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FORM 10-K/A NO. 1
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: 0-14206
CABLE TV FUND 12-D, LTD.
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(Exact name of registrant as specified in its charter)
Colorado 84-1010423
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(State of Organization) (IRS Employer Identification No.)
P.O. Box 3309, Englewood, Colorado 80155-3309 (303) 792-3111
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(Address of principal executive office and Zip Code) (Registrant's telephone
no. including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited Partnership
Interests
Indicate by check mark whether the registrants, (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days:
Yes x No _____
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Aggregate market value of the voting stock held by non-affiliates of the
registrant: N/A
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((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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All statements, other than statements of historical facts, included in
this Form 10-K Report that address activities, events or developments that the
Partnership, the Venture 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 results predicted by these forward-
looking statements as a result of various factors.
PART I.
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ITEM 1. BUSINESS
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THE PARTNERSHIP. Cable TV Fund 12-D, Ltd. (the "Partnership") is a
Colorado limited partnership that was formed pursuant to the public offering of
limited partnership interests in the Cable TV Fund 12 Limited Partnership
Program (the "Program"), which was sponsored by Jones Intercable, Inc. (the
"General Partner"). Cable TV Fund 12-A, Ltd. ("Fund 12-A"), Cable TV Fund 12-B,
Ltd. ("Fund 12-B") and Cable TV Fund 12-C, Ltd. ("Fund 12-C") are the other
partnerships that were formed pursuant to that Program. In 1986, the
Partnership, Fund 12-B and Fund 12-C formed a general partnership known as Cable
TV Fund 12-BCD Venture (the "Venture"), in which the Partnership owns a 76
percent interest, Fund 12-B owns a 9 percent interest and Fund 12-C owns a 15
percent interest. The Partnership and the Venture were formed for the purpose of
acquiring and operating cable television systems.
The Partnership does not directly own any cable television systems.
The Partnership's sole asset is its 76 percent interest in the Venture. The
Venture owns the cable television systems serving Palmdale, Lancaster and Rancho
Vista and the military installation of Edwards Air Force Base, all in California
(the "Palmdale System") and Albuquerque, New Mexico (the "Albuquerque System").
See Item 2. The Palmdale System and the Albuquerque System may collectively be
referred to as the "Systems." The Venture has entered into an agreement to sell
the Albuquerque System to the General Partner, and the General Partner expects
the Palmdale System will also be sold in 1998.
PROPOSED DISPOSITION OF CABLE TELEVISION SYSTEM. Pursuant to the terms
and conditions of a purchase and sale agreement dated as of July 28, 1997 (the
"Purchase and Sale Agreement") by and between the Venture as seller and the
General Partner as purchaser, the Venture agreed to sell the Albuquerque System
to the General Partner or to a subsidiary of the General Partner. The General
Partner has assigned its rights and obligations as purchaser to Jones
Communications of New Mexico, Inc., an indirect wholly owned subsidiary. Subject
to the customary working capital closing adjustments, the sales price for the
Albuquerque System is $222,963,267, which price is based on the average of three
separate independent appraisals of the Albuquerque System's fair market value.
The closing of the sale will occur on a date upon which the Venture and the
purchaser mutually agree. It is anticipated that the closing will occur in the
second quarter of 1998 within a few weeks after receipt of the approval of the
sale by the limited partners of the Venture's three constituent limited
partnerships: the Partnership, Fund 12-B and Fund 12-C. The General Partner
anticipates that it will conduct a vote of the limited partners of the
Partnership, Fund 12-B and Fund 12-C in March and April 1998.
The purchaser's obligations under the Purchase and Sale Agreement are
subject to the following conditions: (a) the Venture shall have obtained all
material consents and approvals from governmental authorities and third parties
with whom the Venture has contracted that are necessary for the transfer of the
Albuquerque System, (b) all representations and warranties of the Venture shall
be true and correct in all material respects as of the closing date and (c)
termination or expiration of the statutory waiting period applicable to the
Purchase and Sale Agreement and the transactions contemplated thereby under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). The Venture's obligations under the Purchase and Sale Agreement are
subject to the following conditions: (a) the receipt of the purchase price for
the Albuquerque System, (b) the limited partners of the Partnership, Fund 12-B
and Fund 12-C shall have approved the Venture's sale of the Albuquerque System
and (c) the statutory waiting periods applicable to the Purchase and Sale
Agreement and the
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transactions contemplated thereby under the HSR Act shall have terminated or
shall have expired. All waiting periods under the HSR Act have expired, thereby
removing this as a condition to closing.
Upon the consummation of the proposed sale of the Albuquerque System,
the Venture will repay its outstanding Senior Notes balance of $41,544,890 plus
a make whole premium that, based on current market interest rates, is estimated
to total $2,016,985, plus accrued interest and, pursuant to an amendment to the
Venture's credit facility, distribute $125,000,000 to the Partnership, Fund 12-B
and Fund 12-C in proportion to their ownership interests in the Venture. The
remaining proceeds will be used to repay a portion of the outstanding balance
and accrued interest on its credit facility. The closing adjustments will not
affect the amount of the net sale proceeds distributed to the Partnership, Fund
12-B and Fund 12-C. The Partnership will receive 76 percent of the net sale
proceeds, estimated to total approximately $94,428,308, and the Partnership will
distribute this portion of the net sale proceeds to its partners of record as of
the closing date of the sale of the Albuquerque System. Based upon financial
information as of December 31, 1997, as a result of the Albuquerque System's
sale, the limited partners of the Partnership, as a group, will receive
approximately $90,101,856 and the General Partner will receive approximately
$4,326,452. Limited partners will receive $380 for each $500 limited partnership
interest, or $759 for each $1,000 invested in the Partnership from the
Partnership's portion of the net proceeds of the Albuquerque System's sale. Once
the Partnership has completed the distribution of its portion of the net
proceeds from the sale of the Albuquerque System, limited partners of the
Partnership will have received a total of $555 for each $500 limited partnership
interest, or $1,109 for each $1,000 invested in the Partnership, taking into
account the prior distributions to limited partners made in 1995 and 1996 from
the net proceeds of the sale of the Tampa System.
CABLE TELEVISION SERVICES. The Systems offer 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
signals received from satellites. Basic service also usually includes programs
originated locally by the system, which may consist of music, news, weather
reports, stock market and financial information and live or videotaped programs
of a public service or entertainment nature. FM radio signals are also
frequently distributed to subscribers as part of the basic service.
The Systems offer tier services on an optional basis to 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
Systems also offer a package that includes the basic service channels and the
tier services.
The Systems also offer 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 Systems also offer to subscribers pay-per-view programming. Pay-
per-view is a service that allows subscribers to receive single programs,
frequently consisting of motion pictures that have recently completed their
theatrical exhibitions and major sporting events, and to pay for such service on
a program-by-program basis.
REVENUES. Monthly service fees for basic, tier and premium services
constitute the major source of revenue for the Systems. At December 31, 1997,
the Systems' monthly basic service rates ranged from $8.35 to
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$13.81, monthly basic and tier ("basic plus") service rates ranged from $17.00
to $26.52 and monthly premium services ranged from $1.95 to $10.95 per premium
service. In addition, the Venture earns revenues from the Systems' pay-per-view
programs and advertising fees. Related charges may include a nonrecurring
installation fee that ranges from $4.95 to $35.54; however, from time to time
the Systems have followed the common industry practice of reducing or waiving
the installation fee during promotional periods. Commercial subscribers such as
hotels, motels and hospitals are charged a nonrecurring connection fee that
usually covers the cost of installation. Except under the terms of certain
contracts with commercial subscribers and residential apartment and condominium
complexes, the subscribers are free to discontinue the service at any time
without penalty. For the year ended December 31, 1997, of the total fees
received by the Systems, basic service and tier service fees accounted for
approximately 64% of total revenues, premium service fees accounted for
approximately 12% of total revenues, pay-per-view fees were approximately 3% of
total revenues, advertising fees were approximately 9% of total revenues and the
remaining 12% of total revenues came principally from equipment rentals,
installation fees and program guide sales. The Venture is dependent upon the
timely receipt of service fees to provide for maintenance and replacement of
plant and equipment, current operating expenses and other costs of the Systems.
FRANCHISES. The Systems are constructed and operated under non-
exclusive, fixed-term franchises or other types of operating authorities
(referred to collectively herein as "franchises") granted by local governmental
authorities. 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.
Following are the franchises held by the Venture relating to the
Systems and the expiration date of each franchise:
<TABLE>
<CAPTION>
ALBUQUERQUE SYSTEM PALMDALE SYSTEM
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<S> <C> <C> <C>
Bernalillo County 08/05/2011 Edwards AFB 09/30/2004
City of Albuquerque 09/01/1999 City of Lancaster 05/04/2001
Kirtland AFB 10/01/1999 Los Angeles County 10/29/2005
Sandoval County 03/03/2002 Los Angeles County-Green Valley/ 10/29/2005
Town of Bernalillo 08/17/2001 Elizabeth Lake/Leona Valley
Valencia County 01/21/2000 City of Palmdale 02/13/2007
Village of Bosque Farms 10/13/1999
Village of Corrales 04/20/2006
Village of Los Ranchos 05/14/2011
</TABLE>
The Venture's franchises provide for the payment of fees to the
issuing authorities and generally range from 3% to 5% of the gross revenues of a
cable television system. The 1984 Cable Act prohibits franchising authorities
from imposing annual franchise fees in excess of 5% of gross revenues and also
permits the cable television system operator to seek renegotiation and
modification of franchise requirements if warranted by changed circumstances.
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.
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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 the systems owned or
managed by the General Partner but not in any of the systems owned by the
Venture. 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 Partner cannot predict at this time the extent of telephone
company competition that will emerge to owned or managed cable television
systems. 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 the General Partner's owned and managed
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 Venture 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 Venture 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
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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 Venture has
not lost a significant number of subscribers, nor a significant amount of
revenue, to MMDS operators competing with the Venture's cable television
systems. 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
Venture'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 Venture's cable systems and does not purport to describe
all present, proposed, or possible laws and regulations affecting the Venture.
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%) by the incumbent cable operator, appreciable penetration (more
than 15%) 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
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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
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, a 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
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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% 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% 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 of BCI Telecom Holding Inc. ("BCI") 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.
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 Venture'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
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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% 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
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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
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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 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 Venture'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.
9
<PAGE>
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% 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 Venture'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 Venture's business. The Systems have had some
subscribers who later terminated the service. Terminations occur primarily
because people move to another home or to another city. In other cases, people
terminate on a seasonal basis or because they no longer can afford or are
dissatisfied with the service. The amount of past due accounts in the Systems is
not significant. The Venture's policy with regard to past due accounts is
basically one of disconnecting service before a past due account becomes
material.
The Venture 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. Neither the Venture nor the Partnership has
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 Venture'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
Venture.
ITEM 2. PROPERTIES
------------------
The cable television systems owned by the Venture are described below:
10
<PAGE>
<TABLE>
<CAPTION>
Ownership SYSTEM ACQUISITION DATE
---------- ------ ----------------
<S> <C> <C>
Cable TV Fund 12-B, Ltd., Cable TV Palmdale System April 1986
Fund 12-C, Ltd. and Cable TV Fund Albuquerque System August 1986
12-D, Ltd. own a 9%, 15% and 76%
interest, respectively, through
their interest in Cable TV Fund
12-BCD Venture
</TABLE>
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 Systems. The monthly basic service rates set forth herein represent,
with respect to systems with multiple headends, the basic service rate charged
to the majority of the subscribers within the system. 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 Palmdale System operated cable plant
passing approximately 87,800 homes, with an approximate 72% penetration rate,
and the Albuquerque System operated cable plant passing approximately 236,600
homes, with an approximate 48% penetration rate. Figures for numbers of
subscribers and homes passed are compiled from the General Partner's records and
may be subject to adjustments.
<TABLE>
<CAPTION>
At December 31,
------------------------------------------------
Palmdale System 1997 1996 1995
- ---------------- ---- ---- ----
<S> <C> <C> <C>
Monthly basic plus service rate $ 26.52 $ 24.77 $ 23.27
Basic subscribers 63,521 63,188 61,993
Pay units 42,731 45,108 46,699
</TABLE>
<TABLE>
<CAPTION>
At December 31,
-----------------------------------------------
Albuquerque System 1997 1996 1995
- ------------------ ---- ---- ----
<S> <C> <C> <C>
Monthly basic plus service rate $ 25.35 $ 23.95 $ 22.85
Basic subscribers 114,553 112,460 109,911
Pay units 68,113 61,210 57,189
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
-------------------------
David Hirsch, Marty, Inc. Pension Plan (By its Trustee and Beneficiary,
-----------------------------------------------------------------------
Martin Ury) and Jonathan Fussner and Eileen Fussner, derivatively on behalf of
- ------------------------------------------------------------------------------
Cable TV Fund 12-B, Ltd., Cable TV Fund 12-C, Ltd. and Cable TV Fund 12-D, Ltd.
- -------------------------------------------------------------------------------
v. Jones Intercable, Inc. (Arapahoe County District Court, Colorado, Case No.
- -------------------------
96-CV-1800, Division 3).
The General Partner is a defendant in a now consolidated civil action
filed by limited partners of the Partnership derivatively on behalf of the
Partnership, Fund 12-B and Fund 12-C. The consolidated complaint generally
alleges that the General Partner breached its fiduciary duty to the plaintiffs
and to the other limited partners of the Partnership, Fund 12-B and Fund 12-C
and the Venture in connection with the Venture's sale of its Tampa, Florida
cable television system (the "Tampa System") to a subsidiary of the General
Partner and the subsequent trade to Time Warner. The consolidated complaint also
sets forth a claim for breach of contract and a claim for breach of the implied
covenant of good faith and fair dealing. Among other things, the plaintiffs
assert that the subsidiary of the General Partner that acquired the Tampa System
paid an inadequate price for the Tampa System. The price paid for the Tampa
System was determined by the average of three separate, independent appraisals
of the Tampa System's fair market value as required by the limited partnership
agreements of the Partnership, Fund 12-B and Fund 12-C. The plaintiffs have
challenged the adequacy and independence of the
11
<PAGE>
appraisals. The consolidated complaint seeks damages in an unspecified amount
and an award of attorneys' fees, and the complaint also seeks punitive damages
and certain equitable relief.
The General Partner has filed its answer to the consolidated complaint
and has generally denied the substantive allegations in the complaint and has
asserted a number of affirmative defenses. The General Partner intends to defend
this lawsuit vigorously.
On August 29, 1997, the General Partner moved for summary judgment in its
favor on the ground that plaintiffs did not make demand on the General Partner
for the relief they seek before commencing their lawsuits or show that such a
demand would have been futile. On January 8, 1998, the Court (1) held that
plaintiffs did not make demand before commencing their lawsuits or show that
such demand would have been futile, (2) stayed the consolidated case and vacated
the February 17, 1998 trial date, (3) ordered that plaintiffs make a demand on
the General Partner and that the General Partner appoint an independent counsel
to review, consider and report on that demand, (4) ordered that the independent
counsel be appointed at the March 1998 meeting of the General Partner's Board of
Directors and (5) ordered that the independent counsel will be subject to the
approval of the Court. The Court set a new trial date for October 26, 1998 in
the event that the case is not resolved through the independent counsel process
or otherwise.
Section 2.2 of the Partnership's limited partnership agreement (the
"Partnership Agreement") provides that the General Partner will not be liable to
the Partnership or to the limited partners for any act or omission performed or
omitted by it in good faith pursuant to the authority granted to the General
Partner by the Partnership Agreement. This provision further provides that the
General Partner will be liable to the Partnership and to the limited partners
only for fraud, bad faith or gross negligence in the performance of the cable
television activities of the Partnership or negligence in the management of the
internal affairs of the Partnership. Section 9.6 of the Partnership Agreement
provides that the Partnership "shall indemnify and save harmless the General
Partner and its affiliates and any agent or officer or director thereof, from
any loss or damage incurred by them, including legal fees and expenses and
amounts paid in settlement by reason of any action performed by the General
Partner or any agent, officer or director thereof on behalf of the Partnership
or in furtherance of its interest; provided, however, that the foregoing shall
not relieve the General Partner of its fiduciary duty to the limited partners or
liability for (nor shall the General Partner be indemnified for) its fraud, bad
faith or gross negligence in the performance of the cable television activities
of the Partnership or negligence in the management of the internal affairs of
the Partnership." In accordance with the foregoing provisions of the Partnership
Agreement, the Partnership, together with Fund 12-B and Fund 12-C, which have
identical partnership agreement provisions with respect to general partner
liability and indemnification, will be obligated to indemnify and save harmless
the General Partner from any loss incurred by it, including its legal fees and
expenses and amounts paid in settlement, in connection with the litigation
concerning the Tampa System sale unless the General Partner is found to have
breached its fiduciary duty to the limited partners in connection with the Tampa
System sale or is found to have committed fraud or to have acted in bad faith or
with gross negligence in connection with the Tampa System sale. Amounts
reimbursed to the General Partner by the three constituent limited partnerships
of the Venture would be in proportion to their ownership interests in the
Venture and such amounts may be significant, but the General Partner expects
that any such reimbursement will not have a material adverse effect on the
Partnership or the Venture.
Maxine Cohen, for herself and all others similarly situated v. Jones
--------------------------------------------------------------------
Intercable, Inc., a Colorado corporation for itself, its wholly owned
- ---------------------------------------------------------------------
subsidiaries, managed partnerships and other affiliated cable television
- ------------------------------------------------------------------------
entities (Bernalillo County, New Mexico District Court, Second Judicial
- --------
District, Case No. CV-97 09694). This class action Complaint for Declaratory
and Injunctive Relief and Restitution was filed on October 27, 1997 in the
Bernalillo County District Court, by Maxine Cohen for herself and all others
similarly situated. The Complaint basically alleges that the Defendant, Jones
Intercable, Inc., for itself, its wholly owned subsidiaries, managed
partnerships and other affiliated cable television entities, collected from its
cable television subscribers, illegal late payment penalties.
Belen Cordova, on behalf of herself and all others similarly situated v.
------------------------------------------------------------------------
Jones Intercable, Inc. (Bernalillo County, New Mexico District Court, Second
- ----------------------
Judicial District, Case No. CV-97 10957). This class action
12
<PAGE>
Complaint for Breach of Contract, Unconscionable Trade Practice and Restitution
was filed on December 2, 1997 in the Bernalillo County District Court by Belen
Cordova on behalf of herself and all others similarly situated. The Complaint
alleges that Jones Intercable, Inc. charges and collects from its cable
television subscribers in New Mexico unconscionable late payment penalties.
The plaintiffs in the Cohen and Cordova actions have not specified the
----- -------
requested relief in quantitative terms. The plaintiffs have requested that (i)
the court determine what is a reasonable late fee under applicable law, (ii) the
court order Jones Intercable, Inc. and its affiliates that own and operate cable
television systems to reduce their late payment penalties to such level going
forward and (iii) the court require Jones Intercable, Inc. and its affiliates
that own and operate cable television systems to refund all late fee payments in
excess of the "reasonable amount" paid by subscribers, subject to the applicable
statutes of limitations. The plaintiff in the Cordova case also seeks treble
damages for New Mexico subscribers based on alleged violations of the Deceptive
Practices Act. The General Partner currently is opposing plaintiff's motion to
certify a nationwide class in the Cohen case, and the General Partner does not
-----
expect a trial on the merits of the cases until sometime in 1999. Given the
preliminary status of these cases, the General Partner cannot predict whether
the Venture or the Partnership will have any material financial obligation to
the plaintiffs or whether this litigation will have an adverse effect on the
distributions to be made to the limited partners of the Partnership.
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
$316 to $410 per interest. As of January 16, 1998, the Partnership had 237,339
limited partnership interests outstanding held by 16,557 persons.
13
<PAGE>
Item 6. Selected Financial Data
- -------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------------------------------------------------------
Cable TV Fund 12-D, Ltd./(a)/ 1997 1996 1995 1994 1993
- ----------------------------- ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Revenues $ 82,675,018 $ 82,363,752 $101,399,697 $ 92,823,076 $ 89,131,530
Depreciation and Amortization 21,837,251 22,142,809 26,666,735 24,809,654 25,772,299
Operating Income 6,129,688 1,880,308 4,127,622 289,904 779,887
Minority Interest in Consolidated
(Income) Loss 1,173,555 (15,248,079) 2,720,847 3,149,271 2,833,316
Net Income (Loss) (3,624,693) 47,090,757/(b)/ (8,403,720) (9,726,971) (8,751,100)
Net Income (Loss) per Limited
Partnership Unit (15.12) 193.47/(b)/ (35.05) (40.57) (36.50)
Weighted Average Number of Limited
Partnership Units Outstanding 237,339 237,339 237,339 237,339 237,339
General Partner's Deficit (108,581) (72,334) (1,244,562) (1,160,525) (1,063,255)
Limited Partners' Deficit (20,175,212) (16,586,766) (20,958,295) (12,638,612) (3,008,911)
Total Assets 124,269,504 120,899,336 163,486,029 170,675,914 169,670,552
Debt 144,308,462 138,345,878 180,770,267 180,402,748 167,698,697
General Partner Advances - - 4,198,739 616,810 188,430
</TABLE>
(a) The above financial information represents the consolidated operations of
Cable TV Fund 12-BCD Venture, in which Cable TV Fund 12-D, Ltd. has a 76
percent equity interest.
(b) Net income resulted primarily from the sale of the Tampa System by Cable TV
Fund 12-BCD Venture in February 1996.
14
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
- -------------------------------------------------------------------------
Results of Operations
- ---------------------
The following discussion of the financial condition and results of
operations of Cable TV Fund 12-D, Ltd. (the "Partnership") and Cable TV Fund
12-BCD Venture (the "Venture") 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 and Venture's
actual results may differ significantly from the results predicted in such
forward-looking statements.
FINANCIAL CONDITION
- -------------------
Cable TV Fund 12-D, Ltd. -
- ------------------------
The Partnership's investment in the Venture has decreased by $3,624,693
when compared to the December 31, 1996 balance representing a deficit of
$20,283,793. This deficit is due to the Partnership's share of Venture losses,
which are principally the result of depreciation and amortization charges being
greater than equity invested. These losses are expected to be recovered upon
liquidation of the Venture.
Cable TV Fund 12-BCD Venture -
- ----------------------------
It is the General Partner's publicly announced policy that it intends to
liquidate its managed partnerships, including the partnerships that comprise the
Venture, as opportunities for sales of partnership cable television systems
arise in the marketplace over the next several years. In accordance with the
General Partner's policy, the Venture has sold the Tampa System and has entered
into a purchase and sale agreement to sell the Albuquerque System. The General
Partner expects that the Palmdale System will be sold in 1998.
On July 28, 1997, the Venture entered into a purchase and sale agreement to
sell the Albuquerque System to the General Partner for a sales price of
$222,963,267, which price represents the average of three separate independent
appraisals of the fair market value of the Albuquerque System. The closing of
this sale is subject to a number of conditions, including the approval of the
holders of a majority of the limited partnership interests in each of the three
partnerships that comprise the Venture and necessary governmental and other
third party consents. Closing is expected to occur in the second quarter of
1998. Upon the consummation of the proposed sale of the Albuquerque System, the
Venture will repay its then outstanding Senior Notes balance of $41,544,890,
plus a make whole premium that, based on current market interest rates, is
estimated to total $2,016,985 plus accrued interest, and, then pursuant to an
amendment to the Venture's credit facility, the Venture will distribute
$125,000,000 to the three constituent partnerships of the Venture in proportion
to their ownership interests in the Venture. The remaining proceeds will be
used to repay a portion of the outstanding balance and accrued interest on its
credit facility. The Partnership will receive $94,428,308, or 76 percent of the
$125,000,000 distribution, which the Partnership will distribute to its partners
of record as of the closing date of the sale of the Albuquerque System. As a
result of the Albuquerque System's sale, the limited partners of the
Partnership, as a group, will receive $90,101,856 and the General Partner will
receive $4,326,452. Such distribution represents $380 for each $500 limited
partnership interest, or $759 for each $1,000 invested in the Partnership. Once
the Partnership has completed the distribution, limited partners of the
Partnership will have received a total of $555 for each $500 limited partnership
interest, or $1,109 for each $1,000 invested in the Partnership, taking into
account the prior distribution to limited partners made in 1996 from the net
proceeds of the sale of the Tampa System.
For the year ended December 31, 1997, the Venture generated net cash from
operating activities totaling $14,131,916, which was available to fund capital
expenditures and non-operating costs. Capital expenditures for the Venture
totaled approximately $19,866,800 during 1997. Capital expenditures in the
Albuquerque System totaled $13,076,679. Of the Albuquerque System's capital
expenditures, approximately 39 percent was for service drops to subscribers'
homes, approximately 38 percent was for cable plant extensions and the remainder
was for other capital expenditures to maintain the value of the Albuquerque
System. Capital expenditures in the Palmdale System totaled $6,790,121. Of the
Palmdale System's capital expenditures, approximately 31 percent was for service
drops to subscribers' homes, approximately 18 percent was for cable plant
extensions, approximately 16 percent was for premium service converters and the
remainder was for other capital expenditures to maintain the value of the
Palmdale System. These capital expenditures were funded primarily from cash on
hand, cash generated from operations and borrowings from the Venture's credit
facility. Budgeted capital expenditures for 1998 are approximately $12,682,500.
Budgeted capital expenditures in the Albuquerque System are approximately
$7,777,800, of which approximately 31 percent is for service drops to customers'
homes, approximately 32 percent is for cable plant extensions and the remainder
relates to other capital expenditures to maintain the value of the Albuquerque
System. Budgeted capital expenditures in the Palmdale System are approximately
$4,904,700, of which 48 percent is for service drops to subscribers' homes,
approximately 20 percent is for cable plant extensions and the remainder is for
other
15
<PAGE>
capital expenditures to maintain the value of the Palmdale System. Depending
upon the timing of the closing of the sale of the Venture's systems, the Venture
will make only the portion of the budgeted capital expenditures scheduled to be
made during the Venture's continued ownership of its systems. Funding for these
expenditures is expected to be provided by cash on hand, cash generated from
operations and borrowings from the Venture's credit facility.
The Venture's debt arrangements at December 31, 1997 consisted of
$47,479,874 of Senior Notes placed with a group of institutional lenders and a
$120,000,000 credit facility with a group of commercial bank lenders. The
Senior Notes and the credit facility are equal in standing with the other, and
both are equally secured by the assets of the Venture. The Senior Notes and the
credit facility contain certain financial covenants. The most restrictive of
these covenants is that the ratio of debt to annualized cash flow will not
exceed 4.5 to 1. The Venture was in compliance with all covenants at December
31, 1997.
The Senior Notes have a fixed interest rate of 8.64 percent and a final
maturity date of March 31, 2000. The Senior Notes require payments of interest
and accelerating principal through maturity, payable semi-annually in March and
September. Semi-annual principal payments of $3,956,656 were made in March and
September 1997, respectively. These payments were funded from cash on hand,
cash generated from operations and borrowings from the Venture's credit
facility. Upon the sale of the Albuquerque System, the Senior Notes will be
repaid in full together with a make whole premium.
The balance outstanding on the Venture's $120,000,000 credit facility at
December 31, 1997 was $95,630,620, leaving $24,369,380 available for future
needs. Upon the sale of the Albuquerque System and pursuant to an amendment to
the Venture's credit facility, the Venture anticipates repaying a portion of the
then outstanding balance of the credit facility and that the commitment will be
reduced to $55,000,000. At the Venture's option, the credit facility will be
payable in full on December 31, 1999 or will convert to a term loan that matures
on December 31, 2004 payable in consecutive quarterly amounts. Interest on the
credit facility is at the Venture's option of the London Interbank Offered Rate
plus .875 percent, the Prime Rate or the Certificate of Deposit Rate plus 1
percent. The effective interest rates on amounts outstanding on the Venture's
credit facility as of December 31, 1997 and 1996 were 6.91 percent and 6.90
percent, respectively.
The Venture has sufficient sources of capital available through its ability
to generate cash from operations and borrowings under its credit facility to
meet its presently anticipated needs until its systems are sold.
RESULTS OF OPERATIONS
- ---------------------
Cable TV Fund 12-D, Ltd. -
- ------------------------
All of the Partnership's operations are represented by its 76 percent
interest in the Venture. Thus, Management's Discussion and Analysis of
Financial Condition and Results of Operations of the Venture should be consulted
for pertinent comments regarding the Partnership's performance.
16
<PAGE>
Cable TV Fund 12-BCD Venture -
- ----------------------------
As a result of the sale of the Tampa System in February 1996, the following
discussion of the Venture's results of operations, through operating income,
pertains only to the results of operations of the Albuquerque System and the
Palmdale System for the periods discussed. Results of operations of each system
for 1997 and 1996 are summarized below:
<TABLE>
<CAPTION>
Albuquerque System
---------------------------------------------------------
1997 1996 Inc(Dec) % Inc/(Dec)
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues $52,784,567 $49,487,923 $ 3,296,644 7%
Costs and expenses
Operating expenses 29,842,290 28,754,334 1,087,956 4%
----------- ----------- -----------
Operating cash flow 22,942,277 20,733,589 2,208,688 11%
Management fees and allocated
overhead from Jones Intercable, Inc. 5,583,053 5,804,631 (221,578) (4%)
Depreciation and amortization 15,440,702 12,922,479 2,518,223 19%
----------- ----------- -----------
Operating income $ 1,918,522 $ 2,006,479 $ (87,957) (4%)
=========== =========== ===========
<CAPTION>
Palmdale System
---------------------------------------------------------
1997 1996 Inc(Dec) % Inc/(Dec)
----------- ----------- ----------- ------------
<S> <C> <C> <C>
Revenues $29,890,451 $27,990,637 $ 1,899,814 7%
Costs and expenses
Operating expenses 16,116,197 15,524,050 592,147 4%
----------- ----------- -----------
Operating cash flow 13,774,254 12,466,587 1,307,667 10%
Management fees and allocated
overhead from Jones Intercable, Inc. 3,166,539 3,227,757 (61,218) (2%)
Depreciation and amortization 6,396,549 8,228,592 (1,832,043) (22%)
----------- ----------- -----------
Operating income $ 4,211,166 $ 1,010,238 $ 3,200,928 317%
=========== =========== ===========
<CAPTION>
Total
---------------------------------------------------------
1997 1996 Inc(Dec) % Inc/(Dec)
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues $82,675,018 $77,478,560 $ 5,196,458 7%
Costs and expenses
Operating expenses 45,958,487 44,278,384 1,680,103 4%
----------- ----------- -----------
Operating cash flow 36,716,531 33,200,176 3,516,355 11%
Management fees and allocated
overhead from Jones Intercable, Inc. 8,749,592 9,032,388 (282,796) (3%)
Depreciation and amortization 21,837,251 21,151,071 686,180 3%
----------- ----------- -----------
Operating income $ 6,129,688 $ 3,016,717 $ 3,112,971 103%
=========== =========== ===========
</TABLE>
17
<PAGE>
1997 compared to 1996
---------------------
Revenues in the Albuquerque System and the Palmdale System increased
$5,196,458, or approximately 7 percent, to $82,675,018 in 1997 from $77,478,560
in 1996. This increase in revenues was primarily due to basic service rate
increases implemented in the Venture's systems and an increase in the number of
basic service subscribers. Basic service rate increases implemented in the
Venture's systems accounted for approximately 52 percent of the increase in
revenues in 1997. An increase in the number of basic service subscribers in the
Albuquerque System and the Palmdale System accounted for approximately 21
percent of the increase in revenues for 1997. The number of basic service
subscribers increased by 2,426 subscribers, or approximately 1 percent, to
178,074 subscribers in 1997 from 175,648 subscribers in 1996. An increase in
advertising activity accounted for approximately 11 percent of the increase in
revenues for 1997. No other factor was significant to the increase in revenues.
Operating expenses consist primarily of costs associated with the operation
and administration of the Venture'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 in the Albuquerque System and the Palmdale System
increased $1,680,103, or approximately 4 percent, to $45,958,487 in 1997 from
$44,278,384 in 1996. Operating expenses represented 56 percent and 57 percent,
respectively, of revenues for 1997 and 1996. An increase in programming fees
primarily accounted for the increase in operating expenses. No other factor was
significant to the increase in operating expenses.
The cable television industry generally measures the financial performance
of a cable television system in terms of operating cash flow (revenues less
operating expenses). This measure is not intended to be a substitute or
improvement upon the items disclosed on the financial statements, rather it is
included because it is an industry standard. Operating cash flow increased
$3,516,355, or approximately 11 percent, to $36,716,531 in 1997 from $33,200,176
in 1996. This increase was due to the increase in revenues exceeding the
increase in operating expenses.
Management fees and allocated overhead from Jones Intercable, Inc.
decreased $282,796, or approximately 3 percent, to $8,749,592 in 1997 from
$9,032,388 in 1996. This decrease was primarily due to a decrease in allocated
overhead from the General Partner which was partially offset by an increase in
management fees.
Depreciation and amortization expense increased $686,180, or approximately
3 percent, to $21,837,251 in 1997 from $21,151,071 in 1996. This increase was
due to capital additions in 1997.
Operating income increased $3,112,971 to $6,129,688 in 1997 from $3,016,717
in 1996. This increase was due to the increase in operating cash flow and
decrease in management fees and allocated overhead from Jones Intercable, Inc.
exceeding the increase in depreciation and amortization expense.
Interest expense decreased $284,385, or approximately 3 percent, to
$10,934,909 in 1997 from $11,219,294 in 1996. This decrease was primarily due
to lower outstanding balances on the Venture's interest bearing obligations.
The Venture recognized a gain of $71,914,391 related to the sale of the
Tampa System in February 1996. No similar gain was recognized in 1997.
The Venture recognized a net loss of $4,798,248 compared to a net income of
$62,338,836 in 1996. This change was primarily due to the gain on the sale of
the Tampa System.
1996 compared to 1995
---------------------
Revenues in the Albuquerque System and the Palmdale System increased
$4,778,991, or approximately 7 percent, to $77,478,560 in 1996 from $72,699,569
in 1995. This increase in revenues was primarily due to basic service rate
increases implemented in the Venture's systems and an increase in the number of
basic service subscribers. Basic service rate increases implemented in the
Venture's systems accounted for approximately 39 percent of the increase in
revenues in 1996. An increase in the number of basic service subscribers in the
Albuquerque System and the Palmdale System
18
<PAGE>
accounted for approximately 31 percent of the increase in revenues for 1996. The
number of basic service subscribers increased by 3,744 subscribers, or
approximately 2 percent, to 175,648 subscribers in 1996 from 171,904 subscribers
in 1995. No other factor was significant to the increase in revenues.
Operating expenses in the Albuquerque System and the Palmdale System
increased $3,608,831, or approximately 9 percent, to $44,278,384 in 1996 from
$40,669,553 in 1995. Operating expenses represented 57 percent and 56 percent,
respectively, of revenues for 1996 and 1995. An increase in programming fees
primarily accounted for the increases in operating expenses. No other factor
was significant to the increase in operating expenses.
Operating cash flow increased $1,170,160, or approximately 4 percent, to
$33,200,176 in 1996 from $32,030,016 in 1995. This increase was due to the
increase in revenues exceeding the increase in operating expenses.
Management fees and allocated overhead from Jones Intercable, Inc.
increased $230,923, or approximately 3 percent, to $9,032,388 in 1996 from
$8,801,465 in 1995. This increase was due to the increase in revenues, upon
which such management fees are based.
Depreciation and amortization expense increased $959,513, or approximately
5 percent, to $21,151,071 in 1996 from $20,191,558 in 1995. This increase was
due to capital additions in 1996.
Operating income increased $20,276, or approximately 1 percent, to
$3,016,717 in 1996 from $3,036,993 in 1995. This increase was due to the
increase in operating cash flow exceeding the increases in management fees and
allocated overhead from Jones Intercable, Inc. and depreciation and amortization
expense.
Interest expense decreased $4,127,956, or approximately 27 percent, to
$11,219,294 in 1996 from $15,347,250 in 1995. This decrease in interest expense
was primarily due to the lower outstanding balance and lower effective interest
rates on the Venture's interest bearing obligations. A portion of the proceeds
from the sale of the Tampa System was used to repay a portion of the Venture's
debt.
The Venture recognized a gain of $71,914,391 related to the sale of the
Tampa System in February 1996. No similar gain was recognized in 1995.
The Venture recognized net income of $62,338,836 in 1996 compared to a net
loss of $11,124,567 in 1995. This change was primarily due to the gain on the
sale of the Tampa System.
19
<PAGE>
Item 8. Financial Statements
- -----------------------------
20
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Partners of Cable TV Fund 12-D, Ltd.:
We have audited the accompanying consolidated balance sheets of CABLE TV
FUND 12-D, LTD. (a Colorado limited partnership) and subsidiary as of December
31, 1997 and 1996, and the related consolidated statements of operations,
partners' 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 Cable TV Fund 12-D, Ltd. and
subsidiary as of December 31, 1997 and 1996, and the results of their operations
and their 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,
February 27, 1998.
21
<PAGE>
CABLE TV FUND 12-D, LTD.
------------------------
(A Limited Partnership)
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
December 31,
--------------------------------
ASSETS 1997 1996
------ ------------- ------------
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 1,742,444 $ 1,514,773
RECEIVABLES:
Trade receivables, less allowance for doubtful receivables of
$404,821 and $417,017 at December 31, 1997 and 1996,
respectively 4,456,904 2,676,246
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 218,189,145 198,322,316
Less- accumulated depreciation (113,368,132) (95,040,023)
------------- ------------
104,821,013 103,282,293
Franchise costs and other intangible assets, net of accumulated
amortization of $63,250,092 and $60,652,010 at
December 31, 1997 and 1996, respectively 7,791,062 10,389,144
------------- ------------
Total investment in cable television properties 112,612,075 113,671,437
DEPOSITS, PREPAID EXPENSES AND DEFERRED
CHARGES 5,458,081 3,036,880
------------- ------------
Total assets $ 124,269,504 $120,899,336
============= ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
22
<PAGE>
CABLE TV FUND 12-D, LTD.
------------------------
(A Limited Partnership)
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
December 31,
--------------------------------
LIABILITIES AND PARTNERS' DEFICIT 1997 1996
--------------------------------- ------------- ------------
<S> <C> <C>
LIABILITIES:
Debt $144,308,462 $138,345,878
Trade accounts payable and accrued liabilities 6,726,286 4,499,549
Subscriber prepayments 424,486 445,391
------------ ------------
Total liabilities 151,459,234 143,290,818
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 7)
MINORITY INTEREST IN JOINT VENTURE (6,905,937) (5,732,382)
------------ ------------
PARTNERS' DEFICIT:
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (109,581) (73,334)
------------ ------------
(108,581) (72,334)
------------ ------------
Limited Partners-
Net contributed capital (237,339 units outstanding
at December 31, 1997 and 1996) 102,198,175 102,198,175
Accumulated deficit (80,826,387) (77,237,941)
Distributions (41,547,000) (41,547,000)
------------ ------------
(20,175,212) (16,586,766)
------------ ------------
Total liabilities and partners' deficit $124,269,504 $120,899,336
============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
23
<PAGE>
CABLE TV FUND 12-D, LTD.
------------------------
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES $ 82,675,018 $ 82,363,752 $101,399,697
COSTS AND EXPENSES:
Operating expenses 45,958,487 48,731,182 58,351,692
Management fees and allocated overhead from
Jones Intercable, Inc. 8,749,592 9,609,453 12,253,648
Depreciation and amortization 21,837,251 22,142,809 26,666,735
------------ ------------ ------------
OPERATING INCOME 6,129,688 1,880,308 4,127,622
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (10,934,909) (11,219,294) (15,347,250)
Gain on sale of cable television system - 71,914,391 -
Other, net 6,973 (236,569) 95,061
------------ ------------ ------------
Total other income (expense), net (10,927,936) 60,458,528 (15,252,189)
------------ ------------ ------------
CONSOLIDATED NET INCOME (LOSS) (4,798,248) 62,338,836 (11,124,567)
MINORITY INTEREST IN CONSOLIDATED NET
(INCOME) LOSS 1,173,555 (15,248,079) 2,720,847
------------ ------------ ------------
NET INCOME (LOSS) $ (3,624,693) $ 47,090,757 $ (8,403,720)
============ ============ ============
ALLOCATION OF NET INCOME (LOSS):
General Partner $ (36,247) $ 1,172,228 $ (84,037)
============ ============ ============
Limited Partners $ (3,588,446) $ 45,918,529 $ (8,319,683)
============ ============ ============
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $(15.12) $193.47 $(35.05)
============ ============ ============
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 237,339 237,339 237,339
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
24
<PAGE>
CABLE TV FUND 12-D, LTD.
------------------------
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT
--------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
GENERAL PARTNER:
Balance, beginning of year $ (72,334) $ (1,244,562) $ (1,160,525)
Net income (loss) for year (36,247) 1,172,228 (84,037)
------------ ------------ ------------
Balance, end of year $ (108,581) $ (72,334) $ (1,244,562)
============ ============ ============
LIMITED PARTNERS:
Balance, beginning of year $(16,586,766) $(20,958,295) $(12,638,612)
Net income (loss) for year (3,588,446) 45,918,529 (8,319,683)
Distributions - (41,547,000) -
------------ ------------ ------------
Balance, end of year $(20,175,212) $(16,586,766) $(20,958,295)
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
25
<PAGE>
CABLE TV FUND 12-D, LTD.
------------------------
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------------------
1997 1996 1995
------------- -------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (3,624,693) $ 47,090,757 $ (8,403,720)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 21,837,251 22,142,809 26,666,735
Gain on sale of cable television system - (71,914,391) -
Minority interest in consolidated income (loss) (1,173,555) 15,248,079 (2,720,847)
Decrease (increase) in trade receivables (1,780,658) 1,788,527 (657,502)
Increase in deposits, prepaid expenses and
deferred charges (3,332,261) (2,221,806) (351,579)
Increase (decrease) in trade accounts payable and
accrued liabilities and subscriber prepayments 2,205,832 (3,302,401) (14,766)
Increase (decrease) in advances from Jones Intercable, Inc. - (4,198,739) 3,581,929
------------ ------------- ------------
Net cash provided by operating activities 14,131,916 4,632,835 18,100,250
------------ ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (19,866,829) (17,474,134) (21,474,577)
Proceeds from sale of cable television system - 110,395,667 -
------------ ------------- ------------
Net cash provided by (used in)
investing activities (19,866,829) 92,921,533 (21,474,577)
------------ ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 15,551,159 72,365,824 882,431
Repayment of debt (9,588,575) (114,790,213) (514,912)
Distributions to Limited Partners - (41,547,000) -
Distributions to Joint Venture Partners - (13,453,000) -
------------ ------------- ------------
Net cash provided by (used in)
financing activities 5,962,584 (97,424,389) 367,519
------------ ------------- ------------
Increase (decrease) in cash and cash equivalents 227,671 129,979 (3,006,808)
Cash and cash equivalents, beginning of year 1,514,773 1,384,794 4,391,602
------------ ------------- ------------
Cash and cash equivalents, end of year $ 1,742,444 $ 1,514,773 $ 1,384,794
============ ============= ============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 10,776,074 $ 12,370,892 $ 15,331,071
============ ============= ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
26
<PAGE>
CABLE TV FUND 12-D, LTD.
------------------------
(A Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(1) ORGANIZATION AND PARTNERS' INTERESTS
------------------------------------
Formation and Business
----------------------
Cable TV Fund 12-D, Ltd. ("Fund 12-D"), a Colorado limited partnership, was
formed on February 5, 1986, under a public program sponsored by Jones
Intercable, Inc. Fund 12-D was formed to acquire, construct, develop and
operate cable television systems. Jones Intercable, Inc. ("Intercable"), is the
"General Partner" and manager of Fund 12-D. The General Partner and its
subsidiaries also own and operate cable television systems. In addition, the
General Partner manages cable television systems for other limited partnerships
for which it is general partner and, also, for affiliated entities.
Contributed Capital
-------------------
The capitalization of Fund 12-D is set forth in the accompanying
consolidated statements of partners' deficit. No limited partner is obligated
to make any additional contributions to partnership capital. The General
Partner purchased its interest in Fund 12-D by contributing $1,000 to
partnership capital.
All profits and losses of Fund 12-D are allocated 99 percent to the limited
partners and 1 percent to the General Partner, except for income or gain from
the sale or disposition of cable television properties, which will be allocated
to the partners based upon the formula set forth in the Partnership Agreement,
and interest income earned prior to the first acquisition by Fund 12-D of a
cable television system, which was allocated 100 percent to the limited
partners.
Formation of Joint Venture and Venture Sale of Cable Television Systems
-----------------------------------------------------------------------
On March 17, 1986, Cable TV Fund 12-B, Ltd. ("Fund 12-B"), Cable TV Fund
12-C, Ltd. ("Fund 12-C") and Fund 12-D formed Cable TV Fund 12-BCD Venture (the
"Venture"). The Venture was formed for the purpose of acquiring certain cable
television systems. At December 31, 1997, the Venture owned and operated the
cable television systems serving certain areas in and around Albuquerque, New
Mexico (the "Albuquerque System") and Palmdale, California (the "Palmdale
System").
On February 28, 1996, the Venture sold the cable television system serving
the areas in and around Tampa, Florida (the "Tampa System") to a wholly owned
subsidiary of the General Partner. The sales price of the Tampa System was
$110,395,667, subject to normal working capital closing adjustments. This price
represented the average of three separate, independent appraisals of the fair
market value of the Tampa System. In February 1996, the Venture's debt
arrangements were amended to permit a $55,000,000 distribution to the Venture's
partners from the sale proceeds, and the balance of the sale proceeds were used
to reduce Venture indebtedness. Of this total distribution, Fund 12-B received
$5,049,000, Fund 12-C received $8,404,000 and Fund 12-D received $41,547,000.
Because the limited partners of Fund 12-D had not yet received distributions in
an amount equal to 100 percent of the capital initially contributed to Fund 12-D
by them, the entire portion of Fund 12-D's distribution was distributed to the
limited partners in March 1996. This distribution has given Fund 12-D's limited
partners an approximate return of $350 for each $1,000 invested in Fund 12-D.
Because the Tampa System did not constitute all or substantially all of the
Venture's assets, no vote of the limited partners of the Partnership was
required in connection with this transaction.
On July 28, 1997, the Venture entered into a purchase and sale agreement to
sell the Albuquerque System to the General Partner for a sales price of
$222,963,267, which price represents the average of three separate independent
appraisals of the fair market value of the Albuquerque System. The closing of
this sale is subject to a number of conditions, including the approval of the
holders of a majority of the limited partnership interests in each of the three
partnerships that comprise the Venture and necessary governmental and other
third party consents. Closing is expected to occur in the second quarter of
1998. Upon the consummation of the proposed sale of the Albuquerque System, the
Venture will repay its then outstanding Senior Notes balance of $41,544,890,
plus a make whole premium that, based on current market interest rates, is
estimated to total $2,016,985 plus accrued interest, and, then pursuant to an
amendment to
27
<PAGE>
the Venture's credit facility, the Venture will distribute $125,000,000 to the
three constituent partnerships of the Venture in proportion to their ownership
interests in the Venture. The remaining proceeds will be used to repay a portion
of the outstanding balance and accrued interest on its credit facility. The
Partnership will receive $94,428,308, or 76 percent of the $125,000,000
distribution, which the Partnership will distribute to its partners of record as
of the closing date of the sale of the Albuquerque System. As a result of the
Albuquerque System's sale, the limited partners of the Partnership, as a group,
will receive $90,101,856 and the General Partner will receive $4,326,452. Such
distribution represents $380 for each $500 limited partnership interest, or $759
for each $1,000 invested in the Partnership. Once the Partnership has completed
the distribution, limited partners of the Partnership will have received a total
of $555 for each $500 limited partnership interest, or $1,109 for each $1,000
invested in the Partnership, taking into account the prior distribution to
limited partners made in 1996 from the net proceeds of the sale of the Tampa
System.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Accounting Records
------------------
The accompanying consolidated financial statements have been prepared on
the accrual basis of accounting in accordance with generally accepted accounting
principles. Fund 12-D's tax returns are also prepared on the accrual basis.
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.
Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include 100 percent of
the accounts of Fund 12-D and those of the Venture reduced by the approximate 24
percent minority interest in the Venture. All inter-partnership accounts and
transactions have been eliminated.
Property, Plant and Equipment
-----------------------------
Depreciation is provided using the straight-line method over the following
estimated service lives:
Cable distribution systems 5 - 15 years
Equipment and tools 3 - 5 years
Office furniture and equipment 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.
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 costs in excess of interests in net assets
purchased are amortized using the straight-line method over the following
remaining estimated useful lives:
Franchise costs 1 - 3 years
Costs in excess of interests in net assets purchased 28 - 29 years
Revenue Recognition
-------------------
Subscriber prepayments are initially deferred and recognized as revenue
when earned.
28
<PAGE>
Cash and Cash Equivalents
-------------------------
For purposes of the Statements of Cash Flows, the Venture considers all
highly liquid investments purchased with an original maturity of three months or
less to be cash equivalents.
Reclassifications
-----------------
Certain prior year amounts have been reclassified to conform with the 1997
presentation.
(3) TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
----------------------------------------------------
Management Fees, Distribution Ratios and Reimbursements
-------------------------------------------------------
The General Partner manages Fund 12-D and the Venture and receives a fee
for its services equal to 5 percent of the gross revenues of the Venture,
excluding revenues from the sale of cable television systems or franchises.
Management fees paid to the General Partner by the Venture were $4,133,751,
$4,118,188 and $5,069,985 during 1997, 1996 and 1995, respectively.
Any partnership distributions made from cash flow (defined as cash receipts
derived from routine operations, less debt principal and interest payments and
cash expenses) are allocated 99 percent to the limited partners and 1 percent to
the General Partner. Any distributions other than interest income on limited
partnership subscriptions earned prior to the acquisition of Fund 12-D's first
cable television system or from cash flow, such as from the sale or refinancing
of a system or upon dissolution of the Partnership, will be made as follows:
first, to the limited partners in an amount which, together with all prior
distributions, will equal the amount initially contributed by the limited
partners; the balance, 75 percent to the limited partners and 25 percent to the
General Partner.
The Venture reimburses the General Partner for certain allocated overhead
and administrative expenses. These expenses represent the salaries and related
benefits paid 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
Venture. Such services, and their related costs, are necessary to the operation
of the Venture and would have been incurred by the Venture 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 entity managed.
Remaining expenses are allocated based on the pro rata relationship of the
Venture's revenues to the total revenues of all systems owned or managed by the
General Partner and certain of its subsidiaries. Systems owned by the General
Partner and all other systems owned by partnerships for which 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. Overhead and administrative expenses
allocated to the Venture by the General Partner were $4,615,841, $5,491,265 and
$7,183,663 in 1997, 1996 and 1995, respectively.
The Venture is charged interest at a rate which approximates the General
Partner's weighted average cost of borrowing on any amounts due the General
Partner. No interest was charged to the Venture by the General Partner in 1997
and 1996. Total interest charged to the Venture by the General Partner was
$220,743 in 1995.
Payments to/from Affiliates for Programming Services
----------------------------------------------------
The Venture receives 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.
Payments to Superaudio totaled $118,032, $116,710 and $135,861 in 1997,
1996 and 1995, respectively. Payments to Knowledge TV, Inc. totaled $131,277,
$126,665 and $145,598 in 1997, 1996 and 1995, respectively. Payments to Jones
Computer Network, Ltd., whose service was discontinued in April 1997, totaled
$85,543, $248,044 and $283,339 in 1997, 1996 and 1995, respectively. Payments
to Great American Country, Inc., which initiated service in 1996, totaled
$131,863 and $141,753 in 1997 and 1996, respectively.
The programming fees paid by the Venture to Superaudio, Knowledge TV, Inc.,
Jones Computer Network, Ltd. and Great American Country (collectively, the
"affiliated programming providers") are governed by the terms of the various
master programming agreements entered into by and between the General Partner
and each of the
29
<PAGE>
affiliated programming providers. Generally, with respect to most video
programming services, cable operators pay to programmers a monthly license fee
per subscriber that is based on a number of factors, including the perceived
value of the programming, the size of the cable operator and the level of
distribution of the programming service within the cable operator's systems and
the other terms and conditions under which the programming is provided. The
General Partner negotiates master programming agreements with each programming
network distributed on any of its owned or managed cable systems. The Venture
pays the same per subscriber rate for all of its programming, including the
programming provided by affiliates of the General Partner, as the General
Partner pays for the programming it provides on cable television systems that it
owns itself, i.e., the General Partner does not receive any markup for
programming provided to the Venture under its master programming agreements. The
master programming agreements entered into by and between the General Partner
and the affiliated programming providers were negotiated by officers of the
General Partner with representatives of the affiliated programming providers.
(4) 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 system $ 199,967,191 $182,058,124
Equipment and tools 5,483,657 4,853,010
Office furniture and equipment 2,842,973 2,189,497
Buildings 5,925,072 5,925,072
Vehicles 3,019,282 2,345,643
Land 950,970 950,970
------------- ------------
218,189,145 198,322,316
Less-accumulated depreciation (113,368,132) (95,040,023)
------------- ------------
$ 104,821,013 $103,282,293
============= ============
</TABLE>
(5) DEBT
----
Debt consists of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------
1997 1996
------------- ------------
<S> <C> <C>
Lending institutions-
Revolving credit and term loan $ 95,630,620 $ 82,130,620
Senior secured notes 47,479,874 55,393,187
Capital lease obligations 1,197,968 822,071
------------- ------------
$ 144,308,462 $138,345,878
============= ============
</TABLE>
The Venture's debt arrangements at December 31, 1997 consisted of
$47,479,874 of Senior Notes placed with a group of institutional lenders and a
$120,000,000 credit facility with a group of commercial bank lenders. The
Senior Notes and credit facility are equal in standing with the other, and both
are equally secured by the assets of the Venture.
The Senior Notes have a fixed interest rate of 8.64 percent and a final
maturity date of March 31, 2000. The Senior Notes require payments of interest
and accelerating principal through maturity, payable semi-annually in March and
September. Semi-annual principal payments of $3,956,656 were made in March and
September 1997, respectively. These payments were funded from cash on hand,
cash generated from operations and borrowings from the Venture's credit
facility. A scheduled principal payment of $5,934,984 will be made on March 31,
1998 and a similar payment is due
30
<PAGE>
September 30, 1998. However, upon the sale of the Albuquerque System, the Senior
Notes will be repaid in full together with a make whole premium plus accrued
interest.
The balance outstanding on the Venture's $120,000,000 credit facility at
December 31, 1997 was $95,630,620, leaving $24,369,380 available for future
needs. Upon the sale of the Albuquerque System, pursuant to an amendment to the
Venture's credit facility, the Venture will repay a portion of the then
outstanding balance of the credit facility and reduce the commitment to
$55,000,000. At the Venture's option, the credit facility will be payable in
full on December 31, 1999 or will convert to a term loan that matures on
December 31, 2004 payable in consecutive quarterly amounts. Interest on the
credit facility is at the Venture's option of the London Interbank Offered Rate
plus .875 percent, the Prime Rate or the Certificate of Deposit Rate plus 1
percent. The effective interest rates on amounts outstanding on the Venture's
credit facility as of December 31, 1997 and 1996 were 6.91 percent and 6.90
percent, respectively.
During 1996, the Venture incurred costs associated with renegotiating its
debt arrangements. These costs were capitalized and are being amortized using
the straight-line method over the life of the debt agreements.
At December 31, 1997, the carrying amount of the Venture's long-term debt
did not differ significantly from the estimated fair value of the financial
instruments. The fair value of the Venture'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.
(6) INCOME TAXES
------------
Income taxes have not been recorded in the accompanying consolidated
financial statements because they accrue directly to the partners. The federal
and state income tax returns of Fund 12-D are prepared and filed by the General
Partner.
Fund 12-D's tax returns, the qualification of the Partnership as such for
tax purposes, and the amount of distributable income or loss are subject to
examination by federal and state taxing authorities. If such examinations
result in changes with respect to Fund 12-D's qualification as such, or in
changes with respect to Fund 12-D's recorded income or loss, the tax liability
of the general and limited partners would likely be changed accordingly.
Taxable losses reported to the partners is different from that reported in
the consolidated statements of operations due to the difference in depreciation
allowed under generally accepted accounting principles and the expense allowed
for tax purposes under the Modified Accelerated Cost Recovery System (MACRS).
There are no other significant differences between taxable income or losses and
the losses reported in the consolidated statements of operations.
(7) COMMITMENTS AND CONTINGENCIES
-----------------------------
The General Partner is a defendant in a now consolidated civil action filed
by limited partners of Fund 12-D derivatively on behalf of the Partnership, Fund
12-B and Fund 12-C. The consolidated complaint generally alleges that the
General Partner breached its fiduciary duty to the plaintiffs and to the other
limited partners of the Partnership, Fund 12-B and Fund 12-C and the Venture in
connection with the Venture's sale of its Tampa System to a wholly owned
subsidiary of the General Partner and its subsequent trade to an unaffiliated
third party. The consolidated complaint also sets forth a claim for breach of
contract and a claim for breach of the implied covenant of good faith and fair
dealing. Among other things, the plaintiffs assert that the subsidiary of the
General Partner that acquired the Tampa System paid an inadequate price for the
Tampa System. The price paid for the Tampa System was determined by the average
of three separate, independent appraisals of the Tampa System's fair market
value as required by the limited partnership agreements of the Partnership, Fund
12-B and Fund 12-C. The plaintiffs have challenged the adequacy and
independence of the appraisals. The consolidated complaint seeks damages in an
unspecified amount and an award of attorneys' fees, and the complaint also seeks
punitive damages and certain equitable relief.
The General Partner has filed its answer to the consolidated complaint and
has generally denied the substantive allegations in the complaint and has
asserted a number of affirmative defenses. The General Partner intends to
defend this lawsuit vigorously.
On August 29, 1997, the General Partner moved for summary judgment in its
favor on the ground that plaintiffs did not make demand on the General Partner
for the relief they seek before commencing their lawsuits or show that such a
demand would have been futile. On January 8, 1998, the Court (1) held that
plaintiffs did not make demand before
31
<PAGE>
commencing their lawsuits or show that such demand would have been futile, (2)
stayed the consolidated case and vacated the February 17, 1998 trial date, (3)
ordered that plaintiffs make a demand on the General Partner and that the
General Partner appoint an independent counsel to review, consider and report on
that demand, (4) ordered that the independent counsel be appointed at the March
1998 meeting of the General Partner's Board of Directors and (5) ordered that
the independent counsel will be subject to the approval of the Court. The Court
set a new trial date for October 26, 1998 in the event that the case is not
resolved through the independent counsel process or otherwise.
Section 2.2 of the Partnership's limited partnership agreement (the
"Partnership Agreement") provides that the General Partner will not be liable to
the Partnership or to the limited partners for any act or omission performed or
omitted by it in good faith pursuant to the authority granted to the General
Partner by the Partnership Agreement. This provision further provides that the
General Partner will be liable to the Partnership and to the limited partners
only for fraud, bad faith or gross negligence in the performance of the cable
television activities of the Partnership or negligence in the management of the
internal affairs of the Partnership. Section 9.6 of the Partnership Agreement
provides that the Partnership "shall indemnify and save harmless the General
Partner and its affiliates and any agent or officer or director thereof, from
any loss or damage incurred by them, including legal fees and expenses and
amounts paid in settlement by reason of any action performed by the General
Partner or any agent, officer or director thereof on behalf of the Partnership
or in furtherance of its interest; provided, however, that the foregoing shall
not relieve the General Partner of its fiduciary duty to the limited partners or
liability for (nor shall the General Partner be indemnified for) its fraud, bad
faith or gross negligence in the performance of the cable television activities
of the Partnership or negligence in the management of the internal affairs of
the Partnership." In accordance with the foregoing provisions of the
Partnership Agreement, the Partnership, together with Fund 12-B and Fund 12-C,
which have identical partnership agreement provisions with respect to general
partner liability and indemnification, will be obligated to indemnify and save
harmless the General Partner from any loss incurred by it, including its legal
fees and expenses and amounts paid in settlement, in connection with the
litigation concerning the Tampa System sale unless the General Partner is found
to have breached its fiduciary duty to the limited partners in connection with
the Tampa System sale or is found to have committed fraud or to have acted in
bad faith or with gross negligence in connection with the Tampa System sale.
Amounts reimbursed to the General Partner by the three constituent limited
partnerships of the Venture would be in proportion to their ownership interests
in the Venture and such amounts may be significant, but the General Partner
expects that any such reimbursement will not have a material adverse effect on
the Partnership or the Venture.
Maxine Cohen, for herself and all others similarly situated v. Jones
--------------------------------------------------------------------
Intercable, Inc., a Colorado corporation for itself, its wholly owned
- ---------------------------------------------------------------------
subsidiaries, managed partnerships and other affiliated cable television
- ------------------------------------------------------------------------
entities (Bernalillo County, New Mexico District Court, Second Judicial
- --------
District, Case No. CV-97 09694). This class action Complaint for Declaratory
and Injunctive Relief and Restitution was filed on October 27, 1997 in the
Bernalillo County District Court, by Maxine Cohen for herself and all others
similarly situated. The Complaint basically alleges that the Defendant, Jones
Intercable, Inc., for itself, its wholly owned subsidiaries, managed
partnerships and other affiliated cable television entities, collected from its
cable television subscribers, illegal late payment penalties.
Belen Cordova, on behalf of herself and all others similarly situated v.
------------------------------------------------------------------------
Jones Intercable, Inc. (Bernalillo County, New Mexico District Court, Second
- ----------------------
Judicial District, Case No. CV-97 10957). This class action Complaint for
Breach of Contract, Unconscionable Trade Practice and Restitution was filed on
December 2, 1997 in the Bernalillo County District Court by Belen Cordova on
behalf of herself and all others similarly situated. The Complaint alleges that
Jones Intercable, Inc. charges and collects from its cable television
subscribers in New Mexico unconscionable late payment penalties.
The plaintiffs in the Cohen and Cordova actions have not specified the
----- -------
requested relief in quantitative terms. The plaintiffs have requested that (i)
the court determine what is a reasonable late fee under applicable law, (ii) the
court order Jones Intercable, Inc. and its affiliates that own and operate cable
television systems to reduce their late payment penalties to such level going
forward and (iii) the court require Jones Intercable, Inc. and its affiliates
that own and operate cable television systems to refund all late fee payments in
excess of the "reasonable amount" paid by subscribers, subject to the applicable
statutes of limitations. The plaintiff in the Cordova case also seeks treble
damages for New Mexico subscribers based on alleged violations of the Deceptive
Practices Act. The General Partner currently is opposing plaintiff's motion to
certify a nationwide class in the Cohen case, and the General Partner does not
-----
expect a trial on the merits of the cases until sometime in 1999. Given the
preliminary status of these cases, the General Partner cannot predict whether
the Venture or the Partnership will have any material financial obligation to
the plaintiffs or whether this litigation will have an adverse effect on the
distributions to be made to the limited partners of the Partnership.
32
<PAGE>
Office and other facilities are rented under various long-term lease
arrangements. Rent paid under such lease arrangements totaled $384,610,
$373,169 and $331,963, respectively, for the years ended December 31, 1997, 1996
and 1995. Minimum commitments under operating leases for the five years in the
period ending December 31, 2002 and thereafter are as follows:
<TABLE>
<S> <C>
1998 $ 534,693
1999 398,715
2000 345,765
2001 345,046
2002 341,700
Thereafter 569,500
--------
$2,535,419
=========
</TABLE>
(8) SUPPLEMENTARY PROFIT AND LOSS INFORMATION
-----------------------------------------
Supplementary profit and loss information is presented below:
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Maintenance and repairs $ 734,011 $ 1,104,878 $ 1,182,963
=========== =========== ===========
Taxes, other than income
and payroll taxes $ 873,053 $ 895,669 $ 1,286,357
=========== =========== ===========
Advertising $ 1,288,316 $ 1,183,565 $ 1,298,497
=========== =========== ===========
Depreciation of property,
plant and equipment $18,824,685 $15,727,639 $20,285,166
=========== =========== ===========
Amortization of intangible
assets $ 3,012,566 $ 6,265,907 $ 6,381,569
=========== =========== ===========
</TABLE>
33
<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.
<TABLE>
<S> <C> <C>
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 37 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
</TABLE>
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.
34
<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. Mr. 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.
35
<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, as 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. In
March 1998, Mr. Fridman was named Chief Legal Officer of BCE Inc. and Bell
Canada. 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.
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
36
<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 Chief Financial Officer 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 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.
37
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
--------------------------------
The Partnership has no employees; however, various personnel are required
to operate the Systems. 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 January 16, 1998, no person or entity owned more than 5% 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 Venture. The General Partner believes that the terms of such transactions
are generally as favorable as could be obtained by the Venture 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 Venture from
unaffiliated parties.
TRANSACTIONS WITH THE GENERAL PARTNER
The General Partner charges the Venture a 5% 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 Venture. 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 Venture's revenues to the total revenues of
all systems owned or managed by the General Partner and certain of its
subsidiaries. Systems owned by the General Partner and all other systems owned
by partnerships for which Jones Intercable, Inc. is the general partner are also
allocated a proportionate share of these expenses.
The General Partner from time to time also advances funds to the Venture
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% by Jones Education Group, Ltd., 7%
by Mr. Jones and 26% 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 cable
television systems owned by the Venture.
Jones Computer Network, Ltd., a wholly owned subsidiary of Jones Education
Group, Ltd., a company owned 64% by Jones International, Ltd., 16% by the
General Partner, 12% by BCI and 8% 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 the
cable television systems owned by the Venture. Jones Computer Network, Ltd.
terminated its programming in April 1997.
The Great American Country network provides country music video programming
to the cable television systems owned by the Venture. This network, owned and
operated by Great American Country, Inc., a
38
<PAGE>
subsidiary of Jones International Networks, Ltd., an affiliate of the General
Partner, commenced service in 1996 in the cable television systems owned by the
Venture.
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 cable television systems owned by the Venture.
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% of its net
advertising revenue to the cable systems that carry its programming. The
Venture's systems carry PIN for all or part of each day. Revenues received by
the Venture from the PIN Venture relating to the Venture's owned cable
television systems totaled approximately $199,997 for the year ended December
31, 1997.
The programming fees paid by the Venture to Knowledge TV, Inc., Jones
Computer Network, Ltd., Great American Country and Superaudio (collectively, the
"affiliated programming providers") are governed by the terms of the various
master programming agreements entered into by and between the General Partner
and each of the affiliated programming providers. Generally, with respect to
most video programming services, cable operators pay to programmers a monthly
license fee per subscriber that is based on a number of factors, including the
perceived value of the programming, the size of the cable operator and the level
of distribution of the programming service within the cable operator's systems
and the other terms and conditions under which the programming is provided. The
General Partner negotiates master programming agreements with each programming
network distributed on any of its owned or managed cable systems. The Venture
pays the same per subscriber rate for all of its programming, including the
programming provided by affiliates of the General Partner, as the General
Partner pays for the programming it provides on cable television systems that it
owns itself, i.e., the General Partner does not receive any markup for
programming provided to the Venture under its master programming agreements. The
master programming agreements entered into by and between the General Partner
and the affiliated programming providers were negotiated by officers of the
General Partner with representatives of the affiliated programming providers.
The charges to the Venture for related party transactions are as follows
for the periods indicated:
<TABLE>
<CAPTION>
For the Year Ended December 31,
------------------------------
Cable TV Fund 12-BCD 1997 1996 1995
- -------------------- ---- ---- ----
<S> <C> <C> <C>
Management fees $4,133,751 $4,118,188 $5,069,985
Allocation of expenses 4,615,841 5,491,265 7,183,663
Interest expense 0 0 220,743
Amount of advances outstanding 0 0 4,198,739
Highest amount of advances outstanding 0 0 4,574,572
Programming fees:
Knowledge TV, Inc. 131,277 126,665 145,598
Jones Computer Network, Ltd. 85,543 248,044 283,339
Great American Country 131,863 141,753 0
Superaudio 118,032 116,710 135,861
</TABLE>
39
<PAGE>
PART IV.
--------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------
(a)1. See index to financial statements for list of
financial statements and exhibits thereto filed as a
part of this report.
3. The following exhibits are filed herewith.
4.1 Limited Partnership Agreement for Cable TV Fund 12-D. (1)
4.2 Joint Venture Agreement of Cable TV Fund 12-BCD Venture dated
as of March 17, 1986, among Cable TV Fund 12-B, Ltd., Cable TV
Fund 12-C, Ltd. and Cable TV Fund 12-D, Ltd. (2)
10.1.1 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for Edwards Air
Force Base, California (Fund 12-BCD). (3)
10.1.2 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the City of
Lancaster, California (Fund 12-BCD). (4)
10.1.3 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for
Unincorporated portions of Los Angeles County, California (Fund
12-BCD). (4)
10.1.4 Copy of Los Angeles County Code regarding cable tv system
franchises (Fund 12-BCD). (5)
10.1.5 Copy of Ordinance 90-0118F dated 10/29/90 granting a cable
television franchise to Fund 12-BCD (Fund 12-BCD). (5)
10.1.6 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Green
Valley/Elizabeth Lake/Leona Valley unincorporated areas of Los
Angeles County, California (Fund 12-BCD). (2)
10.1.7 Ordinance 88-0166F dated 10/4/88 amending the franchise
described in 10.1.5 (Fund 12-BCD). (5)
10.1.8 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the City of
Palmdale, California (Fund 12-BCD). (5)
10.1.9 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the City of
Albuquerque, New Mexico (Fund 12-BCD). (4)
10.1.10 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the County of
Bernalillo, New Mexico (Fund 12-BCD). (4)
10.1.11 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Town of
Bernalillo, New Mexico (Fund 12-BCD). (4)
40
<PAGE>
10.1.12 Resolution No. 12-14-87 dated 12/14/87 authorizing the
assignment of the franchise to Fund 12-BCD. (5)
10.1.13 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Village
of Bosque Farms, New Mexico (Fund 12-BCD). (4)
10.1.14 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Village
of Corrales, New Mexico (Fund 12-BCD). (4)
10.1.15 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Kirtland
Air Force Base, New Mexico (Fund 12-BCD). (5)
10.1.16 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the Village
of Los Ranchos, New Mexico (Fund 12-BCD). (4)
10.1.17 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the County
of Sandoval, New Mexico (Fund 12-BCD). (4)
10.1.18 Copy of a franchise and related documents thereto granting a
community antenna television system franchise for the County
of Valencia, New Mexico (Fund 12-BCD). (4)
10.1.19 Resolution No. 88-23 dated 2/14/88 authorizing assignment of
the franchise to Fund 12-BCD. (5)
10.2.1 Note Purchase Agreement dated as of March 31, 1992 between
Cable TV Fund 12-BCD Venture and the Noteholders (6)
10.2.2 Amendment No. 1 dated as of March 31, 1994 to the Note
Purchase Agreement dated as of March 31, 1992 between Cable TV
Fund 12-BCD Venture and the Noteholders (6)
10.2.3 Amendment No. 2 dated as of September 30, 1994 to the Note
Purchase Agreement dated as of March 31, 1992 between Cable TV
Fund 12-BCD Venture and the Noteholders (6)
10.2.4 Amendment No. 3 dated as of February 12, 1996 to the Note
Purchase Agreement dated as of March 31, 1992 between Cable TV
Fund 12-BCD Venture and the Noteholders (6)
10.2.5 Second Amended and Restated Credit Agreement by and among
Cable TV Fund 12-BCD Venture, various banks, Corestates Bank,
N.A. and Societe Generale, as Managing Agents and Corestates
Bank, N.A., as Administrative Agent dated February 12, 1996.
(6)
10.3.1 Purchase and Sale Agreement (Albuquerque) dated as of July 28,
1997 between Jones Intercable, Inc. and Cable TV Fund 12-BCD
Venture. (7)
41
<PAGE>
27 Financial Data Schedule
__________
(1) Incorporated by reference from Registrant's Report on Form 10-K
for the fiscal year ended December 31, 1985 (Commission File Nos.
0-13193, 0-13807, 0-13964 and 0-14206).
(2) Incorporated by reference from Registrant's Report on Form 10-K
for the fiscal year ended December 31, 1987 (Commission File Nos.
0-13193, 0-13807, 0-13964 and 0-14206).
(3) Incorporated by reference from Registrant's Report on Form 10-K
for the fiscal year ended December 31, 1994 (Commission File No.
0-14206).
(4) Incorporated by reference from Registrant's Report on Form 10-K
for the fiscal year ended December 31, 1986 (Commission File Nos.
0-13193, 0-13807, 0-13964 and 0-14206).
(5) Incorporated by reference from Registrant's Report on Form 10-K
for the fiscal year ended December 31, 1992 (Commission File Nos.
0-13193, 0-13807, 0-13964 and 0-14206).
(6) Incorporated by reference from Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1995.
(7) Incorporated by reference from the Preliminary Proxy Statement of
Cable TV Fund 12-D, Ltd. (Commission File No. 1-14206) filed with
the SEC on 10/2/97.
(b) Reports on Form 8-K.
None.
42
<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.
CABLE TV FUND 12-D, LTD.
a Colorado limited partnership
By: Jones Intercable, Inc.
By: /s/ Elizabeth M. Steele
--------------------------------
Elizabeth M. Steele
Dated: April 17, 1998 Vice President
43
<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> 1,742,444
<SECURITIES> 0
<RECEIVABLES> 4,456,904
<ALLOWANCES> (404,821)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 218,189,145
<DEPRECIATION> (113,368,132)
<TOTAL-ASSETS> 124,269,504
<CURRENT-LIABILITIES> 7,150,772
<BONDS> 144,308,462
0
0
<COMMON> 0
<OTHER-SE> (27,189,730)
<TOTAL-LIABILITY-AND-EQUITY> 124,269,504
<SALES> 0
<TOTAL-REVENUES> 82,675,018
<CGS> 0
<TOTAL-COSTS> 76,545,330
<OTHER-EXPENSES> (6,973)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,934,909
<INCOME-PRETAX> (3,624,693)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,624,693)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,624,693)
<EPS-PRIMARY> (15.12)
<EPS-DILUTED> (15.12)
</TABLE>
