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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number: 0-16200
CABLE TV FUND 14-B, LTD.
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(Exact name of registrant as specified in its charter)
Colorado 84-1024658
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(State of Organization) (IRS Employer Identification No.)
P.O. Box 3309, Englewood, Colorado 80155-3309 (303) 792-3111
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(Address of principal executive office and Zip Code) (Registrant's telephone
no. including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited Partnership
Interests
Indicate by check mark whether the registrants, (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days:
Yes x No
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Aggregate market value of the voting stock held by non-affiliates of the
registrant: N/A
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S)229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. X
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DOCUMENTS INCORPORATED BY REFERENCE: None
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Certain information contained in this Form 10-K Report contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. All statements, other than statements of
historical facts, included in this Form 10-K Report that address activities,
events or developments that the Partnership, the Venture or the General Partner
expects, believes or anticipates will or may occur in the future are forward-
looking statements. These forward-looking statements are based upon certain
assumptions and are subject to a number of risks and uncertainties. Actual
events or results may differ materially from those discussed in the 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-B, 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-A, Ltd. ("Fund 14-A") is the other
partnership that was formed pursuant to the Program. The Partnership and Fund
14-A formed a general partnership known as Cable TV Fund 14-A/B Venture (the
"Venture"), in which the Partnership owns a 73 percent interest and Fund 14-A
owns a 27 percent interest. The 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 Surfside, South Carolina (the "Surfside System") and
Littlerock, California (the "Littlerock System"). The Venture owns the cable
television system serving certain areas in Broward County, Florida (the "Broward
System"). See Item 2. The Surfside System, the Littlerock System and the Broward
System may collectively be referred to as the "Systems."
It is the General Partner's publicly announced policy that it intends
to liquidate its managed limited partnerships, including the Partnership, as
opportunities for sales of partnership cable television systems arise in the
marketplace. In accordance with this policy, the Partnership expects to sell
its Surfside System in the second quarter of 1998 and its Littlerock System in
the third quarter of 1998, and the Venture expects to sell the Broward System in
March 1998.
PROPOSED DISPOSITIONS OF CABLE TELEVISION SYSTEM.
Broward System. On October 3, 1997, the Venture entered into an
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agreement to sell the Broward System to an unaffiliated party for $140,000,000,
subject to closing adjustments discussed below. Closing of this sale is
scheduled for March 31, 1998, subject to several conditions, including necessary
governmental and other third-party consents. The General Partner expects that
all material consents will be obtained prior to the scheduled closing date. The
closing adjustments primarily relate to the number of equivalent basic
subscribers at closing. If the equivalent basic subscribers are less than
56,637, the sales price will be reduced $2,462 multiplied by the number by which
the Broward System's equivalent basic subscribers are less than 56,637, up to a
maximum adjustment of $7,000,000. Because it is estimated that at March 31,
1998, the Broward System will have 55,274 equivalent basic subscribers, as
defined in the agreement, there will be a sales price reduction at closing of
approximately $3,369,000. The General Partner expects, however, that when final
closing adjustments are done approximately sixty days after closing, additional
equivalent basic subscribers that were not able to be counted at closing because
they were relatively recent subscribers at March 31, 1998, will be counted as
equivalent basic subscribers when final closing adjustments are done and the
sales price will be adjusted accordingly. If the sales price is adjusted
upward, the Venture would make an additional distribution to the two constituent
partnerships of the Venture in proportion to their ownership interests in the
Venture.
Upon closing, the Venture will repay all of its indebtedness, which
totaled $39,597,617 at December 31, 1997, and a brokerage fee of $3,500,000 to
The Jones Group, Ltd. ("The Jones Group"), a subsidiary of the
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General Partner, and then the Venture will distribute the remaining net sale
proceeds, or approximately $94,039,000, to the two constituent partnerships of
the Venture in proportion to their ownership interests in the Venture.
Accordingly, the Partnership will receive 73 percent of such proceeds, estimated
to total $68,548,000. The Partnership will distribute this portion of the net
sale proceeds to its limited partners of record as of the closing date of the
sale of the Broward System. Such distribution represents approximately $262 for
each $500 limited partnership interest, or $524 for each $1,000 invested in the
Partnership. Because the distribution to the limited partners from the sales of
the Broward System will not return 125 percent of the capital initially
contributed to the Partnership by the limited partners, the General Partner will
not receive any general partner distribution of the proceeds from the Broward
System's sale. The sale of the Broward System has been approved by over 60
percent of the limited partnership interests of the Partnership. Because the
Broward System represents the only asset of the Venture, the Venture will be
liquidated and dissolved upon completion of the sale of the Broward System.
Surfside System. On November 4, 1997, the Partnership entered into an
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asset purchase agreement to sell the Surfside System to an unaffiliated party
for a sales price of $51,500,000, subject to customary closing adjustments that
may have the effect of increasing or decreasing the sales price by a non-
material amount. Closing of the sale, which is anticipated to occur in the
second quarter of 1998, is subject to several conditions, including the receipt
of material third party consents necessary for the transfer of the Surfside
System. The sale of the Surfside System has been approved by over 60 percent of
the limited partnership interests of the Partnership. The asset purchase
agreement may be terminated by either the Partnership or the purchaser if the
closing is not consummated on or before June 30, 1998.
Upon the consummation of the proposed sale of the Surfside System, the
Partnership will retain approximately $380,000 of the sale proceeds as a working
capital reserve, repay advances from the General Partner totaling approximately
$390,000, repay all of the Partnership's indebtedness (including the
approximately $14,400,000 borrowed under its credit facility and $155,474 of
capital lease obligations), pay a 2.5 percent brokerage fee totaling $1,287,500
to The Jones Group, pay a deferred acquisition fee of $920,000 to The Jones
Group and then the $33,821,213 of net sale proceeds will be distributed to the
Partnership's limited partners of record as of the closing date of the sale of
the Surfside System. Based upon financial information as of December 31, 1997,
as a result of the Surfside System's sale, the limited partners of the
Partnership, as a group, will receive $33,821,213. Limited partners will
receive $129 for each $500 limited partnership interest, or $258 for each $1,000
invested in the Partnership.
Once the Partnership has completed the distributions of its portion of
the net proceeds from the sale of the Broward System and the net proceeds from
the sale of the Surfside System, limited partners of the Partnership will have
received a total of $391 for each $500 limited partnership interest, or $782 for
each $1,000 invested in the Partnership. Because the distributions to the
limited partners from the sale of the Surfside System and the Broward System
will not return 125 percent of the capital initially contributed by the limited
partners to the Partnership, the General Partner will not receive a general
partner distribution from the Surfside System's sale proceeds.
Littlerock System. On March 10, 1998, the Partnership entered into an
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agreement with the General Partner to sell the Littlerock System to the General
Partner or one of its affiliates for a sales price of $10,720,400, subject to
customary closing adjustments. The sales price represents the average of three
independent appraisals of the fair market value of the Littlerock System. The
closing of this transaction is expected to occur in the third quarter of 1998.
The closing is subject to a number of conditions including the approval of the
transaction by the holders of a majority of the limited partnership interests of
the Partnership, the expiration or termination of all waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 applicable to the agreement
or the transactions contemplated thereby, and the consents of governmental
authorities and other third parties. The General Partner expects to conduct a
proxy vote on the Littlerock System's sale during the summer of 1998. Upon the
consummation of the proposed sale of the Littlerock System, the Partnership will
distribute the net sale proceeds of approximately $10,808,000 to the limited
partners of the Partnership. This distribution will give the Partnership's
limited partners a return of $41 for each $500 limited partnership interest, or
$82 for each $1,000 invested in the Partnership.
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Taking into account the anticipated distribution from the sale of the
Broward System, the anticipated distribution from the sale of the Surfside
System and the anticipated distribution from the sale of the Littlerock System,
the limited partners of the Partnership can expect to receive a total of $432
for each $500 limited partnership interest, or $864 for each $1,000 invested in
the Partnership. Because the distributions to the limited partners from the
sales of the Littlerock System, the Surfside System and the Broward System will
not return 125 percent of the capital initially contributed by the limited
partners to the Partnership, the General Partner will not receive a general
partner distribution from the Littlerock System's sale proceeds.
Based upon the proposed sales prices for the Littlerock System,
Surfside System and the Broward System, the limited partners of the Partnership
will not ultimately receive distributions in an amount equal to their initial
capital contributions. The Partnership will be liquidated and dissolved after
the sale of the Littlerock System, which will be the Partnership's sole
remaining asset at the time of its sale.
CABLE TELEVISION SERVICES. The Systems offer to their subscribers
various types of programming, which include basic service, tier service, premium
service, pay-per-view programs and packages including several of these services
at combined rates.
Basic cable television service usually consists of signals of all
national television networks broadcast by their local affiliates, various
independent and educational television stations (both VHF and UHF) and certain
signals received from satellites. Basic service also usually includes programs
originated locally by the system, which may consist of music, news, weather
reports, stock market and financial information and live or videotaped programs
of a public service or entertainment nature. FM radio signals are also
frequently distributed to subscribers as part of the basic service.
The Systems offer tier services on an optional basis to its
subscribers. A tier generally includes most of the cable networks such as
Entertainment and Sports Programming Network (ESPN), Cable News Network (CNN),
Turner Network Television (TNT), Family Channel, Discovery and others, and the
cable television operators buy tier programming from these networks. The
Systems also offer a package that includes the basic service channels and the
tier services.
The Systems also offer premium services to subscribers, which consist
of feature films, sporting events and other special features that are presented
without commercial interruption. The cable television operators buy premium
programming from suppliers such as HBO, Showtime, Cinemax, Encore and others at
a cost based on the number of subscribers served by the cable operator. The per
service cost of premium service programming usually is significantly more
expensive than the basic service or tier service programming, and consequently
cable operators price premium service separately when sold to subscribers.
The Systems also offer to subscribers pay-per-view programming. Pay-
per-view is a service that allows subscribers to receive single programs,
frequently consisting of motion pictures that have recently completed their
theatrical exhibitions and major sporting events, and to pay for such service on
a program-by-program basis.
REVENUES. Monthly service fees for basic, tier and premium services
constitute the major source of revenue for the Systems. At December 31, 1997,
the Systems' monthly basic service rates ranged from $9.30 to $13.81, monthly
basic and tier ("basic plus") service rates ranged from $17.00 to $26.52 and
monthly premium services ranged from $3.00 to $10.95 per premium service. In
addition, the Partnership and the Venture earn revenues from the Systems' pay-
per-view programs and advertising fees. Related charges may include a
nonrecurring installation fee that ranges from $1.90 to $49.21; however, from
time to time the Systems have followed the common industry practice of reducing
or waiving the installation fee during promotional periods. Commercial
subscribers such as hotels, motels and hospitals are charged a nonrecurring
connection fee that usually covers the cost of installation. Except under the
terms of certain contracts with commercial subscribers and residential apartment
and condominium complexes, the subscribers are free to discontinue the service
at any time without penalty. For the year ended December 31, 1997, of the total
fees received by the Systems, basic
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service and tier service fees accounted for approximately 66 percent of total
revenues, premium service fees accounted for approximately 15 percent of total
revenues, pay-per-view fees were approximately 2 percent of total revenues,
advertising fees were approximately 7 percent of total revenues and the
remaining 10 percent of total revenues came principally from equipment rentals,
installation fees and program guide sales. The Partnership and the Venture are
dependent upon the timely receipt of service fees to provide for maintenance and
replacement of plant and equipment, current operating expenses and other costs
of the Systems.
FRANCHISES. The Systems are constructed and operated under non-
exclusive, fixed-term franchises or other types of operating authorities
(referred to collectively herein as "franchises") granted by local governmental
authorities. These franchises typically contain many conditions, such as time
limitations on commencement and completion of construction, conditions of
service, including the number of channels, types of programming and the
provision of free service to schools and certain other public institutions, and
the maintenance of insurance and indemnity bonds. The provisions of local
franchises are subject to federal regulation.
The Partnership directly holds 6 franchises, and the Venture holds 9
franchises. These franchises provide for the payment of fees to the issuing
authorities and generally range from 3 percent to 5 percent of the gross
revenues of a cable television system. The 1984 Cable Act prohibits franchising
authorities from imposing annual franchise fees in excess of 5 percent of gross
revenues and also permits the cable television system operator to seek
renegotiation and modification of franchise requirements if warranted by changed
circumstances.
Neither the Partnership nor the Venture has ever had a franchise
revoked. Neither the Partnership nor the Venture has any franchises that expire
prior to December 31, 1998.
COMPETITION. Cable television systems currently experience competition
from several sources.
Broadcast Television. Cable television systems have traditionally
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competed with broadcast television, which consists of television signals that
the viewer is able to receive directly on his television without charge using an
"off-air" antenna. The extent of such competition is dependent in part upon the
quality and quantity of signals available by such antenna reception as compared
to the services provided by the local cable system. Accordingly, it has
generally been less difficult for cable operators to obtain higher penetration
rates in rural areas where signals available off-air are limited, than in
metropolitan areas where numerous, high quality off-air signals are often
available without the aid of cable television systems.
Traditional Overbuild. Cable television franchises are not exclusive,
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so that more than one cable television system may be built in the same area
(known as an "overbuild"), with potential loss of revenues to the operator of
the original cable television system. The General Partner has experienced
overbuilds in connection with certain systems that it has owned or managed for
limited partnerships, and currently there are overbuilds in certain of the
systems owned or managed by the General Partner but not in the Systems.
Constructing and developing a cable television system is a capital intensive
process, and it is often difficult for a new cable system operator to create a
marketing edge over the existing system. Generally, an overbuilder would be
required to obtain franchises from the local governmental authorities, although
in some instances, the overbuilder could be the local government itself. In any
case, an overbuilder would be required to obtain programming contracts from
entertainment programmers and, in most cases, would have to build a complete
cable system, including headends, trunk lines and drops to individual
subscribers homes, throughout the franchise areas.
DBS. High-powered direct-to-home satellites have made possible the
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wide-scale delivery of programming to individuals throughout the United States
using small roof-top or wall-mounted antennas. Several companies began offering
direct broadcast satellite ("DBS") service over the last few years. Companies
offering DBS service use video compression technology to increase channel
capacity of their systems to 100 or more channels and to provide packages of
movies, satellite network and other program services which are competitive to
those of cable television systems. DBS faces technical and legal obstacles to
offering its customers local broadcast programming, although at least one DBS
provider is now attempting to do so. In addition to emerging high-powered DBS
competition, cable television systems face competition from a major medium-
powered satellite
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distribution provider and several low-powered providers, whose service requires
use of much larger home satellite dishes. Not all subscribers terminate cable
television service upon acquiring a DBS system. The General Partner has observed
that there are DBS subscribers that also elect to subscribe to cable television
service in order to obtain the greatest variety of programming on multiple
television sets, including local programming not available through DBS service.
The ability of DBS service providers to compete successfully with the cable
television industry will depend on, among other factors, the ability of DBS
providers to overcome certain legal and technical hurdles and the availability
of equipment at reasonable prices.
Telephone and Utilities. Federal cross-ownership restrictions
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historically limited entry by local telephone companies into the cable
television business. The 1996 Telecommunications Act (the "1996 Telecom Act")
eliminated this cross-ownership restriction, making it possible for companies
with considerable resources to overbuild existing cable operators and enter the
business. Several telephone companies have begun seeking cable television
franchises from local governmental authorities and constructing cable television
systems. The General Partner cannot predict at this time the extent of
telephone company competition that will emerge. The entry of telephone
companies as direct competitors, however, is likely to continue over the next
several years and could adversely affect the profitability and market value of
cable television systems. The entry of electric utility companies into the
cable television business, as now authorized by the 1996 Telecom Act, could have
a similar adverse effect. The local electric utility in the Washington D.C.
area recently announced plans to participate in RCN, a planned video competitor.
Private Cable. Additional competition is provided by private cable
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television systems, known as Satellite Master Antenna Television (SMATV),
serving multi-unit dwellings such as condominiums, apartment complexes, and
private residential communities. These private cable systems may enter into
exclusive agreements with apartment owners and homeowners associations, which
may preclude operators of franchised systems from serving residents of such
private complexes. Private cable systems that do not cross public rights of way
are free from the federal, state and local regulatory requirements imposed on
franchised cable television operators. In some cases, neither the Partnership
nor the Venture has been unable to provide cable television service to buildings
in which private operators have secured exclusive contracts to provide video and
telephony services. The Partnership and the Venture are interested in providing
these same services, but expect that the market to install and provide these
services in multi-unit buildings will continue to be highly competitive.
MMDS. Cable television systems also compete with wireless program
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distribution services such as multichannel, multipoint distribution service
("MMDS") systems, commonly called wireless cable, which are licensed to serve
specific areas. MMDS uses low-power microwave frequencies to transmit
television programming over-the-air to paying subscribers. The MMDS industry is
less capital intensive than the cable television industry, and it is therefore
more practical to construct MMDS systems in areas of lower subscriber
penetration. Wireless cable systems are now in direct competition with cable
television systems in several areas of the country, including the system in Pima
County, Arizona owned by the General Partner. Telephone companies have acquired
or invested in wireless companies, and may use MMDS systems to provide services
within their service areas in lieu of wired delivery systems. Enthusiasm for
MMDS has waned in recent months, however, as Bell Atlantic and NYNEX have
suspended their investment in two major MMDS companies. To date, neither the
Partnership nor the Venture has lost a significant number of subscribers, nor a
significant amount of revenue, to MMDS operators competing with the
Partnership's and the Venture's cable television systems. A series of actions
taken by the FCC, however, including reallocating certain frequencies to the
wireless services, are intended to facilitate the development of wireless cable
television systems as an alternative means of distributing video programming.
In addition, Local Multipoint Distribution Services ("LMDS"), could also pose a
significant threat to the cable television industry, if and when it becomes
established. The potential impact, however, of LMDS is difficult to assess due
to the newness of the technology and the absence of any current fully
operational LMDS systems.
Cable television systems are also in competition, in various degrees
with other communications and entertainment media, including motion pictures and
home video cassette recorders.
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REGULATION AND LEGISLATION
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The operation of cable television systems is extensively regulated by
the FCC, some state governments and most local governments. The new 1996
Telecom Act alters the regulatory structure governing the nation's
telecommunications providers. It removes barriers to competition in both the
cable television market and the local telephone market. Among other things, it
also reduces the scope of cable rate regulation.
The 1996 Telecom Act requires the FCC to undertake a host of
implementing rulemakings, the final outcome of which cannot yet be determined.
Moreover, Congress and the FCC have frequently revisited the subject of cable
regulation. Future legislative and regulatory changes could adversely affect
the Partnership's and the Venture's operations and there has been a recent
increase in calls to maintain or even tighten cable regulation in the absence of
widespread effective competition. This section briefly summarizes key laws and
regulations affecting the operation of the Partnership's and the Venture's cable
systems and does not purport to describe all present, proposed, or possible laws
and regulations affecting the Partnership and the Venture.
Cable Rate Regulation. The 1992 Cable Act imposed an extensive rate
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regulation regime on the cable television industry. Under that regime, all
cable systems are subject to rate regulation, unless they face "effective
competition" in their local franchise area. Federal law now defines "effective
competition" on a community-specific basis as requiring either low penetration
(less than 30 percent) by the incumbent cable operator, appreciable penetration
(more than 15 percent) by competing multichannel video providers ("MVPs"), or
the presence of a competing MVP affiliated with a local telephone company.
Although the FCC rules control, local government units (commonly
referred to as local franchising authorities or "LFAs") are primarily
responsible for administering the regulation of the lowest level of cable -- the
basic service tier ("BST"), which typically contains local broadcast stations
and public, educational, and government ("PEG") access channels. Before an LFA
begins BST rate regulation, it must certify to the FCC that it will follow
applicable federal rules, and many LFAs have voluntarily declined to exercise
this authority. LFAs also have primary responsibility for regulating cable
equipment rates. Under federal law, charges for various types of cable
equipment must be unbundled from each other and from monthly charges for
programming services. The 1996 Telecom Act allows operators to aggregate costs
for broad categories of equipment across geographic and functional lines. This
change should facilitate the introduction of new technology.
The FCC itself directly administers rate regulation of any cable
programming service tiers ("CPST"), which typically contain satellite-delivered
programming. Under the 1996 Telecom Act, the FCC can regulate CPST rates only
if an LFA first receives at least two rate complaints from local subscribers and
then files a formal complaint with the FCC. When new CPST rate complaints are
filed, the FCC now considers only whether the incremental increase is justified
and will not reduce the previously established CPST rate.
Under the FCC's rate regulations, most cable systems were required to
reduce their BST and CPST rates in 1993 and 1994, and have since had their rate
increases governed by a complicated price cap scheme that allows for the
recovery of inflation and certain increased costs, as well as providing some
incentive for expanding channel carriage. The FCC has modified its rate
adjustment regulations to allow for annual rate increases and to minimize
previous problems associated with regulatory lag. Operators also have the
opportunity of bypassing this "benchmark" regulatory scheme in favor of
traditional "cost-of-service" regulation in cases where the latter methodology
appears favorable. Premium cable services offered on a per-channel or per-
program basis remain unregulated, as do affirmatively marketed packages
consisting entirely of new programming product. Federal law requires that the
BST be offered to all cable subscribers, but limits the ability of operators to
require purchase of any CPST before purchasing premium services offered on a
per-channel or per-program basis.
The 1996 Telecom Act sunsets FCC regulation of CPST rates for all
systems (regardless of size) on March 31, 1999. Certain critics of the cable
television industry have called for a delay in the regulatory sunset and some
have even urged more rigorous rate regulation in the interim, including a limit
on operators passing through to their customers increased programming costs.
The 1996 Telecom Act also relaxes existing uniform rate requirements by
specifying that uniform rate requirements do not apply where the operator faces
"effective
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competition," and by exempting bulk discounts to multiple dwelling units,
although complaints about predatory pricing still may be made to the FCC.
Cable Entry Into Telecommunications. The 1996 Telecom Act provides
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that no state or local laws or regulations may prohibit or have the effect of
prohibiting any entity from providing any interstate or intrastate
telecommunications service. States are authorized, however, to impose
"competitively neutral" requirements regarding universal service, public safety
and welfare, service quality, and consumer protection. State and local
governments also retain their authority to manage the public rights-of-way and
may require reasonable, competitively neutral compensation for management of the
public rights-of-way when cable operators provide telecommunications service.
The favorable pole attachment rates afforded cable operators under federal law
can be gradually increased by utility companies owning the poles (beginning in
2001) if the operator provides telecommunications service, as well as cable
service, over its plant.
Cable entry into telecommunications will be affected by the regulatory
landscape now being fashioned by the FCC and state regulators. One critical
component of the 1996 Telecom Act to facilitate the entry of new
telecommunications providers (including cable operators) is the interconnection
obligation imposed on all telecommunications carriers. In July 1997, the Eighth
Circuit Court of Appeals vacated certain aspects of the FCC's initial
interconnection order. That decision is now on appeal to the U.S. Supreme
Court.
Telephone Company Entry Into Cable Television. The 1996 Telecom Act
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allows telephone companies to compete directly with cable operators by repealing
the historic telephone company/cable cross-ownership ban. Local exchange
carriers ("LECs"), including the BOCs, can now compete with cable operators both
inside and outside their telephone service areas. Because of their resources,
LECs could be formidable competitors to traditional cable operators, and certain
LECs have begun offering cable service. As described above, the General Partner
is now witnessing the beginning of LEC competition in a few of its cable
communities.
Under the 1996 Telecom Act, an LEC providing video programming to
subscribers will be regulated as a traditional cable operator (subject to local
franchising and federal regulatory requirements), unless the LEC elects to
provide its programming via an "open video system" ("OVS"). To qualify for OVS
status, the LEC must reserve two-thirds of the system's activated channels for
unaffiliated entities. RCN and affiliates of local power companies recently
have been certified to provide OVS service in areas encompassing the General
Partner's cable systems in suburban Maryland and Virginia. This OVS potential
competition is not yet operational.
Although LECs and cable operators can now expand their offerings
across traditional service boundaries, the general prohibition remains on LEC
buyouts (i.e., any ownership interest exceeding 10 percent) of co-located cable
systems, cable operator buyouts of co-located LEC systems, and joint ventures
between cable operators and LECs in the same market. The 1996 Telecom Act
provides a few limited exceptions to this buyout prohibition, including a
carefully circumscribed "rural exemption." The 1996 Telecom Act also provides
the FCC with the limited authority to grant waivers of the buyout prohibition
(subject to LFA approval).
Electric Utility Entry Into Telecommunications/Cable Television. The
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1996 Telecom Act provides that registered utility holding companies and
subsidiaries may provide telecommunications services (including cable
television) notwithstanding the Public Utilities Holding Company Act. Electric
utilities must establish separate subsidiaries, known as "exempt
telecommunications companies" and must apply to the FCC for operating authority.
Again, because of their resources, electric utilities could be formidable
competitors to traditional cable systems.
Additional Ownership Restrictions. The 1996 Telecom Act eliminates
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statutory restrictions on broadcast/cable cross-ownership (including broadcast
network/cable restrictions), but leaves in place existing FCC regulations
prohibiting local cross-ownership between co-located television stations and
cable systems. The 1996 Telecom Act also eliminates the three year holding
period required under the 1992 Cable Act's "anti-trafficking" provision. The
1996 Telecom Act leaves in place existing restrictions on cable cross-ownership
with SMATV and MMDS facilities, but lifts those restrictions where the cable
operator is subject to effective competition. In January 1995, however, the FCC
adopted regulations which permit cable operators to own and operate SMATV
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systems within their franchise area, provided that such operation is consistent
with local cable franchise requirements.
Pursuant to the 1992 Cable Act, the FCC adopted rules precluding a
cable system from devoting more than 40 percent of its activated channel
capacity to the carriage of affiliated national program services. A companion
rule establishing a nationwide ownership cap on any cable operator equal to 30
percent of all domestic cable subscribers has been stayed pending further
judicial review, although the FCC recently expressed an interest in reviewing
and reimposing this limit.
There are no federal restrictions on non-U.S. entities having an
ownership interest in cable television systems or the FCC licenses commonly
employed by such systems. Section 310(b)(4) of the Communications Act does,
however, prohibit foreign ownership of FCC broadcast and telephone licenses,
unless the FCC concludes that such foreign ownership is consistent with the
public interest. The investment of BCI Telecom Holding Inc. ("BTH") in the
General Partner could, therefore, adversely affect any plan to acquire FCC
broadcast or common carrier licenses. The Partnership, however, does not
currently plan to acquire such licenses.
Must Carry/Retransmission Consent. The 1992 Cable Act contains
---------------------------------
broadcast signal carriage requirements that allow local commercial television
broadcast stations to elect once every three years between requiring a cable
system to carry the station ("must carry") or negotiating for payments for
granting permission to the cable operator to carry the station ("retransmission
consent"). Less popular stations typically elect "must carry," and more popular
stations typically elect "retransmission consent." Must carry requests can
dilute the appeal of a cable system's programming offerings, and retransmission
consent demands may require substantial payments or other concessions. Either
option has a potentially adverse affect on the Partnership's and the Venture's
business. Additionally, cable systems are required to obtain retransmission
consent for all "distant" commercial television stations (except for satellite-
delivered independent "superstations" such as WGN). The burden associated with
"must carry" may increase substantially if broadcasters proceed with planned
conversion to digital transmission and the FCC determines that cable systems
must carry all analogue and digital broadcasts in their entirety.
Access Channels. LFAs can include franchise provisions requiring
---------------
cable operators to set aside certain channels for public, educational and
governmental access programming. Federal law also requires cable systems to
designate a portion of their channel capacity (up to 15 percent in some cases)
for commercial leased access by unaffiliated third parties. The FCC has adopted
rules regulating the terms, conditions and maximum rates a cable operator may
charge for use of the designated channel capacity, but use of commercial leased
access channels has been relatively limited. The FCC released revised rules in
February 1997 mandating a modest rate reduction. The reduction sparked some
increase in part-time use, but did not make commercial leased access
substantially more attractive to third party programmers. Certain of those
programmers have now appealed the revised rules to the D.C. Court of Appeals.
Should the courts and the FCC ultimately determine that an additional reduction
in access rates is required, cable operators could lose programming control of a
substantial number of cable channels.
Access to Programming. To spur the development of independent cable
---------------------
programmers and competition to incumbent cable operators, the 1992 Cable Act
imposed restrictions on the dealings between cable operators and cable
programmers. Of special significance from a competitive business posture, the
1992 Cable Act precludes video programmers affiliated with cable companies from
favoring cable operators over competitors and requires such programmers to sell
their programming to other multichannel video distributors. This provision
limits the ability of vertically integrated cable programmers to offer exclusive
programming arrangements to cable companies. There recently has been increased
interest in further restricting the marketing practices of cable programmers,
including subjecting programmers who are not affiliated with cable operators to
all of the existing program access requirements.
Inside Wiring. The FCC recently determined that an incumbent cable
-------------
operator can be required by the owner of a multiple dwelling unit ("MDU")
complex to remove, abandon or sell the "home run" wiring it initially provided.
In addition, the FCC is reviewing the enforceability of contracts to provide
exclusive video service
9
<PAGE>
within a MDU complex. The FCC has proposed abrogating all such contracts held by
incumbent cable operators, but allowing such contracts when held by new
entrants. These changes, and others now being considered by the FCC, would, if
implemented, make it easier for a MDU complex owner to terminate service from an
incumbent cable operator in favor of a new entrant and leave the already
competitive MDU sector even more challenging for incumbent cable operators.
Other FCC Regulations. In addition to the FCC regulations noted
---------------------
above, there are other FCC regulations covering such areas as equal employment
opportunity, subscriber privacy, programming practices (including, among other
things, syndicated program exclusivity, network program nonduplication, local
sports blackouts, indecent programming, lottery programming, political
programming, sponsorship identification, and children's programming
advertisements), registration of cable systems and facilities licensing,
maintenance of various records and public inspection files, frequency usage,
lockbox availability, antenna structure notification, tower marking and
lighting, consumer protection and customer service standards, technical
standards and consumer electronics equipment compatibility. Federal
requirements governing Emergency Alert Systems and Closed Captioning adopted in
1997 will impose additional costs on the operation of cable systems. The FCC is
currently considering whether cable customers must be allowed to purchase cable
converters from third party vendors. If the FCC concludes that such
distribution is required, and does not make appropriate allowances for signal
piracy concerns, it may become more difficult for cable operators to combat
theft of service. The FCC has the authority to enforce its regulations through
the imposition of substantial fines, the issuance of cease and desist orders
and/or the imposition of other administrative sanctions, such as the revocation
of FCC licenses needed to operate certain transmission facilities used in
connection with cable operations.
Internet Access. Many cable operators have begun offering high speed
---------------
internet service to their customers. At this time, there is no significant
federal or local regulation of this service. However, as internet services
develop, it is possible that new regulations could be imposed.
Copyright. Cable television systems are subject to federal copyright
---------
licensing covering carriage of television and radio broadcast signals. In
exchange for filing certain reports and contributing a percentage of their
revenues to a federal copyright royalty pool (that varies depending on the size
of the system and the number of distant broadcast television signals carried),
cable operators can obtain blanket permission to retransmit copyrighted material
on broadcast signals. The possible modification or elimination of this
compulsory copyright license is the subject of continuing legislative review and
could adversely affect the Partnership's and the Venture's ability to obtain
desired broadcast programming. In addition, the cable industry pays music
licensing fees to BMI and is negotiating a similar arrangement with ASCAP.
Copyright clearances for nonbroadcast programming services are arranged through
private negotiations.
State and Local Regulation. Cable television systems generally are
--------------------------
operated pursuant to nonexclusive franchises granted by a municipality or other
state or local government entity in order to cross public rights-of-way.
Federal law now prohibits franchise authorities from granting exclusive
franchises or from unreasonably refusing to award additional franchises. Cable
franchises generally are granted for fixed terms and in many cases include
monetary penalties for non-compliance and may be terminable if the franchisee
fails to comply with material provisions.
The terms and conditions of franchises vary materially from
jurisdiction to jurisdiction. Each franchise generally contains provisions
governing cable operations, service rates, franchise fees, system construction
and maintenance obligations, system channel capacity, design and technical
performance, customer service standards, and indemnification protections. A
number of states subject cable television systems to the jurisdiction of
centralized state governmental agencies, some of which impose regulation of a
character similar to that of a public utility. Although LFAs have considerable
discretion in establishing franchise terms, there are certain federal
limitations. For example, LFAs cannot insist on franchise fees exceeding 5
percent of the system's gross revenues, cannot dictate the particular technology
used by the system, and cannot specify video programming other than identifying
broad categories of programming.
10
<PAGE>
Federal law contains renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. Even if a franchise is
renewed, the franchise authority may seek to impose new and more onerous
requirements such as significant upgrades in facilities and services or
increased franchise fees as a condition of renewal. Similarly, if a franchise
authority's consent is required for the purchase or sale of a cable system or
franchise, such authority may attempt to impose more burdensome or onerous
franchise requirements in connection with a request for consent. Historically,
franchises have been renewed for cable operators that have provided satisfactory
services and have complied with the terms of their franchises.
GENERAL. The Partnership's and the Venture's business consists of
providing cable television services to a large number of customers, the loss of
any one of which would have no material effect on the Partnership's and the
Venture's business. The Systems have had some subscribers who later terminated
the service. Terminations occur primarily because people move to another home
or to another city. In other cases, people terminate on a seasonal basis or
because they no longer can afford or are dissatisfied with the service. The
amount of past due accounts in the Systems is not significant. The
Partnership's and the Venture's policy with regard to past due accounts is
basically one of disconnecting service before a past due account becomes
material.
The Partnership and the Venture do not depend to any material extent
on the availability of raw materials; they carry no significant amounts of
inventory and they have no material backlog of customer orders. Neither the
Venture nor the Partnership has any employees because all properties are managed
by employees of the General Partner. The General Partner has engaged in
research and development activities relating to the provision of new services
but the amount of the Partnership's and the Venture's funds expended for such
research and development has never been material.
Compliance with federal, state and local provisions that have been
enacted or adopted regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment has had no material
effect upon the capital expenditures, earnings or competitive position of the
Partnership and the Venture.
ITEM 2. PROPERTIES
-------------------
The cable television systems owned by the Partnership and the Venture
are described below:
<TABLE>
<CAPTION>
FUND SYSTEM ACQUISITION DATE
---- ------ ----------------
<S> <C> <C>
Cable TV Fund 14-B, Ltd. Surfside System September 1988
Littlerock System November 1989
Cable TV Fund 14-A/B Venture Broward County System March 1988
</TABLE>
The following sets forth (i) the monthly basic plus service rates
charged to subscribers and (ii) the number of basic subscribers and pay units
for the Systems. The monthly basic service rates set forth herein represent,
with respect to systems with multiple headends, the basic service rate charged
to the majority of the subscribers within the system. In cable television
systems, basic subscribers can subscribe to more than one pay TV service. Thus,
the total number of pay services subscribed to by basic subscribers are called
pay units. As of December 31, 1997, the Littlerock System operated cable plant
passing approximately 8,200 homes, with an approximate 69 percent penetration
rate; the Surfside System operated cable plant passing approximately 26,600
homes, with an approximate 81 percent penetration rate; and the Broward County
System operated cable plant passing approximately 89,100 homes, with an
approximate 57 percent penetration rate. Figures for numbers of subscribers and
homes passed are compiled from the General Partner's records and may be subject
to adjustments.
11
<PAGE>
CABLE TV FUND 14-B, LTD.
- ------------------------
<TABLE>
<CAPTION>
At December 31,
------------------------------------------------------------------
Littlerock System 1997 1996 1995
- ----------------- -------------------- --------------------- ---------------------
<S> <C> <C> <C>
Monthly basic plus service rate $26.52 $24.77 $23.27
Basic subscribers 5,673 5,774 5,673
Pay units 4,118 4,365 4,608
At December 31,
---------------------------------------------------------------------
Surfside System 1997 1996 1995
- --------------- --------------------- ---------------------- ----------------------
Monthly basic plus service rate $ 25.60 $ 24.09 $ 22.59
Basic subscribers 21,748 20,821 20,055
Pay units 20,242 18,897 14,083
CABLE TV FUND 14-A/B VENTURE
- ----------------------------
At December 31,
---------------------------------------------------------------------
Broward County System 1997 1996 1995
- --------------------- --------------------- ---------------------- ----------------------
Monthly basic plus service rate $ 27.25 $ 25.58 $ 24.16
Basic subscribers 51,032 50,957 49,654
Pay units 44,203 47,286 42,167
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
--------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
None.
PART II.
--------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
-------------------------------------------------
AND RELATED SECURITY HOLDER MATTERS
-----------------------------------
While the Partnership is publicly held, there is no public market for the
limited partnership interests, and it is not expected that a market will develop
in the future. During 1997, limited partners of the Partnership conducted
"limited tender offers" for interests in the Partnership at prices ranging from
$165 to $190 per interest. As of February 16, 1998, the number of equity
security holders in the Partnership was 15,304.
12
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31,
------------------------------------------------------------------------
Cable TV Fund 14-B, Ltd.(a) 1997 1996 1995 1994 1993
- ---------------------------------------- ------------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues $40,929,333 $ 37,768,924 $ 34,443,760 $ 32,084,279 $ 31,735,048
Depreciation and Amortization 14,070,460 13,474,568 14,265,096 15,037,554 15,812,869
Operating Loss (258,143) (1,165,250) (2,684,818) (5,677,171) (5,755,811)
Minority Interest in Consolidated Loss 626,089 815,252 1,104,003 1,468,218 1,277,358
Net Loss (3,543,869) (4,470,043) (6,108,952) (7,903,005) (7,637,593)
Net Loss per Limited Partnership Unit (13.42) (16.93) (23.14) (29.94) (28.93)
Weighted Average Number of Limited
Partnership Units Outstanding 261,353 261,353 261,353 261,353 261,353
General Partner's Deficit (749,411) (713,972) (669,272) (608,182) (529,152)
Limited Partners' Capital 38,417,913 41,926,343 46,351,686 52,399,548 60,223,523
Total Assets 99,133,735 105,915,409 111,850,697 118,867,757 128,779,941
Debt 54,185,513 56,656,424 56,241,715 57,376,558 58,881,755
General Partner Advances 835,015 449,094 1,896,049 297,956 29,182
For the Year Ended December 31,
-----------------------------------------------------------------------
Cable TV Fund 14-A/B Venture 1997 1996 1995 1994 1993
- ---------------------------------------- ----------- ------------ ------------ ------------ ------------
Revenues $27,504,735 $ 25,519,105 $ 23,469,505 $ 22,183,524 $ 22,068,952
Depreciation and Amortization 8,775,019 8,408,157 8,774,507 9,188,994 9,352,808
Operating Income (Loss) 567,514 (18,682) (753,422) (2,661,198) (2,324,939)
Net Loss (2,310,292) (3,008,309) (4,073,811) (5,417,779) (4,713,500)
Partners' Capital 12,671,551 14,981,843 17,990,152 22,063,963 27,481,742
Total Assets 54,156,017 58,277,058 62,447,556 66,597,460 72,315,816
Debt 39,597,617 41,262,561 40,530,652 42,271,921 43,461,730
Jones Intercable, Inc. Advances 446,115 268,256 2,206,959 354,179 57,920
</TABLE>
(a) Cable TV Fund 14-B, Ltd.'s. selected financial data includes 100 percent of
the accounts of Cable TV Fund 14-A/B Venture on a consolidated basis.
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------- -----------------------------------------------------------------------
OF OPERATIONS
-------------
The following discussion of the financial condition and results of
operations of Cable TV Fund 14-B, 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
- -------------------
In addition to the Surfside System and the Littlerock System, the
Partnership owns a 73 percent interest in the Venture. The accompanying
consolidated financial statements include 100 percent of the accounts of the
Partnership and those of the Venture reduced by the 27 percent minority interest
in the Venture owned by Cable TV Fund 14-A, Ltd. ("Fund 14-A").
It is the General Partner's publicly announced policy that it intends to
liquidate its managed partnerships, including the Partnership, as opportunities
for sales of partnership cable television systems arise in the marketplace. In
accordance with the General Partner's policy, the Partnership's Surfside System
and Littlerock System are under contract for sale and the Venture's Broward
System is expected to be sold on March 31, 1998.
Cable TV Fund 14-B, Ltd. -
- ------------------------
On October 3, 1997, the Venture entered into an asset purchase agreement
(the "Agreement") to sell the Broward System to an unaffiliated party (the
"Purchaser") for a sales price of $140,000,000. The Partnership will distribute
its portion (approximately $68,548,000, or approximately $524 for each $1,000
invested in the Partnership) of the net sales proceeds to its limited partners
of record as of the closing date of the sale of the Broward System. Refer to
Management's Discussion and Analysis of Financial Condition of the Venture for
information pertinent to the Partnership with respect to the sale of the Broward
System.
On November 4, 1997, the Partnership entered into an asset purchase
agreement to sell the Surfside System to an unaffiliated party for a sales price
of $51,500,000, subject to customary closing adjustments. Closing of the sale,
which is anticipated to occur in the second quarter of 1998, is subject to
several conditions, including necessary governmental and other third party
consents. The sale has been approved by over 60 percent of the limited
partnership interests of the Partnership.
Upon the consummation of the proposed sale of the Surfside System, the
Partnership will retain approximately $380,000 of the sale proceeds as a working
capital reserve, repay advances from the General Partner totaling approximately
$390,000, repay all of the Partnership's indebtedness (including the approximate
$14,400,000 borrowed under its credit facility and capital lease obligations of
$155,474), pay a 2.5 percent brokerage fee totaling $1,287,500 to The Jones
Group, pay a deferred acquisition fee of $920,000 to The Jones Group and then
the $33,821,213 of net sale proceeds will be distributed to the Partnership's
limited partners of record as of the closing date of the sale of the Surfside
System. Based upon financial information as of December 31, 1997, as a result
of the Surfside System's sale, the limited partners of the Partnership, as a
group, will receive $33,821,213. Limited partners will receive $129 for each
$500 limited partnership interest, or $258 for each $1,000 invested in the
Partnership.
Once the Partnership has completed the distributions of its portion of the
net proceeds from the sale of the Broward System and the net proceeds from the
sale of the Surfside System, limited partners of the Partnership will have
received a total of $391 for each $500 limited partnership interest, or $782 for
each $1,000 invested in the Partnership. Because the distributions to the
limited partners from the sale of the Surfside System and the Broward System
will not return 125 percent of the capital initially contributed by the limited
partners to the Partnership, the General Partner will not receive a general
partner distribution from the Surfside System's sale proceeds.
On March 10, 1998, the Partnership entered into an agreement with the
General Partner to sell the cable television system serving areas in and around
Littlerock, California (the "Littlerock System") to the General Partner or one
of its subsidiaries for a sales price of $10,720,400, subject to customary
closing adjustments. The sales price represents the average of three
independent appraisals of the fair market value of the Littlerock System. The
closing of this transaction is expected to occur in the third quarter of 1998,
concurrently with the closing of the purchase by the General Partner from
another one of its managed partnerships of the cable television system serving
areas in and around Palmdale and Lancaster, California. The closing is subject
to a number of conditions including the approval of the transaction by the
holders of a majority of the limited partnership interests of the Partnership,
the expiration or termination of all waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 applicable to the agreement or the
transactions contemplated thereby, and the consents of governmental authorities
and other third parties. The General Partner expects to conduct a proxy vote on
the Littlerock System sale during the summer of 1998.
14
<PAGE>
Upon the consummation of the proposed sale of the Littlerock System, the
Partnership will distribute the net sale proceeds of approximately $10,808,000
to the limited partners of the Partnership. This distribution will give the
Partnership's limited partners a return of $41 for each $500 limited partner
interest, or $82 for each $1,000 invested in the Partnership.
Taking into account the distribution from the sale of the Broward System,
the distribution from the sale of the Surfside System, and the distribution from
the sale of the Littlerock System, the limited partners of the Partnership can
expect to receive a total of $432 for each $500 limited partner interest, or
$864 for each $1,000 invested in the Partnership. Because the distributions to
the limited partners from the sales of the Littlerock System, the Surfside
System and the Broward System will not return 125 percent of the capital
initially contributed by the limited partners to the Partnership, the General
Partner will not receive a general partner distribution from the Littlerock
System sale proceeds. The Partnership will be liquidated and dissolved after
the sale of the Littlerock System, which will be the Partnership's last
remaining asset at the time of the sale.
For the twelve months ended December 31, 1997, the Surfside System and
Littlerock System generated net cash from operating activities totaling
$4,157,653, which is available to fund capital expenditures and non-operating
costs. The Partnership expended approximately $4,029,000 on capital additions
during 1997 in its Surfside System and Littlerock System. Approximately 31
percent of the expenditures was for the upgrade of cable plant. Approximately
29 percent of these expenditures was for the construction of cable plant
extensions related to new homes passed. Approximately 22 percent of the
expenditures was for the construction of drops to subscribers' homes. The
remainder of the expenditures was to maintain the value of the Partnership's
cable television systems. Funding for these expenditures was provided by cash
generated by operations. Budgeted capital expenditures for all of 1998 are
approximately $1,758,246. Approximately 46 percent of these expenditures are
expected to be used for the construction of plant extensions related to new
homes passed in the Partnership's systems. Approximately 36 percent are
expected to be used for service drops to homes. The remainder of these
expenditures is necessary to maintain the value of the Partnership's systems
until they are sold. Depending upon the timing of the closing of the sale of
the Partnership's systems, the Partnership will make only the portion of the
budgeted capital expenditures scheduled to be made during the Partnership's
continued ownership of its systems. Funding for these improvements will be
provided by cash generated from operations and borrowings under the
Partnership's credit facility.
The Partnership has a reducing revolving credit facility with an available
commitment of $18,000,000. At December 31, 1997, the balance outstanding was
$14,400,000, leaving $3,600,000 available for future borrowings. On September
30, 1998, the maximum amount available begins to reduce quarterly until December
31, 2003 when the amount available will be zero. Interest on the reducing
revolving credit facility is at the Partnership's option of the Base Rate, the
London Interbank Offered Rate ("LIBOR") plus 1 percent, or the Certificate of
Deposit Rate ("CD Rate") plus 1-1/8 percent. The effective interest rates on
amounts outstanding as of December 31, 1997 and 1996 were 6.85 percent and 6.69
percent, respectively. This credit facility will be paid in full upon the sale
of the Surfside System.
The General Partner believes that the Partnership's wholly owned systems
have sufficient sources of capital from cash generated from operations and
borrowings available under the reducing revolving credit facility to service
their presently anticipated needs until its systems are sold.
Year 2000 Issue
- ---------------
The Year 2000 issue is the result of many computer programs being written
such that they will malfunction when reading a year of "00." This problem could
cause system failure or miscalculations causing disruptions of business
processes.
The General Partner has initiated an assessment of its computer
applications to determine the extent of the problem. Based on this assessment,
the General Partner has determined that the majority of its computer
applications supporting business processes, including accounting and billing,
are designed to handle the Year 2000 appropriately.
The General Partner is currently focusing its efforts on the impact of the
Year 2000 issue on service delivery. The General Partner has established an
internal team to address this issue. The General Partner is identifying and
testing all date-sensitive equipment involved in delivering service to the
Venture's and the Partnership's customers. In addition, the General Partner
will assess its options regarding repair or replacement of affected equipment
during this testing. The General Partner currently has no definitive estimate of
the cost or the extent of the impact, if any, this problem will have on service
delivery; however, the General Partner does not believe that the impact will be
material. The General Partner anticipates completion of its testing in 1998, at
which time it will determine the financial impact on the Venture and the
Partnership. The General Partner expects that the financial impact on the
Venture and the Partnership of the Year 2000 issue likely will not be material
because the General Partner anticipates that the Venture and the Partnership
will be liquidated before the year 2000.
15
<PAGE>
Cable TV Fund 14-A/B Venture -
- ----------------------------
On October 3, 1997, the Venture entered into an agreement to sell the
Broward System to an unaffiliated third party for $140,000,000, subject to
closing adjustments discussed below. Closing of this sale is scheduled for
March 31, 1998, subject to several conditions, including necessary governmental
and other third party consents. The General Partner expects that all material
consents will be obtained prior to the scheduled closing date. The closing
adjustments primarily relate to the number of equivalent basic subscribers at
closing. If equivalent basic subscribers are less than 56,637, the sales price
will be reduced $2,472 multiplied by the number by which the Broward System's
equivalent basic subscribers are less than 56,637, up to a maximum adjustment of
$7,000,000. Because it is estimated that the Broward System will have 55,274
equivalent basic subscribers, as defined in the agreement, at March 31, 1998, at
closing their will be a sales price reduction of approximately $3,369,000. The
General Partner expects that when final closing adjustments are done
approximately sixty days after closing, additional equivalent basic subscribers
that were not able to be counted at closing because they were relatively recent
subscribers at March 31, 1998 will be counted as equivalent basic subscribers
when final closing adjustments are done and the sales price will be adjusted
accordingly. If the sales price is adjusted upward, the Venture would make an
additional distribution to the two constituent partnerships of the Venture in
proportion to their ownership interests in the Venture.
Upon closing, the Venture will repay all of its indebtedness, which totaled
$39,597,617 at December 31, 1997 and a brokerage fee of approximately $3,500,000
to The Jones Group and then the Venture will distribute the remaining net sales
proceeds, or approximately $94,039,000, to the two constituent partnerships of
the Venture in proportion to their ownership interests in the Venture.
Accordingly, the Partnership will receive 73 percent of the net sales proceeds,
or approximately $68,548,000. The Partnership will distribute its net sales
proceeds to its limited partners of record as of the closing date of the sale of
the Broward System. Such distribution represents approximately $262 for each
limited partnership unit or $524 for each $1,000 invested in the Partnership.
Because the distribution to the limited partners from the sale of the Broward
System will not return 125 percent of the capital initially contributed to the
Partnership by the limited partners, the General Partner will not receive any
general partner distribution from the Broward System's sale. The sale of the
Broward System has been approved by over 60 percent of the limited partnership
interests of the Partnership. Because the Broward System represents the only
asset of the Venture, the Venture will be liquidated and dissolved upon the
completion of the sale of the Broward System.
For the twelve months ended December 31, 1997, the Venture generated net
cash from operating activities totaling $5,486,763 which is available to fund
capital expenditures and non-operating costs. The Venture expended
approximately $3,812,000 on capital additions during 1997. The construction of
service drops to homes accounted for approximately 39 percent of the
expenditures. Cable television plant extensions related to new homes passed
accounted for approximately 38 percent of these expenditures. The remainder of
these expenditures was to maintain the value of the Broward System. These
capital expenditures were funded primarily from cash on hand and cash generated
from operations. Because the closing of the sale of the Broward System is
scheduled for March 31, 1998, approximately $886,000 of capital expenditures are
expected to be made to maintain the value of the Broward System until it is
sold. These capital expenditures are expected to be funded from cash on hand,
cash generated from operations and borrowings under its credit facility.
The Venture has a reducing revolving credit facility with an available
commitment of $42,500,000. The entire $42,500,000 commitment is available
through December 31, 1998, at which time the commitment will begin to reduce
quarterly until December 31, 2003 when the amount available will be zero. At
December 31, 1997, the balance outstanding was $39,402,968, leaving $3,097,032
available for future borrowings. Interest is at the Venture's option of Prime
plus 1/4 percent, LIBOR plus 1-1/4 percent or the CD Rate plus 1-3/8 percent.
The effective interest rates on amounts outstanding as of December 31, 1997 and
1996 were 7.10 percent and 6.79 percent, respectively. This credit facility
will be paid in full upon the sale of the Broward System.
16
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
Cable TV Fund 14-B, Ltd. -
- ------------------------
The results of operations for the Partnership are summarized below:
<TABLE>
<CAPTION>
Year Ended December 31, 1997
-----------------------------------------
Partnership Venture
Owned Owned Consolidated
------------ ------------ -------------
<S> <C> <C> <C>
Revenues $13,424,598 $27,504,735 $40,929,333
Operating expenses $ 7,531,859 $15,185,319 $22,717,178
Management fees and allocated overhead from General Partner $ 1,422,955 $ 2,976,883 $ 4,399,838
Depreciation and amortization $ 5,295,441 $ 8,775,019 $14,070,460
----------- ----------- -----------
Operating income (loss) $ (825,657) $ 567,514 $ (258,143)
Interest expense $(1,025,917) $(2,877,337) $(3,903,254)
Other, net $ (8,092) $ (469) $ (8,561)
----------- ----------- -----------
Consolidated loss before minority interest $(1,859,666) $(2,310,292) $(4,169,958)
Minority interest in consolidated loss $ - $ 626,089 $ 626,089
----------- ----------- -----------
Net loss $(1,859,666) $(1,684,203) $(3,543,869)
=========== =========== ===========
Year Ended December 31, 1996
----------------------------------------
Partnership Venture
Owned Owned Consolidated
----------- ----------- ------------
Revenues $12,249,819 $25,519,105 $37,768,924
Operating expenses $ 6,918,196 $14,148,533 $21,066,729
Management fees and allocated overhead from General Partner $ 1,411,780 $ 2,981,097 $ 4,392,877
Depreciation and amortization $ 5,066,411 $ 8,408,157 $13,474,568
----------- ----------- -----------
Operating loss $(1,146,568) $ (18,682) $(1,165,250)
Interest expense $(1,082,104) $(3,006,847) $(4,088,951)
Other, net $ (48,314) $ 17,220 $ (31,094)
----------- ----------- -----------
Consolidated loss before minority interest $(2,276,986) $(3,008,309) $(5,285,295)
Minority interest in consolidated loss $ - $ 815,252 $ 815,252
----------- ----------- -----------
Net loss $(2,276,986) $(2,193,057) $(4,470,043)
=========== =========== ===========
</TABLE>
17
<PAGE>
1997 Compared to 1996 -
Revenues of the Partnership's Surfside System and Littlerock System
increased $1,174,779, or approximately 10 percent, to $13,424,598 in 1997 from
$12,249,819 in 1996. This increase was primarily the result of basic service
rate increases, an increase in the number of basic subscribers, an increase in
advertising sales and an increase in premium service revenue. Basic service
rate increases accounted for approximately 36 percent of the increase in
revenues. The number of basic subscribers totaled 27,421 at December 31, 1997
compared to 26,595 at December 31, 1996, an increase of 826, or approximately 3
percent. This increase in basic subscribers accounted for approximately 20
percent of the increase in revenues. Increases in advertising sales and premium
service revenue accounted for approximately 21 percent and 9 percent,
respectively, of the increase in revenues. No other individual factor
contributed significantly to the increase in revenues.
Operating expenses consist primarily of costs associated with the operation
and administration of the Partnership's cable television systems. The principal
cost components are salaries paid to system personnel, programming expenses,
professional fees, subscriber billing costs, rent for leased facilities, cable
system maintenance expenses and marketing expenses.
Operating expenses increased $613,663, or approximately 9 percent, to
$7,531,859 in 1997 from $6,918,196 in 1996. Increases in programming fees and
advertising expenses were primarily responsible for the increase in operating
expenses. No other individual factor significantly affected the increase in
operating expenses. Operating expenses represented approximately 56 percent of
revenue for both 1997 and 1996.
The cable television industry generally measures the financial performance
of a cable television system in terms of operating cash flow (revenues less
operating expenses). This measure is not intended to be a substitute or
improvement upon the items disclosed on the financial statements, rather it is
included because it is an industry standard. Operating cash flow increased
$561,116, or approximately 11 percent, to $5,892,739 in 1997 from $5,331,623 in
1996. This increase was due to the increase in revenues exceeding the increase
in operating expenses.
Management fees and allocated overhead from the General Partner increased
$11,175, or approximately 1 percent, to $1,422,955 in 1997 from $1,411,780 in
1996. This increase was due to the increase in revenues, upon which such
management fees are based and was partially offset by a decrease in allocated
overhead from the General Partner.
Depreciation and amortization expense increased $229,030, or approximately
5 percent, to $5,295,441 in 1997 from $5,066,411 in 1996. This increase was due
to capital additions to the Partnership's asset base.
Operating loss decreased $320,911, or approximately 28 percent, to $825,657
in 1997 from $1,146,568 in 1996. This decrease was due to the increase in
operating cash flow exceeding the increase in depreciation and amortization.
Interest expense decreased $56,187, or approximately 5 percent, to
$1,025,917 in 1997 from $1,082,104 in 1996. This decrease was due to lower
outstanding balances on interest bearing obligations during 1997.
Net loss decreased $417,320, or approximately 18 percent, to $1,859,666 in
1997 from $2,276,986 in 1996. These losses were primarily the result of the
factors discussed above.
1996 Compared to 1995 -
Revenues of the Partnership's Surfside System and Littlerock System
increased $1,275,564, or approximately 12 percent, to $12,249,819 in 1996 from
$10,974,255 in 1995. This increase was primarily the result of basic service
rate increases and an increase in the number of basic subscribers. Basic
service rate increases accounted for approximately 37 percent of the increase in
revenues. The number of basic subscribers totaled 26,595 at December 31, 1996
compared to 25,728 at December 31, 1995, an increase of 867, or approximately 3
percent. This increase in basic subscribers accounted for approximately 24
percent of the increase in revenues. Increases in advertising sales and premium
service revenue accounted for approximately 13 percent and 8 percent,
respectively, of the increase in revenues. No other individual factor
contributed significantly to the increase in revenues.
Operating expenses increased $856,592, or approximately 14 percent, to
$6,918,196 in 1996 from $6,061,604 in 1995. Increases in programming fees,
advertising expenses and marketing expenses were primarily responsible for the
increase in operating expenses. No other individual factor significantly
affected the increase in operating expenses. Operating expenses represented
approximately 56 percent and 55 percent of revenue for 1996 and 1995,
respectively.
Operating cash flow increased $418,972, or approximately 9 percent, to
$5,331,623 in 1996 from $4,912,651 in 1995. This increase was due to the
increase in revenues exceeding the increase in operating expenses.
18
<PAGE>
Management fees and allocated overhead from the General Partner increased
$58,322, or approximately 4 percent, to $1,411,780 in 1996 from $1,353,458 in
1995. This increase was due to the increase in revenues, upon which such fees
are based.
Depreciation and amortization expense decreased $424,178, or approximately
8 percent, to $5,066,411 in 1996 from $5,490,589 in 1995. This decrease was due
to the maturation of the Partnership's asset base.
Operating loss decreased $784,828, or approximately 41 percent, to
$1,146,568 in 1996 from $1,931,396 in 1995. This decrease was due to the
increase in operating cash flow and the decrease in depreciation and
amortization.
Interest expense decreased $107,573, or approximately 9 percent, to
$1,082,104 in 1996 from $1,189,677 in 1995. This decrease was due to lower
effective interest rates on interest bearing obligations during 1996.
Net loss decreased $862,158, or approximately 27 percent, to $2,276,986 in
1996 from $3,139,144 in 1995. These losses were primarily the result of the
factors discussed above.
Cable TV Fund 14-A/B Venture -
- ----------------------------
In addition to its ownership of the Surfside System and the Littlerock
System, the Partnership owns a 73 percent interest in the Venture.
1997 Compared to 1996-
Revenues of the Venture's Broward System increased $1,985,630, or
approximately 8 percent, to $27,504,735 in 1997 from $25,519,105 in 1996. Basic
service rate increases accounted for approximately 48 percent of the increase in
revenues. Increases in advertising sales accounted for approximately 20 percent
of the increase in revenues. No other individual factor significantly affected
the increase in revenues.
Operating expenses increased $1,036,786, or approximately 7 percent, to
$15,185,319 in 1997 from $14,148,533 in 1996. The increase in operating
expenses was due primarily to increases in programming fees and advertising
expenses. No other individual factor significantly affected the increase in
operating expenses. Operating expenses represented 55 percent of revenue for
both 1997 and 1996.
Operating cash flow increased $948,844, or approximately 8 percent, to
$12,319,416 in 1997 from $11,370,572 in 1996 due to the increase in revenues
exceeding the increase in operating expenses.
Management fees and allocated overhead from Jones Intercable, Inc.
decreased $4,214, or less than 1 percent, to $2,976,883 in 1997 from $2,981,097
in 1996. This decrease was due primarily to a decrease in allocated overhead
from Jones Intercable, Inc.
Depreciation and amortization expense increased $366,862, or approximately
4 percent, to $8,775,019 in 1997 from $8,408,157 in 1996. The increase in
depreciation and amortization expense was attributable to capital additions to
the Venture's asset base.
The Venture reported operating income of $567,514 in 1997 compared to an
operating loss of $18,682 in 1996. This change was due to the increase in cash
flow exceeding the increase in depreciation and amortization expense.
Interest expense decreased $129,510, or approximately 4 percent, to
$2,877,337 in 1997 from $3,006,847 in 1996 due to lower outstanding balances on
interest bearing obligations during 1997.
Net loss decreased $698,017, or approximately 23 percent, to $2,310,292 in
1997 from $3,008,309 in 1996. These losses were primarily the result of the
factors discussed above.
1996 Compared to 1995-
Revenues of the Venture's Broward System increased $2,049,600, or
approximately 9 percent, to $25,519,105 in 1996 from $23,469,505 in 1995. Basic
service rate increases accounted for approximately 35 percent of the increase in
revenue. An increase in the number of basic subscribers accounted for
approximately 27 percent of the increases in revenue. The number of basic
subscribers totaled 50,957 at December 31, 1996 compared to 49,654 at December
31, 1995, an increase of 1,303, or
19
<PAGE>
approximately 3 percent. Increases in premium service revenue accounted for
approximately 16 percent of the increase in revenue. No other individual factor
significantly affected the increase in revenues.
Operating expenses increased $1,528,324, or approximately 12 percent, to
$14,148,533 in 1996 from $12,620,209 in 1995. Operating expenses represented 55
percent of revenue in 1996, compared to 54 percent in 1995. The increase in
operating expenses was due primarily to increases in programming fees, which
were partially offset by decreases in personnel and marketing expenses. No
other individual factor significantly affected the increase in operating
expenses.
Operating cash flow increased $521,276, or approximately 5 percent, to
$11,370,572 in 1996 from $10,849,296 in 1995 due to the increase in revenues
exceeding the increase in operating expenses.
Management fees and allocated overhead from Jones Intercable, Inc.
increased $152,886, or approximately 5 percent, to $2,981,097 in 1996 from
$2,828,211 in 1995. This increase was due primarily to the increase in revenues
upon which such management fees and allocations are based.
Depreciation and amortization expense decreased $366,350, or approximately
4 percent, to $8,408,157 in 1996 from $8,774,507 in 1995. The decrease in
depreciation and amortization expense was attributable to the maturation of a
portion of the Venture's asset base.
Operating loss decreased $734,740 to $18,682 in 1996 compared to $753,422
in 1995. This decrease was due to the increase in operating cash flow and the
decrease in depreciation and amortization.
Interest expense decreased $364,677, or approximately 11 percent, to
$3,006,847 in 1996 from $3,371,524 in 1995 due to lower outstanding balances and
lower effective interest rates on interest bearing obligations during 1996.
Net loss decreased $1,065,502, or approximately 26 percent, to $3,008,309
in 1996 from $4,073,811 in 1995. These losses were primarily the result of the
factors discussed above.
ITEM 8. FINANCIAL STATEMENTS
- -----------------------------
The audited financial statements of the Partnership and the Venture for the
year ended December 31, 1997 follow.
20
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Partners of Cable TV Fund 14-B, Ltd.:
We have audited the accompanying consolidated balance sheets of CABLE TV
FUND 14-B, Ltd.(a Colorado limited partnership) and subsidiary as of December
31, 1997 and 1996, and the related consolidated statements of operations,
partners' capital (deficit) and cash flows for each of the three years in the
period ended December 31, 1997. These financial statements are the
responsibility of the General Partner's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cable TV Fund 14-B, Ltd. and
subsidiary as of December 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1997, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 13, 1998.
21
<PAGE>
CABLE TV FUND 14-B, LTD.
------------------------
(A Limited Partnership)
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
December 31,
----------------------------
ASSETS 1997 1996
------ ------------ ------------
<S> <C> <C>
CASH $ 173,628 $ 840,309
TRADE RECEIVABLES, less allowance for doubtful receivables of
$133,188 and $140,879 at December 31, 1997 and 1996, respectively 1,470,293 2,077,493
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 105,933,977 98,093,791
Less- accumulated depreciation (55,360,283) (48,820,169)
------------ ------------
50,573,694 49,273,622
Franchise costs and other intangible assets, net of accumulated
amortization of $84,913,605 and $77,746,909 at December 31, 1997
and 1996, respectively 46,126,693 53,293,389
------------ ------------
Total investment in cable television properties 96,700,387 102,567,011
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 789,427 430,596
------------ ------------
Total assets $ 99,133,735 $105,915,409
============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
22
<PAGE>
CABLE TV FUND 14-B, LTD.
------------------------
(A Limited Partnership)
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
December 31,
----------------------------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1997 1996
------------------------------------------- ------------- ------------
<S> <C> <C>
LIABILITIES:
Debt $ 54,185,513 $ 56,656,424
General Partner advances 835,015 449,094
Deferred brokerage fee 920,000 920,000
Trade accounts payable and accrued liabilities 1,617,666 2,151,254
Subscriber prepayments 569,308 562,446
------------ ------------
Total liabilities 58,127,502 60,739,218
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 7)
MINORITY INTEREST IN CABLE TELEVISION
JOINT VENTURE 3,337,731 3,963,820
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (750,411) (714,972)
------------ ------------
(749,411) (713,972)
------------ ------------
Limited Partners-
Net contributed capital (261,353 units
outstanding at December 31, 1997 and 1996) 112,127,301 112,127,301
Accumulated deficit (73,709,388) (70,200,958)
------------ ------------
38,417,913 41,926,343
------------ ------------
Total liabilities and partners' capital (deficit) $ 99,133,735 $105,915,409
============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
23
<PAGE>
CABLE TV FUND 14-B, LTD.
------------------------
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES $40,929,333 $37,768,924 $34,443,760
COSTS AND EXPENSES:
Operating expenses 22,717,178 21,066,729 18,681,813
Management fees and allocated overhead from
General Partner 4,399,838 4,392,877 4,181,669
Depreciation and amortization 14,070,460 13,474,568 14,265,096
----------- ----------- -----------
OPERATING LOSS (258,143) (1,165,250) (2,684,818)
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (3,903,254) (4,088,951) (4,561,201)
Other, net (8,561) (31,094) 33,064
----------- ----------- -----------
Total other income (expense), net (3,911,815) (4,120,045) (4,528,137)
----------- ----------- -----------
CONSOLIDATED LOSS BEFORE MINORITY INTEREST (4,169,958) (5,285,295) (7,212,955)
MINORITY INTEREST IN CONSOLIDATED LOSS 626,089 815,252 1,104,003
----------- ----------- -----------
NET LOSS $(3,543,869) $(4,470,043) $(6,108,952)
=========== =========== ===========
ALLOCATION OF NET LOSS:
General Partner $ (35,439) $ (44,700) $ (61,090)
=========== =========== ===========
Limited Partners $(3,508,430) $(4,425,343) $(6,047,862)
=========== =========== ===========
NET LOSS PER LIMITED
PARTNERSHIP UNIT $(13.42) $(16.93) $(23.14)
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 261,353 261,353 261,353
=========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
24
<PAGE>
CABLE TV FUND 14-B, LTD.
------------------------
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
GENERAL PARTNER:
Balance, beginning of year $ (713,972) $ (669,272) $ (608,182)
Net loss for year (35,439) (44,700) (61,090)
----------- ----------- -----------
Balance, end of year $ (749,411) $ (713,972) $ (669,272)
=========== =========== ===========
LIMITED PARTNERS:
Balance, beginning of year $41,926,343 $46,351,686 $52,399,548
Net loss for year (3,508,430) (4,425,343) (6,047,862)
----------- ----------- -----------
Balance, end of year $38,417,913 $41,926,343 $46,351,686
=========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
25
<PAGE>
CABLE TV FUND 14-B, LTD.
------------------------
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1997 1996 1995
----------- ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,543,869) $(4,470,043) $ (6,108,952)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 14,070,460 13,474,568 14,265,096
Amortization of interest rate protection contract - 10,581 106,431
Minority interest in consolidated loss (626,089) (815,252) (1,104,003)
Decrease (increase) in trade receivables 607,200 (337,634) (795,486)
Increase in deposits, prepaid expenses and
deferred charges (722,481) (164,700) (293,774)
Increase (decrease) in trade accounts payable and
accrued liabilities and subscriber prepayments (526,726) 382,253 (267,355)
Increase (decrease) in General Partner advances 385,921 (1,446,955) 1,598,093
----------- ----------- ------------
Net cash provided by operating activities 9,644,416 6,632,818 7,400,050
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (7,840,186) (6,682,122) (6,438,682)
----------- ----------- ------------
Net cash used in investing activities (7,840,186) (6,682,122) (6,438,682)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 1,541,111 4,048,014 17,622,092
Repayment of debt (4,012,022) (3,633,305) (18,756,935)
----------- ----------- ------------
Net cash provided by (used in)
financing activities (2,470,911) 414,709 (1,134,843)
----------- ----------- ------------
Increase (decrease) in cash (666,681) 365,405 (173,475)
Cash, beginning of year 840,309 474,904 648,379
----------- ----------- ------------
Cash, end of year $ 173,628 $ 840,309 $ 474,904
=========== =========== ============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 4,136,822 $ 3,788,839 $ 4,852,445
=========== =========== ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
26
<PAGE>
CABLE TV FUND 14-B, LTD.
------------------------
(A Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(1) ORGANIZATION AND PARTNERS' INTERESTS
------------------------------------
Formation and Business
----------------------
Cable TV Fund 14-B, Ltd. (the "Partnership"), a Colorado limited
partnership, was formed on September 9, 1987, under a public program sponsored
by Jones Intercable, Inc. ("Intercable"). The Partnership was formed to
acquire, construct, develop and operate cable television systems. Intercable, a
publicly held Colorado corporation, 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.
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 partnership
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.
Formation of Joint Venture and Joint Venture Cable Television System
--------------------------------------------------------------------
Acquisition
- -----------
On January 8, 1988, Cable TV Fund 14-A, Ltd. and the Partnership 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"). Cable TV Fund 14-A, Ltd. contributed $18,975,000 to the capital of
the Venture for a 27 percent ownership interest and the Partnership contributed
$51,025,000 to the capital of the Venture for a 73 percent ownership interest.
Partnership Cable Television System Acquisitions
------------------------------------------------
The Partnership acquired the cable television system serving Surfside,
South Carolina (the "Surfside System") in 1988 and the cable television system
serving Littlerock, California (the "Littlerock System") in 1989.
Proposed Cable Television System Sales
--------------------------------------
On October 3, 1997, the Venture entered into an agreement to sell the
Broward System to an unaffiliated third party for $140,000,000, subject to
closing adjustments discussed below. Closing of this sale is scheduled for
March 31, 1998, subject to several conditions, including necessary governmental
and other third party consents. The General Partner expects that all material
consents will be obtained prior to the scheduled closing date. The closing
adjustments primarily relate to the number of equivalent basic subscribers at
closing. If equivalent basic subscribers are less than 56,637, the sales price
will be reduced $2,472 multiplied by the number by which the Broward System's
equivalent basic subscribers are less than 56,637, up to a maximum adjustment of
$7,000,000. Because it is estimated that the Broward System will have 55,274
equivalent basic subscribers, as defined in the agreement, at March 31, 1998, at
closing their will be a sales price reduction of approximately $3,369,000. The
General Partner expects that when final closing adjustments are done
approximately sixty days after closing, additional equivalent basic subscribers
that were not able to be counted at closing because they were relatively recent
subscribers at March 31, 1998 will be counted as equivalent basic subscribers
when final closing adjustments are done and the sales price will be adjusted
accordingly. If the sales price is adjusted upward, the Venture would make an
additional distribution to the two constituent partnerships of the Venture in
proportion to their ownership interests in the Venture.
Upon closing, the Venture will repay all of its indebtedness, which totaled
$39,597,617 at December 31, 1997 and a brokerage fee of approximately $3,500,000
to The Jones Group and then the Venture will distribute the remaining net sales
proceeds, or approximately $94,039,000, to the two constituent partnerships of
the Venture in proportion to their ownership interests in the Venture.
Accordingly, the Partnership will receive 73 percent of the net sales proceeds,
or approximately
27
<PAGE>
$68,548,000. The Partnership will distribute its net sales proceeds to its
limited partners of record as of the closing date of the sale of the Broward
System. Such distribution represents approximately $262 for each limited
partnership unit or $524 for each $1,000 invested in the Partnership. Because
the distribution to the limited partners from the sale of the Broward System
will not return 125 percent of the capital initially contributed to the
Partnership by the limited partners, the General Partner will not receive any
general partner distribution from the Broward System's sale. The sale of the
Broward System has been approved by over 60 percent of the limited partnership
interests of the Partnership. Because the Broward System represents the only
asset of the Venture, the Venture will be liquidated and dissolved upon the
completion of the sale of the Broward System.
On November 4, 1997, the Partnership entered into an asset purchase
agreement to sell the Surfside System to an unaffiliated party for a sales price
of $51,500,000, subject to customary closing adjustments. Closing of the sale,
which is anticipated to occur in the second quarter of 1998, is subject to
several conditions, including necessary governmental and other third party
consents. The sale has been approved by over 60 percent of the limited
partnership interests of the Partnership.
Upon the consummation of the proposed sale of the Surfside System, the
Partnership will retain approximately $380,000 of the sale proceeds as a working
capital reserve, repay advances from the General Partner totaling approximately
$390,000, repay all of the Partnership's indebtedness (including the approximate
$14,400,000 borrowed under its credit facility and capital lease obligations of
$155,474), pay a 2.5 percent brokerage fee totaling $1,287,500 to The Jones
Group, pay a deferred acquisition fee of $920,000 to The Jones Group and then
the $33,821,213 of net sale proceeds will be distributed to the Partnership's
limited partners of record as of the closing date of the sale of the Surfside
System. Based upon financial information as of December 31, 1997, as a result
of the Surfside System's sale, the limited partners of the Partnership, as a
group, will receive $33,821,213. Limited partners will receive $129 for each
$500 limited partnership interest, or $258 for each $1,000 invested in the
Partnership.
Once the Partnership has completed the distributions of its portion of the
net proceeds from the sale of the Broward System and the net proceeds from the
sale of the Surfside System, limited partners of the Partnership will have
received a total of $391 for each $500 limited partnership interest, or $782 for
each $1,000 invested in the Partnership. Because the distributions to the
limited partners from the sale of the Surfside System and the Broward System
will not return 125 percent of the capital initially contributed by the limited
partners to the Partnership, the General Partner will not receive a general
partner distribution from the Surfside System's sale proceeds.
On March 10, 1998, the Partnership entered into an agreement with the
General Partner to sell the cable television system serving areas in and around
Littlerock, California (the "Littlerock System") to the General Partner or one
of its subsidiaries for a sales price of $10,720,400, subject to customary
closing adjustments. The sales price represents the average of three
independent appraisals of the fair market value of the Littlerock System. The
closing of this transaction is expected to occur in the third quarter of 1998,
concurrently with the closing of the purchase by the General Partner from
another one of its managed partnerships of the cable television system serving
areas in and around Palmdale and Lancaster, California. The closing is subject
to a number of conditions including the approval of the transaction by the
holders of a majority of the limited partnership interests of the Partnership,
the expiration or termination of all waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 applicable to the agreement or the
transactions contemplated thereby, and the consents of governmental authorities
and other third parties. The General Partner expects to conduct a proxy vote on
the Littlerock System sale during the summer of 1998.
Upon the consummation of the proposed sale of the Littlerock System, the
Partnership will distribute the net sale proceeds of approximately $10,808,000
to the limited partners of the Partnership. This distribution will give the
Partnership's limited partners a return of $41 for each $500 limited partner
interest, or $82 for each $1,000 invested in the Partnership.
Taking into account the distribution from the sale of the Broward System,
the distribution from the sale of the Surfside System, and the distribution from
the sale of the Littlerock System, the limited partners of the Partnership can
expect to receive a total of $432 for each $500 limited partner interest, or
$864 for each $1,000 invested in the Partnership. Because the distributions to
the limited partners from the sales of the Littlerock System, the Surfside
System and the Broward System will not return 125 percent of the capital
initially contributed by the limited partners to the Partnership, the General
Partner will not receive a general partner distribution from the Littlerock
System sale proceeds. The Partnership will be liquidated and dissolved after
the sale of the Littlerock System, which will be the Partnership's last
remaining asset at the time of the sale.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Accounting Records
------------------
The accompanying consolidated financial statements have been prepared on
the accrual basis of accounting in accordance with generally accepted accounting
principles. The Partnership's tax returns are also prepared on the accrual
basis.
28
<PAGE>
The preparation of financial statements in conformity with generally
accepted accounting principles requires the General Partner's management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Purchase Price Allocation
-------------------------
Cable television system acquisitions were accounted for as purchases with
the individual purchase prices allocated to tangible and intangible assets based
upon an independent appraisal. The method of allocation of purchase price was
as follows: first, to the fair value of net tangible assets acquired; second,
to the value of subscriber lists and non compete agreements with previous
owners; third, to franchise costs; and fourth, to costs in excess of interests
in net assets purchased. Brokerage fees paid to an affiliate of Intercable
(Note 3) and other system acquisition costs were capitalized and included in the
cost of intangible assets.
Principles of Consolidation
---------------------------
As a result of the Partnership's ownership interest in the Venture of 73
percent, the accompanying consolidated financial statements present the
Partnership's and the Venture's financial condition and results of operations on
a consolidated basis with the ownership interest of Cable TV Fund 14-A, Ltd. in
the Venture shown as a minority interest. The Venture does not have any
ownership interest in the Surfside System or Littlerock System. These systems
are owned 100 percent by the Partnership. All interpartnership accounts and
transactions have been eliminated.
Property, Plant and Equipment
-----------------------------
Depreciation is provided using the straight-line method over the following
estimated service lives:
Cable distribution systems 5-15 years
Equipment and tools 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 franchises, costs in excess of interests in net assets
purchased and subscriber lists are amortized using the straight-line method over
the following remaining estimated useful lives:
Franchise costs 2 - 9 years
Costs in excess of interests
in net assets purchased 30 - 32 years
Subscriber lists 1 year
Revenue Recognition
-------------------
Subscriber prepayments are initially deferred and recognized as revenue
when earned.
Reclassifications
-----------------
Certain prior year amounts have been reclassified to conform to the 1997
presentation.
(3) TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES
----------------------------------------------------
Brokerage Fees
--------------
The Jones Group performs brokerage services for the Partnership. For
brokering the acquisition of the Surfside System for the Partnership, The Jones
Group earned a fee totaling $1,920,000, or 4 percent of the purchase price,
during the year ended December 31, 1988 of which $920,000 has been deferred
until the sale of the Surfside System.
29
<PAGE>
Management Fees, Distribution Ratios and Reimbursements
-------------------------------------------------------
Intercable manages the Partnership and the Venture and receives a fee for
its services equal to 5 percent of the gross revenues of the Partnership and the
Venture, excluding revenues from the sale of cable television systems or
franchises. Management fees paid to Intercable by the Partnership and the
Venture for the years ended December 31, 1997, 1996 and 1995 were $2,046,467,
$1,888,446 and $1,722,188, respectively.
Any partnership distributions made from cash flow (defined as cash receipts
derived from routine operations, less debt principal and interest payments and
cash expenses) are allocated 99 percent to the limited partners and 1 percent to
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 and the Venture reimburse 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 facilities costs. Such personnel provide engineering,
marketing, accounting, administrative, legal, and investor relations services to
the Partnership and to the Venture. Such services, and their related costs, are
necessary to the operation of the Partnership and Venture and would have been
incurred by the Partnership if they were stand alone entities. 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 and Venture'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 expense is
reasonable. Reimbursements made to Intercable for allocated overhead and
administrative expenses during the years ended December 31, 1997, 1996 and 1995
were $2,353,371, $2,504,431 and $2,459,481, respectively.
The Partnership and the Venture were charged interest during 1997 at an
average interest rate of 7.82 percent on the amounts due Intercable, which
approximated Intercable's weighted average cost of borrowing. Total interest
charged to the Partnership and the Venture by Intercable was $2,678, $106,022
and $145,929 for the years ended December 31, 1997, 1996 and 1995, respectively.
Payments to/from Affiliates for Programming Services
----------------------------------------------------
The Partnership and the Venture receive or have 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 by the Partnership and the Venture totaled $57,469,
$52,687 and $46,269 in 1997, 1996 and 1995, respectively. Payments to Knowledge
TV, Inc. by the Partnership and Venture totaled $63,921, $56,798 and $49,493 in
1997, 1996 and 1995, respectively. Payments to Jones Computer Network, Ltd.,
whose service was discontinued in April 1997, totaled $14,633, $39,371 and
$34,402 in 1997, 1996 and 1995, respectively. Payments by the Partnership and
Venture to Great American Country, Inc., which initiated service in 1996,
totaled $22,309 in 1997 and $71,929 in 1996.
The Partnership and the Venture received commissions from Product
Information Network based on a percentage of advertising revenue and number of
subscribers. Product Information Network paid commissions to the Partnership
and the Venture totaling $125,785, $80,474 and $54,759 in 1997, 1996 and 1995,
respectively.
30
<PAGE>
(4) PROPERTY, PLANT AND EQUIPMENT
-----------------------------
Property, plant and equipment as of December 31, 1997 and 1996, consisted
of the following:
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Cable distribution systems $ 96,364,218 $ 89,190,656
Equipment and tools 3,101,450 2,884,959
Office furniture and equipment 1,681,941 1,592,656
Buildings 2,400,272 2,213,590
Vehicles 1,199,795 1,025,629
Land 1,186,301 1,186,301
------------ ------------
105,933,977 98,093,791
Less - accumulated depreciation (55,360,283) (48,820,169)
------------ ------------
Total $ 50,573,694 $ 49,273,622
============ ============
(5) DEBT
----
Debt consists of the following: December 31,
---------------------------
1997 1996
------------ ------------
Lending institutions-
Reducing revolving credit facility for the Venture $ 39,402,968 $ 41,102,968
Reducing revolving credit facility for the Partnership 14,400,000 15,300,000
Capital lease obligations 382,545 253,456
------------ ------------
Total $ 54,185,513 $ 56,656,424
============ ============
</TABLE>
The Partnership has a reducing revolving credit facility with an available
commitment of $18,000,000. At December 31, 1997, the balance outstanding was
$14,400,000, leaving $3,600,000 available for future borrowings. On September
30, 1998, the maximum amount available begins to reduce quarterly until December
31, 2003 when the amount available will be zero. Interest on the reducing
revolving credit facility is at the Partnership's option of the Base Rate, the
London Interbank Offered Rate ("LIBOR") plus 1 percent, or the Certificate of
Deposit Rate ("CD Rate") plus 1-1/8 percent. The effective interest rates on
amounts outstanding as of December 31, 1997 and 1996 were 6.85 percent and 6.69
percent, respectively. This credit facility will be paid in full upon the sale
of the Surfside System.
The Venture has a reducing revolving credit facility with an available
commitment of $42,500,000. The entire $42,500,000 commitment is available
through December 31, 1998, at which time the commitment will begin to reduce
quarterly until December 31, 2003 when the amount available will be zero. At
December 31, 1997, the balance outstanding was $39,402,968, leaving $3,097,032
available for future borrowings. Interest is at the Venture's option of Prime
plus 1/4 percent, LIBOR plus 1-1/4 percent or the CD Rate plus 1-3/8 percent.
The effective interest rates on amounts outstanding as of December 31, 1997 and
1996 were 7.10 percent and 6.79 percent, respectively. This credit facility
will be paid in full upon the sale of the Broward System.
31
<PAGE>
Installments due on debt principal for each of the five years in the
period ending December 31, 2002 and thereafter, respectively, are:
Venture Partnership Total
----------- ----------- -----------
1998 $ 58,394 $ 56,368 $ 114,762
1999 3,761,363 56,369 3,817,732
2000 6,858,395 2,756,369 9,614,764
2001 8,519,465 3,618,790 12,138,255
2002 10,200,000 3,600,000 13,800,000
Thereafter 10,200,000 4,500,000 14,700,000
----------- ----------- -----------
Total $39,597,617 $14,587,896 $54,185,513
=========== =========== ===========
At December 31, 1997, substantially all of the Partnership's and the
Venture's property, plant and equipment secured their respective indebtedness.
At December 31, 1997, the carrying amount of the Partnership's long-term
debt did not differ significantly from the estimated fair value of the financial
instruments. The fair value of the Partnership's long-term debt is estimated
based on the discounted amount of future debt service payments using rates of
borrowing for a liability of similar risk.
(6) INCOME TAXES
------------
Income taxes have not been recorded in the accompanying consolidated
financial statements because they accrue directly to the partners. The federal
and state income tax returns of the Partnership are prepared and filed by
Intercable.
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 loss reported to the partners is different from that reported in
the consolidated statements of operations due to the difference in depreciation
recognized under generally accepted accounting principles and the expense
allowed for tax purposes under the Modified Accelerated Cost Recovery System
(MACRS). There are no other significant differences between taxable loss and
the net loss reported in the consolidated statements of operations.
(7) COMMITMENTS AND CONTINGENCIES
-----------------------------
Office and other facilities are rented under various long-term lease
arrangements. Rent paid under such lease arrangements totaled $65,387, $40,356
and $62,987, respectively, for the years ended December 31, 1997, 1996 and 1995.
Minimum commitments under operating leases for each of the five years in the
period ending December 31, 2002 and thereafter are as follows:
1998 $ 84,516
1999 83,350
2000 82,950
2001 40,175
2002 39,300
Thereafter 293,378
--------
$623,669
========
32
<PAGE>
(8) SUPPLEMENTARY PROFIT AND LOSS INFORMATION
-----------------------------------------
<TABLE>
<CAPTION>
Supplementary profit and loss information is presented below:
For the Year Ended December 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Maintenance and repairs $ 310,652 $ 318,345 $ 340,354
========== ========== ==========
Taxes, other than income and payroll taxes $ 696,477 $ 584,220 $ 435,128
========== ========== ==========
Advertising $ 306,273 $ 295,082 $ 275,739
========== ========== ==========
Depreciation of property, plant and equipment $6,816,082 $6,256,158 $6,014,327
========== ========== ==========
Amortization of intangible assets $7,254,378 $7,218,410 $8,250,769
========== ========== ==========
</TABLE>
(9) OPERATING RESULTS OF SURFSIDE AND LITTLEROCK SYSTEMS
----------------------------------------------------
The results of operations of the Partnership's Surfside System and
Littlerock System on a stand-alone basis are presented below. The Partnership's
share of the Venture-owned Broward System's operations is also presented.
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $13,424,598 $12,249,819 $10,974,255
Operating expenses 7,531,859 6,918,196 6,061,604
Management fees and allocated overhead from General Partner 1,422,955 1,411,780 1,353,458
Depreciation and amortization 5,295,441 5,066,411 5,490,589
----------- ----------- -----------
Operating loss (825,657) (1,146,568) (1,931,396)
Interest expense (1,025,917) (1,082,104) (1,189,677)
Other, net (8,092) (48,314) (18,071)
----------- ----------- -----------
Loss of the Surfside System and the Littlerock System (1,859,666) (2,276,986) (3,139,144)
The Partnership's share of the loss of the Broward System (1,684,203) (2,193,057) (2,969,808)
----------- ----------- -----------
Net loss $(3,543,869) $(4,470,043) $(6,108,952)
=========== =========== ===========
</TABLE>
33
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Partners of Cable TV Fund 14-A/B Venture:
We have audited the accompanying balance sheets of CABLE TV FUND 14-A/B
VENTURE (a Colorado general partnership) as of December 31, 1997 and 1996, and
the related statements of operations, partners' capital and cash flows for each
of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the General Partner's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cable TV Fund 14-A/B Venture
as of December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 13, 1998.
34
<PAGE>
CABLE TV FUND 14-A/B VENTURE
----------------------------
(A General Partnership)
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
December 31,
----------------------------
ASSETS 1997 1996
------ ------------- ------------
<S> <C> <C>
CASH $ 499,861 $ 489,615
TRADE RECEIVABLES, less allowance for doubtful receivables of
$105,836 and $104,005 at December 31, 1997 and 1996, respectively 1,188,262 879,267
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 59,704,351 55,892,778
Less- accumulated depreciation (31,090,988) (27,437,977)
------------ ------------
28,613,363 28,454,801
Franchise costs and other intangible assets, net of accumulated
amortization of $57,752,957 and $52,915,541 at December 31, 1997
and 1996, respectively 23,234,009 28,071,425
------------ ------------
Total investment in cable television properties 51,847,372 56,526,226
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 620,522 381,950
------------ ------------
Total assets $ 54,156,017 $ 58,277,058
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
35
<PAGE>
CABLE TV FUND 14-A/B VENTURE
----------------------------
(A General Partnership)
BALANCE SHEETS
--------------
<TABLE>
<CAPTION>
December 31,
----------------------------
LIABILITIES AND PARTNERS' CAPITAL 1997 1996
--------------------------------- ------------- ------------
<S> <C> <C>
LIABILITIES:
Debt $ 39,597,617 $ 41,262,561
Jones Intercable, Inc. advances 446,115 268,256
Trade accounts payable and accrued liabilities 956,693 1,282,624
Subscriber prepayments 484,041 481,774
------------ ------------
Total liabilities 41,484,466 43,295,215
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 7)
PARTNERS' CAPITAL:
Contributed capital 70,000,000 70,000,000
Accumulated deficit (57,328,449) (55,018,157)
------------ ------------
12,671,551 14,981,843
------------ ------------
Total liabilities and partners' capital $ 54,156,017 $ 58,277,058
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
36
<PAGE>
CABLE TV FUND 14-A/B VENTURE
----------------------------
(A General Partnership)
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES $27,504,735 $25,519,105 $23,469,505
COSTS AND EXPENSES:
Operating expenses 15,185,319 14,148,533 12,620,209
Management fees and allocated overhead from
Jones Intercable, Inc. 2,976,883 2,981,097 2,828,211
Depreciation and amortization 8,775,019 8,408,157 8,774,507
----------- ----------- -----------
OPERATING INCOME (LOSS) 567,514 (18,682) (753,422)
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (2,877,337) (3,006,847) (3,371,524)
Other, net (469) 17,220 51,135
----------- ----------- -----------
Total other income (expense) (2,877,806) (2,989,627) (3,320,389)
----------- ----------- -----------
NET LOSS $(2,310,292) $(3,008,309) $(4,073,811)
========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
37
<PAGE>
CABLE TV FUND 14-A/B VENTURE
----------------------------
(A General Partnership)
STATEMENTS OF PARTNERS' CAPITAL
-------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
CABLE TV FUND 14-A, LTD. (27%):
Balance, beginning of year $ 3,963,820 $ 4,779,072 $ 5,883,075
Net loss for year (626,089) (815,252) (1,104,003)
----------- ----------- -----------
Balance, end of year $ 3,337,731 $ 3,963,820 $ 4,779,072
=========== =========== ===========
CABLE TV FUND 14-B, LTD. (73%):
Balance, beginning of year $11,018,023 $13,211,080 $16,180,888
Net loss for year (1,684,203) (2,193,057) (2,969,808)
----------- ----------- -----------
Balance, end of year $ 9,333,820 $11,018,023 $13,211,080
=========== =========== ===========
TOTAL:
Balance, beginning of year $14,981,843 $17,990,152 $22,063,963
Net loss for year (2,310,292) (3,008,309) (4,073,811)
----------- ----------- -----------
Balance, end of year $12,671,551 $14,981,843 $17,990,152
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
38
<PAGE>
CABLE TV FUND 14-A/B VENTURE
----------------------------
(A General Partnership)
STATEMENTS OF CASH FLOWS
------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,310,292) $(3,008,309) $(4,073,811)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 8,775,019 8,408,157 8,774,507
Amortization of interest rate protection agreement - 793 82,085
Decrease (increase) in trade receivables (308,995) 214,700 (492,782)
Increase in deposits, prepaid expenses
and deferred charges (523,164) (455,610) (193,197)
Increase (decrease) in trade accounts payable and
accrued liabilities and subscriber prepayments (323,664) 44,605 (187,604)
Increase (decrease) in Jones Intercable, Inc. advances 177,859 (1,938,703) 1,852,780
----------- ----------- -----------
Net cash provided by operating activities 5,486,763 3,265,633 5,761,978
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (3,811,573) (3,879,797) (3,903,813)
---------- ----------- -----------
Net cash used in investing activities (3,811,573) (3,879,797) (3,903,813)
---------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 1,419,267 3,612,576 108,593
Repayment of debt (3,084,211) (2,880,667) (1,849,862)
----------- ----------- -----------
Net cash provided by (used in)
financing activities (1,664,944) 731,909 (1,741,269)
----------- ----------- -----------
Increase in cash 10,246 117,745 116,896
Cash, beginning of year 489,615 371,870 254,974
----------- ----------- -----------
Cash, end of year $ 499,861 $ 489,615 $ 371,870
=========== =========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 2,997,551 $ 2,929,302 $ 3,467,008
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
39
<PAGE>
CABLE TV FUND 14-A/B VENTURE
----------------------------
(A General Partnership)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(1) ORGANIZATION AND PARTNERS' INTERESTS
------------------------------------
Formation and Business
----------------------
On January 8, 1988, Cable TV Fund 14-A, Ltd. ("Fund 14-A") and Cable TV
Fund 14-B, Ltd. ("Fund 14-B") (collectively, the "Venture Partners") formed a
Colorado general partnership known as Cable TV Fund 14-A/B Venture (the
"Venture") by contributing $18,975,000 and $51,025,000, respectively, for 27
percent and 73 percent ownership interests, respectively. The Venture was
formed for the purpose of acquiring the cable television system serving areas in
and around Broward County, Florida (the "Broward System").
Jones Intercable, Inc. ("Intercable") is the "General Partner" of each of
the Venture Partners and manages the Venture. 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 for other affiliated entities.
Contributed Capital
-------------------
The capitalization of the Venture is set forth in the accompanying
Statements of Partners' Capital.
All Venture distributions, including those made from cash flow, from the
sale or refinancing of Venture property and on dissolution of the Venture, shall
be made to the Venture Partners in proportion to their 27 and 73 percent
interests in the Venture.
Proposed Sale of a Cable Television System
------------------------------------------
On October 3, 1997, the Venture entered into an agreement to sell the
Broward System to an unaffiliated third party for $140,000,000, subject to
closing adjustments discussed below. Closing of this sale is scheduled for March
31, 1998, subject to several conditions, including necessary governmental and
other third party consents. The General Partner expects that all material
consents will be obtained prior to the scheduled closing date. The closing
adjustments primarily relate to the number of equivalent basic subscribers at
closing. If equivalent basic subscribers are less than 56,637, the sales price
will be reduced $2,472 multiplied by the number by which the Broward System's
equivalent basic subscribers are less than 56,637, up to a maximum adjustment of
$7,000,000. Because it is estimated that the Broward System will have 55,274
equivalent basic subscribers, as defined in the agreement, at March 31, 1998, at
closing there will be a sales price reduction of approximately $3,369,000. The
General Partner expects that when final closing adjustments are done
approximately sixty days after closing, additional equivalent basic subscribers
that were not able to be counted at closing because they were relatively recent
subscribers at March 31, 1998 will be counted as equivalent basic subscribers
when final closing adjustments are done and the sales price will be adjusted
accordingly. If the sales price is adjusted upward, the Venture would make an
additional distribution to the two constituent partnerships of the Venture in
proportion to their ownership interests in the Venture.
Upon closing, the Venture will repay all of its indebtedness, which totaled
$39,597,617 at December 31, 1997 and a brokerage fee of approximately $3,500,000
to the Jones Group and then the Venture will distribute the remaining net sales
proceeds, or approximately $94,039,000, to the two constituent partnerships of
the Venture in proportion to their ownership interests in the Venture.
Accordingly, Fund 14-A will receive 27 percent of the net sales proceeds
(approximately $25,491,000, or $318 for each $1,000 invested in Fund 14-A) and
Fund 14-B will receive 73 percent of the net sales proceeds (approximately
$68,548,000, or $524 for each $1,000 invested in Fund 14-B).
(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 Venture's tax returns are also prepared on the accrual basis.
The preparation of financial statements in conformity with generally
accepted accounting principles requires Intercable's management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent
40
<PAGE>
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Purchase Price Allocation
-------------------------
The Broward System acquisition was accounted for as a purchase with the
purchase price allocated to tangible and intangible assets based upon an
independent appraisal. The method of allocation of purchase price was as
follows: first, to the fair value of net tangible assets acquired; second, to
the value of subscriber lists and noncompete agreements with previous owners;
third, to franchise costs; and fourth, to costs in excess of interests in net
assets purchased. Brokerage fees paid to an affiliate of Intercable and other
system acquisition costs were capitalized and included in the cost of intangible
assets.
Property, Plant and Equipment
-----------------------------
Depreciation is provided using the straight-line method over the following
estimated service lives:
Cable distribution systems 5-15 years
Equipment and tools 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 franchises, subscriber lists and costs in excess of
interests in net assets purchased are amortized using the straight-line method
over the following remaining estimated useful lives:
Franchise costs 1- 5 years
Subscriber lists 1- 5 years
Costs in excess of interests
in net assets purchased 31 years
Revenue Recognition
-------------------
Subscriber prepayments are initially deferred and recognized as revenue
when earned.
Reclassifications
-----------------
Certain prior year amounts have been reclassified to conform to the 1997
presentation.
(3) TRANSACTIONS WITH AFFILIATES
----------------------------
Management Fees and Reimbursements
----------------------------------
Intercable manages the Venture and receives a fee for its services equal to
5 percent of the gross revenues of the Venture, excluding revenues from the sale
of cable television systems or franchises. Management fees paid to Intercable
by the Venture for the years ended December 31, 1997, 1996 and 1995 were
$1,375,237, $1,275,955 and $1,173,475, respectively.
The Venture reimburses Intercable for allocated overhead and administrative
expenses. These expenses represent the salaries and related benefits paid for
corporate personnel, rent, data processing services and other corporate
facilities costs. Such personnel provide engineering, marketing, accounting,
administrative, legal, and investor relations services to the Venture. Such
services, and their related costs, are necessary to the operation of the Venture
and would have been incurred by the Venture if it was a stand alone entity.
Allocations of personnel costs are based primarily on actual time spent by
employees of Intercable with respect to each entity managed. Remaining expenses
are allocated based on the pro rata relationship of the Venture's revenues to
the total revenues of all systems owned or managed by 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
41
<PAGE>
expenses. Intercable believes that the methodology used in allocating overhead
and administrative expenses is reasonable. Reimbursements made to Intercable by
the Venture for allocated overhead and administrative expenses during the years
ended December 31, 1997, 1996 and 1995 were $1,601,646, $1,705,142 and
$1,654,736, respectively.
The Venture was charged interest during 1997 at an average interest rate of
7.82 percent on the amounts due Intercable, which approximated Intercable's
weighted average cost of borrowing. Total interest charged to the Venture by
Intercable was $2,678, $122,224 and $155,659 for the years ended December 31,
1997, 1996 and 1995, respectively.
Payments to/from Affiliates for Programming Services
----------------------------------------------------
The Venture receives or has received programming from Superaudio, Knowledge
TV, Inc., Great American Country, Inc. and Product Information Network, all of
which are affiliates of Intercable.
Payments to Superaudio totaled $37,459, $34,421 and $30,171 in 1997, 1996
and 1995, respectively. Payments to Knowledge TV, Inc. totaled $41,668, $37,113
and $32,268 in 1997, 1996 and 1995, respectively. Payments to Great American
Country, Inc., which initiated service in 1996, totaled $79,127 in 1997 and
$47,590 in 1996.
The Venture 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 Venture totaling $80,297, $49,973
and $23,430 in 1997, 1996 and 1995, respectively.
(4) PROPERTY, PLANT AND EQUIPMENT
-----------------------------
Property, plant and equipment as of December 31, 1997 and 1996, consisted
of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cable distribution systems $ 53,144,005 $ 49,591,013
Equipment and tools 2,074,443 1,899,148
Office furniture and equipment 1,191,559 1,149,554
Buildings 1,875,016 1,870,430
Vehicles 688,461 651,766
Land 730,867 730,867
------------ ------------
59,704,351 55,892,778
Less - accumulated depreciation (31,090,988) (27,437,977)
------------ ------------
$ 28,613,363 $ 28,454,801
============ ============
(5) DEBT
----
Debt consists of the following: December 31,
---------------------------
1997 1996
------------ ------------
Lending institutions-
Reducing revolving credit facility $ 39,402,968 $ 41,102,968
Capital lease obligations 194,649 159,593
------------ ------------
$ 39,597,617 $ 41,262,561
============ ============
</TABLE>
The Venture has a reducing revolving credit facility with an available
commitment of $42,500,000. The entire $42,500,000 commitment is available
through December 31, 1998, at which time the commitment will begin to reduce
quarterly until December 31, 2003 when the amount available will be zero. At
December 31, 1997, the balance outstanding was $39,402,968, leaving $3,097,032
available for future borrowings. Interest is at the Venture's option of Prime
plus 1/4 percent, LIBOR plus 1-1/4 percent or the CD Rate plus 1-3/8 percent.
The effective interest rates on amounts outstanding as of
42
<PAGE>
December 31, 1997 and 1996 were 7.10 percent and 6.79 percent, respectively.
This credit facility will be paid in full upon the sale of the Venture's Broward
System.
Installments due on debt principal for each of the five years in the period
ending December 31, 2002 and thereafter, respectively, are: $58,394,
$3,761,363, $6,858,395, $8,519,465, $10,200,000 and $10,200,000. At December
31, 1997, substantially all of the Venture's property, plant and equipment
secured the above indebtedness.
At December 31, 1997, the carrying amount of the Venture's long-term debt
did not differ significantly from the estimated fair value of the financial
instruments. The fair value of the Venture's long-term debt is estimated based
on the discounted amount of future debt service payments using rates of
borrowing for a liability of similar risk.
(6) INCOME TAXES
------------
Income taxes have not been recorded in the accompanying financial
statements because they accrue directly to the partners of Fund 14-A and Fund
14-B.
The Venture's tax returns, the qualification of the Venture as such for tax
purposes, and the amount of distributable Venture income or loss are subject to
examination by federal and state taxing authorities. If such examinations
result in changes with respect to the Venture's qualification as such, or in
changes with respect to the Venture's recorded income or loss, the tax liability
of the Venture's general partners would likely be changed accordingly.
Taxable loss reported to the partners is different from that reported in
the statements of operations due to the difference in depreciation recognized
under generally accepted accounting principles and the expense allowed for tax
purposes under the Modified Accelerated Cost Recovery System (MACRS). There are
no other significant differences between taxable loss and the net loss reported
in the statements of operations.
(7) COMMITMENTS AND CONTINGENCIES
-----------------------------
Office and other facilities are rented under various long-term lease
arrangements. Rent paid under such lease arrangements totaled $49,301, $21,762
and $22,680, respectively for the years ended December 31, 1997, 1996 and 1995.
Minimum commitments under operating leases for each of the five years in the
period ending December 31, 2002 and thereafter are as follows:
1998 $ 34,466
1999 33,300
2000 33,300
2001 33,300
2002 33,300
Thereafter 291,378
--------
$459,044
========
43
<PAGE>
(8) SUPPLEMENTARY PROFIT AND LOSS INFORMATION
-----------------------------------------
<TABLE>
<CAPTION>
Supplementary profit and loss information is presented below:
Year Ended December 31,
----------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Maintenance and repairs $ 169,474 $ 163,219 $ 204,878
========== ========== ==========
Taxes, other than income and payroll taxes $ 491,297 $ 425,691 $ 268,757
========== ========== ==========
Advertising $ 168,056 $ 197,237 $ 152,727
========== ========== ==========
Depreciation of property, plant and equipment $3,849,922 $3,570,740 $3,429,925
========== ========== ==========
Amortization of intangible assets $4,925,097 $4,837,417 $5,344,582
========== ========== ==========
</TABLE>
44
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
---------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
None.
PART III.
---------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------
The Partnership itself has no officers or directors. Certain information
concerning the directors and executive officers of the General Partner is set
forth below. Directors of the General Partner serve until the next annual
meeting of the General Partner and until their successors shall be elected and
qualified.
Glenn R. Jones 68 Chairman of the Board and Chief
Executive Officer
James B. O'Brien 48 President and Director
Ruth E. Warren 48 Group Vice President/Operations
Kevin P. Coyle 46 Group Vice President/Finance
Christopher J. Bowick 42 Group Vice President/Technology
Cheryl M. Sprague 45 Group Vice President/Human Resources
Cynthia A. Winning 46 Group Vice President/Marketing
Elizabeth M. Steele 46 Vice President/General Counsel/Secretary
Larry W. Kaschinske 38 Vice President/Controller
Robert E. Cole 65 Director
William E. Frenzel 69 Director
Josef J. Fridman 52 Director
Donald L. Jacobs 59 Director
Robert Kearney 61 Director
James J. Krejci 56 Director
Raphael M. Solot 64 Director
Howard O. Thrall 50 Director
Siim A. Vanaselja 41 Director
Sanford Zisman 58 Director
Robert B. Zoellick 44 Director
Mr. Glenn R. Jones has served as Chairman of the Board of Directors and
Chief Executive Officer of the General Partner since its formation in 1970, and
he was President from June 1984 until April 1988. Mr. Jones is the sole
shareholder, President and Chairman of the Board of Directors of Jones
International, Ltd. He is also Chairman of the Board of Directors of the
subsidiaries of the General Partner and of certain other affiliates of the
General Partner. Mr. Jones has been involved in the cable television business in
various capacities since 1961, and he is a member of the Board of Directors and
of the Executive Committee of the National Cable Television Association. In
addition, Mr. Jones is a member of the Board of Education Council of the
National Alliance of Business. Mr. Jones is also a founding member of the James
Madison Council of the Library of Congress. Mr. Jones has been the recipient of
several awards including: the Grand Tam Award in 1989, the highest award from
the Cable Television Administration and Marketing Society; the President's Award
from the Cable Television Public Affairs Association in recognition of Jones
International's educational efforts through Mind Extension University (now
Knowledge TV); the Donald G. McGannon Award for the advancement of minorities
and women in cable from the United Church of Christ Office of Communications;
the STAR Award from American Women in Radio and Television, Inc. for exhibition
of a commitment to the issues and concerns of women in television and radio; the
Cableforce 2000 Accolade awarded by Women in Cable in recognition of the General
Partner's innovative employee programs; the Most Outstanding Corporate
Individual Achievement Award from the International Distance Learning Conference
for his contributions to distance education; the Golden Plate Award from the
American Academy of Achievement for his advances in distance education; the Man
of the Year named
45
<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 the
Chairman of the Board of Directors of the Cable Television Administration and
Marketing Association and as a director and a member of the Executive Committee
of the Walter Kaitz Foundation, a foundation that places people of ethnic
minority groups in positions with cable television systems, networks and vendor
companies.
Ms. Ruth E. Warren joined the General Partner in August 1980 and has served in
various operational capacities, including system marketing manager, director of
marketing, assistant division manager, regional vice president and Fund Vice
President, since then. Ms. Warren was elected Group Vice President/Operations
of the General Partner in September 1990.
Mr. Kevin P. Coyle joined The Jones Group, Ltd. in July 1981 as Vice
President/Financial Services. In September 1985, he was appointed Senior Vice
President/Financial Services. He was elected Treasurer of the General Partner
in August 1987, Vice President/Treasurer in April 1988 and Group Vice
President/Finance and Chief Financial Officer in October 1990.
Mr. Christopher J. Bowick joined the General Partner in September 1991 as
Group Vice President/Technology and Chief Technical Officer. Prior to joining
the General Partner, Mr. Bowick worked for Scientific Atlanta's Transmission
Systems Business Division in various technical management capacities since 1981,
and as Vice President of Engineering since 1989. Mr. Bowick also has served
since 1995 as President of Jones Futurex, Inc., a wholly owned subsidiary of the
General Partner that manufactures and markets data encryption products.
Ms. Cheryl M. Sprague joined the General Partner in November 1997 as Group
Vice President/Human Resources. Prior to November 1997 and since December 1995,
Ms. Sprague served as Director, Human Resources for Westmoreland Coal Company,
where she was responsible for human resources management for said company and
three of its subsidiaries. From October 1993 to December 1995, Ms. Sprague
served as President of Peak Executive Resources, where she provided consulting
services in organizational development and human resources to businesses
experiencing organizational transition. From April 1992 to October 1993, Ms.
Sprague was Vice President, Human Resources for Penrose-St. Francis Healthcare
System, where she was responsible for management of all human resources
activities. Ms. Sprague serves as an adjunct instructor at Regis University and
has earned the professional designation as a Senior Professional in Human
Resources from the Society for Human Resource Management and its affiliate, the
Human Resources Certification Board. Ms. Sprague is a past president of the
Colorado Human Resource Association and was named by that association as the
Colorado Human Resources Administrator of the Year in 1986. Ms. Sprague also
serves as a director on the Area VI Board for the Society for Human Resource
Management.
Ms. Cynthia A. Winning joined the General Partner as Group Vice
President/Marketing in December 1994. Previous to joining the General Partner,
Ms. Winning served since 1994 as the President of PRS Inc., Denver, Colorado, a
sports and event marketing company. From 1979 to 1981 and from 1986 to 1994,
Ms. Winning served as the Vice President and Director of Marketing for Citicorp
Retail Services, Inc., a provider of private-label credit cards for ten national
retail department store chains. From 1981 to 1986, Ms. Winning was the Director
of Marketing Services for Daniels & Associates cable television operations, as
well as the Western Division Marketing Director for Capital Cities Cable. Ms.
Winning also serves as a board member of Cities in Schools, a dropout
intervention/prevention program.
46
<PAGE>
Ms. Elizabeth M. Steele joined the General Partner in August 1987 as Vice
President/General Counsel and Secretary. From August 1980 until joining the
General Partner, Ms. Steele was an associate and then a partner at the Denver
law firm of Davis, Graham & Stubbs, which serves as counsel to the General
Partner.
Mr. Larry Kaschinske joined the General Partner in 1984 as a staff
accountant in the General Partner's former Wisconsin Division, was promoted to
Assistant Controller in 1990, named Controller in August 1994 and was elected
Vice President/Controller in June 1996.
Mr. Robert E. Cole was appointed a Director of the General Partner in March
1996. Mr. Cole is currently self-employed as a partner of First Variable
Insurance Marketing and is responsible for marketing to National Association of
Securities Dealers, Inc. firms in northern California, Oregon, Washington and
Alaska. From 1993 to 1995, Mr. Cole was the Director of Marketing for Lamar
Life Insurance Company; from 1992 to 1993, Mr. Cole was Senior Vice President of
PMI Inc., a third party lender serving the special needs of Corporate Owned Life
Insurance (COLI) and from 1988 to 1992, Mr. Cole was the principal and co-
founder of a specialty investment banking firm that provided services to finance
the ownership and growth of emerging companies, productive assets and real
property. Mr. Cole is a Certified Financial Planner and a former United States
Naval Aviator.
Mr. William E. Frenzel was appointed a Director of the General Partner in
April 1995. Mr. Frenzel has been a Guest Scholar since 1991 with the Brookings
Institution, a research organization located in Washington D. C. Until his
retirement in January 1991, Mr. Frenzel served for twenty years in the United
States House of Representatives, representing the State of Minnesota, where he
was a member of the House Ways and Means Committee and its Trade Subcommittee,
the Congressional Representative to the General Agreement on Tariffs and Trade
(GATT), the Ranking Minority Member on the House Budget Committee and a member
of the National Economic Commission. Mr. Frenzel also served in the Minnesota
Legislature for eight years. He is a Distinguished Fellow of the Tax
Foundation, Vice Chairman of the Eurasia Foundation, a Board Member of the U.S.-
Japan Foundation, the Close-Up Foundation, Sit Mutual Funds and Chairman of the
Japan-America Society of Washington.
Mr. Josef J. Fridman was appointed a Director of the General Partner in
February 1998. Mr. Fridman is currently senior vice-president, law and
corporate secretary of BCE Inc., Canada's largest telecommunications company.
Mr. Fridman joined Bell Canada, a wholly owned subsidiary of BCE Inc., in 1969,
and has held increasingly senior positions with Bell Canada and BCE Inc. since
such time. Mr. Fridman has held his current position since January 1991. Mr.
Fridman's directorships include Telesat Canada, TMI Communications, Inc.,
Telebec Itee, BCI Telecom Holding Inc. and BCE Corporate Services Inc. He is a
member of the Quebec Bar Association, the Canadian, American and International
Bar Associations and the Lord Reading Law Society. Mr. Fridman is a governor of
the Quebec Bar Association.
Mr. Donald L. Jacobs was appointed a Director of the General Partner in
April 1995. Mr. Jacobs is a retired executive officer of TRW. Prior to his
retirement, he was Vice President and Deputy Manager of the Space and Defense
Sector; prior to that appointment, he was the Vice President and General Manager
of the Defense Systems Group and prior to his appointment as Group General
Manager, he was President of ESL, Inc., a wholly owned subsidiary of TRW.
During his career, Mr. Jacobs served on several corporate, professional and
civic boards.
Mr. Robert Kearney was appointed a director of the General Partner in July
1997. Mr. Kearney is a retired executive officer of Bell Canada. Prior to his
retirement in December 1993, Mr. Kearney was the President and Chief Executive
Officer of Bell Canada. He served as Chairman of BCE Canadian Telecom Group in
1994 and as Deputy Chairman of BCI Management Limited in 1995. During his
career, Mr. Kearney served in a variety of capacities in the Canadian, American
and International Standards organizations, and he has served on several
corporate, professional and civic boards.
Mr. James J. Krejci is President and CEO of Imagelink Technologies, Inc., a
privately financed company with leading technology in the desktop or personal
computer videoconferencing market. Prior to joining
47
<PAGE>
Imagelink Technologies in July 1996, Mr. Krejci was President of the
International Division of International Gaming Technology, the world's largest
gaming equipment manufacturer, with headquarters in Reno, Nevada. Prior to
joining IGT in May 1994, Mr. Krejci was Group Vice President of Jones
International, Ltd. and was Group Vice President of the General Partner. He also
served as an officer of subsidiaries of Jones International, Ltd. until leaving
the General Partner in May 1994. Mr. Krejci started his career as an electronics
research engineer with the Allen-Bradley Company, then moved to the 3M Company,
General Electric and Becton Dickinson until March 1985 when he joined Jones
International, Ltd. Mr. Krejci has been a director of the General Partner since
August 1987.
Mr. Raphael M. Solot was appointed a Director of the General Partner in
March 1996. Mr. Solot is an attorney and has practiced law for 34 years with an
emphasis on franchise, corporate and partnership law and complex litigation.
Mr. Howard O. Thrall was appointed a Director of the General Partner in
March 1996. Mr. Thrall had previously served as a Director of the General
Partner from December 1988 to December 1994. Mr. Thrall is a management and
international marketing consultant, having active assignments with First
National Net, Inc., LEP Technologies, Cheong Kang Associates (Korea), Aero
Investment Alliance, Inc. and Western Real Estate Partners, among others. From
September 1993 through July 1996, Mr. Thrall served as Vice President of Sales,
Asian Region, for World Airways, Inc. headquartered at the Washington Dulles
International Airport. From 1984 until August 1993, Mr. Thrall was with the
McDonnell Douglas Corporation, where he concluded as a Regional Vice President,
Commercial Marketing with the Douglas Aircraft Company subsidiary.
Mr. Siim A. Vanaselja was appointed a Director of the General Partner in
August 1996. He is the Executive Vice President and Chief Financial Officer of
Bell Canada International Inc. and Vice President of BCI Telecom Holding Inc.
Mr. Vanaselja joined BCE Inc., Canada's largest telecommunications company, in
February 1994 as Assistant Vice-President, International Taxation. In June
1994, he was appointed Assistant Vice-President and Director of Taxation, and in
February 1995, Mr. Vanaselja was appointed Vice-President, Taxation. On August
1, 1996, Mr. Vanaselja was appointed the Executive Vice President and Chief
Financial Officer of Bell Canada International Inc., a subsidiary of BCE Inc.
Prior to joining BCE Inc. and since August 1989, Mr. Vanaselja was a partner in
the Toronto office of KPMG Peat Marwick Thorne. Mr. Vanaselja has been a member
of the Institute of Chartered Accountants of Ontario since 1982 and is a member
of the Canadian Tax Foundation, the Tax Executives Institute and the
International Fiscal Association.
Mr. Sanford Zisman was appointed a director of the General Partner in June
1996. Mr. Zisman is a principal in the law firm of Zisman & Ingraham, P.C. of
Denver, Colorado and he has practiced law for 32 years, specializing in the
areas of tax, business and estate planning and probate administration. Mr.
Zisman was a member of the Board of Directors of Saint Joseph Hospital, the
largest hospital in Colorado, serving at various times as Chairman of the Board,
Chairman of the Finance Committee and Chairman of the Strategic Planning
Committee. Since 1982, he has also served on the Board of Directors of Maxim
Series Fund, Inc., a subsidiary of Great-West Life Assurance Company.
Mr. Robert B. Zoellick was appointed a Director of the General Partner in
April 1995. Mr. Zoellick is the John M. Olin Professor at the U.S. Naval
Academy for the 1997-1998 term. From 1993 through 1997, he was an Executive
Vice President at Fannie Mae, a federally chartered and stockholder-owned
corporation that is the largest housing finance investor in the United States.
From August 1992 to January 1993, Mr. Zoellick served as Deputy Chief of Staff
of the White House and Assistant to the President. From May 1991 to August
1992, Mr. Zoellick served concurrently as the Under Secretary of State for
Economic and Agricultural Affairs and as Counselor of the Department of State, a
post he assumed in March 1989. From 1985 to 1988, Mr. Zoellick served at the
Department of Treasury in a number of capacities, including Counselor to the
Secretary. Mr. Zoellick currently serves on the boards of Alliance Capital and
Said Holdings.
48
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
--------------------------------
Neither the Partnership nor the Venture has any employees; however, various
personnel are required to operate the Systems. Such personnel are employed by
the General Partner and, the cost of such employment is charged by the General
Partner to the Partnership or the Venture as a direct reimbursement item. See
Item 13.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
----------------------------------------------------------------------
As of February 16, no person or entity owned more than 5 percent of the
limited partnership interests of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------
The General Partner and its affiliates engage in certain transactions with
the Partnership and the Venture. The General Partner believes that the terms of
such transactions are generally as favorable as could be obtained by the
Partnership and the Venture from unaffiliated parties. This determination has
been made by the General Partner in good faith, but none of the terms were or
will be negotiated at arm's-length and there can be no assurance that the terms
of such transactions have been or will be as favorable as those that could have
been obtained by the Partnership or the Venture from unaffiliated parties.
TRANSACTIONS WITH THE GENERAL PARTNER
The General Partner charges the Partnership and the Venture a 5 percent
management fee, and the General Partner is reimbursed for certain allocated
overhead and administrative expenses. These expenses represent the salaries and
benefits paid to corporate personnel, rent, data processing services and other
corporate facilities costs. Such personnel provide engineering, marketing,
administrative, accounting, legal and investor relations services to the
Partnership and the Venture. Allocations of personnel costs are based primarily
on actual time spent by employees of the General Partner with respect to each
partnership managed. Remaining expenses are allocated based on the pro rata
relationship of the Partnership's and the Venture's revenues to the total
revenues of all systems owned or managed by the General Partner and certain of
its subsidiaries. Systems owned by the General Partner and all other systems
owned by partnerships for which Jones Intercable, Inc. is the general partner
are also allocated a proportionate share of these expenses.
The General Partner from time to time also advances funds to the
Partnership and the Venture and charges interest on the balance payable. The
interest rate charged approximates the General Partner's weighted average cost
of borrowing.
TRANSACTIONS WITH AFFILIATES
Knowledge TV, Inc., a company owned 67 percent by Jones Education Group,
Ltd., 7 percent by Mr. Jones and 26 percent by the General Partner, operates the
television network JEC Knowledge TV. JEC Knowledge TV provides programming
related to computers and technology; business, careers and finance; health and
wellness; and global culture and languages. Knowledge TV. Inc. sells its
programming to the Systems.
Jones Computer Network, Ltd., a wholly owned subsidiary of Jones Education
Group, Ltd., a company owned 64 percent by Jones International, Ltd., 16 percent
by the General Partner, 12 percent by BTH and 8 percent by Mr. Jones, operated
the television network Jones Computer Network. This network provided
programming focused primarily on computers and technology. Jones Computer
Network sold its programming to the Partnership's systems. Jones Computer
Network, Ltd. terminated its programming in April 1997.
The Great American Country network provides country music video programming
to the cable television systems owned by the Partnership and the Venture. This
network, owned and operated by Great American
49
<PAGE>
Country, Inc., a subsidiary of Jones International Networks, Ltd., an affiliate
of the General Partner, commenced service in 1996 in the Systems.
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 $125,785 for
the year ended December 31, 1997. Revenues received by the Venture from the PIN
Venture relating the Venture's owned cable television systems totaled
approximately $80,297 for the year ended December 31, 1997.
The charges to the Partnership and to the Venture for related party
transactions are as follows for the periods indicated:
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------------------------------------------
Cable TV Fund 14-B 1997 1996 1995
- ------------------ --------------------- --------------------- ---------------------
<S> <C> <C> <C>
Management fees $2,046,467 $1,888,466 $1,722,188
Allocation of expenses 2,353,371 2,504,431 2,459,481
Interest expense 2,678 106,022 145,929
Amount of advances outstanding 835,015 449,094 1,896,049
Highest amount of advances outstanding 835,015 3,058,834 1,896,049
Programming fees:
Knowledge TV, Inc. 63,921 56,798 49,493
Jones Computer Network, Ltd. 14,633 39,371 34,402
Great American Country 22,309 24,339 0
Superaudio 57,469 52,687 46,269
For the Year Ended December 31,
-------------------------------------------------------------------
Cable TV Fund 14-A/B Venture 1997 1996 1995
- ---------------------------- --------------------- --------------------- ---------------------
Management fees $1,375,237 $1,275,955 $1,173,475
Allocation of expenses 1,601,646 1,705,142 1,654,736
Interest expense 2,678 122,224 155,659
Amount of advances outstanding 446,115 268,256 2,206,959
Highest amount of advances outstanding 446,115 2,206,959 2,206,959
Programming fees:
Knowledge TV, Inc. 41,668 37,113 32,268
Great American Country 79,127 47,590 0
Superaudio 37,459 34,421 30,171
</TABLE>
50
<PAGE>
PART IV.
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
-------------------------------------------------
AND REPORTS ON FORM 10-K405
---------------------------
<TABLE>
<CAPTION>
<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-B, 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 Littlerock, California (Fund 14-B). (2)
10.1.2 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Big Cypress Seminole Indian Reservation, Florida (Fund 14-A/B). (3)
10.1.3 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Brighton Seminole Indian Reservation, Florida (Fund 14-A/B). (3)
10.1.4 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the unincorporated portions of Broward County, Florida (Fund 14-A/B).
(2)
10.1.5 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for Cooper City, Florida (Fund 14-A/B). (10)
10.1.6 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for Dania, Florida (Fund 14-A/B). (2)
10.1.7 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for Davie, Florida (Fund 14-A/B). (2)
10.1.8 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Hollywood Seminole Indian Reservation, Florida (Fund 14-A/B). (3)
10.1.9 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Immokalee Seminole Indian Reservation, Florida (Fund 14-A/B). (3)
10.1.10 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for Lauderdale Lakes, Florida (Fund 14-A/B). (2)
10.1.11 Copy of Ordinance No. 1200 dated 3/5/90 relating to the City of Big Lake franchise. (4)
10.1.12 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the County of Georgetown, South Carolina (Fund 14-B). (4)
</TABLE>
51
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<TABLE>
<CAPTION>
<S> <C>
10.1.13 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the County of Horry, South Carolina (Fund 14-B). (5)
10.1.14 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for Myrtle Beach Air Force Base, South Carolina (Fund 14-B). (5)
10.1.15 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Town of Pawley's Island, South Carolina (Fund 14-B). (5)
10.1.16 Copy of a franchise and related documents thereto granting a community antenna television
system franchise for the Town of Surfside Beach, South Carolina (Fund 14-B). (4)
10.2.1 Credit Agreement dated as of December 28, 1995 among Cable TV Fund 14-B, Ltd. and Credit
Lyonnais Caymand Island Branch, as agent for various lenders. (Fund 14-B) (10)
10.2.2 Credit Agreement dated as of September 30, 1988 among Cable TV Fund 14-A/B Venture and The
Bank of Nova Scotia, as agent for various lenders. (Fund 14-A/B) (6)
10.2.3 First Letter Amendment dated June 11, 1990 to Credit Agreement dated as of September 30, 1988
among Cable TV Fund 14-A/B Venture and The Bank of Nova Scotia, as agent for various lenders.
(Fund 14-A/B) (7)
10.2.4 Second Letter Amendment dated May 28, 1992 to Credit Agreement dated as of September 30, 1988
among Cable TV Fund 14-A/B Venture and The Bank of Nova Scotia, as agent for various lenders.
(Fund 14-A/B) (7)
10.2.5 Third Letter Amendment dated June 30, 1994 to Credit Agreement dated as of September 30, 1988
among Cable TV Fund 14-A/B Venture and The Bank of Nova Scotia, as agent for various lenders.
(Fund 14-A/B) (9)
10.2.6 Fourth Letter Amendment dated June 24, 1996 to Credit Agreement dated as of September 30,
1988 among Cable TV Fund 14-A/B Venture and The Bank of Nova Scotia, as agent for various
lenders. (Fund 14-A/B) (11)
10.3.1 Purchase and Sale Agreement dated as of March 31, 1988 by and between Cable TV Fund 14-A/B
Venture as Buyer and Jones Intercable, Inc. as Seller. (Fund 14-A/B) (8)
10.3.2 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. (12)
10.3.3 Asset Purchase Agreement dated as of November 4, 1997 between Cable One, Inc. and Cable TV
Fund 14-B, Ltd. (13)
27 Financial Data Schedule
__________
(1) Incorporated by reference from Registrant's Annual 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 Annual Report on Form 10-K for fiscal year ended
December 31, 1989 (Commission File Nos. 0-15378 and 0-16200)
(3) Incorporated by reference from Registrant's Annual Report on Form 10-K for fiscal year ended
December 31, 1990 (Commission File Nos. 0-15378 and 0-16200)
</TABLE>
52
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<CAPTION>
<S> <C>
(4) Incorporated by reference from Registrant's Annual Report on Form 10-K for fiscal year ended
December 31, 1992.
(5) Incorporated by reference from Registrant's Annual Report on Form 10-K for fiscal year ended
December 31, 1988 (Commission File Nos. 0-15378 and 0-16200)
(6) Incorporated by reference from Registrant's Annual Report on Form 10-K for fiscal year ended
December 31, 1991 (Commission File Nos. 0-15378 and 0-16200)
(7) Incorporated by reference from Registrants' Current Reports on Form 8-K dated March 31, 1993
(Commission File Nos. 0-15378 and 0-16200)
(8) Incorporated by reference from Registrants' Current Reports on Form 8-K dated March 31, 1988
(Commission File Nos. 0-15378 and 0-16200)
(9) Incorporated by reference from Registrant's Annual Report on Form 10-K for fiscal year ended
December 31, 1994
(10) Incorporated by reference from Registrant's Annual Report on Form 10-K for fiscal year ended
December 31, 1995
(11) Incorporated by reference from Registrant's Annual Report on Form 10-K for fiscal year ended
December 31, 1996.
(12) Incorporated by reference from Registrant's Current Report on Form 8-K dated October 15, 1997.
(13) Incorporated by reference from Registrant's Preliminary Proxy Statement filed with the
Securities and Exchange Commission on December 23, 1997.
(b) Reports on Form 8-K
-------------------
Current Report on Form 8-K dated October 15, 1997, describing the execution of an Asset
Purchase Agreement dated October 3, 1997, to sell the Broward System.
</TABLE>
53
<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-B, LTD.
a Colorado limited partnership
By: Jones Intercable, Inc.
By: /s/ Glenn R. Jones
------------------
Glenn R. Jones
Chairman of the Board and Chief
Dated: March 23, 1998 Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ Glenn R. Jones
------------------
Glenn R. Jones
Chairman of the Board and Chief
Executive Officer
Dated: March 23, 1998 (Principal Executive Officer)
By: /s/ Kevin P. Coyle
------------------
Kevin P. Coyle
Group Vice President/Finance
Dated: March 23, 1998 (Principal Financial Officer)
By: /s/ Larry Kaschinske
--------------------
Larry Kaschinske
Vice President/Controller
Dated: March 23, 1998 (Principal Accounting Officer)
By: /s/ James B. O'Brien
--------------------
James B. O'Brien
Dated: March 23, 1998 President and Director
By: /s/ Robert E. Cole
------------------
Robert E. Cole
Dated: March 23, 1998 Director
By: /s/ William E. Frenzel
----------------------
William E. Frenzel
Dated: March 23, 1998 Director
54
<PAGE>
By: ----------------------
Josef J. Fridman
Dated: March 23, 1998 Director
By: ----------------------
Donald L. Jacobs
Dated: March 23, 1998 Director
By: ----------------------
Robert Kearney
Dated: March 23, 1998 Director
By: /s/ James J. Krejci
-------------------
James J. Krejci
Dated: March 23, 1998 Director
By: /s/ Raphael M. Solot
--------------------
Raphael M. Solot
Dated: March 23, 1998 Director
By: /s/ Howard O. Thrall
----------------------
Howard O. Thrall
Dated: March 23, 1998 Director
By: ----------------------
Siim A. Vanaselja
Dated: March 23, 1998 Director
By: /s/ Sanford Zisman
------------------
Sanford Zisman
Dated: March 23, 1998 Director
By: /s/ Robert B. Zoellick
----------------------
Robert B. Zoellick
Dated: March 23, 1998 Director
55
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 173,628
<SECURITIES> 0
<RECEIVABLES> 1,470,293
<ALLOWANCES> (133,188)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 105,933,977
<DEPRECIATION> (55,360,283)
<TOTAL-ASSETS> 99,133,735
<CURRENT-LIABILITIES> 3,941,989
<BONDS> 54,185,513
0
0
<COMMON> 0
<OTHER-SE> 41,006,233
<TOTAL-LIABILITY-AND-EQUITY> 99,133,735
<SALES> 0
<TOTAL-REVENUES> 40,929,333
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<OTHER-EXPENSES> 8,561
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<INCOME-PRETAX> (3,543,869)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,543,869)
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