<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number: 0-15378
CABLE TV FUND 14-A, LTD.
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(Exact name of registrant as specified in its charter)
Colorado 84-1024657
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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 (Registrant's telephone no.
and Zip Code) including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited Partnership
Interests
Indicate by check mark whether the registrants, (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days:
Yes x No
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Aggregate market value of the voting stock held by non-affiliates of the
registrant: N/A
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S)229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. X
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DOCUMENTS INCORPORATED BY REFERENCE: None
(40850)
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Certain information contained in this Form 10-K Report contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. All statements, other than statements of
historical facts, included in this Form 10-K Report that address activities,
events or developments that the Partnership or the General Partner expects,
believes or anticipates will or may occur in the future are forward-looking
statements. These forward-looking statements are based upon certain assumptions
and are subject to risks and uncertainties. Actual events or results may differ
from those discussed in the forward-looking statements as a result of various
factors.
PART I.
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ITEM 1. BUSINESS
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The Partnership. Cable TV Fund 14-A, Ltd. (the "Partnership") is a
Colorado limited partnership that was formed pursuant to the public offering of
limited partnership interests in the Cable TV Fund 14 Limited Partnership
Program (the "Program"), which was sponsored by Jones Intercable, Inc. (the
"General Partner"). Cable TV Fund 14-B, Ltd. ("Fund 14-B") is the other
partnership that was formed pursuant to the Program. The Partnership and Fund
14-B formed a general partnership known as Cable TV Fund 14-A/B Venture (the
"Venture"). The Partnership and the Venture were formed for the purpose of
acquiring and operating cable television systems.
The Partnership directly owns cable television systems serving the
areas in and around Buffalo, Minnesota (the "Buffalo System"), Naperville,
Illinois (the "Naperville System") and Calvert County, Maryland (the "Calvert
County System"), all of which are in the process of being sold. The Venture
owned and operated the cable television system serving certain areas in Broward
County, Florida (the "Broward System") until its sale on March 31, 1998. The
Partnership owned a 27 percent interest in the Venture until it was liquidated
and dissolved in October 1998. The Buffalo System, the Naperville System and
the Calvert County System may collectively be referred to as the "Systems."
It is anticipated that Comcast Corporation ("Comcast") will acquire a
controlling interest in the General Partner during April 1999. As a result of
this transaction, it is expected that the current management of the General
Partner and a majority of the Board of Directors of the General Partner will be
replaced by Comcast.
Disposition of Cable Television System by the Venture.
Broward System. In March 1998, the Venture sold the Broward System to
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an unaffiliated third party for $140,000,000. The agreement provided that the
contract price of $140,000,000 would be reduced $2,472 for each of the Broward
System's equivalent basic subscribers less than 56,637 at closing. At March 31,
1998, the Broward System had 55,346 equivalent basic subscribers, which reduced
the sales price by $3,191,352. When final closing adjustments were completed on
June 30, 1998, however, additional equivalent basic subscribers that were not
able to be counted as basic subscribers of the Broward System at the March 31,
1998 closing (because they were relatively recent subscribers at such date) were
able to be counted as equivalent basic subscribers of the Broward System. These
basic subscribers brought the equivalent basic subscriber count up to 56,637 and
the sales price accordingly was adjusted upward by $3,191,352 to $140,000,000.
From the proceeds of the Broward System sale at the initial closing,
the Venture settled working capital adjustments, repaid the outstanding balance
on its credit facility, which totaled $39,902,968, and paid a 2.5 percent
brokerage fee of $3,420,216 to The Intercable Group, Ltd., a subsidiary of the
General Partner ("The Intercable Group"), for acting as a broker in this
transaction. The Venture then distributed the remaining net sale proceeds, or
$94,039,000, to the Partnership and Fund 14-B in proportion to their ownership
interests in the Venture. Accordingly, the Partnership received 27 percent of
the net sale proceeds, or $25,484,569, which the Partnership distributed in
April 1998 to its limited partners of record as of March 31, 1998. Such
distribution represented approximately $159 for each $500 limited partnership
interest, or $318 for each $1,000 invested in the Partnership.
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From the additional proceeds of the Broward System sale at final
closing, the Venture settled final working capital adjustments and paid a 2.5
percent brokerage fee of $79,784 to The Intercable Group. The Venture then
distributed the remaining additional net sale proceeds, or $1,669,056, to the
Partnership and Fund 14-B in proportion to their ownership interests in the
Venture. Accordingly, the Partnership received 27 percent of the additional net
sale proceeds, or $452,433. The Partnership retained the $452,433 for working
capital purposes. Because the distributions to the limited partners from the
sale of the Broward System, together with all prior distributions, did not
return to the limited partners 125 percent of the capital initially contributed
to the Partnership by the limited partners, the General Partner did not receive
any general partner distribution from the Broward System's sale. Because the
Broward System represented the only asset of the Venture, the Venture was
liquidated and dissolved in October 1998.
Proposed Dispositions of Cable Television Systems by the Partnership.
Buffalo System. On November 6, 1998, the Partnership entered into a
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purchase and sale agreement, as amended, to sell the Buffalo System to an
unaffiliated party for a sales price of $26,605,000, subject to customary
closing adjustments. Closing of the sale is expected to occur in late March
1999. The holders of a majority of the limited partnership interests approved
this sale in a vote conducted by the General Partner in the first quarter of
1999. Upon the proposed sale of the Buffalo System, based upon financial
information as of December 31, 1998, the Partnership will repay $13,302,500
outstanding on its revolving credit facility, pay a brokerage fee to The
Intercable Group totaling $665,125, representing 2.5 percent of the sales price,
for acting as a broker in this transaction, settle working capital adjustments
and deposit $1,200,000 into an indemnity escrow account. The remaining net sale
proceeds of approximately $10,856,000 will be distributed to the Partnership's
limited partners of record as of the closing date of the sale of the Buffalo
System. Because the distribution to the limited partners from the sale of the
Buffalo System, together with all prior distributions, will not return to the
limited partners more than 125 percent of the capital initially contributed to
the Partnership by the limited partners, all of the net proceeds from the sale
of the Buffalo System will be distributed to the limited partners. The limited
partner distribution from the sale of the Buffalo System will represent $68 for
each $500 limited partnership interest, or $136 for each $1,000 invested in the
Partnership.
For a period of 90 days following the closing date, $1,200,000 of the
sale proceeds will remain in escrow as security for the Partnership's agreement
to indemnify the buyer under the asset purchase agreement. The Partnership's
primary exposure, if any, relates to the representations and warranties made
about the Buffalo System in the asset purchase agreement. Any amounts remaining
from this interest-bearing indemnity escrow account and not claimed by the buyer
at the end of the escrow period, plus interest earned on the escrowed funds,
will be returned to Partnership. From this amount, the Partnership will pay any
remaining liabilities and the Partnership will then distribute the balance to
its partners. The Partnership will continue in existence at least until any
amounts remaining from the indemnity escrow account have been distributed. If
any disputes with respect to the indemnification arise, the Partnership would
not be dissolved until such disputes were resolved.
Naperville System. On August 7, 1998, the Partnership entered into an
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asset purchase agreement to sell the Naperville System to an unaffiliated party
for a sales price of $23,000,000, subject to customary closing adjustments.
Closing of the sale, which is expected to occur in April 1999, has been approved
by a majority of the limited partners in a vote conducted by the General Partner
in December 1998. Upon the proposed sale of the Naperville System, based upon
financial information as of December 31, 1998, the Partnership will repay the
balance outstanding on its revolving credit facility, estimated to total
$9,747,500, pay a brokerage fee to The Intercable Group of $575,000,
representing 2.5 percent of the sales price, for acting as a broker in this
transaction, settle working capital adjustments and deposit $696,000 into an
interest-bearing indemnity escrow account. The remaining net sale proceeds of
approximately $11,039,000 will be distributed to the Partnership's limited
partners of record as of the closing date of the sale of the Naperville System.
Based upon financial information as of December 31, 1998, this distribution will
provide the Partnership's limited partners an approximate return of $69 for each
$500 limited partnership interest, or $138 for each $1,000 invested in the
Partnership. Because the distribution to the limited partners from the proposed
sale of the Naperville System, together with all prior distributions, will not
return to the
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limited partners 125 percent of the capital initially contributed to the
Partnership by the limited partners, the General Partner will not receive a
general partner distribution from the sale of the Naperville system.
In connection with the planned sale of the Naperville System, on March
5, 1999 the Partnership entered into a signal and service agreement with the
cable television company that will purchase the Naperville System. Pursuant to
the terms of this agreement, the purchaser will provide certain services to the
Partnership relating to the operation of the Naperville System until the closing
of the sale, which is expected to occur in mid-April 1999. The Partnership will
pay the puchaser fees and expense reimbursements related to this agreement, and
the Partnership will also indemnify the purchaser in connection with the
services it provides to the Partnership. The management fees and expense
reimbursements that the Partnership otherwise would pay to the General Partner
will be reduced to offset the fees and expenses paid to the purchaser of the
Naperville System pursuant to the signal and service agreement.
The $696,000 of the sale proceeds to be placed in the interest-bearing
indemnity escrow account will remain in escrow until November 15, 1999 as
security for the Partnership's agreement to indemnify the buyer under the asset
purchase agreement. The Partnership's primary exposure, if any, relates to the
representations and warranties made about the Naperville System in the asset
purchase agreement. Any amounts remaining from this interest-bearing indemnity
escrow account and not claimed by the buyer at the end of the escrow period,
plus interest earned on the escrowed funds, will be returned to the Partnership.
From this amount, the Partnership will pay any remaining liabilities and the
Partnership will then distribute the balance to its partners. The Partnership
will continue in existence at least until any amounts remaining from the
indemnity escrow account have been distributed. If any disputes with respect to
the indemnification arise, the Partnership would not be dissolved until such
disputes were resolved.
Calvert County System. On June 29, 1998, the Partnership entered into
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a purchase and sale agreement to sell the Calvert County System to an indirect
subsidiary of the General Partner, for a sales price of $39,388,667, subject to
customary closing adjustments. The purchase price was determined by the average
of three separate independent appraisals of the fair market value of the Calvert
County System. Closing of the sale, which is expected to occur in April 1999,
is subject to several conditions, including necessary governmental and other
third party consents and the approval of the holders of a majority of the
limited partnership interests in a vote conducted by the General Partner in
March and April 1999. Upon the proposed sale of the Calvert County System,
which is expected to occur after the sale of the Buffalo System and the sale of
the Naperville System, the Partnership will pay certain fees and expenses of the
transaction and distribute the net sale proceeds of approximately $38,985,000 to
the Partnership's partners of record as of the closing date of the sale of the
Calvert County System. Because at the time of the Calvert County System's sale,
the distributions expected to be made to the limited partners from the Calvert
County System sale and from prior sales of cable television systems will have
returned to the limited partners more than 125 percent of the amounts originally
contributed to the Partnership by the limited partners, the General Partner will
receive a general partner distribution from the proceeds of the sale of the
Calvert County System. It is estimated that the limited partners, as a group,
will receive $33,757,000 from the sale of the Calvert County System and that the
General Partner will receive a general partner distribution of $5,228,000 from
the net sale proceeds. The limited partner distribution from the sale of the
Calvert County System will represent $211 for each $500 limited partnership
interest, or $422 for each $1,000 invested in the Partnership.
Taking into account all distributions of the Partnership's portion of
the net proceeds from the prior sales of cable television systems and the
anticipated distributions from the proposed sales of the Partnership's remaining
cable television systems in 1999 (excluding escrowed proceeds), the General
Partner expects that the limited partners of the Partnership will receive
approximately $723 for each $500 limited partnership interest, or $1,446 for
each $1,000 invested in the Partnership.
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Following the close of the sales of the Buffalo System, the Naperville
System, the Calvert County System and the expiration of the indemnity escrow
periods, assuming there are no pending disputes, it is anticipated that the
Partnership will be dissolved before the end of 1999.
ITEM 2. PROPERTIES
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The Partnership owns the Buffalo System, the Naperville System and the
Calvert County System, all of which are expected to be sold before the end of
April 1999.
ITEM 3. LEGAL PROCEEDINGS
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Cable TV Fund 14-A, Ltd. v. City of Naperville and Ameritech New
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Media, Inc. and City of Naperville v. Cable TV Fund 14-A, Ltd., United States
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District Court for the Northern District of Illinois, Eastern Division, Case No.
96C 5962. The Partnership is plaintiff and counter-defendant in a suit
challenging certain actions arising from the City of Naperville's grant of a
franchise to Ameritech New Media, Inc. ("Ameritech NMI"). Specifically, the
Partnership alleges that under Cable Act standards, the City should have
modified the Partnership's Naperville franchise because certain provisions of
the franchise are unduly burdensome in a competitive environment. Further, the
Partnership alleges that the franchise granted by the City to Ameritech NMI is
materially more favorable than the franchise granted to the Partnership, that
this is contrary to Illinois law and that the Ameritech NMI franchise therefore
is void. This suit also challenges the City's assertion that the Partnership
has breached its franchise in various ways, particularly by withholding certain
payments due to the City. In its countersuit, the City seeks a declaratory
ruling that the Partnership has breached its franchise by withholding those same
payments and seeks to impose liquidated damages on the Partnership for such
breach. On cross motions to dismiss and for partial summary judgment, the Court
issued a number of rulings that sustained the Partnership's right to proceed on
the majority of its claims. The Court has also ruled that, in reviewing the
City's denial of modification, it will make its own factual determinations based
on a full evidentiary record to be developed by the parties. A trial date has
not yet been set and it is anticipated that this litigation will be settled in
connection with the proposed sale of the Naperville System in April 1999.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None.
PART II.
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
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AND RELATED SECURITY HOLDER MATTERS
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While the Partnership is publicly held, there is no public market for
the limited partnership interests, and it is not expected that a market will
develop in the future. During 1998, limited partners of the Partnership
conducted registered and unregistered tender offers for interests in the
Partnership at prices ranging from $160 to $305 per interest. As of February 16,
1999, the number of equity security holders in the Partnership was 11,260.
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ITEM 6. SELECTED FINANCIAL DATA
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<TABLE>
<CAPTION>
For the Year Ended December 31,
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Cable TV Fund 14-A, Ltd. 1998 1997 1996 1995 1994
- ------------------------ -------------- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $23,458,429 $26,642,247 $47,808,719 $44,094,802 $40,442,268
Depreciation and Amortization 8,662,922 10,111,635 14,627,726 14,459,479 14,826,256
Operating Loss (3,048,163) (2,713,383) (397,890) (1,459,868) (3,323,006)
Equity in Net Income (Loss) of
Cable Television Joint Venture 22,599,271 (626,089) (815,252) (1,104,003) (1,468,218)
Net Income (Loss) 18,214,158/(a)/ 62,735,041/(b)/ (7,371,183) (8,536,167) (9,472,910)
Net Income (Loss) per Limited
Partnership Unit 113.54/(a)/ 387.70/(b)/ (45.61) (52.82) (58.61)
Weighted Average Number of
Limited Partnership Units Outstanding 160,000 160,000 160,000 160,000 160,000
General Partner's
Deficit (24,635) (72,389) (776,152) (702,440) (617,078)
Limited Partners' Capital (Deficit) 11,949,739 19,267,904 (8,215,874) (918,403) 7,532,402
Total Assets 38,472,721 44,982,801 79,343,054 82,900,838 87,556,346
Debt 23,432,210 22,773,095 85,424,507 80,726,793 77,425,047
General Partner Advances 365,829 489,313 352,232 887,215 706,579
</TABLE>
(a) Net income resulted primarily from the sale of the Broward System in March
1998 by Cable TV Fund 14-A/B Venture.
(b) Net income resulted primarily from the sales of the Turnersville System in
January 1997 and the Central Illinois System in June 1997 by Cable TV Fund
14-A, Ltd.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
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The following discussion of the financial condition and results of
operations of Cable TV Fund 14-A, Ltd. (the "Partnership") and Cable TV Fund 14-
A/B Venture (the "Venture") contains, in addition to historical information,
forward-looking statements that are based upon certain assumptions and are
subject to a number of risks and uncertainties. The Partnership's and Venture's
actual results may differ significantly from the results predicted in such
forward-looking statements.
FINANCIAL CONDITION
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The Partnership sold two of its systems in 1997 and the Venture sold its
cable television system serving areas in and around Broward County, Florida (the
"Broward System") in March 1998. The Partnership also has entered into
agreements to sell its cable television systems serving Buffalo, Minnesota (the
"Buffalo System"), which is expected to close in the first quarter of 1999, its
Naperville, Illinois (the "Naperville System") and Calvert County, Maryland (the
"Calvert County System"), which are expected to close in the second quarter of
1999. There is no assurance as to the timing or terms of any sales.
Cable TV Fund 14-A, Ltd.-
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The Partnership is in various stages of selling its three remaining cable
television systems. These transactions are discussed below in the order of
anticipated sale closing date.
On November 6, 1998, the Partnership entered into an asset purchase
agreement, as amended, to sell the Buffalo System to an unaffiliated party for a
sales price of $26,605,000, subject to customary closing adjustments. Closing
of the sale is expected to occur in March 1999. The holders of a majority of the
limited partnership interests approved this sale in a vote conducted by the
General Partner in the first quarter of 1999. Upon the proposed sale of the
Buffalo System, based upon financial information as of December 31, 1998, the
Partnership will repay $13,302,500 outstanding on its revolving credit facility,
pay a brokerage fee to The Intercable Group, Ltd. ("The Intercable Group"), a
wholly owned subsidiary of the General Partner, totaling $665,125, representing
2.5 percent of the sales price, for acting as a broker in this transaction,
settle working capital adjustments and deposit $1,200,000 into an indemnity
escrow account. The remaining net sale proceeds of approximately $10,856,000
will be distributed to the Partnership's limited partners of record as of the
closing date of the sale of the Buffalo System. Based upon financial information
as of December 31, 1998, this distribution will give the Partnership's limited
partners an approximate return of $68 for each $500 limited partnership
interest, or $136 for each $1,000 invested in the Partnership. Because the
distribution to the limited partners from the sale of the Buffalo System
together with all prior distributions, will not return to the limited partners
125 percent of the capital initially contributed to the Partnership by the
limited partners, the General Partner will not receive a general partner
distribution from the sale of the Buffalo System.
For a period of 90 days following the closing date, $1,200,000 of the sale
proceeds will remain in escrow as security for the Partnership's agreement to
indemnify the purchaser under the asset purchase agreement. The Partnership's
primary exposure, if any, will relate to the representations and warranties made
about the Buffalo System in the asset purchase agreement. Any amounts remaining
from this interest-bearing indemnity escrow account that are not claimed by the
purchaser at the end of the 90-day period, plus interest earned on the escrowed
funds, will be returned to the Partnership. From this amount, the Partnership
will pay any remaining liabilities and it will then distribute the balance to
the Partnership's partners. Because the distribution to the limited partners
from the sale of the Partnership's remaining systems, together with all prior
distributions, will return to the limited partners more than 125 percent of the
capital initially contributed to the Partnership by the limited partners, the
General Partner will receive a distribution from the escrowed proceeds. If the
entire $1,200,000 escrow amount is distributed to the partners, of which there
can be no assurance, the limited partners as a group would receive 75 percent
($900,000) and the General Partner would receive 25 percent ($300,000) of the
net escrow proceeds.
On August 7, 1998, the Partnership signed an asset purchase agreement to
sell its Naperville System to an unaffiliated party for a sales price of
$23,000,000, subject to customary closing adjustments. Closing of the sale,
which is expected to occur in April 1999, has been approved by a majority of the
limited partners in a vote conducted by the General Partner in December 1998.
Upon the proposed sale of the Naperville System, based upon financial
information as of December 31, 1998, the Partnership will repay the balance
outstanding on its revolving credit facility, estimated to total $9,747,500, pay
a brokerage fee to The Intercable Group totaling $575,000, representing 2.5
percent of the sales price, for acting as a broker in this transaction, settle
working capital adjustments, and then deposit $696,000 into an indemnity escrow
account. The remaining net sale proceeds of approximately $11,039,000 will be
distributed to the Partnership's limited partners of record as of the closing
date of the sale of the Naperville System. Based upon financial information as
of December 31, 1998, this distribution will give the Partnership's limited
partners an approximate return of $69 for each $500 limited partnership
interest, or $138 for each $1,000 invested in the Partnership. Because the
distribution to the limited partners from the sale of the Naperville System and
the Buffalo System, together with all prior
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distributions, will not return to the limited partners 125 percent of the
capital initially contributed to the Partnership by the limited partners, the
General Partner will not receive a general partner distribution from the sale of
the Naperville System.
In connection with the planned sale of the Naperville System, on March 5,
1999 the Partnership entered into a signal and service agreement with the cable
company that will purchase the system. Pursuant to the terms of this agreement,
the purchaser will provide certain services to the Partnership relating to the
operations of the Naperville System until the closing of the sale, which is
expected to occur in mid-April 1999. The Partnership will pay the purchaser
fees and expense reimbursements related to this agreement and the Partnership
will also indemnify the purchaser in connection with the service it provides to
the Partnership. The management fees and expense reimbursements that the
Partnership otherwise would pay to the General Partner will be reduced to offset
the fees and expenses paid to the purchaser of the system pursuant to the signal
and service agreement.
The $696,000 of sale proceeds to be placed in the interest-bearing
indemnity escrow account will remain in escrow from the closing date until
November 15, 1999 as security for the Partnership's agreement to indemnify the
buyer under the asset purchase agreement. The Partnership's primary exposure, if
any, will relate to the representations and warranties to be made about the
Naperville System in the asset purchase agreement. Any amounts remaining from
this interest-bearing indemnity escrow account and not claimed by the buyer at
the end of the escrow period, plus interest earned on the escrowed funds, will
be returned to the Partnership. From this amount, the Partnership will pay any
remaining liabilities and it will then distribute the balance to the
Partnership's partners. Because the distribution to the limited partners from
the sale of the Partnership's remaining systems, together with all prior
distributions, will return to the limited partners more than 125 percent of the
capital initially contributed to the Partnership by the limited partners, the
General Partner will receive a distribution from the escrowed proceeds. If the
entire $696,000 escrow amount is distributed to the partners, of which there can
be no assurance, the limited partners as a group would receive 75 percent
($522,000) and the General Partner would receive 25 percent ($174,000) of the
net escrow proceeds.
On June 29, 1998, the Partnership entered into a purchase and sale
agreement to sell the Calvert County System to a subsidiary of the General
Partner for a sales price of $39,388,667, subject to customary closing
adjustments. The purchase price was determined by the average of three separate
independent appraisals of the fair market value of the Calvert County System.
Closing of the sale, which is expected to occur in April 1999, will be subject
to several conditions, including necessary governmental and other third party
consents and the approval of the holders of a majority of the limited
partnership interests in a vote conducted by the General Partner in March and
April 1999. Upon the proposed sale of the Calvert County System, based upon
financial information as of December 31, 1998, the Partnership will pay certain
fees and expenses of the transaction and distribute the remaining net sale
proceeds of approximately $38,985,000 to the Partnership's partners of record as
of the closing date of the sale of the Calvert County System. The limited
partners, as a group, will receive $33,757,000, and the General Partner will
receive a $5,228,000 general partner distribution from the net sale proceeds;
thus, the limited partners would receive approximately $211 for each $500
limited partnership interest, or $422 for each $1,000 invested in the
Partnership from the sale of the Calvert County System.
The Partnership will continue in existence at least until any amounts
remaining from the indemnity escrow accounts have been distributed. The
Partnership will be liquidated and dissolved upon the final distribution of any
amounts remaining from the Buffalo System's and Naperville System's indemnity
escrow accounts. If any disputes with respect to indemnification arise, the
Partnership would not be dissolved until such disputes were resolved, which
could result in the Partnership continuing in existence beyond 1999.
Taking into account all distributions from prior sales and the anticipated
distributions of the net proceeds from the proposed sales of the Partnership's
remaining systems (excluding escrowed proceeds) in 1999, the General Partner
expects that the limited partners of the Partnership will receive approximately
$723 for each $500 limited partnership interest, or $1,446 for each $1,000
invested in the Partnership.
For the twelve months ended December 31, 1998, the Partnership generated
net cash from operating activities totaling $5,483,420, which is available to
fund capital expenditures and non-operating costs. For the twelve months ended
December 31, 1998, capital expenditures totaled approximately $6,601,000 for all
of the Partnership's systems. Approximately 38 percent of the expenditures
related to new plant construction associated with new homes passed in all of the
Partnership's systems. Approximately 38 percent of the expenditures related to
construction of service drops to subscriber's homes. The remainder was for
other capital expenditures to maintain the value of the Partnership's systems.
These expenditures were funded by cash generated from operations, borrowings
under the Partnership's credit facility and cash on hand. Budgeted capital
expenditures for all of the Partnership's remaining systems for 1999 are
approximately $1,267,000. These capital expenditures are to maintain the value
of the Partnership's remaining systems until they are sold. Funding for the
improvements is expected to come from cash on hand, cash generated from
operations and, if necessary, borrowings under its credit facility. The
Partnership is obligated to conduct its business in the ordinary course until
its systems are sold.
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The Partnership is a party to a $27,700,000 revolving credit facility, of
which $23,050,000 was outstanding at December 31, 1998, leaving $4,650,000
available for future borrowings. The revolving credit facility expires on
September 30, 2000, at which time the then-outstanding balance is payable in
full. The revolving credit facility requires that one-half of the proceeds from
the next Partnership system sale be used to reduce amounts outstanding and that
the credit facility be repaid in full on the second system sale. Based on the
current expected order of system sale closings, the Partnership will repay
approximately $13,302,500 upon the closing of the sale of the Buffalo System,
which is expected to occur in March 1999, and the maximum amount of borrowings
available under the revolving credit facility will be reduced to $14,397,500.
The remaining balance will be repaid upon the sale of the Naperville System,
which is expected to occur in April 1999. Interest on the revolving credit
facility's outstanding balance is at the Partnership's option of the London
Interbank Offered Rate plus 1.125 percent, the Certificate of Deposit Rate plus
1.25 percent or the Base Rate plus .125 percent. The effective interest rates
on amounts outstanding as of December 31, 1998 and 1997 were 6.38 percent and
6.79 percent, respectively.
Ameritech, which provides telephone service in a multi-state region
including Illinois, is providing cable television service in Naperville,
Illinois, the community served by the Partnership's Naperville System. This
competition has had an adverse effect on the Naperville System's revenues and
cash flow. The General Partner is taking prudent steps necessary to meet this
competition from Ameritech and, to the extent possible, to safeguard the value
of the Naperville System until it is sold. These steps include a judicial
challenge to the terms on which a franchise was issued to Ameritech. The City
of Naperville has filed a countersuit against the Partnership declaring that the
Partnership has breached its franchise agreement by withholding franchise
payments and seeks to impose liquidated damages on the Partnership for such
breach. Litigation is currently pending in federal court against both the City
of Naperville and Ameritech and includes claims made by the City of Naperville
against the Partnership. A trial date has not yet been set.
The Partnership has sufficient sources of capital available from cash on
hand, cash generated from operations and borrowings available under its
revolving credit facility to meet its needs until its systems are sold.
Cable TV Fund 14-A/B Venture-
- ----------------------------
On March 31, 1998, the Venture sold the Broward System to an unaffiliated
third party for $140,000,000. The agreement provided that the contract sales
price of $140,000,000 would be reduced $2,472 for each of the Broward System's
equivalent basic subscribers less than 56,637 at closing. At March 31, 1998,
the Broward System had 55,346 equivalent basic subscribers, which reduced the
sales price by $3,191,352. When final closing adjustments were completed on
June 30, 1998, however, additional equivalent basic subscribers that were not
able to be counted as basic subscribers of the Broward System at the March 31,
1998 closing (because they were relatively recent subscribers at such date) were
able to be counted as equivalent basic subscribers of the Broward System. These
basic subscribers brought the equivalent basic subscriber count up to 56,637 and
the sales price accordingly was adjusted upward by $3,191,352 to $140,000,000.
From the proceeds of the Broward System sale at initial closing, the
Venture settled working capital adjustments, repaid the outstanding balance on
its credit facility, which totaled $39,902,968 at March 31, 1998 and paid a 2.5
percent brokerage fee of $3,420,216 to The Intercable Group for acting as a
broker in this transaction. The Venture then distributed the remaining net sale
proceeds, or $94,039,000, to the two constituent partnerships of the Venture in
proportion to their ownership interests in the Venture. Accordingly, the
Partnership received 27 percent of the net sale proceeds, or $25,484,569. In
April 1998, the Partnership distributed its net sale proceeds to its limited
partners of record as of March 31, 1998. Such distribution represented
approximately $159 for each $500 limited partnership interest, or $318 for each
$1,000 invested in the Partnership.
From the additional proceeds of the Broward System sale at final closing,
the Venture settled final working capital adjustments and paid a 2.5 percent
brokerage fee of $79,784 to The Intercable Group. The Venture then distributed
the remaining additional net sale proceeds, or $1,669,056, to the two
constituent partnerships of the Venture in proportion to their ownership
interests in the Venture. Accordingly, the Partnership received 27 percent of
the additional net sale proceeds, or $452,433. The Partnership retained the
$452,433 for working capital purposes. Because the distributions to the limited
partners from the sale of the Broward System, together with all prior
distributions, did not return to the limited partners 125 percent of the capital
initially contributed to the Partnership by the limited partners, the General
Partner did not receive any general partner distribution from the Broward
System's sale. Because the Broward System represented the only asset of the
Venture, the Venture was liquidated and dissolved in October 1998.
9
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
Cable TV Fund 14-A, Ltd. -
- ------------------------
1998 Compared to 1997-
Revenues of the Partnership decreased $3,183,818, or approximately 12
percent, to $23,458,429 in 1998 compared to $26,642,247 in 1997. This decrease
was primarily a result of the sales of the Turnersville System on January 10,
1997 and the Central Illinois System on June 30, 1997. Disregarding the effect
of the sales of the Turnersville System and the Central Illinois System,
revenues would have increased $184,468, or approximately 1 percent, to
$23,458,429 in 1998 from $23,273,961 in 1997. This increase was primarily due
to increases in the number of basic subscribers and basic rates in the
Partnership's Buffalo System and Calvert County System. This increase was
partially offset by a reduction in revenues in the Partnership's Naperville
System due to competition from Ameritech.
Operating expenses consist primarily of costs associated with the operation
and administration of the Partnership's cable television systems. The principal
cost components are salaries paid to system personnel, programming expenses,
professional fees, subscriber billing costs, rent for leased facilities, cable
system maintenance expenses and marketing expenses.
Operating expenses decreased $1,186,504, or approximately 7 percent, to
$15,199,086 in 1998 compared to $16,385,590 in 1997. This decrease was
primarily a result of the sales of the Turnersville System and the Central
Illinois System. Disregarding the effect of the Turnersville System and the
Central Illinois System sales, operating expenses would have increased $797,275,
or approximately 6 percent, to $15,199,086 in 1998 from $14,401,811 in 1997.
This increase was primarily due to an increase in programming expenses.
Operating expenses represented 65 percent and 62 percent, respectively, of
revenues in 1998 and 1997.
Management fees and allocated overhead from the General Partner decreased
$213,821, or approximately 7 percent, to $2,644,584 in 1998 compared to
$2,858,405 in 1997. This decrease was primarily a result of the sales of the
Turnersville System and the Central Illinois System. Disregarding the effect of
the Turnersville System and the Central Illinois System sales, management fees
and allocated overhead from the General Partner would have increased $143,855,
or approximately 6 percent, to $2,644,584 in 1998 from $2,500,729 in 1997. This
increase was due to an increase in expenses allocated from the General Partner.
Depreciation and amortization expense decreased $1,448,713, or
approximately 14 percent, to $8,662,922 in 1998 compared to $10,111,635 in 1997.
This decrease was a result of the sales of the Turnersville System and the
Central Illinois System. Disregarding the effect of the Turnersville System and
the Central Illinois System sales, depreciation and amortization expense would
have increased $420,101, or approximately 5 percent, to $8,662,922 in 1998 from
$8,242,821 in 1997. This increase was a result of capital additions to the
Partnership's other systems during 1998.
Operating loss increased $334,780, or approximately 12 percent, to
$3,048,163 in 1998 compared to $2,713,383 in 1997. Disregarding the effect of
the Turnersville System and the Central Illinois System sales, operating loss
would have increased $1,176,763, or approximately 63 percent, to $3,048,163 in
1998 from $1,871,400 in 1997. This increase was a result of the increases in
operating expenses, management fees and allocated overhead from the General
Partner and increase in depreciation and amortization expense exceeding the
increase in revenues.
Interest expense decreased $282,114, or approximately 15 percent, to
$1,641,112 in 1998 compared to $1,923,226 in 1997. This decrease was primarily
due to lower outstanding balances on interest bearing obligations during 1998.
Portions of the proceeds from the sales of the Turnersville System and the
Central Illinois System were used to reduce the Partnership's debt.
The Partnership recognized a gain on the sale of the Turnersville System of
$62,923,951 and a gain on the sale of the Central Illinois System of $7,050,021
during 1997. No similar gains were recognized during 1998.
The Partnership reported loss before equity in net income of cable
television joint venture of $4,385,113 in 1998 compared to income before equity
in net loss of cable television joint venture of $63,361,130 in 1997. This
change was primarily a result of the gain on the sales of the Turnersville
System and the Central Illinois System in 1997.
1997 Compared to 1996-
Revenues of the Partnership decreased $21,166,472, or approximately 44
percent, to $26,642,247 in 1997 compared to $47,808,719 in 1996. This decrease
was primarily a result of the sales of the Turnersville System on January 10,
1997 and the Central Illinois System on June 30, 1997. Disregarding the effect
of the sales of the Turnersville System and the Central Illinois
10
<PAGE>
System, revenues would have decreased $1,800,522, or approximately 7 percent, to
$23,273,961 in 1997 from $25,074,483 in 1996. This decrease in revenues was due
to the Naperville System's loss of subscribers due to competition from
Ameritech.
Operating expenses consist primarily of costs associated with the operation
and administration of the Partnership's cable television systems. The principal
cost components are salaries paid to system personnel, programming expenses,
professional fees, subscriber billing costs, rent for leased facilities, cable
system maintenance expenses and marketing expenses.
Operating expenses decreased $11,640,742, or approximately 42 percent, to
$16,385,590 in 1997 compared to $28,026,332 in 1996. This decrease was
primarily a result of the sales of the Turnersville System and the Central
Illinois System. Disregarding the effect of the Turnersville System and the
Central Illinois System sales, operating expenses would have decreased
$1,277,130, or approximately 8 percent, to $14,401,811 in 1997 from $15,678,941
in 1996. This decrease was primarily due to a decrease in subscriber related
expenses as a result of the Naperville System's loss of subscribers due to
competition from Ameritech. Operating expenses represented 62 percent and 63
percent, respectively, of revenues in 1997 and 1996.
Management fees and allocated overhead from the General Partner decreased
$2,694,146, or approximately 49 percent, to $2,858,405 in 1997 compared to
$5,552,551 in 1996. This decrease was primarily a result of the sales of the
Turnersville System and the Central Illinois System. Disregarding the effect of
the Turnersville System and the Central Illinois System sales, management fees
and allocated overhead from the General Partner would have decreased $459,314,
or approximately 16 percent, to $2,500,729 in 1997 from $2,960,043 in 1996.
This decrease was due to the decrease in revenues, upon which such management
fees and allocations are based.
Depreciation and amortization expense decreased $4,516,091, or
approximately 31 percent, to $10,111,635 in 1997 compared to $14,627,726 in
1996. This decrease was a result of the sales of the Turnersville System and
the Central Illinois System. Disregarding the effect of the Turnersville System
and the Central Illinois System sales, depreciation and amortization expense
would have increased $1,161,639, or approximately 16 percent, to $8,242,821 in
1997 from $7,081,182 in 1996. This increase was a result of capital additions
to the Partnership's other systems during 1997.
Operating loss increased $2,315,493 to $2,713,383 in 1997 compared to
$397,890 in 1996. Disregarding the effect of the Turnersville System and the
Central Illinois System sales, operating loss increased $1,225,717 to $1,871,400
in 1997 from $645,683 in 1996. This increase was a result of the decrease in
revenues and the increase in depreciation and amortization expense exceeding the
decreases in operating expenses and management fees and allocated overhead from
the General Partner.
Interest expense decreased $4,026,632, or approximately 68 percent, to
$1,923,226 in 1997 compared to $5,949,858 in 1996. This decrease was primarily
due to lower outstanding balances on interest bearing obligations during 1997.
Portions of the proceeds from the sales of the Turnersville System and the
Central Illinois System were used to reduce the Partnership's debt.
The Partnership recognized a gain on the sale of the Turnersville System of
$62,923,951 and a gain on the sale of the Central Illinois System of $7,050,021
during 1997. No similar gains were recognized during 1996.
The Partnership reported income before equity in net loss of cable
television joint venture of $63,361,130 in 1997 compared to a loss before equity
in net loss of cable television joint venture of $6,555,931 in 1996. This
change was primarily a result of the gain on the sales of the Turnersville
System and the Central Illinois System.
Year 2000 Issue
- ---------------
The Year 2000 issue is the result of many computer programs being written
such that they will malfunction when reading a year of "00." This problem could
cause system failure or miscalculations causing disruptions of business
processes. Due to the pending sales of all of the Partnership's cable
television systems in 1999 and the anticipated liquidation and dissolution of
the Partnership before the end of 1999, the Year 2000 issue will not have a
material effect on the Partnership.
11
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------
Interest Rate Risk
------------------
The Partnership utilizes variable rate long-term debt from its credit
facility to partially finance capital expenditures. Such debt arrangements
expose the Partnership to market risk related to changes in interest rates. The
Partnership will repay all amounts outstanding on its credit facility upon the
sale of the Naperville System in April 1999. Therefore, the Partnership's risk
from changes in interest rates is not expected to be significant.
ITEM 8. FINANCIAL STATEMENTS
- -----------------------------
The audited financial statements of the Partnership and the Venture for the
year ended December 31, 1998 follow.
12
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Partners of Cable TV Fund 14-A, Ltd.:
We have audited the accompanying balance sheets of CABLE TV FUND 14-A, LTD.
(a Colorado limited partnership) as of December 31, 1998 and 1997, and the
related statements of operations, partners' capital (deficit) and cash flows for
each of the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the General Partner's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cable TV Fund 14-A, Ltd. as
of December 31, 1998 and 1997, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 12, 1999.
13
<PAGE>
CABLE TV FUND 14-A, LTD.
------------------------
(A Limited Partnership)
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
December 31,
----------------------------
ASSETS 1998 1997
------ ------------ ------------
<S> <C> <C>
CASH $ 357,145 $ 363,032
TRADE RECEIVABLES, less allowance for doubtful receivables of
$127,439 and $85,436 at December 31, 1998 and 1997, respectively 454,788 931,372
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 93,032,212 86,431,357
Less- accumulated depreciation (57,669,712) (50,186,043)
------------ ------------
35,362,500 36,245,314
Franchise costs and other intangible assets, net of accumulated
amortization of $12,840,171 and $11,920,332 at
December 31, 1998 and 1997, respectively 1,541,203 2,461,042
Investment in cable television joint venture - 3,337,731
------------ ------------
Total investment in cable television properties 36,903,703 42,044,087
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 757,085 1,644,310
------------ ------------
Total assets $ 38,472,721 $ 44,982,801
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
14
<PAGE>
CABLE TV FUND 14-A, LTD.
------------------------
(A Limited Partnership)
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
December 31,
----------------------------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1998 1997
------------------------------------------- ------------ ------------
<S> <C> <C>
LIABILITIES:
Debt $ 23,432,210 $ 22,773,095
General Partner advances 365,829 489,313
Trade accounts payable and accrued liabilities 2,625,673 2,440,724
Subscriber prepayments 123,905 84,154
------------ ------------
Total liabilities 26,547,617 25,787,286
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 7)
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (25,635) (73,389)
------------ ------------
(24,635) (72,389)
------------ ------------
Limited Partners-
Net contributed capital (160,000 units outstanding at
December 31, 1998 and 1997) 68,722,000 68,722,000
Accumulated earnings (deficit) 3,259,808 (14,906,596)
Distributions (60,032,069) (34,547,500)
------------ ------------
11,949,739 19,267,904
------------ ------------
Total liabilities and partners' capital (deficit) $ 38,472,721 $ 44,982,801
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
15
<PAGE>
CABLE TV FUND 14-A, LTD.
------------------------
(A Limited Partnership)
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES $23,458,429 $26,642,247 $47,808,719
COSTS AND EXPENSES:
Operating expenses 15,199,086 16,385,590 28,026,332
Management fees and allocated overhead from
General Partner 2,644,584 2,858,405 5,552,551
Depreciation and amortization 8,662,922 10,111,635 14,627,726
----------- ----------- -----------
OPERATING LOSS (3,048,163) (2,713,383) (397,890)
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (1,641,112) (1,923,226) (5,949,858)
Gain on sale of cable television systems - 69,973,972 -
Other, net 304,162 (1,976,233) (208,183)
----------- ----------- -----------
Total other income (expense), net (1,336,950) 66,074,513 (6,158,041)
----------- ----------- -----------
INCOME (LOSS) BEFORE EQUITY IN NET INCOME (LOSS)
OF CABLE TELEVISION JOINT VENTURE (4,385,113) 63,361,130 (6,555,931)
EQUITY IN NET INCOME (LOSS) OF CABLE TELEVISION
JOINT VENTURE 22,599,271 (626,089) (815,252)
----------- ----------- -----------
NET INCOME (LOSS) $18,214,158 $62,735,041 $(7,371,183)
=========== =========== ===========
ALLOCATION OF NET INCOME (LOSS):
General Partner $ 47,754 $ 703,763 $ (73,712)
=========== =========== ===========
Limited Partners $18,166,404 $62,031,278 $(7,297,471)
=========== =========== ===========
NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT $113.54 $387.70 $(45.61)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 160,000 160,000 160,000
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
16
<PAGE>
CABLE TV FUND 14-A, LTD.
------------------------
(A Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
-----------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1998 1997 1996
------------ ------------ -----------
<S> <C> <C> <C>
GENERAL PARTNER:
Balance, beginning of year $ (72,389) $ (776,152) $ (702,440)
Net income (loss) for year 47,754 703,763 (73,712)
------------ ------------ -----------
Balance, end of year $ (24,635) $ (72,389) $ (776,152)
============ ============ ===========
LIMITED PARTNERS:
Balance, beginning of year $ 19,267,904 $ (8,215,874) $ (918,403)
Net income (loss) for year 18,166,404 62,031,278 (7,297,471)
Distributions (25,484,569) (34,547,500) -
------------ ------------ -----------
Balance, end of year $ 11,949,739 $ 19,267,904 $(8,215,874)
============ ============ ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
17
<PAGE>
CABLE TV FUND 14-A, LTD.
------------------------
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 18,214,158 $ 62,735,041 $ (7,371,183)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 8,662,922 10,111,635 14,627,726
Equity in net loss (income) of cable television
joint venture (22,599,271) 626,089 815,252
Gain on sales of cable television systems - (69,973,972) -
Decrease in trade receivables, net 476,584 210,957 186,386
Decrease (increase) in deposits, prepaid expenses
and deferred charges 627,811 (454,813) (726,606)
Increase (decrease) in trade accounts payable and
accrued liabilities and subscriber prepayments 224,700 (33,463) (349,332)
Increase (decrease) in General Partner advances (123,484) 137,081 (534,983)
------------ ------------ ------------
Net cash provided by operating activities 5,483,420 3,358,555 6,647,260
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (6,600,855) (8,016,393) (10,381,131)
Proceeds from sale of cable television systems, net
of brokerage fees - 100,962,760 -
Distributions from Joint Venture 25,937,002 - -
------------ ------------ ------------
Net cash provided by (used in)
investing activities 19,336,147 92,946,367 (10,381,131)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 1,694,890 36,894,399 5,183,313
Repayment of debt (1,035,775) (99,545,811) (485,599)
Distributions to limited partners (25,484,569) (34,547,500) -
------------ ------------ ------------
Net cash provided by (used in)
financing activities (24,825,454) (97,198,912) 4,697,714
------------ ------------ ------------
Increase (decrease) in cash (5,887) (893,990) 963,843
Cash, beginning of year 363,032 1,257,022 293,179
------------ ------------ ------------
Cash, end of year $ 357,145 $ 363,032 $ 1,257,022
============ ============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 1,642,848 $ 2,375,177 $ 6,136,741
============ ============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
18
<PAGE>
CABLE TV FUND 14-A, LTD.
------------------------
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(1) ORGANIZATION AND PARTNERS' INTERESTS
------------------------------------
Formation and Business
----------------------
Cable TV Fund 14-A, Ltd. (the "Partnership"), a Colorado limited
partnership, was formed on February 6, 1987, under a public program sponsored by
Jones Intercable, Inc. ("Intercable"), a publicly held Colorado corporation.
The Partnership was formed to acquire, construct, develop and operate cable
television systems. Intercable is the "General Partner" and manager of the
Partnership. Intercable and its subsidiaries also own and operate cable
television systems. In addition, Intercable manages cable television systems
for other limited partnerships for which it is general partner and, also, for
other affiliated entities.
On January 8, 1988, the Partnership and Cable TV Fund 14-B, Ltd. ("Fund 14-
B") formed Cable TV Fund 14-A/B Venture (the "Venture"), to acquire the cable
television system serving areas in and around Broward County, Florida (the
"Broward System"). The Partnership contributed $18,975,000 to the capital of
the Venture for 27 percent ownership interest and Fund 14-B contributed
$51,025,000 to the capital of the Venture for 73 percent ownership interest. As
discussed below, the Venture sold the Broward System on March 31, 1998. Because
the Broward System represented the only asset of the Venture, the Venture was
liquidated and dissolved in October 1998.
Cable Television System Acquisitions
------------------------------------
The Partnership acquired the cable television systems serving certain areas
in and around the communities of Turnersville, New Jersey (the "Turnersville
System"); Buffalo, Minnesota (the "Buffalo System"); Naperville, Illinois (the
"Naperville System"); and Calvert County, Maryland (the "Calvert County System")
in 1987. In 1991, the Partnership purchased additional cable television systems
serving certain communities in rural central Illinois (the "Central Illinois
System"). As discussed below, the Partnership sold the Turnersville System on
January 10, 1997 and the Central Illinois System on June 30, 1997.
Cable Television System Sales - Partnership
-------------------------------------------
On January 10, 1997, the Partnership sold the Turnersville System to an
unaffiliated party for a sales price of $84,500,000. From the sale proceeds,
the Partnership repaid $57,387,500 of the balance outstanding on its credit
facility (of which $52,500,000 was required to be repaid under the terms of the
Partnership's credit facility), paid The Intercable Group, Ltd. ("The Intercable
Group"), a subsidiary of the General Partner, a brokerage fee of $2,112,500,
representing 2.5 percent of the sales price, for acting as a broker in this
transaction and distributed the remaining net sale proceeds of $25,000,000 to
its limited partners in January 1997. Such distribution represented
approximately $156 for each $500 limited partnership interest, or $312 for each
$1,000 invested in the Partnership. Because the $25,000,000 distribution to the
limited partners did not return 125 percent of the capital initially contributed
to the Partnership by the limited partners, the General Partner did not receive
a general partner distribution from the proceeds of the sale of the Turnersville
System. Because the sale of the Turnersville System did not represent a sale of
all or substantially all of the Partnership's assets, no vote of the limited
partners of the Partnership was required to approve this sale.
On June 30, 1997, the Partnership sold the Central Illinois System to an
unaffiliated party for a sales price of $20,005,280. The Partnership repaid
$9,800,000 of the balance outstanding on its credit facility, paid a 2.5 percent
brokerage fee of $502,500 to The Intercable Group for acting as a broker in this
transaction, settled working capital adjustments and distributed $9,547,500 of
the sale proceeds to its limited partners in July 1997. Such distribution
represented approximately $60 for each $500 limited partnership interest, or
$120 for each $1,000 invested in the Partnership. Because the distributions to
the limited partners from the sales of the Turnersville System and the Central
Illinois System did not return 125 percent of the capital initially contributed
to the Partnership by the limited partners, the General Partner did not receive
a general partner distribution from the proceeds of the sale of the Central
Illinois System. Because the sale of the Central Illinois System did not
represent a sale of all or substantially all of the Partnership's assets, no
vote of the limited partners of the Partnership was required to approve this
sale.
19
<PAGE>
The pro forma effect of the sales of the Turnersville System and the
Central Illinois System on the results of the Partnership's operations for the
year ended December 31, 1997, assuming the transaction had occurred at the
beginning of the year, is presented in the following unaudited tabulation:
<TABLE>
<CAPTION>
For the Year Ended December 31, 1997
-----------------------------------------
Unaudited
Pro Forma Unaudited
As Reported Adjustments Pro Forma
------------ ------------- ------------
<S> <C> <C> <C>
Revenues $26,642,247 $ (3,368,286) $23,273,961
=========== ============ ===========
Operating Loss $(2,713,383) $ 706,983 $(2,006,400)
=========== ============ ===========
Income (Loss) Before Equity in Net Loss of
Cable Television Joint Venture $63,361,130 $(67,467,656) $(4,106,526)
=========== ============ ===========
</TABLE>
Cable Television System Sale - Venture
--------------------------------------
On March 31, 1998, the Venture sold the Broward System to an unaffiliated
third party for $140,000,000. The agreement provided that the contract sales
price of $140,000,000 would be reduced $2,472 for each of the Broward System's
equivalent basic subscribers less than 56,637 at closing. At March 31, 1998,
the Broward System had 55,346 equivalent basic subscribers, which reduced the
sales price by $3,191,352. When final closing adjustments were completed on
June 30, 1998, however, additional equivalent basic subscribers that were not
able to be counted as basic subscribers of the Broward System at the March 31,
1998 closing (because they were relatively recent subscribers at such date) were
able to be counted as equivalent basic subscribers of the Broward System. These
basic subscribers brought the equivalent basic subscriber count up to 56,637 and
the sales price accordingly was adjusted upward by $3,191,352 to $140,000,000.
From the proceeds of the Broward System sale at initial closing, the
Venture settled working capital adjustments, repaid the outstanding balance on
its credit facility, which totaled $39,902,968 at March 31, 1998 and paid a 2.5
percent brokerage fee of $3,420,216 to The Intercable Group for acting as a
broker in this transaction. The Venture then distributed the remaining net sale
proceeds, or $94,039,000, to the two constituent partnerships of the Venture in
proportion to their ownership interests in the Venture. Accordingly, the
Partnership received 27 percent of the net sale proceeds, or $25,484,569. In
April 1998, the Partnership distributed its net sale proceeds to its limited
partners of record as of March 31, 1998. Such distribution represented
approximately $159 for each $500 limited partnership interest, or $318 for each
$1,000 invested in the Partnership.
From the additional proceeds of the Broward System sale at final closing,
the Venture settled final working capital adjustments and paid a 2.5 percent
brokerage fee of $79,784 to The Intercable Group. The Venture then distributed
the remaining additional net sale proceeds, or $1,669,056, to the two
constituent partnerships of the Venture in proportion to their ownership
interests in the Venture. Accordingly, the Partnership received 27 percent of
the additional net sale proceeds, or $452,433. The Partnership retained the
$452,433 for working capital purposes. Because the distributions to the limited
partners from the sale of the Broward System, together with all prior
distributions, did not return to the limited partners 125 percent of the capital
initially contributed to the Partnership by the limited partners, the General
Partner did not receive any general partner distribution from the Broward
System's sale. Because the Broward System represented the only asset of the
Venture, the Venture was liquidated and dissolved in October 1998.
Pending Cable Television System Sales
-------------------------------------
The Partnership is in various stages of selling its three remaining cable
television systems. These transactions are discussed below in the order of
anticipated sale closing date.
Buffalo System
--------------
On November 6, 1998, the Partnership entered into an asset purchase
agreement, as amended, to sell the Buffalo System to an unaffiliated party for a
sales price of $26,605,000, subject to customary closing adjustments. Closing
of the sale is expected to occur in March 1999. The holders of a majority of the
limited partnership interests approved this sale in a vote conducted by the
General Partner in the first quarter of 1999. Upon the proposed sale of the
Buffalo System, based upon financial information as of December 31, 1998, the
Partnership will repay $13,302,500 outstanding on its revolving credit facility,
pay a brokerage fee to The Intercable Group totaling $665,125, representing 2.5
percent of the sales price, for acting as a broker in this transaction, settle
20
<PAGE>
working capital adjustments and deposit $1,200,000 into an indemnity escrow
account. The remaining net sale proceeds of approximately $10,856,000 will be
distributed to the Partnership's limited partners of record as of the closing
date of the sale of the Buffalo System. Based upon financial information as of
December 31, 1998, this distribution will give the Partnership's limited
partners an approximate return of $68 for each $500 limited partnership
interest, or $136 for each $1,000 invested in the Partnership. Because the
distribution to the limited partners from the sale of the Buffalo System,
together with all prior distributions, will not return to the limited partners
125 percent of the capital initially contributed to the Partnership by the
limited partners, the General Partner will not receive a general partner
distribution from the sale of the Buffalo System.
For a period of 90 days following the closing date, $1,200,000 of the sale
proceeds will remain in escrow as security for the Partnership's agreement to
indemnify the purchaser under the asset purchase agreement. The Partnership's
primary exposure, if any, will relate to the representations and warranties made
about the Buffalo System in the asset purchase agreement. Any amounts remaining
from this interest-bearing indemnity escrow account that are not claimed by the
purchaser at the end of the 90-day period, plus interest earned on the escrowed
funds, will be returned to the Partnership. From this amount, the Partnership
will pay any remaining liabilities and it will then distribute the balance to
the Partnership's partners. Because the distribution to the limited partners
from the sale of the Partnership's remaining systems, together with all prior
distributions, will return to the limited partners more than 125 percent of the
capital initially contributed to the Partnership by the limited partners, the
General Partner will receive a distribution from the escrowed proceeds. If the
entire $1,200,000 escrow amount is distributed to the partners, of which there
can be no assurance, the limited partners as a group would receive 75 percent
($900,000) and the General Partner would receive 25 percent ($300,000) of the
net escrow proceeds.
Naperville System
-----------------
On August 7, 1998, the Partnership signed an asset purchase agreement to
sell its Naperville System to an unaffiliated party for a sales price of
$23,000,000, subject to customary closing adjustments. Closing of the sale,
which is expected to occur in April 1999, has been approved by a majority of the
limited partners in a vote conducted by the General Partner in December 1998.
Upon the proposed sale of the Naperville System, based upon financial
information as of December 31, 1998, the Partnership will repay the balance
outstanding on its revolving credit facility, estimated to total $9,747,500, pay
a brokerage fee to The Intercable Group totaling $575,000, representing 2.5
percent of the sales price, for acting as a broker in this transaction, settle
working capital adjustments, and then deposit $696,000 into an indemnity escrow
account. The remaining net sale proceeds of approximately $11,039,000 will be
distributed to the Partnership's limited partners of record as of the closing
date of the sale of the Naperville System. Based upon financial information as
of December 31, 1998, this distribution will give the Partnership's limited
partners an approximate return of $69 for each $500 limited partnership
interest, or $138 for each $1,000 invested in the Partnership. Because the
distribution to the limited partners from the sale of the Naperville System and
the Buffalo System, together with all prior distributions, will not return to
the limited partners 125 percent of the capital initially contributed to the
Partnership by the limited partners, the General Partner will not receive a
general partner distribution from the sale of the Naperville System.
In connection with the planned sale of the Naperville System, on March 5,
1999 the Partnership entered into a signal and service agreement with the cable
company that will purchase the system. Pursuant to the terms of this agreement,
the purchaser will provide certain services to the Partnership relating to the
operations of the Naperville System until the closing of the sale, which is
expected to occur in mid-April 1999. The Partnership will pay the purchaser
fees and expense reimbursements related to this agreement and the Partnership
will also indemnify the purchaser in connection with the service it provides to
the Partnership. The management fees and expense reimbursements that the
Partnership otherwise would pay to the General Partner will be reduced to offset
the fees and expenses paid to the purchaser of the system pursuant to the signal
and service agreement.
The $696,000 of sale proceeds to be placed in the interest-bearing
indemnity escrow account will remain in escrow from the closing date until
November 15, 1999 as security for the Partnership's agreement to indemnify the
buyer under the asset purchase agreement. The Partnership's primary exposure, if
any, will relate to the representations and warranties to be made about the
Naperville System in the asset purchase agreement. Any amounts remaining from
this interest-bearing indemnity escrow account and not claimed by the buyer at
the end of the escrow period, plus interest earned on the escrowed funds, will
be returned to the Partnership. From this amount, the Partnership will pay any
remaining liabilities and it will then distribute the balance to the
Partnership's partners. Because the distribution to the limited partners from
the sale of the Partnership's remaining systems, together with all prior
distributions, will return to the limited partners more than 125 percent of the
capital initially contributed to the Partnership by the limited partners, the
General Partner will receive a distribution from the escrowed proceeds. If the
entire $696,000 escrow amount is distributed to the partners, of which there can
be no assurance, the limited partners as a group would receive 75 percent
($522,000) and the General Partner would receive 25 percent ($174,000) of the
net escrow proceeds.
21
<PAGE>
Calvert County System
---------------------
On June 29, 1998, the Partnership entered into a purchase and sale
agreement to sell the Calvert County System to a subsidiary of the General
Partner for a sales price of $39,388,667, subject to customary closing
adjustments. The purchase price was determined by the average of three separate
independent appraisals of the fair market value of the Calvert County System.
Closing of the sale, which is expected to occur in April 1999, will be subject
to several conditions, including necessary governmental and other third party
consents and the approval of the holders of a majority of the limited
partnership interests in a vote conducted by the General Partner in March and
April 1999. Upon the proposed sale of the Calvert County System, based upon
financial information as of December 31, 1998, the Partnership will pay certain
fees and expenses of the transaction and distribute the remaining net sale
proceeds of approximately $38,985,000 to the Partnership's partners of record as
of the closing date of the sale of the Calvert County System. The limited
partners, as a group, will receive $33,757,000, and the General Partner will
receive a $5,228,000 general partner distribution from the net sale proceeds;
thus, the limited partners would receive approximately $211 for each $500
limited partnership interest, or $422 for each $1,000 invested in the
Partnership from the sale of the Calvert County System.
The Partnership will continue in existence at least until any amounts
remaining from the indemnity escrow accounts have been distributed. The
Partnership will be liquidated and dissolved upon the final distribution of any
amounts remaining from the Buffalo System's and Naperville System's indemnity
escrow accounts. If any disputes with respect to indemnification arise, the
Partnership would not be dissolved until such disputes were resolved, which
could result in the Partnership continuing in existence beyond 1999.
Anticipated Total Distributions
-------------------------------
Taking into account all distributions from prior sales and the anticipated
distributions of the net proceeds from the proposed sales of the Partnership's
remaining systems (excluding escrowed proceeds) in 1999, the General Partner
expects that the limited partners of the Partnership will receive approximately
$723 for each $500 limited partnership interest, or $1,446 for each $1,000
invested in the Partnership.
Contributed Capital, Commissions and Syndication Costs
------------------------------------------------------
The capitalization of the Partnership is set forth in the accompanying
statements of partners' capital (deficit). No limited partner is obligated to
make any additional contribution to partnership capital.
Intercable purchased its interest in the Partnership by contributing $1,000
to partnership capital.
All profits and losses of the Partnership are allocated 99 percent to the
limited partners and 1 percent to Intercable, except for income or gain from the
sale or disposition of cable television properties, which will be allocated to
the partners based upon the formula set forth in the Partnership's agreement and
interest income earned prior to the first acquisition by the Partnership of a
cable television system, which was allocated 100 percent to the limited
partners.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Accounting Records
------------------
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting principles.
The Partnership's tax returns are also prepared on the accrual basis.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the General Partner's management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Investment in Cable Television Joint Venture
--------------------------------------------
In addition to its wholly owned systems, the Partnership owned a 27 percent
interest in the Venture through a capital contribution made in March 1988 of
$18,975,000. The Venture acquired the Broward System in March 1988. The
Venture reported net income of $83,036,505 in 1998, of which $22,599,271 was
allocated to the Partnership, and the Partnership also received distributions
totaling $25,937,002 from the Venture's sale of the Broward System. The Venture
incurred losses of $2,310,292 and $3,008,309 in 1997 and 1996, respectively, of
which $626,089 and $815,252, respectively, was allocated to the
22
<PAGE>
Partnership. The investment was accounted for on the equity method. The Venture
sold the Broward System on March 31, 1998 and the Venture was liquidated and
dissolved in October 1998.
Property, Plant and Equipment
-----------------------------
Depreciation of property, plant and equipment is provided primarily using
the straight-line method over the following estimated service lives:
Cable distribution systems 5 - 15 years
Equipment and tools 5 - 7 years
Office furniture and equipment 3 - 5 years
Buildings 30 years
Vehicles 3 - 4 years
Replacements, renewals and improvements are capitalized and maintenance and
repairs are charged to expense as incurred.
Property, plant and equipment and the corresponding accumulated
depreciation are written off as certain assets become fully depreciated and are
no longer in service.
Intangible Assets
-----------------
Costs assigned to intangible assets are being amortized using the straight-
line method over the following remaining estimated useful lives:
Franchise costs 1 - 11 years
Costs in excess of interests
in net assets purchased 29 years
Revenue Recognition
-------------------
Subscriber prepayments are initially deferred and recognized as revenue
when earned.
(3) TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
----------------------------------------------------
Management Fees, Distribution Ratios and Reimbursements
-------------------------------------------------------
Intercable 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 paid
to Intercable by the Partnership for the years ended December 31, 1998, 1997 and
1996 (exclusive of the Partnership's 27 percent interest in the Venture) were
$1,172,921, $1,332,112 and $2,390,436, respectively.
Any distributions made from cash flow (defined as cash receipts derived
from routine operations, less debt principal and interest payments and cash
expenses) are allocated 99 percent to the limited partners and 1 percent to
Intercable. Any distributions other than interest income on limited partner
subscriptions earned prior to the acquisition of the Partnership's first cable
television system or from cash flow, such as from the sale or refinancing of a
system or upon dissolution of the Partnership, will be made as follows: first,
to the limited partners in an amount which, together with all prior
distributions, will equal 125 percent of the amount initially contributed to the
Partnership capital by the limited partners; the balance, 75 percent to the
limited partners and 25 percent to Intercable.
The Partnership reimburses Intercable for certain allocated overhead and
administrative expenses. These expenses represent the salaries and related
benefits paid for corporate personnel, rent, data processing services and other
corporate related facilities costs. Such personnel provide engineering,
marketing, administrative, accounting, legal and investor relations services to
the Partnership. Such services, and their related costs, are necessary to the
operation of the Partnership and would have been incurred by the Partnership if
it was a stand alone entity. Allocations of personnel costs are based primarily
on actual time spent by employees of Intercable with respect to each partnership
managed. Remaining expenses are allocated based on the pro rata relationship of
the Partnership's revenues to the total revenues of all systems owned or managed
by Intercable and certain of its subsidiaries. Systems owned by Intercable and
all other systems owned by partnerships for which Intercable is the general
partner are also allocated a proportionate share of these expenses. Intercable
believes that the methodology used in allocating overhead and administrative
expenses is reasonable. Reimbursements made to Intercable by the Partnership
for allocated overhead and
23
<PAGE>
administrative expenses (exclusive of the Partnership's 27 percent interest in
the Venture) were $1,471,663, $1,526,293 and $3,162,115 in 1998, 1997 and 1996,
respectively.
The Partnership was charged interest during 1998 at an average interest
rate of 7.05 percent on the amounts due Intercable, which approximated
Intercable's weighted average cost of borrowing. Total interest charged to the
Partnership by Intercable was $3,728, $2,783 and $250,004 for the years ended
December 31, 1998, 1997 and 1996, respectively.
Payments to/from Affiliates for Programming Services
----------------------------------------------------
The Partnership receives or has received programming from Superaudio,
Knowledge TV, Inc., Jones Computer Network, Ltd., Great American Country, Inc.
and Product Information Network, all of which are affiliates of Intercable.
Payments to Superaudio totaled $39,430, $40,647 and $63,513 in 1998, 1997
and 1996, respectively. Payments to Knowledge TV, Inc. totaled $40,959, $46,123
and $71,736 in 1998, 1997 and 1996, respectively. Payments to Jones Computer
Network, Ltd., whose service was discontinued in April 1997, totaled $22,173 and
$61,374 in 1997 and 1996, respectively. Payments to Great American Country,
Inc. totaled $32,421, $28,314 and $35,100 in 1998, 1997 and 1996, respectively.
The Partnership receives a commission from Product Information Network
based on a percentage of advertising revenue and number of subscribers. Product
Information Network paid commissions to the Partnership totaling $63,159,
$87,685 and $90,304 in 1998, 1997 and 1996, respectively.
(4) PROPERTY, PLANT AND EQUIPMENT
-----------------------------
Property, plant and equipment as of December 31, 1998 and 1997, consisted
of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cable distribution systems $ 88,196,420 $ 81,803,602
Equipment and tools 2,620,566 2,572,960
Office furniture and equipment 832,850 743,694
Buildings 199,109 199,109
Vehicles 1,111,342 1,040,067
Land 71,925 71,925
------------ ------------
93,032,212 86,431,357
Less - accumulated depreciation (57,669,712) (50,186,043)
------------ ------------
$ 35,362,500 $ 36,245,314
============ ============
(5) DEBT
----
December 31,
---------------------------
Debt consisted of the following: 1998 1997
------------ ------------
Lending institutions-
Revolving credit and term loan $ 23,050,000 $ 22,300,000
Capital lease obligations 382,210 473,095
------------ ------------
$ 23,432,210 $ 22,773,095
============ ============
</TABLE>
The Partnership is a party to a $27,700,000 revolving credit facility, of
which $23,050,000 was outstanding at December 31, 1998, leaving $4,650,000
available for future borrowings. The revolving credit facility expires on
September 30, 2000, at which time the then-outstanding balance is payable in
full. The revolving credit facility requires that one-half of the proceeds from
the next Partnership system sale be used to reduce amounts outstanding and that
the credit facility be repaid in full on the second system sale. Based on the
current expected order of system sale closings, the Partnership will repay
approximately $13,302,500 upon the closing of the sale of the Buffalo System,
which is expected to occur in March 1999, and the maximum
24
<PAGE>
amount of borrowings available under the revolving credit facility will be
reduced to $14,397,500. The remaining balance will be repaid upon the sale of
the Naperville System, which is expected to occur in April 1999. Interest on the
revolving credit facility's outstanding balance is at the Partnership's option
of the London Interbank Offered Rate plus 1.125 percent, the Certificate of
Deposit Rate plus 1.25 percent or the Base Rate plus .125 percent. The effective
interest rates on amounts outstanding as of December 31, 1998 and 1997 were 6.38
percent and 6.79 percent, respectively. Disregarding the proposed cable
television system sales, installments due on debt principal for the five years
in the period ending December 31, 2003, respectively, are: $114,663,
$23,164,663, $114,663, $38,221 and $-0-.
At December 31, 1998 and 1997, the carrying amount of the Partnership's
long-term debt did not differ significantly from the estimated fair value of the
financial instruments. The fair value of the Partnership's long-term debt is
estimated based on the discounted amount of future debt service payments using
rates of borrowing for a liability of similar risk.
(6) INCOME TAXES
------------
Income taxes have not been recorded in the accompanying financial
statements because they accrue directly to the partners. The federal and state
income tax returns of the Partnership are prepared and filed by the General
Partner.
The Partnership's tax returns, the qualification of the Partnership as such
for tax purposes, and the amount of distributable partnership income or loss are
subject to examination by federal and state taxing authorities. If such
examinations result in changes with respect to the Partnership's qualification
as such, or in changes with respect to the Partnership's recorded income or
loss, the tax liability of the general and limited partners would likely be
changed accordingly.
Taxable income reported to the partners is different from that reported in
the statements of operations due to the difference in depreciation recognized
under generally accepted accounting principles and the expense allowed for tax
purposes under the Modified Accelerated Cost Recovery System (MACRS). There are
no other significant differences between taxable income and the net income
reported in the statements of operations.
(7) COMMITMENTS AND CONTINGENCIES
-----------------------------
The Partnership rents office and other facilities under various long-term
lease arrangements. Rent paid under such lease arrangements totaled $199,248,
$206,236 and $296,719, respectively, for the years ended December 31, 1998, 1997
and 1996. Minimum commitments under operating leases for each of the five years
in the period ending December 31, 2003 and thereafter are as follows:
1999 $129,498
2000 2,250
2001 1,000
2002 1,000
2003 1,000
Thereafter -
--------
$134,748
========
From the Partnership's sale of the Naperville System, $696,000 of sale
proceeds will be placed in an interest-bearing indemnity escrow account and will
remain in escrow from the closing date until November 15, 1999 as security for
the Partnership's agreement to indemnify the buyer under the asset purchase
agreement. The Partnership's primary exposure, if any, will relate to the
representations and warranties to be made about the Naperville System in the
asset purchase agreement. Any amounts remaining from this interest-bearing
indemnity escrow account and not claimed by the buyer at the end of the escrow
period, plus interest earned on the escrowed funds, will be returned to the
Partnership. From this amount, the Partnership will pay any remaining
liabilities and it will then distribute the balance to the Partnership's
partners.
From the Partnership's sale of the Buffalo System, $1,200,000 of the sale
proceeds will be placed in an interest-bearing indemnity escrow account for 90
days following the closing date as security for the Partnership's agreement to
indemnify the purchaser under the asset purchase agreement. The Partnership's
primary exposure, if any, will relate to the representations and warranties made
about the Buffalo System in the asset purchase agreement. Any amounts remaining
from this interest-bearing indemnity escrow account that are not claimed by the
purchaser at the end of the 90-day period, plus interest earned on the escrowed
funds, will be returned to the Partnership. From this amount, the Partnership
will pay any remaining liabilities and it will then distribute the balance to
the Partnership's partners.
25
<PAGE>
(8) SUPPLEMENTARY PROFIT AND LOSS INFORMATION
-----------------------------------------
Supplementary profit and loss information is presented below:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------
1998 1997 1996
---------- ---------- -----------
<S> <C> <C> <C>
Maintenance and repairs $ 286,265 $ 346,054 $ 633,182
========== ========== ===========
Taxes, other than income and payroll taxes $ 167,877 $ 158,832 $ 147,180
========== ========== ===========
Advertising $ 160,601 $ 420,665 $ 717,531
========== ========== ===========
Depreciation of property, plant and equipment $7,706,654 $7,626,491 $11,032,939
========== ========== ===========
Amortization of intangible assets $ 956,268 $2,485,144 $ 3,594,787
========== ========== ===========
</TABLE>
26
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
---------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
None.
PART III.
---------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------
The Partnership itself has no officers or directors. Certain
information concerning the directors and executive officers of the General
Partner is set forth below. Directors of the General Partner serve until the
next annual meeting of the General Partner and until their successors shall be
elected and qualified.
<TABLE>
<S> <C> <C>
Glenn R. Jones 69 Chairman of the Board and Chief Executive Officer
James B. O'Brien 49 President and Director
Ruth E. Warren 49 Group Vice President/Operations
Kevin P. Coyle 47 Group Vice President/Finance
Cynthia A. Winning 47 Group Vice President/Marketing
Elizabeth M. Steele 47 Vice President/General Counsel/Secretary
Wayne H. Davis 45 Vice President/Engineering
Larry W. Kaschinske 39 Vice President/Controller
Robert E. Cole 66 Director
William E. Frenzel 70 Director
Josef J. Fridman 53 Director
Donald L. Jacobs 60 Director
Robert Kearney 62 Director
James J. Krejci 57 Director
Raphael M. Solot 65 Director
Howard O. Thrall 51 Director
Siim A. Vanaselja 42 Director
Sanford Zisman 59 Director
Robert B. Zoellick 45 Director
</TABLE>
Mr. Glenn R. Jones has served as Chairman of the Board of Directors
and Chief Executive Officer of the General Partner since its formation in 1970,
and he was President from June 1984 until April 1988. Mr. Jones is the sole
shareholder, President and Chairman of the Board of Directors of Jones
International, Ltd. He is also Chairman of the Board of Directors of the
subsidiaries of the General Partner and of certain other affiliates of the
General Partner. Mr. Jones has been involved in the cable television business in
various capacities since 1961, and he is a member of the Board of Directors and
of the Executive Committee of the National Cable Television Association. In
addition, Mr. Jones is a member of the Board and Education Council of the
National Alliance of Business. Mr. Jones is also a founding member of the James
Madison Council of the Library of Congress. Mr. Jones has been the recipient of
several awards including: the Grand Tam Award in 1989, the highest award from
the Cable Television Administration and Marketing Society; the President's Award
from the Cable Television Public Affairs Association in recognition of Jones
International's educational efforts through Mind Extension University (now
Knowledge TV); the Donald G. McGannon Award for the advancement of minorities
and women in cable from the United Church of Christ Office of Communications;
the STAR Award from American Women in Radio and Television, Inc. for exhibition
of a commitment to the issues and concerns of women in television and radio; the
Cableforce 2000 Accolade awarded by Women in Cable in recognition of the General
Partner's innovative employee programs; the Most Outstanding Corporate
Individual Achievement Award from the International Distance Learning Conference
for his contributions to distance education; the Golden Plate Award from the
American Academy of Achievement for his advances in distance education; the Man
of the Year named
27
<PAGE>
by the Denver chapter of the Achievement Rewards for College Scientists; and in
1994 Mr. Jones was inducted into Broadcasting and Cable's Hall of Fame.
Mr. James B. O'Brien, the General Partner's President, joined the
General Partner in January 1982. Prior to being elected President and a director
of the General Partner in December 1989, Mr. O'Brien served as a division
manager, director of operations planning/assistant to the CEO, Fund Vice
President and Group Vice President/Operations. Mr. O'Brien was appointed to the
General Partner's Executive Committee in August 1993. As President, he is
responsible for the day-to-day operations of the cable television systems
managed and owned by the General Partner. Mr. O'Brien is a board member of Cable
Labs, Inc., the research arm of the U.S. cable television industry. He also
serves as Chairman of the Board of Directors of CTAM: The Marketing Society for
the Cable Telecommunications Industry and as an executive director of the Walter
Kaitz Foundation, a foundation that places people of ethnic minority groups in
positions with cable television systems, networks and vendor companies. Mr.
O'Brien's numerous industry recognitions include a CTAM Tami Award for marketing
excellence, a Women In Cable and Telecommunications Accolade Award recognizing
his leadership efforts on behalf of women in the telecommunications industry,
The President's Award for Leadership from the Illinois Cable and
Telecommunications Association and a Lifetime Achievement Award from The
National Association of Minorities in Communications. Additionally, Mr. O'Brien
is a member of The Society of UK Cable Pioneers.
Ms. Ruth E. Warren joined the General Partner in August 1980 and has
served in various operational capacities, including system marketing manager,
director of marketing, assistant division manager, regional vice president and
Fund Vice President, since then. Ms. Warren was elected Group Vice
President/Operations of the General Partner in September 1990. Ms. Warren is a
past president of Women in Cable & Telecommunications and past Chairman of the
Women in Cable Foundation. She serves as the Vice Chair of Five Points Media
Center Board and on the Corporate Advisory Board of Planned Parenthood of the
Rocky Mountains and the Advisory Board for Girls Count. In 1995, Ms. Warren
received the Corporate Business Woman of the Year Award from the Colorado
Women's Chamber of Commerce, and in 1998 Ms. Warren received the Vanguard Award
for Distinguished Leadership from the National Cable Television Association.
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. From 1978 to
1981 Mr. Coyle was employed by American Television and Communications (now Time
Warner Cable), and from 1974 to 1978 he was an associate at Haskins & Sells (now
Deloitte & Touche LLP).
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. 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. Wayne H. Davis joined the General Partner in August 1983 and has
served in various technical operations positions, including System Engineering
Manager, Fund Engineering Manager, Senior Director/Technical Operations, and
Vice President/Technical Operations since then. Mr. Davis was elected Vice
President/Engineering in June 1998. He is past Vice President of the Upstate New
York Chapter of the Society of Cable Telecommunications Engineers. Mr. Davis has
received certification from the Society of Cable Telecommunications Engineers,
Broadband Cable Telecommunications Engineering Program and the National Cable
Television Institute's Technology Program.
28
<PAGE>
Mr. Larry Kaschinske joined the General Partner in 1984 as a staff
accountant in the General Partner's former Wisconsin Division, was promoted to
Assistant Controller in 1990, named Controller in August 1994 and was elected
Vice President/Controller in June 1996.
Mr. Robert E. Cole was appointed a director of the General Partner in
March 1996. Mr. Cole is currently self-employed as a partner of First Variable
Insurance Marketing and is responsible for marketing to National Association of
Securities Dealers, Inc. firms in northern California, Oregon, Washington and
Alaska. From 1993 to 1995, Mr. Cole was the Director of Marketing for Lamar Life
Insurance Company; from 1992 to 1993, Mr. Cole was Senior Vice President of PMI
Inc., a third party lender serving the special needs of Corporate Owned Life
Insurance (COLI) and from 1988 to 1992, Mr. Cole was the principal and co-
founder of a specialty investment banking firm that provided services to finance
the ownership and growth of emerging companies, productive assets and real
property. Mr. Cole is a Certified Financial Planner and a former United States
Naval Aviator.
Mr. William E. Frenzel was appointed a director of the General
Partner in April 1995. Mr. Frenzel has been a Guest Scholar since 1991 with the
Brookings Institution, a research organization located in Washington D.C. Until
his retirement in January 1991, Mr. Frenzel served for twenty years in the
United States House of Representatives, representing the State of Minnesota,
where he was a member of the House Ways and Means Committee and its Trade
Subcommittee, the Congressional Representative to the General Agreement on
Tariffs and Trade (GATT), the Ranking Minority Member on the House Budget
Committee and a member of the National Economic Commission. Mr. Frenzel also
served in the Minnesota Legislature for eight years. He is Vice Chairman of the
Eurasia Foundation, a Board Member of the U.S.-Japan Foundation, the Close-Up
Foundation, Sit Mutual Funds, Logistics Management Institute and Chairman of the
Japan-America Society of Washington.
Mr. Josef J. Fridman was appointed a director of the General Partner
in February 1998. Mr. Fridman is currently Chief Legal Officer of Bell Canada
and of BCE Inc., Canada's largest telecommunications company. Mr. Fridman joined
Bell Canada, a wholly owned subsidiary of BCE Inc., in 1969, and has held
increasingly senior positions with Bell Canada and BCE Inc. since such time. Mr.
Fridman has held his current position since March 1998. Mr. Fridman's
directorships include Alouette Telecommunications Inc., Telesat Canada, TMI
Communications, Inc., Telebec Itee, BCI Telecom Holding Inc. and BCE Corporate
Services Inc. He is a member of the Quebec Bar Association, the Canadian,
American and International Bar Associations and the Lord Reading Law Society.
Mr. Fridman is a governor of the Quebec Bar Foundation.
Mr. Donald L. Jacobs was appointed a director of the General Partner
in April 1995. Mr. Jacobs is a retired executive officer of TRW. Prior to his
retirement, he was Vice President and Deputy Manager of the Space and Defense
Sector; prior to that appointment, he was the Vice President and General Manager
of the Defense Systems Group and prior to his appointment as Group General
Manager, he was President of ESL, Inc., a wholly owned subsidiary of TRW. During
his career, Mr. Jacobs served on several corporate, professional and civic
boards.
Mr. Robert Kearney was appointed a director and a member of the
Executive Committee of the General Partner in July 1997. Mr. Kearney is a
retired executive officer of Bell Canada. Prior to his retirement in December
1993, Mr. Kearney was the President and Chief Executive Officer of Bell Canada.
He served as Chairman of BCE Canadian Telecom Group in 1994 and as Deputy
Chairman of BCI Management Limited in 1995. He currently serves as a Director of
MPACT, a Canadian electronic commerce company. During his career, Mr. Kearney
served in a variety of capacities in the Canadian, American and International
Standards organizations, and he has served on several corporate, professional
and civic boards.
Mr. James J. Krejci is President and CEO of Comtect International,
Inc., a company in the specialized mobile radio services business, headquartered
in Denver, Colorado. Prior to joining Comtec International, Inc. in February
1998, Mr. Krejci was President and CEO of Imagelink Technologies, Inc.,
headquartered in Boulder, Colorado, from June 1996 to February 1998, and prior
to that, he was President of the International Division of
29
<PAGE>
International Gaming Technology, the world's largest gaming equipment
manufacturer, with headquarters in Reno, Nevada from May 1994 to February 1995.
Prior to joining IGT, Mr. Krejci was Group Vice President of Jones
International, Ltd. and was Group Vice President of the General Partner. He also
served as an officer of subsidiaries of Jones International, Ltd. until leaving
the General Partner in May 1994. Mr. Krejci has been a director of the General
Partner since August 1987.
Mr. Raphael M. Solot was appointed a director of the General Partner
in March 1996 and he was elected Vice Chairman of the Board of Directors in
November 1997. Mr. Solot is an attorney and has practiced law for 34 years with
an emphasis on franchise, corporate and partnership law and complex litigation.
Mr. Howard O. Thrall was appointed a director of the General Partner
in March 1996. Mr. Thrall had previously served as a Director of the General
Partner from December 1988 to December 1994. Mr. Thrall is a management and
international marketing consultant, having active assignments with First
National Net, Inc., LEP Technologies, Cheong Kang Associates (Korea), Aero
Investment Alliance, Inc. and Western Real Estate Partners, among others. From
September 1993 through July 1996, Mr. Thrall served as Vice President of Sales,
Asian Region, for World Airways, Inc. headquartered at the Washington Dulles
International Airport. From 1984 until August 1993, Mr. Thrall was with the
McDonnell Douglas Corporation, where he concluded as a Regional Vice President,
Commercial Marketing with the Douglas Aircraft Company subsidiary.
Mr. Siim A. Vanaselja was appointed a director of the General Partner
in August 1996. He is the Chief Financial Officer of BCI Telecom Holding Inc.
Mr. Vanaselja joined BCE Inc., Canada's largest telecommunications company, in
February 1994 as Assistant Vice-President, International Taxation. In June 1994,
he was appointed Assistant Vice-President and Director of Taxation, and in
February 1995, Mr. Vanaselja was appointed Vice-President, Taxation. On August
1, 1996, Mr. Vanaselja was appointed the Executive Vice President and Chief
Financial Officer of Bell Canada International Inc., a subsidiary of BCE Inc.
Prior to joining BCE Inc. and since August 1989, Mr. Vanaselja was a partner in
the Toronto office of KPMG Peat Marwick Thorne. Mr. Vanaselja has been a member
of the Institute of Chartered Accountants of Ontario since 1982 and is a member
of the Canadian Tax Foundation, the Tax Executives Institute and the
International Fiscal Association.
Mr. Sanford Zisman was appointed a director of the General Partner in
June 1996. Mr. Zisman is a principal in the law firm of Zisman & Ingraham, P.C.
of Denver, Colorado and he has practiced law for 33 years, specializing in the
areas of tax, business and estate planning and probate administration. Mr.
Zisman was a member of the Board of Directors of Saint Joseph Hospital, the
largest hospital in Colorado, from 1991 to 1997, serving at various times as
Chairman of the Board, Chairman of the Finance Committee and Chairman of the
Strategic Planning Committee. Since 1982, he has also served on the Board of
Directors of Maxim Series Fund, Inc., a subsidiary of Great-West Life Assurance
Company.
Mr. Robert B. Zoellick was appointed a director of the General
Partner in April 1995. Mr. Zoellick is the President and CEO of the Center for
Strategic and International Studies (CSIS), an independent, non-profit policy
institution with a staff of 180 people and a $17 million budget. He was the John
M. Olin Professor at the U.S. Naval Academy for the 1997-1998 term. From 1993
through 1997, he was Executive Vice President at Fannie Mae, a federally
chartered and stockholder-owned corporation that is the largest housing finance
investor in the United States. From August 1992 to January 1993, Mr. Zoellick
served as Deputy Chief of Staff of the White House and Assistant to the
President. From May 1991 to August 1992, Mr. Zoellick served concurrently as the
Under Secretary of State for Economic and Agricultural Affairs and as Counselor
of the Department of State, a post he assumed in March 1989. From 1985 to 1988,
Mr. Zoellick served at the Department of Treasury in a number of capacities,
including Counselor to the Secretary. Mr. Zoellick currently serves on the
boards of Alliance Capital and Said Holdings and the Advisory Council of Enron
Corp.
30
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
--------------------------------
The Partnership has no employees; however, various personnel are
required to operate the Systems. Such personnel are employed by the General
Partner and, pursuant to the terms of the limited partnership agreement of the
Partnership, the cost of such employment is charged by the General Partner to
the Partnership as a direct reimbursement item. See Item 13.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
----------------------------------------------------------------------
As of February 16, 1999, Madison/AG Partnership Value Partners II,
Madison/AG Partnership Value Partners III, ISA Partnership Liquidity Investors
and Cobble Hill Investments, L.P., all with an address of P.O. Box 7533, Incline
Village, Nevada 89452, own 8,073 units of limited partnership interests,
representing 5.046 percent of the limited partnership interests of the
Partnership. Most of the units owned by this group were acquired through tender
offers. (Item 5. Market for the Registrant's Common Stock and Related Security
Holder Matters.)
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------
The General Partner and its affiliates engage in certain transactions
with the Partnership and, until the disposition of the Broward System in March
1998, the General Partner and its affiliates engaged in certain transactions
with the Venture. The General Partner believes that the terms of such
transactions are generally as favorable as could be obtained 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 from unaffiliated parties.
Transactions with the General Partner
The General Partner manages the Partnership and, until the
disposition by the Venture in March 1998 of the Broward System, the General
Partner managed the Venture, and receives or received, respectively, a fee for
its services of 5 percent of the gross revenues of the Partnership or the
Venture, respectively, excluding revenues from the sale of cable television
systems or franchises.
The Partnership reimburses the General Partner for certain allocated
overhead and administrative expenses. These expenses represent the salaries and
benefits paid to corporate personnel, rent, data processing services and other
corporate facilities costs. Such personnel provide engineering, marketing,
administrative, accounting, legal and investor relations services. Allocations
of personnel costs are based primarily on actual time spent by employees of the
General Partner with respect to each partnership managed. Remaining expenses
are allocated based on the pro rata relationship of the Partnership's revenues
to the total revenues of all systems owned or managed by the General Partner and
certain of its subsidiaries. Systems owned by the General Partner and all other
systems owned by partnerships for which Jones Intercable, Inc. is the general
partner are also allocated a proportionate share of these expenses. Prior to
the sale of the Broward System in March 1998, the Venture also reimbursed the
General Partner for certain allocated overhead and administrative expenses.
The General Partner has from time to time advanced funds to the
Partnership and the Venture and charged interest on the balance payable. The
interest rate charged approximated the General Partner's weighted average cost
of borrowing.
Transactions with Affiliates
Jones International, Ltd. ("International"), a company owned by Glenn
R. Jones, and certain of its subsidiaries provide various services to the
Partnership, including affiliation agreements for the distribution of
31
<PAGE>
programming owned by affiliated companies on cable television systems owned by
the Partnership, as described below. Similar services were provided to the
Venture's Broward System before it was sold in March 1998.
Knowledge TV, Inc., a company jointly owned by Mr. Jones, affiliates
of International, the General Partner and BCI Telecom Holdings Inc., a principal
shareholder of the General Partner, operates the television network Knowledge
TV. Knowledge TV provides programming related to computers and technology;
business, careers and finance; health and wellness; and global culture and
languages. Knowledge TV, Inc. sells its programming to the Systems.
The Great American Country network provides country music video
programming to the Systems. This network is owned and operated by Great American
Country, Inc., a subsidiary of Jones International Networks, Ltd., an affiliate
of the General Partner.
Jones Galactic Radio, Inc. is a subsidiary of Jones International
Networks, Ltd., an affiliate of the General Partner. Superaudio, a joint venture
between Jones Galactic Radio, Inc. and an unaffiliated entity, provides audio
programming to the Systems.
The Product Information Network Venture (the "PIN Venture") is a
venture among a subsidiary of Jones International Networks, Ltd., an affiliate
of the General Partner, and two unaffiliated cable system operators. The PIN
Venture operates the Product Information Network ("PIN"), which is a 24-hour
network that airs long-form advertising generally known as "infomercials." The
PIN Venture generally makes incentive payments of approximately 60 percent of
its net advertising revenue to the cable systems that carry its programming. The
Partnership's and the Venture's systems carry PIN for all or part of each day.
Revenues received by the Partnership from the PIN Venture relating to the
Partnership's owned cable television systems totaled approximately $63,159 for
the year ended December 31, 1998. Revenues received by the Venture from the PIN
Venture relating to the Broward System totaled approximately $63,159 for the
year ended December 31, 1998.
The charges to the Partnership and to the Venture for related party
transactions were as follows for the periods indicated:
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------
Cable TV Fund 14-A 1998 1997 1996
- ------------------ ---- ---- ----
<S> <C> <C> <C>
Management fees $1,172,921 $1,332,112 $2,390,436
Allocation of expenses 1,471,663 1,526,293 3,162,115
Interest expense 3,728 2,783 250,004
Amount of advances outstanding 365,829 489,313 352,232
Highest amount of advances outstanding 365,829 489,313 3,453,993
Programming fees:
Knowledge TV, Inc. 40,959 46,123 71,736
Great American Country 32,421 28,314 35,100
Superaudio 39,430 40,647 63,513
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------
Cable TV Fund 14-A/B Venture 1998 1997 1996
- ---------------------------- ---- ---- ----
<S> <C> <C> <C>
Management fees $353,245 $1,375,237 $1,275,955
Allocation of expenses 407,405 1,601,646 1,705,142
Interest expense 0 2,678 122,224
Amount of advances outstanding 0 446,115 268,256
Highest amount of advances outstanding 0 446,115 2,206,959
Programming fees:
Knowledge TV, Inc. 11,627 41,668 37,113
Great American Country 10,916 79,127 47,590
Superaudio 9,968 37,459 34,421
</TABLE>
33
<PAGE>
PART IV.
-------
<TABLE>
<CAPTION>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------
<S> <C>
(a) 1. See index to financial statements for the list of financial statements and exhibits thereto
filed as part of this report.
3. The following exhibits are filed herewith.
4.1 Limited Partnership Agreement for Cable TV Fund 14-A, Ltd. (1)
4.2 Joint Venture Agreement of Cable TV Fund 14-A/B Venture, dated as of January 8, 1988, between
Cable TV Fund 14-A, Ltd. and Cable TV Fund 14-B, Ltd. (1)
10.1.1 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the County of Calvert, Maryland (Fund 14-A). (1)
10.1.2 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for St. Mary's County, Maryland (Fund 14-A). (3)
10.1.3 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for Southern Anne Arundel County, Maryland (Fund 14-A). (1)
10.1.4 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Albertville, Minnesota (Fund 14-A). (1)
10.1.5 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for City of Big Lake, Minnesota (Fund 14-A). (1)
10.1.6 Copy of Ordinance No. 1200 dated 3/5/90 relating to the City of Big Lake franchise (Fund
14-A). (5)
10.1.7 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Buffalo, Minnesota (Fund 14-A). (1)
10.1.8 Copy of Ordinance dated 4/16/90 relating to the Buffalo franchise (Fund 14-A). (3)
10.1.9 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Cokato, Minnesota (Fund 14-A). (1)
10.1.10 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Dassel, Minnesota (Fund 14-A). (1)
10.1.11 Copy of Ordinance No. 10.044 dated 1/16/90 relating to the Dassel franchise (Fund 14-A). (3)
10.1.12 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Dayton, Minnesota (Fund 14-A). (1)
10.1.13 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Delano, Minnesota (Fund 14-A). (1)
10.1.14 Copy of Ordinance No. 0-90-01 dated 3/20/90 relating to the Delano franchise (Fund 14-A). (3)
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.1.15 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Elk River, Minnesota (Fund 14-A). (1)
10.1.16 Copy of Ordinance No. 90-3 dated 2/26/90 relating to the City of Elk River franchise (Fund
14-A). (3)
10.1.17 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Hassan, Minnesota (Fund 14-A). (2)
10.1.18 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Maple Lake, Minnesota (Fund 14-A). (1)
10.1.19 Copy of Ordinance No. 38 dated 3/5/90 relating to the City of Maple Lake franchise (Fund
14-A). (3)
10.1.20 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Monticello, Minnesota (Fund 14-A). (1)
10.1.21 Copy of Ordinance No. 183 dated 2/26/90 relating to the City of Monticello franchise (Fund
14-A). (3)
10.1.22 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Monticello, Minnesota (Fund 14-A). (1)
10.1.23 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Township of Ostego, Minnesota (Fund 14-A). (1)
10.1.24 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Rockford, Minnesota (Fund 14-A). (1)
10.1.25 Resolutions 90-14 and 90-15 dated 4/10/90 relating to the City of Rockford franchise (Fund
14-A). (3)
10.1.26 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Town of Rockford, Minnesota (Fund 14-A). (2)
10.1.27 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of St. Michael, Minnesota (Fund 14-A). (1)
10.1.28 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the City of Watertown, Minnesota (Fund 14-A). (1)
10.2.1 Revolving Credit Agreement dated March 31, 1997 among Cable TV Fund 14-A, Ltd. and Royal Bank
of Canada. (5)
10.3.1 Asset Purchase Agreement dated as of October 3, 1997, among Comcast Corporation, Cable TV
Fund 14 A/B Venture, Jones International, Ltd., Jones Intercable, Inc., Cable TV Fund 14-A,
Ltd. and Cable TV Fund 14-B, Ltd. (4)
10.3.2 Asset Purchase Agreement dated as of August 7, 1998, between Cable TV Fund 14-A, Ltd. and TCI
Communications, Inc. (6)
10.3.3 Asset Purchase Agreement dated as of June 29, 1998, between Cable TV Fund 14-A, Ltd. and
Jones Communications of Maryland, Inc. (7)
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.3.4 Asset Purchase Agreement dated as of November 6, 1998, between Cable TV Fund 14-A, Ltd. and
Bresnan Communications Company, L.P. (8)
10.3.5 Signal and Service Agreement dated March 5, 1999 between Cable TV Fund 14-A, Ltd. and TCI
Illinois Holdings, L.P.
27 Financial Data Schedule
__________
(1) Incorporated by reference from Registrant's Report on Form 10-K for fiscal year ended
December 31, 1987 (Commission File Nos. 0-15378 and 0-16200)
(2) Incorporated by reference from Registrant's Report on Form 10-K for fiscal year ended
December 31, 1990 (Commission File Nos. 0-15378 and 0-16200)
(3) Incorporated by reference from Registrant's Report on Form 10-K for fiscal year ended
December 31, 1992 (Commission File No. 15378).
(4) Incorporated by reference from Registrant's Current Report on Form 8-K dated October 15, 1997
(Commission File No. 15378).
(5) Incorporated by reference from Registrant's Report on Form 10-K for fiscal year ended
December 31, 1997 (Commission File No. 15378).
(6) Incorporated by reference from Registrant's Proxy Statement on Schedule 14A filed on October
16, 1998 (Commission File No. 15378).
(7) Incorporated by reference from Registrant's Report on Form 8-K dated July 1, 1998 (Commission
File No. 15378).
(8) Incorporated by reference from Registrant's Proxy Statement on Schedule 14A filed on January
26, 1999 (Commission File No. 15378).
(b) Reports on Form 8-K
-------------------
None.
</TABLE>
36
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CABLE TV FUND 14-A, LTD.
a Colorado limited partnership
By: Jones Intercable, Inc.
By: /s/ Glenn R. Jones
------------------
Glenn R. Jones
Chairman of the Board and Chief
Dated: March 24, 1999 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 24, 1999 (Principal Executive Officer)
By: /s/ Kevin P. Coyle
------------------
Kevin P. Coyle
Group Vice President/Finance
Dated: March 24, 1999 (Principal Financial Officer)
By: /s/ Larry Kaschinske
--------------------
Larry Kaschinske
Vice President/Controller
Dated: March 24, 1999 (Principal Accounting Officer)
By: /s/ James B. O'Brien
--------------------
James B. O'Brien
Dated: March 24, 1999 President and Director
By: /s/ Robert E. Cole
------------------
Robert E. Cole
Dated: March 24, 1999 Director
By: /s/ William E. Frenzel
----------------------
William E. Frenzel
Dated: March 24, 1999 Director
37
<PAGE>
By: /s/ Josef J. Fridman
--------------------
Josef J. Fridman
Dated: March 24, 1999 Director
By:
--------------------
Donald L. Jacobs
Dated: March 24, 1999 Director
By: /s/ Robert Kearney
------------------
Robert Kearney
Dated: March 24, 1999 Director
By: /s/ James J. Krejci
-------------------
James J. Krejci
Dated: March 24, 1999 Director
By: /s/ Raphael M. Solot
--------------------
Raphael M. Solot
Dated: March 24, 1999 Director
By: /s/ Howard O. Thrall
--------------------
Howard O. Thrall
Dated: March 24, 1999 Director
By: /s/ Siim A. Vanaselja
---------------------
Siim A. Vanaselja
Dated: March 24, 1999 Director
By: /s/ Sanford Zisman
------------------
Sanford Zisman
Dated: March 24, 1999 Director
By: /s/ Robert B. Zoellick
----------------------
Robert B. Zoellick
Dated: March 24, 1999 Director
38
<PAGE>
Exhibit 10.3.5
SIGNAL AND SERVICE AGREEMENT
THIS SIGNAL AND SERVICE AGREEMENT ("Agreement") is dated this 5th day of
March, 1999, by and between Cable TV Fund 14-A, Ltd., a Colorado limited
partnership ("Fund 14-A") and TCI Illinois Holdings, L.P., an Arizona limited
partnership ("TCI").
Recitals
A. Fund 14-A owns and operates the cable television system serving the
City of Naperville and portions of Will and DuPage County, all in the State of
Illinois (the "Naperville System").
B. TCI owns and operates the cable television system serving the
Villages of Montgomery, North Aurora, Oswego and Yorkville, the Cities of
Aurora, Plano and Sandwich, and the Counties of Kane and Kendall, all in the
State of Illinois (the "Aurora System").
C. Fund 14-A desires to utilize certain programming signals received by,
and transmitted from, the Oswego headend facility located in the Aurora System
for distribution on the Naperville System. In addition, Fund 14-A desires TCI
to perform, and TCI is willing to provide, certain services related to the
operation of the Naperville System.
Agreement
In consideration of the above recitals and the mutual agreements stated in
this Agreement, the parties agree as follows:
Section 1 Definitions
1.1 Affiliate. An "Affiliate" with respect to any party shall mean any
---------
person or entity controlling, controlled by or under common control with such
party, with "control" for such purpose meaning the possession, directly, or
indirectly, of the power to direct or cause the direction of the management and
policies of such party, whether through ownership of voting securities or voting
interests, by contract or otherwise.
1.2 Allocated Percentage. The "Allocated Percentage" with respect to any
--------------------
Employee shall mean the percentage of such Employee's salary allocated by TCI to
the Naperville System in accordance with Intercable's past practice of managing
the Jones Chicago Systems and as reflected on Schedule A attached hereto.
1.3 Intercable. "Intercable" shall mean Jones Intercable, Inc.
----------
<PAGE>
1.4 Jones Chicago Systems. The "Jones Chicago Systems" shall collectively
---------------------
mean the Naperville System and the following cable television systems located in
the Chicago metropolitan area and previously managed by Intercable: (a) the Lake
Zurich and South Suburb Systems; (b) the Wheaton System; (c) the Aurora System
and (d) the Lake County and Orland Park Systems.
1.5 Lake County and Orland Park Systems. The "Lake County and Orland
-----------------------------------
Park Systems" shall mean the cable television systems serving the Villages of
Orland Park, Grayslake, Libertyville, Mundelein, Wauconda and Park Forest and
the Counties of Lake, Will and Cook, all in the State of Illinois.
1.6 Lake Zurich and South Suburb Systems. The "Lake Zurich and South
------------------------------------
Suburb Systems" shall mean and refer to the cable television systems serving the
Villages of Crete, Flossmoor, Hazel Crest, Indian Head Park, La Grange, La
Grange Park, Lansing, Matteson, Olympia Fields, Richton Park, Riverside,
Thornton, University Park, Western Springs, Barrington, Deer Park, Hawthorn
Woods, Hoffman Estates, Indian Creek, Kildeer, Lake Barrington, Lake Zurich,
Long Grove, South Elgin, and Vernon Hills, the City of Elgin and the Counties of
Kane, Lake, Will and Cook, all in the State of Illinois.
1.7 Wheaton System. The "Wheaton System" shall mean the cable television
--------------
system serving the Villages of Addison, Glen Ellyn, and Winfield, the Cities of
Geneva, St. Charles, Warrenville, West Chicago, and Wheaton and the Counties of
Dupage and Kane, all in the State of Illinois.
Section 2. Signal
2.1 Programming Signals and Allocation of Oswego Headend Costs. During
----------------------------------------------------------
the term of this Agreement, TCI shall provide to Fund 14-A for distribution on
the Naperville System the programming signals set forth on Schedule B attached
hereto (the "Programming Signals"). TCI acknowledges and agrees that TCI shall
not add to or delete the Programming Signals distributed to the Naperville
System during the term of this Agreement without the prior written consent of
Fund 14-A, which consent shall not be unreasonably withheld. The Programming
Signals shall be transmitted to the Naperville System from the Oswego headend
facility located in the Aurora System. Except with respect to programming costs
as set forth in Section 2.2 below, all costs associated with the normal
-----------
maintenance and repair of the Oswego headend (other than rebuild or upgrade
expenditures or those costs that would be capitalized under generally accepted
accounting principles) will be allocated among TCI and Fund 14-A in accordance
with Intercable's past practices of managing the Jones Chicago Systems.
2.2 Programming Agreements and Fees. Fund 14-A shall arrange for all
-------------------------------
programming agreements necessary to distribute the Programming Signals on the
Naperville System and shall be responsible for the payment of all programming
fees associated therewith.
2
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Section 3. Services and Facilities
3.1 General. Subject to terms and provisions of this Agreement, TCI
-------
shall use commercially reasonable efforts to provide the services outlined in
this Agreement as well as such services as may, from time to time, be
appropriate or reasonably required for the proper and efficient operation of the
Naperville System in accordance with sound business principles and practices
customary in the cable television industry (the "Services"). Notwithstanding
anything in this Agreement to the contrary, TCI acknowledges that TCI shall be
subject to the direction and control of Fund 14-A with respect to the operation
of Naperville System and the Services provided hereunder. Fund 14-A will have
the right to review all policies and procedures employed by TCI in providing the
Services to the Naperville System. TCI will perform all of its obligations under
this Agreement on behalf of Fund 14-A and will act for all purposes in
performing its obligations under this Agreement as the agent of Fund 14-A. Fund
14-A and TCI acknowledge and agree that during the term of this Agreement, TCI
will provide Services set forth herein using the Intercable name.
Notwithstanding any provision of this Agreement to the contrary, during the term
of this Agreement, TCI shall use commercially reasonable efforts to refrain from
taking any action that would constitute, and TCI shall use commercially
reasonable efforts not to fail to take any action the effect of which failure
would cause: (a) a violation of any law applicable to the Naperville System; (b)
a breach of any cable franchise, license, or material contract applicable to the
Naperville System; or (c) a violation of any rule or regulation of the Federal
Communications Commission ("FCC"). Subject to Fund 14-A's right to direct TCI to
cure, at Fund 14-A's expense, any of the matters referred to subparagraphs (a)-
(c) above, TCI will be deemed to have satisfied its obligations to provide
Services under this Agreement if, and to the extent that, the Services provided
by TCI under this Agreement are consistent with, and reasonably comparable to,
Intercable's past practices of managing the Naperville System.
3.2 Services to be Provided. The Services to be provided by TCI to the
-----------------------
Naperville System shall include, but shall not be limited to, the following:
(a) the formulation and supervision of all advertising, marketing
and sales programs but excluding the formulation or creation of any
marketing materials;
(b) the maintenance of the cable plant of the Naperville System
in its condition as of the date of this Agreement, reasonable wear and tear
excepted;
(c) the supervision of all plant installation, maintenance and
repair, including, without limitation, the selection and appointment of all
subcontractors, equipment suppliers and vendors; provided, however, that
TCI shall not utilize or retain subcontractors other than those described
on Schedule C attached hereto without the prior consent of Fund 14-A;
3
<PAGE>
(d) the supervision and maintenance of all collections relating
to the Naperville Systems in accordance with Intercable's past practices;
(e) the acquisition of materials and supplies, if any, necessary
for the day-to-day operations of the Naperville System;
(f) providing to Fund 14-A converter repair services on behalf of
the Naperville System;
(g) subject to Section 3.4, providing to Fund 14-A any reports
-----------
and information, financial or otherwise, regarding the Naperville System
reasonably requested by Fund 14-A; provided, however, that such reports and
information are reasonably practical for TCI to generate and provide;
(h) providing customer service support during regular business
hours and after hours telephone support;
(i) supervising capital projects on behalf of the Naperville
System so that the same are consistent with the capital budget attached
hereto as Schedule D;
(j) providing any public, educational, governmental, local
origination, or leased access services required under any of the Franchises
of the System; and
(k) the taking of any other action in connection with the
development, operation and maintenance of the Naperville System in the
ordinary course of business which is commercially reasonable, appropriate
and necessary or which may be requested by the local operations manager of
the Naperville System.
3.3 Services Requiring Consent of Fund 14-A. TCI shall not, without the
---------------------------------------
prior authorization of Fund 14-A:
(a) enter into any agreement or contract on behalf of Fund 14-A
with any third party, including, but not limited to, franchise agreements
or any amendments, extensions or renewals thereof, license agreements, pole
attachment agreements, leases, easements, rights-of-way, or bulk service
agreements;
(b) implement or request any rate increases or decreases with
respect to the services provided by the Naperville System;
(c) sell, lease, exchange, trade, encumber or otherwise dispose
of the assets of the Naperville System;
(d) engage on behalf of Fund 14-A, attorneys, accountants,
engineers,
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consultants or other qualified professionals;
(e) borrow from banks or other lending institutions on behalf of
Fund 14-A for any purpose; or
(f) cause Fund 14-A to institute, defend, or settle litigation
involving Fund 14-A or the Naperville System or apply for injunctive relief
or give releases and discharges with respect to any of the foregoing, and
any matters incident thereto.
3.4 Exclusions from Services. The definition of Services shall expressly
------------------------
exclude, and TCI shall not be entitled or required to:
(a) subject to Section 2, arrange for, or provide, programming
---------
agreements to the Naperville System or arrange for the payment of
programming fees;
(b) cause Fund 14-A to maintain its franchises, except in the
ordinary course of business;
(c) subject to Section 3.2(i) make capital expenditures on
--------------
behalf of Fund 14-A other than from funds provided by Fund 14-A and, in any
case, at the direction of Fund 14-A;
(d) enter into any agreement on behalf of Fund 14-A;
(e) prepare copyright filings on behalf of Fund 14-A;
(f) prepare or file income tax returns with respect to the
Naperville System on behalf of Fund 14-A;
(g) prepare or maintain accounting, bookkeeping or other
financial systems or records relating to the Naperville System;
(h) except as may otherwise be provided herein, prepare or file
any applications, reports, statements or other documents with appropriate
national, federal, state and local regulatory agencies or departments
(including but not limited to the Federal Communications Commission,
Federal Aviation Administration, Equal Employment Opportunity Commission,
and national, federal and state agencies having similar jurisdictions),
including, but not limited to, federal, state or local tax returns with
respect to the operation of the Naperville Systems; or
(i) arrange for or provide subscriber billing services to the
Naperville System during such time as Intercable is providing transitional
billing services to
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TCI or any of its Affiliates;
3.5 Facilities. In addition to the Services to be provided above, TCI
----------
shall allow Fund 14-A and the Naperville System to utilize warehouse space
located in the Oswego office of the Aurora System for the benefit of the
Naperville System. In addition, TCI shall allow Fund 14-A and the Naperville
System to utilize the local origination studio of the Wheaton System for the
benefit of the Naperville System. All costs associated with Fund 14-A's use of
the above-referenced facilities will be allocated among TCI, TCI's Affiliates
and Fund 14-A in accordance with Intercable's past practices of managing the
Jones Chicago Systems.
3.6 TCI Employees. All TCI employees utilized by TCI in its performance
-------------
of the Services shall hereinafter be referred to as "Employees." As part of the
Services to be provided by TCI to Fund 14-A hereunder, TCI agrees to use
commercially reasonable efforts to make available to Fund 14-A the services of
those individuals identified on Schedule A attached hereto. Fund 14-A and TCI
acknowledge that all Employees utilized by TCI to perform Services hereunder
shall be deemed employees of TCI whose salaries and benefits (as determined by
TCI) shall be paid and administered by TCI, subject to Fund 14-A's reimbursement
obligation as provided in Section 4.2 hereof,
-----------
3.7 Payment of Expenses. Notwithstanding anything to the contrary
-------------------
contained herein, Fund 14-A shall be responsible for the payment of all costs,
expenses and liabilities of any nature whatsoever in connection with the
development and operation of the Naperville System. Fund 14-A shall be the
responsible party under all agreements relating to the Naperville System.
3.8 Compliance with Agreements. Notwithstanding anything to the contrary
--------------------------
contained herein, Fund 14-A shall continue to be the franchisee, licensee and
permittee, as applicable, of all agreements of any nature whatsoever issued by
any governmental authority or other third party in connection with the operation
of the Naperville System and shall retain ultimate control over the Naperville
System. Fund 14-A shall also retain ultimate responsibility for compliance with
all applicable laws and the terms of any applicable authorizations. Fund 14-A
shall be responsible for notifying any franchising authorities of the terms and
provisions of this Agreement if required by any franchise.
3.9 Power of Attorney. Fund 14-A hereby grants to TCI power of attorney
-----------------
to endorse all checks, deposits and other payments made to Fund 14-A or
Intercable to the extent they relate to the Naperville System. Such power of
attorney is coupled with an interest and shall be irrevocable for the term
hereof.
Section 4. Compensation and Expenses
4.1 Service Fee. As compensation to TCI for the performance of its
-----------
obligations hereunder, Fund 14-A shall pay to TCI a monthly service fee (the
"Service Fee") equal to three percent (3%) of the total "Gross Monthly Operating
Revenues of the
6
<PAGE>
Naperville System." For the purposes of this Agreement "Gross Monthly Operating
Revenues of the Naperville System" shall mean all revenues arising out of, or in
connection with, the operation of the Naperville System including, but not
limited to, subscriber billings, advertising billings, and home shopping royalty
payments, but exclusive of all interest, dividends, royalties and other similar
types of investment income that do not arise from the operation of the
Naperville System in the ordinary course.
4.2 TCI Expense Reimbursement. In addition to the Service Fee described
-------------------------
above, Fund 14-A shall reimburse TCI for: (a) all Employee Expenses, as
hereinafter defined; (b) all direct, out-of-pocket expenditures incurred by TCI
arising from, or related to, the performance of TCI's Services hereunder,
including, but not limited to, reasonable labor attorney's fees provided that
the same are allocated to the Naperville System in accordance with Intercable's
past practices of managing the Jones Chicago Systems; (c) the cost, on a FIFO
basis (including freight, carrying costs and taxes), for any and all parts or
equipment used by TCI in the performance of the Services that are obtained
either from TCI's existing inventory or from TCI Affiliates; (d) the allocated
costs, from TCI's centralized warehouse, its converter repair facility, and its
after-hours phone center, including, but not limited to, all Employee Expenses,
as determined in accordance with Intercable's past practices of managing the
Jones Chicago Systems; (e) expenses incurred by TCI's advertising sales
department, including all Employee Expenses, on behalf of the Naperville System
as determined in accordance with Intercable's past practices of managing the
Jones Chicago Systems; (f) costs and expenses for which TCI is entitled to be
indemnified hereunder; (g) any other services that would ordinarily be direct
expenditures of Fund 14-A in connection with the Naperville System; and (h) any
expenses for which TCI is entitled to be reimbursed under Sections 2.1, 3.5 or
-----------------
any other provision of this Agreement (collectively, "Reimbursable Expenses").
For the purposes of this Agreement, Employee Expenses shall mean and include:
(i) the base salary, overtime entitlement, commission and/or bonus payable to
each Employee multiplied by the Allocated Percentage for such Employee ("Total
Employee Compensation"); (ii) an amount equal to twenty-eight percent (28%) of
each Employee's Total Compensation, which amount represents TCI's good faith
estimate of the cost to TCI of its normal and customary benefits to an Employee,
and TCI's portion of F.I.C.A., unemployment and workers compensation insurance,
and other statutory benefits and taxes; (iii) all costs (including judgments,
settlements, awards and attorney's fees) incurred by TCI due to injuries
sustained by an Employee during the term of this Agreement while performing
Services for Fund 14-A (including workers compensation claims); (iv) all costs
(including judgments, settlements, awards and attorney's fees) incurred by TCI
as a result of any claim or lawsuit brought by an Employee against Fund 14-A or
TCI, including claims of discrimination or wrongful discharge, arising out of
the performance of Services hereunder during the term hereof; and (v) all costs
(including judgments, settlements, awards and attorney's fees) incurred by TCI
in connection with any third-party claim against TCI or Fund 14-A for damages or
injuries arising from any act or omission of an Employee while such Employee is
performing Services during the term of this Agreement. Reimbursable Expenses
shall not include any overhead of TCI's corporate or regional offices including,
but not limited to, salaries, bonuses, health,
7
<PAGE>
welfare, retirement and other benefits and overhead expenses of its corporate or
regional office management, development, internal accounting and finance
management personnel, or any labor attorney's fees incurred by TCI, or any
Affiliate thereof, that arise from, or are related to, TCI's election, or any
TCI Affiliate's election, to retain or release previous Intercable employees in
connection with their acquisition of the Jones Chicago Systems.
4.3 Fund 14-A/Intercable Expense Reimbursement. To the extent that the
------------------------------------------
Naperville local operations manager for Fund 14-A performs services for the
benefit of TCI, or any TCI Affiliate, with respect to any of the Jones Chicago
Systems, any employee expenses associated with such employee (as calculated in
accordance with the provisions of Section 4.2 above) will be allocated among TCI
-----------
and Fund 14-A in accordance with Intercable's past practices of managing the
Jones Chicago Systems. Any such employee expenses will be offset against the
amount of Reimbursable Expenses payable by Fund 14-A to TCI hereunder.
4.4 Payment of Service Fee and Reimbursable Expenses. On or before the
------------------------------------------------
20th day of each month, Fund 14-A shall submit to TCI a statement which
indicates the Gross Monthly Operating Revenues of the Naperville System (the
"GMOR Statement"). All invoices, receipts and other supporting information
relating to the GMOR Statement shall be available for TCI's review upon TCI's
request. On or before the 30th day of each month, TCI shall submit to Fund 14-A
a reconciliation statement which indicates (a) all Reimbursable Expenses payable
to TCI for the previous month together with a copy of the general ledger
detailing such amounts, and (b) the amount of the Service Fee payable to TCI for
the previous month based upon the GMOR Statement provided by Fund 14-A (the
"Reconciliation Statement"). The Reconciliation Statement and the general
ledger detailing the amounts set forth thereon shall be prepared on a cash
basis. All invoices, receipts and other supporting information relating to the
Reconciliation Statement shall be available for Fund 14-A's review upon Fund 14-
A's request. Within 10 days of Fund 14-A's receipt of the Reconciliation
Statement, Fund 14-A shall pay to TCI the amount set forth in the Reconciliation
Statement subject to Fund 14-A's right to review and object to the same.
Section 5. Term
The term of this Agreement shall commence as of 12:00 a.m. C.S.T, March 6,
1999, and, unless earlier terminated, shall automatically terminate upon the
earliest of: (a) the date upon which an Affiliate of TCI acquires the assets of
the Naperville System from Fund 14-A; or (b) July 31, 1999; provided, however,
that Fund 14-A will have the one time right to extend the term of Section 2 of
this Agreement until November 30, 1999, in the event that Fund 14-A has not
conveyed the Naperville System to TCI or an Affiliate thereof by July 31, 1999.
In the event that Fund 14-A elects to exercise this right, Fund 14-A shall
provide written notice of its election to do so no later than June 30, 1999.
8
<PAGE>
Section 6. The Chicago Cable Interconnect Agreement
During the term of this Agreement, the Naperville Systems' Chicago Cable
Interconnect ("CCI") revenues shall continue to be included in the Naperville
Systems' portion of the CCI revenues, and all advertising revenues, including
CCI revenues, and related advertising expenses, will be allocated to the
Naperville System as a percentage of revenue in accordance with Intercable's
past practices of managing the Jones Chicago Systems. On or before the 20th day
of each month, TCI shall submit to Fund 14-A a report detailing all advertising
revenues, including CCI revenues, and related advertising expenses, allocated to
the Naperville System for the previous month.
Section 7. Indemnification
7.1 Indemnification by Fund 14-A. Fund 14-A will indemnify and hold
----------------------------
harmless TCI, its Affiliates, and all direct and indirect shareholders,
directors, officers, employees, members and agents of TCI and its Affiliates
(individually or collectively a "TCI Indemnitee") from and against any and all
claims, demands, costs, damages, expenses, losses, liabilities, judgments,
fines, settlements and other amounts of any nature (including, but not limited
to reasonable attorney, accountant and expert fees) (collectively, "Damages")
arising from or related to TCI's performance of its obligations under this
Agreement or arising out of, or related to the Naperville System; provided,
however, that with respect to any matter for which indemnification is sought:
(i) the TCI Indemnitee acted in good faith and in a manner it reasonably
believed to be in the best interest of Fund 14-A and, with respect to any
criminal proceeding, had no reasonable cause to believe its conduct was
unlawful, and (ii) the TCI Indemnitee's conduct for which indemnification is
sought does not constitute gross negligence, willful misconduct or a willful
breach of this Agreement.
7.2 Indemnification by TCI. Except as may otherwise be provided herein,
----------------------
TCI will indemnify and hold harmless Fund 14-A, Intercable and their Affiliates,
and all partners, shareholders, directors, officers, employees, members and
agents of Fund 14-A and Intercable and their Affiliates (individually or
collectively, a "Fund 14-A Indemnitee") from and against any and all Damages
incurred by any Fund 14-A Indemnitee which arise from, or are related to, TCI's
gross negligence or willful misconduct in the performance of its duties
hereunder or as a result of TCI's willful breach of this Agreement.
7.3 Right to Indemnification Not Exclusive Remedy - Survival. Except as
--------------------------------------------------------
otherwise provided herein, the indemnification rights contained in this Section
will be cumulative of, and in addition to, any and all other rights, remedies
and recourse to which any TCI Indemnitee or Fund 14-A Indemnitee may have under
this Agreement, at law or in equity. The indemnification rights provided in
this Section will inure to the benefit of the heirs, successors, assigns and
administrators of each TCI Indemnitee and Fund 14-A Indemnitee. TCI's and Fund
14-A's indemnification obligations hereunder shall survive the termination of
this Agreement.
9
<PAGE>
Section 8. Limitations on Liability
Notwithstanding anything to the contrary contained herein, or pursuant to
any legal requirement to the contrary, neither TCI (nor any of its direct or
indirect partners, shareholders, directors, officers, Affiliates, employees,
members or agents) shall have any liability, express or implied, for any action
taken or omitted to be taken by TCI, or for any failure or delay in performing
or exercising any obligation, duty, right, power or authority possessed by TCI
under this Agreement, or any other document related hereto, except for actual
Damages, if any, suffered by Fund 14-A that are proximately caused either by
TCI's gross negligence, willful misconduct or willful breach of this Agreement.
Section 9. Insurance
9.1 Insurance to be Maintained by Fund 14-A. At Fund 14-A's expense, Fund
---------------------------------------
14-A shall procure and maintain in full force and effect during the term of this
Agreement insurance coverage of the types and in the amounts set forth below for
the Naperville System (unless greater amounts are required by law, in which case
Fund 14-A shall maintain such greater amounts)
(a) Commercial General Liability Insurance, including coverage for
contractual liability, bodily injury, including wrongful death, and
property damage, with limits of not less than $1,000,000 combined single
limit per occurrence;
(b) Property Damage Insurance, including coverage for buildings,
equipment and cable plant, plus business interruption loss, with a combined
limit of not less than $20,000,000 per loss, per occurrence; and
(c) Comprehensive Automobile Liability Insurance, including all owned,
non-owned, or hired vehicles, with limits of not less than $1,000,000
combined single limit per accident.
9.2 Insurance to be Maintained by TCI. TCI shall procure and maintain in
---------------------------------
full force and effect during the term of this Agreement insurance coverage of
the following types and in the amounts set forth below for the Naperville System
(unless greater amounts are required by law, in which case TCI shall maintain
such greater amounts):
(a) Workmen's Compensation covering all TCI employees involved with the
performance of the Services, with policy amounts and coverage in compliance
with the laws of the jurisdiction in which the Services will be performed
and consistent with Intercable's past practices in managing the Jones
Chicago Systems, and Employer's Liability in limits not less than
$1,000,000 each accident, $1,000,000 disease - each employee and $1,000,000
disease - policy limit.
10
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9.3 Requirements of Insurance Policies. TCI shall provide Fund 14-A, and
----------------------------------
Fund 14-A shall provide TCI, with certificates of insurance (or if certificates
of insurance are not available, such other evidence of insurance as may be
reasonably requested) evidencing the amounts and types of insurance to be
covered by TCI and Fund 14-A, respectively, under this Agreement. TCI shall be
named as an additional insured on all of Fund 14-A's insurance policies related
to the Naperville System. To the extent possible, Fund 14-A and Intercable
shall be named as an additional insured on all of TCI's insurance policies
related to the Naperville System. Fund 14-A's insurance shall be the primary
coverage on any and all claims arising from or related to the terms and
provisions of this Agreement other than worker's compensation or other employee
claims. TCI's worker's compensation and employee liability insurance shall be
the primary coverage with respect to all employee claims covered thereby. All
policies evidencing the insurance coverages required hereunder shall not be
materially changed, modified to reduce coverage, or canceled unless agreed to by
the other party.
9.4 Waiver of Subrogation. Fund 14-A and TCI each hereby release and
---------------------
relieve the other, and waive the entire right of recovery against the other, for
loss or damage arising out of or related to the perils insured under the
provisions of this Section and which arise from or are related to the Services
provided under this Agreement whether due to the negligence of Fund 14-A or TCI,
or any of their agents or employees.
Section 10. Default and Termination
10.1 Default. A default by Fund 14-A or TCI shall occur under this
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Agreement if Fund 14-A or TCI shall willfully breach, in any material respect,
any provision of this Agreement to be kept and performed by Fund 14-A or TCI.
10.2 Remedies Upon Default. This Agreement may be terminated by either TCI
---------------------
or Intercable on written notice to the other party in the event of any default
by the other party which is not cured within 30 days after written notice
thereof is received by the defaulting party (or if not curable within that time
period, within a reasonable time thereafter); provided, however, in no event
shall TCI have the right to terminate its obligation under Section 2 to provide
---------
the Programming Signals to the Naperville System on less than 120 days written
notice to Fund 14-A, unless this Agreement would otherwise terminate pursuant to
Section 5 prior to the end of such 120 day period.
- ---------
10.3 Payment Upon Default. In the event of termination of this Agreement
--------------------
pursuant to the terms hereof, TCI shall be entitled to receive promptly
following termination, and in any event within 30 days thereafter, the amount of
any accrued but unpaid Service Fees and Reimbursable Expenses.
Section 11. Confidentiality
It is understood that each party desires to maintain the confidentiality of
all
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<PAGE>
documents or other information or data, whether written or oral, relating to
the Jones Chicago Systems and the Naperville System and furnished or made
available to the other party or its employees, agents or consultants during the
term of this Agreement (the "Information"). Each party will hold and will use
all reasonable efforts to cause its officers, directors, employees, lenders,
accountants, representatives, agents, consultants and advisors to hold in strict
confidence all of Information in its possession, and will not, without the prior
written consent of the other party, (i) use the Information for any purpose
other than in connection with the Services contemplated by this Agreement; or
(ii) release or disclose any Information to any other person, except to those
persons who need to know the Information in connection with the Services
contemplated by this Agreement and who are informed of the confidential nature
of the Information and who agree to be bound by the terms and conditions hereof.
Notwithstanding the foregoing, the following will not constitute Information for
the purposes of this Agreement: (a) information that the receiving party can
show was known by it, its directors, officers, employees, consultants or by its
affiliates prior to the disclosure thereof by the delivering party; (b)
information that is or becomes generally available to the public other than as a
result of a disclosure directly or indirectly by the receiving party or its
directors, officers, employees or consultants in breach of this Agreement; (c)
information that is independently developed by the receiving party, its
directors, officers, employees, consultants or its affiliates; or (d)
information that is or becomes available to the receiving party on a non-
confidential basis from a source other than the delivering party or its
directors, officers, employees, provided that such source is not known by the
receiving party to be bound by any obligation of confidentiality in relation
thereto. Notwithstanding the foregoing, TCI acknowledges that the exceptions
contained in subparagraphs (a) - (d) above shall not apply to confidential
information developed by TCI, or otherwise in TCI's possession, arising from or
related to, TCI's performance of the Services hereunder.
Section 12. Miscellaneous
12.1 Relationship Among the Parties. Nothing herein contained shall be
------------------------------
deemed to make TCI a partner, co-venturer or other participant in the business
or operations of Fund 14-A or in any manner to render TCI liable as a principal,
surety, guarantor, agent or otherwise for any of the debts, obligations or
liabilities of Fund 14-A, whether incurred directly by Fund 14-A or by TCI on
behalf of Fund 14-A in accordance with this Agreement.
12.2 Other Activities of TCI. Nothing in this Agreement shall limit or
-----------------------
restrict the rights of TCI or any of its Affiliates to engage in any other
business or to devote its time and attention to the management or other aspects
of any other business or to render services of any kind. Fund 14-A acknowledges
that TCI and its Affiliates own, manage or operate cable television systems
throughout the United States, including cable television systems in the Chicago
metropolitan area. TCI will devote such of its attention, time, efforts and
resources to the Naperville System as shall be reasonably necessary for it to
carry out its duties hereunder and consistent with Intercable's past
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practices of managing the Naperville System.
12.3 Force Majeure. TCI shall not be responsible for the loss of, or damage
-------------
to, any property of Fund 14-A, or for any failure to fulfill its duties
hereunder if such loss damage or failure shall be caused by or directly or
indirectly due to war damage, enemy action, the act of any Government or other
authority, riot, civil commotion, rebellion, storm, tempest, accident, fire,
lock-out, strike or other cause whether similar or not beyond the control of
TCI; provided, however, that TCI shall use its reasonable efforts to minimize
the effects of the same.
12.4 Notices. All notices and other communications given or made pursuant
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to this Agreement shall be in writing and shall be deemed to have been duly
given or made as of the date delivered, by hand, by telecopier device (confirmed
by hand delivery or overnight courier service) or by overnight courier service
to the parties at the following address (or at such other address for a party as
shall be specified by like notice):
if to TCI, to: Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Attn: Derek Chang
with a copy to: Peggy Knight, Esq.
Sherman & Howard, L.L.C.
633 17/th/ Street, Suite 3000
Denver, Colorado 80202
if to Fund 14-A, to: Jones Intercable, Inc.
9697 E. Mineral Avenue
Englewood, Colorado, 80112
Attn: President
with a copy to: Jones Intercable, Inc.
9697 E. Mineral Avenue
Englewood, Colorado, 80112
Attn: Legal Department
12.5 Assignability; Benefit and Binding Effect. Neither party hereto may
-----------------------------------------
assign this Agreement, or any part thereof, without the prior written consent of
the other party, which consent shall not be unreasonably withheld. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
12.6 Governing Law. This Agreement shall be governed by the laws of the
-------------
State of Colorado as to all matters, including but not limited to matters of
validity, construction, effect, performance and remedies (without giving effect
to the principles of
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<PAGE>
conflicts of law thereof).
12.7 Headings. The headings preceding the text of sections and subsections
--------
of this Agreement are included for ease of reference only and shall not be
deemed part of this Agreement.
12.8 Entire Agreement. This Agreement represents the entire understanding
----------------
and agreement between TCI and Fund 14-A with respect to the specific subject
matter hereof. This Agreement supersedes all prior negotiations between the
parties and cannot be amended, supplemented or changed except by an agreement in
writing which makes specific reference to this Agreement or an agreement
delivered pursuant hereto, as the case may be, and which is signed by the party
against which enforcement of any such amendment, supplement or modification is
sought.
12.9 Further Assurances. The parties shall take any actions and execute
------------------
any other documents that may be reasonably necessary or desirable to the
implementation and consummation of this Agreement or that may be reasonably
requested by any other party hereto. Each party will cooperate with the other
party and provide any assistance reasonably requested by the other party to
effectuate the intent of this Agreement.
12.10 Severability. If any provision of this Agreement or the application
------------
thereof to any person or circumstance shall be held invalid or unenforceable to
any extent by any court of competent jurisdiction, the remainder of this
Agreement and the application of such provisions to other persons or
circumstances shall not be affected thereby and shall be enforced to the
greatest extent permitted by law.
12.11 Counterparts. This Agreement may be signed in counterparts, each of
------------
which shall be deemed to be an original but which, when taken together, shall
constitute one and the same instrument.
12.12 Exhibits. All Exhibits and Schedules attached hereto are hereby
--------
incorporated herein by reference as if fully set forth herein.
12.13 Conflict. The parties acknowledge and agree that this Agreement is
--------
not intended to modify or amend any provision of that certain Asset Purchase
Agreement by and between TCI Communications, Inc., as assigned to TCI of West
Virginia, Inc., and Cable TV Fund 14-A, Ltd. (the "Asset Purchase Agreement").
Accordingly, in the event of a conflict between the terms and provisions of this
Agreement and the terms and provisions of the Asset Purchase Agreement, the
terms and provisions of the Asset Purchase Agreement shall govern and control.
[See Next Page for Signature Page]
14
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first above written.
Cable TV Fund 14-A, Ltd., a Colorado limited partnership
By: Jones Intercable, Inc., a Colorado corporation, its
general partner
By: /s/ Elizabeth Steele
--------------------
Title: Vice President
--------------
TCI Illinois Holdings L.P., an Arizona limited partnership
By: TCI IL-Holdings II, Inc., its General Partner
By: /s/ Derek Chang
---------------
Title: Vice President
--------------
15
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<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 357,145
<SECURITIES> 0
<RECEIVABLES> 454,788
<ALLOWANCES> (127,439)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 93,032,212
<DEPRECIATION> (57,669,712)
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<BONDS> 23,432,210
0
0
<COMMON> 0
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<TOTAL-LIABILITY-AND-EQUITY> 38,472,721
<SALES> 0
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<OTHER-EXPENSES> (304,162)
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<EXTRAORDINARY> 0
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<NET-INCOME> 18,214,158
<EPS-PRIMARY> 113.54
<EPS-DILUTED> 113.54
</TABLE>
