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FORM 10-K 405
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
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: 0-16183
IDS/JONES GROWTH PARTNERS 87-A, LTD.
(Exact name of registrant as specified in its charter)
Colorado 84-1060544
State of Organization (IRS Employer
Identification No.)
P.O. Box 3309, Englewood, Colorado 80155-3309 (303) 792-3111
(Address of principal (Registrant's telephone no.
executive office and Zip Code) including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Limited Partnership
Interests
Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
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State the aggregate market value of the voting stock held by non-affiliates of
the registrant: N/A
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. x
-----
DOCUMENTS INCORPORATED BY REFERENCE: None
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PART I.
ITEM 1. BUSINESS
THE PARTNERSHIP. IDS/Jones Growth Partners 87-A, Ltd. (the
"Partnership") is a Colorado limited partnership that was formed to acquire, own
and operate cable television systems in the United States. Jones Cable
Corporation, a Colorado corporation, is the managing general partner (the
"Managing General Partner") and IDS Cable Corporation, a Minnesota corporation,
is the supervising general partner (the "Supervising General Partner") of the
Partnership. The Managing General Partner is a wholly owned subsidiary of Jones
Intercable, Inc. ("Intercable"), which is also a Colorado corporation and one of
the largest cable television system operators in the nation. The Supervising
General Partner is a wholly owned subsidiary of IDS Management Corporation, a
Minnesota corporation, which in turn is a wholly owned subsidiary of American
Express Financial Corporation, a Delaware corporation.
The Partnership was formed for the purpose of acquiring and operating
cable television systems. Since the sale of one of its two cable television
systems as described below, the Partnership only owns the cable television
systems serving the areas in and around the City of Roseville and neighboring
portions of unincorporated Placer County, all in the State of California (the
"Roseville System").
DISPOSITION OF CABLE TELEVISION SYSTEM. On February 28, 1996, the
Partnership sold the cable television system serving areas in and around Carmel,
Indiana (the "Carmel System") to Jones Cable Holdings, Inc. ("JCH"), a wholly
owned subsidiary of Intercable, for a sales price of $44,235,333, subject to
normal working capital closing adjustments. This price represented the average
of three separate, independent appraisals of the fair market value of the Carmel
System. A portion of the proceeds, $14,235,333, was used to reduce Partnership
debt, and the remainder of the proceeds, $30,000,000, will be distributed to the
limited partners in April 1996. This distribution will give the Partnership's
limited partners an approximate return of $183 per unit or $731 per $1,000
invested in the Partnership. No vote of the limited partners of the Partnership
was required in connection with this transaction because the assets of the
Carmel System did not constitute all or substantially all of the Partnership's
assets. The Supervising General Partner consented to the timing of the
transaction and participated in the selection of appraisers.
On February 29, 1996, JCH consummated an agreement with Time Warner
Entertainment-Advance/Newhouse Partnership ("TWEAN"), an unaffiliated cable
television system operator, pursuant to which JCH conveyed the Carmel System,
along with certain other cable television systems owned by JCH, and cash in the
amount of $3,500,000, subject to normal closing adjustments, to TWEAN in
exchange for the cable television systems serving Andrews Air Force Base,
Capitol Heights, Cheltenham, District Heights, Fairmount Heights, Forest
Heights, Morningside, Seat Pleasant, Upper Marlboro, and portions of Prince
George's County, all in Maryland, and a portion of Fairfax County, Virginia.
CABLE TELEVISION SERVICES. The Roseville System offerx to its
subscribers various types of programming, which include basic service, tier
service, premium service, pay-per-view programs and packages including several
of these services at combined rates.
Basic cable television service usually consists of signals of all four
national television networks, various independent and educational television
stations (both VHF and UHF) and certain signals received from satellites. Basic
service also usually includes programs originated locally by the system, which
may consist of music, news, weather reports, stock market and financial
information and live or videotaped programs of a public service or entertainment
nature. FM radio signals are also frequently distributed to subscribers as part
of the basic service.
The Roseville System offers tier services on an optional basis to their
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
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television operators buy tier programming from these networks. The
Roseville System also offers a package that includes the basic service channels
and the tier services.
The Roseville System also offers premium services to their subscribers,
which consist of feature films, sporting events and other special features that
are presented without commercial interruption. The cable television operators
buy premium programming from suppliers such as HBO, Showtime, Cinemax or others
at a cost based on the number of subscribers the cable operator serves. Premium
service programming usually is significantly more expensive than the basic
service or tier service programming, and consequently cable operators price
premium service separately when sold to subscribers.
The Roseville System also offers to subscribers pay-per-view
programming. Pay-per-view is a service that allows subscribers to receive single
programs, frequently consisting of motion pictures that have recently completed
their theatrical exhibitions and major sporting events, and to pay for such
service on a program-by-program basis.
REVENUES. Monthly service fees for basic, tier and premium services
constitute the major source of revenue for the Roseville System. At December 31,
1995, the Roseville System's monthly basic service rates ranged from $8.23 to
$9.43, monthly basic and tier ("basic plus") service rates ranged from $22.39 to
$22.95. and monthly premium services ranged from $4.00 to $10.25 per premium
service. In addition, the Partnership earns revenues from the Roseville System's
pay-per-view programs and advertising fees. Related charges may include a
nonrecurring installation fee that ranges from $5.00 to $34.60; however, from
time to time the Roseville System has followed the common industry practice of
reducing or waiving the installation fee during promotional periods. Commercial
subscribers such as hotels, motels and hospitals are charged a nonrecurring
connection fee that usually covers the cost of installation. Except under the
terms of certain contracts with commercial subscribers and residential apartment
and condominium complexes, the subscribers are free to discontinue the service
at any time without penalty. For the year ended December 31, 1995, of the total
fees received by the Systems, basic service and tier service fees accounted for
approximately 64% of total revenues, premium service fees accounted for
approximately 16% of total revenues, pay-per-view fees were approximately 1% of
total revenues, advertising fees were approximately 11 of total revenues and the
remaining 8% of total revenues came principally from equipment rentals,
installation fees and program guide sales. The Partnership is dependent upon the
timely receipt of service fees to provide for maintenance and replacement of
plant and equipment, current operating expenses and other costs of the Roseville
System.
FRANCHISES. The Roseville System is constructed and operated under
non-exclusive, fixed-term franchises or other types of operating authorities
(referred to collectively herein as "franchises") granted by local governmental
authorities. The Roseville System's franchises require that franchise fees
generally based on gross revenues of the cable system be paid to the
governmental authority that granted the franchise, that certain channels be
dedicated to municipal use, that municipal facilities, hospitals and schools be
provided cable service free of charge and that any new cable plant be
substantially constructed within specific periods.
The Partnership holds 2 franchises relating to the Roseville System.
The 1984 Cable Act prohibits franchising authorities from imposing annual
franchise fees in excess of 5% of gross revenues and also permits the cable
television system operator to seek renegotiation and modification of franchise
requirements if warranted by changed circumstances.
The Partnership has never had a franchise revoked. The Partnership's
franchise expiration dates are December 1999 and November 2000. It is
anticipated that the Roseville System will be sold before these franchises must
be renewed.
COMPETITION. Cable television systems currently experience competition
from several sources. A potential source of significant competition is Direct
Broadcast Satellite ("DBS") services that use video compression technology to
increase channel capacity and provide packages of movies, network and other
program services that are competitive with those of cable television systems.
Two companies offering DBS services began
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operations in 1994, and two other companies offering DBS service recently began
operations. In addition, a joint venture has won the right to provide a DBS
service through a FCC spectrum auction. Not all subscribers terminate cable
television service upon acquiring a DBS system. The Managing General Partner has
observed that a number of DBS subscribers also elect to subscribe to cable
television service in order to obtain the greatest variety of programming on
multiple television sets, including local video services programming not
available through DBS service.
Although neither the Partnership, the Managing General Partner or
Intercable has yet encountered competition from a telephone company providing
video services as a cable operator or video dialtone operator, it is
anticipated that the Roseville System and cable television systems owned or
managed by Intercable will face such competition in the near future.
Legislation recently enacted into law will make it possible for companies with
considerable resources to enter the business. For example, in February 1996,
one of the regional Bell operating companies entered into an agreement to
acquire the nation's third largest cable television company. In addition,
several telephone companies have begun seeking cable television franchises from
local governmental authorities as a consequence of litigation that successfully
challenged the constitutionality of the cable television/telephone company
cross-ownership rules.
The Managing General Partner cannot predict at this time when and to
what extent telephone companies will provide cable television service within
service areas in competition with the Roseville System or cable television
systems owned or managed by Intercable. The Managing General Partner is aware of
the following imminent competition from telephone companies: Ameritech, one of
the seven regional Bell operating companies, which provides telephone service in
a multi-state region including Illinois, has just obtained a franchise that will
allow it to provide cable television service in Naperville, Illinois, a
community currently served by a cable system owned by another one of the public
limited partnerships managed by Intercable. Chesapeake and Potomac Telephone
Company of Virginia and Bell Atlantic Video Service Company, both subsidiaries
of Bell Atlantic, another of the regional Bell operating companies, have
announced their intention to build a cable television system in Alexandria,
Virginia in competition with a cable television system owned by Intercable. Bell
Atlantic is preparing for the operation of a telecommunications and video
business in northern Virginia, including the Alexandria metropolitan area. The
FCC has granted GTE Virginia's application for authority to construct, operate,
own and maintain video dialtone facilities in northern Virginia, including in
the service area of a cable television system owned by Intercable. To date, GTE
has not begun construction of a video distribution system. The entry of
telephone companies as direct competitors could adversely affect the
profitability and market value of the Intercable's owned and managed systems.
Additional competition is present from several sources, including the
following: Master Antenna Television and Satellite Master Antenna Television
systems that serve multi-unit dwellings such as condominiums, apartment
complexes, motels, hotels and private residential communities; private cable
television/telephonic companies that have secured exclusive contracts to provide
video and telephony services to multi-unit dwellings and similar complexes; and
multichannel, multipoint distribution service ("MMDS") systems, commonly called
wireless cable which generally focus on providing service to residents of rural
areas. In addition, the FCC has established a new wireless telecommunications
service known as Personal Communications Service ("PCS") that would provide
portable non-vehicular mobile communications services similar to that available
from cellular telephone companies, but at a lower cost. Several cable television
multiple system operators hold or have requested experimental licenses from the
FCC to test PCS technology.
REGULATION AND LEGISLATION. The cable industry is regulated under the
Telecommunications Act of 1996 (the "1996 Act"), the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act") and the Cable
Communications Policy Act of 1984 (the "1984 Cable Act") and the regulations
implementing these statutes. The Federal Communications Commission (the "FCC")
has promulgated regulations covering such areas as the registration of cable
television systems and other communications businesses, carriage of television
broadcast programming, consumer education and lockbox enforcement, origination
cablecasting and sponsorship identification, children's programming, the
regulation of basic cable and cable programming service rates in areas where
cable television systems are not subject to effective competition, signal
leakage and frequency use, technical performance, maintenance of various
records, equal employment opportunity, and antenna structure notification,
marking and lighting. In addition, cable operators periodically are required to
file various
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informational reports with the FCC. The FCC has the authority to enforce these
regulations through the imposition of substantial fines, the issuance of cease
and desist orders and/or the imposition of administrative sanctions, such as the
revocation of FCC licenses needed to operate certain transmission facilities
often used in connection with cable operations. State or local franchising
authorities, as applicable, also have the right to enforce various regulations,
impose fines or sanctions, issue orders or seek revocation subject to the
limitations imposed upon such franchising authorities by federal, state and
local laws and regulations. Several states have assumed regulatory jurisdiction
of the cable television industry, and it is anticipated that other states will
do so in the future. To the extent the cable television industry begins
providing telephone service, additional state regulations will be applied to the
cable television industry. Cable television operations are subject to local
regulation insofar as systems operate under franchises granted by local
authorities.
The following is a summary of federal laws and regulations materially
affecting the cable television industry, and a description of state and local
laws with which the cable industry must comply.
Telecommunications Act of 1996. The 1996 Act, which became law on
February 28, 1996, substantially revised the Communications Act of 1934, as
amended, including the 1984 Cable Act and the 1992 Cable Act, and has been
described as one of the most significant changes in communications regulation
since the original Communications Act of 1934. The 1996 Act is intended, in
part, to promote substantial competition in the telephone local exchange and in
the delivery of video and other services. As a result of the 1996 Act, local
telephone companies (also known as local exchange carriers or "LECs") and other
service providers are permitted to provide video programming, and cable
television operators are permitted entry into the telephone local exchange
market. The FCC is required to conduct rulemaking proceedings over the next
several months to implement various provisions of the 1996 Act.
Among other provisions, the 1996 Act modified the 1992 Cable Act by
deregulating the cable programming service tier of large cable operators
effective March 31, 1999 and the cable programming service tier of small cable
operators (those that provide service to 50,000 or fewer subscribers) effective
immediately. The 1996 Act also revised the procedures for filing a cable
programming service tier rate complaint and adds a new effective competition
test.
The most far-reaching changes in the communications business will
result from the telephony provisions of the 1996 Act. The statute expressly
preempts any legal barriers to competition in the local telephone business that
previously existed in state and local laws and regulations. Many of these
barriers had been lifted by state actions over the last few years, but the 1996
Act completes the task. The 1996 Act also establishes new requirements for
maintaining and enhancing universal telephone service and new obligations for
telecommunications providers to maintain privacy of customer information. The
1996 Act establishes uniform requirements and standards for entry, competitive
carrier interconnection and unbundling of LEC monopoly services.
The 1996 Act repealed the cable television/telephone cross-ownership
ban adopted in the 1984 Cable Act. The federal cross-ownership ban was
particularly important to the cable industry because telephone companies already
own certain facilities such as poles, ducts and associated rights of way. While
this ban had been overturned by several courts, formal removal of the ban ended
the last legal constraints on telephone company plans to enter the cable market.
Under the 1996 Act, telephone companies in their capacity as common carriers now
may lease capacity to others to provide cable television service. Telephone
companies have the option of providing video service as cable operators or
through "open video systems" ("OVS"), a regulatory regime that may provide more
flexibility than traditional cable service. The 1996 Act exempts OVS operators
from many of the regulatory obligations that currently apply to cable operators,
such as rate regulation and franchise fees, although other requirements are
still applicable. OVS operators, although not subject to franchise fees as
defined by the 1992 Cable Act, are subject to fees charged by local franchising
authorities or other governmental entities in lieu of franchise fees. (Under
certain circumstances, cable operators also will be able to offer service
through open video systems.) In addition, the 1996 Act eliminated the
requirement that telephone companies file Section
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214 applications (applications to provide video dialtone services) with the FCC
before providing video service. This limits the opportunity of cable operators
to mount challenges at the FCC regarding telephone company entry into the video
market. The 1996 Act also contains restrictions on buying out incumbent cable
operators in a telephone company's service area, especially in suburban and
urban markets.
Other parts of the 1996 Act also will affect cable operators. Under the
1996 Act, the FCC is required to revise the current pole attachment rate
formula. This revision will result in an increase in the rates paid by entities,
including cable operators, that provide telecommunication services. The rates
will be phased in after a five-year period. (Cable operators that provide only
cable services will be unaffected.) Under the V-chip provisions of the 1996 Act,
cable operators and other video providers are required to pass along any program
rating information that programmers include in video signals. Cable operators
also are subject to new scrambling requirements for sexually explicit
programming, and cable operators that provide Internet access or other online
services are subject to the new indecency limitations for computer services. In
addition, cable operators that provide Internet access or other online services
are subject to the new indecency limitations for computer services, although
these provisions already have been challenged in court, and the courts have
preliminarily enjoined the enforcement of these content-based provisions.
Under the 1996 Act, a franchising authority may not require a cable
operator to provide telecommunications services or facilities, other than an
institutional network, as a condition to a grant, renewal or transfer of a cable
franchise, and franchising authorities are preempted from regulating
telecommunications services provided by cable operators and from requiring cable
operators to obtain a franchise to provide such services. The 1996 Act also
repealed the 1992 Cable Act's anti-trafficking provision, which generally
required the holding of cable television systems for three years.
It is premature to predict the specific effects of the 1996 Act on the
cable industry in general or the Partnership in particular. The FCC shortly will
be undertaking numerous rulemaking proceedings to interpret and implement the
1996 Act. It is not possible at this time to predict the outcome of those
proceedings or their effect on the Partnership.
Cable Television Consumer Protection and Competition Act of
1992. The 1992 Cable Act, which became effective on December 4, 1992, caused
significant changes to the regulatory environment in which the cable television
industry operates. The 1992 Cable Act generally mandated a greater degree of
regulation of the cable television industry. Under the 1992 Cable Act's
definition of effective competition, nearly all cable television systems in the
United States, including those owned and managed by the General Partner, became
subject to rate regulation of basic cable services. In addition, the 1992 Cable
Act allowed the FCC to regulate rates for non-basic service tiers other than
premium services in response to complaints filed by franchising authorities
and/or cable subscribers. In April 1993, the FCC adopted regulations governing
rates for basic and non-basic services. The FCC's rules became effective on
September 1, 1993.
In compliance with these rules, the General Partner on behalf of the
Partnership reduced rates charged for certain regulated services in the
Partnership's cable systems effective September 1, 1993. These reductions
resulted in some decrease in Partnership revenues and operating income before
depreciation and amortization; however, the decrease was not as severe as
originally anticipated. The General Partner has undertaken actions to mitigate a
portion of these reductions primarily through (a) new service offerings in some
systems, (b) product re-marketing and re-packaging and (c) marketing efforts
directed at non-subscribers.
On February 22, 1994, however, the FCC adopted several additional rate
orders including an order which revised its earlier- announced regulatory scheme
with respect to rates. The FCC's new regulations generally required rate
reductions, absent a successful cost-of-service showing, of 17 percent of
September 30, 1992 rates, adjusted for inflation, channel modifications,
equipment costs, and increases in programming costs. Further rate reductions for
cable systems whose rates are below the revised benchmark levels, as well as
reductions that would require operators to reduce rates below benchmark levels
in order to achieve a 17 percent rate reduction, were held in abeyance pending
completion of cable system cost studies. The FCC recently requested some of
these "low price" systems to complete cost study questionnaires. After review of
these
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questionnaires, the FCC could decide to permanently defer any further rate
reductions, or require the additional 7 percent rate roll back for some or all
of these systems. The FCC has also adopted its proposed upgrade methodology by
which operators would be permitted to recover the costs of upgrading their
plant.
After analyzing the effects of the two methods of rate regulation, the
Partnership complied with the new benchmark regulations and further reduced
rates in its operating systems effective July 1994.
On November 10, 1994, the FCC also announced a revision to its
regulations governing the manner in which cable operators may charge subscribers
for new cable programming services. In addition to the present formula for
calculating the permissible rate for new services, the FCC instituted a
three-year flat fee mark-up plan for charges relating to new channels of cable
programming services. Commencing on January 1, 1995, cable system operators may
charge for new channels of cable programming services added after May 14, 1994
at a rate of up to 20 cents per channel, but may not make adjustments to monthly
rates totaling more than $1.20 plus an additional 30 cents for programming
license fees per subscriber over the first two years of the three-year period
for these new services. Operators may charge an additional 20 cents in the third
year only for channels added in that year plus the costs for the programming.
Operators electing to use the 20 cent per channel adjustment may not also take a
7.5 percent mark-up on programming cost increases, which is permitted under the
FCC's current rate regulations. The FCC has requested further comment as to
whether cable operators should continue to receive the 7.5 percent mark-up on
increases in license fees on existing programming services.
The FCC also announced that it will permit operators to offer a "new
product tier" ("NPT"). Operators will be able to price the NPT as they elect so
long as, among other conditions, other channels that are subject to rate
regulation are priced in conformity with applicable regulations and operators do
not remove programming services from existing tiers and offer them on the NPT.
In September 1995, the FCC authorized a new, alternative method of
implementing rate adjustments which will allow cable operators to increase rates
for programming annually on the basis of projected increases in external costs
(inflation, costs for programming, franchise-related obligations and changes in
the number of regulated channels) rather than on the basis of cost increases
incurred in the preceding calendar quarter. Operators that elect not to recover
all of their accrued external costs and inflation pass-throughs each year may
recover them (with interest) in subsequent years.
In December 1995, the FCC adopted final cost-of-service rate
regulations requiring, among other things, cable operators to exclude 34 percent
of system acquisition costs related to intangible and tangible assets used to
provide regulated services. The FCC also reaffirmed the industry-wide 11.25
percent after tax rate of return on an operator's allowable rate base, but
initiated a further rulemaking in which it proposes to use an operator's actual
debt cost and capital structure to determine an operator's cost of capital or
rate of return. After a rate has been set pursuant to a cost-of-service showing,
rate increases for regulated services are indexed for inflation, and operators
are permitted to increase rates in response to increases in costs beyond their
control, such as taxes and increased programming costs.
The United States Court of Appeals for the District of Columbia Circuit
recently upheld the FCC's rate regulations implemented pursuant to the 1992
Cable Act, but ruled that the FCC impermissibly failed to permit cable operators
to adjust rates for certain cost increases incurred during the period between
the date the 1992 Cable Act was passed through the initial date of rate
regulation. The FCC has not yet implemented the court's ruling.
There have been several lawsuits filed by cable operators and
programmers in federal court challenging various aspects of the 1992 Cable Act
including its provisions relating to mandatory broadcast signal carriage,
retransmission consent, access to cable programming, rate regulations,
commercial leased channels and public access channels. On April 8, 1993, a
three-judge federal district court panel issued a decision upholding the
constitutionality of the mandatory signal carriage requirements of the 1992
Cable Act. That decision was appealed directly to the United States Supreme
Court. The United States Supreme Court vacated the lower court decision on June
27, 1994 and remanded the case to the district court for further development of
a factual record.
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On December 12, 1995, the three-judge federal district court
again upheld the must-carry rules' validity. This decision has been appealed to
the United States Supreme Court.
In 1993, a federal district court upheld provisions of the 1992 Cable
Act concerning rate regulation, retransmission consent, restrictions on
vertically integrated cable television operators and programmers, mandatory
carriage of programming on commercial leased channels and public, educational
and governmental access channels and the exemption for municipalities from civil
damage liability arising out of local regulation of cable services. The 1992
Cable Act's provisions providing for multiple ownership limits for cable
operators and advance notice of free previews for certain programming services
have been found unconstitutional and these decisions have been appealed. The
FCC's regulations relating to the carriage of indecent programming, which were
recently upheld by the United States Court of Appeals for the District of
Columbia, have been appealed to the United States Supreme Court.
Franchising . The responsibility for franchising or other authorization
of cable television systems is left to state and local authorities. There are,
however, several provisions in the 1984 Cable Act that govern the terms and
conditions under which cable television systems provide service. These include
uniform standards and policies that are applicable to cable television operators
seeking renewal of a cable television franchise. The procedures established
provide for a formal renewal process should the franchising authority and the
cable television operator decline to use an informal procedure. A franchising
authority unable to make a preliminary determination to renew a franchise is
required to hold a hearing in which the operator has the right to participate.
In the event a determination is made not to renew the franchise at the
conclusion of the hearing, the franchising authority must provide the operator
with a written decision stating the specific reasons for non-renewal. Generally,
the franchising authority can finally decide not to renew a franchise only if it
finds that the cable operator has not substantially complied with the material
terms of the present franchise, has not provided reasonable service in light of
the community's needs, does not have the financial, legal or technical ability
to provide the services being proposed for the future, or has not presented a
reasonable proposal for future service. A final decision of non-renewal by the
franchising authority is appealable in court.
A provision of the 1996 Act preempts franchising authorities from
regulating telecommunications services provided by cable operators and from
requiring cable operators to obtain a franchise to provide such services. A
franchising authority may not require a cable operator to provide
telecommunications services or facilities, other than an institutional network,
as a condition to a grant, renewal or transfer of a cable franchise.
GENERAL. The Partnership's business consists of providing cable
television services to a large number of customers, the loss of any one of which
would have no material effect on the Partnership's business. The Roseville
System has had some subscribers who later terminated the service. Terminations
occur primarily because people move to another home or to another city. In other
cases, people terminate on a seasonal basis or because they no longer can afford
or are dissatisfied with the service. The amount of past due accounts in the
Roseville System is not significant. The Managing General Partner's policy with
regard to past due accounts is basically one of disconnecting service before a
past due account becomes material.
The Partnership does not depend to any material extent on the
availability of raw materials; it carries no significant amounts of inventory
and it has no material backlog of customer orders. The Partnership has no
employees because all properties are managed by employees of Intercable.
Intercable has engaged in research and development activities relating to the
provision of new services but the amount of the Partnership's funds expended for
such research and development has never been material.
Compliance with federal, state and local provisions that have been
enacted or adopted regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment has had no material
effect upon the capital expenditures, earnings or competitive position of the
Partnership.
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ITEM 2. PROPERTIES
The Partnership acquired the Roseville System in April 1988. 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
Roseville System. The monthly basic service rate set forth herein represents,
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, 1995, the Roseville Systems operated cable plant
passing approximately 21,800 homes, representing an approximate 75% penetration
rate. Figures for numbers of subscribers, miles of cable plant and homes passed
are compiled from the Managing General Partner's records and may be subject to
adjustments.
<TABLE>
<CAPTION>
At December 31,
-----------------------------------------
ROSEVILLE SYSTEM 1995 1994 1993
---------------- ---- ---- ----
<S> <C> <C> <C>
Monthly basic plus service rate $ 22.95 $ 21.75 $ 22.46
Basic subscribers 16,470 14,946 13,618
Pay units 11,153 10,733 8,578
</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. As of January 15, 1996, the number of equity security
holders in the Partnership was 6,340.
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Item 6. Selected Financial Data
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $14,465,490 $13,082,094 $12,251,764 $11,160,962 $10,169,251
Operating Expenses 7,972,171 7,298,356 6,476,534 5,726,675 5,321,568
Management and Supervision Fees
and Allocated Overhead from
General Partners 1,848,033 1,737,106 1,590,738 1,452,321 1,240,751
Depreciation and Amortization 4,469,809 5,645,264 6,007,116 5,981,609 6,204,296
Operating Income (Loss) 175,477 (1,598,632) (1,822,624) (1,999,643) (2,597,364)
Net Loss (1,553,063) (2,994,486) (2,879,606) (3,195,844) (4,227,955)
Net Loss per
Limited Partnership Unit (9.37) (18.06) (17.36) (19.27) (25.49)
Weighted Average Number of
Limited Partnership
Units Outstanding 164,178 164,178 164,178 164,178 164,178
General Partners' Deficit (245,344) (229,814) (199,869) (171,073) (139,115)
Limited Partners' Capital 11,945,571 13,483,104 16,447,645 19,298,455 22,462,341
Total Assets 36,160,374 36,683,823 39,507,610 43,454,780 44,643,600
Debt 22,981,227 21,832,052 22,208,312 23,086,835 21,638,568
Managing General Partner
Advances 448,872 665,782 - 238,198 -
</TABLE>
10
<PAGE> 11
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
1995 Compared to 1994
Revenues of IDS/Jones Growth Partners 87-A, Ltd. (the "Partnership")
increased $1,383,396, or approximately 11 percent, to $14,465,490 in 1995 from
$13,082,094 in 1994. An increase in basic subscribers accounted for
approximately 49 percent of the increase in revenues. Basic subscribers
totaled 35,669 at December 31, 1995 compared to 33,102 at December 31, 1994, an
increase of 2,567, or approximately 8 percent. Advertising revenues accounted
for approximately 27 percent of the increase in revenues. No other individual
factor significantly affected the increase in revenues.
Operating expenses consist primarily of costs associated with the
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 consumer marketing expenses.
Operating expenses increased $673,815, or approximately 9 percent, to
$7,972,171 in 1995 from $7,298,356 in 1994. Operating expenses consumed 55
percent and 56 percent of revenue during the years ended December 31, 1995 and
1994, respectively. The increase in operating expenses was primarily due to
increases in programming fees, which accounted for approximately 71 percent of
the increase. No other individual factor significantly affected the increase
in operating expenses.
Management fees and allocated overhead from the general partners
increased $110,927, or approximately 6 percent, to $1,848,033 in 1995 from
$1,737,106 in 1994. This increase was due to the increase in revenues, upon
which such management fees are based, as well as increases in allocated
expenses from the Managing General Partner.
Depreciation and amortization decreased $1,175,455, or approximately
21 percent, to $4,469,809 in 1995 from $5,645,264 in 1994. This decrease was
due to the maturation of the Partnership's intangible asset base.
The Partnership recorded operating income of $175,477 in 1995,
compared to an operating loss of $1,598,632 in 1994. This change was a result
of the increase in revenues and the decrease in depreciation and amortization
expense exceeding the increases in operating expenses, management and
supervision fees and allocated overhead from the general partners.
The cable television industry generally measures the financial
performance of a cable television system in terms of cash flow or operating
income before depreciation and amortization. The value of a cable television
system is often determined using multiples of cash flow. 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 income before depreciation and amortization expenses increased
$598,654, or approximately 15 percent, to $4,645,286 in 1995 from $4,046,632
in 1994 due to the increase in revenues exceeding the increase in operating
expenses and management and supervision fees and allocated overhead from the
general partners.
Interest expense increased $358,591, or approximately 26 percent, to
$1,732,547 in 1995 from $1,373,956 in 1994. This increase was due primarily to
higher outstanding balances on interest bearing obligations during 1995.
Net loss decreased $1,441,423, or approximately 48 percent, to
$1,553,063 in 1995 from $2,994,486 in 1994. These losses were due to the
factors discussed above.
1994 Compared to 1993
Revenues of the Partnership increased $830,330, or approximately 7
percent, to $13,082,094 in 1994 from $12,251,764 in 1993. Advertising revenues
accounted for approximately 60 percent of the increase in revenues. An
increase in basic subscribers accounted for approximately 21 percent of the
increase in revenues. The increase in revenues would have been greater but for
the reduction in basic rates due to basic rate regulations issued by the FCC in
April 1993 and February 1994 with which the Partnership complied effective
September 1993 and July 1994, respectively.
11
<PAGE> 12
Operating expenses increased $821,822, or approximately 13 percent to
$7,298,356 in 1994, from $6,476,534 in 1993. Operating expenses consumed 56
percent and 53 percent of revenue during the years ended December 31, 1994 and
1993, respectively. Increases in programming fees and advertising expenses
accounted for approximately 31 percent and 27 percent, respectively, of the
increase in operating expenses. No other individual factor significantly
affected the increase in operating expenses.
Management fees and allocated overhead from the general partners
increased $146,368, or approximately 9 percent, to $1,737,106 in 1994 from
$1,590,738 in 1993. This increase was due to the increase in revenues, upon
which such management fees are based, as well as increases in allocated
expenses from the Managing General Partner. The Managing General Partner has
experienced increases in expenses in 1994, including personnel costs and
reregulation costs, a portion of which are allocated to the Partnership.
Depreciation and amortization decreased $361,852, or approximately 6
percent, to $5,645,264 in 1994 from $6,007,116 in 1993. This decrease was due
to the maturation of the Partnership's depreciable asset base.
Operating loss decreased $223,992, or approximately 12 percent, to
$1,598,632 in 1994 from $1,822,624 in 1993. This decrease was due to the
increase in revenues and the decrease in depreciation and amortization expense
exceeding the increases in operating expenses, management and supervision fees
and allocated overhead from the general partners.
Operating income before depreciation and amortization expense
decreased $137,860, or approximately 3 percent, to $4,046,632 in 1994 from
$4,184,492 in 1993 due to the increase in operating expenses and management and
supervision fees and allocated overhead from the general partners exceeding the
increase in revenues.
Interest expense increased $291,476, or approximately 27 percent, to
$1,373,956 in 1994 from $1,082,480 in 1993. This increase was due primarily to
higher effective interest rates on outstanding interest bearing obligations
during 1994.
Net loss increased $114,880, or approximately 4 percent, to $2,994,486
in 1994 from $2,879,606 in 1993 due primarily to the increase in interest
expense exceeding the decrease in operating loss. These losses, which are
primarily the result of the factors discussed above.
FINANCIAL CONDITION
For the year ended December 31, 1995, the Partnership generated net
cash from operating activities totaling $2,575,357, which is available to fund
capital expenditures and non-operating costs. The Partnership expended
approximately $3,600,000 in capital improvements during 1995. Of these
improvements, approximately 40 percent related to the construction of cable
television plant. Approximately 25 percent related to service drops to homes.
Approximately 10 percent related to rebuilds and upgrades of the Partnership's
cable television systems. The remaining expenditures related to various system
enhancements in each of the Partnership's systems. Funding for these
expenditures was provided by cash generated from operations and borrowings
available under the Partnership's credit facility.
Anticipated capital expenditures for 1996 in the Partnership's
Roseville System are approximately $1,400,000. Construction of system
extensions will account for approximately 57 percent of these expenditures.
Service drops to homes will account for approximately 7 percent of the
anticipated expenditures. The remainder of the expenditures relate to various
enhancements in the Partnership's Roseville System. Funding for these
expenditures is expected to be provided by cash on hand and cash generated from
operations and, if necessary, borrowings available under the Partnership's new
credit facility, as discussed below.
On August 11, 1995, the Partnership entered into a purchase and sale
agreement pursuant to which it agreed to sell the Carmel System to the Managing
General Partner for a sales price of $44,235,333, subject to normal working
capital closing adjustments. The Managing General Partner assigned its rights
and obligations under the purchase and sale agreement to Jones Cable Holdings,
Inc., an affiliate of the Managing General Partner. Closing of this sale
occurred on February 28, 1996. The sales price represented the average of
three separate, independent appraisals of the Carmel System. A portion of the
net sales proceeds will be used to make a $30,000,000 distribution to the
limited partners. The distribution to the limited partners of the Partnership
equates to approximately $183 per unit, or approximately $731 for
12
<PAGE> 13
each $1,000 invested in the Partnership. This distribution will be made in
April 1996. No vote of the limited partners of the Partnership was required in
connection with this transaction because the assets of the Carmel System did
not constitute all or substantially all of the Partnership's assets. The
Supervising General Partner consented to the timing of the transaction and
participated in the selection of the appraisers.
The Partnership continues to own and operate the Roseville System.
The cash from operations of the Roseville System will be sufficient to provide
liquidity to meet the anticipated needs of the Roseville System as well as
service the anticipated debt balance of approximately $8,420,000.
At December 31, 1995, the outstanding balance under the Partnership's
bank loan was $22,827,500, which converted to a term loan payable in 13
consecutive quarterly installments beginning December 31, 1995. As discussed
above, on February 28, 1996, the Partnership sold its Carmel System and used a
portion of the sales proceeds to repay the then-outstanding principal balance
of $22,655,000. Also, on February 28, 1996, the Partnership entered into a new
reducing revolving credit agreement with a commitment up to $10,000,000. The
reducing revolving credit period expires December 31, 2003. The commitment
amount reduces quarterly, beginning March 31, 1999. The Partnership will
borrow approximately $8,420,000 available from the new $10,000,000 revolving
credit facility, which it will use, together with cash on hand from the sale of
the Carmel System, to fund a $30,000,000 distribution to the Partnership's
limited partners in April 1996. The $8,420,000 borrowed from the credit
facility represents sale proceeds from the Carmel System that were used to
temporarily reduce bank indebtedness. Interest on the new commitment is at the
Partnership's option of the Prime Rate, the London Interbank Offered Rate plus
1 percent or the Certificate of Deposit Rate plus 1-1/4 percent. The
effective interest rates on amounts outstanding are 6.91 percent and 7.19
percent at December 31, 1995 and 1994, respectively.
REGULATION AND LEGISLATION
The Telecommunications Act of 1996 (the "1996 Act"), which became law
on February 8, 1996, substantially revised the Communications Act of 1934, as
amended, including the 1984 Cable Act and the 1992 Cable Act, and has been
described as one of the most significant changes in communications regulation
since the original Communications Act of 1934. The 1996 Act is intended, in
part, to promote substantial competition in the telephone local exchange and in
the delivery of video and other services. As a result of the 1996 Act, local
telephone companies (also known as local exchange carriers or "LECs") and other
service providers are permitted to provide video programming, and cable
television operators are permitted entry into the telephone local exchange
market. The FCC is required to conduct rulemaking proceedings over the next
several months to implement various provisions of the 1996 Act.
Among other provisions, the 1996 Act modified the 1992 Cable Act by
deregulating the cable programming service tier of large cable operators
including the Partnership effective March 31, 1999 and the cable programming
service tier of "small" cable operators in systems providing service to 50,000
or fewer subscribers effective immediately. The 1996 Act also revised the
procedures for filing cable programming service tier rate complaints and adds a
new effective competition test.
It is premature to predict the specific effects of the 1996 Act on the
cable industry in general or the Partnership in particular. The FCC will be
undertaking numerous rulemaking proceedings to interpret and implement the 1996
Act. It is not possible at this time to predict the outcome of those
proceedings or their effect on the Partnership. See Item 1.
13
<PAGE> 14
Item 8. Financial Statements
IDS/JONES GROWTH PARTNERS 87-A, LTD.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1994
INDEX
<TABLE>
<CAPTION>
Page
---
<S> <C>
Report of Independent Public Accountants 15
Balance Sheets 16
Statements of Operations 18
Statements of Partners' Capital (Deficit) 19
Statements of Cash Flows 20
Notes to Financial Statements 21
</TABLE>
14
<PAGE> 15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of IDS/Jones Growth Partners 87-A, Ltd.:
We have audited the accompanying balance sheets of IDS/JONES GROWTH
PARTNERS 87-A, LTD. (a Colorado limited partnership) as of December 31, 1995
and 1994, and the related statements of operations, partners' capital (deficit)
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the General
Partners' 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 IDS/Jones Growth
Partners 87-A, Ltd. as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 8, 1996.
15
<PAGE> 16
IDS/JONES GROWTH PARTNERS 87-A, LTD.
(A Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
----------------------------------
ASSETS 1995 1994
------ ------------- -------------
<S> <C> <C>
CASH $ 557,506 $ 407,610
TRADE RECEIVABLES, less allowance for
doubtful receivables of $24,428 and $17,015
at December 31, 1995 and 1994, respectively 623,890 498,516
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 35,421,532 31,848,280
Less-accumulated depreciation (15,195,244) (12,685,653)
------------- -------------
20,226,288 19,162,627
Franchise costs, net of accumulated
amortization of $19,261,834 and $17,671,439
at December 31, 1995 and 1994, respectively 9,606,958 11,195,969
Subscriber lists, net of accumulated
amortization of $4,338,488 and $4,177,945
at December 31, 1995 and 1994, respectively 37,412 197,955
Costs in excess of interests in net assets purchased,
net of accumulated amortization of $1,075,069 and
$924,122 at December 31, 1995 and 1994, respectively 4,752,968 4,903,915
------------- -------------
Total investment in cable television properties 34,623,626 35,460,466
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 355,352 317,231
------------- -------------
Total assets $ 36,160,374 $ 36,683,823
============= =============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
16
<PAGE> 17
IDS/JONES GROWTH PARTNERS 87-A, LTD.
(A Limited Partnership)
BALANCE SHEETS
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
December 31,
-------------------------------------
LIABILITIES: 1995 1994
------------- ------------
<S> <C> <C>
Debt $ 22,981,227 $ 21,832,052
Accounts payable-
Trade 26,875 65,095
Managing General Partner 448,872 665,782
Accrued liabilities 957,735 828,923
Subscriber prepayments 45,438 38,681
------------- ------------
Total liabilities 24,460,147 23,430,533
------------- ------------
COMMITMENTS AND CONTINGENCIES (Note 7)
PARTNERS' CAPITAL (DEFICIT):
General Partners-
Contributed capital 500 500
Accumulated deficit (245,844) (230,314)
------------- ------------
(245,344) (229,814)
------------- ------------
Limited Partners-
Net contributed capital
(164,178 units outstanding at
December 31, 1995 and 1994) 35,824,200 35,824,200
Accumulated deficit (23,878,629) (22,341,096)
------------- ------------
11,945,571 13,483,104
------------- ------------
Total liabilities and partners'
capital (deficit) $ 36,160,374 $ 36,683,823
============= ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
17
<PAGE> 18
IDS/JONES GROWTH PARTNERS 87-A, LTD.
(A Limited Partnership)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1995 1994 1993
------------- ------------- ------------
<S> <C> <C> <C>
REVENUES $ 14,465,490 $13,082,094 $ 12,251,764
COSTS AND EXPENSES:
Operating expenses 7,972,171 7,298,356 6,476,534
Management and supervision
fees and allocated overhead
from General Partners 1,848,033 1,737,106 1,590,738
Depreciation and
amortization 4,469,809 5,645,264 6,007,116
------------- ------------- ------------
OPERATING INCOME (LOSS) 175,477 (1,598,632) (1,822,624)
------------- ------------- ------------
OTHER INCOME (EXPENSE):
Interest expense (1,732,547) (1,373,956) (1,082,480)
Other, net 4,007 (21,898) 25,498
------------- ------------- ------------
Total other income
(expense) (1,728,540) (1,395,854) (1,056,982)
------------- ------------- ------------
NET LOSS $ (1,553,063) $ (2,994,486) $ (2,879,606)
============= ============= ============
ALLOCATION OF NET LOSS:
General Partners $ (15,530) $ (29,945) $ (28,796)
============= ============= ============
Limited Partners $ (1,537,533) $ (2,964,541) $ (2,850,810)
============= ============= ============
NET LOSS PER LIMITED
PARTNERSHIP UNIT $ (9.37) $ (18.06) $ (17.36)
============= ============= ============
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 164,178 164,178 164,178
============= ============= ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
18
<PAGE> 19
IDS/JONES GROWTH PARTNERS 87-A, LTD.
(A Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1995 1994 1993
------------- ------------- ------------
<S> <C> <C> <C>
GENERAL PARTNERS:
Jones Cable Corporation
Balance, beginning of year $ (114,907) $ (99,935) $ (85,537)
Net loss for year (7,765) (14,972) (14,398)
------------- ------------- ------------
Balance, end of year $ (122,672) $ (114,907) $ (99,935)
============= ============= ============
IDS Cable Corporation
Balance, beginning of year $ (114,907) $ (99,934) $ (85,536)
Net loss for year (7,765) (14,973) (14,398)
------------- ------------- ------------
Balance, end of year $ (122,672) $ (114,907) $ (99,934)
============= ============= ============
Total
Balance, beginning of year $ (229,814) $ (199,869) $ (171,073)
Net loss for year (15,530) (29,945) (28,796)
------------- ------------- ------------
Balance, end of year $ (245,344) $ (229,814) $ (199,869)
============= ============= ============
LIMITED PARTNERS:
Balance, beginning of year $ 13,483,104 $ 16,447,645 $ 19,298,455
Net loss for year (1,537,533) (2,964,541) (2,850,810)
------------- ------------- ------------
Balance, end of year $ 11,945,571 $ 13,483,104 $ 16,447,645
============= ============= ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
19
<PAGE> 20
IDS/JONES GROWTH PARTNERS 87-A, LTD.
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,553,063) $(2,994,486) $(2,879,606)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 4,469,809 5,645,264 6,007,116
Amortization of interest rate protection
contract 33,336 33,336 33,328
Increase in trade receivables (125,374) (177,629) (109,962)
Decrease (increase) in deposits, prepaid
expenses and deferred charges (129,790) 41,383 (23,511)
Increase (decrease) in accounts
payable, accrued liabilities and
subscriber prepayments 97,349 (118,823) 49,157
Increase (decrease) in amount due
Managing General Partner (216,910) 665,782 (238,198)
------------ ------------ ------------
Net cash provided by operating
activities 2,575,357 3,094,827 2,838,324
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (3,573,252) (3,174,865) (2,649,706)
Franchise renewal costs (1,384) (105,508) -
------------ ------------ ------------
Net cash used in investing
activities (3,574,636) (3,280,373) (2,649,706)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 1,398,225 36,298 96,423
Repayment of debt (249,050) (412,558) (974,946)
Purchase of interest rate protection contract - - (100,000)
------------ ------------ ------------
Net cash provided by (used in) financing
activities 1,149,175 (376,260) (978,523)
------------ ------------ ------------
Increase (decrease) in cash 149,896 (561,806) (789,905)
Cash, beginning of year 407,610 969,416 1,759,321
------------ ------------ ------------
Cash, end of year $ 557,506 $ 407,610 $ 969,416
============ ============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 1,690,619 $ 1,256,215 $ 1,130,652
============ ============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
20
<PAGE> 21
IDS/JONES GROWTH PARTNERS 87-A, LTD.
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION AND PARTNERS' INTERESTS
Formation and Business
IDS/Jones Growth Partners 87-A, Ltd. (the "Partnership"), a Colorado
limited partnership, was formed on September 15, 1987, pursuant to a public
offering. The Partnership was formed to acquire, develop and operate cable
television systems. Jones Cable Corporation, a Colorado corporation, is the
"Managing General Partner" and manager of the Partnership. IDS Cable
Corporation, a Minnesota corporation, is the "Supervising General Partner".
Jones Intercable, Inc. ("Intercable"), the parent of Jones Cable Corporation,
manages the cable television systems owned by the Partnership. Intercable and
its subsidiaries also own and operate cable television systems as well as
manage cable television systems for other limited partnerships for which it is
general partner and, also, for affiliated entities.
Cable Television System Acquisitions
In 1988, the Partnership acquired the cable television system serving
the communities in and around Roseville, California (the "Roseville System")
and, in 1989, the Partnership acquired the cable television system serving the
communities in and around Carmel, Indiana (the "Carmel System"). The Carmel
System was sold in February 1996, as discussed below.
The above-described acquisitions were accounted for as purchases with
the purchase price allocated to tangible and intangible assets based upon an
independent appraisal. The method of allocation of the purchase price was as
follows: first, to the fair value of the net tangible assets acquired; second
to the value of subscriber lists and any non-compete agreements; third, to
franchise costs; and fourth, to costs in excess of interests in net assets
purchased. Acquisition fees paid to affiliates of the General Partners and
other system acquisition costs were capitalized and included in the costs of
intangible assets.
Contributed Capital
The capitalization of the Partnership is set forth in the accompanying
statements of partners' capital (deficit). No limited partner is obligated to
make any additional contribution to partnership capital.
The Managing General Partner and the Supervising General Partner
purchased their interests in the Partnership by contributing $250 each to
partnership capital.
All profits and losses of the Partnership are allocated 99 percent to
the limited partners, 1/2 percent to the Managing General Partner and 1/2
percent to the Supervising General Partner, except for income or gain from the
sale or disposition of cable television properties, which will be allocated to
the partners based upon the formula set forth in the Partnership'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.
Cable Television System Sales
On August 11, 1995, the Partnership entered into a purchase and sale
agreement pursuant to which it agreed to sell the Carmel System to the Managing
General Partner for a sales price of $44,235,333, subject to normal working
capital closing adjustments. The Managing General Partner assigned its rights
and obligations under the purchase and sale agreement to Jones Cable Holdings,
Inc., an affiliate of the Managing General Partner. Closing of this sale
occurred on February 28, 1996. The sales price represented the average of
three separate, independent appraisals of the Carmel System. A portion of the
net sales proceeds will be used to make a $30,000,000 distribution to the
limited partners. The distribution to the limited partners of the Partnership
equates to approximately $183 per unit, or approximately $731 for each $1,000
invested in the Partnership. This distribution will be made in April 1996. No
vote of the limited partners of the Partnership was required in connection with
this transaction because the assets of the Carmel System did not constitute
21
<PAGE> 22
all or substantially all of the Partnership's assets. The Supervising General
Partner consented to the timing of the transaction and participated in the
selection of the appraisers.
The pro forma effect of the sale of the Carmel System on the results
of the Partnership's operations for the years ended December 31, 1995 and 1994,
assuming the transaction had occurred at the beginning of the year, is
presented in the following unaudited tabulation:
<TABLE>
<CAPTION>
For the Year Ended December 31, 1995
-------------------------------------------
Pro Forma
As Reported Adjustments Pro Forma
----------- ----------- ---------
<S> <C> <C> <C>
Revenues $ 14,465,490 $(8,082,588) $6,382,902
=========== =========== ==========
Operating Income (Loss) $ 175,477 $ (198,054) $ (22,577)
=========== =========== ==========
Net Loss $(1,553,063) $ 808,599 $ (744,464)
=========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended December 31, 1994
-------------------------------------------
Pro Forma
As Reported Adjustments Pro Forma
----------- ----------- ---------
<S> <C> <C> <C>
Revenues $13,082,094 $(7,377,424) $ 5,704,670
=========== =========== ===========
Operating Loss $(1,598,632) $ 282,606 $(1,316,026)
=========== =========== ===========
Net Loss $(2,994,486) $ 1,259,888 $(1,734,598)
=========== =========== ===========
</TABLE>
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Records
The accompanying financial statements have been prepared on the
accrual basis of accounting in accordance with generally accepted accounting
principles. The Partnership's tax returns are also prepared on the accrual
basis.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the General Partner's management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Property, Plant and Equipment
Depreciation is provided using the straight-line method over the
following estimated service lives:
<TABLE>
<S> <C>
Cable distribution systems 5 - 15 years
Equipment and tools 3 - 5 years
Office furniture and equipment 5 years
Buildings 10 - 20 years
Vehicles 3 years
</TABLE>
Replacements, renewals and improvements are capitalized and
maintenance and repairs are charged to expense as incurred.
22
<PAGE> 23
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:
<TABLE>
<S> <C>
Franchise costs 1 - 12 years
Subscriber lists 1 - 2 years
Costs in excess of interests in net
assets purchased 33 years
</TABLE>
Revenue Recognition
Subscriber prepayments are initially deferred and recognized as
revenue when earned.
(3) TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES
Management Fees, Supervision Fees, Distribution Ratios and Reimbursements
The Managing General Partner manages the Partnership and receives a
fee for its services equal to 5 percent of the gross revenues of the
Partnership, excluding revenues from the sale of cable television systems or
franchises. Management fees paid to the Managing General Partner were
$723,275, $654,105 and $612,588 during 1995, 1994 and 1993, respectively.
The Supervising General Partner participates in certain management
decisions of the Partnership and receives a fee for its services equal to 1/2
percent of the gross revenues of the Partnership, excluding revenues from the
sale of cable television systems or franchises. Supervision fees paid to the
Supervising General Partner during the years ended December 31, 1995, 1994 and
1993 were $72,327, $65,410 and $61,259, 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,
1/2 percent to the Managing General Partner and 1/2 percent to the Supervising
General Partner. 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 partnership capital by the limited partners; the balance, 75 percent to the
limited partners, 12-1/2 percent to the Managing General Partner and 12-1/2
percent to the Supervising General Partner. As of December 31, 1995, the
Partnership had made no such distributions. As a result of the sale of the
Carmel System, the Partnership will make a distribution to the limited partners
in April 1996. Such distribution will total $30,000,000 and will equate to
approximately $183 per unit, or approximately $731 for each $1,000 invested in
the Partnership.
The Partnership reimburses Intercable for certain allocated overhead
and administrative expenses. These expenses represent the salaries and related
benefits paid for corporate personnel, rent, data processing services and other
corporate facilities costs. Such personnel provide engineering, marketing,
administrative, accounting, legal and investor relations services to the
Partnership. Allocations of personnel costs are based primarily on actual time
spent by employees of Intercable with respect to each partnership managed.
Remaining expenses are allocated based on the pro rata relationship of the
Partnership's revenues to the total revenues of all systems owned or managed by
the Managing General Partner 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.
The Managing General Partner believes that the methodology used in allocating
overhead and administrative expense is reasonable. Reimbursements made to
Intercable by the Partnership for allocated overhead and administrative
expenses were $1,052,431, $1,017,591 and $916,891 for 1995, 1994 and 1993,
respectively. The Supervising General Partner may also be reimbursed for
certain expenses incurred on behalf of the Partnership. There were no
reimbursements made to the Supervising General Partner by the Partnership for
allocated overhead and administrative expenses during the years ended December
31, 1995, 1994 and 1993.
The Partnership was charged interest by Intercable during 1995 at an
average interest rate of 10.5 percent on amounts due to the Managing General
Partner, which approximated Intercable's weighted average cost of borrowing.
23
<PAGE> 24
Total interest charged to the Partnership by Intercable was $25,456, $19,296
and $1,705 in 1995, 1994 and 1993, respectively.
Payments to/from Affiliates for Programming Services
The Partnership receives programming from Product Information Network,
Superaudio, Mind Extension University and Jones Computer Network, all of which
are affiliates of the Managing General Partner.
Payments to Superaudio totaled approximately $19,486, $19,257 and
$19,030 in 1995, 1994 and 1993, respectively. Payments to Mind Extension
University totaled $20,848, $17,449 and $11,074 in 1995, 1994 and 1993,
respectively. Payments to Jones Computer Network, which initiated service in
1994, totaled $25,930 and $4,568 in 1995 and 1994, respectively.
The Partnership receives a commission from Product Information Network
based on a percentage of advertising revenue and number of subscribers.
Product Information Network, which initiated service in 1994, paid commissions
to the Partnership totaling $29,029 and $12,236 in 1995 and 1994, respectively.
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of December 31, 1995 and 1994,
consists of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cable distribution systems $ 32,857,826 $ 29,630,038
Equipment and tools 1,180,288 1,055,820
Office furniture and equipment 596,016 513,788
Buildings 72,415 57,184
Vehicles 712,987 589,450
Land 2,000 2,000
------------ ------------
35,421,532 31,848,280
Less - accumulated depreciation (15,195,244) (12,685,653)
------------ ------------
$ 20,226,288 $ 19,162,627
============ ============
</TABLE>
(5) DEBT
<TABLE>
<CAPTION>
Debt consists of the following: December 31,
---------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Lending institutions -
Revolving credit and term loan
agreement $22,827,500 $21,735,000
Capital lease obligations 153,727 97,052
------------ ------------
$ 22,981,227 $ 21,832,052
============ ============
</TABLE>
At December 31, 1995, the outstanding balance under the Partnership's
bank loans was $22,827,500, which converted to a term loan, payable in 13
consecutive quarterly installments beginning December 31, 1995. As discussed
in Note (1), on February 28, 1996, the Partnership sold its Carmel System and
used a portion of the sales proceeds to repay the then-outstanding principal
balance of $22,655,000. Also, on February 28, 1996, the Partnership entered
into a new reducing revolving credit agreement with a commitment up to
$10,000,000. The reducing revolving credit period expires December 31, 2003.
The commitment amount reduces quarterly, beginning March 31, 1999. The
Partnership will borrow approximately $8,420,000 available from the new
$10,000,000 revolving credit facility, which it will use, together
24
<PAGE> 25
with cash on hand from the sale of the Carmel System, to fund a $30,000,000
distribution to the Partnership's limited partners in April 1996. The
$8,420,000 which will be borrowed from the credit facility represents sale
proceeds from the Carmel System that were used to temporarily reduce bank
indebtedness. Interest on the new commitment is at the Partnership's option
of the Prime Rate, the London Interbank Offered Rate plus 1 percent or the
Certificate of Deposit Rate plus 1-1/4 percent. The effective interest rates
on amounts outstanding are 6.91 percent and 7.19 percent at December 31, 1995
and 1994, respectively.
On January 12, 1993, the Partnership entered into an interest rate cap
agreement covering outstanding debt obligations of $10,000,000. The agreement
protected the Partnership for interest rates that exceeded 7 percent for three
years from the date of the agreement. The agreement expired in January 1996.
At December 31, 1995, 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.
As a result of the debt refinancing, as discussed above, no
significant maturities exist. At December 31, 1995, substantially all of the
Partnership's property, plant and equipment secured the above indebtedness.
(6) INCOME TAXES
Income taxes have not been recorded in the accompanying financial
statements because they accrue directly to the partners. The federal and state
income tax returns of the Partnership are prepared and filed by the Managing
General Partner.
The Partnership's tax returns, the qualification of the Partnership as
such for tax purposes, and the amount of distributable Partnership income or
loss are subject to examination by federal and state taxing authorities. If
such examinations result in changes with respect to the Partnership's
qualification as such, or in changes with respect to the Partnership's recorded
income or loss, the tax liability of the general and limited partners would
likely be changed accordingly.
Taxable losses reported to the partners is different from that
reported in the statements of operations due to the difference in depreciation
allowed under generally accepted accounting principles and the expense allowed
for tax purposes under the Modified Accelerated Cost Recovery System (MACRS).
There are no other significant differences between taxable 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 $159,083,
$152,323 and $145,620, respectively, for the years ended December 31, 1995,
1994 and 1993. Minimum commitments under operating leases for each of the five
years in the period ended December 31, 2000 and thereafter are as follows:
<TABLE>
<S> <C>
1996 $110,847
1997 19,343
1998 -
1999 -
2000 -
Thereafter -
----------
$ 130,190
==========
</TABLE>
25
<PAGE> 26
(8) SUPPLEMENTARY PROFIT AND LOSS INFORMATION
Supplementary profit and loss information is presented below:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1995 1994 1993
----------- ------------ ----------
<S> <C> <C> <C>
Maintenance and repairs $ 133,002 $ 135,550 $ 122,667
=========== ============ ==========
Taxes, other than income and payroll taxes $ 397,118 $ 364,608 $ 367,514
=========== ============ ==========
Advertising $ 141,988 $ 95,760 $ 165,034
=========== ============ ==========
Depreciation of property, plant and equipment $ 2,529,591 $ 2,277,171 $2,608,916
=========== ============ ==========
Amortization of intangible assets $ 1,940,218 $ 3,368,093 $3,398,200
=========== ============ ==========
</TABLE>
26
<PAGE> 27
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 Managing
General Partner is set forth below.
<TABLE>
<CAPTION>
Name Age Positions with the Managing General Partner
---- --- -------------------------------------------
<S> <C> <C>
Glenn R. Jones 66 Chairman of the Board and Chief Executive Officer
James B. O'Brien 46 President
Kevin P. Coyle 44 Vice President of Finance
Elizabeth M. Steele 44 Vice President and Secretary
</TABLE>
Mr. Glenn R. Jones has been Chairman of the Board of the Managing
General Partner since its formation in October 1986. Mr. Jones served as
President of the Managing General Partner until September of 1990 at which time
he was elected Chief Executive Officer. Mr. Jones has served as Chairman of the
Board of Directors and Chief Executive Officer of Jones Intercable, Inc. 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 Jones Intercable, Inc. and of certain other affiliates of
Jones Intercable, Inc. Mr. Jones has been involved in the cable television
business in various capacities since 1961, is a past and present member of the
Board of Directors and the Executive Committee of the National Cable Television
Association. He also is on the Executive Committee of Cable in the Classroom, an
organization dedicated to education via cable. Additionally, in March 1991, Mr.
Jones was appointed to the Board of Governors for the American Society for
Training and Development, and in November 1992 to 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 is a past director
and member of the Executive Committee of C-Span. Mr. Jones has been the
recipient of several awards including the Grand Tam Award in 1989, the highest
award from the Cable Television Administration and Marketing Society; the
Chairman's Award from the Investment Partnership Association, which is an
association of sponsors of public syndications; the cable television industry's
Public Affairs Association President's Award in 1990, the Donald G. McGannon
award for the advancement of minorities and women in cable; the STAR Award from
American Women in Radio and Television, Inc. for exhibition of a commitment to
the issues and concerns of women in television and radio; the Women in Cable
Accolade in 1990 in recognition of support of this organization; the Most
Outstanding Corporate Individual Achievement award from the International
Distance Learning Conference; the Golden Plate Award from the American Academy
of Achievement for his advances in distance education; the Man of the Year named
by the Denver chapter of the Achievement Rewards for College Scientists; and in
1994 Mr. Jones was inducted into Broadcasting and Cable's Hall of Fame.
Mr. James B. O'Brien was elected President of the Managing General
Partner in September of 1990. Mr. O'Brien joined Jones Intercable, Inc. in
January 1982. Mr. O'Brien was elected President and a Director of Jones
Intercable, Inc. in December 1989. Prior to being elected President and a
Director of Jones Intercable, Inc., Mr. O'Brien served as a Division Manager,
Director of Operations Planning/Assistant to the CEO, Fund Vice President and
Group Vice President/Operations. As President, he is responsible for the
day-to-day operations of the cable television systems managed and owned by Jones
Intercable, Inc. Mr. O'Brien is a board member of Cable Labs, Inc., the research
arm of the cable television industry. He also serves as a director of the Cable
Television Administration and Marketing Association and as a director of the
Walter Kaitz Foundation, a
27
<PAGE> 28
foundation that places people of any ethnic minority group in positions with
cable television systems, networks and vendor companies.
Mr. Kevin P. Coyle was elected Vice President of Finance of the
Managing General Partner in February 1989. Mr. Coyle is the principal financial
and accounting officer of the Managing General Partner. Mr. Coyle joined The
Jones Group, Ltd. in July 1981 as Vice President/Financial Services. He was
elected Treasurer of Jones Intercable, Inc. in August 1987, Vice
President/Treasurer in April 1988 and Group Vice President/Finance in October
1990.
Ms. Elizabeth M. Steele has served as Secretary of the Managing General
Partner since August 1987 and Vice President since February 1989. Ms. Steele
joined Jones Intercable, Inc. in August 1987 as Vice President/General Counsel
and Secretary. From August 1980 until joining Jones Intercable, Inc., Ms. Steele
was an associate and then a partner at the Denver law firm of Davis, Graham &
Stubbs, which serves as counsel to Jones Intercable, Inc.
Certain information concerning directors and executive officers of the
Supervising General Partner is set forth below:
<TABLE>
<CAPTION>
Name Age Positions with the Supervising General Partner
---- --- ----------------------------------------------
<S> <C> <C>
Janis E. Miller 44 President and Director
Morris Goodwin, Jr. 44 Vice President, Treasurer and Director
Lori J. Larson 37 Vice President and Director
Ronald W. Powell 51 Vice President
Bradley C. Nelson 31 Vice President
John M. Knight 43 Vice President
</TABLE>
Ms. Janis E. Miller has served as Vice President of Variable Assets of
American Express Financial Corporation since December 1993. From June 1990 to
November 1993, Ms. Miller held the position of Vice President of Mutual
Funds/Limited Partnership Product Development and Marketing with American
Express Financial Corporation.
Mr. Morris Goodwin, Jr. has served as Vice President and Treasurer of
American Express Financial Corporation since July 1989. From January 1988 to
July 1989, he had been the Chief Financial Officer and Treasurer of IDS Bank &
Trust Company. From January 1980 to January 1988, he was a Vice President with
Morgan Stanley, an investment banking business headquartered in New York.
Ms. Lori J. Larson has been employed by American Express Financial
Corporation since 1981 and currently holds the title of Vice President. Since
August 1988, she has been responsible for day-to-day management of vendor
relationships, due diligence review, and operational aspects for various limited
partnerships distributed by American Express Financial Advisors Inc. In
addition, Ms. Larson is responsible for product development of the publicly
offered mutual funds in the IDS Mutual Fund Group.
Mr. Ronald W. Powell has held the position of Vice President and
Assistant General Counsel with American Express Financial Corporation since
November 1985. He has been a member of the American Express Financial
Corporation law department since 1975.
Mr. Bradley C. Nelson joined American Express Financial Corporation in
1991 as an Investment Department analyst following his graduation from Cornell
University's Johnson Graduate School of Management where he earned an MBA with a
concentration in finance.
Mr. John M. Knight joined American Express Financial Corporation in
July 1975. He is currently Controller-Variable Assets and charged with the
overall finance responsibilities for Mutual Funds, Limited
28
<PAGE> 29
Partnerships, Variable Annuities and Wealth Management Services. From 1981 to
March 1994, he held a number of positions in the IDS Certificate Company,
leading to Controller of that organization.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no employees; however, various personnel are
required to operate the Roseville System. Such personnel are employed by
Intercable and, pursuant to the terms of the Partnership's limited partnership
agreement, the cost of such employment is charged by the Managing General
Partner to the Partnership as a direct reimbursement item. See Item 13.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
No person or entity owns more than 5 percent of the limited partnership
interests of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Managing General Partner and its affiliates engage in certain
transactions with the Partnership as contemplated by the limited partnership
agreement of the Partnership. The Managing General Partner believes that the
terms of such transactions are generally as favorable as could be obtained by
the Partnership from unaffiliated parties. This determination has been made by
the Managing General Partner in good faith, but none of the terms were or will
be negotiated at arm's-length and there can be no assurance that the terms of
such transactions have been or will be as favorable as those that could have
been obtained by the Partnership from unaffiliated parties.
The Supervising General Partner and its affiliates engage in certain
transactions with the Partnership as contemplated by the limited partnership
agreement of the Partnership. The Supervising General Partner believes that the
terms of such transactions, which are set forth in the Partnership's limited
partnership agreement, are generally as favorable as could be obtained by the
Partnership from unaffiliated parties. This determination has been made by the
Supervising General Partner in good faith, but none of the terms were or will be
negotiated at arm's-length and there can be no assurance that the terms of such
transactions have been or will be as favorable as those that could have been
obtained by the Partnership from unaffiliated parties.
The Managing General Partner charges the Partnership a management fee,
and the Partnership reimburses Intercable, the parent of the Managing General
Partner, for certain allocated overhead and administrative expenses. These
expenses represent the salaries and benefits paid to corporate personnel, rent,
data processing services and other facilities costs. Such personnel provide
engineering, marketing, administrative, accounting, legal and investor relations
services to the Partnership. Allocations of personnel costs are based primarily
on actual time spent by employees with respect to each partnership managed.
Remaining expenses are allocated based on the pro rata relationship of the
Partnership's revenues to the total revenues of all systems owned or managed by
Intercable or its affiliates. Systems owned by Intercable and all other systems
owned by partnerships for which Intercable serves as general partner, are also
allocated a proportionate share of these expenses. The Supervising General
Partner, IDS Cable Corporation, charges the Partnership for supervision fees in
accordance with the limited partnership agreement of the Partnership.
Intercable, the parent of the Managing General Partner, also advances
funds and charges interest on the balance payable from the Partnership. The
interest rate charged the Partnership approximates Intercable's weighted average
cost of borrowing.
The Roseville System receives stereo audio programming from Superaudio,
a joint venture owned 50% by an affiliate of the Managing General Partner and
50% by an unaffiliated party, educational video programming
29
<PAGE> 30
from Mind Extension University, Inc., an affiliate of the Managing General
Partner, and computer video programming from Jones Computer Network, Ltd., an
affiliate of the Managing General Partner, for fees based upon the number of
subscribers receiving the programming.
Product Information Network ("PIN"), an affiliate of the Managing
General Partner, provides advertising time for third parties on the Roseville
System. In consideration, the revenues generated from the third parties are
shared two-thirds and one-third between PIN and the Partnership. During the year
ended December 31, 1995, the Partnership received revenues from PIN of $29,029.
The charges to the Partnership for related party transactions are as
follows for the periods indicated:
<TABLE>
<CAPTION>
At December 31,
-------------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Management fees $ 723,275 $ 654,105 $ 612,588
Supervision fees 72,327 65,410 61,259
Allocation of expenses 1,052,431 1,017,591 916,891
Interest expense 25,456 29,296 1,705
Amount of advances outstanding 448,872 665,782 -0-
Highest amount of advances outstanding 448,872 665,782 238,198
Programming fees:
Superaudio 19,486 19,257 19,030
Mind Extension University 20,848 17,449 11,074
Jones Computer Network 25,930 4,568 -0-
</TABLE>
30
<PAGE> 31
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. See index to financial statements for list of financial
statements and exhibits thereto filed as part of this report.
3. The following exhibits are filed herewith:
4.1 Limited Partnership Agreement for IDS/Jones Growth Partners
87-A, Ltd. (1)
10.1.1 Copy of franchise and related documents granting a cable
television system franchise for the County of Placer,
California (IDS/Jones 87-A). (1)
10.1.2 Copy of franchise and related documents granting a cable
television system franchise for the City of Roseville,
California (IDS/Jones 87-A). (1)
10.1.3 Copy of franchise and related documents granting a cable
television system franchise for the County of Placer,
California (IDS/Jones 87-A). (1)
10.2.1 Revolving Credit and Term Loan Agreement dated February 6,
1989 between IDS/Jones Growth Partners 87-A, Ltd. and
Provident National Bank. (1)
10.2.2 Amendment No. 1 dated May 29, 1992 to Revolving Credit and
Term Loan Agreement dated February 6, 1989 between IDS/Jones
Growth Partners 87-A, Ltd. and Provident National Bank. (5)
10.2.3 Amendment No. 2 dated March 31, 1994 to Revolving Credit and
Term Loan Agreement dated February 6, 1989 between IDS/Jones
Growth Partners 87-A, Ltd. and Provident National Bank. (3)
10.2.4 Third Amendment to Revolving Credit and Term Loan Agreement
dated as of January 17, 1996 between IDS/Jones Growth Partners
87-A, Ltd. and PNC Bank, National Association (successor by
merger to Provident National Bank)
27 Financial Data Schedule
- - - ----------
(1) Incorporated by reference from the Form 10-K of IDS/Jones
Growth Partners (Commission File Nos. 0-16183 and 0-17734) for
fiscal year ended December 31, 1988.
(2) Incorporated by reference from the Annual Report on Form 10-K
of IDS/Jones Growth Partners II (Commission File No. 0-18133)
for fiscal year ended December 31, 1992.
(3) Incorporated by reference from the Annual Report on Form 10-K
of IDS/Jones Growth Partners 87-A, Ltd. (Commission File No.
16183) for fiscal year ended December 31, 1994.
(b) Reports on Form 8-K
A Current Report on Form 8-K (Commission File No. 0-16183),
dated March 13. 1996. describing the sale of the Carmel System
was filed with the Securities and Exchange Commission on March
14, 1996.
31
<PAGE> 32
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.
IDS/JONES GROWTH PARTNERS
87-A, LTD.,
a Colorado limited partnership
By Jones Cable Corporation,
its Managing General Partner
By: /s/ Glenn R. Jones
---------------------------------
Glenn R. Jones
Chairman of the Board and
Dated: March 25, 1996 Chief Executive Officer
By IDS Cable Corporation,
its Supervising General Partner
By: /s/ Janis E. Miller
----------------------------------
Janis E. Miller
Dated: March 25, 1996 President and Director
Pursuant to the requirements 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.
OFFICERS AND DIRECTORS OF JONES CABLE CORPORATION:
By: /s/ Glenn R. Jones
------------------------------------
Glenn R. Jones
Chairman of the Board and
Chief Executive Officer
Dated: March 25, 1996 (Principal Executive Officer)
By: /s/ Kevin P. Coyle
------------------------------------
Kevin P. Coyle
Vice President/Finance
(Principal Financial and
Dated: March 25, 1996 Accounting Officer)
32
<PAGE> 33
OFFICERS AND DIRECTORS OF IDS CABLE CORPORATION:
By: /s/ Janis E. Miller
------------------------------------
Janis E. Miller
President and Director
Dated: March 25, 1996 (Principal Executive Officer)
By: /s/ Morris Goodwin, Jr.
------------------------------------
Morris Goodwin, Jr.
Vice President, Treasurer and
Director
(Principal Financial and
Dated: March 25, 1996 Accounting Officer)
By: /s/ Lori J. Larson
------------------------------------
Lori J. Larson
Dated: March 25, 1996 Vice President and Director
33
<PAGE> 34
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description Page
- - - ------ ------------------- ----
<S> <C>
4.1 Limited Partnership Agreement for IDS/Jones Growth Partners
87-A, Ltd. (1)
10.1.1 Copy of franchise and related documents granting a cable
television system franchise for the County of Placer,
California (IDS/Jones 87-A). (1)
10.1.2 Copy of franchise and related documents granting a cable
television system franchise for the City of Roseville,
California (IDS/Jones 87-A). (1)
10.1.3 Copy of franchise and related documents granting a cable
television system franchise for the County of Placer,
California (IDS/Jones 87-A). (1)
10.2.1 Revolving Credit and Term Loan Agreement dated February 6,
1989 between IDS/Jones Growth Partners 87-A, Ltd. and
Provident National Bank. (1)
10.2.2 Amendment No. 1 dated May 29, 1992 to Revolving Credit and
Term Loan Agreement dated February 6, 1989 between IDS/Jones
Growth Partners 87-A, Ltd. and Provident National Bank. (5)
10.2.3 Amendment No. 2 dated March 31, 1994 to Revolving Credit and
Term Loan Agreement dated February 6, 1989 between IDS/Jones
Growth Partners 87-A, Ltd. and Provident National Bank. (3)
10.2.4 Third Amendment to Revolving Credit and Term Loan Agreement
dated as of January 17, 1995 between IDS/Jones Growth Partners
87-A, Ltd. and PNC Bank, National Association (successor by
merger to Provident National Bank)
27 Financial Data Schedule
</TABLE>
- - - ----------
(1) Incorporated by reference from the Form 10-K of IDS/Jones
Growth Partners (Commission File Nos. 0-16183 and 0-17734) for
fiscal year ended December 31, 1988.
(2) Incorporated by reference from the Annual Report on Form 10-K
of IDS/Jones Growth Partners II (Commission File No. 0-18133)
for fiscal year ended December 31, 1992.
(3) Incorporated by reference from the Annual Report on Form 10-K
of IDS/Jones Growth Partners 87-A, Ltd. (Commission File No.
16183) for fiscal year ended December 31, 1994.
<PAGE> 1
THIRD AMENDMENT TO REVOLVING CREDIT AND TERM LOAN AGREEMENT
Amendment dated as of January 17, 1995, by and among IDS/JONES
GROWTH PARTNERS 87-A, LTD., a Colorado limited partnership ("Borrower"), PNC
BANK, NATIONAL ASSOCIATION (successor by merger to Provident National Bank), a
national banking association ("PNC"), SHAWMUT BANK CONNECTICUT (successor by
merger to Connecticut National Bank), a national banking association
("Shawmut") and PNC BANK, NATIONAL ASSOCIATION, not individually, but as agent
("Agent"). PNC and SHAWMUT are sometimes hereinafter referred to individually
as "Bank" and collectively as "Banks."
BACKGROUND
A. Borrower and Provident National Bank ("Provident")
entered into a Revolving Credit and Term Loan Agreement dated as of February 6,
1989 (the "Original Loan Agreement"), pursuant to which Provident agreed to
make revolving credit loans to Borrower in an aggregate principal amount
outstanding at any one time of up to $25,000,000 (the "Revolving Credit Loans")
and to make a term loan to Borrower on December 31, 1991 in the amount of the
outstanding principal amount of the Revolving Credit Loans on such date (the
"Term Loan"), to be applied to the concurrent repayment in full of the
Revolving Credit Loans.
B. Pursuant to an Assignment, Assumption and
Modification Agreement dated as of July 21, 1989 (the "Assignment"), Provident
sold, assigned, delegated and transferred to Connecticut National Bank
("Connecticut") and Connecticut purchased and assumed from Provident a 40%
interest in all of Provident's rights and obligations under the Loan Documents
(as defined in the Original Loan Agreement) and Connecticut became a party to
the Original Loan Agreement as modified by the Assignment. The Revolving Credit
Loans evidenced by Borrower's Amended and Restated Revolving Credit Notes to
Provident and Connecticut in the principal amounts of $15,000,000 and
$10,000,000, respectively, each dated as of July 21, 1989 (collectively, the
"Revolving Credit Notes").
C. Pursuant to an amendment to the Original Loan
Agreement dated as of May 29, 1992, effective as of December 31, 1991 (the
"First Amendment"), Borrower, Provident and Connecticut agreed, among other
things, to extend the term of the Revolving Credit Notes to December 31, 1992.
The Term Loan which refinanced the outstanding Revolving Credit Loans in the
principal amount of $23,000,000 was made on December 31, 1992 and is evidenced
by Borrower's Term Loan Notes in favor of Provident and Connecticut in the
original principal amounts of $13,800,000
<PAGE> 2
and $9,200,000, respectively (collectively, the "Term Loan Notes").
D. Pursuant to an amendment to the original Loan
Agreement, as amended (as so modified and amended, the "Loan Agreement") dated
as of March 31, 1994, Borrower, PNC and Shawmut agreed, among other things, to
waive certain principal payments with respect to the Term Loan, with such
payments being added to the final payment, and to increase the permitted Debt
to Cash Flow Ratio during the period from March 31 through June 30, 1994.
E. Borrower has requested and Banks have agreed to
reestablish the Revolving Credit Commitment in an amount up to $23,000,000,
allocated $13,800,000 to PNC and $9,200,000 to Shawmut (the "New Revolving
Credit Commitment"), to provide for Term Loans to be available to Borrower on
September 30, 1995 in the amount of the then outstanding principal amount of
the new Revolving Credit Loans, to be applied to the concurrent repayment in
full of the new Revolving Credit Loans, and to modify and supplement certain
covenants of Borrower in the Loan Agreement. The initial advance under the New
Revolving Credit Commitment will be used to refinance the outstanding principal
balance of the Term Loan Notes as of the date hereof. Unless otherwise defined
in this Amendment, capitalized terms used herein shall have the meanings
specified in the Loan Agreement, and unless the context otherwise requires, all
references in the Loan Agreement to "Revolving Credit Commitment," "Revolving
Credit Loans," "Revolving Credit Notes," "Term Loan" and "Term Loan Notes"
shall be deemed to refer to the New Revolving Credit Commitment and the new
loans referred to in this paragraph and the notes which will evidence them, all
as more fully provided in this Amendment.
NOW, THEREFORE, in consideration of the premises and intending
to be legally bound hereby, the parties hereto agree as follows:
1. Amendments to Loan Agreement.
(a) Section 1.1(a) of the Loan Agreement is
hereby amended by changing the references to "December 31, 1992" to "September
30, 1995" and the references to "Twenty-Five Million Dollars ($25,000,000)" to
"Twenty-Three Million Dollars ($23,000,000)."
(b) Section 1.1(b) of the Loan Agreement is
hereby amended by changing the reference to "December 31, 1992" to "September
30, 1995."
(c) A new Section 1.1(c) is added to read in full
as follows:
2
<PAGE> 3
(c) The initial advance under the
Revolving Credit Commitment shall be used to refinance the
outstanding principal balance under Borrower's Term Loan Notes
dated as of December 31, 1992.
(d) Section 1.2(a) of the Loan Agreement is
hereby amended by (i) changing the reference to "twenty-eight (28)" to
"eighteen (18)" and (ii) changing the reference to "March 31, 1993" to
"September 30, 1995."
(e) Section 1.4A of the Loan Agreement is hereby
amended by (i) changing the reference to "January 1, 1993" to "January 1, 1995"
and (ii) changing the reference to "May 1, 1994" to "May 1, 1996."
(f) Section 1.6 of the Loan Agreement is hereby
amended by (i) changing the reference to "one-half of one percent (1/2%)" to
"three-eighths of one percent (3/8%)" and (ii) changing the reference to "March
31, 1989" to "March 31, 1995."
(g) Section 4.15(a) of the Loan Agreement is
hereby amended to read in full as follows:
(a) Borrower shall not permit the Debt
to Cash Flow Ratio to exceed the following during the applicable
periods:
(i) January 1, 1994 through
December 31, 1995: 4.5 to 1;
(ii) January 1, 1996 through
December 31, 1996: 4.0 to 1; and
(iii) January 1, 1997 and thereafter;
3.5 to 1.
(h) Section 4.16 of the Loan Agreement is hereby
amended and restated to read in full as follows:
4.16 Net Cash Flow to Pro Forma Debt Service. Maintain Net
Cash Flow so that the ratio of Net Cash Flow to Borrower's Pro
Forma Debt service does not, on a quarterly basis, fall below
the stated minimum ratio for the following periods:
(i) January 1, 1995 through December
31, 1995: 1.4 to 1; and
(ii) January 1, 1996 and thereafter:
1.25 to 1.
3
<PAGE> 4
For the purpose of this Section 4.16, "Net Cash Flow"
shall mean the consolidated revenues of Borrower for the
relevant period preceding the date of such determination, less
the sum of (A) operating expenses of Borrower for such period
(including allocated home office expenses and management fees
but excluding depreciation and amortization) and (B) general
and administrative expenses of Borrower for such period, all
ascertained in accordance with generally accepted accounting
principles consistently applied; and Net Cash Flow shall be
determined quarterly with respect to financial information for
the end of the prior fiscal quarter. As used in this
Agreement, "Pro Forma Debt Service" shall mean the total of
interest charges and required principal payments on Borrower's
Indebtedness (excluding accounts payable arising in the
ordinary course of business on terms customary in the trade)
during the fiscal quarter immediately following the date such
amount is calculated, using the interest rate applicable to
the Revolving Credit Notes or the Term Loan Notes, as the case
may be, in effect on the date of such calculation to compute
interest charges.
(i) Section 5.5 of the Loan Agreement is hereby
amended by deleting the following: "and (c) Borrower may make cash
distributions to general or limited partners at any time after December 31,
1991,".
(j) Section 5.6 of the Loan Agreement is hereby
amended to read in full as follows:
5.6 Capital Expenditures. Make any capital expenditures
in excess of $3,300,000 for any calendar year; provided that
if Borrower's capital expenditures for any calendar year are
less than $3,300,000, the difference may be carried forward
into the next succeeding calendar year but not beyond.
(k) Section 6.1(m) of the Loan Agreement is
hereby amended by adding at the end thereof the following: "or the Managing
General Partner ceases at any time to be the managing general partner of
Borrower."
(l) Exhibit A to the Loan Agreement, consisting
of the form of Revolving Credit Note, is hereby replaced by Exhibit A hereto,
and Exhibit A to the First Amendment, consisting of the form of Term Loan Note,
is hereby replaced by Exhibit B hereto.
4
<PAGE> 5
2. Representations and Warranties.
(a) The representations and warranties contained
in Section 2 of the Loan Agreement, as amended by Exhibit C attached hereto,
are true and correct as of the date hereof and as if the same related to the
Loan Agreement as amended hereby or to the Loan Documents as amended hereby.
(b) No Event of Default and no event which could
become an Event of Default with the passage of time or the giving of notice, or
both, under the Loan Agreement has occurred and is continuing on the date
hereof.
(c) This Amendment and the Revolving Credit Notes
and Term Loan Notes have been duly authorized by all requisite action on behalf
of Borrower and this Amendment and the Revolving Credit Notes constitute the
legal, valid and binding obligations of Borrower enforceable in accordance with
their respective terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general principles of equity.
(d) The execution, delivery and performance of
this Amendment and the Revolving Credit Notes will not violate any applicable
provision of law or judgment, order or regulation of any court or of any public
or governmental agency or authority nor conflict with or constitute a breach of
or a default under any instrument to which Borrower is a party or by which
Borrower or any of Borrower's properties is bound.
(e) No approval, consent or authorization of, or
registration, declaration or filing with, any governmental or public body or
authority, or any trustee or holder of any indebtedness, is required in
connection with the valid execution, delivery and performance by Borrower of
this Amendment and the Revolving Credit Notes.
All of the above representations and warranties shall survive
the making of this Amendment and the issuance of the Revolving Credit Notes.
3. Additional Documentation. This Amendment shall become
effective as of the date hereof, and Banks shall be obligated to make the
initial Revolving Credit Loan under the New Revolving Credit Commitment, when
Banks shall have received the following in form and substance satisfactory to
Agent and its counsel:
(a) Revolving Credit Notes payable to each of
Banks, substantially in the form of Exhibit A hereto with blanks appropriately
completed;
5
<PAGE> 6
(b) Copies, certified by the corporate secretary
or assistant secretary of the Managing General Partner of the corporate
resolutions relating to this Amendment;
(c) Consent and Authorization of IDS Cable
Corporation, Supervising General Partner of Borrower;
(d) An Amendment Fee in the amount of $86,250
payable to Agent; and
(e) Such additional documents, certificates and
information as Agent may reasonably request.
4. Payment of Counsel Fees. Borrower shall pay Agent's
reasonable special counsel fees and expenses incurred to prepare and execute
this Amendment and any related documents.
5. Counterparts. This Amendment may be executed in one
or more counterparts, each of which shall constitute an original, but all of
which together shall constitute one and the same instrument.
6. Governing Law. This Amendment, the Loan Agreement,
the Notes and each document incident thereto shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania.
7. Effectiveness. Except as expressly amended hereby,
all terms and conditions of the Loan Agreement shall remain in full force and
effect. After the effectiveness hereof as aforesaid, all references in the Loan
Agreement to "this Agreement," "hereof," "hereto" and "hereunder" shall be
deemed to be references to the Loan Agreement as amended hereby.
6
<PAGE> 7
IN WITNESS WHEREOF, Borrower, Banks and Agent have caused this
Amendment to be duly executed by their respective duly authorized officers as
of the date first above written.
IDS/JONES GROWTH PARTNERS 87-A,
LTD.
By its Managing General Partner:
JONES CABLE CORPORATION
[SEAL]
Attest /s/ MARY KAY ROHRER By /s/ J. ROY POTTLE
-------------------------- -------------------------
Title Assistant Secretary Title Treasurer
-------------------------- ----------------------
PNC BANK, NATIONAL ASSOCIATION
By /s/ THOMAS P. CARDON
------------------------------
Title Vice President
---------------------------
SHAWMUT BANK CONNECTICUT
By /s/ ROBERT L. WEST
------------------------------
Title Director
---------------------------
PNC BANK, NATIONAL ASSOCIATION, as
Agent
By /s/ THOMAS P. CARDON
------------------------------
Title Vice President
---------------------------
7
<PAGE> 8
EXHIBIT A
REVOLVING CREDIT NOTE
$__________ Philadelphia, Pennsylvania
January [__], 1995
For value received and intending to be legally bound, IDS/JONES
GROWTH PARTNERS 87-A, LTD., a Colorado limited partnership ("Borrower"), hereby
promises to pay to the order of ____________ ("Bank") at the offices of PNC
Bank, National Association, as Agent ("Agent"), located at Broad and Chestnut
Streets, Philadelphia, PA 19101, on September 30, 1995, the principal sum of
__________ Dollars ($________), or the aggregate unpaid principal amount of all
Revolving Credit Loans made by Bank to Borrower pursuant to Section 1.1 of that
certain Revolving Credit and Term Loan Agreement dated as of February 6, 1989
between Borrower and Provident National Bank, as modified by an Assignment,
Assumption and Modification Agreement dated as of July 21, 1989, and Amendments
dated as of May 29, 1992, March 31, 1994 and the date hereof, each by and among
Borrower, Bank, Agent and __________ Bank (as so amended and as it may hereafter
be further amended from time to time, the "Loan Agreement") (capitalized terms
used herein and not otherwise defined herein having the meanings specified in
the Loan Agreement), whichever is less, and to pay interest from the date hereof
on the unpaid principal amount hereof quarterly in arrears within ten days after
receipt of Agent's invoice therefor, commencing on March 31, 1995, and on the
last day of June and September, 1995, at the applicable rate per annum
hereinafter set forth:
(i) Except as provided in Subsection (ii) hereof,
this Revolving Credit Note shall bear interest on the outstanding
principal balance of the Loans advanced hereunder at a rate per annum
in excess of Agent's prime rate in effect form time to time during any
period in which the ratio of Total Debt to Annualized Cash Flow (the
"Debt to Cash Flow Ratio") is as set forth below (the "Prime Based
Rate"):
<TABLE>
<CAPTION>
Amount by which Prime
Debt to Cash Based Rate exceeds
Flow Ratio Agent's prime rate
---------- ------------------
<S> <C>
greater than or equal 1/4%
to 4.0 to 1
less than 4.0 to 1 0%
</TABLE>
8
<PAGE> 9
The amount by which the Prime Based Rate exceeds the prime rate shall
be determined quarterly, based on the Total Debt and Annualized Cash
Flow calculated with respect to financial information for the end of
the prior fiscal quarter. Any change in the amount by which the Prime
Based Rate exceeds the prime rate shall be effective (x) in the case
of a decrease in the rate of interest, on the date on which Borrower
delivers to Agent the Compliance Certificate referred to in Section
4.1(c) of the Loan Agreement demonstrating the relevant change in the
Debt to Cash Flow Ratio for the preceding fiscal quarter of Borrower
and (y) in the case of an increase in the rate of interest, on the
earlier of the date on which said Compliance Certificate is delivered
to Agent or is due under the terms of the Loan Agreement. Any change
in the Prime Based Rate resulting from a change in the prime rate
shall become effective on the same day as Agent announces a change in
its prime rate. As used herein the term "prime rate" shall mean the
rate of interest that from time to time is publicly announced by Agent
as its prime rate. This rate of interest is determined from time to
time by Agent as a means of pricing some loans to its customers and is
not tied to any external rate of interest or index and does not
necessarily reflect the lowest rate of interest actually charged by
Agent to any particular class or category of customers.
(ii) Upon receipt by Agent of at least two (2)
business days' written or telegraphic notice from Borrower, Borrower
may elect to have all or any portion of the outstanding principal
amount of the Revolving Credit Loans in an amount equal to $1,000,000
or any integral multiple of $500,000 for amounts in excess of
$1,000,000 bear interest at one of the following rates:
(A) A rate per annum in excess of the
Reserve Adjusted CD Rate during any period in which the Debt to Cash
Flow Ratio is as set forth below (the "CD Based Rate"):
<TABLE>
<CAPTION>
Amount by which CD Based
Debt to Cash Rate exceeds Reserve
Flow Ratio Adjusted CD Rate
---------- ----------------
<S> <C>
greater than or equal 1-1/2%
to 4.0 to 1
less than 4.0 to 1 but 1-1/4%
greater than or equal
to 3.0 to 1
less than 3.0 to 1 1%
</TABLE>
9
<PAGE> 10
"Reserve Adjusted CD Rate" shall mean Agent's announced rate of
interest for certificates of deposit of a maturity of 30, 60, 90 or
180 days in effect two business days prior to the first day of the
relevant Maturity Period adjusted for any reserves that Agent may now
or hereafter be required or may elect to maintain and any assessment
rate for insurance of time deposits made in U.S. Dollars at the
offices of Agent then charged by the Federal Deposit Insurance
Corporation, or any successor thereof, all as determined by Agent.
(B) A rate per annum in excess of the
Reserve Adjusted LIBO Rate during any period in which the Debt to Cash
Flow Ratio is as set forth below (the "LIBO Based Rate"):
<TABLE>
<CAPTION>
Amount by which LIBO
Debt to Cash Based Rate exceeds
Flow Ratio Reserve Adjusted LIBO Rate
---------- --------------------------
<S> <C>
greater than or equal
to 4.0 to 1 1-1/4%
less than 4.0 to 1 but
greater than or equal
to 3.0 to 1 1%
less than 3.0 to 1 3/4%
</TABLE>
"Reserve Adjusted LIBO Rate" shall mean Agent's announced rate of
interest for one month, two month, three month or six month deposits
of U.S. Dollars in banks in London, England, in effect two business
days prior to the first day of the relevant Maturity Period adjusted
for the maximum applicable percentage rate stated in Regulation D of
the Board of Governors of the Federal Reserve System at which reserves
are required to be maintained during the relevant Maturity Period
against "Eurocurrency Liabilities" or, if such regulations or
definition of "Eurocurrency Liabilities" is modified, and so long as
Agent may be required or may elect to maintain reserves against a
category of liabilities which includes Eurodollar deposits or a
category of assets which includes Eurodollar loans, the maximum
percentage rate at which reserves are required or elected generally in
respect of such liabilities or assets, to be maintained on such
category, all as determined by Agent.
10
<PAGE> 11
(C) As used herein, "Maturity Period"
shall mean 30, 60, 90 or 180 days, as designated by Borrower in its
notice given pursuant to Section 1.3(a)(ii) of the Loan Agreement,
when the Revolving Credit Loans bear interest at the CD Based Rate,
and one month, two months, three months or six months, as designated
by Borrower in its notice given pursuant to Section 1.3(a)(ii) of the
Loan Agreement when the Revolving Credit Loans bear interest at the
LIBO Based Rate. Borrower shall pay all accrued unpaid interest on the
last day of the Maturity Period then in effect, but in no event shall
Borrower pay interest less frequently than quarterly. The amount by
which the CD Based Rate exceeds the Reserve Adjusted CD Rate or the
LIBO Based Rate exceeds the Reserve Adjusted LIBO Rate during any
Maturity Period shall be determined quarterly, based on the Total Debt
and Annualized Cash Flow calculated with respect to financial
information for the end of the most recent fiscal quarter for which
Agent has received financial information prior to the commencement of
such Maturity Period. Any such change shall be effective (x) in the
case of a decrease in the rate of interest, on the date on which
Borrower delivers to Agent the Compliance Certificate referred to in
Section 4.1(c) of the Loan Agreement demonstrating the relevant change
in the Total Debt to Cash Flow Ratio for the preceding fiscal quarter
of Borrower and (y) in the case of an increase in the rate of
interest, on the earlier of the date on which said Compliance
Certificate is delivered to Agent or is due under the terms of the
Loan Agreement. At the end of any Maturity Period the rate of interest
shall return to the Prime Based Rate unless Agent has received a
notice from Borrower pursuant to Section 1.3(a)(ii) of the Loan
Agreement indicating that all or a portion equal to at least
$1,000,000 of the outstanding principal amount of the Revolving Credit
Loans shall bear interest at either the LIBO Based Rate or the CD
Based Rate.
(D) Notwithstanding the foregoing, at no
time shall the principal outstanding under this Revolving Credit Note
be subject to more than five (5) different Maturity Periods.
All such interest shall be calculated on the basis of the
actual number of days that principal is outstanding over a year of 360 days
with respect to interest at the CD Based Rate or the LIBO Based Rate and 365 or
366 days, as the case may be, with respect to interest at the Prime Based Rate.
All payments of principal and interest shall be made prior to 1:00 P.M., local
time in lawful money of the United States in immediately available funds at the
office of Agent, Broad and Chestnut Streets, Philadelphia, Pennsylvania 19101.
Should any payment of principal or interest or fees become due and payable on a
Saturday, Sunday or legal holiday under the laws of the
11
<PAGE> 12
Commonwealth of Pennsylvania the payment date thereof shall be extended to the
next succeeding business day and such extension of time shall in such case be
included in computing such interest or fees, as the case may be. All payments
made on account of principal hereof shall be endorsed on the reverse of this
Note.
This Note evidences indebtedness incurred under, and is
entitled to the benefits of, the Loan Agreement which, among other things,
contains provisions for acceleration of the maturity hereof and for a higher
rate of interest hereunder upon the happening of an Event of Default (as
defined therein), for prepayments on account of principal hereof prior to the
maturity thereof upon the terms and conditions therein specified and for
certain security interests granted by Borrower.
IDS/JONES GROWTH PARTNERS 87-A,
LTD., a Colorado limited
partnership
By its Managing General Partner:
[SEAL] JONES CABLE CORPORATION
Attest By
------------------------------ ------------------------------
Title Title
------------------------------ ---------------------------
12
<PAGE> 13
EXHIBIT B
TERM LOAN NOTE
$ Philadelphia, Pennsylvania
September 30, 1995
For value received and intending to be legally bound,
IDS/JONES GROWTH PARTNERS 87-A, LTD., a Colorado limited partnership
("Borrower"), hereby promises to pay to the order of _______________ ("Bank")
at the offices of PNC Bank, National Association, as Agent ("Agent"), located
at Broad and Chestnut Streets, Philadelphia, PA 19101, the principal sum of
__________ Dollars ($________) in 18 quarterly principal installments payable
as hereinafter set forth, together with interest from the date hereof on the
unpaid principal amount hereof payable quarterly in arrears within ten days
after receipt of Agent's invoice therefor, commencing on the date hereof and on
the last day of each December, March, June and September thereafter and at
maturity at the applicable rate per annum hereinafter set forth:
(i) Except as provided in Subsection (ii) hereof,
this Note shall bear interest on the outstanding principal balance of
the Term Loan advanced hereunder at a rate per annum in excess of
Agent's prime rate in effect from time to time during any period in
which the ratio of Total Debt to Annualized Cash Flow (the "Debt to
Cash Flow Ratio") is as set forth below (the "Prime Based Rate"):
<TABLE>
<CAPTION>
Amount by which Prime
Debt to Cash Based Rate exceeds
Flow Ratio Agent's prime rate
---------- ------------------
<S> <C>
greater than or equal 1/4%
to 4.0 to 1
less than 4.0 to 1 0%
</TABLE>
The amount by which the Prime Based Rate exceeds the prime rate shall
be determined quarterly, based on the Total Debt and Annualized Cash
Flow calculated with respect to financial information for the end of
the prior fiscal quarter. Any change in the amount by which the Prime
Based Rate exceeds the prime rate shall be effective (x) in the case
of a decrease in the rate of interest, on the date on which Borrower
delivers to Agent the Compliance Certificate referred to in Section
4.1(c) of the Loan Agreement (as hereinafter defined) (capitalized
terms used herein and not otherwise defined herein having the meanings
specified in
13
<PAGE> 14
the Loan Agreement) demonstrating the relevant change in the Debt to
Cash Flow Ratio for the preceding fiscal quarter of Borrower and (y)
in the case of an increase in the rate of interest, on the earlier of
the date on which said Compliance Certificate is delivered to Agent or
is due under the terms of the Loan Agreement. Any change in the Prime
Based Rate resulting from a change in the prime rate shall become
effective on the same day as Agent announces a change in its prime
rate. As used herein the term "prime rate" shall mean the rate of
interest that from time to time is publicly announced by Agent as its
prime rate. This rate of interest is determined from time to time by
Agent as a means of pricing some loans to its customers and is not
tied to any external rate of interest or index and does not
necessarily reflect the lowest rate of interest actually charged by
Agent to any particular class or category of customers.
(ii) Upon receipt by Agent of at least two (2)
business days' written or telegraphic notice from Borrower, Borrower
may elect to have all or any portion of the outstanding principal
amount of the Term Loan in an amount equal to $1,000,000 or any
integral multiple of $500,000 for amounts in excess of $1,000,000 bear
interest at one of the following rates:
(A) A rate per annum in excess of the
Reserve Adjusted CD Rate during any period in which the Debt to Cash
Flow Ratio is as set forth below (the "CD Based Rate"):
<TABLE>
<CAPTION>
Amount by which CD Based
Debt to Cash Rate exceeds Reserve
Flow Ratio Adjusted CD Rate
---------- ----------------
<S> <C>
greater than or equal 1-1/2%
to 4.0 to 1
less than 4.0 to 1 but 1-1/4%
greater than or equal
to 3.0 to 1
less than 3.0 to 1 1%
</TABLE>
"Reserve Adjusted CD Rate" shall mean Agent's announced rate of
interest for certificates of deposit of a maturity of 30, 60, 90 or
180 days in effect two business days prior to the first day of the
relevant Maturity Period adjusted for any reserves that Agent may now
or hereafter be required or may elect to maintain and any assessment
rate for insurance of time deposits made in U.S. Dollars at the
offices of Agent
14
<PAGE> 15
then charged by the Federal Deposit Insurance Corporation, or any
successor thereof, all as determined by Agent.
(B) A rate per annum in excess of the
Reserve Adjusted LIBO Rate during any period in which the Debt to Cash
Flow Ratio is as set forth below (the "LIBO Based Rate"):
<TABLE>
<CAPTION>
Amount by which LIBO
Debt to Cash Based Rate exceeds
Flow Ratio Reserve Adjusted LIBO Rate
---------- --------------------------
<S> <C>
greater than or equal 1-1/4%
to 4.0 to 1
less than 4.0 to 1 1%
but greater than or equal
to 3.0 to 1
less than 3.0 to 1 3/4%
</TABLE>
"Reserve Adjusted LIBO Rate" shall mean Agent's announced rate of
interest for one month, two month, three month or six month deposits
of U.S. Dollars in banks in London, England, in effect two business
days prior to the first day of the relevant Maturity Period adjusted
for the maximum applicable percentage rate stated in Regulation D of
the Board of Governors of the Federal Reserve System at which reserves
are required to be maintained during the relevant Maturity Period
against "Eurocurrency Liabilities" or, if such regulations or
definition of "Eurocurrency Liabilities" is modified, and so long as
Agent may be required or may elect to maintain reserves against a
category of liabilities which includes Eurodollar deposits or a
category of assets which includes Eurodollar loans, the maximum
percentage rate at which reserves are required or elected generally in
respect of such liabilities or assets, to be maintained on such
category, all as determined by Agent.
(C) As used herein, "Maturity Period"
shall mean 30, 60, 90 or 180 days, as designated by Borrower in its
notice given pursuant to Section 1.3(a)(ii) of the Loan Agreement,
when all or any portion of the Term Loan bears interest at the CD
Based Rate, and one month, two months, three months or six months, as
designated by Borrower in its notice given pursuant to Section
1.3(a)(ii) of the Loan Agreement when all or any portion of the Term
Loan bears interest at the LIBO Based Rate. Borrower shall pay all
accrued unpaid interest on the last day of the Maturity Period then in
effect, but in no event shall Borrower pay interest less frequently
than quarterly. The amount by which the CD Based Rate exceeds the
Reserve
15
<PAGE> 16
Adjusted CD Rate or the LIBO Based Rate exceeds the Reserve Adjusted
LIBO Rate during any Maturity Period shall be determined quarterly,
based on the Total Debt and Annualized Cash Flow calculated with
respect to financial information for the end of the most recent fiscal
quarter for which Agent has received financial information prior to
the commencement of such Maturity Period. Any such change shall be
effective (x) in the case of a decrease in the rate of interest, on
the date on which Borrower delivers to Agent the Compliance
Certificate referred to in Section 4.1(c) of the Loan Agreement
demonstrating the relevant change in the Total Debt to Cash Flow Ratio
for the preceding fiscal quarter of Borrower and (y) in the case of an
increase in the rate of interest, on the earlier of the date on which
said Compliance Certificate is delivered to Agent or is due under the
terms of the Loan Agreement. At the end of any Maturity Period the
rate of interest shall return to the Prime Based Rate unless Agent has
received a notice from Borrower pursuant to Section 1.3(a)(ii) of the
Loan Agreement indicating that all or a portion equal to at least
$1,000,000 of the outstanding principal amount of the Term Loan shall
bear interest at either the LIBO Based Rate or the CD Based Rate.
(D) Notwithstanding the foregoing, at no
time shall the principal outstanding under this Term Note be subject
to more than five (5) different Maturity Periods.
All such interest shall be calculated on the basis of the
actual number of days that principal is outstanding over a year of 360 days
with respect to interest at the CD Based Rate or the LIBO Based Rate and 365 or
366 days, as the case may be, with respect to interest at the Prime Based Rate.
All payments of principal and interest shall be made prior to 1:00 P.M., local
time in lawful money of the United States in immediately available funds at the
office of Agent, Broad and Chestnut Streets, Philadelphia, Pennsylvania 19101.
Should any payment of principal or interest or fees become due and payable on a
Saturday, Sunday or legal holiday under the laws of the Commonwealth of
Pennsylvania the payment date thereof shall be extended to the next succeeding
business day and such extension of time shall in such case be included in
computing such interest or fees, as the case may be. All payments made on
account of principal hereof shall be endorsed on the reverse of this Note.
The quarterly installments of principal shall be paid at the
following times and in the indicated amounts: (a) during the period commencing
on the date hereof and ending December 31, 1995, two quarterly installments
payable on the date hereof and on December 31, 1995, each in an amount equal to
one-half of 1.5% of the original principal amount hereof; (b) during the period
commencing January 1, 1996 and ending December 31, 1996, four
16
<PAGE> 17
quarterly installments, each in an amount equal to one-quarter of 4% of the
original principal amount hereof; (c) during the period commencing January 1,
1997 and ending December 31, 1997, four quarterly installments, each in an
amount equal to one-quarter of 6% of the original principal amount hereof; (d)
during the period commencing January 1, 1998 and ending December 31, 1998, four
quarterly installments, each in an amount equal to one-quarter of 8% of the
original principal amount hereof; and (e) during the period commencing January
1, 1999 and ending December 31, 1999, three quarterly installments, each in an
amount equal to one quarter of 10% of the original principal amount hereof,
payable on March 31, June 30 and September 30, 1999 and a final installment
payable on December 31, 1999, in the entire amount of principal outstanding,
together with all unpaid accrued interest.
This Note evidences indebtedness incurred under, and is
entitled to the benefits of, a Revolving Credit and Term Loan Agreement dated
as of February 6, 1989 between Borrower and Provident National Bank, as
modified by an Assignment, Assumption and Modification Agreement dated as of
July 21, 1989 and Amendments dated as of May 29, 1992, March 31, 1994 and the
date hereof, each by and among Borrower, __________ Bank, Agent and Bank (as so
amended and as it may hereafter be further amended from time to time, the "Loan
Agreement"), which, among other things, contains provisions for acceleration of
the maturity hereof and for a higher rate of interest hereunder upon the
happening of an Event of Default (as defined therein), for prepayments on
account of principal hereof prior to the maturity thereof upon the terms and
conditions therein specified and for certain security interests granted by
Borrower.
IDS/JONES GROWTH PARTNERS 87-A,
LTD., a Colorado limited
partnership
By its Managing General Partner:
[SEAL] JONES CABLE CORPORATION
Attest By
------------------------------ ------------------------------
Title Title
------------------------------ ---------------------------
17
<PAGE> 18
EXHIBIT C
As of the date hereof, the representation made by IDS/Jones Growth
Partners 87-A, Ltd. in Section 2.27 of the Loan Agreement is qualified as
follows:
On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act"), which became
effective on December 4, 1992. This legislation effected significant changes to
the regulatory environment in which the cable television industry operates. The
1992 Cable Act generally allows for a greater degree of regulation of the cable
television industry. Under the 1992 Cable Act's definition of effective
competition, nearly all cable television system in the United States, including
those owned by IDS/Jones Growth Partners 87-A, Ltd. ("IDS/Jones"), are subject
to rate regulation of basic cable services. In addition, the 1992 Cable Act
allows the FCC to regulate rates for nonbasic service tiers other than premium
services in response to complaints filed by franchising authorities and/or
cable subscribers. In April 1993, the FCC adopted regulations governing rates
for basic and non-basic services and ordered an interim freeze of these rates
effective on April 15, 1993. The rate freeze recently was extended by the FCC
until the earlier of May 15, 1994, or the date on which a cable system's basic
service rate is regulated by a franchising authority. The FCC's rate
regulations became effective on September 1, 1993. On February 22, 1994, the
FCC announced a revision of its rate regulations which it believes will
generally result in a further reduction of rates for basic and non-basic
services. Those new regulations became effective in May 1994, but provided for
a grace period (until mid-July 1994) within which operators were to assure that
they were in compliance with the most recent regulations. The Borrower further
reduced its rates in its Roseville, California system to comply with the most
recent regulations. Rather than for reducing its rates in its Carmel, Indiana
system, the Borrower has elected, as contemplated under the regulations, to
submit, where required, a cost of service filing to support its current
pricing.
Based on the assessment by Jones Intercable, Inc, ("Jones"), the
parent of the Managing General Partner of IDS/Jones, of the 1993 rate
regulations under the 1992 Cable Act, IDS/Jones reduced the rates it charged
for certain regulated services and, as described above, further reduced its
rates in its Roseville, California system to comply with the 1994 rate
regulations. ]ones has undertaken actions to mitigate a portion of these
reductions primarily through (a) new service offerings, (b) product
re-marketing and re-packaging and (c) targeted non-subscriber acquisition
marketing. To the extent that such actions do not successfully mitigate the
rate reductions, the cash flow from IDS/Jones' cable systems could be less than
would otherwise have been expected, and the value of IDS/Jones' cable
television systems, which are calculated based on cash flow, could be adversely
impacted.
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 557,506
<SECURITIES> 0
<RECEIVABLES> 623,890
<ALLOWANCES> (24,428)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 35,421,532
<DEPRECIATION> (15,195,244)
<TOTAL-ASSETS> 36,160,374
<CURRENT-LIABILITIES> 1,478,920
<BONDS> 22,981,227
0
0
<COMMON> 0
<OTHER-SE> 11,700,227
<TOTAL-LIABILITY-AND-EQUITY> 36,160,374
<SALES> 0
<TOTAL-REVENUES> 14,465,490
<CGS> 0
<TOTAL-COSTS> 14,290,013
<OTHER-EXPENSES> 4,007
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,732,547
<INCOME-PRETAX> (1,553,063)
<INCOME-TAX> 0
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