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FORM 10-K 405
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ________ to ________
Commission file number: 1-9287
JONES INTERCABLE INVESTORS, L.P.
(Exact name of registrant as specified in its charter)
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Colorado 36-3468573
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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
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Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
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State the aggregate market value of the voting stock held by non-affiliates of
the registrant: $97,005,455
Class A Units outstanding as of 2/15/95: 8,322,632
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. x
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DOCUMENTS INCORPORATED BY REFERENCE: None
(15809)
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PART I.
ITEM 1. BUSINESS
THE PARTNERSHIP. Jones Intercable Investors, L.P. (the "Partnership")
is a Colorado limited partnership that was formed to acquire, own and operate
cable television systems in the United States. Jones Intercable, Inc., a
Colorado corporation, is the general partner of the Partnership (the "General
Partner"). The Partnership was formed for the purpose of acquiring and
operating cable television systems. The Partnership owns the cable television
systems serving the areas in and around the City of Independence and suburban
Kansas City, Missouri communities (the "Independence System). See Item 2.
CABLE TELEVISION SERVICES. The Independence System offers to its
subscribers various types of programming, which include basic service, tier
service, premium service, pay-per-view programs and packages including several
of these services at combined rates.
Basic cable television service usually consists of signals of all four
national television networks, various independent and educational television
stations (both VHF and UHF) and certain signals received from satellites.
Basic service also usually includes programs originated locally by the system,
which may consist of music, news, weather reports, stock market and financial
information and live or videotaped programs of a public service or
entertainment nature. FM radio signals are also frequently distributed to
subscribers as part of the basic service.
The Independence System offers tier services on an optional basis to
its subscribers. A tier generally includes most of the cable networks such
as Entertainment and Sports Programming Network (ESPN), Cable News Network
(CNN), Turner Network Television (TNT), Family Channel, Discovery and others,
and the cable television operators buy tier programming from these networks.
The Independence System also offer a package that includes the basic service
channels and the tier services.
The Independence System also offers premium services to its
subscribers, which consist of feature films, sporting events and other special
features that are presented without commercial interruption. The cable
television operators buy premium programming from suppliers such as HBO,
Showtime, Cinemax or others at a cost based on the number of subscribers the
cable operator serves. Premium service programming usually is significantly
more expensive than the basic service or tier service programming, and
consequently cable operators price premium service separately when sold to
subscribers.
The Independence System also offers to subscribers pay-per-view
programming. Pay-per-view is a service that allows subscribers to receive
single programs, frequently consisting of motion pictures that have recently
completed their theatrical exhibitions and major sporting events, and to pay
for such service on a program-by-program basis.
REVENUES. Monthly service fees for basic, tier and premium services
constitute the major source of revenue for the Independence System. In
addition, advertising sales are becoming a significant source of revenue for
the Independence System. As a result of the adoption by the FCC of new rules
under the Cable Television Consumer Protection and Competition Act of 1992 (the
"1992 Cable Act"), and several rate regulation orders, the Independence
System's rate structures for cable programming services and equipment have been
revised. See Regulation and Legislation. At December 31, 1994, the
Independence System's monthly basic service rate was $8.64, the monthly basic
and tier ("basic plus") service rate was $22.32 and monthly premium services
ranged from $3.50 to $9.50 per premium service. Charges for additional
outlets have been eliminated, and charges for remote controls and converters
have been "unbundled" from the programming service rates. In addition, the
Independence System's pay-per-view programs and advertising fees generate
revenues. Related charges may include a nonrecurring installation fee that
ranges from $10.00 to $30.00; however, from time to time the Independence
System has followed the common industry practice of reducing or waiving the
installation fee during promotional periods. Commercial subscribers such as
hotels, motels and hospitals are charged a nonrecurring connection fee that
usually covers the cost of installation. Except under the terms of certain
contracts with
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commercial subscribers and residential apartment and condominium complexes, the
subscribers are free to discontinue the service at any time without penalty.
For the year ended December 31, 1994, of the total fees received by the
Independence System, basic service and tier service fees accounted for
approximately 70% of total revenues, premium service fees accounted for
approximately 19% of total revenues, pay-per-view fees were approximately .5%
of total revenues, advertising fees were approximately 2% of total revenues and
the remaining 8.5% of total revenues came principally from equipment rentals,
installation fees and program guide sales. The Partnership is dependent upon
the timely receipt of service fees to provide for maintenance and replacement
of plant and equipment, current operating expenses and other costs of the
Independence System.
The Partnership's business consists of providing cable television
services to a large number of customers, the loss of any one of which would
have no material effect on the Partnership's business. The Independence System
has had some subscribers who later terminated the service. Terminations occur
primarily because people move to another home or to another city. In other
cases, people terminate on a seasonal basis or because they no longer can
afford or are dissatisfied with the service. The amount of past due accounts
in the Independence System is not significant. The General Partner's policy
with regard to past due accounts is basically one of disconnecting service
before a past due account becomes material.
The Partnership does not depend to any material extent on the
availability of raw materials; it carries no significant amounts of inventory
and it has no material backlog of customer orders. The Partnership has no
employees because all properties are managed by employees of the General
Partner. The General Partner has engaged in research and development
activities relating to the provision of new services but the amount of the
Partnership's funds expended for such research and development has never been
material.
Compliance with federal, state and local provisions that have been
enacted or adopted regulating the discharge of materials into the environment
or otherwise relating to the protection of the environment has had no material
effect upon the capital expenditures, earnings or competitive position of the
Partnership.
FRANCHISES. The Independence System is constructed and operated under
non-exclusive, fixed-term franchises or other types of operating authorities
(referred to collectively herein as "franchises") granted by local governmental
authorities. The Independence System's franchises require that franchise fees
ranging from 3% to 5% of gross revenues of the cable system be paid to the
governmental authority that granted the franchise, that certain channels be
dedicated to municipal use, that municipal facilities, hospitals and schools be
provided cable service free of charge and that any new cable plant be
substantially constructed within specific periods. (See Item 2 for a range of
franchise expiration dates of the Independence System.)
The responsibility for franchising of cable television systems
generally is left to state and local authorities. There are, however, several
provisions in the Communications Act of 1934, as amended, that govern the terms
and conditions under which cable television systems provide service, including
the standards applicable to cable television operators seeking renewal of a
cable television franchise. In addition, the 1992 Cable Act also made several
procedural changes to the process under which a cable operator has not
substantially complied with the material terms of the franchise, has not
provided reasonable service in light of the community's needs, does not have
the financial, legal and technical ability to provide the services being
proposed for the future, or has not presented a reasonable proposal for future
service. A final decision of non-renewal by the franchising authority is
appealable in court. The General Partner and its affiliates recently have
experienced lengthy negotiations with some franchising authorities for the
granting of franchise renewals and transfers. Some of the issues involved in
recent renewal negotiations include rate reregulation, customer service
standards, cable plant upgrade or replacement and shorter terms of franchise
agreements. The inability of the Partnership to renew a franchise, or lengthy
negotiations or litigation involving the renewal process could have an adverse
impact on the business of the Partnership.
COMPETITION. Cable television systems currently experience
competition from several sources, but two technologies, Multichannel Multipoint
Distribution Service ("MMDS") systems, commonly called wireless cable
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systems, and Direct Broadcast Satellite ("DBS") systems, which distribute
programming to home satellite dishes, currently pose the greatest potential
threat to the cable television industry.
MMDS systems will likely focus on providing service to residents of
rural areas that are not served by cable television systems, but providers of
programming via MMDS systems will generally have the potential to compete
directly with cable television systems in urban areas as well, and in some
areas of the country, MMDS systems are now in direct competition with cable
television systems. The Independence System's service area has no MMDS
operators.
DBS operators deliver premium channel services and specialized
programming to subscribers by high-powered DBS satellites on a wide-scale
basis, and two major companies began operations in 1994. Subscribers are able
to receive DBS services virtually anywhere in the United States with a rooftop
or wall-mounted antenna. In some instances, DBS systems may serve as a
complement to cable television operations by enabling cable television
operators to offer additional channels of programming without the construction
of additional cable plant. DBS companies use video compression technology to
increase the channel capacity of their satellite systems to provide a wide
variety of program services that are competitive with those of cable television
systems. There are several retailers marketing DBS equipment; however, at this
time DBS does not provide significant competition.
Cable television systems also compete with broadcast television,
private cable television systems known as Master Antenna Television ("MATV"),
Satellite Master Antenna Television ("SMATV") and Television Receive-Only Earth
Stations ("TVRO"), which are satellite receiving antenna dishes that are used
by "backyard users" to receive satellite delivered programming directly in
their homes. MATV and SMATV generally serve multi-unit dwellings such as
condominiums, apartment complexes and private residential communities. There
are several SMATV operators that provide services primarily to multiple
dwelling units and several TVRO operators that provide moderate competition in
the Independence System's service area.
There is also potential competition from an emerging technology, Local
Multipoint Distribution Service ("LMDS"). When it is authorized for service,
the LMDS, sometimes referred to as cellular television, could have the
capability of delivering approximately 50 channels, or if two systems were
combined 100 channels, of video programming to a subscriber's home, which
capacity could be increased by using video compression technology. The General
Partner believes that there are not any current fully operational LMDS systems.
Although the Independence System has not yet encountered competition
from a telephone company entering into the business of providing video services
to subscribers, the Independence System could potentially face competition from
telephone companies doing so. A Federal cross-ownership restriction has
historically limited entry into the cable television business by potentially
strong competitors such as telephone companies. This restriction, which is
contained in the 1984 Cable Act, has generally prohibited telephone companies
from owning or operating cable television systems within their own telephone
service areas, but several recent court decisions have eliminated this
restriction. In addition, the FCC is authorizing telephone companies to
provide video dialtone service within their service areas. Legislation is also
pending in Congress that would permit telephone companies to provide video
programming through separate subsidiaries. The General Partner cannot predict
at this time to what extent current restrictions will be modified to permit
telephone companies to provide cable television services within their own
service areas in competition with cable television systems. See Regulation and
Legislation, Ownership and Market Structure for a description of the potential
participation of the telephone industry in the delivery of cable television
services. Entry into the market by telephone companies as direct competitors
of the Independence System could adversely impact the profitability of the
Independence System. If a telephone company were to become a direct
competitor of the Partnership in an area served by the Independence System,
the Partnership could be at a competitive disadvantage because of the relative
financial strength of a telephone company compared to the Partnership.
Depending on a number of factors, such competition could also result in cable
television systems providing the same types of services now provided by the
telephone industry.
The FCC has established a new wireless telecommunications service
known as Personal Communications Service ("PCS"). It is envisioned that PCS
would provide portable non-vehicular mobile communications services
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similar to that available from cellular telephone companies, but at a lower
cost. PCS would be delivered by placing numerous microcells in a particular
area to be covered, accessible to both residential and business customers.
Because of the need to link the many microcells necessary to deliver this
service economically, many parties are investigating integration of PCS with
cable television operations. Several cable television multiple systems
operators and others, including affiliates of the General Partner, hold or have
requested experimental licenses from the FCC to test PCS technology. The FCC
has established spectrum auctioning procedures for PCS licenses and the
licenses are being auctioned in a series of auction events.
Cable television franchises are not exclusive, so that more than one
cable television system may be built in the same area (known as an
"overbuild"), with potential loss of revenues to the operator of the original
cable television system. The Independence System currently faces no direct
competition from other cable television operators.
REGULATION AND LEGISLATION. The cable television industry is
regulated through a combination of the Federal Communications Commission
("FCC"), some state governments, and most local governments. In addition, the
Copyright Act of 1976 imposes copyright liability on all cable television
systems. Cable television operations are subject to local regulation insofar
as systems operate under franchises granted by local authorities.
Cable Television Consumer Protection and Competition Act of 1992. On
October 5, 1992, Congress enacted the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act"), which became effective on
December 4, 1992. This legislation has caused significant changes to the
regulatory environment in which the cable television industry operates. The
1992 Cable Act generally allows for a greater degree of regulation of the cable
television industry. Under the 1992 Cable Act's definition of effective
competition, nearly all cable television systems in the United States,
including those owned and managed by the General Partner, are subject to rate
regulation of basic cable services. In addition, the 1992 Cable Act allows the
FCC to regulate rates for non-basic service tiers other than premium services
in response to complaints filed by franchising authorities and/or cable
subscribers. In April 1993, the FCC adopted regulations governing rates for
basic and non-basic services. The FCC's rules became effective on September 1,
1993.
In compliance with these rules, the General Partner reduced rates
charged for certain regulated services effective September 1, 1993. These
reductions resulted in some decrease in revenues and operating income before
depreciation and amortization; however, the decrease was not as severe as
originally anticipated. The General Partner has undertaken actions to mitigate
a portion of these reductions primarily through (a) new service offerings in
some systems, (b) product re-marketing and re-packaging and (c) marketing
efforts directed at non-subscribers.
On February 22, 1994, however, the FCC adopted several additional rate
orders including an order which revised its earlier- announced regulatory
scheme with respect to rates. The FCC's new regulations generally require rate
reductions, absent a successful cost-of-service showing, of 17% of September
30, 1992 rates, adjusted for inflation, channel modifications, equipment costs,
and increases in programming costs. However, the FCC held rate reductions in
abeyance in certain systems. The new regulations became effective on May 15,
1994, but operators could elect to defer rate reductions to July 14, 1994, so
long as they made no changes in their rates and did not restructure service
offerings between May 15 and July 14.
On February 22, 1994, the FCC also adopted interim cost-of-service
regulations. Rate reductions will not be required where it is successfully
demonstrated that rates for basic and other regulated programming services are
justified and reasonable using cost-of-service standards. The FCC established
an interim industry-wide 11.25% permitted rate of return, and requested
comments on whether this standard and other interim cost-of-service standards
should be made permanent. The FCC also established a presumption that
acquisition costs above a system's book value should be excluded from the rate
base, but the FCC will consider individual showings to rebut this presumption.
The need for special rate relief will also be considered by the FCC if an
operator demonstrates that the rates set by a cost-of-service proceeding would
constitute confiscation of investment, and that, absent a higher rate, the
return necessary to operate and to attract investment could not be maintained.
The FCC will establish a uniform system of accounts for operators that elect
cost-of-service rate
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regulation, and the FCC has adopted affiliate transaction regulations. After a
rate has been set pursuant to a cost-of-service showing, rate increases for
regulated services will be indexed for inflation, and operators will also be
permitted to increase rates in response to increases in costs beyond their
control, such as taxes and increased programming costs.
After analyzing the effects of the two methods of rate regulation, the
General Partner elected to file cost-of-service showings for the Independence
System. The General Partner thus anticipates no further reduction in revenues
or operating income before depreciation and amortization resulting from the
FCC's rate regulations. At this time, however, the regulatory authorities have
not yet approved the cost-of-service showings, and there can be no assurance
that the Partnership's cost-of-service showings will prevent further rate
reductions by Independence System until such final approval is received.
Among other issues addressed by the FCC in its February 1994 rate
orders was the treatment of packages of a la carte channels. The FCC in its
rate regulations adopted April 1, 1993, exempted from rate regulation the price
of packages of a la carte channels upon the fulfillment of certain conditions.
On November 10, 1994, the FCC reversed its policy regarding rate regulation of
packages of a la carte services. A la carte services that are offered in a
package will now be subject to rate regulation by the FCC, although the FCC
indicated that it cannot envision circumstances in which any price for a
collective offering of premium channels that have traditionally been offered on
a per-channel basis would be found to be unreasonable.
On November 10, 1994, the FCC also announced a revision to its
regulations governing the manner in which cable operators may charge
subscribers for new cable programming services. In addition to the present
formula for calculating the permissible rate for new services, the FCC
instituted a three-year flat fee mark-up plan for charges relating to new
channels of cable programming services. Commencing on January 1, 1995,
operators may charge for new channels of cable programming services added after
May 14, 1994 at a rate of up to 20 cents per channel, but may not make
adjustments to monthly rates totaling more than $1.20 plus an additional 30
cents for programming license fees per subscriber over the first two years of
the three-year period for these new services. Operators may charge an
additional 20 cents in the third year only for channels added in that year plus
the costs for the programming. Operators electing to use the 20 cent per
channel adjustment may not also take a 7.5% mark-up on programming cost
increases, which is permitted under the FCC's current rate regulations. The
FCC has requested further comment as to whether cable operators should continue
to receive the 7.5% mark-up on increases in license fees on existing
programming services.
The FCC also announced that it will permit operators to offer a "new
product tier" ("NPT"). Operators will be able to price this tier as they elect
so long as, among other conditions, other channels that are subject to rate
regulation are priced in conformity with applicable regulations and operators
do not remove programming services from existing tiers and offer them on the
NPT.
There have been several lawsuits filed by cable operators and
programmers in Federal court challenging various aspects of the 1992 Cable Act,
including provisions relating to mandatory broadcast signal carriage,
retransmission consent, access to cable programming, rate regulations,
commercial leased channels and public access channels. On April 8, 1993, a
three-judge Federal district court panel issued a decision upholding the
constitutionality of the mandatory signal carriage requirements of the 1992
Cable Act. That decision was appealed directly to the United States Supreme
Court. The United States Supreme Court vacated the lower court decision on
June 27, 1994 and remanded the case to the district court for further
development of a factual record. The Supreme Court's majority determined that
the must-carry rules were content neutral, but that it was not yet proven that
the rules were needed to preserve the economic health of the broadcasting
industry. In the interim, the must-carry rules will remain in place during the
pendency of the proceedings in district court. In 1993, a Federal district
court for the District of Columbia upheld provisions of the 1992 Cable Act
concerning rate regulation, retransmission consent, restrictions on vertically
integrated cable television operators and programmers, mandatory carriage of
programming on commercial leased channels and public, educational and
governmental access channels and the exemption for municipalities from civil
damage liability arising out of local regulation of cable services. The 1992
Cable Act's provisions providing for multiple ownership limits for cable
operators and advance notice of free previews for certain programming services
have been found unconstitutional.
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In November 1993, the United States Court of Appeals for the District of
Columbia held that the FCC's regulations implemented pursuant to Section 10 of
the 1992 Cable Act, which permit cable operators to ban indecent programming on
public, educational or governmental access channels or leased access channels,
were unconstitutional, but the court has agreed to reconsider its decision.
All of these decisions construing provisions of the 1992 Cable Act and the
FCC's implementing regulations have been or are expected to be appealed.
Ownership and Market Structure. The FCC rules and federal law
generally prohibit the direct or indirect common ownership, operation, control
or interest in a cable television system, on the one hand, and a local
television broadcast station whose television signal reaches any portion of the
community served by the cable television system, on the other hand. The FCC
recently lifted its ban on the cross-ownership of cable television systems by
broadcast networks. The FCC revised its regulations to permit broadcast
networks to acquire cable television systems serving up to 10% of the homes
passed in the nation, and up to 50% of the homes passed in a local market.
Neither the Partnership nor the General Partner has any direct or indirect
ownership, operation, control or interest in a television broadcast station, or
a telephone company, and they are thus presently unaffected by the
cross-ownership rules.
The Cable Communications Policy Act of 1984 (the "1984 Cable Act") and
FCC regulations generally prohibit the common operation of a cable television
system and a telephone company within the same service area. Until recently, a
provision of a Federal court antitrust consent decree also prohibited the
regional Bell operating companies ("RBOCs") from engaging in cable television
operations. This prohibition was recently removed when the court retaining
jurisdiction over the consent decree ruled that the RBOCs could provide
information services over their facilities. This decision permits the RBOCs to
acquire or construct cable television systems outside of their own service
areas.
The 1984 Cable Act prohibited local exchange carriers, including the
RBOCs, from providing video programming directly to subscribers within their
local exchange telephone service areas, except in rural areas or by specific
waiver of FCC rules. Several Federal district courts have struck down the 1984
Cable Act's telco/cross-ownership provision as facially invalid and
inconsistent with the First Amendment. The United States Courts of Appeals for
the Fourth and the Ninth Circuits have upheld the appeals of two of these
district court decisions, and the United States Justice Department is expected
to request the United States Supreme Court to review these two decisions. This
Federal cross-ownership rule is particularly important to the cable industry
since these telephone companies already own certain facilities needed for cable
television operation, such as poles, ducts and associated rights-of-way.
The FCC amended its rules in 1992 to permit local telephone companies
to offer "video dialtone" service for video programmers, including channel
capacity for the carriage of video programming and certain noncommon carrier
activities such as video processing, billing and collection and joint marketing
arrangements. In its video dialtone order, which was part of a comprehensive
proceeding examining whether and under what circumstances telephone companies
should be allowed to provide cable television services, including video
programming to their customers, the FCC concluded that neither the 1984 Cable
Act nor its rules apply to prohibit the interexchange carriers (i.e., long
distance telephone companies such as AT&T) from providing such services to
their customers. Additionally, the FCC also concluded that where a local
exchange carrier ("LEC") makes its facilities available on a common carrier
basis for the provision of video programming to the public, the 1984 Cable Act
does not require the LEC or its programmer customers to obtain a franchise to
provide such service. This aspect of the FCC's video dialtone order was upheld
on appeal by the United States Court of Appeals for the D.C. Circuit. The FCC
recently issued an order reaffirming its initial decision, and this order has
been appealed. Because cable operators are required to bear the costs of
complying with local franchise requirements, including the payment of franchise
fees, the FCC's decision could place cable operators at a competitive
disadvantage vis-a-vis services offered on a common carrier basis over local
telephone company provided facilities. In its Reconsideration Order, the FCC,
among other actions, refused to require telephone companies to justify cost
allocations prior to the construction of video dialtone facilities, and
indicated that it would provide guidance on costs that must be included in
proposed video dialtone tariffs. The FCC also established dual Federal/state
jurisdiction over video dialtone services based on the origination point of the
video dialtone programming service.
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In a separate proceeding, the FCC has proposed to increase the numerical limit
on the population of areas qualifying as "rural" and in which LECs can provide
cable service without a FCC waiver.
On January 12, 1995, the FCC adopted a Fourth Further Notice of
Proposed Rulemaking in its video dialtone docket. The FCC tentatively
concluded that it should not ban telephone companies from providing their own
video programming over their video dialtone platforms in those areas in which
the cable/telephone cross-ownership rules have been found unconstitutional.
The FCC requested comments on this issue and on further refinements of its
video dialtone regulatory framework concerning, among other issues, telephone
programmer affiliation standards, the establishment of structural safeguards to
prevent cross-subsidization of video dialtone and programming activities, and
the continuation of the FCC's ban prohibiting telephone companies from
acquiring cable systems within their telephone service areas for the provision
of video dialtone services. The FCC will also consider whether a LEC offering
video dialtone service must secure a local franchise if that LEC also engages
in the provision of video programming carried on its video dialtone platform.
The FCC has also proposed to broadly interpret its authority to waive the
cable/telephone cross-ownership ban upon a showing by telephone companies that
they comply with the safeguards which the FCC establishes as a condition of
providing video programming.
A number of bills that would have permitted telephone companies to
provide cable television service within their own service areas were considered
during the last Congress, but none were adopted. These bills would have
permitted the provision of cable television service by telephone companies in
their own service areas conditioned on the establishment of safeguards to
prevent cross-subsidization between telephone and cable television operations
and the provision of telecomunication services by cable television systems.
Similar legislation is expected to be considered by Congress during its current
session. The outcome of these FCC, legislative or court proceedings and
proposals or the effect of such outcome on cable system operations cannot be
predicted.
ITEM 2. PROPERTIES
The Partnership owned only one cable television system at December 31,
1994, the Independence System, which was acquired in May 1987.
The following sets forth (i) the monthly basic plus service rates
charged to subscribers, (ii) the number of basic subscribers and pay units and
(iii) the range of franchise expiration dates for the Independence System. The
monthly basic service rates set forth herein represent, with respect to systems
with multiple headends, the basic service rate charged to the majority of the
subscribers within the Independence System. While the charge for basic plus
service may have increased in 1993 in some cases as a result of the FCC's rate
regulations, overall revenues may have decreased due to the elimination of
charges for additional outlets and certain equipment. In cable television
systems, basic subscribers can subscribe to more than one pay TV service.
Thus, the total number of pay services subscribed to by basic subscribers are
called pay units. As of December 31, 1994, the Independence System operated
approximately 1,400 miles of cable plant, passing approximately 130,000 homes,
representing an approximate 61% penetration rate. Figures for numbers of
subscribers, miles of cable plant and homes passed are compiled from the
General Partner's records and may be subject to adjustments.
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AT DECEMBER 31,
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INDEPENDENCE, MISSOURI 1994 1993 1992
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Monthly basic plus service rate $ 22.32 $ 22.32 $ 21.45
Basic subscribers 79,985 75,117 72,430
Pay units 52,630 55,425 53,247
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Franchise expiration dates range from April 1995 to March 2009. Any franchise
expiring in 1995 is in the renewal process.
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PROGRAMMING SERVICES
Programming services provided by the Independence System include local
affiliates of the national broadcast networks, local independent broadcast
channels, the traditional satellite services (e.g., American Movie Classics,
Arts & Entertainment, Black Entertainment Network, C-SPAN, The Discovery
Channel, Lifetime, Entertainment Sports Network, Home Shopping Network, Mind
Extension University, Music Television, Nickelodeon, Turner Network Television,
The Nashville Network, Video Hits One, and superstations WOR, WGN and TBS. The
Independence System also provides a selection of premium channel programming
(e.g., Cinemax, Encore, Home Box Office, Showtime and The Movie Channel).
ITEM 3. LEGAL PROCEEDINGS
On February 22, 1994, the General Partner and The Jones Group, Ltd.
("Jones Group"), an affiliate of the General Partner engaged in the cable
brokerage business, were named as defendants in a lawsuit brought by three
individuals who are Class A Unitholders in the Partnership. The litigation,
entitled Luva Vaughan et al v. Jones Intercable, Inc. et al, Case No. CV
94-3652 was filed in the Circuit Court for Jackson County, Missouri, and
purports to be "for the use and benefit of" the Partnership. The suit seeks
rescission of the sale of the Alexandria, Virginia cable television system (the
"Alexandria System") by the Partnership to the General Partner, which sale was
completed on November 2, 1992. It also seeks a constructive trust on the
profits derived from the operation of the Alexandria System since the date of
the sale, and seeks an accounting and other equitable relief. The plaintiffs
also allege that the $1,800,000 commission paid to Jones Group by the
Partnership in connection with such sale was improper, and ask the Court to
order that such commission be repaid to the Partnership.
On October 21, 1994, plaintiffs filed a motion to dismiss Jones Group
in response to Jones Group's argument that Missouri lacked personal
jurisdiction over it. Plaintiffs' motion was granted, and plaintiffs then
filed an action in Colorado against Jones Group seeking a return of the
brokerage commission.
Under the terms of the partnership agreement of the Partnership, the
General Partner has the right to acquire cable television systems from the
Partnership at a purchase price equal to the average of three independent
appraisals of the cable television system to be acquired. The plaintiffs claim
that the appraisals obtained in connection with the sale of the Alexandria
System were improperly obtained, were not made by qualified appraisers and were
otherwise improper. The purchase price paid by the General Partner upon such
sale was approximately $73,200,000.
The amount of damages being sought by the plaintiffs has not yet been
specified. The General Partner believes both that the appraisals were properly
obtained and that the brokerage commission was properly paid to Jones Group in
accordance with the express terms of the partnership agreement. The General
Partner further believes that its defenses are meritorious and it intends to
vigorously defend the litigation.
The General Partner and Jones Group have filed motions for summary
judgment in the Missouri and Colorado cases, respectively, which are pending
before the Missouri and Colorado courts. In addition, the General Partner has
conducted written discovery in the form of interrogatories and requests for
production of documents, and has noticed the depositions of plaintiffs and
plaintiffs' expert. A trial date of April 3, 1995 has been set in the Missouri
case, but it will likely be continued in accordance with the General Partner's
request. No trial date has been set in the Colorado case. Because defendants'
motions have not been resolved and because discovery has just commenced, it is
premature to present a realistic evaluation of the probability of a favorable
or unfavorable outcome.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
9
<PAGE> 10
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS
The Partnership's Class A Units are traded on the American Stock
Exchange ("AMEX") under the symbol JTV.
The following table shows the high and low prices as regularly quoted
on AMEX for each quarterly period of 1994 for the Partnership's Class A Units:
<TABLE>
<CAPTION>
YEAR ENDED 12/31/94 HIGH LOW
------------------- ---- -----
<S> <C> <C>
First Quarter 13 9 7/8
Second Quarter 10 3/8 8 5/8
Third Quarter 11 1/4 8 5/8
Fourth Quarter 11 9 1/4
</TABLE>
At February 15, 1995, there were 1,594 record holders of the Class A
Units of the Partnership and 8,322,632 outstanding Class A Units.
The Partnership distributed $.15 per Class A Unit for each of the
calendar quarters in 1994. See Note 4 of the Notes to Financial Statements for
discussion of the Partnership's cash distribution policy.
10
<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1994** 1993** 1992 1991 1990
------------ ---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues $27,522,625 $26,955,292 $38,337,748 $38,468,689 $35,622,250
Operating, General and
Administrative Expenses 13,757,025 13,021,954 18,635,695 18,898,291 17,016,757
Management Fees and Allocated
Overhead from General Partner 3,450,694 3,228,652 4,459,714 4,270,969 3,940,408
Depreciation and Amortization 8,341,272 9,793,347 15,051,597 17,478,720 16,974,387
Operating Income (Loss) 1,973,634 911,339 190,742 (2,179,291) (2,309,302)
Net Income (Loss) 578,056 (57,867) 44,060,105* (7,224,785) (8,113,030)
Net Income (Loss) per Class A Unit .07 ( .01) 5.24 ( .86) (.96)
Distributions per Class A Unit .60 .60 3.60 .60 1.20
Weighted Average Number of
Class A Units Outstanding 8,322,632 8,322,632 8,322,632 8,322,632 8,322,632
General Partner's Deficit (16,688) (22,469) (21,890) (462,491) (390,243)
Class A Unitholders' Capital 22,016,109 26,437,414 31,488,281 17,830,251 29,974,868
Total Assets 48,557,818 48,163,431 52,648,591 86,267,379 97,625,987
Total Debt 23,493,841 19,029,472 18,570,003 63,986,995 63,734,396
</TABLE>
*Includes gain on sale of Alexandria System of $47,118,868 during November 1992.
** Results reflect the sale of the Alexandria System during November 1992.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
1994 Compared to 1993
Partnership revenues increased $567,333, or approximately 2 percent, from
$26,955,292 in 1993 to $27,522,625 in 1994. This increase is primarily the
result of increases in basic subscribers. The Independence System added 4,868
basic subscribers in 1994, an increase of approximately 6 percent. Basic
subscribers for the Independence System totalled 75,117 at December 31, 1993
compared to 79,985 at December 31, 1994. The increase in revenues would have
been greater but for the reduction in basic rates due to regulations issued by
the FCC in April 1993 with which the Partnership complied effective September
1, 1993.
Operating, general and administrative expenses increased $735,071, or
approximately 6 percent, from $13,021,954 in 1993 to $13,757,025 in 1994.
Operating, general and administrative expense represented 48 percent and 50
percent of revenue in 1993 and 1994, respectively. This increase in operating,
general and administrative expenses was primarily due to an increase in
programming costs, which accounted for approximately 80 percent of the total
increase. No other individual factor was significant to the increase in
operating, general and administrative expenses.
Management fees and allocated overhead from the General Partner increased
$222,042, or approximately 7 percent, from $3,228,652 in 1993 to $3,450,694 in
1994 due primarily to increases in allocated expenses from the General Partner.
The General Partner has experienced increases in expenses, including personnel
expenses and reregulation expenses, a portion of which is allocated to the
Partnership.
Depreciation and amortization expense decreased $1,452,075, or
approximately 15 percent, from $9,793,347 in 1993 to $8,341,272 in 1994. This
decrease was due to the maturation of the Independence System's asset base.
11
<PAGE> 12
Operating income increased $1,062,295, from $911,339 in 1993 to
$1,973,634 in 1994. This increase is due to the factors discussed above.
Operating income before depreciation and amortization decreased $389,780, or
approximately 4 percent, from $10,704,686 in 1993 to $10,314,906 in 1994. This
decrease is due to the increases in operating, general and administrative
expense and allocated overhead from the General Partner exceeding the increase
in revenue. The decrease in operating income before depreciation and
amortization reflects the current operating environment of the cable television
industry. The FCC rate regulations under the 1992 Cable Act have caused
revenues to increase more slowly than otherwise would have been the case. In
turn, this has caused certain expenses which are a function of revenue, such as
franchise fees, copyright fees and management fees, to increase more slowly
than in prior years. However, other operating costs such as programming fees,
salaries and benefits, and marketing costs as well as other costs incurred by
the General Partner, which are allocated to the Partnership, continue to
increase at historical rates. This situation has led to reductions in
operating income before depreciation and amortization as a percent of revenue
("Operating Margin"). Such reductions in Operating Margins may continue in the
near term as the Partnership and the General Partner incur cost increases due
to, among other things, increases in programming fees, compliance costs
associated with reregulation and competition, that exceed increases in revenue.
The General Partner will attempt to mitigate a portion of these reductions
through (a) new service offerings, (b) product re-marketing and re-packaging
and (c) marketing efforts targeted at non-subscribers.
Interest expense increased $321,034, or approximately 33 percent, from
$978,624 in 1993 to $1,299,658 in 1994 due to higher interest rates and higher
average outstanding balances on interest bearing obligations in 1994. The
effective interest rates on amounts outstanding as of December 31, 1994 and
1993 were 7.09 percent and 4.80 percent, respectively.
The Partnership reported a net loss of $57,867 in 1993 compared to net
income of $578,056 in 1994. The increase was due to the factors discussed
above.
1993 Compared to 1992
Partnership revenues decreased $11,382,456, or approximately 30 percent,
from $38,337,748 in 1992 to $26,955,292 in 1993. This decrease was primarily
the result of the sale of the Alexandria System on November 2, 1992. The sale
of the Alexandria System resulted in a decrease in 1993 revenues of
approximately $12,828,410, while revenues in the Partnership's Independence
System increased approximately $1,445,954. An increase in the number of basic
subscribers accounted for approximately 46 percent of the increase in revenues
for the Independence System. The Independence System added 2,687 basic
subscribers in 1993, an increase of approximately 4 percent. Basic subscribers
for the Independence System totalled 72,430 at December 31, 1992 compared to
75,117 at December 31, 1993. Basic service rate adjustments primarily
accounted for the remainder of the revenue increase. The increase in revenues
in the Independence System would have been greater but for the reduction in
basic rates due to basic rate regulations issued by the FCC in April 1993 with
which the Partnership complied effective September 1, 1993.
Operating, general and administrative expenses decreased $5,613,741, or
approximately 30 percent, from $18,635,695 in 1992 to $13,021,954 in 1993.
Operating, general and administrative expense represented 48 percent and 49
percent of revenue in 1993 and 1992, respectively. Comparatively, these
expenses decreased by approximately $6,632,968 due to the sale of the
Alexandria System and increased by approximately $1,019,227 in the
Partnership's Independence System. This increase in operating, general and
administrative expenses in the Partnership's Independence System was primarily
due to an increase in programming costs, which accounted for approximately 37
percent of the increase. Increases in professional services accounted for
approximately 23 percent of the increase. No other individual factor was
significant to the increase in operating, general and administrative expenses
in the Partnership's Independence System.
Management fees and allocated overhead from the General Partner decreased
$1,231,062, or approximately 28 percent, from $4,459,714 in 1992 to $3,228,652
in 1993 due primarily to the decrease in revenues due to the sale of the
Alexandria System.
Depreciation and amortization expense decreased $5,258,250, or
approximately 35 percent, from $15,051,597 in 1992 to $9,793,347 in 1993. This
decrease was due to the sale of the Alexandria System in November 1992 and the
maturation of the Independence System's depreciable asset base.
12
<PAGE> 13
Operating income increased $720,597 to $911,339 in 1993 from $190,742 in
1992, due to the factors discussed above.
Interest expense decreased $2,160,715, or approximately 69 percent, from
$3,139,339 in 1992 to $978,624 in 1993 due to lower interest rates and lower
average outstanding balances on interest bearing obligations in 1993. A
portion of the proceeds from the sale of the Alexandria System were used to
repay a portion of the amounts outstanding on the Partnership's credit
facility.
The Partnership recognized a gain on the sale of the Alexandria System in
1992 of $47,118,868. No similar gain was recognized in 1993. The Partnership
recorded net income of $44,060,105 in 1992, primarily due to the gain on the
Alexandria System, compared to a net loss of $57,867 in 1993.
Financial Condition
The Partnership's capital expenditures for 1994 totalled approximately
$8,500,000. Approximately 54 percent of these expenditures related to the
extension and rebuild of cable plant. Service drops to homes accounted for
approximately 16 percent of such expenditures. The remainder of the capital
expenditures related to various enhancements in the Partnership's Independence
System. Funding for these expenditures was provided primarily by cash
generated from operations and borrowings from the Partnership's revolving
credit facility.
Anticipated capital expenditures for 1995 are approximately $8,200,000.
The continuation of the rebuild of the Independence System is expected to
account for approximately 38 percent of the anticipated capital expenditures.
Service drops connecting new subscribers are expected to account for
approximately 19 percent. The remainder of the expenditures will relate to
various enhancements in the Independence System. Funding for these capital
improvements is expected to be provided by cash generated from operations and
borrowings from the Partnership's credit facility.
The maximum amount available under the Partnership's revolving credit
facility is subject to the terms of the credit agreement and the Partnership's
limited partnership agreement's leverage limitations discussed below. Upon
completion of the Alexandria System sale, the maximum amount available under
the Partnership's revolving credit facility was reduced to $35,000,000. As of
December 31, 1994, $23,000,000 was outstanding, leaving $12,000,000 of
available borrowings for future needs. Although the revolving credit period
was scheduled to expire on December 31, 1994, the General Partner completed
negotiations in December 1994 to extend the revolving credit period to December
31, 1996. Interest on outstanding principal balances is at the Partnership's
option of the Prime rate plus .25 percent, the CD rate plus 1.25 percent or the
Euro-rate plus 1.25 percent. In addition, a fee of 3/8 percent per annum is
required on the unused portion of the commitment.
The level of borrowing allowed by the Partnership's limited partnership
agreement is limited to 25 percent of the fair market value of the
Partnership's assets at the time of borrowing or 25 percent of the cost of the
Partnership's assets at the time of borrowing, whichever is higher. This
limitation restricts the Partnership's ability to borrow funds for capital
expenditures and to make distributions. In addition, such limitations may
reduce the financial flexibility and liquidity of the Partnership. Further,
the payment of principal and interest on outstanding debt obligations will
diminish the level of funds available to the Partnership and reduce the
financial flexibility of the Partnership. The Partnership's most recent
appraisal of the Independence System was $157,046,000. Based upon this
appraised value, the Partnership has a borrowing capacity of approximately
$39,000,000, which would allow the Partnership to borrow the maximum amount
($12,000,000) currently available under its credit facility.
The Partnership declared a $.15 per unit distribution for each of the
four quarters of 1994. The Partnership intends to distribute all cash flow
from operations after payment of expenses, capital additions and creation of
cash reserves deemed reasonably necessary to preserve and enhance the value of
the Partnership's cable television system. The General Partner will determine
the level of distributions on a quarter-by-quarter basis.
13
<PAGE> 14
Regulatory Matters
On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act"), which became
effective on December 4, 1992. The 1992 Cable Act generally allows for a
greater degree of regulation of the cable television industry. In April 1993,
the FCC adopted regulations governing rates for basic and non-basic services.
These regulations became effective on September 1, 1993. Such regulations
caused reductions in rates for certain regulated services. On February 22,
1994, the FCC adopted several additional rate orders including an order which
revised its earlier-announced regulatory scheme with respect to rates. The
Partnership has filed cost-of-service showings for its Independence System and
thus anticipates no further reductions in rates. The cost-of-service showings
have not yet received final approval from franchising authorities, however, and
there can be no assurance that the Partnership's cost-of-service showings will
prevent further rate reductions until such final approvals are received. See
Item I for further discussion of the provisions of the 1992 Cable Act and the
FCC regulations promulgated thereunder.
14
<PAGE> 15
ITEM 8. FINANCIAL STATEMENTS
JONES INTERCABLE INVESTORS, L.P.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1994 AND 1993
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants 16
Balance Sheets 17
Statements of Operations 19
Statements of Partners' Capital (Deficit) 20
Statements of Cash Flows 21
Notes to Financial Statements 22
</TABLE>
15
<PAGE> 16
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Jones Intercable Investors, L.P.:
We have audited the accompanying balance sheets of JONES INTERCABLE
INVESTORS, L.P. (a Colorado limited partnership) as of December 31, 1994 and
1993, and the related statements of operations, partners' capital (deficit) and
cash flows for each of the three years in the period ended December 31, 1994.
These financial statements are the responsibility of the General Partner's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Jones Intercable Investors,
L.P. as of December 31, 1994 and 1993, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 8, 1995.
16
<PAGE> 17
JONES INTERCABLE INVESTORS, L.P.
(A Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
ASSETS 1994 1993
----------------- ----------------
<S> <C> <C>
CASH $ 607,422 $ 366,508
TRADE RECEIVABLES, less allowance for doubtful
receivables of $76,659 and $66,380 at
December 31, 1994 and 1993, respectively 741,315 754,318
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 60,015,800 51,833,995
Less- accumulated depreciation (25,208,198) (21,838,729)
------------ ------------
34,807,602 29,995,266
Franchise costs, net of accumulated amortization of
$35,793,356 and $32,364,488 at December 31, 1994
and 1993, respectively 12,057,953 15,486,821
Subscriber lists, net of accumulated amortization of $22,600,000
and $21,332,901 at December 31, 1994 and 1993, respectively - 1,267,099
Costs in excess of interests in net assets purchased, net of
accumulated amortization of $47,562 and $41,310 at
December 31, 1994 and 1993, respectively 202,439 208,691
------------- -------------
Total investment in cable
television properties 47,067,994 46,957,877
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 141,087 84,728
------------- -------------
Total assets $ 48,557,818 $ 48,163,431
============= =============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
17
<PAGE> 18
JONES INTERCABLE INVESTORS, L.P.
(A Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1994 1993
------------- -------------
<S> <C> <C>
LIABILITIES:
Credit facility $ 23,000,000 $ 18,400,000
Other debt 493,841 629,472
Accounts payable 5,381 86,490
Accrued distributions to Class A Unitholders 1,248,395 1,248,395
Accrued liabilities 1,685,890 1,249,896
Subscriber prepayments 124,890 134,233
------------ ------------
Total liabilities 26,558,397 21,748,486
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 8)
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (17,688) (23,469)
------------ ------------
(16,688) (22,469)
------------ ------------
Class A unitholders-
Net contributed capital
(8,322,632 units outstanding
at December 31, 1994 and 1993) 116,433,492 116,433,492
Accumulated deficit (1,751,179) (2,323,454)
Distributions to Unitholders (92,666,204) (87,672,624)
------------ ------------
22,016,109 26,437,414
------------ ------------
Total liabilities and
partners' capital (deficit) $ 48,557,818 $ 48,163,431
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
18
<PAGE> 19
JONES INTERCABLE INVESTORS, L.P.
(A Limited Partnership)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES $27,522,625 $26,955,292 $38,337,748
COSTS AND EXPENSES:
Operating, general and
administrative 13,757,025 13,021,954 18,635,695
Management fees and allocated
overhead from General Partner 3,450,694 3,228,652 4,459,714
Depreciation and amortization 8,341,272 9,793,347 15,051,597
----------- ----------- -----------
OPERATING INCOME 1,973,634 911,339 190,742
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (1,299,658) (978,624) (3,139,339)
Interest income 7,899 17,232 7,874
Gain on sale of assets - - 47,118,868
Other, net (103,819) (7,814) (118,040)
----------- ----------- -----------
Total other income (expense) (1,395,578) (969,206) 43,869,363
----------- ----------- -----------
NET INCOME (LOSS) $ 578,056 $ (57,867) $44,060,105
=========== =========== ===========
ALLOCATION OF NET INCOME (LOSS):
General Partner $ 5,781 $ (579) $ 440,601
=========== =========== ===========
Class A Unitholders $ 572,275 $ (57,288) $43,619,504
=========== =========== ===========
NET INCOME (LOSS) PER CLASS A UNIT $ .07 $ (.01) $ 5.24
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF CLASS A
UNITS OUTSTANDING 8,322,632 8,322,632 8,322,632
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
19
<PAGE> 20
JONES INTERCABLE INVESTORS, L.P.
(A Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1994 1993 1992
------------- -------------- ---------------
<S> <C> <C> <C>
General Partner:
Balance, beginning of year $ (22,469) $ (21,890) $ (462,491)
Net income (loss) for year 5,781 (579) 440,601
------------ ------------ -------------
Balance, end of period $ (16,688) $ (22,469) $ (21,890)
============ ============ =============
Class A Unitholders:
Balance, beginning of year $26,437,414 $31,488,281 $ 17,830,251
Net income (loss) for year 572,275 (57,288) 43,619,504
Distributions to Unitholders (4,993,580) (4,993,579) (29,961,474)
---------- ---------- -----------
Balance, end of year $22,016,109 $26,437,414 $ 31,488,281
========== ========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
20
<PAGE> 21
JONES INTERCABLE INVESTORS, L.P.
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1994 1993 1992
------------ ------------ -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 578,056 $ (57,867) $ 44,060,105
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 8,341,272 9,793,347 15,051,597
Gain on sale of assets - - (47,118,868)
Amortization of interest rate protection contract - - 115,868
Decrease (increase) in trade receivables 13,003 (78,165) 131,770
Increase in deposits, prepaid expenses
and deferred charges (56,359) (98,521) (62,141)
Increase (decrease) in accounts payable, accrued
liabilities and subscriber prepayments 345,542 106,817 (2,300,427)
----------- ----------- ------------
Net cash provided by operating activities 9,221,514 9,665,611 9,877,904
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (8,451,389) (4,808,539) (6,210,829)
Proceeds from the sale of cable
television system, net - - 71,403,150
----------- ----------- ------------
Net cash provided by (used in)
investing activities (8,451,389) (4,808,539) 65,192,321
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 7,064,889 2,414,551 19,519,499
Repayment of debt (2,600,520) (1,955,082) (64,936,491)
Distributions to unitholders (4,993,580) (4,993,579) (29,961,474)
----------- ----------- ------------
Net cash used in financing activities (529,211) (4,534,110) (75,378,466)
----------- ----------- ------------
Increase (decrease) in cash 240,914 322,962 (308,241)
Cash, beginning of year 366,508 43,546 351,787
----------- ----------- ------------
Cash, end of year $ 607,422 $ 366,508 $ 43,546
=========== =========== ============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 1,072,838 $ 1,000,042 $ 4,027,521
=========== =========== ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
21
<PAGE> 22
JONES INTERCABLE INVESTORS, L.P.
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION OF PARTNERSHIP
Formation and Business
Jones Intercable Investors, L.P. (the "Partnership"), a Colorado limited
partnership, was formed on September 18, 1986, to acquire, own and operate
cable television systems in the United States. On November 28, 1986, the
Partnership completed the sale of 3,230,000 Class A Units, representing
beneficial ownership of Class A Limited Partnership Interests, to the public at
a price of $16.00 per Class A Unit. On May 23, 1987, the Partnership completed
the sale of an additional 4,300,000 Class A Units, representing beneficial
ownership of Class A Limited Partnership Interests to Jones Intercable, Inc.
(800,000 Units) and to the public at a price of $15.00 per Class A Unit. In
addition to its 800,000 Class A Units, Jones Intercable, Inc. purchased,
through a series of transactions, 792,632 Class B Units. These purchases by
Jones Intercable, Inc. represent an approximate 19 percent ownership interest
in the Partnership. At December 31, 1989, the Initial Period ended and all
Class B Units were converted to Class A Units. Jones Intercable, Inc. is the
general partner of the Partnership (the "General Partner"). 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.
In September 1992, the Partnership entered into an agreement with the
General Partner to sell its Alexandria System to the General Partner for
$73,234,000. This transaction was completed on November 2, 1992. The
Partnership recognized a gain of $47,118,868, on this sale. The Partnership
used the net sale proceeds to retire a portion of its debt and to distribute $3
per Class A Unit on November 6, 1992. See Note 8, however, for a discussion of
pending litigation that seeks, among other things, to rescind the sale of the
Alexandria System.
At December 31, 1994, the Partnership owned the cable television system
serving certain communities in and around Independence, Missouri.
Contributed Capital of the Partnership
The capitalization of the Partnership is set forth in the accompanying
statements of partners' capital (deficit).
All profits and losses of the Partnership are allocated 99% to the
Unitholders and 1 percent to the General Partner.
Partnership Acquisitions
The Partnership's acquisitions were accounted for using the "purchase
method" of accounting. The allocation of purchase price (determined by
independent appraisal) was distributed as follows: first, to the fair value of
net tangible assets acquired; second, to the value of subscriber lists; third,
to franchise costs; and fourth, to costs in excess of interests in net assets
purchased.
22
<PAGE> 23
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Records
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting
principles. The Partnership's tax returns are also prepared on the accrual
basis.
Property, Plant and Equipment
Depreciation of property, plant and equipment is provided primarily using
the straight-line method over the following estimated service lives:
<TABLE>
<S> <C>
Cable distribution systems 5 - 15 years
Equipment and tools 5 years
Office furniture and equipment 5 years
Buildings 10 - 20 years
Vehicles 3 years
</TABLE>
Replacements, renewals and improvements are capitalized and maintenance
and repairs are charged to expense as incurred.
Intangible Assets
Costs assigned to franchises and costs in excess of interests in net
assets purchased are being amortized using the straight-line method over the
following remaining estimated useful lives:
<TABLE>
<S> <C>
Franchise costs 1 - 4 years
Costs in excess of interests
in net assets purchased 32 years
</TABLE>
Revenue Recognition
Subscriber prepayments are initially deferred and recognized as revenue
when earned.
(3) TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
Management Fees, Reimbursements of Allocated Expenses and Distribution
Ratios
The General Partner manages the Partnership and receives a fee for its
services equal to 5 percent of the gross revenues of the Partnership, excluding
revenues from the sale of cable television systems or franchises. Management
fees for the years ended December 31, 1994, 1993 and 1992 were $1,376,131,
$1,347,765 and $1,916,887, respectively.
The Partnership reimburses the General Partner for certain allocated
overhead and administrative expenses. These expenses represent salaries and
related benefits for corporate personnel, rent, data processing services and
other corporate facilities costs. Such personnel provide engineering,
marketing, administrative, accounting, legal and investor relations services to
the Partnership. Allocations of personnel costs are based primarily on actual
time spent by employees of the General Partner with respect to each partnership
managed. Other overhead costs are allocated primarily based on total revenues
and/or the cost of partnership assets managed. Effective December 1, 1993, the
allocation method was changed to be based only on revenue, which the General
Partner believes provides a more accurate method of allocation. Systems owned
by the General Partner and all other systems owned by partnerships for which
Jones Intercable, Inc. is the general partner are also allocated a
proportionate share of these expenses. The General Partner believes that the
methodology used in allocating overhead and administrative expenses is
reasonable. Amounts charged the Partnership by the General Partner for
allocated
23
<PAGE> 24
overhead and administrative expenses for the years ended December 31, 1994,
1993 and 1992 were $2,074,563, $1,880,887 and $2,542,827, respectively.
The General Partner will receive 40 percent of distributions made upon
sale or refinancing of Partnership cable television systems or upon dissolution
after holders of the Class A Units have first received distributions equal to
the Preferred Return, plus distributions, other than distributions of Cash Flow
from Operations, equal to the capital contributions made to the Partnership
with respect to the Class A Units. The "Preferred Return" is defined as a
return equal to 10 percent per annum, cumulative and non-compounded on an
amount equal to the capital contribution made with respect to a Class A Unit,
less any portion of such amount which has been returned to the holders of Class
A Units from prior sale or refinancing proceeds; provided that such return will
be reduced by all prior distributions of Cash Flow from Operations on the Class
A Units, and certain prior distributions of proceeds from sales or refinancing
of Partnership cable television properties.
The Partnership is charged interest on accounts payable to the General
Partner at a rate which approximates the General Partner's weighted average
cost of borrowing. In addition, the Partnership was charged interest on a note
payable to the General Partner at a rate equal to the interest rate payable on
the Partnership's credit facility. This note was repaid in November 1992.
Total interest charged to the Partnership by the General Partner during 1992
was $182,620. There was no interest charged to the Partnership by the General
Partner during 1994 and 1993.
Payments to/from Affiliates for Programming Services
The Partnership receives programming from Product Information Network,
Superaudio and The Mind Extension University, affiliates of the General
Partner. Payments to Superaudio totalled approximately $46,113, $45,763 and
$63,485 in 1994, 1993 and 1992, respectively. Payments to The Mind Extension
University totalled approximately $41,783, $26,607 and $36,366 in 1994, 1993
and 1992, respectively. The Partnership receives a commission from Product
Information Network based on a percentage of advertising revenue and number of
subscribers. Product Information Network, which initiated service in 1994,
paid commissions to the Partnership totalling $4,073 in 1994.
(4) DISTRIBUTIONS TO UNITHOLDERS
The Partnership declared a $.15 per unit distribution for each of the
four quarters of 1994. All declared distributions were paid at December 31,
1994, except for the fourth quarter distribution, which was paid in February
1995. The Partnership intends to distribute all cash flow from operations
after payment of expenses, capital additions and creation of cash reserves
deemed reasonably necessary to preserve and enhance the value of the
Partnership's cable television system.
24
<PAGE> 25
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of December 31, 1994 and 1993,
consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1994 1993
------------- -------------
<S> <C> <C>
Cable distribution systems $ 55,538,168 $ 47,695,104
Equipiment and tools 1,478,965 1,281,557
Office furniture and equipment 492,444 439,794
Buildings 816,670 673,280
Vehicles 1,638,553 1,693,260
Land 51,000 51,000
------------ ------------
60,015,800 51,833,995
Less - accumulated depreciation (25,208,198) (21,838,729)
------------ ------------
$ 34,807,602 $ 29,995,266
============ ============
</TABLE>
(6) DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1994 1993
----------- -----------
<S> <C> <C>
Lending institutions-
Revolving credit and term loan $23,000,000 $18,400,000
Capital lease obligations 493,841 629,472
----------- -----------
$23,493,841 $19,029,472
=========== ===========
</TABLE>
As of December 31, 1994, $23,000,000 was outstanding on the Partnership's
$35,000,000 revolving credit facility, leaving $12,000,000 of available
borrowings for future needs. Although the revolving credit period was
scheduled to expire on December 31, 1994, the General Partner completed
negotiations in December 1994 to extend the revolving credit period to December
31, 1996. Interest on outstanding principal balances is at the Partnership's
option of the Prime rate plus .25 percent, the CD rate plus 1.25 percent or the
Euro-rate plus 1.25 percent. The effective interest rates on outstanding
obligations as of December 31, 1994 and 1993 were 7.09 percent and 4.8 percent,
respectively. In addition, a fee of 3/8 percent per annum is required on the
unused portion of the commitment.
Installments due on debt principal and capital lease obligations for each
of the five years in the period ending December 31, 1999 and thereafter,
respectively, are $148,152, $148,152, $1,298,152, $2,924,385, $5,750,000 and
$13,225,000. At December 31, 1994, substantially all of the Partnership's
property, plant and equipment secured the above indebtedness.
(7) INCOME TAXES
Income taxes have not been recorded in the accompanying financial
statements because the Partnership will pay no Federal or state income taxes as
an entity. Instead, all of the income, gains, losses, deductions and credits
of the Partnership will pass through to the General Partner and the
Unitholders. The Federal and state income tax returns of the Partnership are
prepared and filed by the General Partner.
25
<PAGE> 26
The Partnership's tax returns, the qualification of the Partnership as
such for tax purposes, and the amount of distributable Partnership income or
loss are subject to examination by Federal and state taxing authorities. If
such examinations result in changes with respect to the Partnership's
qualification as such, or in changes with respect to the Partnership's recorded
income or loss, the tax liability of the General Partner and Unitholders would
likely be changed accordingly.
Taxable income to the General Partner and Unitholders is different from
that reported in the statements of operations largely due to the difference in
depreciation recognized under generally accepted accounting principles and the
expense allowed for tax purposes under the Modified Accelerated Cost Recovery
System. Since the Partnership has previously made an IRC Section 754 election,
the cost basis of the Partnership assets has been increased or decreased to
reflect the difference between the new unitholders' purchase price and their
proportionate share of the adjusted tax basis of the Partnership properties.
The portion of this adjustment which relates to depreciable or amortizable
assets results in difference between book and tax depreciation or amortization.
Under IRC Section 197, certain intangibles placed in service after August 10,
1993, including goodwill, are allowed to be amortized over a 15 year period for
tax purposes, creating additional book and tax amortization differences. There
are no other significant differences between taxable loss and the net loss
reported in the statements of operations.
The General Partner does not expect any currently proposed tax
legislation to have a significant impact on the business of the Partnership.
Current tax law impacts the Unitholders due to limitations on the utilization
of passive losses generated by the Partnership. Investors in Publicly Traded
Partnerships ("PTP's"), such as Jones Intercable Investors, L.P., are subject
to additional limitations under the passive-activity loss rules as amended by
the Revenue Act of 1987. Passive losses reported on Schedule K-1, Form 1065,
by a PTP can only be used to offset passive income from the same partnership.
Passive losses of a PTP which are limited by this rule may be carried forward.
(8) COMMITMENTS AND CONTINGENCIES
On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act"), which became
effective on December 4, 1992. The 1992 Cable Act generally allows for a
greater degree of regulation of the cable television industry. In April 1993,
the Federal Communications Commission (the "FCC") adopted regulations governing
rates for basic and non-basic services. These regulations became effective on
September 1, 1993. Such regulations caused reductions in rates for certain
regulated services. On February 22, 1994, the FCC adopted several additional
rate orders including an order which revised its earlier-announced regulatory
scheme with respect to rates. The Partnership has filed cost-of-service
showings for its Independence System and thus anticipates no further
reductions in rates. The cost-of-service showings have not received final
approval from franchising authorities, however, and there can be no assurance
that the Partnership's cost-of-service showings will prevent further rate
reductions until such final approvals are received.
On February 22, 1994, the General Partner and The Jones Group, Ltd.
("Jones Group"), a subsidiary of the General Partner engaged in the cable
brokerage business, were named as defendants in a lawsuit brought by three
individuals who are Class A Unitholders in the Partnership. The litigation,
entitled Luva Vaughan et al v. Jones Intercable, Inc. et al, Case No. CV
94-3652 was filed in the Circuit Court for Jackson County, Missouri, and
purports to be "for the use and benefit of" the Partnership. The suit seeks
rescission of the sale of the Alexandria, Virginia cable television system (the
"Alexandria System") by the Partnership to the General Partner, which sale was
completed on November 2, 1992. It also seeks a constructive trust on the
profits derived from the operation of the Alexandria System since the date of
the sale, and seeks an accounting and other equitable relief. The plaintiffs
also allege that the $1,800,000 commission paid to Jones Group by the
Partnership in connection with such sale was improper, and ask the Court to
order that such commission be repaid to the Partnership.
On October 21, 1994, plaintiffs filed a motion to dismiss Jones Group
in response to Jones Group's argument that Missouri lacked personal
jurisdiction over it. Plaintiffs' motion was granted, and plaintiffs then
filed an action in Colorado against Jones Group seeking a return of the
brokerage commission.
26
<PAGE> 27
Under the terms of the partnership agreement of the Partnership, the
General Partner has the right to acquire cable television systems from the
Partnership at a purchase price equal to the average of three independent
appraisals of the cable television system to be acquired. The plaintiffs claim
that the appraisals obtained in connection with the sale of the Alexandria
System were improperly obtained, were not made by qualified appraisers and were
otherwise improper. The purchase price paid by the General Partner upon such
sale was approximately $73,200,000.
The amount of damages being sought by the plaintiffs has not yet been
specified. The General Partner believes both that the appraisals were properly
obtained and that the brokerage commission was properly paid to Jones Group in
accordance with the express terms of the partnership agreement. The General
Partner further believes that its defenses are meritorious and it intends to
vigorously defend the litigation.
The General Partner and Jones Group have filed motions for summary
judgment in the Missouri and Colorado cases, respectively, which are pending
before the Missouri and Colorado courts. In addition, the General Partner has
conducted written discovery in the form of interrogatories and requests for
production of documents, and has noticed the depositions of plaintiffs and
plaintiffs' expert. A trial date of April 3, 1995 has been set in the Missouri
case, but it will likely be continued in accordance with the General Partner's
request. No trial date has been set in the Colorado case. Because defendants'
motions have not been resolved and because discovery has just commenced, it is
premature to present a realistic evaluation of the probability of a favorable
or unfavorable outcome.
The Partnership rents office and other facilities under various long-term
operating lease arrangements. Rent paid under such lease arrangements totalled
$147,185, $63,698 and $282,117, respectively, for the years ended December 31,
1994, 1993 and 1992. Minimum commitments for each of the five years in the
period ending December 31, 1999, and thereafter are as follows:
<TABLE>
<S> <C>
1995 $155,996
1996 148,096
1997 141,051
1998 123,996
1999 35,999
Thereafter -
--------
$605,138
========
</TABLE>
(9) SUPPLEMENTARY PROFIT AND LOSS INFORMATION
Supplementary profit and loss information for the respective years
is presented below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Maintenance and repairs $ 303,262 $ 327,242 $ 345,305
========== ========== ==========
Taxes, other than income and payroll taxes $ 199,752 $ 239,760 $ 352,796
========== ========== ==========
Advertising $ 319,442 $ 272,051 $ 499,934
========== ========== ==========
Depreciation of property, plant and equipment $3,639,053 $3,129,651 $5,268,585
========== ========== ==========
Amortization of intangible assets $4,702,219 $6,663,696 $9,783,012
========== ========== ==========
</TABLE>
27
<PAGE> 28
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.
<TABLE>
<CAPTION>
Name Age POSITIONS WITH THE GENERAL PARTNER
---- --- ----------------------------------
<S> <C> <C>
Glenn R. Jones 65 Chairman of the Board and Chief Executive Officer
Derek H. Burney 55 Vice Chairman of the Board
James B. O'Brien 45 President, Chief Operating Officer and Director
Ruth E. Warren 45 Group Vice President/Operations
Kevin P. Coyle 43 Group Vice President/Finance
Christopher J. Bowick 40 Group Vice President/Technology
Timothy J. Burke 44 Group Vice President/Taxation/Administration
Raymond L. Vigil 48 Group Vice President/Human Resources and Director
Cynthia A. Winning 43 Group Vice President/Marketing
Elizabeth M. Steele 43 Vice President/General Counsel/Secretary
Larry W. Kaschinske 35 Controller
James J. Krejci 53 Director
Christine Jones Marocco 39 Director
Daniel E. Somers 47 Director
Robert S. Zinn 58 Director
David K. Zonker 41 Director
</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 was elected a
member of the Executive Committee of the Board of Directors in April 1985. Mr.
Jones is the sole shareholder, President and Chairman of the Board of Directors
of Jones International, Ltd. He is also Chairman of the Board of Directors of
the subsidiaries of the General Partner and of certain other affiliates of the
General Partner. Mr. Jones has been involved in the cable television business
in various capacities since 1961, is a past and present member of the Board of
Directors of the National Cable Television Association, and is a former member
of its Executive Committee. Mr. Jones is a past director and member of the
Executive Committee of C-Span. Mr. Jones has been the recipient of several
awards including the Grand Tam Award in 1989, the highest award from the Cable
Television Administration and Marketing Society; the Chairman's Award from the
Investment Partnership Association, which is an association of sponsors of
public syndications; the cable television industry's Public Affairs Association
President's Award in 1990, the Donald G. McGannon award for the advancement of
minorities and women in cable; the STAR Award from American Women in Radio and
Television, Inc. for exhibition of a commitment to the issues and concerns of
women in television and radio; and the Women in Cable Accolade in 1990 in
recognition of support of this organization. Mr. Jones is also a founding
member of the James Madison Council of the Library of Congress and is on the
Board of Governors of the American Society of Training and Development.
Mr. Derek H. Burney was appointed a Director of the General Partner in
December 1994 and Vice Chairman of the Board of Directors in January 1995. He
is also a member of the Executive Committee of the Board of Directors. Mr.
Burney joined BCE Inc., Canada's largest telecommunications company, in January
1993 as Executive Vice President, International. He has been the Chairman of
Bell Canada International Inc., a
28
<PAGE> 29
subsidiary of BCE, since January 1993 and, in addition, has been Chief
Executive Officer of BCI since July 1993. Prior to joining BCE, Mr. Burney
served as Canada's ambassador to the United States from 1989 to 1992. Mr.
Burney also served as chief of staff to the Prime Minister of Canada from March
1987 to January 1989 where he was directly involved with the negotiation of the
U.S. - Canada Free Trade Agreement. In July 1993, he was named an Officer of
the Order of Canada. Mr. Burney is chairman of Bell Cablemedia plc. He is a
director of Mercury Communications Limited, Videotron Holdings plc, Tele-Direct
(Publications) Inc., Teleglobe Inc., Bimcor Inc., Maritime Telegraph and
Telephone Company, Limited, Moore Corporation Limited and Northbridge
Programming Inc.
Mr. James B. O'Brien, the General Partner's President, joined the
General Partner in January 1982. Prior to being elected President and a
Director of the General Partner in December 1989, Mr. O'Brien served as a
Division Manager, Director of Operations Planning/Assistant to the CEO, Fund
Vice President and Group Vice President/Operations. Mr. O'Brien was appointed
to the General Partner's Executive Committee in August 1993. As President, he
is responsible for the day-to-day operations of the cable television systems
managed and owned by the General Partner. Mr. O'Brien is also President and a
Director of Jones Cable Group, Ltd., Jones Global Funds, Inc. and Jones Global
Management, Inc., all affiliates of the General Partner. Mr. O'Brien is a
board member of Cable Labs, Inc., the research arm of the U.S. cable television
industry. He also serves as a director of the Cable Television Administration
and Marketing Association and as a director of the Walter Kaitz Foundation, a
foundation that places people of any ethnic minority group in positions with
cable television systems, networks and vendor companies.
Ms. Ruth E. Warren joined the General Partner in August 1980 and has
served in various operational capacities, including system manager and Fund
Vice President, since then. Ms. Warren was elected Group Vice
President/Operations of the General Partner in September 1990.
Mr. Kevin P. Coyle joined The Jones Group, Ltd. in July 1981 as Vice
President/Financial Services. In September 1985, he was appointed Senior Vice
President/Financial Services. He was elected Treasurer of the General Partner
in August 1987, Vice President/Treasurer in April 1988 and Group Vice
President/Finance and Chief Financial Officer in October 1990.
Mr. Christopher J. Bowick joined the General Partner in September 1991
as Group Vice President/Technology and Chief Technical Officer. Previous to
joining the General Partner, Mr. Bowick worked for Scientific Atlanta's
Transmission Systems Business Division in various technical management
capacities since 1981, and as Vice President of Engineering since 1989.
Mr. Timothy J. Burke joined the General Partner in August 1982 as
corporate tax manager, was elected Vice President/Taxation in November 1986 and
Group Vice President/Taxation/Administration in October 1990.
Mr. Raymond L. Vigil joined the General Partner in June 1993 as Group
Vice President/Human Resources. Previous to joining the General Partner, Mr.
Vigil served as Executive Director of Learning with USWest. Prior to USWest,
Mr. Vigil worked in various human resources posts over a 14-year term with the
IBM Corporation.
Ms. Cynthia A. Winning joined the General Partner as Group Vice
President/Marketing in December 1994. Previous to joining the General Partner,
Ms. Winning served since 1994 as the President of PRS Inc., Denver, Colorado, a
sports and event marketing company. From 1979 to 1981 and from 1986 to 1994,
Ms. Winning served as the Vice President and Director of Marketing for Citicorp
Retail Services, Inc., a provider of private-label credit cards for ten
national retail department store chains. From 1981 to 1986, Ms. Winning was
the Director of Marketing Services for Daniels & Associates cable television
operations, as well as the Western Division Marketing Director for Capital
Cities Cable. Ms. Winning also serves as a board Member of Cities in Schools,
a dropout intervention/prevention program.
29
<PAGE> 30
Ms. Elizabeth M. Steele joined the General Partner in August 1987 as
Vice President/General Counsel and Secretary. From August 1980 until joining
the General Partner, Ms. Steele was an associate and then a partner at the
Denver law firm of Davis, Graham & Stubbs, which serves as counsel to the
General Partner.
Mr. Larry Kaschinske joined the General Partner in 1984 as a staff
accountant in the General Partner's former Wisconsin Division; was promoted to
Assistant Controller in 1990 and named Controller in August 1994.
Mr. James J. Krejci was President of the International Division of
International Gaming Technology International headquartered in Reno, Nevada,
until March 1995. Prior to joining IGT in May 1994, Mr. Krejci was Group Vice
President of Jones International, Ltd. and a Group Vice President of the
General Partner. Prior to May 1994, he also served as Group Vice President of
Jones Futurex, Inc., an affiliate of the General Partner engaged in
manufacturing and marketing data encryption devices, Jones Interactive, Inc., a
subsidiary of Jones International, Ltd. providing computer data and billing
processing facilities and Jones Lightwave, Ltd., a company owned by Jones
International, Ltd. and Mr. Jones, which is engaged in the provision of
telecommunications services. Mr. Krejci has been a Director of the General
Partner since August 1987.
Ms. Christine Jones Marocco was appointed a Director of the General
Partner in December 1994. She is the daughter of Glenn R. Jones. Ms. Marocco
is also a director of Jones International, Ltd.
Mr. Daniel E. Somers was appointed a Director of the General Partner
in December 1994 and also serves on the General Partner's Audit Committee.
From January 1992 to January 1995, Mr. Somers worked as Senior Vice President
and Chief Financial Officer of Bell Canada International Inc. and was appointed
Executive Vice President and Chief Financial Officer on February 1, 1995. He
is also a Director of certain of its affiliates. Prior to joining Bell Canada
International Inc. and since January 1989, Mr. Somers was the President and
Chief Executive Officer of Radio Atlantic Holdings Limited. Mr. Somers is a
member of the North American Society of Corporate Planning, the Financial
Executives Institution and the Financial Analysts Federation.
Mr. Robert S. Zinn was appointed a Director of the General Partner in
December 1994. Mr. Zinn joined the General Partner in January 1991 and is a
member of its Legal Department. He is also Vice President/Legal Affairs of
Jones International, Ltd. Prior to joining the General Partner, Mr. Zinn was
in private law practice in Denver, Colorado for over 25 years.
Mr. David K. Zonker was appointed a Director of the General Partner in
December 1994. Mr. Zonker has been the President of Jones International
Securities, Ltd., a subsidiary of Jones International, Ltd. since January 1984
and he has been its Chief Executive Officer since January 1988. From October
1980 until joining Jones International Securities, Ltd. in January 1984, Mr.
Zonker was employed by the General Partner. Mr. Zonker is a member of the
Board of Directors of various affiliates of the General Partner, including
Jones International Securities, Ltd. Mr. Zonker is licensed by the National
Association of Securities Dealers, Inc. and he is a past chairman of the
Investment Program Association, a trade organization based in Washington, D.C.
that promotes direct investments. He is a member of the Board of Trustees of
Graceland College, Lamoni, Iowa; the International Association of Financial
Planners and the American and Colorado Institutes of Certified Public
Accountants.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no employees; however, various personnel are
required to operate the Independence System. Such personnel are employed by
the General Partner and, pursuant to the terms of the limited partnership
agreement of the Partnership, the cost of such employment is charged by the
General Partner to the Partnership as a direct reimbursement item. See Item
13.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
No person or entity owns more than 5 percent of the limited
partnership interests of the Partnership.
30
<PAGE> 31
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The General Partner and its affiliates engage in certain transactions
with the Partnership as contemplated by the limited partnership agreement of
the Partnership. The General Partner believes that the terms of such
transactions are generally as favorable as could be obtained by the Partnership
from unaffiliated parties. This determination has been made by the General
Partner in good faith, but none of the terms were or will be negotiated at
arm's-length and there can be no assurance that the terms of such transactions
have been or will be as favorable as those that could have been obtained by the
Partnership from unaffiliated parties.
The General Partner charges the Partnership a management fee, and the
Partnership reimburses the General Partner for certain allocated overhead and
administrative expenses in accordance with the terms of the limited partnership
agreement of the Partnership. These expenses consist primarily of salaries and
benefits paid to corporate personnel, rent, data processing services and other
facilities costs. Such personnel provide engineering, marketing,
administrative, accounting, legal and investor relations services to the
Partnership. Allocations of personnel costs are based primarily on actual time
spent by employees of the General Partner with respect to the Partnership
managed. Remaining overhead costs are allocated based on revenues and/or the
costs of assets managed for the Partnership. Systems owned by the General
Partner and all other systems owned by partnerships for which Jones Intercable,
Inc. is the general partner, are also allocated a proportionate share of these
expenses.
From time to time, The Jones Group, Ltd., an affiliate of the General
Partner, performs brokerage services for the Partnership in connection with
Partnership acquisitions and sales.
The Independence System receives stereo audio programming from
Superaudio, a joint venture owned 50% by an affiliate of the General Partner
and 50% by an unaffiliated party and educational video programming from Mind
Extension University, Inc., an affiliate of the General Partner for fees based
upon the number of subscribers receiving the programming.
Product Information Network ("PIN"), an affiliate of the General
Partner, provides advertising time for third parties on the Independence
System. In consideration, the revenues generated from the third parties are
shared two-thirds and one-third between PIN and the Partnership. During the
year ended December 31, 1994, the Partnership received revenues from PIN of
$4,073.
The charges to the Partnership for related party transactions are as
follows for the periods indicated:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------------------------------------
1994 1993* 1992
---- ----- ----
<S> <C> <C> <C>
Management fees $1,376,131 $1,347,765 $1,916,887
Allocation of expenses 2,074,563 1,880,887 2,542,827
Brokerage fees -0- -0- 1,830,950
Interest on advances paid to the General Partner
-0- -0- 182,620
Programming fees:
Superaudio 46,113 45,763 63,485
Mind Extension University 41,783 26,607 36,366
</TABLE>
*The decreases appearing in 1993 in the fees and expense allocations
reflect the sale in 1992 of the Alexandria, Virginia cable television
system.
31
<PAGE> 32
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<S> <C>
(a)1. See index to financial statements for list of
financial statements and exhibits thereto filed as a
part of this report.
3.
Exhibits:
4.1 Limited Partnership Agreement for Jones Intercable
Investors, L.P. (1)
10.1.1 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the Village of Baldwin Park, Missouri.
(3)
10.1.2 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Bates, Missouri. (4)
10.1.3 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Blue Springs, Missouri.
(2)
10.1.4 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Grain Valley, Missouri.
(2)
10.1.5 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Greenwood, Missouri. (2)
10.1.6 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Independence, Missouri.
(2)
10.1.7 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the County of Jackson, Missouri. (3)
10.1.8 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the County of Johnson, Missouri. (3)
10.1.9 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Lake Lotawana, Missouri.
(2)
10.1.10 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Lake Tapawingo, Missouri.
(2)
10.1.11 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Lake Winnebago, Missouri.
(2)
10.1.12 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Lee's Summit, Missouri.
(2)
10.1.13 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Oak Grove, Missouri. (2)
10.1.14 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Odessa, Missouri. (2)
</TABLE>
32
<PAGE> 33
<TABLE>
<S> <C>
10.1.15 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Olathe, Kansas. (2)
10.1.16 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Peculiar, Missouri. (2)
10.1.17 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Pleasant Hill, Missouri.
(2)
10.1.18 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Raymore, Missouri. (2)
10.1.19 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Raytown, Missouri. (2)
10.1.20 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Sugar Creek, Missouri. (2)
10.2.1 Revolving Credit and Term Loan Agreement dated as of
August 27, 1987, between the Partnership, Mellon
Bank, N.A. and other banks. (2)
10.2.2 Amendment No. 1 dated May 5, 1989 to the Revolving
Credit and Term Loan Agreement. (4)
10.2.3 Amendment No. 2 dated August 10, 1990 to the
Revolving Credit and Term Loan Agreement. (4)
10.2.4 Amendment No. 3 dated June 30, 1992 to the Revolving
Credit and Term Loan Agreement. (4)
10.2.5 Amendment No. 4 dated September 30, 1992 to the
Revolving Credit and Term Loan Agreement. (4)
10.2.6 Amendment No. 5 dated June 30, 1993 to the Revolving
Credit and Term Loan Agreement. (5)
10.2.7 Amendment No. 6 dated August 31, 1993 to the
Revolving Credit and Term Loan Agreement. (5)
10.2.8 Amendment No. 7 dated February 28, 1994 to the
Revolving Credit and Term Loan Agreement. (5)
10.2.9 Amendment No. 8 dated as of December 23, 1994 to the
Revolving Credit and Term Loan Agreement.
27 Financial Data Schedule
</TABLE>
-------------------
(1) Incorporated by reference from Registrant's Annual
Report on Form 10-K for fiscal year ended December
31, 1986.
(2) Incorporated by reference from Registrant's Annual
Report on Form 10-K for fiscal year ended December
31, 1987.
33
<PAGE> 34
<TABLE>
<S> <C>
(3) Incorporated by reference from Registrant's Annual
Report on Form 10-K for fiscal year ended December
31, 1988.
(4) Incorporated by reference from Registrant's Annual
Report on Form 10-K for fiscal year ended December
31, 1992.
(5) Incorporated by reference from Registrant's Annual
Report on Form 10-K for fiscal year ended December
31, 1993.
</TABLE>
(b) Reports on Form 8-K
None.
34
<PAGE> 35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
JONES INTERCABLE INVESTORS, L.P.,
a Colorado limited partnership
By: Jones Intercable, Inc.
By: /s/ Glenn R. Jones
-------------------------------
Glenn R. Jones
Chairman of the Board
Dated: March 27, 1995 and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ Glenn R. Jones
-------------------------------
Glenn R. Jones
Chairman of the Board
and Chief Executive Officer
Dated: March 27, 1995 (Principal Executive Officer)
By: /s/ Kevin P. Coyle
-------------------------------
Kevin P. Coyle
Group Vice President/Finance
Dated: March 27, 1995 (Principal Financial Officer)
By: /s/ Larry Kaschinske
-------------------------------
Larry Kaschinske
Controller
Dated: March 27, 1995 (Principal Accounting Officer)
By: /s/ James B. O'Brien
-------------------------------
James B. O'Brien
Dated: March 27, 1995 President and Director
By: /s/ Raymond L. Vigil
-------------------------------
Raymond L. Vigil
Dated: March 27, 1995 Group Vice President and
Director
By: /s/ Robert S. Zinn
-------------------------------
Robert S. Zinn
Dated: March 27, 1995 Director
35
<PAGE> 36
By: /s/ David K. Zonker
-------------------------------
David K. Zonker
Dated: March 27, 1995 Director
By:
-------------------------------
Derek H. Burney
Dated: Director
By:
-------------------------------
James J. Krejci
Dated: Director
By:
-------------------------------
Christine Jones Marocco
Dated: Director
By:
-------------------------------
Daniel E. Somers
Dated: Director
36
<PAGE> 37
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
-------- ----
<S> <C> <C>
4.1 Limited Partnership Agreement for Jones Intercable
Investors, L.P. (1)
10.1.1 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the Village of Baldwin Park, Missouri.
(3)
10.1.2 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Bates, Missouri. (4)
10.1.3 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Blue Springs, Missouri.
(2)
10.1.4 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Grain Valley, Missouri.
(2)
10.1.5 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Greenwood, Missouri. (2)
10.1.6 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Independence, Missouri.
(2)
10.1.7 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the County of Jackson, Missouri. (3)
10.1.8 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the County of Johnson, Missouri. (3)
10.1.9 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Lake Lotawana, Missouri.
(2)
10.1.10 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Lake Tapawingo, Missouri.
(2)
10.1.11 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Lake Winnebago, Missouri.
(2)
10.1.12 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Lee's Summit, Missouri.
(2)
10.1.13 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Oak Grove, Missouri. (2)
10.1.14 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Odessa, Missouri. (2)
</TABLE>
<PAGE> 38
<TABLE>
<CAPTION>
Exhibit Page
------- ----
<S> <C> <C>
10.1.15 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Olathe, Kansas. (2)
10.1.16 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Peculiar, Missouri. (2)
10.1.17 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Pleasant Hill, Missouri.
(2)
10.1.18 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Raymore, Missouri. (2)
10.1.19 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Raytown, Missouri. (2)
10.1.20 Copy of a franchise and related documents thereto
granting a community antenna television system
franchise for the City of Sugar Creek, Missouri. (2)
10.2.1 Revolving Credit and Term Loan Agreement dated as of
August 27, 1987, between the Partnership, Mellon
Bank, N.A. and other banks. (2)
10.2.2 Amendment No. 1 dated May 5, 1989 to the Revolving
Credit and Term Loan Agreement. (4)
10.2.3 Amendment No. 2 dated August 10, 1990 to the
Revolving Credit and Term Loan Agreement. (4)
10.2.4 Amendment No. 3 dated June 30, 1992 to the Revolving
Credit and Term Loan Agreement. (4)
10.2.5 Amendment No. 4 dated September 30, 1992 to the
Revolving Credit and Term Loan Agreement. (4)
10.2.6 Amendment No. 5 dated June 30, 1993 to the Revolving
Credit and Term Loan Agreement. (5)
10.2.7 Amendment No. 6 dated August 31, 1993 to the
Revolving Credit and Term Loan Agreement. (5)
10.2.8 Amendment No. 7 dated February 28, 1994 to the
Revolving Credit and Term Loan Agreement. (5)
10.2.9 Amendment No. 8 dated as of December 23, 1994 to the
Revolving Credit and Term Loan Agreement.
27 Financial Data Schedule
</TABLE>
----------------
(1) Incorporated by reference from Registrant's Annual
Report on Form 10-K for fiscal year ended December
31, 1986.
(2) Incorporated by reference from Registrant's Annual
Report on Form 10-K for fiscal year ended December
31, 1987.
<PAGE> 39
(3) Incorporated by reference from Registrant's Annual
Report on Form 10-K for fiscal year ended December
31, 1988.
(4) Incorporated by reference from Registrant's Annual
Report on Form 10-K for fiscal year ended December
31, 1992.
(5) Incorporated by reference from Registrant's Annual
Report on Form 10-K for fiscal year ended December
31, 1993.
<PAGE> 1
AMENDMENT NO. 8
TO
REVOLVING CREDIT AND TERM LOAN AGREEMENT
This AMENDMENT NO. 8 TO REVOLVING CREDIT AND TERM LOAN AGREEMENT (the
"Amendment") dated as of December 23, 1994, by and among JONES INTERCABLE
INVESTORS, L.P., a Colorado limited partnership (the "Borrower"), the banks
signatory hereto (the "Banks"), and MELLON BANK, N.A., a national banking
association, as Agent (the "Agent");
WITNESSETH THAT:
WHEREAS, the Borrower, the Banks and the Agent entered into a
Revolving Credit and Term Loan Agreement dated as of August 27, 1987, as
amended by Amendment No. 1 dated as of May 5, 1989, Amendment No. 2 thereto
dated as of August 10, 1990, Amendment No. 3 thereto dated as of June 30,
1992, Amendment No. 4 thereto dated as of September 30, 1992, Amendment No. 5
thereto dated as of June 30, 1993, Amendment No. 6 thereto dated as of August
31, 1993 and Amendment No. 7 thereto dated as of February 28, 1994 (the
"Credit Agreement");
WHEREAS, the Borrower has requested that the Banks extend the
Revolving Credit Expiration Date and the Term Loan Expiration Date and make
other amendments to the Credit Agreement;
WHEREAS, upon the terms and subject to the conditions set forth
herein, the Banks and the Agent are willing to extend such additional credit
and make such amendments; and
WHEREAS, words and terms used herein which are used in the Credit
Agreement are, unless the context otherwise requires, used herein as therein
defined;
NOW, THEREFORE, the parties hereto, in consideration of their
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, covenant and agree, as follows:
SECTION 1. Amendments to Credit Agreement. Subject to the terms
and conditions set forth herein, the Credit Agreement is hereby amended in the
following respects:
(a) Definitions. Section 1.01 is amended by deleting the
definitions of "Revolving Credit Expiration Date" and "Term Loan Expiration
Date" and substituting the following:
"Revolving Credit Expiration Date" shall mean December 31, 1996, or
such later date to which the Revolving Credit Expiration Date has been
extended pursuant to Section 2.01(c).
<PAGE> 2
"Term Loan Expiration Date" shall mean December 31, 2001.
(b) Commitment Fee. Section 2.04(a) is amended by deleting the
percentage "1/2%" and substituting the percentage "3/8%".
(c) Endorsements to Title Policies. Section 5.12 of the Credit
Agreement is amended by deleting the reference to "April 1, 1994" and
substituting a reference to "February 1, 1995.
SECTION 2. Exchange of Notes. Upon the terms and subject to the
conditions herein set forth, on or before December 23, 1994, the Borrower
shall execute and deliver to the Agent new notes (the "New Notes"), in the
form provided by Exhibit A to the Credit Agreement, as amended hereby, with the
blanks appropriately filled as provided by the Credit Agreement, as amended
hereby. The New Notes shall be deemed for all purposes of the Credit
Agreement, as amended hereby, and the Security Documents, as amended hereby,
to be the Revolving Credit Notes issued pursuant to the Credit Agreement, and,
as used in this Amendment, in the Credit Agreement as amended hereby, and in
the Security Documents, as amended hereby, the terms "Note" and "Notes" shall
thereafter be deemed to mean and include the New Notes. Promptly after the
Effective Date, upon request of the Borrower, each Bank shall surrender to the
Borrower its Revolving Credit Note (collectively the "Existing Notes")
presently outstanding under the Credit Agreement. Interest which is accrued
and unpaid under the Existing Notes shall be due and payable on the dates such
interest would have been payable under the Existing Notes.
SECTION 3. Representations and Warranties. The Borrower represents
and warrants to the Agent and the Banks that:
(a) Power and Authority. The Borrower has partnership power and
authority to execute, deliver and carry out the provisions of this Amendment,
the Credit Agreement, as amended hereby, and the Security Documents, as
amended in connection herewith (collectively, the "Amended Documents"), and
the New Notes, and the execution and delivery of this Amendment, the Amended
Documents and the New Notes have been duly authorized by all necessary
partnership action on the part of the Borrower.
(b) Enforceability. This Amendment has been duly and validly
executed and delivered by the Borrower and this Amendment, the New Notes, and
the Amended Documents constitute legal, valid and binding agreements of the
Borrower, enforceable against the Borrower, in accordance with their
respective terms, except as enforceability of the foregoing may be limited by
bankruptcy, insolvency or other laws of general application relating to or
affecting the enforcement of creditors' rights or by general
-2-
<PAGE> 3
principles of equity limiting the availability of equitable remedies.
(c) Governmental Approvals. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Official
Body is required in connection with the execution and delivery of this
Amendment, the New Notes or the Amended Documents.
(d) Conflict with Other Instruments. Neither the execution and
delivery of this Amendment, the New Notes, nor consummation of the
transactions contemplated herein or in the Amended Documents or compliance with
the terms and provisions hereof or thereof (i) violate any Law, (ii)
conflict with or result in a breach of or a default under (A) the Partnership
Agreement or (B) any material agreement or instrument to which the Borrower is
a party or by which it or any of its properties may be subject or bound (except
with respect to conflicts with agreements or instruments, as described on
Schedules 1 and 3 to the Credit Agreement as amended hereby, in which a
security interest may not be granted or as to which consent to the granting of
a security interest is required but has not been received), (iii) conflict
with or result in a breach of or a default under the articles of incorporation
or by-laws of the General Partner or any material agreement or instrument to
which the General Partner is a party or by which any of its properties are
bound or (iv) result in the creation or imposition of any Lien upon any
property (now owned or hereafter acquired) of the Borrower or the General
Partner, other than Liens created by the Security Documents.
(e) Representations and Warranties under the Agreement. The
representations and warranties contained in Article III of the Credit Agreement
and in the Security Documents are, and immediately after giving effect to this
Amendment and the transactions contemplated hereby will be, true in all
material respects on and as of the date hereof, with the same effect as though
such representations and warranties had been made on and as of the date hereof.
(f) Events of Default. No Event of Default and no Potential
Default has occurred and is continuing or exists under the Credit Agreement, as
amended hereby, or after giving effect to the transactions contemplated hereby.
SECTION 4. Conditions of Amendment. Subject to the following
conditions, the provisions of Section 1 of this Amendment shall become
effective as of December 23, 1994 (the "Effective Date"):
(a) Certificate as to Representations and Defaults. The Agent shall
have received a certificate, dated the Effective Date, and signed on behalf
of the Borrower by the President, Treasurer or chief financial officer of the
General Partner, to
-3-
<PAGE> 4
the effect that (i) the representations and warranties described in Section 3
hereof are true and correct in all material respects on and as of the Effective
Date and (ii) on such date no Event of Default or Potential Default has
occurred and is continuing or exists or will occur or exist after giving effect
to this Amendment.
(b) Proceedings and Incumbency. On or before the Effective Date
there shall have been delivered to the Agent certificates in form and substance
satisfactory to the Agent, dated the Effective Date of the type referred to in
Sections 4.02(a), (b) and (c) of the Credit Agreement, except that (i) in
the case of the certificates referred to in Sections 4.01(a) and 4.01(b),
such certificates may indicate that no change has occurred with respect to the
requested information since the date of the certificate delivered in connection
with the initial Loans and (ii) such certificates shall refer to this
Amendment and the Amended Documents.
(c) Opinions of Counsel. On the Effective Date there shall have
been delivered to the Agent, with sufficient signed copies to provide one for
each Bank a written opinion, dated the Closing Date, of Elizabeth Steele,
Esquire, General Counsel and Vice President of Jones Intercable, Inc., in
form and substance satisfactory to the Agent as to the matters referred to in
Sections 3(a), 3(b), 3(c) and 3(d) hereof, and as to such other matters as
the Agent may reasonably request.
(d) Security Documentation. On or before the Effective Date the
Agent shall have received:
(i) Amendments to the deed of trust and the assignment of
leases executed and delivered on the Closing Date, in form and
substance satisfactory to the Agent; and
(ii) UCC searches covering filings since the date of the
searches delivered in connection with Amendment No. 7 to the
Agreement.
(e) New Notes. The Borrower shall have executed and delivered to
the Agent the New Notes as required by Section 2 of this Amendment.
(f) Amendment Fee. The Borrower agrees to pay to the Agent, for
the account of each Bank ratably according to its Current Commitment, a
facility fee equal to .125% of the Total Current Commitment in effect on the
Effective Date.
(g) Details, Proceedings and Documents. All legal details and
proceedings in connection with the transactions contemplated by this Amendment
shall be satisfactory to the Agent and the Agent shall have received all such
counterpart originals or certified or other copies of such documents and
proceedings in
-4-
<PAGE> 5
connection with such transactions, in form and substance satisfactory to the
Agent, as the Agent may from time to time request.
SECTION 6. Miscellaneous. The Borrower agrees to reimburse the
Agent for its reasonable out-of-pocket expenses arising in connection with the
negotiation, preparation and execution of this Amendment, including the
reasonable fees and expenses of Reed Smith Shaw & McClay, counsel for the
Agent.
Except as amended hereby, the provisions of the Credit Agreement and
the Security Documents shall remain in full force and effect.
This Amendment shall be deemed to be a contract under the laws of the
Commonwealth of Pennsylvania and for all purposes shall be construed in
accordance with and governed by the laws of such Commonwealth.
All representations, warranties, covenants and agreements of the
Borrower contained herein or made in writing in connection herewith shall
survive the execution and delivery of this Amendment and the execution and
delivery of the Notes and the making of Loans under the Credit Agreement as
amended hereby.
This Amendment may be executed in as many counterparts as may be
deemed necessary and convenient and by the separate parties hereto on separate
counterparts, each of which when so executed and delivered shall be deemed to
constitute an original, but all such separate counterparts shall constitute but
one and the same instrument.
If any provision of this Amendment, or the application thereof to any
party hereto, shall be held invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provisions or applications of this
Amendment which can be given effect without the invalid and unenforceable
provision or application, and to this end the parties hereto agree that the
provisions of this Amendment are and shall be severable.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto by their officers thereunto
duly authorized have executed this Amendment as of the date and year first
above written.
Attest: JONES INTERCABLE INVESTORS, L.P.
a Colorado limited partnership
By: Jones Intercable, Inc.,
a Colorado corporation,
as general partner
By /s/ KATHERINE A. LEVOY By /s/ J. ROY POTTLE
Title Assistant Secretary Title Treasurer
MELLON BANK, N.A., individually
and as Agent
By /s/ JRUCHARE P. HAYARKO
Title Assistant Vice President
PNC BANK, NATIONAL ASSOCIATION
By /s/ THOMAS P. CARDER
Title Vice President
-6-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 607,422
<SECURITIES> 0
<RECEIVABLES> 741,315
<ALLOWANCES> (76,659)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 60,015,800
<DEPRECIATION> (25,208,198)
<TOTAL-ASSETS> 48,557,818
<CURRENT-LIABILITIES> 3,558,397
<BONDS> 23,000,000
<COMMON> 0
0
0
<OTHER-SE> 21,999,421
<TOTAL-LIABILITY-AND-EQUITY> 48,557,818
<SALES> 0
<TOTAL-REVENUES> 27,522,625
<CGS> 0
<TOTAL-COSTS> 25,548,991
<OTHER-EXPENSES> 95,920
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,299,658
<INCOME-PRETAX> 578,056
<INCOME-TAX> 0
<INCOME-CONTINUING> 578,056
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 578,056
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
