-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LI11frkc0V+rwZDWkEwpxx9nM014GEmktJHsVCtaAyBcDPFjn8jzpTtbE+xasUZP 7GK/LR9cUMd2PJ3k/P9jzQ== 0000927356-96-000296.txt : 19960515 0000927356-96-000296.hdr.sgml : 19960515 ACCESSION NUMBER: 0000927356-96-000296 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960229 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: JONES INTERCABLE INC CENTRAL INDEX KEY: 0000275605 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 840613514 STATE OF INCORPORATION: CO FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09953 FILM NUMBER: 96564123 BUSINESS ADDRESS: STREET 1: PO BOX 3309 CITY: ENGLEWOOD STATE: CO ZIP: 80155 BUSINESS PHONE: 3037923111 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): February 29, 1996 JONES INTERCABLE, INC. ---------------------- (Exact name of registrant as specified in its charter) Colorado 1-9953 84-0613514 -------- ------ ---------- (State of Organization) (Commission File No.) (IRS Employer Identification No.) P.O. Box 3309, Englewood, Colorado 80155-3309 (303) 792-3111 - --------------------------------------------- -------------- (Address of principal executive office and Zip Code) (Registrant's telephone no. including area code) Item 2. Acquisition of Assets --------------------- All of the following information previously was disclosed in the Report of Jones Intercable, Inc. (the "Company") for the transition period June 1, 1995 through December 31, 1995, which was filed by the Company with the Securities and Exchange Commission ("SEC") on March 13, 1996, and is being restated herein in the context of the Company's filing of the historical and pro forma financial information required by Item 7 of SEC Form 8-K: In August 1995, the Company entered into an asset exchange agreement (the "TWEAN Exchange Agreement") with Time Warner Entertainment-Advance/Newhouse Partnership ("TWEAN"), an unaffiliated cable television operator. The Company subsequently assigned the TWEAN Exchange Agreement to Jones Cable Holdings, Inc.("JCH"), a wholly owned subsidiary. On February 29, 1996, JCH conveyed to TWEAN the cable television systems serving areas in and around Carmel, Indiana (the "Carmel System"), Orangeburg, South Carolina (the "Orangeburg System") and Tampa, Florida (the "Tampa System") and cash in the amount of $3,500,000, subject to normal closing adjustments. In return, JCH received substantially all of the assets of cable television systems serving Andrews Air Force Base, Capitol Heights, Cheltenham, District Heights, Fairmont Heights, Forest Heights, Morningside, Seat Pleasant, Upper Marlboro and portions of Prince Georges County, Maryland (the "Prince Georges County System") and a portion of Fairfax County, Virginia (the "Reston System"). Taking into account the aggregate purchase price paid by JCH for the Carmel System, the Orangeburg System and the Tampa System, which were acquired by JCH on February 28, 1996, plus the $3,500,000 cash consideration paid by JCH to TWEAN, the aggregate consideration paid for the Prince Georges County System and the Reston System was approximately $176,468,000. 2 Item 7. Financial Statements and Exhibits --------------------------------- a. Financial statements of businesses acquired. The historical financial statements of the Prince Georges County cable television system are included in the enclosed financial statements of Time Warner Entertainment-Advance/Newhouse Partnership. The historical financial statements of the Reston System are included in the enclosed financial statements of Warner Capital Communications of Reston, a division of Time Warner Entertainment - Advance/Newhouse Partnership. b. Pro forma financial information. Pro forma financial statements of Jones Intercable, Inc. reflecting the acquisitions of the Prince Georges County System and the Reston System. c. Exhibits. 2.1 Purchase and Sale Agreement dated as of August 11, 1995 between IDS/Jones Growth Partners 87-A, Ltd. and the Company. (1) 2.2 Purchase and Sale Agreement dated as of August 11, 1995 between Jones Cable Income Fund 1-B, Ltd. and the Company. (1) 2.3 Purchase and Sale Agreement dated as of August 11, 1995 between Cable TV Fund 12-BCD Venture and the Company. (1) 2.4 Asset Exchange Agreement dated as of August 11, 1995 between Time Warner Entertainment-Advance/Newhouse Partnership and the Company. (1) (1) Incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1995. 3 SIGNATURES 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 hereunto duly authorized. JONES INTERCABLE, INC., a Colorado corporation Dated: May 13, 1996 By: /s/ Kevin P. Coyle ------------------------------ Kevin P. Coyle Group Vice President/Finance 4 Financial Statements Prince George's County A Cable System Included in the Partnership of Time Warner Entertainment - Advance/Newhouse April 1, 1995 through December 31, 1995 with Report of Independent Auditors Prince George's County A Cable System Included in the Partnership of Time Warner Entertainment - Advance/Newhouse Financial Statements April 1, 1995 through December 31, 1995 CONTENTS Report of Independent Auditors........................................ 1 Financial Statements Balance Sheet......................................................... 2 Statement of Operations............................................... 3 Statement of Changes in Partners' Capital............................. 4 Statement of Cash Flows............................................... 5 Notes to Financial Statements......................................... 6 [LOGO OF ERNEST & YOUNG LLP] Report of Independent Auditors To the Management of Jones Intercable, Inc. We have audited the accompanying balance sheet of Prince George's County, a cable system included in the partnership of Time Warner Entertainment - Advance/Newhouse ("TWEAN") as of December 31, 1995, and the related statements of operations, changes in partners' capital and cash flows for the period from April 1, 1995 through December 31, 1995. These financial statements are the responsibility of Prince George's County management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 audit provides 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 Prince George's County as of December 31, 1995, and its results of operations and its cash flows for the period from April 1, 1995 through December 31, 1995, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP April 12, 1996 1 Prince George's County A Cable System Included in the Partnership of Time Warner Entertainment - Advance/Newhouse Balance Sheet (in thousands) December 31, 1995
ASSETS Cash $ 287 Accounts receivable, less allowance for doubtful accounts of $26 1,090 Prepaid expenses and other assets 290 Property, plant and equipment, at cost: Land, buildings and improvements 2,021 Distribution system 29,801 Vehicles and other equipment 4,890 Construction in progress 1,651 -------- 38,363 Less accumulated depreciation (22,683) -------- Net property, plant and equipment 15,680 Franchise costs, less accumulated amortization of $263 63 Receivable from TWEAN 9,713 -------- Total assets $ 27,123 ======== LIABILITIES AND PARTNERS' CAPITAL Accounts payable $ 78 Accrued liabilities 1,788 Due to affiliated companies 561 -------- 2,427 Partners' capital 24,696 -------- Total liabilities and partners' capital $ 27,123 ========
See accompanying notes. 2 Prince George's County A Cable System Included in the Partnership of Time Warner Entertainment - Advance/Newhouse Statement of Operations (in thousands) April 1, 1995 through December 31, 1995
REVENUES Service $27,095 Connection and other 1,580 ------- 28,675 EXPENSES Operating and origination 8,099 Programming purchased from affiliated 2,498 companies Selling, general and administrative 5,167 Depreciation and amortization 3,039 Interest expense 15 ------- 18,818 ------- Net income $ 9,857 =======
See accompanying notes. 3 Prince George's County A Cable System Included in the Partnership of Time Warner Entertainment - Advance/Newhouse Statement of Changes in Partners' Capital (in thousands) April 1, 1995 through December 31, 1995
Contribution of partners' capital at $14,839 April 1, 1995 Net income for the period from April 1, 1995 through 9,857 December 31, 1995 ------- Partners' capital at December 31, 1995 $24,696 =======
See accompanying notes. 4 Prince George's County A Cable System Included in the Partnership of Time Warner Entertainment - Advance/Newhouse Statement of Cash Flows (in thousands) April 1, 1995 through December 31, 1995
OPERATING ACTIVITIES Net income $ 9,857 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,039 Changes in operating assets and liabilities: Accounts receivable and prepaid (1,199) expenses Accounts payable and accrued 1,274 liabilities -------- Net cash provided by operating 12,971 activities INVESTING ACTIVITIES Purchases of property, plant and (2,972) equipment, net Increase in receivable from TWEAN (9,713) -------- Net cash used in investing activities (12,685) Net decrease in cash 286 Cash at beginning of year 1 -------- Cash at end of year $ 287 ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid $ 15 ========
See accompanying notes. 5 Prince George's County A Cable System Included in the Partnership of Time Warner Entertainment - Advance/Newhouse Notes to Financial Statements 1. DESCRIPTION OF BUSINESS Prince George's County (the "System"), a cable system included in the partnership of Time Warner Entertainment - Advance/Newhouse ("TWEAN"), is principally engaged in the operation of a cable television business. Such operations consist primarily of selling video programming which is distributed to subscribers for a monthly fee. The System operates in the City of Largo, Maryland and surrounding areas under nonexclusive franchise agreements which expire at various times beginning July 1997. On April 1, 1995, Time Warner Entertainment Company, L.P. ("TWE"), contributed 2.9 million subscribers (for a two-thirds interest) and Advance/Newhouse ("A/N") contributed 1.5 million subscribers (for a one-third interest) to form TWEAN, a joint venture that TWE manages. TWE is a limited partnership between certain subsidiaries of Time Warner Inc., the general partners, and a subsidiary of US WEST, Inc., the limited partner's. Assets (primarily property, plant and equipment) and liabilities of the System were included in the A/N contribution at historical amounts. The statements of operations, partners' capital and cash flows are presented under the accounting policies of TWEAN for the period from April 1, 1995 through December 31, 1995. The System has no separate legal status or existence. The System resources are under the control of TWEAN management. The System assets are legally available for the satisfaction of debts of TWEAN, not solely those appearing in the accompanying statements, and its debts may result in claims against assets not appearing therein. The System is one of several cable systems included in the partnership of TWEAN and transactions and the terms thereof may be arranged by and among members of the affiliated group. 6 Prince George's County A Cable System Included in the Partnership of Time Warner Entertainment - Advance/Newhouse Notes to Financial Statements 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PROPERTY, PLANT AND EQUIPMENT Depreciation is provided on the straight-line basis over the estimated useful lives of the assets as follows: Buildings and improvements 10-20 years Distribution system 5-15 years Vehicles and other equipment 3-11 years In March 1995, the FASB issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," ("FAS 121") effective for fiscal years beginning after December 15, 1995. The new rules establish standards for the recognition and measurement of impairment losses on long-lived assets and certain intangible assets. The Company expects that the adoption of FAS 121 will not have a material effect on its financial statements. FRANCHISE COSTS Costs incurred in acquiring cable television franchises are capitalized and then amortized on a straight-line basis over various periods not in excess of the life of the applicable franchise agreement. DEFERRED INCOME Recognition of income from subscribers billed in advance is deferred until the services are rendered. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes thereto. Actual results could differ from those estimates. 7 Prince George's County A Cable System Included in the Partnership of Time Warner Entertainment - Advance/Newhouse Notes to Financial Statements 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CONCENTRATION OF CREDIT RISK A significant portion of the customer base is concentrated within the local geographical area of the cable system. The division generally extends credit to its customers and the ultimate collection of accounts receivable could be affected by the local economy. Management performs continuous credit evaluations of its customers and may require cash in advance or other special arrangements from certain customers. Management does not believe that there is any significant credit risk which could have a material effect on the financial condition of the division. INCOME TAXES Income or loss of the System is included in separate income tax returns of the TWEAN partners. Accordingly, no income taxes are reflected in the System financial statements. 3. RELATED PARTY TRANSACTIONS The balance sheet includes an amount receivable from TWEAN (see Note 6) representing the balance of excess cash flow generated by the system and transferred to TWEAN. Amounts transferred are not subject to repayment and do not bear interest. The statement of revenues and expenses and changes in net assets includes charges for programming and promotional services provided by Home Box Office and other affiliates of TWE. These charges are based upon customary rates. Total charges allocated to the System aggregated $2,498,000 for the period from April 1, 1995 through December 31, 1995. 8 Prince George's County A Cable System Included in the Partnership of Time Warner Entertainment - Advance/Newhouse Notes to Financial Statements 4. COMMITMENTS Rental expense for all operating leases, principally office, equipment and pole attachments, approximated $332,000 for the period from April 1, 1995 through December 31, 1995. Future minimum rental payments required under noncancelable operating leases are summarized as follows:
Year ended December 31: 1996 $ 281,000 1997 288,000 1998 295,000 1999 302,000 2000 310,000 Thereafter 264,000 ---------- $1,740,000 ==========
5. BENEFIT PLANS Effective April 1, 1995, the System has participated in the Time Warner Cable Pension Plan (the "Pension Plan"), a noncontributory defined benefit pension plan, and the Time Warner Cable Employees Savings Plan (the "Savings Plan"), a defined contribution plan, both of which are administered by a committee appointed by the Board of Representatives of TWE and cover substantially all employees. Benefits under the Pension Plan are determined based on formulas which reflect employees' years of service and compensation levels during their employment period. Total pension cost for the period from April 1, 1995 through December 31, 1995 approximated $82,000. The System's contributions to the Savings Plan can amount to up to 6.67% of the employees' compensation during the plan year. The Board of Representatives of TWE has the right in any year to set the maximum amount of the System's contribution. Defined contribution plan expense for the period from April 1, 1995 through December 31, 1995 approximated $38,000. 9 Prince George's County A Cable System Included in the Partnership of Time Warner Entertainment - Advance/Newhouse Notes to Financial Statements 6. SUBSEQUENT EVENT On February 29, 1996, certain System assets, excluding the receivable from TWEAN, and certain liabilities were traded pursuant to an asset exchange agreement between TWEAN and Jones Intercable, Inc. 10 Financial Statements Warner Cable Communications (Fairfax County, Virginia) A Division of Time Warner Entertainment-Advance/Newhouse Partnership Year ended December 31, 1995 with Report of Independent Auditors Warner Cable Communications (Fairfax County, Virginia) A Division of Time Warner Entertainment-Advance/Newhouse Partnership Financial Statements Year ended December 31, 1995 INDEX TO AUDITED FINANCIAL STATEMENTS Report of Independent Auditors...................................... 1 Statement of Assets, Liabilities and Net Assets..................... 2 Statement of Revenues and Expenses and Changes in Net Assets........ 3 Statement of Cash Flows............................................. 4 Notes to Financial Statements....................................... 5 Report of Independent Auditors The General Partner Time Warner Entertainment-Advance/Newhouse Partnership Stamford, Connecticut We have audited the accompanying statement of assets, liabilities and net assets of Warner Cable Communications (Fairfax County, Virginia), a division of Time Warner Entertainment-Advance/Newhouse Partnership, as of December 31, 1995, and the related statements of revenues and expenses and changes in net assets and cash flows for the year then ended. These financial statements are the responsibility of the Division's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the assets, liabilities and net assets of Warner Cable Communications (Fairfax County, Virginia), a division of Time Warner Entertainment-Advance/Newhouse Partnership, at December 31, 1995, and its revenues and expenses and changes in net assets and its cash flows for the year then ended in conformity with generally accepted accounting principles. May 2, 1996 1 Warner Cable Communications (Fairfax County, Virginia) A Division of Time Warner Entertainment-Advance/Newhouse Partnership Statement of Assets, Liabilities and Net Assets December 31, 1995
ASSETS Cash $ 66,124 Accounts receivable, net of allowance for doubtful accounts of $25,985 276,768 Prepaid expenses and other assets 33,505 Property, plant and equipment, at cost (Note 2): Land, building and improvements $ 168,487 Distribution system 14,148,225 Vehicles and other equipment 733,143 Construction in progress 588 ----------- 15,050,443 Less accumulated depreciation (7,925,300) ----------- Net property, plant and equipment 7,125,143 Franchise costs and other intangible assets, less accumulated amortization of $272,639 190,254 ---------- $7,691,794 ========== LIABILITIES AND NET ASSETS Accounts payable $ 91,191 Accrued liabilities 417,210 Subscribers' advance payments 164,405 ---------- Total current liabilities 672,806 Net assets (Note 1) 7,018,988 ---------- $7,691,794 ==========
See notes to financial statements. 2 Warner Cable Communications (Fairfax County, Virginia) A Division of Time Warner Entertainment-Advance/Newhouse Partnership Statement of Revenues and Expenses and Changes in Net Assets Year ended December 31, 1995
Revenues: Service $5,368,406 Connection and other 929,483 ---------- $ 6,297,889 Expenses: Operating and origination 2,375,300 Selling, general and administrative 971,119 Depreciation and amortization (Note 2) 1,047,636 Interest 163,793 ---------- 4,557,848 ----------- Net income 1,740,041 Net assets at beginning of year 7,212,992 Net payments to Time Warner Entertainment- Advance/Newhouse Partnership (1,934,045) ----------- Net assets at end of year $ 7,018,988 ===========
See notes to financial statements. 3 Warner Cable Communications (Fairfax County, Virginia) A Division of Time Warner Entertainment-Advance/Newhouse Partnership Statement of Cash Flows Year ended December 31, 1995
OPERATING ACTIVITIES Net income $1,740,041 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,047,636 Changes in noncash working capital: Accounts receivable, prepaid expenses, and other assets 10,531 Accounts payable, accrued liabilities, and subscribers' advance payments 9,286 ---------- Net cash provided by operating activities $ 2,807,494 INVESTING ACTIVITIES Purchases of property, plant and equipment (859,800) FINANCING ACTIVITIES Net payments to Time Warner Entertainment- Advance/Newhouse Partnership (1,934,045) ----------- Net increase in cash 13,649 Cash at beginning of year 52,475 ----------- Cash at end of year $ 66,124 ===========
See notes to financial statements. 4 Warner Cable Communications (Fairfax County, Virginia) A Division of Time Warner Entertainment-Advance/Newhouse Partnership Notes to Financial Statements Year ended December 31, 1995 1. Description of Business Warner Cable Communications (Fairfax County, Virginia) (the Division), a division of Time Warner Entertainment-Advance/Newhouse Partnership (TWE-A/N), is principally engaged in the cable television business. Such operations consist primarily of selling video programming which is distributed to subscribers for a monthly fee through a network of coaxial cables. The Division operates in the County of Fairfax, Virginia, under a nonexclusive franchise agreement which is in effect until 2003. On April 1, 1995, Time Warner Entertainment Company, L.P. (TWE) formed TWE-A/N, a general partnership, with Advance/Newhouse Partnership (Advance/Newhouse). The TWE and Advance/Newhouse interests in TWE-A/N are 66.67% and 33.33%, respectively. The assets of the Division were contributed to TWE-A/N, which is managed by, and an affiliate of TWE. The Division has no separate legal status or existence. The Division's resources and existence are at the disposal of TWE-A/N management, subject to contractual commitments by TWE-A/N to perform certain long-term contracts within the present divisional structure. The Division's assets are legally available for the satisfaction of debts of TWE-A/N, not solely those appearing in the accompanying statements; and its debts may result in claims against assets not appearing therein. The Division is one of several divisions and affiliates of TWE-A/N, and transactions and the terms thereof may be arranged by and among members of the affiliated group. 2. Significant Accounting Policies Property, Plant and Equipment Depreciation is provided on the straight-line basis over the estimated useful lives of the assets as follows: Building and improvements 5-25 years Distribution system 3-15 years Vehicles and other equipment 3-10 years 5 Warner Cable Communications (Fairfax County, Virginia) A Division of Time Warner Entertainment-Advance/Newhouse Partnership Notes to Financial Statements (continued) 2. Significant Accounting Policies (continued) Franchise Costs and Other Intangible Assets The Division has deferred costs incurred to acquire the franchises and other intangible assets. Amortization of these costs is provided on the straight-line basis over the term of the franchise agreement. Income Taxes As a U.S. partnership, TWE-A/N is not subject to federal and state income taxation. As a result, a provision for income taxes has not been included in the financial statements. Statement of Cash Flows For purposes of this statement, cash includes all highly liquid investments purchased with original maturities of three months or less. Financial Statements The financial statements have been prepared in accordance with generally accepted accounting principles, which require the use of management's estimates and assumptions. Actual results could differ from these estimates. 3. Related Party Transactions There is a charge equivalent to income taxes of $707,000 included in Net Payments to TWE-A/N. Interest charged to the Division for January through March by TWE was computed by multiplying the Division's estimated debt by the TWE effective interest rate. The TWE effective interest rate was 7.6%. For April through December, the TWE-A/N interest expense was allocated to the Division based on the ratio of the Division's net assets to total TWE-A/N net assets. During the year ended December 31, 1995, interest charges aggregated $163,793. 6 Warner Cable Communications (Fairfax County, Virginia) A Division of Time Warner Entertainment-Advance/Newhouse Partnership Notes to Financial Statements (continued) 3. Related Party Transactions (continued) The Division records charges for a portion of TWE-A/N's selling, general and administrative expenses ($211,064 for the year ended December 31, 1995), which are allocated by TWE-A/N to its divisions and affiliates based upon subscriber levels. The statement of revenues and expenses and changes in net assets includes charges for programming and promotional services provided by Home Box Office and other affiliates of TWE-A/N. These charges are based upon customary rates. 4. Leases Rental expenses for all operating leases, principally office rent, for the year ended December 31, 1995, amounted to $136,541. The Division has no significant noncancelable rental commitments. 5. Benefit Plans The Division participates in a noncontributory defined benefit pension plan (the Pension Plan) which is maintained by TWE-A/N and covers substantially all employees. Benefits under the Pension Plan are determined based on formulas which reflect the employees' years of service and average compensation for the highest five consecutive years of the last ten years of service. Total pension cost for the year ended December 31, 1995, was $25,513. Prior to April 1, 1995, the Division participated in a defined contribution plan maintained by TWE (The Time Warner Cable Employees' Savings Plan). Effective April 1, 1995, this Savings Plan was amended, restated and renamed the Cable Employees' Savings Plan (The Savings Plan). The Savings Plan covers substantially all employees. The Division's contributions to the Savings Plan can amount to up to 6.67% of the employee's eligible compensation during the plan year. The plan sponsor has the right in any year to set the maximum amount of the Division's contribution. Defined contribution plan expense totaled $10,907 for the year ended December 31, 1995. 7 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS On February 28, 1996, Jones Intercable, Inc. and subsidiaries (the "Company") purchased pursuant to a purchase and sale agreement with IDS/Jones Growth Partners 87-A, Ltd., one of the Company's managed limited partnerships, the cable television system serving areas in and around Carmel, Indiana (the "Carmel System"). The purchase price was $44,235,333, which was the average of three separate independent appraisals of the fair market value of the Carmel System. The purchase of the Carmel System was funded by borrowings available under the Company's revolving credit facility. The Carmel System passes approximately 24,400 homes and serves approximately 19,200 basic subscribers. On February 28, 1996, the Company purchased pursuant to a purchase and sale agreement with Jones Cable Income Fund 1-B, Ltd., one of the Company's managed limited partnerships, the cable television system serving areas in and around Orangeburg, South Carolina (the "Orangeburg System"). The purchase price was $18,347,667, which was the average of three separate independent appraisals of the fair market value of the Orangeburg System. The purchase of the Orangeburg System was funded by borrowings available under the Company's revolving credit facility. The Orangeburg System passes approximately 16,530 homes and serves approximately 12,500 basic subscribers. On February 28, 1996, the Company purchased pursuant to a purchase and sale agreement with the Cable TV Fund 12-BCD Venture (the "Venture"), a joint venture of three of the Company's managed limited partnerships, the cable television system serving areas in and around Tampa, Florida (the "Tampa System"). The purchase price was $110,395,667, which was the average of three separate independent appraisals of the fair market value of the Tampa System. The purchase of the Tampa System was funded by borrowings available under the Company's revolving credit facility. The Tampa System passes approximately 128,500 homes and serves approximately 65,000 basic subscribers. On August 11, 1995, the Company entered into an asset exchange agreement (the "TWEAN Exchange Agreement") with Time Warner Entertainment-Advance/Newhouse Partnership ("TWEAN"), an unaffiliated cable television system operator. Pursuant to the TWEAN Exchange Agreement, on February 29, 1996, the Company conveyed to TWEAN the Carmel System, the Orangeburg System and the Tampa System and cash in the amount of $3,500,000 (subject to normal closing adjustments). In return, the Company received from TWEAN 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 (the "Prince George's County System"), and portions of Fairfax County, Virginia (the "Reston System"). These systems serve approximately 86,500 subscribers. This transaction was considered a non-monetary exchange of similar productive assets for accounting purposes and the Prince Georges County System and the Reston System were recorded at the historical cost of the assets given up plus the $3,500,000 cash consideration. The Company paid Financial Group a $1,668,000 fee upon the completion of the TWEAN Exchange Agreement as compensation to it for acting as the Company's financial advisor. All fees paid to Financial Group by the Company are based upon 90% of the estimated commercial rate charged by unaffiliated financial advisors. The following Unaudited Pro Forma Consolidated Financial Statements reflect the acquisition of the Prince Georges County System and the Reston System. The Unaudited Pro Forma Consolidated Balance Sheet reflects the acquisition of the Prince Georges County System and the Reston System as if the transaction had occurred as of December 31, 1995. In addition, the Unaudited Pro Forma Consolidated Balance Sheet reflects the purchase of the cable television system serving areas in and around Manassas, Virginia (the "Manassas System"), which was completed on January 10, 1996, as if the transaction had occurred as of December 31, 1995. The Unaudited Pro Forma Statement of Operations reflects the acquisition of the Prince Georges County System and the Reston System, as well as acquisitions of the Manassas System, the cable television system serving areas in and around Dale City, Virginia (the "Dale City System") and the cable television system serving areas in and around Augusta, Georgia (the "Augusta System"), as if the transactions had occurred January 1, 1995. The capital required to complete the acquisition of the Prince Georges County System and the Reston System was provided by the Company's Revolving Credit Facility. The Unaudited Pro Forma Financial Statements should be read in conjunction with the Notes to Unaudited Financial Statements. The Unaudited Pro Forma Statements of Operations are based on historical data and may not be indicative of actual results obtained due to these transactions. 2 JONES INTERCABLE, INC. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET DECEMBER 31, 1995
Pro Forma Adjustments ---------------------------- As Prince George/ Reported Manassas Reston Pro Forma 12/31/95 System Systems 12/31/95 -------- -------- -------------- ---------- CASH AND CASH EQUIVALENTS $ 2,314 $ - $ - $ 2,314 RESTRICTED CASH 9,770 - - 9,770 RECEIVABLES 36,085 350 1,728 38,163 INVESTMENT IN CABLE TELEVISION PROPERTIES Property, plant and equipment, net 303,488 17,750 44,120 365,358 Franchise Costs and Other Intangibles, net 309,813 54,372 134,027 498,212 Investments in Domestic Partnerships 45,745 - - 45,745 Investments in Foreign Partnerships 99,613 - - 99,613 -------- ------- -------- ---------- Total investment 758,659 72,122 178,147 1,008,928 DEFERRED TAX ASSET, NET 3,862 - - 3,862 DEPOSITS, PREPAIDS AND OTHER 49,809 (2,802) 52 47,059 -------- ------- -------- ---------- TOTAL ASSETS $860,499 $69,670 $179,927 $1,110,096 ======== ======= ======== ========== LIABILITIES AND SHAREHOLDERS' INVESTMENT LIABILITIES Accounts payable and accrued liabilities $ 69,411 $ - $ - $ 69,411 Subscriber prepayments and deposits 5,579 20 60 5,659 Subordinated debentures and other debt 462,714 - - 462,714 Credit Facility 30,000 69,650 179,867 279,517 -------- ------- -------- ---------- Total liabilities 567,704 69,670 179,927 817,301 -------- ------- -------- ---------- SHAREHOLDERS' INVESTMENT Class A Common Stock 262 - - 262 Common Stock 51 - - 51 Additional Paid-in Capital 394,875 - - 394,875 Accumulated Deficit (144,897) - - (144,897) Unrealized Gain 42,504 - - 42,504 -------- ------- -------- ---------- Total shareholders' investment 292,795 292,795 -------- ------- -------- ---------- Total Liabilities and Shareholders' Investment $860,499 $69,670 $179,927 $1,110,096 ======== ======= ======== ==========
3 JONES INTERCABLE, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS For the year ended December 31, 1995
Pro Forma Adjustments As ---------------------------- Reported Other Prince George/ 12/31/95 Acquisitions Reston Systems Total -------- ------------ -------------- -------- (In Thousands Except Per Share Data) REVENUES FROM CABLE TELEVISION OPERATIONS: Cable Television Revenue Subscriber service fees $135,350 $ 57,343 $ 44,660 $237,353 Management fees 21,462 (1,215) (2,085) 18,162 Non-cable Revenue 32,026 - - 32,026 -------- -------- -------- -------- TOTAL REVENUES 188,838 56,128 42,575 287,541 COSTS AND EXPENSES: Cable Television Expenses Operating expenses 77,638 29,013 22,770 129,421 General and administrative expenses 8,284 3,787 2,903 14,974 Non-cable operating, general and administrative 32,382 - - 32,382 Depreciation and amortization 55,805 30,842 17,648 104,295 -------- -------- -------- -------- OPERATING INCOME 14,729 (7,514) (746) 6,469 OTHER INCOME (EXPENSE): Interest expense (49,552) (6,895) (12,354) (68,801) Equity in income (losses) of affiliated entities (58) - - (58) Interest income 14,383 (11,350) - 3,033 Other, net (526) - - (526) -------- -------- -------- -------- LOSS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM (21,024) (25,759) (13,100) (59,883) Income tax provision - - - - -------- -------- -------- -------- LOSS BEFORE EXTRAORDINARY ITEM (21,024) (25,759) (13,100) (59,883) EXTRAORDINARY ITEM Loss on early extinguishment of debt, net of related income taxes (692) - - (692) -------- -------- -------- -------- NET LOSS $(21,716) $(25,759) $(13,100) $(60,575) ======== ======== ======== ========
4 NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (1) The Unaudited Pro Forma Consolidated Financial Statements reflect the acquisition of the Prince Georges County System and the Reston System. The Unaudited Pro Forma Consolidated Balance Sheet reflects the acquisition of the Prince Georges County System and the Reston System as if the transaction had occurred as of December 31, 1995. In addition, the Unaudited Pro Forma Consolidated Balance Sheet reflects the purchase of the cable television system serving areas in and around Manassas, Virginia (the "Manassas System"), which was completed on January 10, 1996, as if the transaction had occurred as of December 31, 1995. The Unaudited Pro Forma Statement of Operations reflects the acquisition of the Prince Georges County System and the Reston System, as well as acquisitions of the Manassas System, the cable television system serving areas in and around Dale City, Virginia (the "Dale City System") and the cable television system serving areas in and around Augusta, Georgia (the "Augusta System"), as if the transactions had occurred January 1, 1995. (2) The basis for the Unaudited Pro Forma Consolidated Statements of Operations are the historical financials of the Company, the Prince Georges County System, the Reston System, the Dale City System, the Augusta System and the Manassas System. The depreciation and amortization of the acquired systems has been adjusted to reflect the Company's basis in the assets. Interest expense and interest income have been adjusted as a result of changes in debt balances and cash due to the above transactions. In addition, management fee revenue has been reduced to reflect the sale of certain partnership systems in connection with the above acquisitions. 5 -----END PRIVACY-ENHANCED MESSAGE-----