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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number: 0-14689
JONES CABLE INCOME FUND 1-A, LTD.
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(Exact name of registrant as specified in its charter)
Colorado 84-1010416
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(State of Organization) (IRS Employer Identification No.)
P.O. Box 3309, Englewood, Colorado 80155-3309 (303) 792-3111
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(Address of principal executive office and Zip Code) (Registrant's telephone
no. including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited Partnership
Interests
Indicate by check mark whether the registrants, (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days:
Yes X No ___
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Aggregate market value of the voting stock held by non-affiliates of the
registrant: N/A
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S)229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. X
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DOCUMENTS INCORPORATED BY REFERENCE: None
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Certain information contained in this Form 10-K Report contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. All statements, other than statements of
historical facts, included in this Form 10-K Report that address activities,
events or developments that the Partnership or the General Partner expects,
believes or anticipates will or may occur in the future are forward-looking
statements. These forward-looking statements are based upon certain assumptions
and are subject to a number of risks and uncertainties. Actual events or
results may differ materially from those discussed in the forward-looking
statements as a result of various factors.
PART I.
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ITEM 1. BUSINESS
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THE PARTNERSHIP. Jones Cable Income Fund 1-A, Ltd. (the
"Partnership") is a Colorado limited partnership that was formed pursuant to the
public offering of limited partnership interests in the Jones Cable Income Fund
1 Limited Partnership Program (the "Program"), which was sponsored by Jones
Intercable, Inc. (the "General Partner"). Jones Cable Income Fund 1-B, Ltd. and
Jones Cable Income Fund 1-C, Ltd. are the other partnerships that were formed
pursuant to the Program. The Partnership was formed for the purpose of
acquiring and operating cable television systems. The Partnership currently
owns the cable television system serving the communities of Owatonna and
Glencoe, Minnesota (the "Owatonna/Glencoe System"). Until March 11, 1997, the
Partnership owned the cable television system serving the community of
Milwaukie, Oregon (the "Milwaukie System").
It is the General Partner's publicly announced policy that it intends
to liquidate its managed partnerships, including the Partnership, as
opportunities for sales of partnership cable television systems arise in the
marketplace. In accordance with the General Partner's policy, the Milwaukie
System was sold in 1997 and it is anticipated that the Owatonna/Glencoe
System will be sold in 1998.
A primary objective of the Partnership has been to provide quarterly
cash distributions from operating cash flow to its partners. During 1997, the
Partnership declared such distributions totaling $555,558, of which $550,000 was
payable to the limited partners and $5,558 was payable to the General Partner.
The limited partner distribution of $550,000 equates to $65 for each $1,000
invested in the Partnership. The distributions, which were principally from
operating cash flow, were paid to limited partners during 1997, except the
fourth quarter distribution of $75,000, which was paid on February 13, 1998.
The General Partner has agreed to defer its portion of cash distributions until
the Partnership is liquidated. To date, limited partners have received a total
of $8,699,000 in distributions from operating cash flow or $1,023 for each
$1,000 invested in the Partnership. Due to the announced sale of the
Partnership's remaining cable television system, which is expected to close in
the third quarter of 1998, and due to the fact that principal payments are
required in 1998 on the Partnership's loan, the Partnership does not expect to
pay any additional cash flow distributions during the remaining term of the
Partnership. See Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations.
DISPOSITION OF CABLE TELEVISION SYSTEM. On March 11, 1997, the
Partnership sold the Milwaukie System to an unaffiliated party for a sales price
of $8,200,000. From the sale proceeds, the Partnership repaid $3,200,000 of the
amount outstanding under its credit facility, paid a brokerage fee of 2.5
percent of the sales price, or $205,000, to The Jones Group, Ltd. ("The Jones
Group"), a subsidiary of the General Partner, for acting as a broker in this
transaction, and then made a distribution of $4,505,000 to the Partnership's
limited partners. This distribution gave the Partnership's limited partners an
approximate return of $530 for each $1,000 invested in the Partnership. This
distribution, together with all prior distributions to limited partners from the
Partnership's operating cash flow, gave the Partnership's limited partners a
return of approximately $1,553 for each $1,000 invested in the Partnership.
Because the distributions made on the sale of the Milwaukie System together with
all prior distributions made by the Partnership do not total the amounts
originally contributed to the Partnership by the limited partners plus the
liquidation preference as set forth in the Partnership's limited
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partnership agreement, the General Partner did not receive any general partner
distribution on the sale of the Milwaukie System. Because the sale of the
Milwaukie System did not represent the sale of all or substantially all of the
assets of the Partnership, no vote of the limited partners of the Partnership
was required to approve the sale.
PROPOSED DISPOSITION OF CABLE TELEVISION SYSTEM. As of March 1998,
the Partnership was in the final stage of negotiations for the sale of the
Owatonna/Glencoe System to an unaffiliated party for a sales price of
$11,750,000, subject to customary closing adjustments that may have the effect
of increasing or decreasing the sales price by a non-material amount. Closing
of the sale, which is anticipated to occur during the third quarter of 1998, is
subject to several conditions, including necessary governmental and other third
party consents and the termination of expiration of the statutory waiting period
applicable to the asset purchase agreement and the transactions contemplated
thereby under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended. In addition, because the Owatonna/Glencoe System constitutes all of
the Partnership's remaining assets, the sale must be approved by a majority of
the limited partnership interests of the Partnership. The General Partner
expects to conduct a proxy vote on this matter in the second quarter of 1998.
Upon the consummation of the proposed sale of the Owatonna/Glencoe
System, the Partnership will settle working capital adjustments, pay a brokerage
fee of 2.5 percent of the sales price or $293,750 to The Jones Group, repay all
of its indebtedness including the $3,300,000 borrowed under its credit facility
and capital lease obligations totaling $90,507, pay the General Partner deferred
cash flow distributions totaling $87,867 and then deposit $600,000 into an
indemnity escrow account. The remaining net sale proceeds of approximately
$7,531,000 will be distributed to the Partnership's limited partners of record
as of the closing date of the sale of the Owatonna/Glencoe System. Based upon
financial information as of December 31, 1997, the limited partners as a group
will receive $5,686,466 and the General Partner will receive $1,844,534 of the
net sale proceeds. This distribution will provide the Partnership's limited
partners an approximate return of $334.50 for each $500 limited partnership
interest, or $669 for each $1,000 invested in the Partnership. Taking into
account the prior distributions to limited partners from the Partnership's
operating cash flow and from the net proceeds from the sale of the Milwaukie
System and the anticipated distribution from the net proceeds of the sale of the
Owatonna/Glencoe System, the limited partners of the Partnership will have
received a total of $1,111 for each $500 limited partnership interest or $2,222
for each $1,000 invested in the Partnership following the closing of the
Owatonna/Glencoe System sale.
For a period of one year following the closing date, $600,000 of the
sale proceeds will remain in escrow as security for the Partnership's agreement
to indemnify the purchaser under the asset purchase agreement. The
Partnership's primary exposure, if any, will relate to the representations and
warranties made about the Owatonna/Glencoe System in the asset purchase
agreement. Any amounts remaining from this indemnity escrow account that are
not claimed by the purchaser at the end of the one-year period will be
distributed to the partners of the Partnership at that time. If the entire
$600,000 escrow amount is distributed to the partners, of which there can be no
assurance, limited partners as a group would receive $453,045 and the General
Partner would receive $146,955. Thus, the limited partners would receive $27
for each $500 limited partnership interest, or $54 for each $1,000 invested in
the Partnership from this portion of the sale proceeds. The Partnership will
continue in existence at least until any amounts remaining from the indemnity
escrow account have been distributed. Since the Owatonna/Glencoe System
represents the only asset of the Partnership, the Partnership will be liquidated
and dissolved upon the final distribution of any amounts remaining from the
indemnity escrow account. If any disputes with respect to indemnification
arise, the Partnership would not be dissolved until such disputes were resolved,
which could result in the Partnership continuing in existence beyond 1999.
CABLE TELEVISION SERVICES. The Owatonna/Glencoe System offers to
subscribers various types of programming, which include basic service, tier
service, premium service, pay-per-view programs and packages including several
of these services at combined rates.
Basic cable television service usually consists of signals of all
national television networks broadcast by their local affiliates, various
independent and educational television stations (both VHF and UHF) and certain
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signals received from satellites. Basic service also usually includes programs
originated locally by the system, which may consist of music, news, weather
reports, stock market and financial information and live or videotaped programs
of a public service or entertainment nature. FM radio signals are also
frequently distributed to subscribers as part of the basic service.
The Owatonna/Glencoe System offers tier services on an optional basis
to its subscribers. A tier generally includes most of the cable networks such
as Entertainment and Sports Programming Network (ESPN), Cable News Network
(CNN), Turner Network Television (TNT), Family Channel, Discovery and others,
and the cable television operators buy tier programming from these networks.
The Owatonna/Glencoe System also offers a package that includes the basic
service channels and the tier services.
The Owatonna/Glencoe System also offers premium services to
subscribers, which consist of feature films, sporting events and other special
features that are presented without commercial interruption. The cable
television operators buy premium programming from suppliers such as HBO,
Showtime, Cinemax, Encore and others at a cost based on the number of
subscribers served by the cable operator. The per service cost of premium
service programming usually is significantly more expensive than the basic
service or tier service programming, and consequently cable operators price
premium service separately when sold to subscribers.
The Owatonna/Glencoe System also offers to subscribers pay-per-view
programming. Pay-per-view is a service that allows subscribers to receive
single programs, frequently consisting of motion pictures that have recently
completed their theatrical exhibitions and major sporting events, and to pay for
such service on a program-by-program basis.
REVENUES. Monthly service fees for basic, tier and premium services
constitute the major source of revenue for the Owatonna/Glencoe System. At
December 31, 1997, the Owatonna/Glencoe System's monthly basic service rates
ranged from $9.35 to $10.40, monthly basic and tier ("basic plus") service rates
ranged from $23.10 to $23.15 and monthly premium services ranged from $3.95 to
$25.95 per premium service. In addition, the Partnership earns revenues from
the Owatonna/Glencoe System's pay-per-view programs and advertising fees.
Related charges may include a nonrecurring installation fee that ranges from
$1.99 to $40.05; however, from time to time the Owatonna/Glencoe System has
followed the common industry practice of reducing or waiving the installation
fee during promotional periods. Commercial subscribers such as hotels, motels
and hospitals are charged a nonrecurring connection fee that usually covers the
cost of installation. Except under the terms of certain contracts with
commercial subscribers and residential apartment and condominium complexes, the
subscribers are free to discontinue the service at any time without penalty.
For the year ended December 31, 1997, of the total fees received by the
Owatonna/Glencoe System, basic service and tier service fees accounted for
approximately 69 percent of total revenues, premium service fees accounted for
approximately 11 percent of total revenues, pay-per-view fees were approximately
2 percent of total revenues, advertising fees were approximately 6 percent of
total revenues and the remaining 12 percent of total revenues came principally
from equipment rentals, installation fees and program guide sales. The
Partnership is dependent upon the timely receipt of service fees to provide for
maintenance and replacement of plant and equipment, current operating expenses
and other costs of the Owatonna/Glencoe System.
FRANCHISES. The Owatonna/Glencoe System is constructed and operated
under non-exclusive, fixed-term franchises or other types of operating
authorities (referred to collectively herein as "franchises") granted by local
governmental authorities. These franchises typically contain many conditions,
such as time limitations on commencement and completion of construction,
conditions of service, including the number of channels, types of programming
and the provision of free service to schools and certain other public
institutions, and the maintenance of insurance and indemnity bonds. The
provisions of local franchises are subject to federal regulation.
The Partnership holds four franchises for the Owatonna/Glencoe System.
These franchises provide for the payment of fees to the issuing authorities and
generally range from 3 percent to 5 percent of the gross revenues of a cable
television system. The 1984 Cable Act prohibits franchising authorities from
imposing annual
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franchise fees in excess of 5 percent of gross revenues and also permits the
cable television system operator to seek renegotiation and modification of
franchise requirements if warranted by changed circumstances.
The Partnership has never had a franchise revoked. The Company is
currently negotiating the renewal of four franchises that expire prior to
December 31, 1998. The General Partner has no reason to believe that such
franchises will not be renewed in due course. The General Partner recently has
experienced lengthy negotiations with some franchising authorities for the
granting of franchise renewals. Some of the issues involved in recent renewal
negotiations include rate regulation, customer service standards, cable plant
upgrade or replacement and shorter terms of franchise agreements.
COMPETITION. Cable television systems currently experience
competition from several sources.
Broadcast Television. Cable television systems have traditionally
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competed with broadcast television, which consists of television signals that
the viewer is able to receive directly on his television without charge using an
"off-air" antenna. The extent of such competition is dependent in part upon the
quality and quantity of signals available by such antenna reception as compared
to the services provided by the local cable system. Accordingly, it has
generally been less difficult for cable operators to obtain higher penetration
rates in rural areas where signals available off-air are limited, than in
metropolitan areas where numerous, high quality off-air signals are often
available without the aid of cable television systems.
Traditional Overbuild. Cable television franchises are not exclusive,
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so that more than one cable television system may be built in the same area
(known as an "overbuild"), with potential loss of revenues to the operator of
the original cable television system. The General Partner has experienced
overbuilds in connection with certain systems that it has owned or managed for
limited partnerships, and currently there are overbuilds in certain of the
systems owned or managed by the General Partner but not in the Owatonna/Glencoe
System. Constructing and developing a cable television system is a capital
intensive process, and it is often difficult for a new cable system operator to
create a marketing edge over the existing system. Generally, an overbuilder
would be required to obtain franchises from the local governmental authorities,
although in some instances, the overbuilder could be the local government
itself. In any case, an overbuilder would be required to obtain programming
contracts from entertainment programmers and, in most cases, would have to build
a complete cable system, including headends, trunk lines and drops to individual
subscribers homes, throughout the franchise areas.
DBS. High-powered direct-to-home satellites have made possible the
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wide-scale delivery of programming to individuals throughout the United States
using small roof-top or wall-mounted antennas. Several companies began offering
direct broadcast satellite ("DBS") service over the last few years. Companies
offering DBS service use video compression technology to increase channel
capacity of their systems to 100 or more channels and to provide packages of
movies, satellite network and other program services which are competitive to
those of cable television systems. DBS faces technical and legal obstacles to
offering its customers local broadcast programming, although at least one DBS
provider is now attempting to do so. In addition to emerging high-powered DBS
competition, cable television systems face competition from a major medium-
powered satellite distribution provider and several low-powered providers, whose
service requires use of much larger home satellite dishes. Not all subscribers
terminate cable television service upon acquiring a DBS system. The General
Partner has observed that there are DBS subscribers that also elect to subscribe
to cable television service in order to obtain the greatest variety of
programming on multiple television sets, including local programming not
available through DBS service. The ability of DBS service providers to compete
successfully with the cable television industry will depend on, among other
factors, the ability of DBS providers to overcome certain legal and technical
hurdles and the availability of equipment at reasonable prices.
Telephone and Utilities. Federal cross-ownership restrictions
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historically limited entry by local telephone companies into the cable
television business. The 1996 Telecommunications Act (the "1996 Telecom Act")
eliminated this cross-ownership restriction, making it possible for companies
with considerable resources to overbuild existing cable operators and enter the
business. Several telephone companies have begun seeking cable television
franchises from local governmental authorities and constructing cable television
systems. The General
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Partner cannot predict at this time the extent of telephone company competition
that will emerge. The entry of telephone companies as direct competitors,
however, is likely to continue over the next several years and could adversely
affect the profitability and market value of cable television systems. The entry
of electric utility companies into the cable television business, as now
authorized by the 1996 Telecom Act, could have a similar adverse effect. The
local electric utility in the Washington D.C. area recently announced plans to
participate in RCN, a planned video competitor.
Private Cable. Additional competition is provided by private cable
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television systems, known as Satellite Master Antenna Television (SMATV),
serving multi-unit dwellings such as condominiums, apartment complexes, and
private residential communities. These private cable systems may enter into
exclusive agreements with apartment owners and homeowners associations, which
may preclude operators of franchised systems from serving residents of such
private complexes. Private cable systems that do not cross public rights of way
are free from the federal, state and local regulatory requirements imposed on
franchised cable television operators. In some cases, the Partnership has been
unable to provide cable television service to buildings in which private
operators have secured exclusive contracts to provide video and telephony
services. The Partnership is interested in providing these same services, but
expects that the market to install and provide these services in multi-unit
buildings will continue to be highly competitive.
MMDS. Cable television systems also compete with wireless program
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distribution services such as multichannel, multipoint distribution service
("MMDS") systems, commonly called wireless cable, which are licensed to serve
specific areas. MMDS uses low-power microwave frequencies to transmit
television programming over-the-air to paying subscribers. The MMDS industry is
less capital intensive than the cable television industry, and it is therefore
more practical to construct MMDS systems in areas of lower subscriber
penetration. Wireless cable systems are now in direct competition with cable
television systems in several areas of the country, including the system in Pima
County, Arizona owned by the General Partner. Telephone companies have acquired
or invested in wireless companies, and may use MMDS systems to provide services
within their service areas in lieu of wired delivery systems. Enthusiasm for
MMDS has waned in recent months, however, as Bell Atlantic and NYNEX have
suspended their investment in two major MMDS companies. To date, the
Partnership has not lost a significant number of subscribers, nor a significant
amount of revenue, to MMDS operators competing with the Partnership's
Owatonna/Glencoe System. A series of actions taken by the FCC, however,
including reallocating certain frequencies to the wireless services, are
intended to facilitate the development of wireless cable television systems as
an alternative means of distributing video programming. In addition, Local
Multipoint Distribution Services ("LMDS"), could also pose a significant threat
to the cable television industry, if and when it becomes established. The
potential impact, however, of LMDS is difficult to assess due to the newness of
the technology and the absence of any current fully operational LMDS systems.
Cable television systems are also in competition, in various degrees
with other communications and entertainment media, including motion pictures and
home video cassette recorders.
REGULATION AND LEGISLATION
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The operation of cable television systems is extensively regulated by
the FCC, some state governments and most local governments. The new 1996
Telecom Act alters the regulatory structure governing the nation's
telecommunications providers. It removes barriers to competition in both the
cable television market and the local telephone market. Among other things, it
also reduces the scope of cable rate regulation.
The 1996 Telecom Act requires the FCC to undertake a host of
implementing rulemakings, the final outcome of which cannot yet be determined.
Moreover, Congress and the FCC have frequently revisited the subject of cable
regulation. Future legislative and regulatory changes could adversely affect
the Partnership's operations and there has been a recent increase in calls to
maintain or even tighten cable regulation in the absence of widespread effective
competition. This section briefly summarizes key laws and regulations affecting
the operation of the Partnership's Owatonna/Glencoe System and does not purport
to describe all present, proposed, or possible laws and regulations affecting
the Partnership.
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Cable Rate Regulation. The 1992 Cable Act imposed an extensive rate
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regulation regime on the cable television industry. Under that regime, all
cable systems are subject to rate regulation, unless they face "effective
competition" in their local franchise area. Federal law now defines "effective
competition" on a community-specific basis as requiring either low penetration
(less than 30 percent) by the incumbent cable operator, appreciable penetration
(more than 15 percent) by competing multichannel video providers ("MVPs"), or
the presence of a competing MVP affiliated with a local telephone company.
Although the FCC rules control, local government units (commonly
referred to as local franchising authorities or "LFAs") are primarily
responsible for administering the regulation of the lowest level of cable -- the
basic service tier ("BST"), which typically contains local broadcast stations
and public, educational, and government ("PEG") access channels. Before an LFA
begins BST rate regulation, it must certify to the FCC that it will follow
applicable federal rules, and many LFAs have voluntarily declined to exercise
this authority. LFAs also have primary responsibility for regulating cable
equipment rates. Under federal law, charges for various types of cable
equipment must be unbundled from each other and from monthly charges for
programming services. The 1996 Telecom Act allows operators to aggregate costs
for broad categories of equipment across geographic and functional lines. This
change should facilitate the introduction of new technology.
The FCC itself directly administers rate regulation of any cable
programming service tiers ("CPST"), which typically contain satellite-delivered
programming. Under the 1996 Telecom Act, the FCC can regulate CPST rates only
if an LFA first receives at least two rate complaints from local subscribers and
then files a formal complaint with the FCC. When new CPST rate complaints are
filed, the FCC now considers only whether the incremental increase is justified
and will not reduce the previously established CPST rate.
Under the FCC's rate regulations, most cable systems were required to
reduce their BST and CPST rates in 1993 and 1994, and have since had their rate
increases governed by a complicated price cap scheme that allows for the
recovery of inflation and certain increased costs, as well as providing some
incentive for expanding channel carriage. The FCC has modified its rate
adjustment regulations to allow for annual rate increases and to minimize
previous problems associated with regulatory lag. Operators also have the
opportunity of bypassing this "benchmark" regulatory scheme in favor of
traditional "cost-of-service" regulation in cases where the latter methodology
appears favorable. Premium cable services offered on a per-channel or per-
program basis remain unregulated, as do affirmatively marketed packages
consisting entirely of new programming product. Federal law requires that the
BST be offered to all cable subscribers, but limits the ability of operators to
require purchase of any CPST before purchasing premium services offered on a
per-channel or per-program basis.
The 1996 Telecom Act sunsets FCC regulation of CPST rates for all
systems (regardless of size) on March 31, 1999. Certain critics of the cable
television industry have called for a delay in the regulatory sunset and some
have even urged more rigorous rate regulation in the interim, including a limit
on operators passing through to their customers increased programming costs.
The 1996 Telecom Act also relaxes existing uniform rate requirements by
specifying that uniform rate requirements do not apply where the operator faces
"effective competition," and by exempting bulk discounts to multiple dwelling
units, although complaints about predatory pricing still may be made to the FCC.
Cable Entry Into Telecommunications. The 1996 Telecom Act provides
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that no state or local laws or regulations may prohibit or have the effect of
prohibiting any entity from providing any interstate or intrastate
telecommunications service. States are authorized, however, to impose
"competitively neutral" requirements regarding universal service, public safety
and welfare, service quality, and consumer protection. State and local
governments also retain their authority to manage the public rights-of-way and
may require reasonable, competitively neutral compensation for management of the
public rights-of-way when cable operators provide telecommunications service.
The favorable pole attachment rates afforded cable operators under federal law
can be gradually increased by utility companies owning the poles (beginning in
2001) if the operator provides telecommunications service, as well as cable
service, over its plant.
Cable entry into telecommunications will be affected by the regulatory
landscape now being fashioned by the FCC and state regulators. One critical
component of the 1996 Telecom Act to facilitate the entry of new
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telecommunications providers (including cable operators) is the interconnection
obligation imposed on all telecommunications carriers. In July 1997, the Eighth
Circuit Court of Appeals vacated certain aspects of the FCC's initial
interconnection order. That decision is now on appeal to the U.S. Supreme
Court.
Telephone Company Entry Into Cable Television. The 1996 Telecom Act
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allows telephone companies to compete directly with cable operators by repealing
the historic telephone company/cable cross-ownership ban. Local exchange
carriers ("LECs"), including the BOCs, can now compete with cable operators both
inside and outside their telephone service areas. Because of their resources,
LECs could be formidable competitors to traditional cable operators, and certain
LECs have begun offering cable service. As described above, the General Partner
is now witnessing the beginning of LEC competition in a few of its cable
communities.
Under the 1996 Telecom Act, an LEC providing video programming to
subscribers will be regulated as a traditional cable operator (subject to local
franchising and federal regulatory requirements), unless the LEC elects to
provide its programming via an "open video system" ("OVS"). To qualify for OVS
status, the LEC must reserve two-thirds of the system's activated channels for
unaffiliated entities. RCN and affiliates of local power companies recently
have been certified to provide OVS service in areas encompassing the General
Partner's cable systems in suburban Maryland and Virginia. This OVS potential
competition is not yet operational.
Although LECs and cable operators can now expand their offerings
across traditional service boundaries, the general prohibition remains on LEC
buyouts (i.e., any ownership interest exceeding 10 percent) of co-located cable
systems, cable operator buyouts of co-located LEC systems, and joint ventures
between cable operators and LECs in the same market. The 1996 Telecom Act
provides a few limited exceptions to this buyout prohibition, including a
carefully circumscribed "rural exemption." The 1996 Telecom Act also provides
the FCC with the limited authority to grant waivers of the buyout prohibition
(subject to LFA approval).
Electric Utility Entry Into Telecommunications/Cable Television. The
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1996 Telecom Act provides that registered utility holding companies and
subsidiaries may provide telecommunications services (including cable
television) notwithstanding the Public Utilities Holding Company Act. Electric
utilities must establish separate subsidiaries, known as "exempt
telecommunications companies" and must apply to the FCC for operating authority.
Again, because of their resources, electric utilities could be formidable
competitors to traditional cable systems.
Additional Ownership Restrictions. The 1996 Telecom Act eliminates
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statutory restrictions on broadcast/cable cross-ownership (including broadcast
network/cable restrictions), but leaves in place existing FCC regulations
prohibiting local cross-ownership between co-located television stations and
cable systems. The 1996 Telecom Act also eliminates the three year holding
period required under the 1992 Cable Act's "anti-trafficking" provision. The
1996 Telecom Act leaves in place existing restrictions on cable cross-ownership
with SMATV and MMDS facilities, but lifts those restrictions where the cable
operator is subject to effective competition. In January 1995, however, the FCC
adopted regulations which permit cable operators to own and operate SMATV
systems within their franchise area, provided that such operation is consistent
with local cable franchise requirements.
Pursuant to the 1992 Cable Act, the FCC adopted rules precluding a
cable system from devoting more than 40 percent of its activated channel
capacity to the carriage of affiliated national program services. A companion
rule establishing a nationwide ownership cap on any cable operator equal to 30
percent of all domestic cable subscribers has been stayed pending further
judicial review, although the FCC recently expressed an interest in reviewing
and reimposing this limit.
There are no federal restrictions on non-U.S. entities having an
ownership interest in cable television systems or the FCC licenses commonly
employed by such systems. Section 310(b)(4) of the Communications Act does,
however, prohibit foreign ownership of FCC broadcast and telephone licenses,
unless the FCC concludes that such foreign ownership is consistent with the
public interest. The investment by BCI Telecom Holding Inc. ("BTH") in the
General Partner could, therefore, adversely affect any plan to acquire FCC
broadcast or common carrier licenses. The Partnership, however, does not
currently plan to acquire such licenses.
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Must Carry/Retransmission Consent. The 1992 Cable Act contains
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broadcast signal carriage requirements that allow local commercial television
broadcast stations to elect once every three years between requiring a cable
system to carry the station ("must carry") or negotiating for payments for
granting permission to the cable operator to carry the station ("retransmission
consent"). Less popular stations typically elect "must carry," and more popular
stations typically elect "retransmission consent." Must carry requests can
dilute the appeal of a cable system's programming offerings, and retransmission
consent demands may require substantial payments or other concessions. Either
option has a potentially adverse affect on the Partnership's business.
Additionally, cable systems are required to obtain retransmission consent for
all "distant" commercial television stations (except for satellite-delivered
independent "superstations" such as WGN). The burden associated with "must
carry" may increase substantially if broadcasters proceed with planned
conversion to digital transmission and the FCC determines that cable systems
must carry all analogue and digital broadcasts in their entirety.
Access Channels. LFAs can include franchise provisions requiring
---------------
cable operators to set aside certain channels for public, educational and
governmental access programming. Federal law also requires cable systems to
designate a portion of their channel capacity (up to 15 percent in some cases)
for commercial leased access by unaffiliated third parties. The FCC has adopted
rules regulating the terms, conditions and maximum rates a cable operator may
charge for use of the designated channel capacity, but use of commercial leased
access channels has been relatively limited. The FCC released revised rules in
February 1997 mandating a modest rate reduction. The reduction sparked some
increase in part-time use, but did not make commercial leased access
substantially more attractive to third party programmers. Certain of those
programmers have now appealed the revised rules to the D.C. Court of Appeals.
Should the courts and the FCC ultimately determine that an additional reduction
in access rates is required, cable operators could lose programming control of a
substantial number of channels.
Access to Programming. To spur the development of independent cable
---------------------
programmers and competition to incumbent cable operators, the 1992 Cable Act
imposed restrictions on the dealings between cable operators and cable
programmers. Of special significance from a competitive business posture, the
1992 Cable Act precludes video programmers affiliated with cable companies from
favoring cable operators over competitors and requires such programmers to sell
their programming to other multichannel video distributors. This provision
limits the ability of vertically integrated cable programmers to offer exclusive
programming arrangements to cable companies. There recently has been increased
interest in further restricting the marketing practices of cable programmers,
including subjecting programmers who are not affiliated with cable operators to
all of the existing program access requirements.
Inside Wiring. The FCC recently determined that an incumbent cable
-------------
operator can be required by the owner of a multiple dwelling unit ("MDU")
complex to remove, abandon or sell the "home run" wiring it initially provided.
In addition, the FCC is reviewing the enforceability of contracts to provide
exclusive video service within a MDU complex. The FCC has proposed abrogating
all such contracts held by incumbent cable operators, but allowing such
contracts when held by new entrants. These changes, and others now being
considered by the FCC, would, if implemented, make it easier for a MDU complex
owner to terminate service from an incumbent cable operator in favor of a new
entrant and leave the already competitive MDU sector even more challenging for
incumbent cable operators.
Other FCC Regulations. In addition to the FCC regulations noted
---------------------
above, there are other FCC regulations covering such areas as equal employment
opportunity, subscriber privacy, programming practices (including, among other
things, syndicated program exclusivity, network program nonduplication, local
sports blackouts, indecent programming, lottery programming, political
programming, sponsorship identification, and children's programming
advertisements), registration of cable systems and facilities licensing,
maintenance of various records and public inspection files, frequency usage,
lockbox availability, antenna structure notification, tower marking and
lighting, consumer protection and customer service standards, technical
standards and consumer electronics equipment compatibility. Federal
requirements governing Emergency Alert Systems and Closed Captioning adopted in
1997 will impose additional costs on the operation of cable systems. The FCC is
currently considering whether cable customers must be allowed to purchase cable
converters from third party vendors. If the FCC concludes that such
distribution is required, and does not make appropriate allowances for
9
<PAGE>
signal piracy concerns, it may become more difficult for cable operators to
combat theft of service. The FCC has the authority to enforce its regulations
through the imposition of substantial fines, the issuance of cease and desist
orders and/or the imposition of other administrative sanctions, such as the
revocation of FCC licenses needed to operate certain transmission facilities
used in connection with cable operations.
Internet Access. Many cable operators have begun offering high speed
---------------
internet service to their customers. At this time, there is no significant
federal or local regulation of this service. However, as internet services
develop, it is possible that new regulations could be imposed.
Copyright. Cable television systems are subject to federal copyright
---------
licensing covering carriage of television and radio broadcast signals. In
exchange for filing certain reports and contributing a percentage of their
revenues to a federal copyright royalty pool (that varies depending on the size
of the system and the number of distant broadcast television signals carried),
cable operators can obtain blanket permission to retransmit copyrighted material
on broadcast signals. The possible modification or elimination of this
compulsory copyright license is the subject of continuing legislative review and
could adversely affect the Partnership's ability to obtain desired broadcast
programming. In addition, the cable industry pays music licensing fees to BMI
and is negotiating a similar arrangement with ASCAP. Copyright clearances for
nonbroadcast programming services are arranged through private negotiations.
State and Local Regulation. Cable television systems generally are
--------------------------
operated pursuant to nonexclusive franchises granted by a municipality or other
state or local government entity in order to cross public rights-of-way.
Federal law now prohibits franchise authorities from granting exclusive
franchises or from unreasonably refusing to award additional franchises. Cable
franchises generally are granted for fixed terms and in many cases include
monetary penalties for non-compliance and may be terminable if the franchisee
fails to comply with material provisions.
The terms and conditions of franchises vary materially from
jurisdiction to jurisdiction. Each franchise generally contains provisions
governing cable operations, service rates, franchise fees, system construction
and maintenance obligations, system channel capacity, design and technical
performance, customer service standards, and indemnification protections. A
number of states subject cable television systems to the jurisdiction of
centralized state governmental agencies, some of which impose regulation of a
character similar to that of a public utility. Although LFAs have considerable
discretion in establishing franchise terms, there are certain federal
limitations. For example, LFAs cannot insist on franchise fees exceeding 5
percent of the system's gross revenues, cannot dictate the particular technology
used by the system, and cannot specify video programming other than identifying
broad categories of programming.
Federal law contains renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. Even if a franchise is
renewed, the franchise authority may seek to impose new and more onerous
requirements such as significant upgrades in facilities and services or
increased franchise fees as a condition of renewal. Similarly, if a franchise
authority's consent is required for the purchase or sale of a cable system or
franchise, such authority may attempt to impose more burdensome or onerous
franchise requirements in connection with a request for consent. Historically,
franchises have been renewed for cable operators that have provided satisfactory
services and have complied with the terms of their franchises.
GENERAL. The Partnership's business consists of providing cable
television services to a large number of customers, the loss of any one of which
would have no material effect on the Partnership's business. The
Owatonna/Glencoe System has had some subscribers who later terminated the
service. Terminations occur primarily because people move to another home or to
another city. In other cases, people terminate on a seasonal basis or because
they no longer can afford or are dissatisfied with the service. The amount of
past due accounts in the Owatonna/Glencoe System is not significant. The
Partnership's policy with regard to past due accounts is basically one of
disconnecting service before a past due account becomes material.
10
<PAGE>
The Partnership does not depend to any material extent on the
availability of raw materials; it carries no significant amounts of inventory
and it has no material backlog of customer orders. The Partnership does not
have any employees because all properties are managed by employees of the
General Partner. The General Partner has engaged in research and development
activities relating to the provision of new services but the amount of the
Partnership's funds expended for such research and development has never been
material.
Compliance with federal, state and local provisions that have been
enacted or adopted regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment has had no material
effect upon the capital expenditures, earnings or competitive position of the
Partnership.
ITEM 2. PROPERTIES
-------------------
The Partnership acquired the Owatonna/Glencoe System in July 1986.
The following sets forth (i) the monthly basic plus service rates charged to
subscribers and (ii) the number of basic subscribers and pay units for the
Owatonna/Glencoe System. The monthly basic service rates set forth herein
represent, with respect to systems with multiple headends, the basic service
rate charged to the majority of the subscribers within the system. In cable
television systems, basic subscribers can subscribe to more than one pay TV
service. Thus, the total number of pay services subscribed to by basic
subscribers are called pay units. As of December 31, 1997, the Owatonna/Glencoe
System operated cable plant passing approximately 11,300 homes, with an
approximate 75 percent penetration rate. Figures for numbers of subscribers,
miles of cable plant and homes passed are compiled from the General Partner's
records and may be subject to adjustments.
At December 31,
-------------------------------------
OWATONNA/GLENCOE SYSTEM 1997 1996 1995
- ----------------------- ------ ------ ------
Monthly basic plus service rate $23.15 $21.91 $20.91
Basic subscribers 8,533 8,301 7,938
Pay units 4,429 4,503 4,150
ITEM 3. LEGAL PROCEEDINGS
--------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
None.
PART II.
--------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
-------------------------------------------------
AND RELATED SECURITY HOLDER MATTERS
-----------------------------------
While the Partnership is publicly held, there is no public market for
the limited partnership interests, and it is not expected that a market will
develop in the future. During 1997, limited partners of the Partnership
conducted "limited tender offers" for interests in the Partnership at prices
ranging from $150 to $210 per interest. As of February 16, 1998, the number of
equity security holders in the Partnership was 954.
11
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $3,598,676 $ 4,971,826 $4,589,457 $4,294,257 $4,111,369
Depreciation and Amortization 684,748 835,374 787,556 882,035 832,444
Operating Income 324,751 496,883 461,529 299,402 333,627
Net Income 6,539,347 109,405 131,482 93,845 195,588
Net Income per Limited Partnership Unit 374.93 6.37 7.66 5.47 11.39
Distributions per Limited Partnership Unit 297.35 47.06 47.06 57.65 60.59
Weighted Average Number of
Limited Partnership Units Outstanding 17,000 17,000 17,000 17,000 17,000
General Partner's Capital (Deficit) 75,164 (84,796) (77,810) (71,045) (62,083)
Limited Partners' Capital (Deficit) 155,823 (1,163,006) (471,317) 198,516 1,085,609
Total Assets 3,932,550 4,610,684 4,691,823 4,755,245 4,903,310
Debt 3,390,507 5,296,610 4,606,827 3,584,706 3,310,501
General Partner Advances - - 39,725 483,487 20,529
</TABLE>
12
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------- -----------------------------------------------------------------------
OF OPERATIONS
-------------
JONES CABLE INCOME FUND 1-A, LTD.
---------------------------------
The following discussion of the Partnership's financial condition and
results of operations contains, in addition to historical information, forward-
looking statements that are based upon certain assumptions and are subject to a
number of risks and uncertainties. The Partnership's actual results may differ
significantly from the results predicted in such forward-looking statements.
FINANCIAL CONDITION
- -------------------
It is the General Partner's publicly announced policy that it intends to
liquidate its managed partnerships, including the Partnership, as opportunities
for sales of partnership cable television systems arise in the marketplace. In
accordance with the General Partner's policy, the Milwaukie System was sold in
1997 and the Owatonna/Glencoe System is under negotiation for sale in 1998.
On March 11, 1997, the Partnership sold its Milwaukie System to an
unaffiliated party for a sales price of $8,200,000. From the sale proceeds, the
Partnership repaid $3,200,000 of the amount outstanding under its credit
facility, paid a brokerage fee of 2.5 percent of the sales price, or $205,000,
to The Jones Group, a subsidiary of the General Partner, for acting as a broker
in this transaction, and then made a distribution of $4,505,000 to the
Partnership's limited partners. This distribution gave the Partnership's
limited partners an approximate return of $530 for each $1,000 invested in the
Partnership. This distribution, together with all prior distributions to
limited partners from the Partnership's operating cash flow, gave the
Partnership's limited partners a return of approximately $1,553 for each $1,000
invested in the Partnership. Because the distributions made on the sale of the
Milwaukie System together with all prior distributions made by the Partnership
do not total the amounts originally contributed to the Partnership by the
limited partners plus the liquidation preference as set forth in the partnership
agreement, the General Partner did not receive any general partner distribution
on the sale of the Milwaukie System. Because the sale of the Milwaukie System
did not represent the sale of all or substantially all of the assets of the
Partnership, no vote of the limited partners of the Partnership was required to
approve the sale.
As of March 1998, the Partnership was in the final stage of negotiations
for the sale of the Owatonna/Glencoe System to an unaffiliated party for a sales
price of $11,750,000, subject to customary closing adjustments that may have the
effect of increasing or decreasing the sales price by a non-material amount.
Closing of the sale, which is anticipated to occur during the third quarter of
1998, is subject to several conditions, including necessary governmental and
other third party consents and the termination of expiration of the statutory
waiting period applicable to the asset purchase agreement and transactions
contemplated thereby under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended. In addition, because the Owatonna/Glencoe System constitutes
all of the Partnership's remaining assets, the sale must be approved by a
majority of the limited partnership interests of the Partnership. The General
Partner expects to conduct a proxy vote on this matter in the second quarter of
1998.
Upon the consummation of the proposed sale of the Owatonna/Glencoe System,
the Partnership will pay a brokerage fee of 2.5 percent of the sales price, or
$293,750, to The Jones Group for acting as a broker in this transaction, repay
all of its indebtedness, including the $3,300,000 borrowed under its credit
facility and capital lease obligations totaling $90,507, pay the General Partner
deferred cash flow distributions totaling $87,867, pay for working capital
adjustments, and then deposit $600,000 into an indemnity escrow account. The
remaining net sale proceeds of approximately $7,531,000 will be distributed to
the Partnership's limited partners of record as of the closing date of the sale
of the Owatonna/Glencoe System. Based upon financial information as of December
31, 1997, the limited partners as a group will receive $5,686,466 and the
General Partner will receive $1,844,534 of the net sale proceeds. This
distribution will provide the Partnership's limited partners an approximate
return of $334.50 for each $500 limited partnership interest, or $669 for each
$1,000 invested in the Partnership. Taking into account the prior distributions
to limited partners from the Partnership's operating cash flow, from the net
proceeds from the sale of the Milwaukie System and the anticipated distribution
from the net proceeds from the sale of the Owatonna/Glencoe System, the limited
partners of the Partnership will have received a total of $1,111 for each $500
limited partnership interest, or $2,222 for each $1,000 invested in the
Partnership following the closing of the Owatonna/Glencoe System sale.
For a period of one year following the closing date, $600,000 of the sale
proceeds will remain in escrow as security for the Partnership's agreement to
indemnify the purchaser under the asset purchase agreement. The Partnership's
13
<PAGE>
primary exposure, if any, will relate to the representations and warranties made
about the Owatonna/Glencoe System in the asset purchase agreement. Any amounts
remaining from this indemnity escrow account that are not claimed by the
purchaser at the end of the one-year period will be distributed to the partners
of the Partnership at that time. If the entire $600,000 escrow amount is
distributed to the partners, of which there can be no assurance, the limited
partners as a group would receive $453,045 and the General Partner would receive
$146,955 of the net sale proceeds, thus, the limited partners would receive $27
for each $500 limited partnership interest, or $54 for each $1,000 invested in
the Partnership from this portion of the sale proceeds. The Partnership will
continue in existence at least until any amounts remaining from the indemnity
escrow account have been distributed. Since the Owatonna/Glencoe System
represents the only asset of the Partnership, the Partnership will be liquidated
and dissolved upon the final distribution of any amounts remaining from the
indemnity escrow account. If any disputes with respect to indemnification
arise, the Partnership would not be dissolved until such disputes were resolved,
which could result in the Partnership continuing in existence beyond 1999.
For the year ended December 31, 1997, the Partnership generated net cash
from operating activities totaling $328,277, which is available to fund capital
expenditures and non-operating costs. The Partnership expended approximately
$491,000 on capital improvements during 1997. Of these expenditures,
approximately 42 percent related to service drops to subscribers' homes,
approximately 16 percent related to the purchase of converters for the
Partnership's system and approximately 8 percent related to the construction of
new cable plant associated with new homes passed. The remaining expenditures
were used to maintain the value of the Partnership's system. Funding for these
expenditures was provided by borrowings under the Partnership's credit facility.
Budgeted capital expenditures in the Partnership's Owatonna/Glencoe System for
1998 total approximately $378,000. Of this total, approximately 47 percent
relates to construction of service drops to subscribers' homes and approximately
29 percent relates to the construction of new cable plant associated with new
homes passed. The remainder of the anticipated expenditures is necessary to
maintain the value of the Partnership's Owatonna/Glencoe System until it is
sold. Funding for these expenditures is expected to be provided by cash
generated from operations.
As a result of the sale of the Milwaukie System on March 11, 1997, the
Partnership repaid $3,200,000 of the then-outstanding balance of its $6,500,000
revolving credit facility, and the commitment amount was reduced to $3,300,000.
The revolving credit period expired December 31, 1997, at which time the
$3,300,000 outstanding balance converted to a term loan. The term loan is
payable in 24 consecutive quarterly installments that will commence on March 31,
1998. Installments due during 1998 total $330,000 and will be funded by cash on
hand and cash generated from operations. Interest on outstanding principal
amounts on the credit facility is computed at the Partnership's option of the
London Interbank Offered Rate plus 1-1/4 percent or the Prime Rate plus 1/4
percent. The effective interest rates on amounts outstanding as of December 31,
1997 and 1996 were 7.46 percent and 6.81 percent, respectively.
A primary objective of the Partnership has been to provide quarterly cash
distributions from operating cash flow to its partners. During 1997, the
Partnership declared such distributions totaling $555,558, of which $550,000 was
payable to the limited partners and $5,558 was payable to the General Partner.
The limited partner distributions of $550,000 equates to $65 for each $1,000
invested in the Partnership. These distributions, which were principally from
operating cash flow, were paid to limited partners during 1997, except the
fourth quarter distribution of $75,000, which was paid on February 13, 1998.
The General Partner has agreed to defer its portion of cash flow distributions
until the Partnership is liquidated. To date, the limited partners have
received a total of $8,699,000 in distributions from cash flow, or $1,023 for
each $1,000 invested in the Partnership. Due to the announced sale of the
Partnership's remaining cable television system, and due to the fact that
principal payments are required in 1998 on the Partnership's loan, the General
Partner does not expect to pay any additional cash flow distributions during the
remaining term of the Partnership.
The General Partner believes that cash on hand and cash generated from
operations will be sufficient to fund capital expenditures and other liquidity
needs of the Partnership's Owatonna/Glencoe System for the next year.
Year 2000 Issue
- ---------------
The Year 2000 issue is the result of many computer programs being written
such that they will malfunction when reading a year of "00." This problem could
cause system failure or miscalculations causing disruptions of business
processes.
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.
14
<PAGE>
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 its
options regarding repair or replacement of affected equipment during this
testing. The General Partner currently has no definitive estimate of the cost or
the extent of the impact, if any, this problem will have on service delivery;
however, the General Partner does not believe that the impact will be material.
The General Partner anticipates completion of its testing in 1998, at which time
it will determine the financial impact on the Partnership. The General Partner
expects that the financial impact on the Partnership of the Year 2000 issue
likely will not be material because the General Partner anticipates that the
Partnership will be liquidated before the year 2000.
RESULTS OF OPERATIONS
- ---------------------
1997 Compared to 1996
---------------------
Revenues of the Partnership decreased $1,373,150, or approximately 28
percent, to $3,598,676 in 1997 from $4,971,826 in 1996. This decrease was a
result of the sale of the Milwaukie System. Disregarding the effect of the sale
of the Milwaukie System, revenues would have increased $221,118, or
approximately 7 percent, to $3,186,770 in 1997 from $2,965,652 in 1996. The
increase in revenues was primarily the result of basic service rate increases
and an increase in the number of basic subscribers in the Partnership's
Owatonna/Glencoe System. Basic service rate increases accounted for
approximately 46 percent of the increase in revenues in 1997. An increase in
the number of basic subscribers accounted for approximately 27 percent of the
increase in revenues in 1997. The number of basic subscribers in the
Partnership's Owatonna/Glencoe System increased by 232, or approximately 3
percent, to 8,533 at December 31, 1997 from 8,301 at December 31, 1996. No
other individual factor contributed significantly to the increase 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 $860,376, or approximately 28 percent, to
$2,182,150 in 1997 from $3,042,526 in 1996. This decrease was primarily due to
the sale of the Milwaukie System. Disregarding the effect of the sale of the
Milwaukie System, operating expenses would have increased $100,851, or
approximately 6 percent, to $1,847,918 in 1997 from $1,747,067 in 1996. The
increase in operating expenses was primarily a result of increases in
programming costs. No other individual factor contributed significantly to the
increase in operating expenses. Operating expenses represented 58 percent and
59 percent of the revenues in 1997 and 1996, respectively.
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 decreased
$512,774, or approximately 27 percent, to $1,416,526 in 1997 from $1,929,300 in
1996. This decrease was the result of the sale of the Milwaukie System.
Disregarding the effect of the sale of the Milwaukie System, operating cash flow
would have increased $120,267, or approximately 10 percent, to $1,338,852 in
1997 from $1,218,585 in 1996. This increase was due to the increase in revenues
exceeding the increase in operating expenses.
Management fees and allocated overhead from the General Partner
decreased $190,016, or approximately 32 percent, to $407,027 in 1997 from
$597,043 in 1996. This decrease was the result of the sale of the Milwaukie
System. Disregarding the effect of the sale of the Milwaukie System, management
fees and allocated overhead from the General Partner would have increased
$9,816, or approximately 3 percent, to $372,168 in 1997 from $362,352 in 1996.
This increase was primarily due to the increase in revenues, upon which such
management fees are based, which was partially offset by a decrease in expenses
allocated from the General Partner.
Depreciation and amortization expense decreased $150,626, or approximately
18 percent, to $684,748 in 1997 from $835,374 in 1996. This decrease was the
result of the sale of the Milwaukie System. Disregarding the effect of the sale
of the Milwaukie System, depreciation and amortization would have increased
$57,571, or approximately 10 percent, to $619,129 in 1997 from $561,558 in 1996.
This increase was due to capital additions in the Owatonna/Glencoe System in
1997.
15
<PAGE>
Operating income decreased $172,132, or approximately 35 percent, to
$324,751 in 1997 from $496,883 in 1996. This decrease was the result of the
sale of the Milwaukie System. Disregarding the effect of the sale of the
Milwaukie System, operating income would have increased $52,880, or
approximately 18 percent, to $347,555 in 1997 from $294,675 in 1996. This
increase was primarily due to the increase in operating cash flow exceeding the
increase in depreciation and amortization expense.
Interest expense decreased $141,533, or approximately 40 percent, to
$215,331 in 1997 from $356,864 in 1996. This decrease was primarily due to
lower outstanding balances on the Partnership's interest bearing obligations as
a result of a portion of the proceeds from the sale of the Milwaukie System
being used to repay $3,200,000 of the outstanding loan principal balance.
The Partnership reported a gain on the sale of the Milwaukie System of
$6,684,781 in 1997. No similar gain was reported in 1996.
Net income increased $6,429,942 to $6,539,347 in 1997 from $109,405 in
1996. This increase was primarily the result of the gain on the sale of the
Milwaukie System.
1996 Compared to 1995
---------------------
Revenues of the Partnership increased $382,369, or approximately 8 percent,
to $4,971,826 in 1996 compared to $4,589,457 in 1995. The increase in revenues
was primarily due to basic service rate increases and an increase in the number
of basic subscribers. Basic service rate increases accounted for approximately
43 percent of the increase in revenues and an increase in the number of basic
subscribers accounted for approximately 39 percent of the increase in revenues
for the year ended December 31, 1996. The number of basic subscribers increased
by 575, or approximately 4 percent, to 13,898 at December 31, 1996 from 13,323
at December 31, 1995. No other individual factor significantly affected the
increase in revenues.
Operating expenses increased $279,778, or approximately 10 percent, to
$3,042,526 in 1996 from $2,762,748 in 1995. Operating expenses represented 61
percent and 60 percent of the revenues in 1996 and 1995, respectively. The
increase in operating expenses was primarily due to increases in programming
costs. No other individual factor significantly affected the increase in
operating expenses.
Operating cash flow increased $102,591, or approximately 6 percent, to
$1,929,300 in 1996 from $1,826,709 in 1995. 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
$19,419, or approximately 3 percent, to $597,043 in 1996 from $577,624 in 1995.
This increase was primarily a result of the increase in revenues, upon which
such management fees and allocations are based.
Depreciation and amortization increased $47,818, or approximately 6
percent, to $835,374 in 1996 from $787,556 in 1995. This increase in
depreciation and amortization expense was attributable to capital additions in
1996.
Operating income increased $35,354, or approximately 8 percent, to $496,883
in 1996 from $461,529 in 1995. This increase was due to the increase in
operating cash flow exceeding the increases in management fees and allocated
overhead from the General Partner and depreciation and amortization expense.
Interest expense increased $21,505, or approximately 6 percent, to $356,864
in 1996 from $335,359 in 1995 due to higher outstanding balances on interest
bearing obligations.
Net income decreased $22,077, or approximately 17 percent, to $109,405 in
1996 from $131,482 in 1995 due to the factors discussed above.
ITEM 8. FINANCIAL STATEMENTS
- -----------------------------
The audited financial statements of the Partnership for the year ended
December 31, 1997 follow.
16
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Partners of Jones Cable Income Fund 1-A, Ltd.:
We have audited the accompanying balance sheets of JONES CABLE INCOME
FUND 1-A, LTD. (A Colorado limited partnership) as of December 31, 1997 and
1996, and the related statements of operations, partners' capital (deficit) and
cash flows for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the General Partner's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Jones Cable Income
Fund 1-A, Ltd. as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 13, 1998.
17
<PAGE>
JONES CABLE INCOME FUND 1-A, LTD.
---------------------------------
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
<S> <C> <C>
ASSETS 1997 1996
------ ------------ ------------
CASH $ 788,679 $ 42,929
TRADE RECEIVABLES, less allowance for doubtful
receivables of $5,628 and $11,125 at December 31, 1997
and 1996, respectively 59,963 119,661
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 6,701,483 9,022,869
Less- accumulated depreciation (3,778,933) (4,794,646)
----------- -----------
2,922,550 4,228,223
Franchise costs and other intangible assets, net of
accumulated amortization of $465,203 and $723,631
at December 31, 1997 and 1996, respectively 12,797 187,369
----------- -----------
Total investment in cable television properties 2,935,347 4,415,592
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 148,561 32,502
----------- -----------
Total assets $ 3,932,550 $ 4,610,684
=========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
18
<PAGE>
JONES CABLE INCOME FUND 1-A, LTD.
---------------------------------
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
December 31,
--------------------------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1997 1996
- -------------------------------------------------- ------------ -----------
<S> <C> <C>
LIABILITIES:
Debt $ 3,390,507 $ 5,296,610
Trade accounts payable and accrued liabilities 204,802 320,020
Accrued distribution to limited partners 75,000 200,000
Subscriber prepayments 31,254 41,856
------------ -----------
Total liabilities 3,701,563 5,858,486
------------ -----------
COMMITMENTS AND CONTINGENCIES (NOTE 8)
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated earnings (deficit) 162,031 (3,487)
Distributions (87,867) (82,309)
------------ -----------
75,164 (84,796)
------------ -----------
Limited Partners-
Net contributed capital
(17,000 units outstanding at
December 31, 1997 and 1996) 7,288,694 7,288,694
Accumulated earnings (deficit) 6,071,129 (302,700)
Distributions (13,204,000) (8,149,000)
------------ -----------
155,823 (1,163,006)
------------ -----------
Total liabilities and partners' capital (deficit) $ 3,932,550 $ 4,610,684
============ ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
19
<PAGE>
JONES CABLE INCOME FUND 1-A, LTD.
---------------------------------
(A LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
<S> <C> <C> <C>
1997 1996 1995
---------- ---------- ----------
REVENUES $3,598,676 $4,971,826 $4,589,457
COSTS AND EXPENSES:
Operating expenses 2,182,150 3,042,526 2,762,748
Management fees and allocated overhead
from General Partner 407,027 597,043 577,624
Depreciation and amortization 684,748 835,374 787,556
---------- ---------- ----------
OPERATING INCOME 324,751 496,883 461,529
---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest expense (215,331) (356,864) (335,359)
Gain on sale of cable television system 6,684,781 - -
Other, net (254,854) (30,614) 5,312
---------- ---------- ----------
Total other income (expense) 6,214,596 (387,478) (330,047)
---------- ---------- ----------
NET INCOME $6,539,347 $ 109,405 $ 131,482
========== ========== ==========
ALLOCATION OF NET INCOME:
General Partner $ 165,518 $ 1,094 $ 1,315
========== ========== ==========
Limited Partners $6,373,829 $ 108,311 $ 130,167
========== ========== ==========
NET INCOME PER LIMITED
PARTNERSHIP UNIT $374.93 $6.37 $7.66
========== ========== ==========
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 17,000 17,000 17,000
========== ========== ==========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
20
<PAGE>
JONES CABLE INCOME FUND 1-A, LTD.
---------------------------------
(A Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
-----------------------------------------
Year Ended December 31,
-------------------------------------
1997 1996 1995
----------- ----------- ---------
GENERAL PARTNER:
Balance, beginning of year $ (84,796) $ (77,810) $ (71,045)
Cash flow distributions (5,558) (8,080) (8,080)
Net income for year 165,518 1,094 1,315
----------- ----------- ---------
Balance, end of year $ 75,164 $ (84,796) $ (77,810)
=========== =========== =========
LIMITED PARTNERS:
Balance, beginning of year $(1,163,006) $ (471,317) $ 198,516
Cash flow distributions (550,000) (800,000) (800,000)
Distribution from the sale of
cable television system (4,505,000) - -
Net income for year 6,373,829 108,311 130,167
----------- ----------- ---------
Balance, end of year $ 155,823 $(1,163,006) $(471,317)
=========== =========== =========
The accompanying notes to financial statements
are an integral part of these statements.
21
<PAGE>
JONES CABLE INCOME FUND 1-A, LTD.
---------------------------------
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
------------ ---------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,539,347 $ 109,405 $ 131,482
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 684,748 835,374 787,556
Gain on sale of cable television system (6,684,781) - -
Decrease (increase) in trade receivables 59,698 8,579 (57,967)
Increase in deposits, prepaid expenses and
deferred charges (144,915) (79,178) (47,660)
Increase (decrease) in trade accounts payable and
accrued liabilities and subscriber prepayments (125,820) (32,522) 69,817
Decrease in advances from general partner - (39,725) (443,762)
----------- --------- ----------
Net cash provided by operating activities 328,277 801,933 439,466
----------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (491,424) (676,986) (676,674)
Proceeds from sale of cable television system, net
of brokerage fees 7,995,000 - -
----------- --------- ----------
Net cash provided by (used in)
investing activities 7,503,576 (676,986) (676,674)
----------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 1,525,035 740,941 1,063,834
Repayment of debt (3,431,138) (51,158) (41,713)
Distributions to limited partners (5,055,000) (800,000) (800,000)
Decrease in accrued distributions to limited partners (125,000) - (35,000)
----------- --------- ----------
Net cash provided by (used in)
financing activities (7,086,103) (110,217) 187,121
----------- --------- ----------
Increase (decrease) in cash 745,750 14,730 (50,087)
Cash, beginning of year 42,929 28,199 78,286
----------- --------- ----------
Cash, end of year $ 788,679 $ 42,929 $ 28,199
=========== ========= ==========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 256,626 $ 356,864 $ 301,059
=========== ========= ==========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
22
<PAGE>
JONES CABLE INCOME FUND 1-A, LTD.
---------------------------------
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(1) ORGANIZATION AND PARTNERS' INTERESTS
------------------------------------
Formation and Business
----------------------
Jones Cable Income Fund 1-A, Ltd. (the "Partnership"), a Colorado
limited partnership, was formed on June 2, l986, under a public program
sponsored by Jones Intercable, Inc. ("Intercable"). The Partnership was formed
to acquire, develop and operate cable television systems. Intercable is the
"General Partner" and manager of the Partnership. The General Partner and its
subsidiaries also own and operate cable television systems. In addition, the
General Partner manages cable television systems for other limited partnerships
for which it is general partner and, also, for other affiliated entities. The
Partnership owns the cable television systems serving the communities of
Owatonna and Glencoe, Minnesota (the "Owatonna/Glencoe System"). The Partnership
sold its Milwaukie, Oregon cable television system (the "Milwaukie System") in
March 1997.
Sale of Cable Television System
-------------------------------
On March 11, 1997, the PArtnership sold its Milwaukie System to an
unaffiliated party for a sales price of $8,200,000. From the sale proceeds, the
Partnership repaid $3,200,000 of the amount outstanding under its credit
facility, paid a brokerage fee of 2.5 percent of the sales price, or $205,000,
to The Jones Group, Ltd., a subsidiary of the General Partner, for acting as a
broker in this transaction, and then made a distribution of $4,505,000 to the
Partnership's limited partners. This distribution gave the Partnership's
limited partners an approximate return of $530 for each $1,000 invested in the
Partnership. This distribution, together with all prior distributions to
limited partners from the Partnership's operating cash flow, gave the
Partnership's limited partners a return of approximately $1,553 for each $1,000
invested in the Partnership. Because the distributions made on the sale of the
Milwaukie System together with all prior distributions made by the Partnership
do not total the amounts originally contributed to the partnership by the
limited partners plus the liquidation preference as set forth in the partnership
agreement, the General Partner did not receive any general partner distribution
on the sale of the Milwaukie System. Because the sale of the Milwaukie System
did not represent the sale of all or substantially all of the assets of the
Partnership, no vote of the limited partners of the Partnership was required to
approve the sale.
The pro forma effect of the sale of the Milwaukie System on the results
of the Partnership's operations for the years ended December 31, 1997 and 1996,
assuming the transaction had occurred at the beginning of the year, is presented
in the following unaudited tabulation:
For the year ended December 31, 1997
------------------------------------
<TABLE>
<CAPTION>
Pro Forma
As Reported Adjustments Pro Forma
----------- ------------ ----------
<S> <C> <C> <C>
Revenues $3,598,676 $ (411,906) $3,186,770
========== =========== ==========
Operating Income $ 324,751 $ 22,804 $ 347,555
========== =========== ==========
Net Income $6,539,347 $(6,366,686) $ 172,661
========== =========== ==========
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
For the Year Ended December 31, 1996
--------------------------------------
Pro forma
As Reported Adjustments Pro Forma
----------- ------------ ----------
<S> <C> <C> <C>
Revenues $4,971,826 $(2,006,174) $2,965,652
========== =========== ==========
Operating Income $ 496,883 $ (202,208) $ 294,675
========== =========== ==========
Net Income $ 109,405 $ (17,665) $ 91,740
========== =========== ==========
</TABLE>
Contributed Capital
- -------------------
The capitalization of the Partnership is set forth in the accompanying
statements of partners' capital (deficit). No limited partner is obligated to
make any additional contribution to partnership capital.
The General Partner purchased its interest in the Partnership by
contributing $1,000 to partnership capital.
All profits and losses of the Partnership are allocated 99 percent to the
limited partners and 1 percent to the General Partner, except for income or gain
from the sale or disposition of cable television properties, which will be
allocated to the partners based upon the formula set forth in the Partnership
Agreement.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Accounting Records
------------------
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting principles.
The Partnership's tax returns are also prepared on the accrual basis.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the General Partner's management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Purchase Price Allocation
-------------------------
The Partnership's acquisitions were accounted for as purchases with the
purchase price allocated as follows: first, to the fair value of net tangible
assets acquired; second, to the value of subscriber lists and franchise costs;
and third, to costs in excess of interests in net assets purchased. Brokerage
fees paid to an affiliate of the General Partner and additional acquisition
costs were allocated to intangible assets based upon the relative value of these
assets at acquisition. Other system acquisition costs were capitalized and
included in the cost of distribution systems.
Property, Plant and Equipment
-----------------------------
Depreciation of property, plant and equipment is provided using the
straight-line method over the following estimated service lives:
Cable distribution systems 5 - 15 years
Equipment and tools 5 - 7 years
Office furniture and equipment 3 - 5 years
Buildings 30 years
Vehicles 3 - 4 years
Replacements, renewals and improvements are capitalized and maintenance
and repairs are charged to expense as incurred.
24
<PAGE>
Property, plant and equipment and the corresponding accumulated
depreciation are written off as certain assets become fully depreciated and are
no longer in service.
Intangible Assets
-----------------
Costs assigned to franchises and cost in excess of interests in net assets
purchased are being amortized using the straight-line method over the following
remaining estimated useful lives:
Franchise costs 1 year
Cost in excess of interests in net assets purchased 29 years
Revenue recognition
-------------------
Subscriber prepayments are initially deferred and recognized as revenue
when earned.
(3) TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
----------------------------------------------------
Management Fees, Distribution Ratios and Reimbursements
-------------------------------------------------------
The General Partner manages the Partnership and receives a fee for its
services equal to 5 percent of the gross revenues of the Partnership, excluding
revenues from the sale of cable television systems or franchises. Management
fees charged during the years ended December 31, 1997, 1996 and 1995 were
$179,934, $248,591 and $229,473, respectively.
Any partnership distributions made from cash flow (defined as cash receipts
derived from routine operations, less debt principal and interest payments and
cash expenses) are allocated 99 percent to the limited partners and 1 percent to
the General Partner. Distributions resulting from the sale or refinancing of a
system or upon dissolution of the Partnership will be made as follows: first, to
the limited partners in an amount which together with all prior distributions,
other than those made regularly from cash flow, will equal their initial capital
contribution; second, payment to the limited partners of a liquidation
preference equal to a 10 percent cumulative return on their initial capital
contribution, reduced by all prior distributions from cash flow; and the
balance, 75 percent to the limited partners and 25 percent to the General
Partner.
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, administrative accounting, legal, and investor relations services to
the Partnership. Such services, and their related costs, are necessary to the
operations of the Partnership and would have been incurred by the Partnership if
it was a stand alone entity. Allocations of personnel costs 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 revenues to the total revenues of all systems
owned or managed by the General Partner and certain of its subsidiaries. Systems
owned by the General Partner and all other systems owned by partnerships for
which Intercable is the general partner 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. Amounts allocated
to the Partnership by the General Partner for overhead and administrative
expenses during the years ended December 31, 1997, 1996 and 1995 were $227,093,
$348,452 and $348,151, respectively.
The Partnership was charged interest during 1997 at an average interest
rate of approximately 7.82 percent per annum on the amounts due the General
Partner, which approximated the General Partner's weighted average cost of
borrowing. Total interest charged to the partnership by the General Partner was
$4,169, $-0- and $37,498 for the years ended December 31, 1997, 1996 and 1995,
respectively.
Payments to/from affiliates for programming services
----------------------------------------------------
The Partnership receives or has received programming from Superaudio,
Knowledge Tv, Inc., Jones Computer Network, Ltd., Great American Country, Inc.
and Product Information Network, all of which are affiliates of the General
Partner.
25
<PAGE>
Payments to Superaudio totaled $6,231, $8,547 and $7,517 in 1997, 1996 and
1995, respectively. Payments to Knowledge Tv, Inc. totaled $6,945, $9,211 and
$8,040 in 1997, 1996 and 1995, respectively. Payments to Jones Computer
Network, Ltd., which discontinued service in April 1997, totaled $5,636, $14,923
and $6,518 in 1997, 1996 and 1995, respectively. Payments to Great American
Country, Inc., which initiated service in 1996, totaled $7,466 in 1997 and
$10,356 in 1996.
The Partnership receives a commission from Product Information Network
based on a percentage of advertising revenues and number of subscribers.
Product Information Network paid commissions to the Partnership totaling
$13,342, $12,306 and $8,015 in 1997, 1996 and 1995, respectively.
(4) DISTRIBUTIONS FROM CASH FLOW
----------------------------
A primary objective of the Partnership has been to provide quarterly cash
distributions from operating cash flow to its partners. During 1997, the
Partnership declared such distributions totaling $555,558, of which $550,000 was
payable to the limited partners and $5,558 was payable to the General Partner.
The limited partner distributions of $550,000 equates to $65 for each $1,000
invested in the Partnership. These distributions, which were principally from
operating cash flow, were paid to limited partners during 1997, except the
fourth quarter distribution of $75,000, which was paid on February 13, 1998.
The General Partner has agreed to defer its portion of cash flow distributions
until the partnership is liquidated. To date, the limited partners have
received a total of $8,699,000 in distributions from cash flow, or $1,023 for
each $1,000 invested in the Partnership. Due to the announced sale of the
Partnership's remaining cable television system, and due to the fact that
Principal payments are required in 1998 on the Partnership's loan, the General
Partner does not expect to pay any additional cash flow distributions during the
remaining term of the Partnership.
(5) PROPERTY, PLANT AND EQUIPMENT
-----------------------------
Property, plant and equipment as of December 31, 1997 and 1996, consisted
of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------
1997 1996
------------ -------------
<S> <C> <C>
Cable distribution systems $ 5,561,583 $ 7,771,101
Equipment and tools 419,360 457,819
Office furniture and equipment 284,963 306,160
Buildings 111,550 114,920
Vehicles 174,027 222,869
Land 150,000 150,000
----------- -----------
6,701,483 9,022,869
Less- accumulated depreciation (3,778,933) (4,794,646)
----------- -----------
$ 2,922,550 $ 4,228,223
=========== ===========
(6) DEBT
----
Debt consists of the following: December 31,
------------
1997 1996
----------- -----------
Lending institutions-
Revolving credit and term loan agreement $ 3,300,000 $ 5,200,000
Capital lease obligations 90,507 96,610
----------- -----------
$ 3,390,507 $ 5,296,610
=========== ===========
</TABLE>
As a result of the sale of the Milwaukie System on March 11, 1997, the
Partnership repaid $3,200,000 of the then-outstanding balance of its $6,500,000
revolving credit facility, and the commitment amount was reduced to $3,300,000.
The revolving credit period expired December 31, 1997, at which time the
$3,300,000 outstanding balance converted to a term loan. The term loan is
payable in 24 consecutive quarterly installments that will commence on March 31,
1998. Installments due during 1998 total $330,000 and will be funded by cash on
hand and cash generated from operations. Interest on outstanding principal
amounts on the credit facility is computed at the Partnership's option of the
26
<PAGE>
London Interbank Offered Rate plus 1-1/4 percent or the Prime Rate plus 1/4
percent. The effective interest rates on amounts outstanding as of December 31,
1997 and 1996 were 7.46 percent and 6.81 percent, respectively.
Installments due on debt principal for the five years ending December 31,
2002 and thereafter, respectively, are $357,152, $439,652, $522,152, $669,051,
$660,000 and $742,500. At December 31, 1997, substantially all of the
Partnership's assets secured the above indebtedness.
At December 31, 1997, the carrying amount of the Partnership's long-term
debt did not differ significantly from the estimated fair value of the financial
instruments. The fair value of the Partnership's long-term debt is estimated
based on the discounted amount of future debt service payments using rates of
borrowing for a liability of similar risk.
(7) INCOME TAXES
------------
Income taxes have not been recorded in the accompanying financial
statements because they accrue directly to the partners. The federal and state
income tax returns of the Partnership are prepared and filed by the General
Partner.
The Partnership tax returns, the qualification of the Partnership as
such for tax purposes, and the amount of distributable partnership income or
loss are subject to examination by federal and state taxing authorities. If
such examinations result in changes with respect to the Partnership's
qualification as such, or in changes with respect to the Partnership's recorded
income or loss, the tax liability of the General and limited partners would
likely be changed accordingly.
Taxable loss reported to the partners is different from that reported in
the statements of operations due to the difference in depreciation recognized
under generally accepted accounting principles and the expense allowed for tax
purposes under the Modified Accelerated Cost Recovery System (MACRS). There are
no other significant differences between taxable loss and the net loss reported
in the statements of operations.
(8) COMMITMENTS AND CONTINGENCIES
-----------------------------
The Partnership rented office and other facilities under various long-term
lease arrangements. Rent paid under such lease agreements totaled $7,845,
$32,053 and $30,791, respectively, for the years ended December 31, 1997, 1996
and 1995.
(9) SUPPLEMENTARY PROFIT AND LOSS INFORMATION
-----------------------------------------
Supplementary profit and loss information for the respective periods is
presented below:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
<S> <C> <C> <C>
1997 1996 1995
-------- -------- --------
Maintenance and repairs $ 30,742 $ 52,991 $ 39,605
======== ======== ========
Taxes, other than income and payroll taxes $ 13,873 $ 24,169 $ 26,032
======== ======== ========
Advertising $ 37,802 $ 68,935 $ 63,026
======== ======== ========
Depreciation of property, plant and equipment $660,321 $764,106 $717,338
======== ======== ========
Amortization of intangible assets $ 24,427 $ 71,268 $ 70,218
======== ======== ========
</TABLE>
27
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
---------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
None.
PART III.
---------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------
The Partnership itself has no officers or directors. Certain
information concerning the directors and executive officers of the General
Partner is set forth below. Directors of the General Partner serve until the
next annual meeting of the General Partner and until their successors shall be
elected and qualified.
Glenn R. Jones 68 Chairman of the Board and Chief Executive Officer
James B. O'Brien 48 President and Director
Ruth E. Warren 48 Group Vice President/Operations
Kevin P. Coyle 46 Group Vice President/Finance
Christopher J. Bowick 42 Group Vice President/Technology
Cheryl M. Sprague 45 Group Vice President/Human Resources
Cynthia A. Winning 46 Group Vice President/Marketing
Elizabeth M. Steele 46 Vice President/General Counsel/Secretary
Larry W. Kaschinske 38 Vice President/Controller
Robert E. Cole 65 Director
William E. Frenzel 69 Director
Josef J. Fridman 52 Director
Donald L. Jacobs 59 Director
Robert Kearney 61 Director
James J. Krejci 56 Director
Raphael M. Solot 64 Director
Howard O. Thrall 50 Director
Siim A. Vanaselja 41 Director
Sanford Zisman 58 Director
Robert B. Zoellick 44 Director
Mr. Glenn R. Jones has served as Chairman of the Board of Directors
and Chief Executive Officer of the General Partner since its formation in 1970,
and he was President from June 1984 until April 1988. Mr. Jones is the sole
shareholder, President and Chairman of the Board of Directors of Jones
International, Ltd. He is also Chairman of the Board of Directors of the
subsidiaries of the General Partner and of certain other affiliates of the
General Partner. Mr. Jones has been involved in the cable television business in
various capacities since 1961, and he is a member of the Board of Directors and
of the Executive Committee of the National Cable Television Association. In
addition, Mr. Jones is a member of the Board of Education Council of the
National Alliance of Business. Mr. Jones is also a founding member of the James
Madison Council of the Library of Congress. Mr. Jones has been the recipient of
several awards including: the Grand Tam Award in 1989, the highest award from
the Cable Television Administration and Marketing Society; the President's Award
from the Cable Television Public Affairs Association in recognition of Jones
International's educational efforts through Mind Extension University (now
Knowledge TV); the Donald G. McGannon Award for the advancement of minorities
and women in cable from the United Church of Christ Office of Communications;
the STAR Award from American Women in Radio and Television, Inc. for exhibition
of a commitment to the issues and concerns of women in television and radio; the
Cableforce 2000 Accolade awarded by Women in Cable in recognition of the General
Partner's innovative employee programs; the Most Outstanding Corporate
Individual Achievement Award from the International Distance Learning Conference
for his contributions to distance education; the Golden Plate Award from the
American Academy of Achievement for his advances in distance education; the Man
of the Year named by the Denver chapter of the Achievement Rewards for College
Scientists; and in 1994 Mr. Jones was inducted into Broadcasting and Cable's
Hall of Fame.
28
<PAGE>
Mr. James B. O'Brien, the General Partner's President, joined the
General Partner in January 1982. Prior to being elected President and a Director
of the General Partner in December 1989, Mr. O'Brien served as a division
manager, director of operations planning/assistant to the CEO, Fund Vice
President and Group Vice President/Operations. Mr. O'Brien was appointed to the
General Partner's Executive Committee in August 1993. As President, he is
responsible for the day-to-day operations of the cable television systems
managed and owned by the General Partner. Mr. O'Brien is a board member of Cable
Labs, Inc., the research arm of the U.S. cable television industry. He also
serves as the Chairman of the Board of Directors of the Cable Television
Administration and Marketing Association and as a director and a member of the
Executive Committee of the Walter Kaitz Foundation, a foundation that places
people of ethnic minority groups in positions with cable television systems,
networks and vendor companies.
Ms. Ruth E. Warren joined the General Partner in August 1980 and has
served in various operational capacities, including system marketing manager,
director of marketing, assistant division manager, regional vice president and
Fund Vice President, since then. Ms. Warren was elected Group Vice
President/Operations of the General Partner in September 1990.
Mr. Kevin P. Coyle joined The Jones Group, Ltd. in July 1981 as Vice
President/Financial Services. In September 1985, he was appointed Senior Vice
President/Financial Services. He was elected Treasurer of the General Partner
in August 1987, Vice President/Treasurer in April 1988 and Group Vice
President/Finance and Chief Financial Officer in October 1990.
Mr. Christopher J. Bowick joined the General Partner in September 1991
as Group Vice President/Technology and Chief Technical Officer. Prior to joining
the General Partner, Mr. Bowick worked for Scientific Atlanta's Transmission
Systems Business Division in various technical management capacities since 1981,
and as Vice President of Engineering since 1989. Mr. Bowick also has served
since 1995 as President of Jones Futurex, Inc., a wholly owned subsidiary of the
General Partner that manufactures and markets data encryption products.
Ms. Cheryl M. Sprague joined the General Partner in November 1997 as
Group Vice President/Human Resources. Prior to November 1997 and since December
1995, Ms. Sprague served as Director, Human Resources for Westmoreland Coal
Company, where she was responsible for human resources management for said
company and three of its subsidiaries. From October 1993 to December 1995, Ms.
Sprague served as President of Peak Executive Resources, where she provided
consulting services in organizational development and human resources to
businesses experiencing organizational transition. From April 1992 to October
1993, Ms. Sprague was Vice President, Human Resources for Penrose-St. Francis
Healthcare System, where she was responsible for management of all human
resources activities. Ms. Sprague serves as an adjunct instructor at Regis
University and has earned the professional designation as a Senior Professional
in Human Resources from the Society for Human Resource Management and its
affiliate, the Human Resources Certification Board. Ms. Sprague is a past
president of the Colorado Human Resource Association and was named by that
association as the Colorado Human Resources Administrator of the Year in 1986.
Ms. Sprague also serves as a director on the Area VI Board for the Society for
Human Resource Management.
Ms. Cynthia A. Winning joined the General Partner as Group Vice
President/Marketing in December 1994. Previous to joining the General Partner,
Ms. Winning served since 1994 as the President of PRS Inc., Denver, Colorado, a
sports and event marketing company. From 1979 to 1981 and from 1986 to 1994,
Ms. Winning served as the Vice President and Director of Marketing for Citicorp
Retail Services, Inc., a provider of private-label credit cards for ten national
retail department store chains. From 1981 to 1986, Ms. Winning was the Director
of Marketing Services for Daniels & Associates cable television operations, as
well as the Western Division Marketing Director for Capital Cities Cable. Ms.
Winning also serves as a board member of Cities in Schools, a dropout
intervention/prevention program.
29
<PAGE>
Ms. Elizabeth M. Steele joined the General Partner in August 1987 as
Vice President/General Counsel and Secretary. From August 1980 until joining the
General Partner, Ms. Steele was an associate and then a partner at the Denver
law firm of Davis, Graham & Stubbs, which serves as counsel to the General
Partner.
Mr. Larry Kaschinske joined the General Partner in 1984 as a staff
accountant in the General Partner's former Wisconsin Division, was promoted to
Assistant Controller in 1990, named Controller in August 1994 and was elected
Vice President/Controller in June 1996.
Mr. Robert E. Cole was appointed a Director of the General Partner in
March 1996. Mr. Cole is currently self-employed as a partner of First Variable
Insurance Marketing and is responsible for marketing to National Association of
Securities Dealers, Inc. firms in northern California, Oregon, Washington and
Alaska. From 1993 to 1995, Mr. Cole was the Director of Marketing for Lamar Life
Insurance Company; from 1992 to 1993, Mr. Cole was Senior Vice President of PMI
Inc., a third party lender serving the special needs of Corporate Owned Life
Insurance (COLI) and from 1988 to 1992, Mr. Cole was the principal and co-
founder of a specialty investment banking firm that provided services to finance
the ownership and growth of emerging companies, productive assets and real
property. Mr. Cole is a Certified Financial Planner and a former United States
Naval Aviator.
Mr. William E. Frenzel was appointed a Director of the General Partner
in April 1995. Mr. Frenzel has been a Guest Scholar since 1991 with the
Brookings Institution, a research organization located in Washington D. C. Until
his retirement in January 1991, Mr. Frenzel served for twenty years in the
United States House of Representatives, representing the State of Minnesota,
where he was a member of the House Ways and Means Committee and its Trade
Subcommittee, the Congressional Representative to the General Agreement on
Tariffs and Trade (GATT), the Ranking Minority Member on the House Budget
Committee and a member of the National Economic Commission. Mr. Frenzel also
served in the Minnesota Legislature for eight years. He is a Distinguished
Fellow of the Tax Foundation, Vice Chairman of the Eurasia Foundation, a Board
Member of the U.S.-Japan Foundation, the Close-Up Foundation, Sit Mutual Funds
and Chairman of the Japan-America Society of Washington.
Mr. Josef J. Fridman was appointed a Director of the General Partner
in February 1998. Mr. Fridman is currently senior vice-president, law and
corporate secretary of BCE Inc., Canada's largest telecommunications company.
Mr. Fridman joined Bell Canada, a wholly owned subsidiary of BCE Inc., in 1969,
and has held increasingly senior positions with Bell Canada and BCE Inc. since
such time. Mr. Fridman has held his current position since January 1991. Mr.
Fridman's directorships include Telesat Canada, TMI Communications, Inc.,
Telebec Itee, BCI Telecom Holding Inc. and BCE Corporate Services Inc. He is a
member of the Quebec Bar Association, the Canadian, American and International
Bar Associations and the Lord Reading Law Society. Mr. Fridman is a governor of
the Quebec Bar Association.
Mr. Donald L. Jacobs was appointed a Director of the General Partner
in April 1995. Mr. Jacobs is a retired executive officer of TRW. Prior to his
retirement, he was Vice President and Deputy Manager of the Space and Defense
Sector; prior to that appointment, he was the Vice President and General Manager
of the Defense Systems Group and prior to his appointment as Group General
Manager, he was President of ESL, Inc., a wholly owned subsidiary of TRW. During
his career, Mr. Jacobs served on several corporate, professional and civic
boards.
Mr. Robert Kearney was appointed a director of the General Partner in
July 1997. Mr. Kearney is a retired executive officer of Bell Canada. Prior to
his retirement in December 1993, Mr. Kearney was the President and Chief
Executive Officer of Bell Canada. He served as Chairman of BCE Canadian Telecom
Group in 1994 and as Deputy Chairman of BCI Management Limited in 1995. During
his career, Mr. Kearney served in a variety of capacities in the Canadian,
American and International Standards organizations, and he has served on several
corporate, professional and civic boards.
Mr. James J. Krejci is President and CEO of Imagelink Technologies,
Inc., a privately financed company with leading technology in the desktop or
personal computer videoconferencing market. Prior to joining
30
<PAGE>
Imagelink Technologies in July 1996, Mr. Krejci was President of the
International Division of International Gaming Technology, the world's largest
gaming equipment manufacturer, with headquarters in Reno, Nevada. Prior to
joining IGT in May 1994, Mr. Krejci was Group Vice President of Jones
International, Ltd. and was Group Vice President of the General Partner. He also
served as an officer of subsidiaries of Jones International, Ltd. until leaving
the General Partner in May 1994. Mr. Krejci started his career as an electronics
research engineer with the Allen-Bradley Company, then moved to the 3M Company,
General Electric and Becton Dickinson until March 1985 when he joined Jones
International, Ltd. Mr. Krejci has been a director of the General Partner since
August 1987.
Mr. Raphael M. Solot was appointed a Director of the General Partner
in March 1996. Mr. Solot is an attorney and has practiced law for 34 years with
an emphasis on franchise, corporate and partnership law and complex litigation.
Mr. Howard O. Thrall was appointed a Director of the General Partner
in March 1996. Mr. Thrall had previously served as a Director of the General
Partner from December 1988 to December 1994. Mr. Thrall is a management and
international marketing consultant, having active assignments with First
National Net, Inc., LEP Technologies, Cheong Kang Associates (Korea), Aero
Investment Alliance, Inc. and Western Real Estate Partners, among others. From
September 1993 through July 1996, Mr. Thrall served as Vice President of Sales,
Asian Region, for World Airways, Inc. headquartered at the Washington Dulles
International Airport. From 1984 until August 1993, Mr. Thrall was with the
McDonnell Douglas Corporation, where he concluded as a Regional Vice President,
Commercial Marketing with the Douglas Aircraft Company subsidiary.
Mr. Siim A. Vanaselja was appointed a Director of the General Partner
in August 1996. He is the Executive Vice President and Chief Financial Officer
of Bell Canada International Inc. and Vice President of BCI Telecom Holding Inc.
Mr. Vanaselja joined BCE Inc., Canada's largest telecommunications company, in
February 1994 as Assistant Vice-President, International Taxation. In June 1994,
he was appointed Assistant Vice-President and Director of Taxation, and in
February 1995, Mr. Vanaselja was appointed Vice-President, Taxation. On August
1, 1996, Mr. Vanaselja was appointed the Executive Vice President and Chief
Financial Officer of Bell Canada International Inc., a subsidiary of BCE Inc.
Prior to joining BCE Inc. and since August 1989, Mr. Vanaselja was a partner in
the Toronto office of KPMG Peat Marwick Thorne. Mr. Vanaselja has been a member
of the Institute of Chartered Accountants of Ontario since 1982 and is a member
of the Canadian Tax Foundation, the Tax Executives Institute and the
International Fiscal Association.
Mr. Sanford Zisman was appointed a director of the General Partner in
June 1996. Mr. Zisman is a principal in the law firm of Zisman & Ingraham, P.C.
of Denver, Colorado and he has practiced law for 32 years, specializing in the
areas of tax, business and estate planning and probate administration. Mr.
Zisman was a member of the Board of Directors of Saint Joseph Hospital, the
largest hospital in Colorado, serving at various times as Chairman of the Board,
Chairman of the Finance Committee and Chairman of the Strategic Planning
Committee. Since 1982, he has also served on the Board of Directors of Maxim
Series Fund, Inc., a subsidiary of Great-West Life Assurance Company.
Mr. Robert B. Zoellick was appointed a Director of the General Partner
in April 1995. Mr. Zoellick is the John M. Olin Professor at the U.S. Naval
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. Mr.
Zoellick currently serves on the boards of Alliance Capital and Said Holdings.
31
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
--------------------------------
The Partnership has no employees; however, various personnel are
required to operate the Owatonna/Glencoe System. Such personnel are employed by
the General Partner and, pursuant to the terms of the limited partnership
agreement of the Partnership, the cost of such employment is charged by the
General Partner to the Partnership as a direct reimbursement item. See Item 13.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
----------------------------------------------------------------------
As of February 16, 1998, no person or entity owned more than 5 percent
of the limited partnership interests of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------
The General Partner and its affiliates engage in certain transactions
with the Partnership. 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.
TRANSACTIONS WITH THE GENERAL PARTNER
The General Partner charges the Partnership a 5 percent management
fee, and the General Partner is reimbursed for certain allocated overhead and
administrative expenses. These expenses represent the salaries and benefits paid
to corporate personnel, rent, data processing services and other corporate
facilities costs. Such personnel provide engineering, marketing, administrative,
accounting, legal and investor relations services to the Partnership.
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 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 from time to time also advances funds to the
Partnership and charges interest on the balance payable. The interest rate
charged approximates the General Partner's weighted average cost of borrowing.
TRANSACTIONS WITH AFFILIATES
Knowledge TV, Inc., a company owned 67 percent by Jones Education
Group, Ltd., 7 percent by Mr. Jones and 26 percent by the General Partner,
operates the television network JEC Knowledge TV. JEC Knowledge TV 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 Owatonna/Glencoe System.
Jones Computer Network, Ltd., a wholly owned subsidiary of Jones
Education Group, Ltd., a company owned 64 percent by Jones International, Ltd.,
16 percent by the General Partner, 12 percent by BTH and 8 percent by Mr. Jones,
operated the television network, Jones Computer Network. This network provided
programming focused primarily on computers and technology. Jones Computer
Network sold its programming to certain cable television systems the
Owatonna/Glencoe System. Jones Computer Network, Ltd. terminated its programming
in April 1997.
32
<PAGE>
The Great American Country network provides country music video
programming to the cable television systems owned by the Partnership. This
network, owned and operated by Great American Country, Inc., a subsidiary of
Jones International Networks, Ltd., an affiliate of the General Partner,
commenced service in 1996 in the Owatonna/Glencoe System.
Jones Galactic Radio, Inc. is a subsidiary of Jones International
Networks, Ltd., an affiliate of the General Partner. Superaudio, a joint venture
between Jones Galactic Radio, Inc. and an unaffiliated entity, provides audio
programming to the Owatonna/Glencoe System.
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
Owatonna/Glencoe System carries PIN for all or part of each day. Revenues
received by the Partnership from the PIN Venture relating to the
Owatonna/Glencoe System totaled approximately $13,342 for the year ended
December 31, 1997.
The charges to the Partnership for related party transactions are as
follows for the periods indicated:
For the Year Ended December 31,
-------------------------------
1997 1996 1995
-------- -------- --------
Management fees $179,934 $248,591 $229,473
Allocation of expenses 227,093 348,452 348,151
Interest expense 4,169 0 37,498
Amount of notes and advances outstanding 0 0 39,725
Highest amount of notes and advances outstanding 40,509 39,725 776,291
Programming fees:
Knowledge TV, Inc. 6,945 9,211 8,040
Jones Computer Network, Ltd. 5,636 14,923 6,518
Great American Country 7,466 10,356 0
Superaudio 6,231 8,547 7,517
33
<PAGE>
PART IV.
--------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------
(a) 1. See index to financial statements for a list of financial
statements and exhibits thereto filed as a part of this report.
3. The following exhibits are filed herewith:
4.1 Limited Partnership Agreement of Jones Cable Income Fund 1-A, Ltd.
(1)
10.1.1 Copy of a franchise and related documents thereto granting a
community antenna television franchise for the City of Glencoe,
Minnesota. (1)
10.1.2 Copy of a franchise and related documents thereto granting a
community antenna television franchise for the Township of Glencoe,
Minnesota. (2)
10.1.3 Copy of a franchise and related documents thereto granting a
community antenna television franchise for the City of Owatonna,
Minnesota. (1)
10.1.4 Copy of a franchise and related documents thereto granting a
community antenna television franchise for the Township of
Owatonna, Minnesota. (2)
10.2.1 Revolving Credit and Term Loan Agreement dated 7/21/95 between
Jones Cable Income Fund 1-A, Ltd. and Colorado National Bank. (3)
10.2.3 Asset Purchase Agreement dated November 8, 1996 between TCI
Cablevision of Georgia, Inc. and Jones Cable Income Fund 1-A, Ltd.
(3)
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
____________
(1) Incorporated by reference from Registrant's Report on Form 10-K for
the fiscal year ended December 31, 1986.
(2) Incorporated by reference from Registrant's Report on Form 10-K for
the fiscal year ended December 31, 1992.
(3) Incorporated by reference from Registrant's Report on Form 10-K for
the fiscal year ended December 31, 1996.
34
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
JONES CABLE INCOME FUND 1-A, LTD.
a Colorado limited partnership
By: Jones Intercable, Inc.
By: /s/ Glenn R. Jones
------------------
Glenn R. Jones
Chairman of the Board and Chief
Dated: March 23, 1998 Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ Glenn R. Jones
------------------
Glenn R. Jones
Chairman of the Board and Chief
Executive Officer
Dated: March 23, 1998 (Principal Executive Officer)
By: /s/ Kevin P. Coyle
------------------
Kevin P. Coyle
Group Vice President/Finance
Dated: March 23, 1998 (Principal Financial Officer)
By: /s/ Larry Kaschinske
--------------------
Larry Kaschinske
Vice President/Controller
Dated: March 23, 1998 (Principal Accounting Officer)
By: /s/ James B. O'Brien
--------------------
James B. O'Brien
Dated: March 23, 1998 President and Director
By: /s/ Robert E. Cole
------------------
Robert E. Cole
Dated: March 23, 1998 Director
By: /s/ William E. Frenzel
----------------------
William E. Frenzel
Dated: March 23, 1998 Director
35
<PAGE>
By:
----------------------
Josef J. Fridman
Dated: March 23, 1998 Director
By:
----------------------
Donald L. Jacobs
Dated: March 23, 1998 Director
By:
----------------------
Robert Kearney
Dated: March 23, 1998 Director
By: /s/ James J. Krejci
-------------------
James J. Krejci
Dated: March 23, 1998 Director
By: /s/ Raphael M. Solot
--------------------
Raphael M. Solot
Dated: March 23, 1998 Director
By: /s/ Howard O. Thrall
--------------------
Howard O. Thrall
Dated: March 23, 1998 Director
By:
----------------------
Siim A. Vanaselja
Dated: March 23, 1998 Director
By: /s/ Sanford Zisman
------------------
Sanford Zisman
Dated: March 23, 1998 Director
By: /s/ Robert B. Zoellick
----------------------
Robert B. Zoellick
Dated: March 23, 1998 Director
36
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 788,679
<SECURITIES> 0
<RECEIVABLES> 59,963
<ALLOWANCES> (5,628)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 6,701,483
<DEPRECIATION> (3,778,933)
<TOTAL-ASSETS> 3,932,550
<CURRENT-LIABILITIES> 311,056
<BONDS> 3,390,507
0
0
<COMMON> 0
<OTHER-SE> 230,987
<TOTAL-LIABILITY-AND-EQUITY> 3,932,550
<SALES> 0
<TOTAL-REVENUES> 3,598,676
<CGS> 0
<TOTAL-COSTS> 3,273,925
<OTHER-EXPENSES> (6,429,927)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 215,331
<INCOME-PRETAX> 6,539,347
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,539,347
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,539,347
<EPS-PRIMARY> 374.93
<EPS-DILUTED> 374.93
</TABLE>
