership interests, which is the vote necessary to
cause the transaction to be approved. The General Partner owns 28 limited
partnership interests. Officers and directors of the General Partner own no
limited partnership interests. The 28 limited partnership interests owned by
the General Partner will be voted in favor of the proposed transaction. Only
limited partners of record at the close of business on November 18, 1998 will
be entitled to notice of, and to participate in, the vote.
As of the date of this Proxy Statement, the Partnership's only asset is the
Littlerock System. The Partnership sold its cable television system serving
communities in and around Surfside Beach, South Carolina (the "Surfside
System") in June 1998. The Partnership formerly owned a 73 percent interest in
the Cable TV Fund 14-A/B Venture (the "Venture"). The Venture's only asset was
the cable television system serving portions of Broward County, Florida (the
"Broward System"). The Venture sold the Broward System in March 1998. The
Venture subsequently was liquidated and dissolved.
Upon the consummation of the proposed sale of the Littlerock System, the
Partnership will distribute the approximately $10,259,235 of net sale proceeds
to its limited partners of record as of the closing date of the sale of the
Littlerock System, which is expected to be December 31, 1998. Limited partners
will receive $39 for each $500 limited partnership interest, or $78 for each
$1,000 invested in the Partnership. Distributions will be net of California
non-resident withholding, if applicable, and distribution checks will be
issued to the limited partners' account registration or pursuant to any
special payment instruction of record. Once the Partnership has completed the
distribution of the net proceeds from the sale of the Littlerock System,
limited partners of the Partnership will have received a total of $433 for
each $500 limited partnership interest, or $866 for each $1,000 invested in
the Partnership, taking into account the prior distributions to limited
partners made earlier in 1998 from the net proceeds of the sales of the
Broward System and the Surfside System. Because the distributions to the
limited partners from the sales of the Partnership's various cable television
systems will not return to the limited partners all of the capital initially
contributed by the limited partners to the Partnership, the General Partner
will not receive a general partner distribution from the Littlerock System's
sale proceeds. The Partnership will be liquidated and dissolved after the sale
of the Littlerock System, which will be the Partnership's last remaining asset
at the time of its sale.
After the sale of the Littlerock System, the Partnership will continue to be
a public entity subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), until the
Partnership is dissolved, which is expected to occur in early 1999. See
"Certain Information About the Partnership and the General Partner."
Limited partners should note that there are certain federal and state income
tax consequences of the proposed sale of the Littlerock System, which are
outlined herein under the caption "Federal and State Income Tax Consequences."
The Board of Directors of the General Partner has approved the proposed sale
of the Littlerock System and the General Partner recommends approval of the
transaction by the holders of the Partnership's limited
2
<PAGE>
partnership interests. In determining the fairness of the proposed
transaction, the General Partner followed the procedures outlined in Section
2.3(b)(iv)(b) of the Partnership's limited partnership agreement (the
"Partnership Agreement"), which provides that the Partnership's cable
television systems may be sold to the General Partner or to one of its
affiliates if the price paid by the General Partner or such affiliate is
determined by the average of three separate, independent appraisals of the
fair market value of the system to be sold. Because the purchase price to be
paid to the Partnership is equal to the average of three separate, independent
appraisals of the fair market value of the Littlerock System, the Board of
Directors of the General Partner has concluded that the consideration to be
paid to the Partnership for the Littlerock System is fair to all unaffiliated
limited partners of the Partnership.
The proposal that is the subject of this proxy solicitation will be adopted
only if approved by the holders of a majority of the limited partnership
interests. Each limited partnership interest entitles the holder thereof to
one vote on the proposal. Because the Partnership Agreement requires that the
proposal to sell the Littlerock System be approved by the holders of a
majority of the limited partnership interests, abstentions and non-votes will
be treated as votes against the proposal. A properly executed consent returned
to the General Partner on which a limited partner does not mark a vote will be
counted as a vote for the proposed sale of the Littlerock System. Because
limited partners do not have dissenters' or appraisal rights in connection
with the proposed sale of the Littlerock System, if the holders of a majority
of the limited partnership interests approve the proposal, all limited
partners will receive a distribution of the Partnership's portion of the net
sale proceeds in accordance with the procedures prescribed by the Partnership
Agreement regardless of how or whether they vote on the proposal.
The approximate date on which this Proxy Statement and Form of Proxy are
being sent to limited partners is December 1, 1998.
SPECIAL FACTORS
THE PARTNERSHIP'S INVESTMENT OBJECTIVES
The Partnership was formed to acquire, develop, operate and, ultimately,
sell cable television systems. The primary objectives of the Partnership have
been to obtain capital appreciation in the value of the Partnership's cable
television properties; to generate tax losses that could be used to offset
taxable income of limited partners from other sources; and to obtain equity
build-up through debt reduction. It was contemplated from the outset of the
Partnership's existence that capital appreciation in Partnership cable
television properties would be converted to cash by a sale of such properties
at such time as the General Partner determined that the Partnership's
investment objectives had substantially been achieved and after a holding
period of approximately five to seven years. It also was contemplated from the
outset of the Partnership's existence that the General Partner or one of its
affiliates could be the purchaser of the Partnership's cable television
properties.
Sales of the Partnership's limited partnership interests commenced on August
17, 1987 and the Partnership was formed on September 9, 1987 when
subscriptions for the minimum offering amount were received. The Partnership
acquired the Littlerock System in November 1989. Based upon the track record
of prior public partnerships sponsored by the General Partner that had
liquidated or were in the process of liquidating their assets during the
period that limited partnership interests in the Partnership were being sold
and based upon disclosures made to prospective investors about the
Partnership's investment objectives in the Cable TV Fund 14 prospectus and
accompanying sales brochure, investors in the Partnership reasonably could
have anticipated that the Partnership's investment objectives would be
achieved and its assets liquidated after a holding period of approximately
five to seven years. Due to the uncertain and then adverse regulatory
environment that developed in the early 1990s for the cable television
industry, the resultant decline in the prices for cable television systems and
the subsequent inactivity in the cable television system marketplace, the
General Partner determined that it would be prudent to delay the sale of the
Littlerock System until market conditions improved, and as a result the
Littlerock System has been held by the Partnership for almost 9 years.
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The purpose of the sale of the Littlerock System, from the Partnership's
perspective, is to attain the Partnership's primary investment objective with
respect to the Littlerock System, i.e., to convert the Partnership's capital
appreciation in the Littlerock System to cash. The sale proceeds will be
distributed to the limited partners of the Partnership in accordance with the
distribution procedures established by the Partnership Agreement. The sale of
the Littlerock System is thus the necessary final step in the Partnership's
accomplishment of its investment objectives with respect to the Littlerock
System.
All distributions of the Partnership from the proceeds of the sale of cable
television systems are to be distributed 100 percent to the limited partners
until the limited partners receive an amount equal to 125 percent of their
initial capital contributions, and thereafter all such distributions are to be
shared 75 percent to the limited partners and 25 percent to the General
Partner. Based upon the distributions made to limited partners on the prior
sales of the Broward System and the Surfside System and the proposed sale
price of the Littlerock System, the limited partners of the Partnership will
not ultimately receive distributions in an amount equal to their initial
capital contributions and thus the sharing arrangement with the General
Partner will not ever be triggered.
PRIOR ACQUISITIONS AND SALES
The Partnership was formed in September 1987 as a Colorado limited
partnership in connection with a public offering of its limited partnership
interests. The Partnership has owned two cable television systems directly.
The Partnership acquired the Surfside System in September 1988 and the
Partnership acquired the Littlerock System in November 1989. In addition, in
January 1988, the Partnership and Cable TV Fund 14-A, Ltd. ("Fund 14-A"),
another public partnership managed by the General Partner, formed the Cable TV
Fund 14-A/B Venture (the "Venture"). Fund 14-A contributed $18,975,000 to the
capital of the Venture for a 27 percent ownership interest and the Partnership
contributed $51,025,000 to the capital of the Venture for a 73 percent
ownership interest. The Venture was formed to pool the financial resources of
Fund 14-A and the Partnership, two public partnerships sponsored by the
General Partner with identical investment objectives, and to enable them to
acquire a greater number of and/or larger cable television systems than each
of the partnerships could acquire on its own. The Venture acquired the Broward
System in March 1988.
On March 31, 1998, the Venture sold the Broward System to an unaffiliated
third party for $136,808,648. The sale of the Broward System was approved by
the holders of approximately 61 percent of the Partnership's limited
partnership interests in a vote of the limited partners held in the first
quarter of 1998. From the proceeds of the Broward System sale, the Venture
settled working capital adjustments, repaid the outstanding balance on its
credit facility, which totaled $39,902,968 at March 31, 1998, and paid a 2.5
percent brokerage fee of $3,420,216 to The Jones Group, Ltd., a subsidiary of
the General Partner. The Venture then distributed the remaining net sale
proceeds, or $94,039,000, to the two constituent partnerships of the Venture
in proportion to their ownership interests in the Venture. The Partnership
accordingly received 73 percent of the net sale proceeds, or $68,554,431. In
April 1998, the Partnership distributed its net sale proceeds to its limited
partners of record as of March 31, 1998. Such distribution represented
approximately $262 for each $500 limited partnership interest or $524 for each
$1,000 invested in the Partnership.
The initial sales price for the Venture's Broward System had been
$140,000,000, but this sales price was reduced by $3,191,352 to $136,808,648
at the closing on March 31, 1998 because of a basic subscriber shortfall at
closing. (The agreement between the Venture and the buyer provided that the
sales price would be reduced $2,472 for each basic subscriber less than 56,637
at the March 31, 1998 closing.) When final closing adjustments were completed
on June 30, 1998, however, additional basic subscribers that were not able to
be counted as basic subscribers of the Broward System at the March 31, 1998
closing (because they were relatively recent subscribers at such date) were
able retrospectively to be counted as basic subscribers of the Broward System.
These basic subscribers brought the basic subscriber count up to 56,637 and
the sales price accordingly was adjusted upward by $3,191,352 to $140,000,000.
The Venture distributed this $3,191,352 in July 1998 to the Venture's two
constituent partnerships in proportion to their ownership interests in the
Venture. The Partnership accordingly received 73 percent of these additional
Broward System sale proceeds, or $2,326,272. The
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Partnership subsequently distributed this sum to its limited partners of
record as of March 31, 1998, resulting in an additional return of $10 for each
$500 limited partnership interest or $20 for each $1,000 invested in the
Partnership from the Broward System sale.
On June 30, 1998, the Partnership sold the Surfside System to an
unaffiliated third party for $51,500,000. The sale of the Surfside System was
approved by the holders of approximately 61 percent of the Partnership's
limited partnership interests in a vote of the limited partners held in the
first quarter of 1998. Upon the closing of the sale of the Surfside System,
the Partnership retained approximately $240,000 of the sale proceeds for
working capital purposes, repaid all of its indebtedness (including
$15,800,000 borrowed under its credit facility, $658,490 in advances from the
General Partner and capital lease obligations of $143,870), paid a 2.5 percent
brokerage fee totaling $1,287,500 to The Jones Group, Ltd., paid a deferred
acquisition fee of $920,000 to The Jones Group, Ltd. and then distributed the
net sale proceeds of approximately $33,096,952 to the Partnership's limited
partners of record as of June 30, 1998. This distribution was made in August
1998. Such distribution represented approximately $127 for each $500 limited
partnership interest or $254 for each $1,000 invested in the Partnership.
Limited partners of Partnership have received distributions from the Broward
System sale and the Surfside System sale totaling approximately $102,868,006.
All distributions to date have given the Partnership's limited partners an
approximate return of $394 for each $500 limited partnership interest or $788
for each $1,000 invested in the Partnership. The Partnership intends to make a
final distribution of approximately $10,259,235 to the limited partners,
representing the net proceeds of the sale of the Littlerock System. This
distribution will give the Partnership's limited partners an additional return
of $39 for each $500 limited partnership interest or $78 for each $1,000
invested in the Partnership. Taking into account the distributions from the
sale of the Broward System and the Surfside System and the anticipated
distribution from the sale of the Littlerock System, the limited partners of
the Partnership can expect to receive a total return of $433 for each $500
limited partnership interest or $866 for each $1,000 invested in the
Partnership. After the sale of the Littlerock System, the Partnership will be
liquidated and dissolved and no further distributions to limited partners will
be made. The General Partner has not received and will not receive any general
partner distributions from the Partnership.
THE GENERAL PARTNER'S OBJECTIVES
The purpose of the Littlerock System's sale from the General Partner's
perspective is to enable the Partnership to sell the Littlerock System at a
fair price and to enable the General Partner (through an indirect wholly owned
subsidiary) to acquire a cable television system operating in a marketplace in
which the General Partner itself desires to own and operate a cable television
system. The General Partner currently is one of the ten largest cable
television system operators in the United States, with owned and managed
systems totaling in excess of one million basic subscribers. A key element of
the General Partner's strategy is to increase the number of owned subscribers
clustered in attractive demographic areas. The General Partner is making
progress in clustering its owned subscribers in two primary groups of cable
systems. The General Partner's Maryland/Virginia cluster is based primarily on
geography. The General Partner's suburban cluster is based on similar market
and operating characteristics, rather than geography. The General Partner
believes that its clustering strategy may allow it to obtain both economies of
scale and operating efficiencies, for example in areas such as marketing,
administration and capital expenditures. The General Partner plans to acquire,
from three of its managed partnerships, the much larger neighboring cable
television system serving the communities of Palmdale and Lancaster,
California (the "Palmdale System") concurrently with its acquisition of the
Littlerock System. The General Partner's purchase of the Palmdale System is
subject to several closing conditions, however, and the closing of the General
Partner's purchase of the Littlerock System is not contingent on the General
Partner's acquisition of the Palmdale System. The Palmdale System is adjacent
to the Littlerock System and the two systems have been jointly operated by the
General Partner using one headend and several microwave receive sites and a
single management team based in Palmdale. The General Partner desires to add
both the Palmdale System and the Littlerock System to its suburban cluster,
which currently includes the cable systems serving the communities of Savannah
and Augusta, Georgia, Pima County, Arizona, Albuquerque, New Mexico and
Independence, Missouri.
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In contrast to the Partnership, which is a limited partnership with a finite
term and which sought cable television properties with high growth potential
during a holding period of approximately five to seven years, the General
Partner, a corporation with perpetual existence, is seeking to acquire cable
television systems that can generate a steady stream of income and may
appreciate in value over a longer holding period. The Littlerock System
satisfies this objective of the General Partner. The General Partner also may
be in a better position than the Partnership to access both debt and equity to
finance the long-term development of the Littlerock System. The General
Partner may be able to leverage the Littlerock System at a higher level than
the Partnership has done and, accordingly, the General Partner may be able to
generate a greater return on its investment in the Littlerock System than the
Partnership would be able to do within the same time. Because the General
Partner's investment horizon is much longer term than the Partnership's
investment horizon, and the General Partner will not need to sell the
Littlerock System to achieve its investment objectives, it can better
withstand the costs associated with meeting the competition and the regulatory
risks inherent in long-term holding and development of the Littlerock System.
RELEVANT PROVISIONS OF THE PARTNERSHIP AGREEMENT
Section 2.2(k) of the Partnership Agreement provides that the sale of all or
substantially all of the Partnership's assets is subject to the approval of
the holders of a majority of the Partnership's limited partnership interests.
Because the Littlerock System is the Partnership's sole remaining asset, the
sale of the Littlerock System is being submitted for limited partner approval.
Section 2.3(b)(iv)(b) of the Partnership Agreement permits the Partnership
to sell any or all of its cable television systems directly to the General
Partner or one or more of its affiliates if the system to be sold has been
held by the Partnership for at least three years, or if it is part of, or
related to, another system that has been held for three years, and provided
that the price paid to the Partnership by the General Partner or any such
affiliate is determined by the average of three separate, independent
appraisals of the particular cable television system or systems being sold,
and that the cost of such appraisals is not borne by the Partnership. Because
the Littlerock System has been held by the Partnership for at least three
years and the purchase price to be paid to the Partnership is equal to the
average of three separate, independent appraisals of the fair market value of
the Littlerock System obtained at the General Partner's expense, these
requirements of the Partnership Agreement have been satisfied.
REASONS FOR THE TIMING OF THE SALE
The Partnership has a finite legal existence of 17 years, over 11 of which
have passed. It was not intended or expected, however, that the Partnership
would hold its cable systems for 17 years. Although it was not possible at the
outset of the Partnership to determine precisely how quickly the investment
objectives with respect to any particular system would be achieved, investors
were informed that the General Partner's past experience with prior
partnerships had shown that five to seven years was the average length of time
from the acquisition of a cable system to its sale. Investors in the
Partnership also were able to examine the track record of the General
Partner's prior partnerships because such track record was set forth in the
prospectus delivered in connection with the Partnership's initial public
offering. At the time of the formation of the Partnership, the track record
showed that prior partnerships had rarely held their cable systems for any
longer than six years.
It is the General Partner's publicly announced policy that it intends to
liquidate all of its managed partnerships, including the Partnership, as
opportunities for sales of partnership cable television systems arise in the
marketplace. The General Partner has determined that, as part of this general
liquidation plan, it is in the best interests of the Partnership to sell the
Littlerock System. The General Partner's determination that the Littlerock
System should be sold in 1998 should not be deemed to be free of conflicts of
interest, however, in light of the fact that the General Partner was a
potential purchaser of the Littlerock System. During the years that the
Partnership has owned and operated the Littlerock System, senior management of
the General Partner, including Glenn R. Jones, the General Partner's Chief
Executive Officer, James B. O'Brien, the General Partner's President and Chief
Operating Officer, and Kevin P. Coyle, the General Partner's Vice
President/Finance and
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Chief Financial Officer, has monitored the performance of the Littlerock
System. The General Partner has overseen the Littlerock System's growth in the
number of homes passed, the miles of cable plant and the number of basic and
premium subscribers. The General Partner's management has regularly reviewed
the Littlerock System's budgets, it has examined the Littlerock System's
liquidity and capital needs and it has carefully monitored the Littlerock
System's revenue and cash flow growth to confirm that the Partnership's
primary investment objective, i.e., capital appreciation in the Littlerock
System, was being achieved.
The General Partner concluded in January 1998 that, because the Littlerock
System met the General Partner's objective of acquiring cable systems with
operating characteristics like those of the Littlerock System, the General
Partner would proceed to acquire the Littlerock System pursuant to the
conditions of Section 2.3(b)(iv)(b) of the Partnership Agreement. The General
Partner accordingly did not market the system for sale and did not solicit
third party buyers for the Littlerock System but instead contracted with
independent appraisal firms to prepare appraisals of the fair market value of
the Littlerock System so that the General Partner could determine the price it
would offer to pay for the Littlerock System. The three appraisals obtained by
the General Partner valued the Littlerock System at $11,118,000, $11,092,200
and $9,951,000, respectively. The General Partner's Chief Financial Officer
then took the three appraised values and averaged them pursuant to the
requirements of Section 2.3(b)(iv)(b) of the Partnership Agreement, and
thereby determined that the price the General Partner would offer for the
Littlerock System would be $10,720,400. The General Partner's senior
management also agreed that this was a fair price and accepted it on behalf of
the Partnership. See "Special Factors, The Appraisals." The General Partner's
decision to acquire the Littlerock System for its own account, its
determination that the Partnership would not market the system for sale and
not solicit third party buyers for the system, its contracting with
independent appraisal firms to prepare appraisals of the fair market value of
the Littlerock System and its review and acceptance of the appraisals should
not be deemed to be free of conflicts of interest in light of the fact that
the General Partner has determined that it would be in the best interests of
the General Partner and its shareholders for the General Partner to acquire
the Littlerock System.
No arm's-length negotiations of the terms of the purchase and sale agreement
were conducted because the Partnership does not have any employees or
management other than the employees and management of the General Partner.
When the appraisal process was completed in March 1998, the General Partner
prepared the standard purchase and sale agreement that it uses for the
acquisition of cable television systems from its managed partnerships. This
agreement was executed by officers of the General Partner both on behalf of
the General Partner as buyer and on behalf of the Partnership as seller. The
terms of the purchase and sale agreement and the process by which such terms
were negotiated should not be deemed to be free of conflicts of interest in
light of the fact that management of the General Partner, which owes a
fiduciary duty to both the Partnership and its limited partners and to the
shareholders of the General Partner, represented all of the parties in the
negotiation of the purchase and sale agreement. A written memorandum to the
General Partner's Board of Directors from the General Partner's management
outlining the terms of the transaction, including the means by which
management had determined the sales price for the Littlerock System, the
results of the three appraisals, the operating and financial statistics of the
Littlerock System and the reasons why the General Partner should purchase the
Littlerock System, was submitted to the Board of Directors with a
recommendation from management that the Board of Directors approve the
transaction, which the Board of Directors did on March 10, 1998. The directors
also were provided with copies of the three appraisal reports that management
had used in determining the sales price and a copy of the draft purchase and
sale agreement. As discussed below, the Board of Directors unanimously
concluded that the transaction was fair to the unaffiliated limited partners
of the Partnership. See "Special Factors, Recommendation of the General
Partner and Fairness of the Proposed Sale of Assets."
When investing in the Partnership, by virtue of the provisions of Section
2.2(k) of the Partnership Agreement, the limited partners vested in the
General Partner the right and responsibility to determine when the
Partnership's investment objectives had been substantially achieved. The
Littlerock System was acquired by the Partnership in November 1989 because, in
the opinion of the General Partner at the time of the Littlerock System's
acquisition, it had the potential for capital appreciation within a reasonable
period of time. It is the
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General Partner's opinion that during the almost 9 years that the Littlerock
System has been held by the Partnership, the Partnership's investment
objectives with respect to the Littlerock System have been achieved. The
General Partner used no specific benchmarks or measurement tools in
determining that the Partnership's investment objectives have been achieved.
The General Partner conducted a subjective evaluation of a variety of factors
including the length of the holding period, the prospect for future growth as
compared to the potential risks, the cash on cash return to investors and the
amount of gain to be recognized on the sale of assets. The General Partner's
conclusion that the Partnership's investment objectives with respect to the
Littlerock System have been achieved should not be deemed to be free of
conflicts of interest in light of the fact that the General Partner could not
purchase the Littlerock System unless it also determined that now was the time
for the Partnership to sell the Littlerock System.
The Littlerock System was acquired by the Partnership in November 1989 for
an aggregate purchase price of approximately $4,576,000. At acquisition, the
Littlerock System consisted of cable plant passing 2,328 homes and serving
1,985 basic subscribers. As of December 31, 1997, the Littlerock System
consisted of approximately 205 miles of cable plant passing 8,165 homes and
serving 5,675 basic subscribers. During the holding period, the Partnership
used approximately $3,946,500 in capital expenditures to expand the cable
plant of the Littlerock System. The increase in the value of the Littlerock
System during the holding period is demonstrated by the fact that the
Littlerock System was purchased for $4,576,000 and the Littlerock System is
proposed to be sold for $10,720,400, a difference of $6,144,400.
In evaluating whether now was the time for the Partnership to sell the
Littlerock System, the General Partner generally considered the benefits to
the limited partners that might be derived by the Partnership's holding the
Littlerock System for an additional period of time. The General Partner
assumed that the Littlerock System might continue to appreciate in value and,
if so, the Littlerock System would be able to be sold for a greater sales
price in the future. The General Partner weighed these assumptions about the
Littlerock System's continuing growth against the risks to investors from a
longer holding period, i.e., the risks that regulatory, technology and/or
competitive developments could cause the Littlerock System to decline in
value, which would result in a lesser sales price in the future. A longer
holding period would expose investors to the risk that competition from direct
broadcast satellite companies, telephone companies and/or neighboring cable
companies could diminish the number of subscribers to the Littlerock System's
basic and premium services, thereby decreasing the value of the Littlerock
System. A longer holding period also would expose investors to the risk that
changes in the regulations promulgated by the governmental agencies that
oversee cable operations could make cable systems a less desirable investment,
thereby decreasing the value of the Littlerock System. The General Partner's
decision to sell the Littlerock System was greatly influenced by the fact that
the originally contemplated holding period had been exceeded. The General
Partner's consideration of the benefits and risks to the limited partners from
a longer holding period should not be deemed to be free of conflicts of
interest in light of the fact that the General Partner could not purchase the
Littlerock System unless it also determined that now was the time for the
Partnership to sell the Littlerock System.
The General Partner determined that it is in a better position than the
Partnership to bear the risks of investment in the Littlerock System. The
Partnership is limited in its ability to obtain additional equity financing,
in part because the limited partnership interests are non-assessable. The
Partnership Agreement also contains limits on the amounts that the Partnership
can borrow. And the Partnership has only one asset, the Littlerock System,
which gives the Partnership limited collateral for borrowings. The General
Partner, on the other hand, is one of the nation's largest cable television
companies with longer term investment objectives. For example, if significant
competition to the Littlerock System were to develop, the General Partner
would be in a better position than the Partnership to finance the marketing
campaigns or technological improvements necessary to meet such competition.
This analysis too should not be deemed to be free of the conflicts of interest
of the General Partner.
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Therefore, in light of all of the above factors, the General Partner has
determined that now is the appropriate time for the Partnership to convert its
capital appreciation in the Littlerock System to cash through the sale of the
Littlerock System.
CERTAIN EFFECTS OF THE SALE
Upon consummation of the sale of the Littlerock System, which is expected to
occur on December 31, 1998, the Partnership will distribute the net sale
proceeds (approximately $10,259,235) to its limited partners of record as of
the closing date of the sale of the Littlerock System pursuant to the terms of
the Partnership Agreement. Limited partners will receive $39 for each $500
limited partnership interest, or $78 for each $1,000 invested in the
Partnership. Once the distribution of the net proceeds from the sale of the
Littlerock System has been made, limited partners will have received a total
of $433 for each $500 limited partnership interest, or $866 for each $1,000
invested in the Partnership, taking into account the prior distributions to
limited partners made earlier this year from the net proceeds of the sales of
the Broward System and the Surfside System. The limited partners will be
subject to federal and state income tax on the income resulting from the sale
of the Littlerock System. See the detailed information below under the caption
"Federal and State Income Tax Consequences."
Another effect of the sale is that it will result in an indirect wholly
owned subsidiary of the General Partner acquiring the Littlerock System. Thus,
as a result of this transaction, the General Partner will make a substantial
equity investment in the Littlerock System and it will have a greater equity
ownership interest in the Littlerock System than it does now as the general
partner of the Partnership. The General Partner will have a 100 percent
interest in any future capital appreciation of the Littlerock System. The
General Partner's acquisition of the Littlerock System will advance its goal
of increasing the number of owned subscribers in attractive demographic areas
and may allow the General Partner to obtain economies of scale and operating
efficiencies by adding the Littlerock System to its suburban cluster of
systems with similar market and operating characteristics, including the
adjacent Palmdale System. The General Partner also will bear 100 percent of
the risk of system losses and any diminution in system value. As the general
partner of the Partnership, the General Partner earns management fees and
receives reimbursement of its direct and indirect expenses allocable to the
operation of the Littlerock System. The General Partner's right to receive
such fees and reimbursements related to the Littlerock System will terminate
on the Partnership's sale of the Littlerock System.
Neither Colorado law nor the Partnership Agreement afford dissenters' or
appraisal rights to limited partners in connection with the proposed sale of
the Littlerock System. If the proposed transaction is approved by the holders
of a majority of limited partnership interests, all limited partners will
receive a distribution in accordance with the procedures prescribed by the
Partnership Agreement regardless of how or whether they vote on the proposal.
All distributions to the limited partners of the Partnership from the
proceeds of the sale of the Littlerock System will be made to the
Partnership's limited partners of record as of the closing date of the sale of
the Littlerock System, which is expected to be December 31, 1998. Because
transferees of limited partnership interests following the closing date of the
sale of the Littlerock System would not be entitled to any distributions from
the Partnership, a transfer of limited partnership interests following the
closing date of the sale of the Littlerock System would have no economic
value. The General Partner therefore has determined that, pursuant to the
authority granted to it by Section 3.5 of the Partnership Agreement, it will
approve no transfers of limited partnership interests following the closing of
the sale of the Littlerock System. Sales of limited partnership interests
pursuant to limited tender offers, in the secondary market or otherwise will
not be possible following the closing of the sale of the Littlerock System.
RECOMMENDATION OF THE GENERAL PARTNER AND FAIRNESS OF THE PROPOSED SALE OF
ASSETS
The General Partner believes that the proposed sale of the Littlerock System
and the distribution of the net proceeds therefrom are both procedurally and
substantively fair to all unaffiliated limited partners of the Partnership,
and it recommends that the limited partners approve the transaction. The
General Partner's recommendation that the limited partners approve the sale of
the Littlerock System and its fairness determination
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should not be deemed to be free from conflicts of interest, however, in light
of the fact that one of its subsidiaries is the proposed purchaser of the
Littlerock System. Because the purchaser of the Littlerock System would
benefit from a lower sales price, the General Partner has an economic interest
in conflict with the economic interest of the limited partners.
In determining the substantive and procedural fairness of the proposed
transaction, the General Partner's Board of Directors on March 10, 1998
considered each of the following factors, all of which had a positive effect
on its fairness determination. The factors are listed in descending order of
importance, i.e., the first factor listed was given the most weight in the
determination that the proposed transaction is fair, although, as a practical
matter, this is an approximation of the weight given to each factor because
each factor is relevant and the General Partner's Board of Directors was not
able to weigh the relative importance of each factor precisely:
(i) the limited partnership interests are at present illiquid and the
cash to be distributed to limited partners as a result of the proposed sale
of the Littlerock System will provide limited partners with liquidity and
with the means to realize the appreciation in the value of the Littlerock
System;
(ii) the sales price represents a fair market valuation of the Littlerock
System as determined by the average of three separate appraisals of the
Littlerock System by qualified independent appraisers;
(iii) the Partnership has held the Littlerock System for almost nine
years, a holding period beyond that originally anticipated;
(iv) the conditions and prospects of the cable television industry in
which the Partnership is engaged, including the developing threat of
competition from DBS services and telephone companies, and the working
capital and other financial needs of the Partnership if it were to continue
to own the Littlerock System;
(v) the terms and conditions of the purchase and sale agreement,
including the fact that the sales price will be paid in cash, the fact that
the Partnership was not required to make many of the representations and
warranties about the Littlerock System or give indemnities that are
customarily given in transactions of this nature, the fact that the
purchaser's obligation to close is not contingent upon its ability to
obtain financing, and the fact that the Partnership will pay no brokerage
fees upon the sale of the Littlerock System, which it likely would have
paid if the Littlerock System were being sold to an unaffiliated party; and
(vi) the sale is being conducted in accordance with the terms of the
Partnership Agreement, including the fact that the proposed transaction
will not occur unless it is approved by the holders of at least a majority
of the limited partnership interests.
An officer of The Jones Group, Ltd., the cable brokerage subsidiary of the
General Partner, worked with each of the independent appraisers hired to
prepare fair market value appraisals of the Littlerock System, providing them
with current and historical profit and loss statements for the Littlerock
System and with current subscriber reports. Certain officers and all of the
directors of the General Partner received the final appraisal reports. The
members of the Board of Directors of the General Partner adopted the analyses
and conclusions of Strategis Financial Consulting, Inc., which valued the
Littlerock System at $11,118,000, because such firm's valuation procedures,
assumptions and methodologies most closely approximate the valuation
procedures, assumptions and methodologies used by the General Partner's
management in evaluating cable television systems. The General Partner's Board
of Directors did not specifically adopt the $11,118,000 value placed on the
Littlerock System by Strategis Financial Consulting, Inc., but the Board did
consider the fact that the value determined by this appraisal firm was the
closest of the three appraisals to the average of the three appraisals and
concluded that this fact supported its fairness determination. The General
Partner did not conduct its own analysis of the value of the Littlerock
System.
In making its fairness determination, the General Partner's Board of
Directors did not consider that Strategis' overall fair market value of the
Littlerock System exceeds the sales price by $397,600 or that Strategis'
"high" market value estimate exceeds the sales price by $1,428,226. Because it
was the methodology for determining the sales price mandated by the
Partnership Agreement, the General Partner's Board of Directors considered the
fact that the sales price to be paid to the Partnership for the Littlerock
System was determined by
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<PAGE>
averaging three independent appraisals of the fair market value of the
Littlerock System to be very persuasive evidence of the fairness of the
proposed transaction. As provided in Section 2.3(b)(iv)(b) of the Partnership
Agreement, the General Partner may purchase a cable television system from the
Partnership if the price paid to the Partnership by the General Partner is
determined by the average of three separate, independent appraisals of the
cable television system to be sold. It does not provide that the purchase
price shall be determined by the highest of the three appraisals. In light of
this governing partnership agreement provision, the General Partner's Board of
Directors did not consider offering the Partnership a sales price equal to
Strategis' appraisal values. Whenever a sum is to be determined by the average
of three values, there will be, by definition, values that are higher than and
values that are lower than the average. This implies to the General Partner
that such a process, agreed by all parties, is fair.
The General Partner considered the fact that the $10,720,400 purchase price
to be paid to the Partnership for the Littlerock System was determined by the
average of three independent appraisals of the fair market value of the
Littlerock System to be very persuasive evidence of the fairness of the
proposed transaction. The General Partner reviewed and considered the three
appraisals but it did not consider specific comparable transactions in
reaching its conclusions that the values for the Littlerock System determined
by the three appraisals are within the range of values seen in the marketplace
for comparable cable television systems in similar condition. The General
Partner is regularly engaged in the sale and/or purchase of cable television
systems in the marketplace both for its own account and for the account of its
various managed partnerships. It is the cumulative experience of the General
Partner's management and Board of Directors in such transactions on which the
fairness conclusions were based. The General Partner considered that the fair
market valuations of the Littlerock System were done by respected industry
appraisers using customary measures of value. Based upon the General Partner's
knowledge of and experience in the cable television industry, and its review
and consideration of the appraisals, it has concluded that the values for the
Littlerock System determined by the three appraisals are fair and within the
range of values seen in the marketplace for comparable cable television
systems in similar condition.
The $10,720,400 purchase price represents the current fair market value of
the Littlerock System on a going concern basis. The $10,720,400 purchase price
for the Littlerock System also compares favorably to the $5,291,161 net book
value of the Littlerock System at September 30, 1998. The liquidation value of
a cable television system, i.e., the sale of the system on other than a going
concern basis, is not usually considered to be an accurate indicator of the
value of a cable television system, primarily because the assets of a cable
television system typically are worth less when considered separately than
when considered as a going concern. The assets of a cable television system
consequently are not normally sold or purchased separately. A fair market
valuation of a system should, in the General Partner's view, be a valuation of
the system as a going concern. The liquidation value of the Littlerock System
therefore was not considered by the General Partner in reaching its
determination of fairness.
Because there has never been an established trading market for the
Partnership's limited partnership interests, the General Partner does not have
access to any reliable, official information about the historical or current
market prices for the Partnership's limited partnership interests in the very
limited secondary market where such interests from time to time have been
sold. The General Partner believes that such secondary market deeply discounts
the underlying value of the limited partnership interests due to their highly
illiquid nature. Therefore, even if trading information were available, the
historical or current market prices for the Partnership's limited partnership
interests would not necessarily be indicative of the value of the
Partnership's cable television system assets. For these reasons, the General
Partner did not consider the historical or current market prices for the
limited partnership interests when reaching its fairness determination.
During the past several years, however, several limited partners of the
Partnership who are not in any other way affiliated with the Partnership or
with the General Partner conducted tender offers for interests in the
Partnership at prices ranging from $165 to $190 per $500 limited partnership
interest. The $39 per $500 limited partnership interest to be distributed to
limited partners from the net proceeds of the Littlerock System's sale
compares favorably to these tender offer prices, especially in light of the
fact that the tender offer prices theoretically reflected the distribution
made to limited partners from the Broward System sale ($267 per $500
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<PAGE>
limited partnership interest), the distribution made to limited partners from
the Surfside System sale ($127 per $500 limited partnership interest) and the
distribution to be made to limited partners from the sale of the Littlerock
System.
The fact that the Partnership has held the Littlerock System for a period
beyond that originally anticipated was another important factor in the General
Partner's fairness determination--the General Partner believes that the
transaction is fair because a sale at this time will convert an illiquid
investment into a liquid one for all limited partners. And the current state
of the cable television industry also was considered by the General Partner in
making its fairness determination because the General Partner believes that it
is fair to investors that someone other than the Partnership take on the
uncertainties and risks involved in continuing to own and operate the
Littlerock System.
The fairness of the transaction is also demonstrated in an analysis of
certain of the terms and conditions of the purchase and sale agreement, which
generally are more favorable to the Partnership than reasonably could be
expected if the purchaser were not an affiliated company. There is no
financing contingency to closing. Because of the General Partner's existing
extensive knowledge about the Littlerock System, the Partnership has not been
required to make many of the representations and warranties about the quality
of the Littlerock System's tangible assets, the quantity of the Littlerock
System's subscribers or the validity of the Littlerock System's intangible
assets customarily found in cable television system transactions. The
Partnership likely would have been required to give such representations and
warranties to an unaffiliated party if the Littlerock System were being sold
to an unaffiliated party. In addition, the Partnership is not required to
indemnify the purchaser for defects discovered by the purchaser after the
closing. This frees the Partnership from having to reserve a portion of the
sale proceeds to cover typical indemnification obligations. The Partnership
also will pay no brokerage fee in connection with the sale of the Littlerock
System, which it likely would have paid if the Littlerock System were being
sold to an unaffiliated party. This will result in more funds from the sale
being available for distribution to the Partnership's limited partners.
The General Partner is aware and considered that although consummation of
this transaction will result in a distribution to the Partnership's limited
partners of approximately $78 per $1,000 of limited partnership capital
invested in the Partnership, there are several potential negative consequences
of the transaction to limited partners. For example, the proposed sale will
require the limited partners to recognize, for federal income tax purposes, a
gain resulting from the sale. And although the three fair market valuations
established by the independent appraisals took into account the present value
of the projected future growth of the Littlerock System and the sales price
(the average of the three appraisals) thus takes into account the present
value of the projected future growth of the Littlerock System, the proposed
sale will deprive the limited partners of an opportunity to participate in the
actual future growth of the Littlerock System, if any. The General Partner
nevertheless concluded that the cash distributions to the limited partners of
the Partnership from the sale of the Littlerock System outweighed these
consequences.
As disclosed above, the proposed transaction is subject to various conflicts
of interest arising out of the Partnership's relationships with the General
Partner. Because the General Partner and its affiliates are engaged in the
ownership and operation of cable television systems, they are generally in the
market to purchase cable television systems for their own account. A conflict
thus arises from the General Partner's fiduciary duty as general partner of
the Partnership and its management's fiduciary duty to the General Partner's
shareholders when it determines that one of the Partnership's cable television
systems will be sold to the General Partner or one of its affiliates and not
to an unaffiliated third party. This conflict of interest was disclosed to
limited partners in the prospectus delivered to investors at the time of the
public offering of interests in the Partnership. Prior to the Partnership's
public offering, the General Partner entered into negotiations with certain
state securities administrators as part of the process of clearing the
offering in the "merit" states, i.e., those states that permit the sale of
securities only if the state securities administrator deems the offering as a
whole to be fair, just and equitable. Several of the merit state securities
administrators focused on the conflicts of interest in the event that the
Partnership were to sell one or more of its cable television systems to the
General Partner or one of its
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<PAGE>
affiliates. The General Partner agreed to include the provision in the
Partnership Agreement that permits the Partnership to sell its cable
television systems directly to the General Partner or one of its affiliates
only after a three-year holding period and only if the General Partner or such
affiliate pays a purchase price that is not less than the average of three
separate independent appraisals of the particular cable television system
being sold. The General Partner has concluded that the mechanisms for
determining the purchase price to be paid to the Partnership provide
sufficient procedural safeguards to minimize the effects of the conflicts of
interest inherent in any such transaction. The fact that these procedures have
been carried out in connection with the Partnership's proposed sale of the
Littlerock System, together with the fact that the transaction also is
conditioned upon receipt of the approval of the holders of a majority of the
Partnership's limited partnership interests, enable the General Partner to
conclude that the proposed transaction is both procedurally and financially
fair to all partners.
The directors of the General Partner who are not employees of the General
Partner did not vote separately to approve the transaction, nor did the
outside directors retain an unaffiliated representative to act solely on
behalf of the limited partners for the purposes of negotiating the terms of
the proposed sale of the Littlerock System and/or preparing a report
concerning the fairness of the proposed sale. While the directors of the
General Partner recognized that the interests of the General Partner and the
limited partners may not in all respects necessarily be the same, they
recognized also that the purchase price was determined in accordance with the
terms of the Partnership Agreement, that is, by averaging three separate
independent appraisals of the Littlerock System's fair market value. The
members of the Board of Directors relied on Section 2.3(b)(iv)(b) of the
Partnership Agreement, which permits the General Partner to purchase the
Littlerock System. The members of the Board of Directors reviewed and
considered the appraisals and, based upon their general knowledge of cable
television system transactions undertaken by the General Partner and its
affiliates and by unaffiliated cable television companies, concluded that the
values for the Littlerock System determined by the appraisers were fair and
were within the industry norms for comparable transactions. All 13 directors
of the General Partner participated in the March 10, 1998 meeting to discuss
and vote on the Partnership's sale of the Littlerock System to the General
Partner. Each of Messrs. Glenn R. Jones, James B. O'Brien, Josef J. Fridman,
Robert Kearney, Siim A. Vanaselja, James J. Krejci, William E. Frenzel, Donald
L. Jacobs, Howard O. Thrall, Robert E. Cole, Raphael M. Solot, Sanford Zisman
and Robert B. Zoellick voted to approve the transaction. No director of the
General Partner raised any questions or expressed any reservations about the
fairness of the transaction to the limited partners of the Partnership.
The General Partner determined that the Littlerock System would not be
marketed for sale to third party buyers and the General Partner did not
consider having the Partnership sell the Littlerock System to any cable system
operator other than the General Partner (or one of its affiliates). It is
anticipated that if the proposed transaction is not consummated, the General
Partner's current management team will continue to manage the Littlerock
System on behalf of the Partnership until such time as the Littlerock System
could be sold. No other alternatives have been or are being considered.
THE APPRAISALS
At regular intervals during the holding period, the General Partner obtained
appraisals of all of the Partnership's cable television systems so that the
General Partner could fulfill its obligation of reporting the Partnership's
asset values to trustees and custodians of qualified plans that own limited
partner interests in the Partnership. These appraised values also have been
reported to all investors in the quarterly and annual reports mailed to
limited partners with copies of the Partnership's periodic reports on Forms
10-Q and 10-K. The most recent appraisal of the Littlerock System done prior
to the General Partner's decision to buy the system from the Partnership was
done as of July 31, 1997 by Strategis Financial Consulting, Inc., which valued
the Littlerock System as of such date at $10,579,000. This old appraisal was
not used by the General Partner's management in determining the sales price
that the General Partner would offer for the Littlerock System and it was not
considered by the General Partner's Board of Directors in making its fairness
determinations.
In determining the price that the General Partner would offer for the
Littlerock System, in January 1998 the General Partner retained Strategis
Financial Consulting, Inc., Bond & Pecaro, Inc. and Waller Capital
13
<PAGE>
Corporation to prepare separate appraisals of the fair market value of the
Littlerock System as of December 31, 1997. Each of the appraisers were asked
to determine the cash price a willing buyer would give a willing seller,
neither being under any compulsion to buy or sell and both having reasonable
knowledge of relevant facts, in an arm's-length transaction to acquire the
Littlerock System. Upon receipt of the three appraisal reports, management of
the General Partner examined each of them and discussed among themselves the
merits of the appraisals' assumptions, methodologies and conclusions, and,
based on their experience in and knowledge of the cable television industry,
they found each of them to be fair and reasonable. The appraisal reports were
then submitted to the Board of Directors of the General Partner for review. As
disclosed above, the Board of Directors of the General Partner unanimously
approved the transaction based upon a price determined by averaging these
three appraisals.
The written appraisal reports are available for inspection and copying at
the offices of the General Partner during regular business hours by any
interested limited partner of the Partnership or by his or her authorized
representative. Copies of such appraisals will be mailed by the General
Partner to any interested limited partner or to his or her authorized
representative upon written request to the General Partner at the expense of
the requesting limited partner. Copies of these three appraisals also have
been publicly filed with the Securities and Exchange Commission and may be
inspected at the Commission's public reference facilities and at its World
Wide Web site.
The General Partner provided each of the appraisers with the same current
and historical profit and loss statements for the Littlerock System and with
the same current subscriber reports. The appraisers also gathered information
about the Littlerock System's subscribers, channel line-up, technology, cable
plant, penetration rates and the local economy from questionnaires that each
individual appraisal firm prepared and provided to the general manager of the
Littlerock System and from conversations with the Littlerock System's
management team. From this information, the appraisers used their independent
analyses to project cash flow, determine growth of homes passed, the
Littlerock System's future penetration and possible rate adjustments. The
appraisals thus reflect the application of the appraisers' expertise to the
data about the Littlerock System supplied by the General Partner.
The General Partner's $10,720,400 offer for the Littlerock System was based
on the three separate, independent appraisals of the Littlerock System
prepared by Strategis Financial Consulting, Inc., Bond & Pecaro, Inc. and
Waller Capital Corporation as of December 31, 1997. Strategis Financial
Consulting, Inc. concluded that the Littlerock System's overall fair market
value as of December 31, 1997 was $11,118,000. Bond & Pecaro, Inc. concluded
that the Littlerock System's overall fair market value as of December 31, 1997
was $11,092,200. Waller Capital Corporation concluded that the Littlerock
System's overall fair market value as of December 31, 1997 was $9,951,000.
The General Partner believes that the three appraisals were current as of
March 10, 1998, the date that the General Partner's Board of Directors made
its fairness determination and the date on which the purchase and sale
agreement was executed. In the General Partner's view, the assumptions
regarding system operations and the cable television system marketplace
underlying the three appraisals have generally remained unchanged since the
date of the appraisals.
One of the independent appraisers hired by the General Partner to determine
the fair market value of the Littlerock System is a subsidiary of one of the
firms hired to appraise the Tampa, Florida cable television system formerly
owned by several partnerships of which the General Partner also is general
partner when it was proposed to be sold to a subsidiary of the General Partner
in 1995. The sale of the Tampa system is the subject of a derivative lawsuit
challenging the sales price paid by a subsidiary of the General Partner for
the Tampa system. This appraiser applied the same methodologies in valuing the
Littlerock System as its affiliate employed in valuing the Tampa system.
Another of the independent appraisers hired by the General Partner to
determine the fair market value of the Littlerock System also serves as the
General Partner's expert witness in this derivative lawsuit.
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The Strategis Appraisal
Strategis Financial Consulting, Inc. ("Strategis") has served the
communications industry for nearly 30 years. Its team of financial,
engineering and managerial professionals devotes a substantial portion of its
time to the appraisal of cable television systems, cellular telephone systems,
paging systems, mobile radio and broadcast stations. Strategis was selected by
the General Partner to render an opinion as to the fair market value of the
Littlerock System in light of such overall qualifications. No limitations were
imposed with respect to the appraisal to be rendered by Strategis. The firm
was selected by the General Partner to prepare an independent appraisal of the
Littlerock System because of the General Partner's familiarity with the firm
and its good reputation in the cable television industry. Strategis has
prepared independent appraisals of other cable television systems owned and/or
managed by the General Partner. The principals of Strategis are not affiliated
in any way with the General Partner.
Strategis used five generally accepted cable television valuation methods
using the income approach to valuation in establishing the range of fair
market values of the Littlerock System as a going concern. The first method
used a multiple of 1997's operating income derived from comparable asset
values of privately held and publicly traded cable companies. The second
method used a lower multiple of the Littlerock System's December 1997
operating income annualized. The third method applied a slightly lower
multiple of 1998's projected operating income. The fourth method was a
discounted net cash flow analysis in which a purchase price (estimated fair
market value) was calculated to achieve a target after-tax return on equity,
given particular operating and financing assumptions unique to the Littlerock
System's assets. The fifth method was a discounted cash flow analysis that
measured the net present value of the pre-tax operating cash flows (less
capital expenditures, plus the residual value of the Littlerock System) that
represent the return on total investment. For each valuation method, Strategis
established a "high" and a "low" estimated fair market value.
The first valuation method used a multiple of 1997's operating income of the
Littlerock System derived from comparable asset values of certain cable
companies. The cable companies used to generate baseline values for this
methodology included Adelphia Communications Corporation, Cablevision Systems
Corporation, Century Communications Corp., Comcast Corporation, Cox
Communications, C-TEC, EW Scripps, Grupo Televisa, Knight-Ridder, Media
General, TCA Cable TV, Inc., Telecommunications, Inc., Time Warner, United
International Holdings, US West MediaOne Group, the Washington Post and the
General Partner. Strategis determined, based upon its expertise and knowledge
of the cable television industry, a "low" multiple of 9.5 and a "high"
multiple of 10.5, concluding that a system comparable to the Littlerock System
would be unlikely to sell for less than 9.5 times its past year's operating
income and would be unlikely to sell for more than 10.5 times its past year's
operating income. These operating income multiples were determined based upon
several factors. First, the "pre-determined target returns on equity"
developed in connection with the fourth valuation method discussed below were
examined for the implied capitalization rate. The capitalization rate is the
inverse of the valuation multiple. The basic equation supporting a valuation
multiple is a fraction, with one being the numerator and the rate of return
minus the growth rate being the denominator. For the rates of return,
Strategis refers to the "predetermined (pre-tax) target returns on equity"
calculated as follows:
12%/(l-.34) = 18.2%
14%/(l-.34) = 21.2%
For the rate of growth estimate, Strategis examined projected growth in the
Littlerock System's operating income over the projection term. The average
annual growth rate in operating cash flow is approximately 8 percent on
Strategis' model. The inverse of the capitalization rate implies multiples of:
<TABLE>
<S> <C> <C>
1
(18.2%-8.0%) = 9.8 high
1
(21.2%-8.0%) = 7.6 low
</TABLE>
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<PAGE>
These calculated multiples were then adjusted by Strategis based on its
experience in the cable television industry. According to Strategis, in its
judgment, the implied high and low multiples, if applied to trailing twelve
months operating cash flow, would not provide an adequate estimate of value
for a mature cable system such as the Littlerock System. The multiples
ultimately used by Strategis in its first valuation method, 9.5 and 10.5, as
adjusted from the capitalization rate approach, in Strategis' judgment
appropriately reflect the value of the Littlerock System. This method resulted
in an estimated fair market value ranging from a low of $10,991,614 to a high
of $12,148,626 for the Littlerock System.
The second valuation method used a lower multiple of the Littlerock System's
December 1997 operating income annualized. Strategis determined, again based
on its expertise and knowledge of the cable television industry, a "low"
multiple of 9 and a "high" multiple of 10, concluding that a system comparable
to the Littlerock System would be unlikely to sell for less than 9 times the
dollar amount of its annualized current month's operating income and would be
unlikely to sell for more than 10 times the dollar amount of its annualized
current month's operating income. These multiples are slightly lower than
those used in the previous methodology because of the increased risk and time
factors involved in using current as compared to historical information. This
method resulted in an estimated fair market value ranging from a low of
$10,637,832 to a high of $11,819,813 for the Littlerock System.
The third valuation method applied a slightly lower multiple of 1998's
projected operating income of the Littlerock System. For this valuation,
Strategis first estimated, through its own analyses of current financial and
operating data provided by the General Partner, 1998's operating income for
the Littlerock System. The projection of 1998's operating income for this
third valuation method is the sum derived by subtracting projected operating
expenses from projected revenues of the Littlerock System to be generated
during the first twelve months following the valuation date. Strategis
projected growth in residential service revenue based on previously
established or reasonably foreseeable patterns of growth in the marketplace
and plant facilities (homes passed); the subscriber base; the amount of
programming to be sold to subscribers and the rates charged for programming,
associated equipment rentals and service installations. Strategis projected
revenue for commercial accounts to increase at a steady but lower rate than
residential revenue, while advertising revenue was projected based on
Strategis' estimates of the long term potential growth for local advertising
in the Littlerock System's market. Operating expenses were projected by
Strategis based on the Littlerock System's actual historical expenses and
Strategis' familiarity with cable system operating expenses typical for a
system of the Littlerock System's size. Line item expenses within the
technical-operations, general and administrative, sales and marketing, and
programming departments were examined and projected based on their
relationship to the number of subscribers or plant miles, whichever was
appropriate, and included a general inflation component. Based on its
expertise and knowledge of the cable television industry, Strategis set a
"low" multiple of 8.5 and a "high" multiple of 9.5 concluding that a system
comparable to the Littlerock System would be unlikely to sell for less than
8.5 times the system's projected operating income for the following year and
would be unlikely to sell for more than 9.5 times the system's projected
operating income for the following year. These multiples are slightly lower
than those used in the previous methodologies because of the increased risk
and time factors involved in using projected as compared to historical and
current information. This method resulted in an estimated fair market value
ranging from a low of $10,981,999 to a high of $12,273,999 for the Littlerock
System.
The fourth valuation method was a discounted net cash flow analysis in which
a purchase price (estimated fair market value) was calculated to achieve a
target after-tax return on equity given particular operating and financing
assumptions specific to the Littlerock System. This method involved the use of
projected operations for the Littlerock System and a pre-determined target
return on equity for a hypothetical buyer. Strategis used the Capital Asset
Pricing Model ("CAPM") as a guide in developing discount rates used in the
discounted cash flow model for the fourth valuation method. The CAPM was
developed to estimate the rate of return on equity that would be required by
investors to take on the risk of a given investment. Strategis used the CAPM
in conjunction with observations of actual market transactions and its
judgment. The following illustrates use of the CAPM and the support it
provided for the "pre-determined target return on equity" used to value the
Littlerock System.
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<PAGE>
To estimate a "pre-determined target return on equity" for the CAPM,
Strategis examined movements in stock prices over 1996 and 1997 of the same
cable television multiple system operators that it examined in determining the
multiples for the first valuation method discussed above. The movements in
individual stock prices were compared to movements in the stock market as a
whole, as indicated by the price of the Standard & Poor's 500 stock index. The
extent to which movements in a particular stock are related to movements in
the market overall is reflected in the stock's "beta." Strategis calculated
individual betas for the above-listed cable television multiple system
operators. Average and median betas for the entire group were then multiplied
by the "equity risk premium," which measures the additional return to equity
investors over and above the return to holders of non-equity investments. The
risk-free rate of investment is then added to determine the required equity
return of the investment. The equation is as follows:
Beta* (Equity Risk Premium) + Risk-Free Rate = Required Return on Equity
In doing this analysis, Strategis found that the average beta for the group
of companies it examined was 1.06 and that the median beta for this same group
of companies was 1.11. It determined that the equity risk premium was 12.7
percent based upon average annual premiums over 1988 to 1997 as calculated in
Ibbotson Associates' Stocks, Bonds, Bills and Inflation (SBBI) Yearbook 1998.
Strategis also found that the risk-free rate was 5.7 percent, which was the
yield on intermediate term government bonds as of December 1997. This
statistic was derived from the SBBI Yearbook 1998. The calculations are as
follows:
(1.06* 12.7%) + 5.7% = 19.2% Required Return on Equity
(1.11* 12.7%) + 5.7% = 19.8% Required Return on Equity
Strategis then multiplied these rates by 1 minus the tax rate to calculate
the after-tax required return on equity rates as follows:
19.2%* (1-.34) = 12.7%
19.8%* (1-.34) = 13.1%
Based on Strategis' professional judgment, in Strategis' opinion these
calculations provide reasonable support for the use of 12% as the high and 14%
as the low after-tax "pre-determined target returns on equity."
Based on system information made available to Strategis by the General
Partner and on information generally available to Strategis about the cable
television industry, the firm made assumptions and projections of a variety of
factors that will affect future cash flow including housing growth, plant
mileage, growth in the number of subscribers for basic and pay television,
adjustments in subscriber rates, increases in operating expenses and capital
expenditures. Strategis also made specific assumptions concerning the capital
structure that a typical, prudent buyer might experience, as well as the
probable interest rates that would be applicable in connection with any debt
financing that might be incurred. Strategis did a "high" and a "low" analysis.
In its "high" analysis, Strategis projected that the Littlerock System's
revenues would grow from $2,730,899 in 1998 to $3,919,943 in 2004; that the
Littlerock System's operating expenses would grow from $1,438,899 in 1998 to
$1,911,846 in 2004; and that net loss of $444,404 in 1998 would decrease to
become net income of $57,859 in 2004. In Strategis' "low" analysis, revenues
and operating expenses are projected to increase to the same levels by 2004,
but net loss of $413,624 in 1998 is projected to become net income of $79,676
in 2004. Strategis projected that the Littlerock System would add
approximately 2.5 to 3 miles of cable plant per year between 1998 and 2004,
resulting in growth of the Littlerock System's cable plant from 230 miles in
1997 to 250 miles in 2004. Strategis projected that the number of homes passed
by the Littlerock System would grow from 8,184 in 1997 to 8,862 in 2004.
Strategis projected that basic subscribers would grow from 5,672 in 1997 to
6,363 in 2004. Strategis projected basic penetration of the Littlerock System
increasing from 70.3 percent in 1998 to 71.8 percent in 2004. Strategis
projected that premium television subscriptions would grow from 4,017 in 1997
to 4,157 in 2004. Strategis estimated that the Littlerock System would take
moderate rate increases between 1998 and 2004, with, for example, a 4 percent
increase in basic rates in 1998 and 1999 and 3 percent increases in
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basic rates each year thereafter, and a 4 percent increase in expanded basic
rates in 1998 and 2000, a 7 percent increase in such rates in 1999 and a 3
percent increase in such rates each year thereafter. Strategis estimated that
rate increases for pay television subscriptions would average 1 percent per
year after a 15 percent increase in 1998. Strategis estimated that rate
increases for converter rentals and installations would average 3 percent per
year. These projections, if true, would result in an increase in basic rates
from $14.37 in 1998 to $17.24 in 2004, and an increase in the rates for the
expanded basic tier from $13.10 in 1998 to $16.43 in 2004. As explained in the
preceding paragraphs, the "low" value was determined using a 14 percent return
on equity and the "high" value was determined using a 12 percent return on
equity. This method resulted in an estimated fair market value ranging from a
low of $10,452,720 to a high of $11,338,789 for the Littlerock System.
The fifth valuation method was a discounted cash flow analysis that measured
the net present value of the pre-tax operating cash flows (less capital
expenditures, plus the residual value of the Littlerock System) that represent
the return on the total investment rather than those that could result from an
assumed "purchase" with a pre-determined debt to equity ratio. The same set of
financial projections that the firm prepared and used in the fourth valuation
methodology were used for growth in subscribers, revenues, operating expenses
and capital expenditures. The projected pre-tax operating cash flows for the
Littlerock System, plus the last-year residual value of the Littlerock System
less capital expenditures, were discounted to the present time at an
acceptable current cost of money. This method indicated the present value of
the future pre-tax operating cash flows, using an acceptable discounted factor
based on the weighted average cost of money. The "high" value was determined
using a 15.1 percent target return on investment and the "low" value was
determined using a 16.6 percent target return on investment. This method
resulted in an estimated fair market value ranging from a low of $10,456,733
to a high of $11,282,266 for the Littlerock System.
Strategis' valuation methodologies resulted in differing values for the
Littlerock System. The reason for this is grounded in the basic approach that
the firm takes. The five different methods allow five different views of a
system's value. The first method looks at past performance, but allows nothing
for future performance. The second method looks at the system as it is as of
the date of the appraisal. The third method looks at the system's projected
operating income in the first year following the date of the appraisal. Both
discounted cash flow methods fully consider the future value of the system by
recognizing projected operating income and expenses, including capital
expenditures. Based upon all of the available information about a system being
appraised, the appraiser decides how to weight each of the five methods. The
final estimated fair market value is not a straight average of all of the
methods. Although the weighting is not shown in the appraisal report,
Strategis generally prefers the discounted cash flow methods since they
consider a broader range of factors that represent all sources of value,
present and future. Strategis accordingly generally gives greater
consideration to the discounted cash flow methods in its final judgment
concerning the fair market value of a cable television system. Strategis'
conclusions as to the range of values were based upon information and data
supplied by the General Partner, Strategis' onsite inspection of the
Littlerock System in January 1998, interviews with the Littlerock System's
onsite management team and general cable television industry information. The
fair market value appraisal of $11,118,000 reached by Strategis was based on
the various valuations generated by it, and Strategis' general knowledge and
expertise in the cable television industry.
As compensation for rendering an opinion as to the fair market value of the
Littlerock System, the General Partner paid Strategis a fee of $7,800. Such
fee was not contingent upon the conclusion reached by Strategis in its
opinion. As compensation for rendering opinions as to the fair market value of
other cable television systems owned and/or managed by the General Partner and
its affiliates, and completing the analysis of the allocations of purchase
prices between tangible and intangible assets for various cable television
systems owned and/or managed by the General Partner and its affiliates,
Strategis has received fees and expense reimbursements totaling $288,621
during the two years ended December 31, 1997.
The Bond & Pecaro Appraisal
Bond & Pecaro, Inc. ("Bond & Pecaro") is a consulting firm specializing in
valuations, asset appraisals and related financial services for the
communications industry. The firm has appraised assets of more than 1,500
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media properties. Bond & Pecaro was selected by the General Partner to render
an opinion as to the fair market value of the Littlerock System in light of
such overall qualifications and because of the firm's good reputation in the
industry. No limitations were imposed with respect to the appraisal to be
rendered by Bond & Pecaro. Bond & Pecaro has prepared independent appraisals
of other cable television systems owned and/or managed by the General Partner.
The principals of Bond & Pecaro are not affiliated in any way with the General
Partner.
Bond & Pecaro used both the income and the market methodologies to determine
the fair market value of the Littlerock System as of December 31, 1997. The
firm developed a discounted cash flow analysis to determine the value of the
Littlerock System based upon its economic potential. Bond & Pecaro noted that
it is generally accepted that the value of a telecommunications business such
as a cable television system lies in the fact that it is a "going concern."
That is, a cable system's value reflects the revenues and, ultimately, the
after-tax cash flow that the business may reasonably be expected to generate
over a period of years. The potential resale value of the business at the end
of that period is also an important factor in the valuation of such
properties. Bond & Pecaro noted that a number of factors contributed to going
concern value, including the formation of a business plan, the construction of
the system headend facility, the development of a functional general,
administrative and technical organization, the establishment of a sales and
marketing organization and the coordination of all of these functions into a
well-defined and efficient operating organization. As described below, Bond &
Pecaro's discounted cash flow model incorporates variables such as capital
expenditures, homes passed by the system, basic penetration, paid penetration,
system revenue projections, anticipated system operating expenses and profits
and various discount rates. The variables in the analysis reflect historical
system and market growth trends as well as anticipated system performance and
market conditions. The capital expenditures provision reflects the amount of
investment that Bond & Pecaro projected will be required to expand and
maintain a competitive cable television business in the Littlerock, California
area. Bond & Pecaro's discounted cash flow projection period of ten years was
deemed by the firm to be an appropriate time horizon for the firm's analysis
because cable operators and investors typically expect to recover their
investments within a ten-year period. Thus, it was over this period that
projections regarding market demographics, system basic and pay penetration,
and operating profit margins were made by Bond & Pecaro. Bond & Pecaro looked
at the ten year period to project household growth in the Littlerock area,
anticipated market penetration percentages and system operating performance
expectations in order to project the Littlerock System's operating profits
during the next ten years. The firm deducted income taxes from the projected
operating profits to determine after-tax net income. Depreciation and
amortization expenses were added back to the after-tax income stream and
projected capital expenditures were subtracted to calculate the Littlerock
System's net after-tax cash flow. Bond & Pecaro then adjusted the stream of
annual cash flow to present value using a discount rate the firm deemed
appropriate for the cable television industry. To determine the Littlerock
System's residual value at the end of the ten-year projection period,
Bond & Pecaro applied an operating cash flow multiple of 11 to the system's
2007 operating cash flow projection. In Bond & Pecaro's opinion the terminal
value represents the hypothetical value of the system at the end of the
projection period and the net terminal value was discounted to present value.
The results of Bond & Pecaro's analysis indicated to the firm that the value
of the Littlerock System as of December 31, 1997 was $11,092,200. In order to
verify the results of the discounted cash flow analysis, as described below,
Bond & Pecaro also utilized a comparable sales approach, relying upon an
analysis of subscriber multiples. The results of this analysis supported the
firm's conclusions about valuation resulting from application of the income
approach.
Bond & Pecaro reported that the initial parameter upon which its discounted
cash flow projection was based was homes passed. Two factors affect the number
of homes passed: new plant construction and household growth. In preparing its
projection, Bond & Pecaro assumed that the number of households in the
Littlerock System's franchise area will increase at a rate equivalent to the
average growth projected for the areas served by the system as a whole, or
approximately 0.7 percent per year. Bond & Pecaro concluded that the basic
penetration rate would grow gradually over the 10-year projected period from
the current 69.5 percent to approximately 71.2 percent by 2007. The firm
projected that pay penetration of the Littlerock System will increase from a
level of 72.6 percent in December 1997 to approximately 90.6 percent by 2007.
Bond & Pecaro concluded that due to regulatory and competitive restrictions,
service rates for basic and expanded basic services are expected to grow
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with inflation while premium channel service rates are expected to remain
relatively flat throughout the 10-year projected period. Bond & Pecaro
estimated that pay-per-view service revenue will increase at a 42.5 percent
annual rate for the years 1998 through 2002 and at an 11 percent annual rate
thereafter, that commercial advertising revenue will increase at a 19.0
percent annual rate through 2002 and at a 10 percent annual rate thereafter,
and that annual installation revenue would remain constant during the
projection period. The firm concluded that equipment rental revenues as well
as other revenues also should increase by 9 percent annually through 2007.
Bond & Pecaro concluded that total system revenues would increase from
$2,700,000 in 1998 to $4,800,000 in 2007. For purposes of its appraisal, Bond
& Pecaro assumed that the Littlerock System would maintain an operating profit
margin of 45.1 percent, which was the system's operating profit margin in
1997. Bond & Pecaro used an estimated tax rate of 41.0 percent to project the
taxable income of the Littlerock System because the estimated rate reflects
the combined federal, state and local tax rates in effect on December 31,
1997. Depreciation expense for each year was determined using the MACRS
schedule for 5, 7, 15 and 39 year property based upon the reported cost of
fixed assets present at the Littlerock System. Subsequent annual capital
expenditures were estimated to approximate 5 percent of the cost of the fixed
assets of the Littlerock System as of December 31, 1997. Supplemental
provisions were made to incorporate projections of capital expenditures
associated with the conversion to digital television.
Bond & Pecaro then determined the net after-tax cash flow for the Littlerock
System. After taxes were subtracted from the system's taxable income, non-cash
depreciation expenses were added back to net income to yield after-tax cash
flow. From the after-tax cash flow, the provision for subsequent capital
expenditures was deducted to calculate the net after-tax cash flows. Bond &
Pecaro used a discount rate of 12 percent to calculate the present value of
the net after-tax cash flows. In order to account for the risks associated
with investments in the cable television industry and in the Littlerock System
in particular, Bond & Pecaro added a premium to a base discount rate to
develop the 12 percent rate employed in its analysis. Bond & Pecaro then
applied a multiplier of 11 to the Littlerock System's 2007 operating cash
flow. Bond & Pecaro's appraisal noted that multiples used in the valuation of
cable television systems of a type similar to the Littlerock System range from
8 to 12 times operating cash flow, depending on market conditions and a
system's profit potential. Bond & Pecaro noted also that exceptional
circumstances will warrant multiples outside of this range. The appraisal
report indicated that the selected multiple of 11 was used to estimate the
value of the system at the end of the investment period. According to Bond &
Pecaro, this multiple reflects the state of the market for cable television
systems as of December 31, 1997, tempered by the economic conditions of the
system's franchise service area, the uncertainty introduced by re-regulation
of the cable television industry and the prospects for increased competition
from wireless cable companies and direct broadcast satellite operators. The
10-year discounted cash flow projection of Bond & Pecaro yielded a value of
$11,092,200 for the Littlerock System.
In order to correlate this statistical valuation with the realities of the
marketplace, Bond & Pecaro analyzed the sale of four comparable cable
television systems that took place in 1997. The sales examined by Bond &
Pecaro were selected based upon their comparability to the Littlerock System.
The four cable television system transactions examined by Bond & Pecaro were:
(i) the sale of the Jonesboro, Arkansas cable television system by one
unaffiliated cable television system operator to another for a sales price of
$41,000,000 or a price per subscriber of $2,000, (ii) the sale of the
Anderson, South Carolina cable television system by one unaffiliated cable
television system operator to another for a sales price of $31,000,000 or a
price per subscriber of $1,934, (iii) the sale of the Auburn, New York cable
television system by one unaffiliated cable television system operator to
another for a sales price of $28,000,000 or a price per subscriber of $1,958,
and (iv) the sale of cable television systems in Connecticut and New Hampshire
by one unaffiliated cable television system operator to another for a sales
price of $30,000,000 or a price per subscriber of $1,954. Bond & Pecaro
determined that the average price per subscriber paid for the four comparable
cable television systems sales was approximately $1,962. As noted above, Bond
& Pecaro's discounted cash flow model concluded that the Littlerock System's
overall fair market value was $11,092,200. This $11,092,200 value reflects a
price of approximately $1,955 per subscriber, which Bond & Pecaro judged to be
consistent with prevailing subscriber multiples of comparable sales in 1997.
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A representative of Bond & Pecaro consulted with system management regarding
market factors and system-specific issues that impacted the value of the
system's tangible and intangible assets. Specific data provided by the system
and the General Partner included historical audited financial statements,
operating statistical summaries, system technical data, market demographic
data and related materials. Other sources consulted in the preparation of the
appraisal included industry factbooks, government publications and similar
reference materials. Bond & Pecaro also relied upon information furnished by
the Littlerock System's management relating to the age, condition and adequacy
of the system's physical plant.
As compensation for rendering an opinion as to the fair market value of the
Littlerock System, the General Partner paid Bond & Pecaro a fee of $10,375.
Such fee was not contingent upon the conclusions reached by Bond & Pecaro in
its opinion. As compensation for rendering opinions as to the fair market
value of other cable television systems owned and/or managed by the General
Partner and its affiliates, Bond & Pecaro has received fees totaling $17,098
during the two years ended December 31, 1997.
The Waller Appraisal
Waller Capital Corporation ("Waller") is a firm specializing in financial
services and asset appraisals for the telecommunications industry. Waller was
selected by the General Partner to render an opinion as to the fair market
value of the Littlerock System in light of its overall qualifications and
because of the firm's good reputation in the cable television industry. No
limitations were imposed with respect to the appraisals to be rendered by
Waller. Waller has prepared independent appraisals of other cable television
systems owned and/or managed by the General Partner. Neither Waller nor any of
its representatives have any active or contemplated direct interest in the
General Partner, in any of its managed partnerships or in any of its
affiliates, except for incidental shareholdings in the General Partner, which
is a publicly traded company.
In arriving at its opinion as to the fair market value of the Littlerock
System, Waller utilized audited and unaudited financial statements, visited
the Littlerock System, met with the management of the General Partner to
discuss the Littlerock System's business, current operations and prospects,
analyzed published financial and operating information and prospects, analyzed
published financial and operating information considered by Waller to be
comparable or related to the Littlerock System, and made other financial
studies, analysis and investigations as Waller deemed appropriate. Waller
indicated in its report that the primary purpose of its valuation was to
arrive at the fair market value of the Littlerock System, with fair market
value defined as the amount at which a property would change hands between a
willing buyer and a willing seller when neither is acting under compulsion and
when both have reasonable knowledge of the relevant facts. The valuation was
determined on a cash-for-assets basis.
Numerous elements, both quantitative and qualitative, were factored into
Waller's valuation. Waller concluded that the Littlerock System has attractive
demographics with, for example, average household income in the area served by
the system being significantly higher than the national average. Waller also
noted that due to the technical profile of the largest employers in the
Littlerock area (aerospace and defense), the residents of the area are also
highly educated. The firm further noted that the Littlerock area has
experienced substantial growth in households, with the area's households
expected to grow over 3.5 percent per year from 1997 to 2000. Waller also
concluded that the technical condition of the system at 550 Mhz capacity will
be sufficient for the Littlerock market for the near future. On the negative
side, Waller noted that while there is no current wireless competition to the
Littlerock System, there exists the potential of wireless competition due to
the Littlerock area's flat geography. Waller also noted that the local
economy, while increasingly diversified, still is heavily dependent on the
aerospace and defense industries and a downturn in either of these industries
could negatively impact system revenues.
The general methodology of Waller's appraisal was to evaluate the discounted
cash flow stream generated by the Littlerock System over a ten-year period
(1998 to 2007), applying all relevant market and economic factors. Waller's
ten-year projections were prepared using information provided by the General
Partner together with Waller's industry estimates. Waller developed its
projections through on-sight due diligence, a review of
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the Littlerock System's 1998 operating budget prepared by the General Partner,
other operating and subscriber data and projections and demographic data
relating to the Littlerock System's service area. A sale was assumed to occur
in the tenth year (2007) of the discounted cash flow model. The cash flow
sales multiple selected reflected the long-term prospects for cash flow growth
and the cash flow quality of the Littlerock System. The multiple selected also
accounted for the presumed technical condition of the Littlerock System at
2007. The multiple selected was applied against the full tenth year cash flow.
Waller's analysis utilized a discount rate of 14 percent derived from Waller's
weighted average cost of capital ("WACC") model. The discount rate was
commensurate with a probable buyer's capital structure, operating risk and
other factors associated with the operations of the Littlerock System. The
discount rate used was consistent with the WACCs for an average cable buyer,
private or public, and adjusted for certain factors such as size, liquidity,
leverage and risk associated with a typical cable system buyer. The cable
companies used to generate the WACC model were Adelphia Communications
Corporation, Comcast Corporation, Cox Communications, Century Communications
Corp., Cablevision Systems Corporation, TCA Cable TV, Inc.,
Telecommunications, Inc., Time Warner and US West MediaOne Group.
Like Strategis and Bond & Pecaro, Waller developed its discounted cash flow
model based upon its own assumptions about the Littlerock System. Waller
projected that homes passed growth would be approximately 1 percent per year
over the ten year projection period, growing from 8,321 homes passed in 1998
to 9,100 homes passed in 2007. Waller projected that system plant miles would
grow from 208 in 1998 to 228 in 2007. Waller concluded that subscriber growth
would range from 0.7 percent to 2.7 percent in any particular year and that,
as a result, subscribers would grow from 5,825 in 1998 to 6,370 in 2007.
Waller projected growth in the number of pay units generally averaging
1 percent per year during the ten year projection period, with pay units
increasing from 4,200 in 1998 to 4,593 in 2007. Waller also examined growth in
rates charged to subscribers, concluding that basic service rates would grow
from $26.98 in 1998 to $37.49 in 2007. Waller concluded that rates for pay
programming would increase approximately 2 percent per year, with rates
increasing from $7.70 in 1998 to $9.20 in 2007. Waller concluded that total
system revenue would increase from $2,891,000 in 1998 to $4,395,000 in 2007,
with growth in basic service revenues the primary reason for such increase.
Waller also included that total operating expenses would grow from $1,481,000
in 1998 to $2,471,000 in 2007. Because Waller concluded that expenses would
increase at a slightly higher rate than revenue, Waller concluded that the
Littlerock System's cash flow would grow less dramatically, from $1,409,000 in
1998 to $1,923,000 in 2007.
Waller's analysis was further supported by comparable system sales. Waller
examined specific transactions to determine if an appropriate multiple of cash
flow could be derived from current market information. Waller examined
multiples from announced and completed cable television transactions in 1996
and 1997, relying upon data from transactions executed by Waller, from Paul
Kagan & Associates, Inc. and from general industry information sources. Waller
acknowledged that comparable sales data is difficult to generalize from
because of the variability of factors such as system size, growth prospects,
penetration, location, demographics, technical system condition and franchise
terms, which information often is not publicly available. Given these
limitations, Waller is of the opinion that comparable sales data offers only
an approximation of factors that help devise a fair market value and is used
as a reasonableness test of the discounted cash flow approach to value.
For its comparable system sales analysis, Waller examined transactions
involving cable television systems of similar size and characteristics to the
Littlerock System. Waller examined five transactions that occurred in 1997 and
seven transactions that occurred in 1996. The five cable television system
transactions examined by Waller from 1997 were: (i) the sale of the
Shelbyville, Tennessee cable television system by one unaffiliated cable
television system operator to another for a sales price of $20,000,000 or a
price per subscriber of $1,726, (ii) the sale a Florida system by one
unaffiliated cable television system operator to another for a sales price of
$4,000,000 or a price per subscriber of $2,000, (iii) the sale of the Sun
City, California cable television system by one unaffiliated cable television
system operator to another for a sales price of $13,000,000 or a price per
subscriber of $1,342, (iv) the sale of the Oak Creek, Arizona cable television
system by one unaffiliated cable television system operator to another for a
sales price of $5,000,000 or a price per subscriber of $1,452, and (v) the
sale of the Clearlake, California cable television system by one of the
General Partner's managed partnerships
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to an unaffiliated cable television system operator for a sales price of
$21,000,000 or a price per subscriber of $1,237. The seven 1996 cable
television system transactions examined by Waller were: (i) the sale of the
Palm Coast, Florida cable television system by one unaffiliated cable
television system operator to another for a sales price of $30,000,000 or a
price per subscriber of $2,970, (ii) the sale of the Nogales, Arizona cable
television system by one unaffiliated cable television system operator to
another for a sales price of $12,000,000 or a price per subscriber of $1,438,
(iii) the sale of the Picken City, South Carolina cable television system by
one unaffiliated cable television system operator to another for a sales price
of $8,000,000 or a price per subscriber of $1,867, (iv) the sale of the Kern
County, California cable television system by one unaffiliated cable
television system operator to another for a sales price of $11,000,000 or a
price per subscriber of $1,657, (v) the sale of a cable television system
serving a portion of San Francisco, California by one unaffiliated cable
television system operator to another for a sales price of $20,000,000 or a
price per subscriber of $1,593, (vi) the sale of several small systems in
California by one unaffiliated cable television system operator to another for
a sales price of $21,000,000 or a price per subscriber of $1,891 and (vii) the
proposed sale of the Roseville, California cable television system by one of
the General Partner's managed partnerships to an unaffiliated cable television
system operator for a sales price of $31,000,000 or a price per subscriber of
$1,738. Waller determined that the average price per subscriber paid for the
comparable cable television system sales was approximately $1,938 and a cash
flow multiple of 8.7. Waller concluded that this comparable sales analysis
supported and validated Waller's discounted cash flow analysis, which resulted
in an aggregate value for the Littlerock System of $1,754 per subscriber and a
8.7 times 1997 cash flow multiple.
Based on its various analyses and investigations of the Littlerock System,
Waller concluded that the fair market value of the Littlerock System as of
December 31, 1997 was $9,951,000.
As compensation for rendering an opinion as to the fair market value of the
Littlerock System, the General Partner paid Waller a fee of $15,213. Such fee
was not contingent upon the conclusion reached by Waller in its opinion.
Waller received no fees from the General Partner and its affiliates during the
two years ended December 31, 1997.
COSTS OF THE TRANSACTION
The following is a reasonably itemized estimate of all expenses incurred or
to be incurred in connection with the proposed sale of the Littlerock System,
all of which will be paid by the General Partner, including without limitation
the cost of soliciting the votes of the holders of limited partnership
interests:
<TABLE>
<S> <C>
Filing fees $ 2,144
Legal fees $10,000
Accounting fees $10,000
Appraisal fees $33,387
Printing costs $60,000
Postage and miscellaneous costs $20,000
</TABLE>
PROPOSED SALE OF ASSETS
THE PURCHASE AND SALE AGREEMENT
Pursuant to the terms and conditions of a purchase and sale agreement dated
as of March 10, 1998 (the "Purchase and Sale Agreement") by and between the
Partnership as seller and the General Partner as purchaser, the Partnership
agreed to sell the Littlerock System to the General Partner or to a subsidiary
of the General Partner. The General Partner has assigned its rights and
obligations as purchaser to Jones Communications of California, Inc., an
indirect wholly owned subsidiary. The purchaser intends to finance the
acquisition of the Littlerock System using cash on hand and borrowings
available under credit facilities dated as of October 29, 1996 among Jones
Cable Holdings II, Inc., as the borrower, and several lenders, including The
Bank of Nova Scotia, NationsBank of Texas, N.A. and Societe Generale as the
managing agents. The maximum amount
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available under the credit facilities is $600 million. One $300 million
facility reduces quarterly beginning March 31, 2000 through the final maturity
date of December 31, 2005. In October 1998, the purchaser borrowed $300
million under the lenders' other $300 million facility. The $300 million term
loan is payable in semi-annual installments commencing June 30, 2001 with a
final maturity date of December 31, 2005. Interest on amounts outstanding
under the credit facilities varies from the "base rate," which generally
approximates the prime rate, to the base rate plus 1/4 percent or LIBOR plus
1/2 percent to 1 1/4 percent depending on certain financial covenants. The
effective interest rate on the $270,000,000 outstanding at September 30, 1998
was 6.00 percent. The credit facilities are secured by a pledge of the stock
of all of the subsidiaries of the borrower. Jones Communications of
California, Inc. is a wholly owned subsidiary of Jones Cable Holdings II,
Inc., which in turn is a wholly owned subsidiary of the General Partner.
Based upon amounts estimated as of September 30, 1998, the aggregate cost of
the acquisition of the Littlerock System to the purchaser, including working
capital adjustments, will be approximately $10,267,575. Amounts borrowed by
the purchaser to acquire the Littlerock System will be repaid from cash
generated by the operations of the Littlerock System and other systems owned
by Jones Cable Holdings II, Inc. and from other sources of funds, including
possible future refinancings.
The closing of the sale will occur on a date upon which the Partnership and
the purchaser mutually agree. It is currently anticipated that the closing
will occur on December 31, 1998. Because the closing is conditioned upon the
approval of the limited partners of the Partnership, there can be no assurance
that the proposed sale will occur. If all conditions precedent to the
purchaser's obligation to close are not eventually satisfied or waived, the
purchaser's obligation to purchase the Littlerock System will terminate.
THE LITTLEROCK SYSTEM
The assets to be acquired consist primarily of the real and personal,
tangible and intangible assets of the Partnership's Littlerock System. The
purchaser will purchase all of the tangible assets of the Littlerock System,
including, among other things, the headend equipment, underground and
aboveground cable distribution systems, towers, earth satellite receive
stations, and furniture and fixtures of the Littlerock System. The purchaser
also will acquire certain of the intangible assets of the Littlerock System,
including, among other things, all of the franchises, leases, agreements,
permits, licenses and other contracts and contract rights of the Littlerock
System. Also included in the sale are any parcels of real estate owned by the
Littlerock System, the subscriber accounts receivable of the Littlerock System
and all of the Littlerock System's engineering records, files, schematics,
maps, reports, promotional graphics, marketing materials and reports filed
with federal, state and local regulatory agencies. Certain of the Littlerock
System's assets will be retained by the Partnership, including cash or cash
equivalents on hand and in banks, certain insurance policies and rights and
claims thereunder, and any federal or state income tax refunds to which the
Partnership may be entitled.
SALES PRICE
Subject to the customary working capital closing adjustments described
below, the sales price for the Littlerock System is $10,720,400. The sales
price will be reduced by any accounts payable and accrued expenses and vehicle
lease obligations existing on the closing date. The sales price will be
increased by any accounts receivable existing on the closing date. The sales
price for the Littlerock System also will be adjusted as of the closing date
with respect to all items of income and expense associated with the operation
of the Littlerock System. This adjustment will reflect, in accordance with
generally accepted accounting principles, that all expenses and income
attributable to the period on or after the closing date are for the account of
the purchaser and those prior to the closing date are for the account of the
seller. While these adjustments may have the effect of increasing or
decreasing the sales price, any adjustment is not expected to be material.
Please see Note 5 of the Notes to Unaudited Pro Forma Consolidated Financial
Statements for a detailed accounting of the estimated closing adjustments.
CONDITIONS TO CLOSING
The purchaser's obligations under the Purchase and Sale Agreement are
subject to the following conditions: (a) the Partnership shall have obtained
all material consents and approvals from governmental authorities and third
parties with whom the Partnership has contracted that are necessary for the
transfer of the Littlerock
24
<PAGE>
System, (b) all representations and warranties of the Partnership shall be
true and correct in all material respects as of the closing date and (c)
termination or expiration of the statutory waiting period applicable to the
Purchase and Sale Agreement and the transactions contemplated thereby under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). The Partnership has obtained the consent of the County of Los Angeles
to the transfer of the Littlerock System's cable franchises and all other
conditions to the purchaser's obligations to close have been met.
The Partnership's obligations under the Purchase and Sale Agreement are
subject to the following conditions: (a) the receipt of the purchase price for
the Littlerock System and (b) the limited partners of the Partnership shall
have approved the sale of the Littlerock System to the purchaser on the terms
and conditions of the Purchase and Sale Agreement. The approval of the
transaction by the limited partners of the Partnership is the only material
closing condition not yet met.
FEDERAL AND STATE INCOME TAX CONSEQUENCES
The purpose of the following discussion of the income tax consequences of
the proposed transaction is to inform the limited partners of the Partnership
of the 1998 federal and state income tax consequences to the Partnership and
to its partners arising from the proposed sale of the Littlerock System as
well as from the prior 1998 sales of the Broward System and the Surfside
System. These tax consequences are expected to be incurred in 1998, the year
in which the sales have closed or are expected to close. The tax information
included herein was prepared by the tax department of the General Partner. The
tax information is taken from tax data compiled by the General Partner in its
role as the Partnership's tax administrator and is not based upon the advice
or formal opinion of counsel. The tax discussion that follows is merely
intended to inform the limited partners of factual information and should not
be considered tax advice.
PARTNERSHIP ALLOCATION OF GAIN FROM SALE
Section 5.3 of the Partnership Agreement specifies that Partnership
distributions of cable television system net sale proceeds shall be allocated
100 percent to limited partners until they have received a return in an amount
equal to 125 percent of their initial capital contributions and thereafter
such distributions will be made 75 percent to the limited partners and 25
percent to the General Partner. Because limited partners will not receive
distributions in an amount equal to the capital they initially contributed to
the Partnership, all of the net proceeds from the sales of the Broward System,
the Surfside System and the Littlerock System will be allocated to the limited
partners.
The allocation of gain from the sales of the Broward System, the Surfside
System and the Littlerock System will be allocated 100 percent to the limited
partners in accordance with Section 5.2 of the Partnership Agreement. This
allocation follows the underlying economic gain of the partners and hence
satisfies the "substantial economic effect" test enacted in Internal Revenue
Code ("IRC") Section 704(b) regarding special partnership allocations.
Application of the allocation provisions of Section 5.2 ensures that the
limited partners' net sum of allocable partnership loss and income during the
Partnership's life will equal the net economic gain or loss realized from
their investment in the Partnership. The estimated allocable limited partner
income from the sales reported below incorporates the application of the
special partnership allocation rules of Section 5.2.
PROJECTED 1998 TAX RESULTS
By the expected date of the sales in 1998, most of the limited partners will
have received certain tax benefits from their investment in the Partnership.
Assuming maximum federal income tax rates and no other sources of passive
income, original limited partners of the Partnership will have received
$1,698,795 in tax benefits from Partnership losses ($13 per $1,000 invested).
Tax benefits derived from allocable Partnership losses have been limited due
to the passive loss limitation rules enacted in 1986.
25
<PAGE>
The Littlerock System sale will be the final of three cable television
system sales whose gains will be reported to the limited partners on their
1998 Partnership income tax forms. The anticipated results of the three cable
system sales are detailed below.
THE BROWARD SYSTEM SALE
The March 1998 sale of the Broward System generated taxable gain that will
be allocable to the limited partners in an amount approximating $68,694,640
($526 per $1,000 invested). The General Partner estimates that all of the gain
will be characterized as ordinary income from Internal Revenue Code ("IRC")
Section 1245 recapture of depreciation and amortization on Partnership
operating assets. It is not anticipated that any of the allocable gain will be
treated as long term capital gain under IRC Section 1231. Some or all of this
allocable gain may be offset by passive loss carryforwards of the limited
partners, which is discussed in more detail below.
THE SURFSIDE SYSTEM SALE
The June 1998 sale of the Surfside System generated taxable gain that will
be allocable to the limited partners in an amount approximating $19,374,805
($148 per $1,000 invested). The General Partner estimates that all of the gain
will be characterized as ordinary income from IRC Section 1245 recapture of
depreciation and amortization on Partnership operating assets. It is not
anticipated that any of the allocable gain will be treated as long term
capital gain under IRC Section 1231. Some or all of this allocable gain may be
offset by passive loss carryforwards of the limited partners, which is
discussed in more detail below.
THE LITTLEROCK SYSTEM SALE
The December 1998 sale of the Littlerock System will generate taxable gain
that will be allocable to the limited partners in an amount approximating
$8,142,765 ($62 per $1,000 invested). The General Partner estimates that all
of the gain will be characterized as ordinary income from IRC Section 1245
recapture of depreciation and amortization on Partnership operating assets. It
is not anticipated that any of the allocable gain will be treated as long term
capital gain under IRC Section 1231. Some or all of this allocable gain may be
offset by passive loss carryforwards of the limited partners, which is
discussed in more detail below.
APPLICATION OF PASSIVE LOSS CARRYFORWARDS
The Tax Reform Act of 1986 enacted a limitation on a limited partner's
ability to currently deduct allocable partnership losses, which were deemed to
be passive losses. The law phased in the disallowance of passive loss
deductions until 1990, when no passive losses were allowable except to the
extent of passive income or a disposition of the passive activity. The proper
application of these loss limitation rules will have resulted in the existence
of passive loss carryforwards for the Partnership's limited partners. These
potential passive loss carryforwards can be deducted in the current year to
offset the allocable Partnership gains from the three system sales detailed
above.
The General Partner estimates that the Partnership has generated potential
passive loss carryforwards of $93,471,735 ($715 per $1,000 invested) that may
be available for offset against 1998 income. The carryforward amount is
calculated by applying the passive loss limitations to historical partnership
losses and assuming that the limited partners of the Partnership would not
have utilized prior year limited passive losses on account of other sources of
passive income. The availability of these loss carryforwards depends on the
particular tax history of each limited partner. Partners that have utilized
some or all of prior Partnership losses limited by the passive loss rules will
have deductible passive losses that vary accordingly.
SYNDICATION COSTS
Syndication costs represent the sales commissions paid by limited partners
on their purchase of their limited partnership interests and allocable costs
associated in forming the Partnership. These costs were capitalized on the
Partnership books and are reflected in the limited partners' capital account
balance. Upon liquidation of the Partnership, the syndication costs cannot be
deducted by the Partnership. However, these costs can be deducted
26
<PAGE>
by the limited partners as a long term capital loss under IRC Section 731.
Limited partners will have an ending capital balance on their final Form 1065,
Schedule K-1 which represents their allocable syndication costs. The
Partnership has syndication costs of $17,969,375 ($138 per $1,000 invested)
that will be deductible by limited partners on their 1998 returns.
A limited partner with the maximum available passive loss carryforwards will
not be subject to 1998 federal income tax on the gain from the sales of the
Partnership's three systems after deduction of his or her allocable
syndication costs. Partners who have previously utilized Partnership passive
losses will have results that vary accordingly.
SECONDARY MARKET PURCHASERS
Limited partners that have recently acquired their partnership interests in
the limited partnership secondary market or through tender offers will have
allocable income from the cable system sales in the amounts reported above.
Because the Partnership does not have an IRC Section 754 election in effect,
the purchase of a limited partnership interest in the Partnership places the
new investor in the same position as the limited partner from whom the
interest was purchased. However, the new investor will not have the prior
investors' passive loss carryforwards or tax basis in the Partnership.
Newer investors in the Partnership will not have the above calculated
passive loss carryforwards and will likely have a greater reportable net
taxable income from the system sales than investors who have held their
partnership interests for a longer period of time. Also, recent investors will
not have their net tax basis in their partnership interests reflected on their
annual Schedule K-1. Such limited partners must track their tax basis by
adjusting their original cost by allocable income or loss and partnership
distributions. Their adjusted tax basis will be deductible as a long term
capital loss under IRC Section 731 in a manner similar to the Partnership
syndication costs discussed above.
TAX WITHHOLDING ON SALE PROCEEDS
Limited partners who are non-resident aliens or foreign corporations
("foreign persons") are subject to a federal withholding tax on their share of
the Partnership's income from the system sales. The withholding rates are 39.6
percent for individual partners and 35 percent for corporate partners. The tax
withheld will be remitted to the Internal Revenue Service and the foreign
persons will receive a credit on their 1998 U.S. tax return for the amount of
the tax withheld by the Partnership. The withheld tax will be treated as a
distribution to such limited partners.
The sale of the Surfside System will require limited partner reporting to
the State of South Carolina. The General Partner is required by state law to
withhold 5 percent of each partner's allocable income occurring from sale
activity within South Carolina without consideration of loss carryforwards.
This withholding requirement also applies to tax exempt entities such as
trusts and IRAs.
The sale of the Littlerock System will require limited partner reporting to
the State of California. The General Partner is required by state law to
withhold 7 percent of each U.S. non-resident partner's allocable income and
9.3 percent of each foreign non-resident partner's allocable income occurring
from sale activity within California without consideration of loss
carryforwards. This withholding requirement does not apply to tax exempt
entities such as trusts and IRAs.
Limited partners are required to file non-resident state tax returns to
compute the appropriate state tax liability. Documentation of withheld taxes
will be reported on state specified forms to limited partners in January 1999.
The General Partner anticipates that most partners will likely receive a
refund from this reporting process. Detailed South Carolina and California
reporting instructions and blank forms will be provided to limited partners in
their annual tax reporting package, which will be mailed to limited partners
in March 1999.
27
<PAGE>
FEDERAL REPORTING BY TAX EXEMPT ENTITIES
The 1998 Partnership cable system sales will generate Unrelated Business
Taxable Income (UBTI) to tax exempt entities, which will require the filing of
Form 990-T. Assuming prior year UBTI losses have not been previously utilized,
the 1998 allocable UBTI income should be fully offset with no resulting tax
liability. Although many trust administrators complete the required tax
returns, responsibility for completion of the Form 990-T ultimately rests with
the beneficiaries of trusts, IRAs and other tax exempt entities. Because this
is an area in which there is a variance of policy among trust administrators,
each limited partner who is a beneficiary is advised to confirm with his or
her trust administrator that this filing requirement will be fulfilled.
The General Partner has learned that some trust administrators will file a
Form 990-T without consideration of prior year loss carryforwards. If your
plan administrator employs this methodology, your tax exempt plan will be
subject to significant tax liabilities that would not be incurred if prior
losses were reported. Each limited partner who is a beneficiary of a tax
exempt entity is advised to inquire about the reporting methodology employed
by his or her trust administrator if the trust administrator is filing the
Form 990-T for 1998.
CERTAIN INFORMATION ABOUT THE PARTNERSHIP
AND THE GENERAL PARTNER
The General Partner acquires, develops and operates cable television systems
for itself and for its managed limited partnerships. Based on the number of
basic subscribers served by the General Partner's owned and managed cable
television systems, the General Partner is one of the larger cable television
system operators in the United States serving in excess of one million basic
subscribers. The principal executive offices of the Partnership and the
General Partner are located at 9697 East Mineral Avenue, Englewood, Colorado
80112, and their telephone number is (303) 792-3111.
The limited partnership interests of the Partnership are registered pursuant
to Section 12(g) of the Exchange Act. As such, the Partnership currently is
subject to the informational reporting requirements of the Exchange Act and,
in accordance therewith, is obligated to file periodic reports, proxy
statements and other information with the Commission relating to its business,
financial condition and other matters. Reports and other information filed by
the Partnership can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and at the following regional offices of the Commission: 7 World
Trade Center, Suite 1300, New York, New York 10048 and Northwest Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The
Commission also maintains a World Wide Web site that contains reports, proxy
statements and information statements of registrants (including the
Partnership) that file electronically with the Commission at
http://www.sec.gov. The Partnership's registration and reporting requirements
under the Exchange Act will be terminated upon the dissolution of the
Partnership, which is expected to occur soon after the sale of the Littlerock
System.
The General Partner also is subject to the informational filing requirements
of the Exchange Act and, in accordance therewith, files periodic reports,
proxy statements and other financial information with the Securities and
Exchange Commission relating to its business, financial condition and other
matters. Information, as of particular dates, concerning the General Partner's
directors and officers, their compensation, options granted to them, the
principal holders of the General Partner's securities and any material
interest of such persons in transactions with the General Partner is required
to be disclosed in certain documents filed with the Commission. Such reports,
proxy statements and other information may be inspected at the above-listed
public reference facilities maintained by the Commission and at the
Commission's World Wide Web site. Copies of such materials may be obtained
upon payment of the Commission's prescribed charges by writing to the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C.
20549.
The name, business address and principal occupation and employment for the
past five years of each of the directors and executive officers of the General
Partner are set forth in Schedule 1 to this Proxy Statement. To the best
knowledge of any of the persons listed on Schedule 1 hereto, except as
disclosed on such schedule, no persons listed on such schedule beneficially
own any limited partnership interests in the Partnership.
28
<PAGE>
Except as disclosed herein, neither the General Partner nor, to the best of
its knowledge, any of the persons listed on Schedule 1 hereto, has any
contract, arrangement, understanding or relationship with any other person
with respect to any limited partnership interest of the Partnership,
including, but not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or the voting of any of such interests,
joint ventures, loan or option arrangements, puts or calls, guaranties of
loans, guaranties against loss or the giving or withholding of proxies.
CERTAIN RELATED PARTY TRANSACTIONS
The General Partner and its affiliates engage in certain transactions with
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 purchase price for the Littlerock System was determined in accordance
with the provisions of the Partnership Agreement but the proposed sale of the
Littlerock System by the Partnership to one of the General Partner's
subsidiaries was not negotiated at arm's-length and thus there can be no
assurance that the terms of such transaction have been or will be as favorable
as those that could have been obtained by the Partnership from an unaffiliated
purchaser.
The General Partner charges the Partnership a management fee relating to the
General Partner's management of the Partnership's cable television systems,
and the Partnership reimburses the General Partner for certain allocated
overhead and administrative expenses in accordance with the terms of the
Partnership Agreement. 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 cable television
systems managed. Systems owned by the General Partner and its subsidiaries and
all other systems owned by partnerships for which Jones Intercable, Inc. or
one of its subsidiaries is the general partner are also allocated a
proportionate share of these expenses. No duplicate management or other fees
or reimbursements are charged to the Partnership.
The General Partner from time to time also advances funds to the Partnership
and charges interest on the balances payable by the Partnership. The interest
rate charged the Partnership approximates the General Partner's weighted
average cost of borrowing.
Knowledge TV, Inc. is an affiliate of the General Partner that owns and
operates Knowledge TV, a network that provides programming related to
computers and technology; business, careers and finance; health and wellness;
and global culture and languages. Knowledge TV, Inc. sells its programming to
the cable television systems owned by the Partnership.
Jones Computer Network, Ltd., an affiliate of the General Partner, operated
the television network Jones Computer Network. This network provided
programming focused primarily on computers and technology. Jones Computer
Network sold its programming to the cable television systems owned by the
Partnership. Jones Computer Network terminated its programming in April 1997.
The Great American Country network provides country music video programming
to the cable television systems owned by the Partnership. This network is
owned and operated by Great American Country, Inc., a subsidiary of Jones
International Networks, Ltd., an affiliate of the General Partner.
29
<PAGE>
Jones Galactic Radio, Inc. is a company owned by Jones International
Networks, Ltd., an affiliate of the General Partner, Superaudio, a joint
venture between Jones Galactic Radio, Inc. and an unaffiliated entity,
provides satellite programming to the cable television systems owned by the
Partnership.
The Product Information Network Venture (the "PIN Venture") is a venture
among a subsidiary of Jones International Networks, Ltd., an affiliate of the
General Partner, and two unaffiliated cable system operators. The PIN Venture
operates the Product Information Network ("PIN"), which is a 24-hour network
that airs long-form advertising generally known as "infomercials." The PIN
Venture generally makes incentive payments of approximately 60 percent of its
net advertising revenue to the cable systems that carry its programming. The
Partnership's systems carry PIN for all or part of each day. Revenues received
by the Partnership from the PIN Venture relating to the Partnership's owned
cable television systems totaled $26,997 for the nine months ended September
30, 1998 and $45,488 for the year ended December 31, 1997.
The programming fees paid by the Partnership to Knowledge TV, Inc., Jones
Computer Network, Ltd., Great American Country and Superaudio (collectively,
the "affiliated programming providers") are governed by the terms of the
various master programming agreements entered into by and between the General
Partner and each of the affiliated programming providers. Generally, with
respect to most video programming services, cable operators pay to programmers
a monthly license fee per subscriber that is based on a number of factors,
including the perceived value of the programming, the size of the cable
operator and the level of distribution of the programming service within the
cable operator's systems and the other terms and conditions under which the
programming is provided. The General Partner negotiates master programming
agreements with each programming network distributed on any of its owned or
managed cable systems. The Partnership pays the same per subscriber rate for
all of its programming, including the programming provided by affiliates of
the General Partner, as the General Partner pays for the programming it
provides on cable television systems that it owns itself, i.e., the General
Partner does not receive any markup for programming provided to the
Partnership under its master programming agreements. The master programming
agreements entered into by and between the General Partner and the affiliated
programming providers were negotiated by officers of the General Partner with
representatives of the affiliated programming providers.
The charges to the Partnership for related party transactions were as
follows for the periods indicated:
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS
ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1998 DECEMBER 31,
------------------ --------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C> <C>
Management fees............ $741,184 $2,046,467 $1,888,466 $1,722,188
Allocation of expenses..... 865,640 2,353,371 2,504,431 2,459,481
Interest expense........... 2,997 2,678 106,022 145,929
Amount of notes and
advances outstanding...... 217,525 835,015 449,094 1,896,049
Highest amount of notes and
advances outstanding...... 1,200,082 835,015 3,058,834 1,896,049
Programming fees:
Knowledge TV, Inc. ...... 37,599 63,921 56,798 49,493
Jones Computer Network,
Ltd. ................... -0- 14,633 39,371 34,402
Great American Country... 35,103 22,309 24,339 -0-
Superaudio............... 34,872 57,469 52,687 46,269
</TABLE>
30
<PAGE>
USE OF PROCEEDS FROM LITTLEROCK SYSTEM SALE
The following is a brief summary of the Partnership's estimated use of the
proceeds from the sale of the Littlerock System. All of the following selected
financial information is based upon amounts as of September 30, 1998 and
certain estimates of liabilities at closing. Final results may differ from
these estimates. A more detailed discussion of the financial consequences of
the sale of the Littlerock System is set forth below under the caption
"Unaudited Pro Forma Consolidated Financial Information." All limited partners
are encouraged to review carefully the unaudited pro forma consolidated
financial statements and notes thereto.
If the holders of a majority of limited partnership interests of the
Partnership approve the proposed sale of the Littlerock System and the
transaction is closed, the Partnership will distribute the $10,259,235 of net
sale proceeds to its limited partners of record as of the closing date of the
sale of the Littlerock System. The estimated uses of the sale proceeds are as
follows:
<TABLE>
<S> <C>
Contract Sales Price of the Littlerock System................... $10,720,400
Add:Cash on Hand................................................ 19,397
Less:Estimated Net Closing Adjustments.......................... (452,825)
Repayment of Capital Lease Obligations.......................... (27,737)
-----------
Cash Available for Distribution by the Partnership......... $10,259,235
===========
Limited Partners' Share (100%)............................. $10,259,235
===========
</TABLE>
Based upon financial information available at September 30, 1998, below is
an estimate of all cash distributions that will have been made to limited
partners after the distribution of the proceeds from the sale of the
Littlerock System is completed.
Summary of Estimated Cash Distributions to Limited Partners:
<TABLE>
<S> <C>
Partial Return of Limited Partners' Initial Capital on the
1998 Sale of the Venture's Broward System................... $ 68,554,431
Partial Return of Limited Partners' Initial Capital on the
Subscriber Warrant Residual on the 1998 Sale of the
Venture's Broward System.................................... 1,216,623
Partial Return of Limited Partners' Initial Capital on the
1998 Sale of the Partnership's Surfside System.............. 33,096,952
Partial Return of Limited Partners' Initial Capital on the
1998 Sale of the Partnership's Littlerock System............ 10,259,235
------------
Total Estimated Cash Received by Limited Partners............ $113,127,241
============
Total Cash Received per $1,000 of Limited Partnership
Capital..................................................... $ 866
============
Total Cash Received per $500 Limited Partnership Interest ... $ 433
============
</TABLE>
31
<PAGE>
Based on financial information available at September 30, 1998, the following
table presents the estimated results of the Partnership when it has completed
the sale of the Littlerock System:
<TABLE>
<S> <C>
Dollar Amount Raised.......................................... $130,676,500
Number of Cable Television Systems Purchased Directly......... Two
Number of Cable Television Systems Purchased Indirectly....... One
Date of Closing of Offering................................... October 1988
Date of First Sale of Properties.............................. March 1998
Tax and Distribution Data per $1,000 of Limited Partnership
Capital:
Federal Income Tax Results
Ordinary Income (Loss)
--from operations......................................... $ 722
--from recapture.......................................... $ 736
Capital Gain (Loss)....................................... $(138)
Cash Distributions to Investors
Source (on GAAP basis)
--investment income....................................... $ -0-
--return of capital....................................... $ 866
Source (on cash basis)
--sales................................................... $ 866
</TABLE>
32
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
OF CABLE TV FUND 14-B, LTD.
The following unaudited pro forma consolidated balance sheet assumes that as
of September 30, 1998, the Partnership had sold the Littlerock System. The
following unaudited pro forma consolidated statements of operations assume
that the Venture had sold the Broward System and the Partnership had sold the
Surfside System and the Littlerock System on January 1 of the respective
periods. The sales price for the Littlerock System is $10,720,400. The funds
available to the Partnership from the sale of the Littlerock System, adjusting
for the estimated net closing adjustments, are expected to total approximately
$10,267,575. Such funds plus cash on hand will be used to distribute
$10,259,235 to the limited partners of the Partnership. The limited partner
distribution of $10,259,235 represents $39 for each $500 limited partnership
interest or $78 for each $1,000 invested in the Partnership.
The unaudited pro forma consolidated financial statements should be read in
conjunction with the appropriate notes to the unaudited pro forma consolidated
financial statements.
ALL OF THE FOLLOWING UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
IS BASED UPON AMOUNTS AS OF SEPTEMBER 30, 1998 AND CERTAIN ESTIMATES OF
LIABILITIES AT CLOSING. FINAL RESULTS MAY DIFFER FROM SUCH INFORMATION.
33
<PAGE>
CABLE TV FUND 14-B, LTD.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
AS PRO FORMA PRO FORMA
REPORTED ADJUSTMENTS BALANCE
---------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents................. $ 842,083 $ 9,417,512 $10,259,235
Receivables, net.......................... 573,608 (573,608) --
Investment in Cable Television Properties:
Property, plant and equipment, net...... 4,596,227 (4,596,227) --
Franchise costs and other intangible
assets, net............................ 694,934 (694,934) --
---------- ----------- -----------
Total investment in cable television
properties........................... 5,291,161 (5,291,161) --
Deposits, Prepaid Expenses and Deferred
Charges.................................. 49,330 (49,330) --
---------- ----------- -----------
Total Assets.......................... $6,756,182 $(3,503,053) $10,259,235
========== =========== ===========
LIABILITIES AND PARTNERS' CAPITAL
(DEFICIT)
Liabilities:
Debt.................................... $ 27,737 $ (27,737) $ --
General Partner advances................ 217,525 (217,525) --
Accrued distributions to limited
partners............................... -- 10,259,235 10,259,235
Trade accounts payable and accrued
liabilities............................ 1,071,450 (1,071,450) --
Subscriber prepayments ................. 4,313 (4,313) --
---------- ----------- -----------
Total Liabilities..................... 1,321,025 8,938,210 10,259,235
---------- ----------- -----------
Partners' Capital (Deficit):
General Partner......................... (5,028) 5,028 --
Limited Partners........................ 5,440,185 (5,440,185) --
---------- ----------- -----------
Total Partners' Capital (Deficit)..... 5,435,157 (5,435,157) --
---------- ----------- -----------
Total Liabilities and Partners'
Capital (Deficit).................... $6,756,182 $(3,503,053) $10,259,235
========== =========== ===========
</TABLE>
The accompanying notes to unaudited pro forma consolidated financial statements
are
an integral part of this unaudited balance sheet.
34
<PAGE>
CABLE TV FUND 14-B, LTD.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ------------ ---------
<S> <C> <C> <C>
Revenues.................................. $40,929,333 $(40,929,333) $ --
Costs and Expenses:
Operating expenses...................... 22,717,178 (22,717,178) --
Management fees and allocated overhead
from
General Partner........................ 4,399,838 (4,399,838) --
Depreciation and amortization........... 14,070,460 (14,070,460) --
----------- ------------ -------
Operating Loss............................ (258,143) 258,143 --
----------- ------------ -------
Other Income (Expense):
Interest expense........................ (3,903,254) 3,903,254 --
Other, net.............................. (8,561) 8,561 --
----------- ------------ -------
Total other income (expense), net..... (3,911,815) 3,911,815 --
----------- ------------ -------
Consolidated Loss Before Minority
Interest................................. (4,169,958) 4,169,958 --
Minority Interest in Consolidated Loss.... 626,089 (626,089) --
----------- ------------ -------
Net Loss.................................. $(3,543,869) $ 3,543,869 $ --
=========== ============ =======
Net Loss Per Limited Partnership Unit..... $ (13.42) $ --
=========== =======
</TABLE>
The accompanying notes to unaudited pro forma consolidated financial statements
are an integral part of this unaudited statement.
35
<PAGE>
CABLE TV FUND 14-B, LTD.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
------------ ------------ ---------
<S> <C> <C> <C>
Revenues................................. $ 14,823,684 $(14,823,684) $ --
Costs and Expenses:
Operating expenses..................... 8,305,285 (8,305,285) --
Management fees and allocated overhead
from General Partner.................. 1,606,824 (1,606,824) --
Depreciation and amortization.......... 5,344,698 (5,344,698) --
------------ ------------ -------
Operating Loss........................... (433,123) 433,123 --
------------ ------------ -------
Other Income (Expense):
Interest expense....................... (1,249,873) 1,249,873 --
Gain on sale of cable television
system................................ 97,500,303 (97,500,303) --
Other, net............................. (2,583,375) 2,583,375 --
------------ ------------ -------
Total other income (expense), net.... 93,667,055 (93,667,055) --
------------ ------------ -------
Consolidated Income Before Minority
Interest................................ 93,233,932 (93,233,932) --
Minority Interest in Consolidated Income. (22,599,271) 22,599,271 --
------------ ------------ -------
Net Income............................... $ 70,634,661 $(70,634,661) $ --
============ ============ =======
Net Income Per Limited Partnership Unit.. $ 267.42 $ --
============ =======
</TABLE>
The accompanying notes to unaudited pro forma consolidated financial statements
are an integral part of this unaudited statement.
36
<PAGE>
CABLE TV FUND 14-B, LTD.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
1) The following calculations present the sale of the Littlerock System and
the resulting estimated distributions to be received by the Partnership.
2) The Partnership sold the Surfside System for $51,500,000. Such funds were
used to repay all Partnership indebtedness and to distribute $33,096,952 to
the limited partners of the Partnership.
3) The unaudited pro forma consolidated balance sheet of the Partnership
assumes that the Partnership had sold the Littlerock System for $10,720,400 as
of September 30, 1998. The unaudited pro forma consolidated statements of
operations of the Partnership assume that the Venture had sold the Broward
System and that the Partnership had sold the Surfside System and the
Littlerock System as of January 1, 1997.
4) The limited partner distribution of $10,259,235 represents $39 for each
$500 limited partnership interest or $78 for each $1,000 invested in the
Partnership.
5) The estimated gain recognized from the sale of the Littlerock System and
corresponding estimated distribution to limited partners as of September 30,
1998 has been computed as follows:
GAIN ON SALE OF ASSETS:
<TABLE>
<S> <C>
Contract sales price.............................................. $10,720,400
Less: Net book value of investment in cable television properties
at September 30, 1998....................................... (5,291,161)
-----------
Gain on sale of assets............................................ $ 5,429,239
===========
DISTRIBUTIONS TO PARTNERS:
Contract sales price.............................................. $10,720,400
Add:Trade receivables, net........................................ 573,608
Prepaid expenses.................................................. 49,330
Less:Accrued liabilities.......................................... (1,071,450)
Subscriber prepayments ........................................... (4,313)
-----------
Adjusted cash received ........................................... 10,267,575
Add:Cash on hand.................................................. 19,397
Less:Repayment of capital lease obligations....................... (27,737)
-----------
Cash available for distribution by the Partnership................ $10,259,235
===========
Limited Partners' share (100%).................................... $10,259,235
===========
</TABLE>
37
<PAGE>
AVAILABLE INFORMATION
The Partnership's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 and the Partnership's Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, 1998, June 30, 1998, and September 30, 1998
are being mailed to the limited partners of the Partnership together with this
Proxy Statement. Copies of the three independent appraisals of the fair market
value of the Littlerock System and copies of the Purchase and Sale Agreement
between the Partnership and the General Partner have been publicly filed with
the Securities and Exchange Commission and may be inspected at the
Commission's public reference facilities and at its World Wide Web site, and
such documents also are available to each limited partner of the Partnership
upon written request to Elizabeth M. Steele, Secretary, Jones Intercable,
Inc., 9697 East Mineral Avenue, Englewood, Colorado 80112. Copies of these
documents will be provided at the expense of the requesting limited partner.
A Rule 13e-3 Transaction Statement furnishing certain additional information
with respect to the transaction described herein has been jointly filed by the
Partnership and the General Partner with the Securities and Exchange
Commission. This document may be inspected at the Commission's public
reference facilities and at its World Wide Web site.
INCORPORATION BY REFERENCE
The following documents, which have been filed by the Partnership with the
Securities and Exchange Commission pursuant to the requirements of the
Exchange Act are hereby incorporated by reference: (i) the Partnership's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997, (ii)
the Partnership's Current Report on Form 8-K dated March 10, 1998, (iii) the
Partnership's Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1998, (iv) the Partnership's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1998 and (v) the Partnership's Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1998.
38
<PAGE>
SCHEDULE 1
EXECUTIVE OFFICERS AND DIRECTORS OF THE GENERAL PARTNER
Set forth below is the name, residence or business address, present
principal occupation or employment and five-year employment history of the
executive officers and directors of the General Partner. Also set forth is the
aggregate number of limited partnership interests of the Partnership
beneficially owned by each such person. The present principal occupation of
each executive officer of the General Partner is as an executive officer of
the General Partner. The Partnership has no officers or employees. All persons
listed except for Messrs. Fridman, Kearney and Vanaselja are citizens of the
United States. Messrs. Fridman, Kearney and Vanaselja are citizens of Canada.
<TABLE>
<CAPTION>
AGGREGATE NUMBER
OF LIMITED
PARTNERSHIP INTERESTS
NAME AND ADDRESS OCCUPATION OR EMPLOYMENT BENEFICIALLY OWNED
---------------- ------------------------ ---------------------
<S> <C> <C>
Glenn R. Jones Mr. Jones has served as Chairman of the Board of 0
c/o Jones Intercable, Directors and Chief Executive Officer of the
Inc. 9697 E. Mineral General Partner since its formation in 1970. He
Avenue Englewood, CO served as President of the General Partner from
80112 1984 to 1988. Mr. Jones has been involved in
the cable television business in various
capacities since 1961.
Robert E. Cole Mr. Cole was appointed a Director of the General 0
c/o Jones Intercable, Partner in March 1996. Mr. Cole is currently
Inc. self-employed as a partner of First Variable
9697 E. Mineral Avenue Insurance Marketing and is responsible for
Englewood, CO 80112 marketing to National Association of Securities
Dealers, Inc. firms in northern California,
Oregon, Washington and Alaska. From 1993 to
1995, Mr. Cole was the director of marketing
for Lamar Life Insurance Company; from 1992 to
1993, Mr. Cole was senior vice president of PMI
Inc., a third party lender serving the special
needs of corporate owned life insurance (COLI);
and from 1988 to 1992, Mr. Cole was the
principal of a specialty investment banking
firm that provided services to finance the
ownership and growth of emerging companies,
productive assets and real property.
Kevin P. Coyle Mr. Coyle, Group Vice President/Finance of the 0
c/o Jones Intercable, General Partner, has been the General Partner's
Inc. 9697 E. Mineral Chief Financial Officer since 1990. Mr. Coyle
Avenue Englewood, CO has been an associate of the finance department
80112 of the General Partner since 1981.
William E. Frenzel Mr. Frenzel was appointed a Director of the 0
1775 Massachusetts General Partner in April 1995. He has been a
Avenue, NW Guest Scholar since 1991 with the Brookings
Washington, DC 20036 Institution, a research organization located in
Washington, DC. Until his retirement in January
1991, Mr. Frenzel served for twenty years in
the United States House of Representatives.
</TABLE>
S-1
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE NUMBER
OF LIMITED
PARTNERSHIP INTERESTS
NAME AND ADDRESS OCCUPATION OR EMPLOYMENT BENEFICIALLY OWNED
---------------- ------------------------ ---------------------
<S> <C> <C>
Josef J. Fridman Mr. Fridman was appointed a director of the 0
c/o BCI Telecom Holding Inc. General Partner in February 1998. He is senior
1000 rue de la vice-president, law and corporate secretary of
Gauchetiere Bureau 1100 BCE Inc. Mr. Fridman joined Bell Canada, a
Montreal (PQ) wholly owned subsidiary of BCE Inc., in 1969,
Canada H3B 4Y8 and he has held increasingly senior positions
with Bell Canada and BCE Inc. since such time.
He has held his current position since 1991.
Donald L. Jacobs Mr. Jacobs was appointed a Director of the 0
60435 Tekampe Road General Partner in April 1995. Mr. Jacobs is a
Bend, OR 97702 retired executive officer of TRW. Prior to his
retirement in 1992, he was Vice President and
Deputy Manager of the Space and Defense Sector;
prior to that appointment, he was the Vice
President and General Manager of the Defense
Systems Group; and prior to that appointment,
he was President of ESL, Inc., a subsidiary of
TRW.
Larry Kaschinske Mr. Kaschinske has been the Controller and Chief 0
c/o Jones Intercable, Accounting Officer of the General Partner since
Inc. 9697 E. Mineral 1994. Mr. Kaschinske has been an associate of
Avenue Englewood, CO the finance department of the General Partner
80112 since 1984.
Robert Kearney Mr. Kearney was appointed a Director of the 0
c/o BCI Telecom Holding General Partner in July 1997. Mr. Kearney is a
Inc. retired executive officer of Bell Canada. Prior
1000 rue de la to his retirement in December 1993, Mr. Kearney
Gauchetiere was the President and Chief Executive Officer
Bureau 1100 of Bell Canada. He served as Chairman of BCE
Montreal (PQ) Canadian Telecom Group in 1994 and as Deputy
Canada H3B 4Y8 Chairman of BCI Management Limited in 1995.
James J. Krejci Mr. Krejci has been a Director of the General 0
3100 Arapahoe Avenue Partner since 1987. Mr. Krejci is President and
Boulder, CO 80303 CEO of Imagelink Technologies, Inc., a
privately financed company with leading
technology in the desktop or personal computer
videoconferencing market. Prior to joining
Imagelink Technologies in July 1996, he was the
President of the International Division of
International Gaming Technology headquartered
in Reno, Nevada. Prior to joining International
Gaming Technology in May 1994, Mr. Krejci had
been a Group Vice President of the General
Partner since 1987.
James B. O'Brien Mr. O'Brien has been President and a Director of 0
c/o Jones Intercable, the General Partner since 1989 and a member of
Inc. the Executive Committee of the General
9697 E. Mineral Avenue Partner's Board of Directors since 1993.
Englewood, CO 80112 Mr. O'Brien has been with the General Partner
since 1982 in various operational management
positions.
</TABLE>
S-2
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE NUMBER
OF LIMITED
PARTNERSHIP INTERESTS
NAME AND ADDRESS OCCUPATION OR EMPLOYMENT BENEFICIALLY OWNED
---------------- ------------------------ ---------------------
<S> <C> <C>
Raphael M. Solot Mr. Solot was appointed a Director of the 0
501 South Cherry Street General Partner in March 1996. Mr. Solot is an
Denver, CO 80222 attorney in private practice. He has practiced
law for 34 years with an emphasis on franchise,
corporate and partnership law and complex
litigation.
Cheryl M. Sprague Ms. Sprague joined the General Partner as Group 0
c/o Jones Intercable, Vice President/Human Resources in November
Inc. 1997. Prior to November 1997 and since December
9697 E. Mineral Avenue 1995, Ms. Sprague served as Director, Human
Englewood, CO 80112 Resources for Westmoreland Coal Company. From
October 1993 to December 1995, Ms. Sprague
served as President of Peak Executive
Resources. From April 1992 to October 1993, Ms.
Sprague was Vice President, Human Resources for
Penrose-St. Francis Healthcare System.
Elizabeth M. Steele Ms. Steele joined the General Partner in 1987 as 0
c/o Jones Intercable, Vice President/General Counsel and Secretary.
Inc. Prior to that time, Ms. Steele was a partner at
9697 E. Mineral Avenue Davis, Graham & Stubbs, a Denver, Colorado law
Englewood, CO 80112 firm that serves as counsel to the General
Partner.
Howard O. Thrall Mr. Thrall was appointed a director of the 0
c/o Jones Intercable, General Partner in March 1996 and he had
Inc. previously served as a director of the General
9697 E. Mineral Avenue Partner from December 1988 to December 1994.
Englewood, CO 80112 Mr. Thrall is now a management and
international marketing consultant. From
September 1993 through July 1996, Mr. Thrall
served as Vice President of Sales, Asian
Region, for World Airways, Inc. From 1984 until
August 1993, Mr. Thrall was with the McDonnell
Douglas Corporation, where he was a Regional
Vice President, Commercial Marketing with the
Douglas Aircraft Company subsidiary.
Siim A. Vanaselja Mr. Vanaselja was appointed a Director of the 0
c/o BCI Telecom Holding General Partner in August 1996. Mr. Vanaselja
Inc. joined BCE Inc., Canada's largest
1000 rue de la telecommunications company, in February 1994
Gauchetiere and he has served in various capacities with
Bureau 1100 that company and its subsidiaries since that
Montreal (PQ) time. He currently serves as Executive Vice
Canada H3B 4Y8 President and Chief Financial Officer of Bell
Canada International Inc. and Vice President of
BCI Telecom Holding Inc., BCE Inc.
subsidiaries. Prior to joining BCE Inc., Mr.
Vanaselja was a partner in the Toronto office
of KPMG Peat Marwick Thorne.
Ruth E. Warren Ms. Warren has been Group Vice 0
c/o Jones Intercable, President/Operations of the General Partner
Inc. since 1990. Ms. Warren has been with the
9697 E. Mineral Avenue General Partner in various operational
Englewood, CO 80112 management positions since 1980.
</TABLE>
S-3
<PAGE>
<TABLE>
<CAPTION>
AGGREGATE NUMBER
OF LIMITED
PARTNERSHIP INTERESTS
NAME AND ADDRESS OCCUPATION OR EMPLOYMENT BENEFICIALLY OWNED
---------------- ------------------------ ---------------------
<S> <C> <C>
Cynthia A. Winning Ms. Winning joined the General Partner as Group 0
c/o Jones Intercable, Vice President/Marketing in December 1994.
Inc. Prior to joining the General Partner, Ms.
9697 E. Mineral Avenue Winning served in 1994 as the President of PRS
Englewood, CO 80112 Inc., a Denver, Colorado 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.
Sanford Zisman Mr. Zisman was appointed a Director of the 0
3773 Cherry Creek North Drive- General Partner in June 1996. Mr. Zisman is a
Denver, CO 80209 principal in the law firm Zisman & Ingraham,
P.C. of Denver, Colorado. He has practiced law
for 32 years, with an emphasis on tax, business
and estate planning and probate administration.
Robert L. Zoellick Mr. Zoellick was appointed a Director of the 0
3900 Wisconsin General Partner in April 1995. Mr. Zoellick is
Avenue, NW the John M. Olin Professor at the U.S. Naval
Washington, DC 20016 Academy for the 1997-1998 term. From 1993
through 1997, he was an Executive Vice
President at Fannie Mae, a federally chartered
and stockholder-owned corporation that is the
largest housing finance investor in the United
States. From August 1992 to January 1993, Mr.
Zoellick served as Deputy Chief of Staff of the
White House and Assistant to the President.
From May 1991 to August 1992, Mr. Zoellick
served concurrently as the Under Secretary of
State for Economic and Agricultural Affairs and
as Counselor of the Department of State, a post
he assumed in March 1989. From 1985 to 1988,
Mr. Zoellick served at the Department of
Treasury in a number of capacities, including
Counselor to the Secretary.
</TABLE>
S-4
<PAGE>
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE PARTNERSHIP BY THE GENERAL PARTNER
The undersigned Limited Partner of Cable TV Fund 14-B, Ltd., a Colorado
limited partnership, hereby votes on the sale of the Partnership's Littlerock,
California cable television system to Jones Communications of California, Inc.,
an indirect wholly owned subsidiary of Jones Intercable, Inc., for a sales
price of $10,720,400 in cash, subject to normal closing adjustments, pursuant
to the terms and conditions of that certain Purchase and Sale Agreement dated
as of March 10, 1998, as follows:
[_] CONSENTS [_] WITHHOLDS CONSENT [_] ABSTAINS
(YOU MUST SIGN ON THE REVERSE SIDE OF THIS PROXY CARD FOR YOUR VOTE TO COUNT.)
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED LIMITED PARTNER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE PROPOSED SALE TRANSACTION.
ALL OWNERS MUST SIGN EXACTLY AS
NAME(S) APPEAR ON LABEL.
When limited partnership
interests are held by more than
one person, all owners must sign.
When signing as attorney, as
executor, administrator, trustee
or guardian, please give full
title as such. If a corpo-ration,
please sign in full corporation
name by autho-rized officer. If a
partnership, please sign in
partnership name by authorized
person.
DATED: _________________, 199
___________________________________
Signature - Investor 1
___________________________________
Signature - Investor 2
___________________________________
Signature - Investor 3
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE PARTNERSHIP BY THE GENERAL PARTNER
The undersigned Limited Partner of Cable TV Fund 14-B, Ltd., a Colorado
limited partnership, hereby votes on the sale of the Partnership's Littlerock,
California cable television system to Jones Communications of California, Inc.,
an indirect wholly owned subsidiary of Jones Intercable, Inc., for a sales
price of $10,720,400 in cash, subject to normal closing adjustments, pursuant
to the terms and conditions of that certain Purchase and Sale Agreement dated
as of March 10, 1998, as follows:
[_] CONSENTS [_] WITHHOLDS CONSENT [_] ABSTAINS
(YOU MUST SIGN ON THE REVERSE SIDE OF THIS PROXY CARD FOR YOUR VOTE TO COUNT.)
<PAGE>
- --------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED LIMITED PARTNER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE PROPOSED SALE TRANSACTION.
ALL OWNERS MUST SIGN EXACTLY AS
NAME(S) APPEAR ON LABEL.
When limited partnership
interests are held by more than
one person, all owners must sign.
When signing as attorney, as
executor, administrator, trustee
or guardian, please give full
title as such. If a corpo-ration,
please sign in full corporation
name by autho-rized officer. If a
partnership, please sign in
partnership name by authorized
person.
DATED: _________________, 199
___________________________________
Signature - Investor 1
___________________________________
Signature - Investor 2
___________________________________
Signature - Investor 3
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
<PAGE>
Exhibit 99(D)(5)
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1998
-------------
or
[_] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___________ to ____________
Commission File Number 0-16200
CABLE TV FUND 14-B, LTD.
- --------------------------------------------------------------------------------
Exact name of registrant as specified in charter
Colorado #84-1024658
- --------------------------------------------------------------------------------
State of organization I.R.S. employer I.D. #
9697 East Mineral Avenue, P.O. Box 3309, Englewood, Colorado 80155-3309
------------------------------------------------------------------------
Address of principal executive office
(303) 792-3111
-----------------------------
Registrant's telephone number
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- _____
<PAGE>
CABLE TV FUND 14-B, LTD.
------------------------
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1998 1997
------ ------------ -------------
<S> <C> <C>
CASH $ 34,009,629 $ 173,628
TRADE RECEIVABLES, less allowance for doubtful receivables of
$13,745 and $133,188 at June 30, 1998 and December 31, 1997,
respectively 395,295 1,470,293
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 8,798,325 105,933,977
Less- accumulated depreciation (4,125,146) (55,360,283)
----------- ------------
4,673,179 50,573,694
Franchise costs and other intangible assets, net of accumulated
amortization of $1,895,632 and $84,913,605 at June 30, 1998
and December 31, 1997, respectively 736,928 46,126,693
----------- ------------
Total investment in cable television properties 5,410,107 96,700,387
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 2,162,137 789,427
----------- ------------
Total assets $ 41,977,168 $ 99,133,735
=========== ============
</TABLE>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated balance sheets.
2
<PAGE>
CABLE TV FUND 14-B, LTD.
------------------------
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1998 1997
------------------------------------------- -------------- -------------
<S> <C> <C>
LIABILITIES:
Debt $ 29,494 $ 54,185,513
General Partner advances 1,200,082 835,015
Deferred brokerage fee - 920,000
Accrued distributions to limited partners 34,313,575 -
Accrued distribution to joint venture partner 452,433 -
Trade accounts payable and accrued liabilities 140,017 1,617,666
Subscriber prepayments - 569,308
------------- ------------
Total liabilities 36,135,601 58,127,502
------------- ------------
MINORITY INTEREST IN CABLE TELEVISION
JOINT VENTURE (96,378) 3,337,731
------------- ------------
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (1,000) (750,411)
------------- ------------
- (749,411)
------------- ------------
Limited Partners-
Net contributed capital (261,353 units
outstanding at June 30, 1998 and
December 31, 1997) 112,127,301 112,127,301
Accumulated deficit (3,321,350) (73,709,388)
Distributions (102,868,006) -
------------- ------------
5,937,945 38,417,913
------------- ------------
Total liabilities and partners' capital (deficit) $ 41,977,168 $ 99,133,735
============= ============
</TABLE>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated balance sheets.
3
<PAGE>
CABLE TV FUND 14-B, LTD.
------------------------
(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- ------------------------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
----------- ----------- ----------- -----------
REVENUES $ 3,623,059 $10,350,148 $14,159,133 $20,415,926
COSTS AND EXPENSES:
Operating expenses 1,954,079 5,792,380 7,939,820 11,500,182
Management fees and allocated overhead
from General Partner 396,691 1,059,667 1,532,687 2,250,843
Depreciation and amortization 1,455,631 3,462,605 5,126,136 6,853,769
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) (183,342) 35,496 (439,510) (188,868)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (277,335) (977,736) (1,248,940) (1,930,920)
Gain on sale of cable television system 15,035,149 - 97,500,303 -
Other, net (1,583,665) (14,197) (2,171,511) 36,520
----------- ----------- ----------- -----------
Total other income (expense), net 13,174,149 (991,933) 94,079,852 (1,894,400)
----------- ----------- ----------- -----------
CONSOLIDATED INCOME (LOSS)
BEFORE MINORITY INTEREST 12,990,807 (956,437) 93,640,342 (2,083,268)
MINORITY INTEREST IN
CONSOLIDATED (INCOME) LOSS (486,106) 155,767 (22,502,893) 316,899
----------- ----------- ----------- -----------
NET INCOME (LOSS) $12,504,701 $ (800,670) $71,137,449 $(1,766,369)
=========== =========== =========== ===========
ALLOCATION OF NET INCOME (LOSS):
General Partner $ - $ (8,007) $ 749,411 $ (17,664)
=========== =========== =========== ===========
Limited Partners $12,504,701 $ (792,663) $70,388,038 $(1,748,705)
=========== =========== =========== ===========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ 47.84 $ (3.03) $ 269.32 $ (6.69)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF LIMITED PARTNERSHIP
UNITS OUTSTANDING 261,353 261,353 261,353 261,353
=========== =========== =========== ===========
</TABLE>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated statements.
4
<PAGE>
CABLE TV FUND 14-B, LTD.
------------------------
(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
----------------------------
1998 1997
------------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 71,137,449 $(1,766,369)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 5,126,136 6,853,769
Gain on sale of cable television system (97,500,303) -
Minority interest in consolidated net income (loss) 22,502,893 (316,899)
Decrease in trade receivables 1,074,998 313,505
Increase in deposits, prepaid expenses and deferred charges (1,920,133) (545,711)
Increase (decrease) in General Partner advances 365,067 (43,991)
Decrease in trade accounts payable and accrued liabilities and
subscriber prepayments (2,966,957) (200,077)
------------- -----------
Net cash provided by (used in) operating activities (2,180,850) 4,294,227
------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (2,500,630) (3,078,039)
Proceeds from sales of cable television systems, net of brokerage fees 186,712,500 -
------------- -----------
Net cash provided by (used in) investing activities 184,211,870 (3,078,039)
------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 2,010,948 1,006,551
Repayment of debt (56,166,967) (2,066,123)
Distributions to limited partners (102,868,006) -
Increase in accrued distributions to limited partners 34,313,575 -
Distributions to joint venture partner (25,937,002) -
Increase in accrued distribution to joint venture partner 452,433 -
------------- -----------
Net cash used in financing activities (148,195,019) (1,059,572)
------------- -----------
Increase in cash 33,836,001 156,616
Cash, beginning of period 173,628 840,309
------------- -----------
Cash, end of period $ 34,009,629 $ 996,925
============= ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 1,746,772 $2,176,869
============= ============
</TABLE>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated statements.
5
<PAGE>
CABLE TV FUND 14-B, LTD.
------------------------
(A Limited Partnership)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(1) This Form 10-Q is being filed in conformity with the SEC requirements
for unaudited financial statements and does not contain all of the necessary
footnote disclosures required for a complete presentation of the Balance Sheets
and Statements of Operations and Cash Flows in conformity with generally
accepted accounting principles. However, in the opinion of management, this data
includes all adjustments, consisting only of normal recurring accruals,
necessary to present fairly the financial position of Cable TV Fund 14-B, Ltd.
(the "Partnership") at June 30, 1998 and December 31, 1997, its results of
operations for the three and six month periods ended June 30, 1998 and 1997 and
its cash flows for the six month periods ended June 30, 1998 and 1997. Results
of operations for these periods are not necessarily indicative of results to be
expected for the full year.
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"), to acquire, own and operate
cable television systems in the United States. 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 Venture's only asset was
the cable television system serving certain areas in Broward County, Florida
(the "Broward System"). The Venture sold the Broward System on March 31, 1998
(see Note 2). Because of the Partnership's majority ownership interest in the
Venture, the accompanying 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 Fund 14-A in the Venture shown as a minority
interest. All interpartnership accounts and transactions have been eliminated.
The Partnership directly owns the cable television system serving Littlerock,
California (the "Littlerock System"). The Partnership sold the cable television
system serving Surfside, South Carolina (the "Surfside System") on June 30, 1998
(see Note 3) and has entered into an agreement to sell the Littlerock System
(see Note 4).
(2) On March 31, 1998, the Venture sold the Broward System to an
unaffiliated third party for $140,000,000. The contract sales price of
$140,000,000 would be reduced $2,472 for each of the Broward System's equivalent
basic subscribers less than 56,637 at closing. At March 31, 1998, the Broward
System had 55,346 equivalent basic subscribers, which reduced the sales price by
$3,191,352. When final closing adjustments were completed on June 30, 1998,
however, additional equivalent basic subscribers that were not able to be
counted as basic subscribers of the Broward System at the March 31, 1998 closing
(because they were relatively recent subscribers at such date) were able to be
counted as equivalent basic subscribers of the Broward System. These basic
subscribers brought the equivalent basic subscriber count up to 56,637 and the
sales price accordingly was adjusted upward by $3,191,352 to $140,000,000.
From the proceeds of the Broward System sale at the initial closing,
the Venture settled working capital adjustments, repaid the outstanding balance
on its credit facility, which totaled $39,902,968 at March 31, 1998 and paid a
2.5 percent brokerage fee of $3,420,216 to The Jones Group, Ltd., a subsidiary
of the General Partner ("The Jones Group"), for acting as a broker in this
transaction. The Venture then distributed the remaining net sale proceeds, or
$94,039,000, to the two constituent partnerships of the Venture in proportion to
their ownership interests in the Venture. Accordingly, the Partnership received
73 percent of the net sale proceeds, or $68,554,431. In April 1998, the
Partnership distributed its net sale proceeds to its limited partners of record
as of March 31, 1998. Such distribution represented approximately $262 for each
$500 limited partnership interest or $524 for each $1,000 invested in the
Partnership.
From the additional proceeds of the Broward System sale at final
closing, the Venture settled final working capital adjustments and paid a 2.5
percent brokerage fee of $79,784 to The Jones Group. The Venture then
distributed the remaining additional net sale proceeds, or $1,669,056, to the
two constituent partnerships of the Venture in proportion to their ownership
interests in the Venture. Accordingly, the Partnership received 73 percent of
the additional net sale proceeds, or $1,216,623. In August 1998, the Partnership
will distribute the $1,216,623 to its limited partners, together with the
distribution to the limited partners from the net sales proceeds from the sale
of the Surfside System. Because the distributions to the limited partners from
the sale of the Broward System, together with all prior distributions, did not
return to the limited partners 125 percent of the capital initially contributed
to the Partnership by the limited partners, the General Partner did not receive
any general partner distribution from the Broward System's sale. Because the
Broward System represented the only asset of the Venture, the Venture will be
liquidated and dissolved before the end of 1998.
6
<PAGE>
(3) On June 30, 1998, the Partnership sold the Surfside System to an
unaffiliated third party for $51,500,000, subject to customary closing
adjustments. Upon the closing of the sale of the Surfside System, the
Partnership retained approximately $240,000 of the sale proceeds for working
capital purposes, repaid all of its indebtedness (including $15,800,000 borrowed
under its credit facility, $658,490 in advances from the General Partner and
capital lease obligations of $143,870), paid a 2.5 percent brokerage fee
totaling $1,287,500 to The Jones Group, paid a deferred acquisition fee of
$920,000 to The Jones Group and then distributed the net sale proceeds of
approximately $33,096,952 to the Partnership's limited partners of record as of
June 30, 1998. This distribution will be made in August 1998. Such distribution
represents approximately $127 for each $500 limited partnership interest, or
$254 for each $1,000 invested in the Partnership.
Once the Partnership has completed the distribution of its portion of
the net proceeds from the sale of the Broward System and the sale of the
Surfside System, limited partners of the Partnership will have received a total
of $394 for each $500 limited partnership interest, or $788 for each $1,000
invested in the Partnership. Because the distributions to the limited partners
from the sale of the Surfside System and the Broward System will not return to
the limited partners 125 percent of the capital initially contributed by the
limited partners to the Partnership, the General Partner will not receive a
general partner distribution from the Surfside System's sale proceeds.
The pro forma effect of the sale of the Surfside System and the sale of
the Broward System on the results of the Partnership's operations for the six
months ended June 30, 1998 and 1997, assuming the transactions had occurred on
January 1, 1997, are presented in the following tabulations.
For the Six Months Ended June 30, 1998
---------------------------------------
Unaudited
Pro Forma Pro Forma
As Reported Adjustments Balance
------------ ------------- -----------
REVENUES $14,159,133 $(12,870,390) $1,288,743
=========== ============ ==========
OPERATING INCOME (LOSS) $ (439,510) $ 439,630 $ 120
=========== ============ ==========
NET INCOME (LOSS) $71,137,449 $(71,138,935) $ (1,486)
=========== ============ ==========
For the Six Months Ended June 30, 1997
---------------------------------------
Unaudited
Pro Forma Pro Forma
As Reported Adjustments Balance
------------ ------------- ----------
REVENUES $20,415,926 $(19,154,484) $1,261,342
=========== ============ ==========
OPERATING INCOME (LOSS) $ (188,868) $ 285,376 $ 96,508
=========== ============ ==========
NET INCOME (LOSS) $(1,766,369) $ 1,856,410 $ 90,041
=========== ============ ==========
(4) On March 10, 1998, the Partnership entered into an agreement with the
General Partner to sell the Littlerock System to the General Partner or one of
its subsidiaries for a sales price of $10,720,400, subject to customary closing
adjustments. The sales price represents the average of three independent
appraisals of the fair market value of the Littlerock System. The closing of
this transaction is expected to occur in the fourth quarter of 1998. The closing
is subject to a number of conditions including the approval of the transaction
by the holders of a majority of the limited partnership interests of the
Partnership, the expiration or termination of all waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 applicable to the agreement
or the transactions contemplated thereby, and the consents of governmental
authorities and other third parties. The General Partner expects to conduct a
vote of the limited partners on the Littlerock System sale during the third
quarter of 1998.
7
<PAGE>
Upon the consummation of the proposed sale of the Littlerock System,
based upon financial information as of June 30, 1998, the Partnership will
settle working capital adjustments, repay capital lease obligations of $29,494
and then the Partnership will distribute the net sale proceeds of approximately
$11,039,000 to the limited partners of the Partnership. This distribution will
give the Partnership's limited partners a return of $42 for each $500 limited
partner interest, or $84 for each $1,000 invested in the Partnership.
Taking into account the distribution from the sale of the Broward
System, the distribution from the sale of the Surfside System, and the
anticipated distribution from the sale of the Littlerock System, the limited
partners of the Partnership can expect to receive a total of $436 for each $500
limited partnership interest, or $872 for each $1,000 invested in the
Partnership. Because the distributions to the limited partners from the sales of
the Surfside System, the Broward System and the anticipated distribution from
the sale of the Littlerock System will not return to the limited partners 125
percent of the capital initially contributed by the limited partners to the
Partnership, the General Partner will not receive a general partner distribution
from the Littlerock System's sale proceeds.
The Partnership will be liquidated and dissolved after the sale of the
Littlerock System, which will be the Partnership's last remaining asset at the
time of its sale. The General Partner anticipates that the Partnership will be
liquidated and dissolved in the first quarter of 1999.
(5) The General Partner manages the Partnership and receives a fee for its
services equal to 5 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 the General Partner by the Partnership and
the Venture for the three and six month periods ended June 30, 1998 were
$181,153 and $707,957, respectively, compared to $517,507 and $1,020,796,
respectively, for the similar 1997 periods.
The Partnership reimburses the General Partner for certain allocated
overhead and administrative expenses. These expenses represent the salaries and
related benefits paid for corporate personnel, rent, data processing services
and other corporate facilities costs. Such personnel provide engineering,
marketing, accounting, administrative, legal and investor relations services to
the Partnership and to the Venture. Such services, and their related costs, are
necessary to the operation of the Partnership and the Venture and would have
been incurred by the Partnership and the Venture if they were stand alone
entities. Allocations of personnel costs are based primarily on actual time
spent by employees of the General Partner with respect to each partnership
managed. Remaining expenses are allocated based on the pro rata relationship of
the Partnership's and the Venture's revenues to the total revenues of all
systems owned or managed by the General Partner and certain of its subsidiaries.
Systems owned by the General Partner and all other systems owned by partnerships
for which Jones Intercable, Inc. is the general partner are also allocated a
proportionate share of these expenses. The General Partner believes that the
methodology used in allocating overhead and administrative expenses is
reasonable. Reimbursements made to the General Partner for allocated overhead
and administrative expenses for the three and six month periods ended June 30,
1998 were $215,538 and $824,730, respectively, compared to $542,160 and
$1,230,047, respectively, for the similar 1997 periods.
8
<PAGE>
(6) Financial information regarding the Venture is presented below:
UNAUDITED BALANCE SHEETS
------------------------
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
-------------- ------------------
ASSETS
------
<S> <C> <C>
Cash and accounts receivable $ - $ 1,688,123
Investment in cable television properties - 51,847,372
Other assets 2,290,433 620,522
------------ ------------
Total assets $ 2,290,433 $ 54,156,017
============ ============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Debt $ - $ 39,597,617
Payables and accrued liabilities 2,290,433 1,886,849
Partners' contributed capital 70,000,000 70,000,000
Distributions to joint venture partners (95,708,056) -
Accumulated capital (deficit) 25,708,056 (57,328,449)
------------ ------------
Total liabilities and partners' capital $ 2,290,433 $ 54,156,017
============ ============
</TABLE>
UNAUDITED STATEMENTS OF OPERATIONS
----------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
--------------------------- -------------------------
1998 1997 1998 1997
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ - $ 6,934,990 $ 7,064,891 $13,779,095
Operating expenses - 3,877,200 3,981,015 7,710,954
Management fees and allocated overhead
from General Partner - 720,372 760,650 1,534,004
Depreciation and amortization - 2,182,538 2,249,219 4,304,255
------------ ------------ ----------- -----------
Operating income - 154,880 74,007 229,882
Interest expense - (719,372) (705,440) (1,423,029)
Gain on sale of cable television system 3,111,568 - 85,576,722 -
Other, net (1,317,821) (10,295) (1,908,784) 23,776
------------ ------------ ----------- -----------
Net income (loss) $ 1,793,747 $ (574,787) $83,036,505 $(1,169,371)
============ ============ =========== ===========
</TABLE>
9
<PAGE>
Management fees paid to the General Partner by the Venture totaled
$-0- and $353,245, respectively, for the three and six month periods ended June
30, 1998, compared to $346,750 and $688,955, respectively, for the similar 1997
periods. Reimbursements for overhead and administrative expenses paid to the
General Partner by the Venture totaled $-0- and $407,405, respectively, for the
three and six month periods ended June 30, 1998, compared to $373,622 and
$845,049 for the similar 1997 periods.
10
<PAGE>
CABLE TV FUND 14-B, LTD.
------------------------
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
FINANCIAL CONDITION
- -------------------
The Partnership owns the Littlerock System and it owned the Surfside System
until its sale on June 30, 1998. The Partnership also owns a 73 percent
interest in the Venture. The accompanying financial statements include 100
percent of the accounts of the Partnership and those of the Venture, reduced by
the 27 percent minority interest in the Venture owned by Fund 14-A.
On March 31, 1998, the Venture sold the Broward System to an unaffiliated
third party for $140,000,000. The contract sales price of $140,000,000 would be
reduced $2,472 for each of the Broward System's equivalent basic subscribers
less than 56,637 at closing. At March 31, 1998, the Broward System had 55,346
equivalent basic subscribers, which reduced the sales price by $3,191,352. When
final closing adjustments were completed on June 30, 1998, however, additional
equivalent basic subscribers that were not able to be counted as basic
subscribers of the Broward System at the March 31, 1998 closing (because they
were relatively recent subscribers at such date) were able to be counted as
equivalent basic subscribers of the Broward System. These basic subscribers
brought the equivalent basic subscriber count up to 56,637 and the sales price
accordingly was adjusted upward by $3,191,352 to $140,000,000.
From the proceeds of the Broward System sale at the initial closing, the
Venture settled working capital adjustments, repaid the outstanding balance on
its credit facility, which totaled $39,902,968 at March 31, 1998 and paid a 2.5
percent brokerage fee of $3,420,216 to The Jones Group for acting as a broker in
this transaction. The Venture then distributed the remaining net sale proceeds,
or $94,039,000, to the two constituent partnerships of the Venture in proportion
to their ownership interests in the Venture. Accordingly, the Partnership
received 73 percent of the net sale proceeds, or $68,554,431. In April 1998,
the Partnership distributed its net sale proceeds to its limited partners of
record as of March 31, 1998. Such distribution represented approximately $262
for each $500 limited partnership interest or $524 for each $1,000 invested in
the Partnership.
From the additional proceeds of the Broward System sale at final closing,
the Venture settled final working capital adjustments and paid a 2.5 percent
brokerage fee of $79,784 to The Jones Group. The Venture then distributed the
remaining additional net sale proceeds, or $1,669,056, to the two constituent
partnerships of the Venture in proportion to their ownership interests in the
Venture. Accordingly, the Partnership received 73 percent of the additional net
sale proceeds, or $1,216,623. In August 1998, the Partnership will distribute
the $1,216,623 to its limited partners, together with the distribution to the
limited partners from the net sales proceeds from the sale of the Surfside
System. Because the distributions to the limited partners from the sale of the
Broward System, together with all prior distributions, did not return to the
limited partners 125 percent of the capital initially contributed to the
Partnership by the limited partners, the General Partner did not receive any
general partner distribution from the Broward System's sale. Because the
Broward System represented the only asset of the Venture, the Venture will be
liquidated and dissolved before the end of 1998.
On June 30, 1998, the Partnership sold the Surfside System to an
unaffiliated third party for $51,500,000, subject to customary closing
adjustments. Upon the closing of the sale of the Surfside System, the
Partnership retained approximately $240,000 of the sale proceeds for working
capital purposes, repaid all of its indebtedness (including $15,800,000 borrowed
under its credit facility, $658,490 in advances from the General Partner and
capital lease obligations of $143,870), paid a 2.5 percent brokerage fee
totaling $1,287,500 to The Jones Group, paid a deferred acquisition fee of
$920,000 to The Jones Group and then distributed the net sale proceeds of
approximately $33,096,952 to the Partnership's limited partners of record as of
June 30, 1998. This distribution will be made in August 1998. Such distribution
represents approximately $127 for each $500 limited partnership interest, or
$254 for each $1,000 invested in the Partnership.
Once the Partnership has completed the distribution of its portion of the
net proceeds from the sale of the Broward System and the sale of the Surfside
System, limited partners of the Partnership will have received a total of $394
for each $500 limited partnership interest, or $788 for each $1,000 invested in
the Partnership. Because the distributions to the limited partners from the
sale of the Surfside System and the Broward System will not return to the
limited partners 125
11
<PAGE>
percent of the capital initially contributed by the limited partners to the
Partnership, the General Partner will not receive a general partner distribution
from the Surfside System's sale proceeds.
On March 10, 1998, the Partnership entered into an agreement with the
General Partner to sell the Littlerock System to the General Partner or one of
its subsidiaries for a sales price of $10,720,400, subject to customary closing
adjustments. The sales price represents the average of three independent
appraisals of the fair market value of the Littlerock System. The closing of
this transaction is expected to occur in the fourth quarter of 1998. The
closing is subject to a number of conditions including the approval of the
transaction by the holders of a majority of the limited partnership interests of
the Partnership, the expiration or termination of all waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 applicable to the agreement
or the transactions contemplated thereby, and the consents of governmental
authorities and other third parties. The General Partner expects to conduct a
vote of the limited partners on the Littlerock System sale during the third
quarter of 1998.
Upon the consummation of the proposed sale of the Littlerock System, based
upon financial information as of June 30, 1998, the Partnership will settle
working capital adjustments, repay capital lease obligations of $29,494 and then
the Partnership will distribute the net sale proceeds of approximately
$11,039,000 to the limited partners of the Partnership. This distribution will
give the Partnership's limited partners a return of $42 for each $500 limited
partner interest, or $84 for each $1,000 invested in the Partnership.
Taking into account the distribution from the sale of the Broward System,
the distribution from the sale of the Surfside System, and the anticipated
distribution from the sale of the Littlerock System, the limited partners of the
Partnership can expect to receive a total of $436 for each $500 limited
partnership interest, or $872 for each $1,000 invested in the Partnership.
Because the distributions to the limited partners from the sales of the Surfside
System, the Broward System and the anticipated distribution from the sale of the
Littlerock System will not return 125 percent of the capital initially
contributed by the limited partners to the Partnership, the General Partner will
not receive a general partner distribution from the Littlerock System's sale
proceeds.
The Partnership will be liquidated and dissolved after the sale of the
Littlerock System, which will be the Partnership's last remaining asset at the
time of its sale. The General Partner anticipates that the Partnership will be
liquidated and dissolved in the first quarter of 1999.
For the six months ended June 30, 1998, the Partnership expended
approximately $1,564,000 on capital additions in its Surfside System and
Littlerock System. Approximately 42 percent of these expenditures was for the
construction of cable plant extensions related to new homes passed.
Approximately 37 percent of the expenditures was for the construction of drops
to subscribers' homes. The remainder of the expenditures was for other capital
expenditures to maintain the value of the Partnership's cable television systems
until they are sold. Funding for these expenditures was provided by cash
generated from operations and borrowings from the Partnership's credit facility.
Budgeted capital expenditures for the remainder of 1998 are approximately
$378,000. Approximately 34 percent of these expenditures are expected to be used
for the construction of plant extensions related to new homes passed.
Approximately 34 percent are expected to be used for service drops to homes. The
remainder of these expenditures is for other capital expenditures to maintain
the value of the Partnership's Littlerock System until it is sold. Depending
upon the timing of the closing of the sale of the Partnership's Littlerock
System, the Partnership will make only the portion of the 1998 budgeted capital
expenditures scheduled to be made during the Partnership's continued ownership
of the system. Funding for these improvements will be provided by cash generated
from operations and cash on hand. The Partnership is obligated to conduct its
business in the ordinary course until the Littlerock System is sold.
The Partnership repaid the outstanding balance of its reducing revolving
credit facility, which totaled $15,800,000, from the proceeds of the sale of the
Surfside System on June 30, 1998. The Partnership therefore has no material debt
outstanding.
The Partnership has sufficient sources of capital from cash on hand and
cash generated from operations to meet its presently anticipated needs until the
Littlerock System is sold.
The Year 2000 issue is the result of many computer programs being written
such that they will malfunction when reading a year of "00." This problem could
cause system failure or miscalculations causing disruptions of business
processes.
12
<PAGE>
The General Partner has initiated an assessment of its computer
applications to determine the extent of the problem. Based on this assessment,
the General Partner has determined that the majority of its computer
applications supporting business processes, including accounting and billing,
are designed to handle the Year 2000 appropriately.
The General Partner is currently focusing its efforts on the impact of the
Year 2000 issue on service delivery. The General Partner has established an
internal team to address this issue. The General Partner is identifying and
testing all date-sensitive equipment involved in delivering service to the
Partnership's customers. In addition, the General Partner will assess the
Partnership's options regarding repair or replacement of affected equipment
during this testing. The General Partner believes that the financial impact
will not be material.
RESULTS OF OPERATIONS
- ---------------------
The results of operations for the Partnership are summarized in the selected
financial data below:
<TABLE>
<CAPTION>
For the Three Months Ended June 30, 1998
------------------------------------------
Partnership Venture
Owned Owned Consolidated
------------ ------------- -------------
<S> <C> <C> <C>
Revenues $ 3,623,059 $ - $ 3,623,059
Operating expenses 1,954,079 - 1,954,079
Management fees and allocated
overhead from General Partner 396,691 - 396,691
Depreciation and amortization 1,455,631 - 1,455,631
----------- ------------ ------------
Operating loss (183,342) - (183,342)
----------- ------------ ------------
Interest expense (277,335) - (277,335)
Gain on sale of cable television system 11,923,581 3,111,568 15,035,149
Other, net (265,844) (1,317,821) (1,583,665)
----------- ------------ ------------
Consolidated income before minority interest 11,197,060 1,793,747 12,990,807
Minority interest in consolidated income - (486,106) (486,106)
----------- ------------ ------------
Net income $11,197,060 $ 1,307,641 $ 12,504,701
=========== ============ ============
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
For the Three Months Ended June 30, 1997
------------------------------------------
Partnership Venture
Owned Owned Consolidated
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $ 3,415,158 $ 6,934,990 $ 10,350,148
Operating expenses 1,915,180 3,877,200 5,792,380
Management fees and allocated
overhead from General Partner 339,295 720,372 1,059,667
Depreciation and amortization 1,280,067 2,182,538 3,462,605
----------- ------------ ------------
Operating income (loss) (119,384) 154,880 35,496
----------- ------------ ------------
Interest expense (258,364) (719,372) (977,736)
Other, net (3,902) (10,295) (14,197)
----------- ------------ ------------
Consolidated loss before minority interest (381,650) (574,787) (956,437)
Minority interest in consolidated loss - 155,767 155,767
----------- ------------ ------------
Net loss $ (381,650) $ (419,020) $ (800,670)
=========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 1998
-----------------------------------------
Partnership Venture
Owned Owned Consolidated
------------ ----------- ------------
<S> <C> <C> <C>
Revenues $ 7,094,242 $ 7,064,891 $ 14,159,133
Operating expenses 3,958,805 3,981,015 7,939,820
Management fees and allocated
overhead from General Partner 772,037 760,650 1,532,687
Depreciation and amortization 2,876,917 2,249,219 5,126,136
----------- ------------ ------------
Operating income (loss) (513,517) 74,007 (439,510)
----------- ------------ ------------
Interest expense (543,500) (705,440) (1,248,940)
Gain on sale of cable television system 11,923,581 85,576,722 97,500,303
Other, net (262,727) (1,908,784) (2,171,511)
----------- ------------ ------------
Consolidated income before minority interest 10,603,837 83,036,505 93,640,342
Minority interest in consolidated income - (22,502,893) (22,502,893)
----------- ------------ ------------
Net income $10,603,837 $ 60,533,612 $ 71,137,449
=========== ============ ============
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 1997
---------------------------------------
Partnership Venture
Owned Owned Consolidated
------------ ---------- ------------
<S> <C> <C> <C>
Revenues $ 6,636,831 $ 13,779,095 $ 20,415,926
Operating expenses 3,789,228 7,710,954 11,500,182
Management fees and allocated
overhead from General Partner 716,839 1,534,004 2,250,843
Depreciation and amortization 2,549,514 4,304,255 6,853,769
----------- ------------ ------------
Operating income (loss) (418,750) 229,882 (188,868)
----------- ------------ ------------
Interest expense (507,891) (1,423,029) (1,930,920)
Other, net 12,744 23,776 36,520
----------- ------------ ------------
Consolidated loss before minority interest (913,897) (1,169,371) (2,083,268)
Minority interest in consolidated loss - 316,899 316,899
----------- ------------ ------------
Net loss $ (913,897) $ (852,472) $ (1,766,369)
=========== ============ ============
</TABLE>
Partnership Owned -
- -----------------
Revenues of the Partnership's Surfside System and Littlerock System
increased $207,901, or approximately 6 percent, to $3,623,059 for the three
months ended June 30, 1998 from $3,415,158 for the three months ended June 30,
1997. For the six months ended June 30, 1998 and 1997, revenues increased
$457,411, or approximately 7 percent, to $7,094,242 in 1998 from $6,636,831 in
1997. These increases in revenues were due primarily to basic service rate
increases and increases in the number of basic subscribers. Basic service rate
increases accounted for approximately 45 percent and 42 percent, respectively,
of the increases in revenues for the three and six month periods ended June 30,
1998. The number of basic subscribers increased 1,440, or approximately 5
percent, to 28,558 at June 30, 1998 from 27,118 at June 30, 1997. The increase
in the number of basic subscribers accounted for approximately 50 percent and 41
percent, respectively, of the increases in revenues for the three and six month
periods ended June 30, 1998. No other individual factor was significant to these
increases in revenues.
Operating expenses consist primarily of costs associated with the operation
and administration of the Partnership's cable television systems. The principal
cost components are salaries paid to system personnel, programming expenses,
professional fees, subscriber billing costs, rent for leased facilities, cable
system maintenance expenses and marketing expenses.
Operating expenses increased $38,899, or approximately 2 percent, to
$1,954,079 for the three month period ended June 30, 1998 from $1,915,180 for
the comparable 1997 period. For the six month periods ended June 30, 1998 and
1997, operating expenses increased $169,577, or approximately 4 percent, to
$3,958,805 at June 30, 1998 from $3,789,228 at June 30, 1997. These increases
were primarily due to increases in programming fees. No other individual factor
significantly affected the increases in operating expenses. Operating expenses
represented 54 percent and 56 percent, respectively, of revenues for the three
and six month periods ended June 30, 1998, compared to 56 percent and 57
percent, respectively, in 1997.
The cable television industry generally measures the financial performance
of a cable television system in terms of operating cash flow (revenues less
operating expenses). This measure is not intended to be a substitute or
improvement upon the items disclosed on the financial statements, rather it is
included because it is an industry standard. Operating cash flow increased
$169,002, or approximately 11 percent, to $1,668,980 for the three months ended
June 30, 1998 from $1,499,978 for the three months ended June 30, 1997. For the
six month periods ended June 30, 1998 and 1997, operating
15
<PAGE>
cash flow increased $287,834, or approximately 10 percent, to $3,135,437 in 1998
from $2,847,603 in 1997. These increases were due to the increases in revenues
exceeding the increases in operating expenses.
Management fees and allocated overhead from the General Partner increased
$57,396, or approximately 17 percent, to $396,691 for the three month period
ended June 30, 1998 from $339,295 for the comparable 1997 period. This increase
was primarily due to the timing of certain expenses allocated from Jones
Intercable, Inc. For the six month periods ended June 30, 1998 and 1997,
management fees and allocated overhead from the General Partner increased
$55,198, or approximately 8 percent, to $772,037 at June 30, 1998 from $716,839
at June 30, 1997. This increase was primarily due to the increases in revenues,
upon which such fees and allocations are based.
Depreciation and amortization expense increased $175,564, or approximately
14 percent, to $1,455,631 for the three month period ended June 30, 1998 from
$1,280,067 for the comparable 1997 period. For the six month periods ended June
30, 1998 and 1997, depreciation and amortization expense increased $327,403, or
approximately 13 percent, to $2,876,917 at June 30, 1998 from $2,549,514 at June
30, 1997. These increases were due to capital additions during 1998.
Operating loss increased $63,958, or approximately 54 percent, to $183,342
for the three month period ended June 30, 1998 from $119,384 for the comparable
1997 period. For the six month periods ended June 30, 1998 and 1997, operating
loss increased $94,767, or approximately 23 percent, to $513,517 at June 30,
1998 from $418,750 at June 30, 1997. These decreases were due to the increases
in management fees and allocated overhead from the General Partner and
depreciation and amortization expense exceeding the increases in operating cash
flow.
Interest expense increased $18,971, or approximately 7 percent, to $277,335
for three months ended June 30, 1998 from $258,364 for the three months ended
June 30, 1997. For the six month periods ended June 30, 1998 and 1997, interest
expense increased $35,609, or approximately 7 percent, to $543,500 at June 30,
1998 from $507,891 at June 30, 1997. These increases were primarily due to
higher outstanding balances on interest bearing obligations during the period.
For the three and six month periods ended June 30, 1998, the Partnership
reported a gain of $11,923,581 from the sale of the Surfside System. No similar
gain was reported for either the three or six month periods in 1997.
For the three months ended June 30, 1998, the Partnership reported net
income of $11,197,060 compared to a net loss of $381,650 for the similar 1997
period. For the six months ended June 30, 1998, the Partnership reported net
income of $10,603,837 compared to a net loss of $913,897 for the similar 1997
period. These changes were primarily due to the gain from the sale of the
Surfside System in June 1998.
Venture Owned -
- -------------
The Venture's only asset was the Broward System which was sold on March 31,
1998. The Venture will be liquidated and dissolved before the end of 1998.
16
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
27) Financial Data Schedule
b) Reports on Form 8-K
Report on Form 8-K dated July 14, 1998, reported that on June 30,
1998 the Partnership sold the Surfside System to an unaffiliated
party for a sales price of $51,500,000, subject to customary
closing adjustments.
17
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
BY: JONES INTERCABLE, INC.
General Partner
By:/S/ Kevin P. Coyle
----------------------------------
Kevin P. Coyle
Group Vice President/Finance
(Principal Financial Officer)
Dated: August 13, 1998
18
<PAGE>
Exhibit 99(D)(6)
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[x] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1998
------------------
or
[_] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to __________
Commission File Number 0-16200
CABLE TV FUND 14-B, LTD.
- --------------------------------------------------------------------------------
Exact name of registrant as specified in charter
Colorado #84-1024658
- --------------------------------------------------------------------------------
State of organization I.R.S. employer I.D. #
9697 East Mineral Avenue, P.O. Box 3309, Englewood, Colorado 80155-3309
------------------------------------------------------------------------
Address of principal executive office
(303) 792-3111
-----------------------------------
Registrant's telephone number
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- _____
<PAGE>
CABLE TV FUND 14-B, LTD.
------------------------
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1998 1997
------ -------------- -------------
<S> <C> <C>
CASH $ 842,083 $ 173,628
TRADE RECEIVABLES, less allowance for doubtful receivables of
$14,073 and $133,188 at September 30, 1998 and December 31, 1997,
respectively 573,608 1,470,293
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 8,891,065 105,933,977
Less- accumulated depreciation (4,294,838) (55,360,283)
----------- ------------
4,596,227 50,573,694
Franchise costs and other intangible assets, net of accumulated
amortization of $1,937,626 and $84,913,605 at September 30, 1998
and December 31, 1997, respectively 694,934 46,126,693
----------- ------------
Total investment in cable television properties 5,291,161 96,700,387
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 49,330 789,427
----------- ------------
Total assets $ 6,756,182 $ 99,133,735
=========== ============
</TABLE>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated balance sheets.
2
<PAGE>
CABLE TV FUND 14-B, LTD.
------------------------
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1998 1997
------------------------------------------- -------------- -------------
<S> <C> <C>
LIABILITIES:
Debt $ 27,737 $ 54,185,513
General Partner advances 217,525 835,015
Deferred brokerage fee - 920,000
Trade accounts payable and accrued liabilities 1,071,450 1,617,666
Subscriber prepayments 4,313 569,308
------------- ------------
Total liabilities 1,321,025 58,127,502
------------- ------------
MINORITY INTEREST IN CABLE TELEVISION
JOINT VENTURE - 3,337,731
------------- ------------
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (6,028) (750,411)
------------- ------------
(5,028) (749,411)
------------- ------------
Limited Partners-
Net contributed capital (261,353 units
outstanding at September 30, 1998 and
December 31, 1997) 112,127,301 112,127,301
Accumulated deficit (3,819,110) (73,709,388)
Distributions (102,868,006) -
------------- ------------
5,440,185 38,417,913
------------- ------------
Total liabilities and partners' capital (deficit) $ 6,756,182 $ 99,133,735
============= ============
</TABLE>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated balance sheets.
3
<PAGE>
CABLE TV FUND 14-B, LTD.
------------------------
(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
---------------------------- ---------------------------
1998 1997 1998 1997
--------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
REVENUES $ 664,551 $10,219,629 $ 14,823,684 $30,635,555
COSTS AND EXPENSES:
Operating expenses 365,465 5,566,487 8,305,285 17,066,669
Management fees and allocated overhead
from General Partner 74,137 1,067,426 1,606,824 3,318,269
Depreciation and amortization 218,562 3,535,390 5,344,698 10,389,159
--------- ----------- ------------ -----------
OPERATING INCOME (LOSS) 6,387 50,326 (433,123) (138,542)
--------- ----------- ------------ -----------
OTHER INCOME (EXPENSE):
Interest expense (933) (1,008,237) (1,249,873) (2,939,157)
Gain on sale of cable television systems - - 97,500,303 -
Other, net (411,864) (16,383) (2,583,375) 20,137
--------- ----------- ------------ -----------
Total other income (expense), net (412,797) (1,024,620) 93,667,055 (2,919,020)
--------- ----------- ------------ -----------
CONSOLIDATED INCOME (LOSS)
BEFORE MINORITY INTEREST (406,410) (974,294) 93,233,932 (3,057,562)
MINORITY INTEREST IN
CONSOLIDATED (INCOME) LOSS - 146,037 (22,599,271) 462,936
--------- ----------- ------------ -----------
NET INCOME (LOSS) $(406,410) $ (828,257) $ 70,634,661 $(2,594,626)
========= =========== ============ ===========
ALLOCATION OF NET INCOME (LOSS):
General Partner $ (4,064) $ (8,282) $ 744,383 $ (25,946)
========= =========== ============ ===========
Limited Partners $(402,346) $ (819,975) $ 69,890,278 $(2,568,680)
========= =========== ============ ===========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ (1.54) $ (3.14) $ 267.42 $ (9.83)
========= =========== ============ ===========
WEIGHTED AVERAGE NUMBER
OF LIMITED PARTNERSHIP
UNITS OUTSTANDING 261,353 261,353 261,353 261,353
========= =========== ============ ===========
</TABLE>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated statements.
4
<PAGE>
CABLE TV FUND 14-B, LTD.
------------------------
(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
----------------------------
<S> <C> <C>
1998 1997
------------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 70,634,661 $(2,594,626)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 5,344,698 10,389,159
Gain on sale of cable television systems (97,500,303) -
Minority interest in consolidated income (loss) 22,599,271 (462,936)
Decrease in trade receivables 896,685 626,609
Decrease (increase) in deposits, prepaid expenses and
deferred charges 185,798 (630,044)
Increase (decrease) in General Partner advances (617,490) 26,068
Increase (decrease) in trade accounts payable and accrued
liabilities and subscriber prepayments (1,111,211) 36,770
------------- -----------
Net cash provided by operating activities 432,109 7,391,000
------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (2,593,370) (5,194,286)
Payment of deferred brokerage fee (920,000) -
Proceeds from sales of cable television systems, net of brokerage fees 186,712,500 -
------------- -----------
Net cash provided by (used in) investing activities 183,199,130 (5,194,286)
------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 2,010,948 1,452,055
Repayment of debt (56,168,724) (3,999,766)
Distributions to limited partners (102,868,006) -
Distribution to joint venture partner (25,937,002) -
------------- -----------
Net cash used in financing activities (182,962,784) (2,547,711)
------------- -----------
Increase (decrease) in cash 668,455 (350,997)
Cash, beginning of period 173,628 840,309
------------- -----------
Cash, end of period $ 842,083 $ 489,312
============= ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 1,752,692 $ 3,228,868
============= ===========
</TABLE>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated statements.
5
<PAGE>
CABLE TV FUND 14-B, LTD.
------------------------
(A Limited Partnership)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(1) This Form 10-Q is being filed in conformity with the SEC requirements for
unaudited financial statements and does not contain all of the necessary
footnote disclosures required for a complete presentation of the Balance Sheets
and Statements of Operations and Cash Flows in conformity with generally
accepted accounting principles. However, in the opinion of management, this data
includes all adjustments, consisting only of normal recurring accruals,
necessary to present fairly the financial position of Cable TV Fund 14-B, Ltd.
(the "Partnership") at September 30, 1998 and December 31, 1997, its results of
operations for the three and nine month periods ended September 30, 1998 and
1997 and its cash flows for the nine month periods ended September 30, 1998 and
1997. Results of operations for these periods are not necessarily indicative of
results to be expected for the full year.
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"), to acquire, own and operate cable
television systems in the United States. 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 owned a 73 percent
interest and Fund 14-A owned a 27 percent interest. The Venture's only asset
was the cable television system serving certain areas in Broward County, Florida
(the "Broward System"). The Venture sold the Broward System on March 31, 1998
and the Venture was liquidated and dissolved in October 1998 (see Note 2).
Because of the Partnership's majority ownership interest in the Venture, the
accompanying financial statements historically present the Partnership's and the
Venture's financial condition and results of operations on a consolidated basis,
with the ownership interest of Fund 14-A in the Venture shown as a minority
interest. All interpartnership accounts and transactions have been eliminated.
The Partnership directly owns the cable television system serving Littlerock,
California (the "Littlerock System"). The Partnership sold the cable television
system serving Surfside, South Carolina (the "Surfside System") on June 30, 1998
(see Note 3) and has entered into an agreement to sell the Littlerock System
(see Note 4).
(2) On March 31, 1998, the Venture sold the Broward System to an unaffiliated
third party for $140,000,000. The agreement provides that the contract sales
price of $140,000,000 would be reduced $2,472 for each of the Broward System's
equivalent basic subscribers less than 56,637 at closing. At March 31, 1998, the
Broward System had 55,346 equivalent basic subscribers, which reduced the sales
price by $3,191,352. When final closing adjustments were completed on June 30,
1998, however, additional equivalent basic subscribers that were not able to be
counted as basic subscribers of the Broward System at the March 31, 1998 closing
(because they were relatively recent subscribers at such date) were able to be
counted as equivalent basic subscribers of the Broward System. These basic
subscribers brought the equivalent basic subscriber count up to 56,637 and the
sales price accordingly was adjusted upward by $3,191,352 to $140,000,000.
From the proceeds of the Broward System sale at the initial closing, the
Venture settled working capital adjustments, repaid the outstanding balance on
its credit facility, which totaled $39,902,968 at March 31, 1998, and paid a 2.5
percent brokerage fee of $3,420,216 to The Jones Group, Ltd., a subsidiary of
the General Partner ("The Jones Group"), for acting as a broker in this
transaction. The Venture then distributed the remaining net sale proceeds, or
$94,039,000, to the two constituent partnerships of the Venture in proportion to
their ownership interests in the Venture. Accordingly, the Partnership received
73 percent of the net sale proceeds, or $68,554,431. In April 1998, the
Partnership distributed its net sale proceeds to its limited partners of record
as of March 31, 1998. Such distribution represented approximately $262 for
each $500 limited partnership interest, or $524 for each $1,000 invested in the
Partnership.
From the additional proceeds of the Broward System sale at final closing,
the Venture settled final working capital adjustments and paid a 2.5 percent
brokerage fee of $79,784 to The Jones Group. The Venture then distributed the
remaining additional net sale proceeds, or $1,669,056, to the two constituent
partnerships of the Venture in proportion to their ownership interests in the
Venture. Accordingly, the Partnership received 73 percent of the additional net
sale proceeds, or $1,216,623. In August 1998, the Partnership distributed the
$1,216,623 to its limited partners, together with the distribution to the
limited partners from the net sales proceeds from the sale of the Surfside
System (see Note 3). Because the distributions to the limited partners from the
sale of the Broward System did not return to the limited partners 125 percent of
the capital initially contributed to the Partnership by the limited partners,
the General Partner did not receive any general partner distribution from the
Broward System's sale. Because the Broward System represented the only asset of
the Venture, the Venture was liquidated and dissolved in October 1998.
6
<PAGE>
(3) On June 30, 1998, the Partnership sold the Surfside System to an
unaffiliated third party for $51,500,000, subject to customary closing
adjustments. Upon the closing of the sale of the Surfside System, the
Partnership retained approximately $240,000 of the sale proceeds for working
capital purposes, repaid all of its indebtedness (including $15,800,000 borrowed
under its credit facility, $658,490 in advances from the General Partner and
capital lease obligations of $143,870), paid a 2.5 percent brokerage fee
totaling $1,287,500 to The Jones Group, paid a deferred acquisition fee of
$920,000 to The Jones Group and then distributed the net sale proceeds of
approximately $33,096,952 to the Partnership's limited partners of record as of
June 30, 1998. This distribution was made in August 1998. Such distribution
represented approximately $127 for each $500 limited partnership interest, or
$254 for each $1,000 invested in the Partnership.
Taking into account the distribution of the net proceeds from the sale of
the Broward System and the sale of the Surfside System, limited partners of the
Partnership have received a total of $394 for each $500 limited partnership
interest, or $788 for each $1,000 invested in the Partnership. Because the
distributions to the limited partners from the sale of the Surfside System and
the Broward System did not return to the limited partners 125 percent of the
capital initially contributed by the limited partners to the Partnership, the
General Partner did not receive a general partner distribution from the Surfside
System's sale proceeds.
The pro forma effect of the sales of the Surfside System and the Broward
System on the results of the Partnership's operations for the nine month periods
ended September 30, 1998 and 1997, assuming the transactions had occurred at the
beginning of the year, are presented in the following unaudited tabulations.
For the Nine Months Ended September 30, 1998
--------------------------------------------
Unaudited
Pro Forma Pro Forma
As Reported Adjustments Balance
------------ ------------- -----------
REVENUES $14,823,684 $(12,870,390) $1,953,294
=========== ============ ==========
OPERATING INCOME (LOSS) $ (433,123) $ 439,630 $ 6,507
=========== ============ ==========
NET INCOME (LOSS) $70,634,661 $(70,645,991) $ (11,330)
=========== ============ ==========
For the Nine Months Ended September 30, 1997
--------------------------------------------
Unaudited
Pro Forma Pro Forma
As Reported Adjustments Balance
------------ ------------- ----------
REVENUES $30,635,555 $(28,742,763) $1,892,792
=========== ============ ==========
OPERATING INCOME (LOSS) $ (138,542) $ 252,341 $ 113,799
=========== ============ ==========
NET INCOME (LOSS) $(2,594,626) $ 2,699,743 $ 105,117
=========== ============ ==========
(4) On March 10, 1998, the Partnership entered into an agreement with the
General Partner to sell the Littlerock System to the General Partner or one of
its subsidiaries for a sales price of $10,720,400, subject to customary closing
adjustments. The sales price represents the average of three independent
appraisals of the fair market value of the Littlerock System. The closing of
this transaction is expected to occur in December 1998. The closing is subject
to a number of conditions including the approval of the transaction by the
holders of a majority of the limited partnership interests of the Partnership.
The General Partner expects to conduct a vote of the limited partners on the
Littlerock System sale during November and December 1998.
Upon the consummation of the proposed sale of the Littlerock System, based
upon financial information as of September 30, 1998, the Partnership will settle
working capital adjustments, repay capital lease obligations of $27,737 and then
the Partnership will distribute the net sale proceeds of approximately
$10,259,235 to the limited partners of the
7
<PAGE>
Partnership. This distribution will give the Partnership's limited partners a
return of $39 for each $500 limited partner interest, or $78 for each $1,000
invested in the Partnership.
Taking into account the distribution from the sale of the Broward System,
the distribution from the sale of the Surfside System, and the anticipated
distribution from the sale of the Littlerock System, the limited partners of the
Partnership can expect to receive a total of $433 for each $500 limited
partnership interest, or $866 for each $1,000 invested in the Partnership.
Because the distributions to the limited partners from the sales of the Surfside
System, the Broward System and the anticipated distribution from the sale of the
Littlerock System will not return to the limited partners 125 percent of the
capital initially contributed by the limited partners to the Partnership, the
General Partner will not receive a general partner distribution from the
Littlerock System's sale proceeds.
The Partnership will be liquidated and dissolved after the sale of the
Littlerock System, which will be the Partnership's last remaining asset at the
time of its sale. The General Partner anticipates that the Partnership will be
liquidated and dissolved in the first quarter of 1999.
(5) The General Partner manages the Partnership and receives a fee for its
services equal to 5 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 the General Partner by the Partnership and
the Venture for the three and nine month periods ended September 30, 1998 were
$33,227 and $741,184, respectively, compared to $510,982 and $1,531,778,
respectively, for the similar 1997 periods.
The Partnership reimburses the General Partner for certain allocated
overhead and administrative expenses. These expenses represent the salaries and
related benefits paid for corporate personnel, rent, data processing services
and other corporate facilities costs. Such personnel provide engineering,
marketing, accounting, administrative, legal and investor relations services to
the Partnership and to the Venture. Such services, and their related costs, are
necessary to the operation of the Partnership and the Venture and would have
been incurred by the Partnership and the Venture if they were stand alone
entities. Allocations of personnel costs are based primarily on actual time
spent by employees of the General Partner with respect to each partnership
managed. Remaining expenses are allocated based on the pro rata relationship of
the Partnership's and the Venture's revenues to the total revenues of all
systems owned or managed by the General Partner and certain of its subsidiaries.
Systems owned by the General Partner and all other systems owned by partnerships
for which Jones Intercable, Inc. is the general partner are also allocated a
proportionate share of these expenses. The General Partner believes that the
methodology used in allocating overhead and administrative expenses is
reasonable. Reimbursements made to the General Partner for allocated overhead
and administrative expenses for the three and nine month periods ended September
30, 1998 were $40,910 and $865,640, respectively, compared to $556,444 and
$1,786,491, respectively, for the similar 1997 periods.
8
<PAGE>
(6) Financial information regarding the Venture is presented below:
UNAUDITED BALANCE SHEETS
------------------------
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
------------------- ------------------
<S> <C> <C>
ASSETS
------
Cash and accounts receivable $ - $ 1,688,123
Investment in cable television properties - 51,847,372
Other assets - 620,522
------------------ ------------
Total assets $ - $ 54,156,017
================== ============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Debt $ - $ 39,597,617
Payables and accrued liabilities - 1,886,849
Partners' contributed capital 70,000,000 70,000,000
Distributions to joint venture partners (95,708,056) -
Accumulated capital (deficit) 25,708,056 (57,328,449)
------------------ ------------
Total liabilities and partners' capital $ - $ 54,156,017
================== ============
</TABLE>
UNAUDITED STATEMENTS OF OPERATIONS
----------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
1998 1997 1998 1997
-------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ - $6,817,075 $ 7,064,891 $20,596,170
Operating expenses - 3,685,786 3,981,015 11,396,740
Management fees and allocated overhead
from General Partner - 716,563 760,650 2,250,567
Depreciation and amortization - 2,211,708 2,249,219 6,515,963
-------- ---------- ----------- -----------
Operating income - 203,018 74,007 432,900
Interest expense - (746,619) (705,440) (2,169,648)
Gain on sale of cable television system - - 85,576,722 -
Other, net - 4,722 (1,908,784) 28,498
-------- ---------- ----------- -----------
Net income (loss) $ - $ (538,879) $83,036,505 $(1,708,250)
======== ========== =========== ===========
</TABLE>
9
<PAGE>
Management fees paid to the General Partner by the Venture totaled $-0- and
$353,245, respectively, for the three and nine month periods ended September 30,
1998, compared to $340,854 and $1,029,808, respectively, for the similar 1997
periods. Reimbursements for overhead and administrative expenses paid to the
General Partner by the Venture totaled $-0- and $407,405, respectively, for the
three and nine month periods ended September 30, 1998, compared to $375,709 and
$1,220,759 for the similar 1997 periods.
10
<PAGE>
CABLE TV FUND 14-B, LTD.
------------------------
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
FINANCIAL CONDITION
- -------------------
The Partnership owns the Littlerock System and it owned the Surfside System
until its sale on June 30, 1998. The Partnership also owned a 73 percent
interest in the Venture. The Venture sold its only asset, the Broward System,
on March 31, 1998, and was liquidated and dissolved in October 1998. The
accompanying financial statements historically include 100 percent of the
accounts of the Partnership and those of the Venture, reduced by the 27 percent
minority interest in the Venture owned by Fund 14-A.
On March 31, 1998, the Venture sold the Broward System to an unaffiliated
third party for $140,000,000. The agreement provides that the contract sales
price of $140,000,000 would be reduced $2,472 for each of the Broward System's
equivalent basic subscribers less than 56,637 at closing. At March 31, 1998,
the Broward System had 55,346 equivalent basic subscribers, which reduced the
sales price by $3,191,352. When final closing adjustments were completed on
June 30, 1998, however, additional equivalent basic subscribers that were not
able to be counted as basic subscribers of the Broward System at the March 31,
1998 closing (because they were relatively recent subscribers at such date) were
able to be counted as equivalent basic subscribers of the Broward System. These
basic subscribers brought the equivalent basic subscriber count up to 56,637 and
the sales price accordingly was adjusted upward by $3,191,352 to $140,000,000.
From the proceeds of the Broward System sale at the initial closing, the
Venture settled working capital adjustments, repaid the outstanding balance on
its credit facility, which totaled $39,902,968 at March 31, 1998, and paid a 2.5
percent brokerage fee of $3,420,216 to The Jones Group for acting as a broker in
this transaction. The Venture then distributed the remaining net sale proceeds,
or $94,039,000, to the two constituent partnerships of the Venture in proportion
to their ownership interests in the Venture. Accordingly, the Partnership
received 73 percent of the net sale proceeds, or $68,554,431. In April 1998,
the Partnership distributed its net sale proceeds to its limited partners of
record as of March 31, 1998. Such distribution represented approximately $262
for each $500 limited partnership interest, or $524 for each $1,000 invested in
the Partnership.
From the additional proceeds of the Broward System sale at final closing,
the Venture settled final working capital adjustments and paid a 2.5 percent
brokerage fee of $79,784 to The Jones Group. The Venture then distributed the
remaining additional net sale proceeds, or $1,669,056, to the two constituent
partnerships of the Venture in proportion to their ownership interests in the
Venture. Accordingly, the Partnership received 73 percent of the additional net
sale proceeds, or $1,216,623. In August 1998, the Partnership distributed the
$1,216,623 to its limited partners, together with the distribution to the
limited partners from the net sales proceeds from the sale of the Surfside
System (see Note 3). Because the distributions to the limited partners from the
sale of the Broward System did not return to the limited partners 125 percent of
the capital initially contributed to the Partnership by the limited partners,
the General Partner did not receive any general partner distribution from the
Broward System's sale. Because the Broward System represented the only asset of
the Venture, the Venture was liquidated and dissolved in October 1998.
On June 30, 1998, the Partnership sold the Surfside System to an
unaffiliated third party for $51,500,000, subject to customary closing
adjustments. Upon the closing of the sale of the Surfside System, the
Partnership retained approximately $240,000 of the sale proceeds for working
capital purposes, repaid all of its indebtedness (including $15,800,000 borrowed
under its credit facility, $658,490 in advances from the General Partner and
capital lease obligations of $143,870), paid a 2.5 percent brokerage fee
totaling $1,287,500 to The Jones Group, paid a deferred acquisition fee of
$920,000 to The Jones Group and then distributed the net sale proceeds of
approximately $33,096,952 to the Partnership's limited partners of record as of
June 30, 1998. This distribution was made in August 1998. Such distribution
represented approximately $127 for each $500 limited partnership interest, or
$254 for each $1,000 invested in the Partnership.
Taking into account the distribution of the net proceeds from the sale of
the Broward System and the sale of the Surfside System, limited partners of the
Partnership have received a total of $394 for each $500 limited partnership
interest, or $788 for each $1,000 invested in the Partnership. Because the
distributions to the limited partners from the sale of the Surfside System and
the Broward System did not return to the limited partners 125 percent of the
capital initially contributed
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by the limited partners to the Partnership, the General Partner did not receive
a general partner distribution from the Surfside System's sale proceeds.
On March 10, 1998, the Partnership entered into an agreement with the
General Partner to sell the Littlerock System to the General Partner or one of
its subsidiaries for a sales price of $10,720,400, subject to customary closing
adjustments. The sales price represents the average of three independent
appraisals of the fair market value of the Littlerock System. The closing of
this transaction is expected to occur in December 1998. The closing is subject
to a number of conditions including the approval of the transaction by the
holders of a majority of the limited partnership interests of the Partnership.
The General Partner expects to conduct a vote of the limited partners on the
Littlerock System sale during November and December 1998.
Upon the consummation of the proposed sale of the Littlerock System, based
upon financial information as of September 30, 1998, the Partnership will settle
working capital adjustments, repay capital lease obligations of $27,737 and then
the Partnership will distribute the net sale proceeds of approximately
$10,259,235 to the limited partners of the Partnership. This distribution will
give the Partnership's limited partners a return of $39 for each $500 limited
partner interest, or $78 for each $1,000 invested in the Partnership.
Taking into account the distribution from the sale of the Broward System,
the distribution from the sale of the Surfside System, and the anticipated
distribution from the sale of the Littlerock System, the limited partners of the
Partnership can expect to receive a total of $433 for each $500 limited
partnership interest, or $866 for each $1,000 invested in the Partnership.
Because the distributions to the limited partners from the sales of the Surfside
System, the Broward System and the anticipated distribution from the sale of the
Littlerock System will not return 125 percent of the capital initially
contributed by the limited partners to the Partnership, the General Partner will
not receive a general partner distribution from the Littlerock System's sale
proceeds.
The Partnership will be liquidated and dissolved after the sale of the
Littlerock System, which will be the Partnership's last remaining asset at the
time of its sale. The General Partner anticipates that the Partnership will be
liquidated and dissolved in the first quarter of 1999.
For the nine months ended September 30, 1998, the Partnership expended
approximately $1,657,000 on capital additions in its Surfside System and
Littlerock System. Approximately 40 percent of these expenditures was for the
construction of cable plant extensions related to new homes passed.
Approximately 38 percent of the expenditures was for the construction of drops
to subscribers' homes. The remainder of the expenditures was for other capital
expenditures to maintain the value of the Partnership's cable television systems
until they are sold. Funding for these expenditures was provided by cash
generated from operations, borrowings from the Partnership's credit facility and
cash on hand. Budgeted capital expenditures in the Littlerock System for the
remainder of 1998 are approximately $285,000. Approximately 39 percent of these
expenditures are expected to be used for the construction of plant extensions
related to new homes passed. Approximately 26 percent are expected to be used
for service drops to homes. The remainder of these expenditures is for other
capital expenditures to maintain the value of the Partnership's Littlerock
System until it is sold. Funding for these improvements will be provided by
cash generated from operations and cash on hand. The Partnership is obligated
to conduct its business in the ordinary course until the Littlerock System is
sold.
The Partnership repaid the outstanding balance of its reducing revolving
credit facility, which totaled $15,800,000, from the proceeds of the sale of the
Surfside System on June 30, 1998. The Partnership therefore has no material debt
outstanding.
The Partnership has sufficient sources of capital from cash on hand and
cash generated from operations to meet its presently anticipated needs until the
Littlerock System is sold.
RESULTS OF OPERATIONS
- ---------------------
Partnership Owned -
- -----------------
As a result of the Surfside System sale in June 1998, the following
discussion of the Partnership's results of operations, through operating income,
pertains only to the results of operations of the Littlerock System for all
periods discussed.
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Revenues of the Partnership's Littlerock System increased $33,101, or
approximately 5 percent, to $664,551 for the three months ended September 30,
1998 from $631,450 for the three months ended September 30, 1997. For the nine
months ended September 30, 1998 and 1997, revenues increased $60,502, or
approximately 3 percent, to $1,953,294 in 1998 from $1,892,792 in 1997. The
increases in revenues were due primarily to basic rate increases and increases
in the number of basic subscribers. Basic rate increases accounted for
approximately 46 percent and 75 percent, respectively, of the increase in
revenues for the three and nine month periods ended September 30, 1998. The
number of basic subscribers increased approximately 3 percent to 5,818 at
September 30, 1998 from 5,636 at September 30, 1997. The increases in the
number of basic subscribers accounted for approximately 46 percent and 25
percent, respectively, of the increases in revenues for the three and nine month
periods ended September 30, 1998. A decrease in pay per view and premium
services partially offset the increase in revenues for the nine month period
ended September 30, 1998. No other individual factor was significant to the
increases in revenues.
Operating expenses consist primarily of costs associated with the operation
and administration of the Partnership's cable television systems. The principal
cost components are salaries paid to system personnel, programming expenses,
professional fees, subscriber billing costs, rent for leased facilities, cable
system maintenance expenses and marketing expenses.
Operating expenses decreased $1,077, or less than 1 percent, to $365,465
for the three months ended September 30, 1998 from $366,542 for the three months
ended September 30, 1997. This decrease was primarily due to decreases in
marketing and plant related expenses. For the nine month periods ended
September 30, operating expenses increased $37,514, or approximately 4 percent,
to $1,089,717 in 1998 from $1,052,203 in 1997. This increase was primarily due
to increases in programming fees. Operating expenses represented 55 percent and
56 percent, respectively, of revenues for the three and nine month periods ended
September 30, 1998. Operating expenses represented 58 percent and 56 percent,
respectively, of revenues for the three and nine month periods ended September
30, 1997.
The cable television industry generally measures the financial performance
of a cable television system in terms of operating cash flow (revenues less
operating expenses). This measure is not intended to be a substitute or
improvement upon the items disclosed on the financial statements, rather it is
included because it is an industry standard. Operating cash flow increased
$34,178, or approximately 13 percent, to $299,086 for the three months ended
September 30, 1998 from $264,908 for the three months ended September 30, 1997.
This increase was due to the increase in revenues and the decrease in operating
expenses. For the nine month periods ended September 30, operating cash flow
increased $22,988, or approximately 3 percent, to $863,577 in 1998 from $840,589
in 1997. This increase was due to the increase in revenues exceeding the
increase in operating expenses.
Management fees and allocated overhead from the General Partner increased
$9,091, or approximately 14 percent, to $74,137 for the three months ended
September 30, 1998 from $65,046 for the comparable 1997 period. This increase
was due to the increase in revenues, upon which such management fees and
allocations are based. For the nine month periods ended September 30,
management fees and allocated overhead from the General Partner increased
$15,286, or approximately 8 percent, to $218,025 in 1998 from $202,739 in 1997.
This increase was due to the increase in revenues, upon which such management
fees are based. This increase was partially offset by a decrease in expenses
allocated from Jones Intercable, Inc.
Depreciation and amortization expense for the three month periods increased
$35,991, or approximately 20 percent, to $218,562 at September 30, 1998 from
$182,571 at September 30, 1997. For the nine month periods ended September 30,
depreciation and amortization expense increased $114,994, or approximately 22
percent, to $639,045 in 1998 from $524,051 in 1997. These increases were due to
capital additions in the Partnership's Littlerock System during 1998.
Operating income decreased $10,904, or approximately 63 percent, to $6,387
for the three months ended September 30, 1998 from $17,291 for the three months
ended September 30, 1997. For the nine month periods ended September 30,
operating income decreased $107,292, or approximately 94 percent, to $6,507 in
1998 from $113,799 in 1997. These decreases were due to the increases in
management fees and allocated overhead from the General Partner and depreciation
and amortization expense exceeding the increases in operating cash flow.
Interest expense decreased $1,007,304 to $933 for the three months ended
September 30, 1998 from $1,008,237 for the three months ended September 30,
1997. For the nine month periods ended September 30, interest expense
13
<PAGE>
decreased $1,689,284, or approximately 57 percent, to $1,249,873 in 1998 from
$2,939,157 in 1997. A portion of the proceeds from the Partnership's sale of the
Surfside System was used to repay the Partnership's indebtedness under its
credit facility and a portion of the proceeds from the sale of the Broward
System was used to repay the Venture's indebtedness under its credit facility.
The Partnership recognized a gain on the sale of the Surfside System of
$11,923,581 and a gain on the sale of the Broward System of $85,576,722 during
the nine month period ended September 30, 1998. No similar gains were
recognized during the comparable 1997 period.
Consolidated loss decreased $568,519, or approximately 58 percent, to
$406,410 for the three months ended September 30, 1998 from $974,929 for the
three months ended September 30, 1997. For the nine month period ended
September 30, 1998, the Partnership reported consolidated income of $93,233,932
compared to a consolidated loss of $3,057,562 for the similar period in 1997.
These changes were primarily due to the Partnership's gain on the sale of the
Surfside System in June 1998, and the Venture's gain on the sale of the Broward
System in March 1998.
14
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
27) Financial Data Schedule
b) Reports on Form 8-K
None
15
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SIGNATURES
Pursuant to the requirements 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.
BY: JONES INTERCABLE, INC.
General Partner
By: /S/ Kevin P. Coyle
------------------------------------
Kevin P. Coyle
Group Vice President/Finance
(Principal Financial Officer)
Dated: November 13, 1998
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