-----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, N2v4BBmr2NXiaoG9qPT+UOR22CzaDRuCixyYI5vO+y2dWAzd/PpkaA6MZqlZRN6Q ByIC/BRANogbDfEKwFl1Fw== 0000927356-96-000493.txt : 19960627 0000927356-96-000493.hdr.sgml : 19960627 ACCESSION NUMBER: 0000927356-96-000493 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960412 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960626 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: 96585735 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/A NO. 1 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): April 12, 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 7. Financial Statements -------------------- The following described financial statements are being filed as an amendment to the Form 8-K dated April 23, 1996 of Jones Intercable, Inc. in connection with the acquisition by Jones Cable Holdings, Inc., a wholly owned subsidiary of Jones Intercable, Inc., of the cable television system operating in and around Savannah, Georgia. a. Financial statements of businesses acquired. Historical financial ------------------------------------------- statements of Cablevision of Savannah, a system included in Time Warner Entertainment Company, L.P., as of December 31, 1995 and December 31, 1994 and for the years then ended and for the period ended March 31, 1996. b. Pro forma financial information. Pro forma financial statements of ------------------------------- Jones Intercable, Inc. reflecting the acquisition of the Savannah System. UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS On April 11, 1996, Jones Intercable, Inc. and subsidiaries (the "Company") purchased pursuant to an asset purchase agreement with Jones Spacelink Income Partners 87-1, L.P., a Colorado limited partnership managed by the Company, the cable television systems serving the communities of Lodi, Burbank, Lafayette Township, New London, Bailey Lakes, Savannah Shreve, Jeromesville, West Lafayette, Loudonville, Perrysville, Creston, Gloria Glens, Sterling, Seville, Westfield Center, Chippewa, Lake Area, Rittman, West Salem, Bloomville, Spencer, Polk and Congress, all in the State of Ohio (the "Lodi System"). The purchase price was $25,706,000, which was the average of three separate independent appraisals of the fair market value of the Lodi System. The purchase of the Lodi System was funded by available borrowings under the Company's revolving credit facility. The Lodi System passes approximately 20,600 homes and serves approximately 15,200 basic subscribers. On April 11, 1996, the Company purchased pursuant to an asset purchase agreement with Jones Spacelink Income/Growth Fund 1-A, Ltd., a Colorado limited partnership managed by the Company, the cable television system serving the areas in and around Ripon, Wisconsin (the "Ripon System"). The purchase price was $3,712,667, which was the average of three separate independent appraisals of the fair market value of the Ripon System. The purchase of the Ripon System was funded by available borrowings under the Company's revolving credit facility. The Ripon System passes approximately 2,500 homes and serves approximately 2,450 basic subscribers. On April 11, 1996, the Company purchased pursuant to a second asset purchase agreement with Jones Spacelink Income/Growth Fund 1-A, Ltd. the cable television system serving the areas in and around Lake Geneva, Wisconsin (the "Lake Geneva System"). The purchase price was $6,345,667, which was the average of three separate independent appraisals of the fair market value of the Lake Geneva System. The purchase of the Lake Geneva System was funded by available borrowings under the Company's revolving credit facility. The Lake Geneva System passes approximately 5,400 homes and serves approximately 3,600 basic subscribers. On September 1, 1995, the Company entered into an asset exchange agreement (the "Time Warner Exchange Agreement") with Time Warner Entertainment Company, L.P. ("Time Warner"), an unaffiliated cable television operator. Pursuant to the Time Warner Exchange Agreement, on April 12, 1996, the Company conveyed to Time Warner the cable television systems serving Hilo, Hawaii (the "Hilo System") and Kenosha, Wisconsin (the "Kenosha System") as well as the Lodi System, the Ripon System, the Lake Geneva System and cash in the amount of $11,735,667. The Hilo System and the Kenosha System serve approximately 17,300 and 28,400 basic subscribers, respectively, and pass approximately 23,000 and 39,000 homes, respectively. In return, the Company received from Time Warner the cable television systems serving the communities in and around Savannah, Georgia (the "Savannah System"). This transaction was considered a non-monetary exchange of similar productive assets for accounting purposes and the Savannah System was recorded at the historical cost of the assets given up plus the $11,735,667 cash consideration. The Savannah System passes approximately 100,000 homes and serves approximately 63,000 subscribers. The Company paid Financial Group a $1,286,000 fee upon the completion of the Time Warner 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 Unaudited Pro Forma Consolidated Balance Sheet reflects the acquisition of the Savannah System as if the transaction had occurred as of March 31, 1996. The Unaudited Pro Forma Statement of Operations for the three months ended March 31, 1996 reflects the acquisition of the Savannah System, as well as the acquisition of the cable television systems serving areas in and around Manassas, Virginia (the "Manassas System"), Prince Georges County, Maryland (the "Prince Georges County System") and Reston, Virginia (the "Reston System"), as if the transactions had occurred on January 1, 1996. The Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 1995, reflects the acquisition of the Savannah System, the Prince Georges County System, the Reston System and the Manassas System, as well as the acquisition of the cable television systems serving areas in and around Dale City, Virginia (the "Dale City System") and Augusta, Georgia (the "Augusta System). The capital required to complete the acquisition of the Savannah 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 MARCH 31, 1996
Pro Forma Adjustments ----------- As Reported Savannah Pro Forma 3/31/96 System 3/31/96 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS $ 5,625 $ - $ 5,625 RESTRICTED CASH 1,750 - 1,750 RECEIVABLES 30,736 - 30,736 INVESTMENT IN CABLE TELEVISION PROPERTIES Property, plant and equipment, net 372,283 12,197 384,480 Franchise Costs and Other Intangibles, net 480,541 36,589 517,130 Investments in Domestic Partnerships 44,859 - 44,859 Investments in Foreign Partnerships 101,169 - 101,169 ----------- ----------- ----------- Total investment 998,852 48,786 1,047,638 DEFERRED TAX ASSET, NET 3,862 - 3,862 DEPOSITS, PREPAIDS AND OTHER 55,127 - 55,127 ----------- ----------- ----------- TOTAL ASSETS $ 1,095,952 $ 48,786 $ 1,144,738 =========== =========== =========== LIABILITIES AND SHAREHOLDERS' INVESTMENT LIABILITIES Accounts payable and accrued liabilities $ 64,071 $ - $ 64,071 Subscriber prepayments and deposits 5,578 - 5,578 Subordinated debentures and other debt 462,535 - 462,535 Credit Facility 284,000 48,786 332,786 ----------- ----------- ----------- Total liabilities 816,184 48,786 864,970 ----------- ----------- ----------- SHAREHOLDERS' INVESTMENT Class A Common Stock 262 - 262 Common Stock 51 - 51 Additional Paid-in Capital 395,081 - 395,081 Accumulated Deficit (159,686) - (159,686) Unrealized Gain 44,060 - 44,060 ----------- ----------- ----------- Total shareholders' investment 279,768 279,768 ----------- ----------- ----------- Total Liabilities and Shareholders' Investment $ 1,095,952 $ 48,786 $ 1,144,738 =========== =========== ===========
3 JONES INTERCABLE, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS For the year three months ended March 31, 1996
Pro Forma Adjustments As -------------------------------- Reported Other Savannah 3/31/96 Acquisitions System Total ------- -------------- ---------- --------- (In Thousands Except Per Share Data) REVENUES FROM CABLE TELEVISION OPERATIONS: Cable Television Revenue Subscriber service fees $ 52,342 $ 8,675 $ 1,858 $ 62,875 Management fees 5,080 (350) (92) 4,638 Non-cable Revenue 9,565 - - 9,565 ------- ------ ------ ------- TOTAL REVENUES 66,987 8,325 1,766 77,078 COSTS AND EXPENSES: Cable Television Expenses Operating expenses 27,884 4,912 381 33,177 General and administrative expenses 2,937 538 7 3,482 Non-cable operating, general and administrative 9,932 - - 9,932 Depreciation and amortization 25,361 3,128 1,011 29,500 ------- ------ ------ ------- OPERATING INCOME 873 (253) 367 987 OTHER INCOME (EXPENSE): Interest expense (15,099) (2,189) (832) (18,120) Equity in losses of affiliated entities (886) - - (886) Interest income 1,026 - - 1,026 Other, net (703) - - (703) ------- ------ ------ ------- LOSS BEFORE INCOME TAXES (14,789) (2,442) (465) (17,696) Income tax provision - - - - ------- ------ ------ ------- NET LOSS $ (14,789) $ (2,442) $ (465) $ (17,696) ======= ====== ====== =======
4 JONES INTERCABLE, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS For the year ended December 31, 1995
Pro Forma Adjustments As -------------------------------- Reported Other Savannah 12/31/95 Acquisitions System Total -------- -------------- ---------- ----------- (In Thousands Except Per Share Data) REVENUES FROM CABLE TELEVISION OPERATIONS: Cable Television Revenue Subscriber service fees $ 135,350 $ 102,003 $ 7,813 $ 245,166 Management fees 21,462 (3,300) (364) 17,798 Non-cable Revenue 32,026 - - 32,026 -------- ------- ------- ------- TOTAL REVENUES 188,838 98,703 7,449 294,990 COSTS AND EXPENSES: Cable Television Expenses Operating expenses 77,638 51,783 2,185 131,606 General and administrative expenses 8,284 6,690 (87) 14,887 Non-cable operating, general and administrative 32,382 - - 32,382 Depreciation and amortization 55,805 48,490 4,321 108,616 -------- ------- ------- ------- OPERATING INCOME 14,729 (8,260) 1,030 7,499 OTHER INCOME (EXPENSE): Interest expense (49,552) (19,249) (3,325) (72,126) 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) (38,859) (2,295) (62,178) Income tax provision - - - - -------- ------- ------- ------- LOSS BEFORE EXTRAORDINARY ITEM (21,024) (38,859) (2,295) (62,178) EXTRAORDINARY ITEM Loss on early extinguishment of debt, net of related income taxes (692) - - (692) -------- ------- ------- ------- NET LOSS $ (21,716) $ (38,859) $ (2,295) $ (62,870) ======== ======= ======= =======
5 NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (1) The Unaudited Pro Forma Consolidated Balance Sheet reflects the acquisition of the Savannah System as if the transaction had occurred as of March 31, 1996. The Unaudited Pro Forma Statement of Operations for the three months ended March 31, 1996 reflects the acquisition of the Savannah System, as well as the acquisition of the cable television systems serving areas in and around Manassas, Virginia (the "Manassas System"), prince Georges County, Maryland (the "Prince Georges County System") and Reston, Virginia (the "Reston System"), as if the transactions had occurred on January 1, 1996. The Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 1995, reflects the acquisition of the Savannah System, the Prince Georges County System, the Reston System and the Manassas System, as well as the acquisition of the cable television systems serving areas in and around Dale City, Virginia (the "Dale City System") and Augusta, Georgia (the "Augusta System"). (2) The basis for the Unaudited Pro Forma Consolidated Statements of Operations are the historical financials of the Company, the Savannah System, 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. 6 Cablevision of Savannah (A Cable System Included in Time Warner Entertainment Company, L.P.) Financial Statements Years ended December 31, 1995 and 1994 CONTENTS
Report of Independent Auditors............................................ 1 Balance Sheets for the three months ended March 31, 1996 (Unaudited) and the years ended December 31, 1995 and 1994........................... 2 Statements of Operations for the three months ended March 31, 1996 and 1995 (Unaudited) and for the years ended December 31, 1995 and 1994.. 3 Statements of Changes in Partners' Capital for the years ended December 31, 1995 and 1994 and for the three months ended March 31, 1996 (Unaudited)............................................... 4 Statements of Cash Flows for the three months ended March 31, 1996 and 1995 (Unaudited) and for the years ended December 31, 1995 and 1994.. 5 Notes to Financial Statements............................................. 6
[LETTERHEAD OF ERNST & YOUNG LLP APPEARS HERE] Report of Independent Auditors To the General Partners of Time Warner Entertainment Company, L.P. We have audited the accompanying balance sheets of Cablevision of Savannah ("Savannah"), a cable system included in Time Warner Entertainment Company, L.P. ("TWE"), as of December 31, 1995 and 1994, and the related statements of operations, changes in partners' capital and cash flows for the years then ended. These financial statements are the responsibility of Savannah's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Savannah, a cable system included in TWE, at December 31, 1995 and 1994, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG LLP May 15, 1996 1 Cablevision of Savannah (A Cable System Included in Time Warner Entertainment Company, L.P.) Balance Sheets (In thousands)
MARCH 31 1996 DECEMBER 31 (UNAUDITED) 1995 1994 ---------------------------------- ASSETS Cash $ 91 $ 373 $ 242 Accounts receivable, less allowance for doubtful accounts of $60 (unaudited) in 1996, 1,322 578 557 $72 in 1995 and $141 in 1994 Prepaid expenses and other assets 15 16 30 Property, plant and equipment, at cost: Land, buildings and improvements 1,842 1,840 1,506 Distribution system 39,896 39,656 37,613 Vehicles and other equipment 4,340 4,315 4,090 Construction in progress 767 314 373 ---------------------------------- 46,845 46,125 43,582 Less accumulated depreciation (24,311) (23,715) (21,437) ---------------------------------- Net property, plant and equipment 22,534 22,410 22,145 Cable franchise costs, net 6,083 6,144 5,684 Total assets $ 30,045 $ 29,521 $ 28,658 ================================== LIABILITIES AND PARTNERS' CAPITAL Accounts payable $ 589 $ 357 $ 412 Accrued expenses 1,847 1,938 1,504 Due to affiliated companies 315 310 295 Payable to Time Warner Entertainment Company, L.P. 597 1,528 5,860 ---------------------------------- 3,348 4,133 8,071 Partners' capital 26,697 25,388 20,587 Total liabilities and partners' capital $ 30,045 $ 29,521 $ 28,658 ==================================
See accompanying notes. 2 Cablevision of Savannah (A Cable System Included in Time Warner Entertainment Company, L.P.) Statements of Operations (In thousands)
THREE MONTHS ENDED YEAR ENDED MARCH 31 DECEMBER 31 1996 1995 1995 1994 ---------------------------------------- (Unaudited) REVENUES Service $6,259 $5,485 $23,036 $21,599 Connection and other 338 381 1,455 1,414 ---------------------------------------- 6,597 5,866 24,491 23,013 ---------------------------------------- EXPENSES Operating and origination 1,626 1,464 6,071 5,887 Programming purchased from affiliated companies 474 457 1,830 1,747 Selling, general and administrative 1,294 1,348 5,041 4,007 Depreciation and amortization 807 808 3,277 3,376 Interest expense to affiliates 1,080 678 3,453 2,092 Loss on retirement of fixed assets 7 9 18 17 ---------------------------------------- 5,288 4,764 19,690 17,126 ---------------------------------------- Net income $1,309 $1,102 $ 4,801 $ 5,887 ========================================
See accompanying notes. 3 Cablevision of Savannah (A Cable System Included in Time Warner Entertainment Company, L.P.) Statements of Changes in Partners' Capital (In thousands) Balance at January 1, 1994 $14,700 Net income for the year ended December 31, 1994 5,887 --------- Balance at December 31, 1994 20,587 Net income for the year ended December 31, 1995 4,801 ========= Balance at December 31, 1995 25,388 Net income for the three months ended March 31, 1996 1,309 (unaudited) --------- Balance at March 31, 1996 (unaudited) $26,697 ========= See accompanying notes. 4 Cablevision of Savannah (A Cable System Included in Time Warner Entertainment Company, L.P.) Statements of Cash Flows (In thousands)
THREE MONTHS ENDED YEAR ENDED MARCH 31 DECEMBER 31 1996 1995 1995 1994 ----------------------------------------- (Unaudited) OPERATING ACTIVITIES Net income $1,309 $ 1,102 $ 4,801 $ 5,887 Adjustments for noncash and nonoperating items: Depreciation and amortization 807 808 3,277 3,376 Loss on retirement of fixed assets 7 9 18 17 Changes in assets and liabilities: Accounts receivable, prepaid expenses and other assets (743) 352 (7) 195 Accounts payable and accrued expenses 141 (165) 379 (145) ----------------------------------------- Net cash provided by operations 1,521 2,106 8,468 9,330 INVESTING ACTIVITIES Capital expenditures (871) (873) (3,306) (3,384) Acquisition of cable franchise cost (1) (587) (699) (3) expenditures ----------------------------------------- Net cash used in investing activities (872) (1,460) (4,005) (3,387) FINANCING ACTIVITIES Net (decrease) increase in payable to Time Warner Entertainment Company, L.P. (931) 71 (4,332) (5,713) ----------------------------------------- Net cash used in financing activities (931) 71 (4,332) (5,713) Net (decrease) increase in cash (282) 717 131 230 Cash at beginning of year 373 242 242 12 ----------------------------------------- Cash at end of year $ 91 $ 959 $ 373 $ 242 ========================================= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Interest paid $1,080 $ 678 $ 3,453 $ 2,092 =========================================
See accompanying notes. 5 Cablevision of Savannah (A Cable System Included in Time Warner Entertainment Company, L.P.) Notes to Financial Statements December 31, 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS Cablevision of Savannah ("Savannah"), a cable system included in Time Warner Entertainment Company, L.P. ("TWE"), 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. Savannah operates in the City of Savannah, Georgia and surrounding areas under nonexclusive franchise agreements which expire at various times through the year 2009. TWE is a limited partnership between certain subsidiaries of Time Warner Inc. ("Time Warner"), the general partners, and a subsidiary of US WEST, Inc. ("USW"), the limited partner. In 1995, Time Warner acquired the aggregate limited partnership interests previously held by subsidiaries of Toshiba Corporation and ITOCHU Corporation. Savannah has no separate legal status or existence. Savannah's resources are under the control of TWE management, subject to contractual commitments by TWE to perform certain long-term contracts within Savannah's present structure. Savannah's assets are legally available for the satisfaction of debts of TWE, not solely those appearing in the accompanying statements, and its debts may result in claims against assets not appearing therein. Savannah is one of several cable systems included in TWE, and transactions and the terms thereof may be arranged by and among members of the affiliated group. GENERAL Information with respect to the three months ended March 31, 1995 and 1996 is unaudited. The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments which are necessary for a fair statement of the results for the interim periods have been made. All such adjustments are of a normal, recurring nature. The results for the three months ended March 31, 1996 are not necessarily indicative of the results of operations for the full year. 6 Cablevision of Savannah (A Cable System Included in Time Warner Entertainment Company, L.P.) Notes to Financial Statements (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 5--20 years Distribution system 8--15 years Vehicles and other equipment 3--10 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. Advertising Costs Advertising costs are expensed upon the first exhibition of the advertisement. Advertising expense amounted to $389,000 and $320,000 in 1995 and 1994, respectively. DEFERRED INCOME Recognition of income from subscribers billed in advance is deferred until the services are rendered. 7 Cablevision of Savannah (A Cable System Included in Time Warner Entertainment Company, L.P.) Notes to Financial Statements (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect the amounts reported in the financial statements and footnotes thereto. Actual results could differ from those estimates. CONCENTRATION OF CREDIT RISK A significant portion of the customer base is concentrated within the local geographical area of the cable system. Savannah 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 Savannah. INCOME TAXES Income or loss of Savannah is included in separate income tax returns of the TWE partners. Accordingly, no income taxes are reflected in the Savannah financial statements. 2. RELATED PARTIES TWE provides services in the form of banking and treasury functions, plant engineering, design and construction administration, employee benefit plan administration, corporate legal services and other services of a general and administrative nature. Management fees charged for such services aggregated $164,000 (unaudited), $313,000 (unaudited) $826,000 and $670,000 for the three months ended March 31, 1996 and 1995, and the years ended December 31, 1995 and 1994, respectively, and are included in the statements of operations. 8 Cablevision of Savannah (A Cable System Included in Time Warner Entertainment Company, L.P.) Notes to Financial Statements (continued) 2. RELATED PARTIES (CONTINUED) The statement of operations includes charges for programming and promotional services provided by Home Box Office and other affiliates of TWE. Such charges were based upon customary rates. Total charges allocated to Savannah aggregates $474,000 (unaudited), $457,000 (unaudited), $1,830,000 and $1,747,000 for the three months ended March 31, 1996 and 1995, and the years ended December 31, 1995 and 1994, respectively. Interest charged to Savannah by TWE was computed based on the average interest rate on TWE's outstanding borrowings and TWE's average debt to capital ratio applied to Savannah's average net assets. Total interest expense was $1,100,000 (unaudited), $678,000 (unaudited) $3,400,000 and $2,100,000 for the three months ended March 31, 1996 and 1995, and the years ended December 31, 1995 and 1994, respectively. 3. COMMITMENTS Rental expense for all operating leases, principally office, equipment and pole attachments, approximated $68,000 (unaudited), $85,000 (unaudited), $339,000 and $328,000 for the three months ended March 31, 1996 and 1995, and the years ended December 31, 1995 and 1994, respectively, and are included in the statements of operations. Future minimum rental payments required under noncancelable operating leases are summarized as follows: TOTAL RENTAL COMMITMENT ------------ Year ended December 31: 1996 $47,000 1997 18,000 1998 3,000 1999 -- 2000 and thereafter -- ------------ $68,000 ============ 9 Cablevision of Savannah (A Cable System Included in Time Warner Entertainment Company, L.P.) Notes to Financial Statements (continued) 4. BENEFIT PLANS Savannah participates 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 was $44,000 (unaudited), $45,000 (unaudited), $125,000 and $159,000 for the three months ended March 31, 1996 and 1995, and the years ended December 31, 1995 and 1994, respectively. Savannah's contributions to the Savings Plan can represent up to 6.67% of the employees' compensation during the plan year. TWE's Board of Representatives has the right in any year to set the maximum amount of Savannah's annual contribution. Defined contribution plan expense was $12,000 (unaudited), $15,000 (unaudited), $54,000 and $64,000 for the three months ended March 31, 1996 and 1995, and the years ended December 31, 1995 and 1994, respectively. 5. SUBSEQUENT EVENT On April 12, 1996, certain Savannah assets, excluding the receivable from TWE, and certain liabilities were traded pursuant to an asset exchange agreement between TWE and Jones Intercable, Inc. 10 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: June 25, 1996 By: /s/ LARRY W. KASCHINSKE ----------------------- Larry W. Kaschinske Controller (Principal Accounting Officer) -----END PRIVACY-ENHANCED MESSAGE-----