-----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, S97JUTn7HPSULvKiUgM5bnARDPkb0J7rbEb9qOQwz0c792Lrh/HhRVcqersR8Mmw TH6X7tvygml1rC5dsHtHhQ== 0000927356-97-000548.txt : 19970513 0000927356-97-000548.hdr.sgml : 19970513 ACCESSION NUMBER: 0000927356-97-000548 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970512 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: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09953 FILM NUMBER: 97600782 BUSINESS ADDRESS: STREET 1: PO BOX 3309 CITY: ENGLEWOOD STATE: CO ZIP: 80155 BUSINESS PHONE: 3037923111 10-Q 1 JONES INTERCABLE, INC. FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 1997 -------------- [_] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ____________ to ___________ Commission File Number 1-9953 JONES INTERCABLE, INC. ------------------------------------------------ Exact name of registrant as specified in charter Colorado #84-0613514 - -------------------------------------------------------------------------------- State of incorporation I.R.S. employer I.D. # 9697 East Mineral Avenue, Englewood, Colorado 80112 --------------------------------------------------- Address of principal executive office (303) 792-3111 ----------------------------- Registrant's telephone number Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section l3 or l5(d) of the Securities Exchange Act of l934 during the preceding l2 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 ----- _____ Shares outstanding of each of the registrant's classes of Common Stock, as of May 1, 1997. 5,113,021 - Common Stock, $.01 par value per share 26,264,523 - Class A Common Stock, $.01 par value per share JONES INTERCABLE, INC. AND SUBSIDIARIES --------------------------------------- I N D E X --------- Page Number ------ PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements Unaudited Consolidated Balance Sheets March 31, 1997 and December 31, 1996 3 Unaudited Consolidated Statements of Operations Three Months Ended March 31, 1997 and 1996 5 Unaudited Consolidated Statements of Cash Flows Three Months Ended March 31, 1997 and 1996 6 Notes to Unaudited Consolidated Financial Statements March 31, 1997 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION. Item 6. Exhibits and Reports on Form 8-K 15 -2-
UNAUDITED CONSOLIDATED Jones Intercable, Inc. BALANCE SHEETS and Subsidiaries As of March 31, 1997 and December 31, 1996 - --------------------------------------------------------------------------------------------------- March 31, 1997 December 31, 1996 ASSETS (Stated in Thousands) - --------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS $ 2,327 $ 1,671 RESTRICTED CASH 905 1,016 RECEIVABLES: Trade receivables, net of allowance for doubtful accounts of $1,647,000 in March 1997 and $1,483,000 in December 1996 14,129 16,327 Affiliated entities 3,199 3,996 Other 1,085 962 INVESTMENT IN CABLE TELEVISION PROPERTIES: Property, plant and equipment, at cost 652,021 569,148 Less-accumulated depreciation (201,952) (184,738) --------- --------- 450,069 384,410 Franchise costs and other intangible assets, net of accumulated amortization of $238,066,000 in March 1997 and $219,783,000 in December 1996 649,396 492,219 Investments in domestic cable television partnerships and affiliates 29,513 31,483 Investment in Bell Cablemedia plc 113,570 111,767 ---------- --------- TOTAL INVESTMENT IN CABLE TELEVISION PROPERTIES 1,242,548 1,019,879 ---------- --------- DEFERRED TAX ASSET, net of valuation allowance of $58,800,000 in March 1997 and $53,006,000 in December 1996 3,862 3,862 DEPOSITS, PREPAID EXPENSES AND OTHER ASSETS 80,726 86,416 ---------- ---------- TOTAL ASSETS $1,348,781 $1,134,129 ========== ==========
The accompanying notes to unaudited consolidated financial statements are an integral part of these balance sheets. -3-
UNAUDITED CONSOLIDATED Jones Intercable, Inc. BALANCE SHEETS and Subsidiaries As of March 31, 1997 and December 31, 1996 - -------------------------------------------------------------------------------------------- March 31, 1997 December 31, 1996 LIABILITIES AND SHAREHOLDERS' INVESTMENT (Stated in Thousands) - -------------------------------------------------------------------------------------------- LIABILITIES: Accounts payable and accrued liabilities $ 83,885 $ 89,563 Subscriber prepayments and deposits 3,091 3,112 Subordinated debentures and other debt 711,472 463,147 Credit Facilities 329,000 343,000 ---------- --------- TOTAL LIABILITIES 1,127,448 898,822 ---------- --------- SHAREHOLDERS' INVESTMENT: Class A Common Stock, $.01 par value, 60,000,000 shares authorized; 26,264,523 shares issued at March 31, 1997 and December 31, 1996 263 263 Common Stock, $.01 par value, 5,550,000 shares authorized; 5,113,021 shares issued at March 31, 1997 and December 31, 1996 51 51 Additional paid-in capital 395,341 395,278 Unrealized holding gain on marketable securities 49,076 47,272 Accumulated deficit (223,398) (207,557) ---------- --------- TOTAL SHAREHOLDERS' INVESTMENT 221,333 235,307 ---------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $1,348,781 $1,134,129 ========== =========
The accompanying notes to unaudited consolidated financial statements are an integral part of these balance sheets. -4- UNAUDITED CONSOLIDATED Jones Intercable, Inc. STATEMENTS OF OPERATIONS and Subsidiaries
- ------------------------------------------------------------------------------------------------------------------------------------ For the Three Months Ended March 31, 1997 March 31, 1996 (Stated in Thousands Except Per Share Data) - ------------------------------------------------------------------------------------------------------------------------------------ REVENUES FROM CABLE TELEVISION OPERATIONS: Cable Television Revenue Subscriber service fees $ 74,675 $ 52,342 Management fees 4,446 5,080 Distributions and brokerage fees 2,530 - Non-cable Revenue 1,413 9,565 ------------- ------------- TOTAL REVENUES 83,064 66,987 COSTS AND EXPENSES: Cable Television Expenses Operating expenses 38,835 27,884 General and administrative expenses (including approximately $1,470,000 and $891,000 of related party expenses in 1997 and 1996, respectively) 4,403 3,437 Non-cable operating, general and administrative 1,910 9,932 Depreciation and amortization 35,532 25,361 ------------- ------------- OPERATING INCOME 2,384 373 OTHER INCOME (EXPENSE): Interest expense (19,665) (15,099) Equity in losses of affiliated entities (1,695) (886) Interest income 382 1,026 Gain on sale of assets 2,979 - Other, net (226) (203) ------------- ------------- LOSS BEFORE INCOME TAXES (15,841) (14,789) Income tax benefit - - ------------- ------------- NET LOSS $ (15,841) $ (14,789) ============= ============= PRIMARY LOSS PER SHARE: $ (.50) $ (.47) ============= ============= AVERAGE NUMBER OF CLASS A COMMON AND COMMON SHARES OUTSTANDING 31,378 31,358 ============= =============
The accompanying notes to unaudited consolidated financial statements are an integral part of these statements. -5-
UNAUDITED CONSOLIDATED STATEMENTS OF Jones Intercable, Inc. CASH FLOWS and Subsidiaries For the three months ended March 31, 1997 and 1996 - -------------------------------------------------------------------------------------------------------------- For the Three Months Ended March 31, 1997 March 31, 1996 (Stated in Thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (15,841) $ (14,789) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 35,532 25,361 Equity in losses of affiliates 1,695 886 Gain on sale of assets (2,979) - Class A Stock option expense 63 63 Decrease in restricted cash 111 4,607 Decrease in trade receivables 2,198 2,569 Decrease in other receivables, prepaid expenses and other assets 805 26 Decrease in accounts payable, accrued liabilities and subscriber prepayments and deposits (5,699) (6,920) -------- -------- Net cash provided by operating activities 15,885 11,803 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of cable television systems (221,987) (249,629) Purchase of property and equipment (24,346) (15,618) Other, net 480 313 --------- -------- Net cash used in investing activities (245,853) (264,934) --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings 240,000 254,000 Repayment of debt (254,000) - Proceeds from the sale of Senior Notes, net 248,600 - Senior Note Offering costs (4,498) - Decrease in accounts receivable from affiliated entities 797 2,478 Proceeds from Class A stock options - 143 Other, net (275) (179) --------- -------- Net cash provided by financing activities 230,624 256,442 --------- -------- Increase in Cash and Cash Equivalents 656 3,311 Cash and Cash Equivalents, beginning of period 1,671 2,314 --------- -------- Cash and Cash Equivalents, end of period $ 2,327 $ 5,625 ========= ========
The accompanying notes to unaudited consolidated financial statements are an integral part of these statements. -6- NOTES TO UNAUDITED CONSOLIDATED Jones Intercable, Inc. FINANCIAL STATEMENTS and Subsidiaries (1) This Form 10-Q is being filed by Jones Intercable, Inc. and its subsidiaries (the "Company"). The majority of the Company's cable television systems are owned by two of the Company's wholly owned subsidiaries, Jones Cable Holdings, Inc. ("JCH") and Jones Cable Holdings II, Inc. ("JCH II"). This Form 10-Q is being filed in conformity with the SEC requirements for unaudited financial statements and does not contain all of the necessary footnote disclosures required for a fair presentation of the Balance Sheets, Statements of Operations and Statements of Cash Flows in conformity with generally accepted accounting principles. However, in the opinion of management, this data includes all adjustments, consisting only of normal recurring accruals, necessary to present fairly the Company's financial position at March 31, 1997 and December 31, 1996 and its results of operations and cash flows for the three months ended March 31, 1997 and 1996. Results of operations for these periods are not necessarily indicative of results to be expected for the full year. (2) The Company has completed the following transactions in 1997: Acquisition ----------- On January 31, 1997, the Company, pursuant to an agreement with Maryland Cable Partners, L.P., an unaffiliated party, purchased the cable television system serving the communities of Berwyn Heights, Bladensburg, Bowie, Brentwood, Cheverly, College Park, Colmar Manor, Cottage City, Edmonston, Glenarden, Greenbelt, Hyattsville, Landover Hills, Laurel, Mt. Rainer, New Carrollton, North Brentwood, Riverdale, Takoma Park, University Park and portions of Prince Georges County, all in the State of Maryland (the "North Prince Georges County System"). The purchase price was $231,367,000 and was funded by borrowings under JCH's revolving credit facility. The Company paid Jones Financial Group, Ltd. ("Financial Group") a fee of $2,082,000 upon closing of this transaction for acting as the Company's financial advisor in connection with this transaction. All fees paid to Financial Group by the Company are based upon 90% of the estimated commercial rate charged by unaffiliated financial advisors. The North Prince Georges County System is contiguous to the Company's South Prince Georges County System and therefore allows the Company to serve all 160,000 cable television subscribers in Prince Georges County. Exchange -------- On April 15, 1997, the Company, pursuant to an exchange agreement with United CATV, Inc., an unaffiliated party that is an affiliate of Tele- Communications, Inc., conveyed the cable television systems serving areas in and around Evergreen, Idaho Springs and Jefferson County, all in the State of Colorado, to United CATV, Inc. in exchange for the cable television system serving areas in and around Annapolis, Southern Anne Arundel County and the Naval Academy, all in the State of Maryland (the "Annapolis System"), and cash in the amount of $2,500,000, subject to normal closing adjustments. The Company paid Financial Group a $695,250 fee upon completion of this exchange as compensation to it for acting as the Company's financial advisor in connection with this transaction. All fees paid to Financial Group by the Company are based upon 90% of the estimated commercial rate charged by unaffiliated financial advisors. This transaction brought the Company's owned subscriber count in the Washington, D.C. area to approximately 400,000 subscribers. -7- The pro forma effect of the above-described 1997 transactions on the Company's results of operations for the three months ended March 31, 1997 are presented in the following unaudited tabulation: For the three months ended March 31, 1997: ------------------------------------------
As Reported Adjustments Pro Forma ----------- ------------ ---------- Revenues $ 83,064 $ 4,756 $ 87,820 ======== ======== ======= Operating Income $ 2,384 $ (317) $ 2,067 ======== ======== ======= Net Loss $ (15,841) $ (3,949) $ (19,790) ======== ======== ======= Loss Per Share $ (.50) $ (.63) ======== =======
The pro forma effect of the above-described 1997 transactions as well as the acquisition of the cable television system serving Manassass, Virginia in January 1996, the acquisition of the cable television systems serving South Prince Georges County, Maryland and Reston, Virginia in February 1996, the acquisition of the cable television system serving Savannah, Georgia in April 1996, the sale of Galactic Radio, Inc. in June 1996, the sale of the assets of Jones Satellite Programming, Inc. in July 1996 and the sale of certain cable television systems owned by managed partnerships during 1996 and 1997, on the Company's results of operations for the three months ended March 31, 1996 are presented in the following unaudited tabulation: For the three months ended March 31, 1996: ------------------------------------------
As Reported Adjustments Pro Forma ----------- ----------- --------- Revenues $ 66,987 $ 12,034 $ 79,021 ======== ======== ======= Operating Income (Loss) $ 373 $ (10,697) $ (10,324) ======== ======== ======= Net Loss $ (14,789) $ (14,890) $ (29,679) ======== ======== ======= Loss Per Share $ (.47) $ (.95) ======== =======
(3) In September 1995, the Company entered into an asset purchase agreement to purchase from Cable TV Joint Fund 11 (the "Venture"), a venture comprised of four managed partnerships, the cable television system serving the City of Manitowoc, Wisconsin (the "Manitowoc System"). Because the City of Manitowoc had not consented to the transfer of the franchise by the asset purchase agreement's original expiration date of September 30, 1996, the Company and the Venture amended the asset purchase agreement to extend the period in which to close the sale of the Manitowoc System to June 30, 1997. Under the terms of the asset purchase agreement, as amended, the purchase price for the Manitowoc System will be $16,122,333, subject to closing adjustments. The closing of the purchase of the Manitowoc System is subject to the approval of the limited partners of each of the managed partnerships that comprise the Venture. The Company anticipates that it will receive, from the four managed partnerships that comprise the Venture, general partner distributions totaling approximately $4,518,000 upon the closing of the sale of the Manitowoc System. Funding of the net purchase price of $11,604,333 is expected to be provided by borrowings under the Company's credit facilities. The closing is expected to occur during the second quarter of 1997. -8- (4) On August 16, 1996, the Company entered into an agreement with an unaffiliated party to sell the cable television systems serving areas in and around Walnut Valley and Oxnard, both in the State of California, for $104,000,000. The closing of this transaction is subject to a number of conditions including obtaining necessary governmental and other third party consents. This transaction is expected to close in the second quarter of 1997. The Company will pay Financial Group a $1,567,000 fee upon completion of this sale for acting as the Company's financial advisor in connection with this transaction. All fees paid to Financial Group by the Company are based upon 90% of the estimated commercial rate charged by unaffiliated financial advisors. (5) On February 28, 1997, JCH II entered into an asset purchase agreement to acquire from Jones Intercable Investors, L.P. (the "Partnership"), a Colorado limited partnership managed by the Company, the cable television systems serving communities in and around Independence, Missouri (the "Independence System") for a purchase price of $171,213,667, which represents the average of three independent appraisals of the fair market value of the Independence System. The Company anticipates that it will receive a limited partner distribution totaling approximately $25,700,000 from the sale by the Partnership of the Independence System because of the Company's equity interest in the Partnership. The closing of the purchase of the Independence System is subject to the consents of governmental authorities and other third parties and is expected to occur in the second half of 1997. The Partnership will pay The Jones Group, Ltd., a wholly owned subsidiary of the Company, a $4,280,000 brokerage fee in connection with this transaction. (6) On December 23, 1996, the Company redeemed 225 of its 380 shares of Jones Global Group, Inc. ("Global Group") in exchange for a $8,950,188 note receivable from Global Group. The note was repaid during the first quarter of 1997. As a result of this transaction, the Company now only owns a 20% interest in Global Group. The redemption price is subject to adjustment based on an appraisal of Global Group to be completed in the first half of 1997. As a result of this transaction, the Company recognized a gain of $2,979,000 in the first quarter of 1997. (7) On March 18, 1997, the Company issued and sold $250,000,000 of its 8 7/8% Senior Notes due April 1, 2007. Proceeds from the sale of the Senior Notes will be used to redeem the Company's $160 million 11.5% Subordinated Debentures (the "11.5% Debentures") due 2004 and for general corporate purposes. The 11.5% Debentures are redeemable on July 15, 1997 at 106.75% of the par value. Pending the use of the proceeds from the sale of the Senior Notes for the above described purposes, the Company has applied the proceeds to reduce amounts outstanding under the Company's credit facilities. (8) On April 25, 1997, the Company tendered its 7,210,764 American Depositary Shares of Bell Cablemedia plc to Cable & Wireless Communications plc ("C&W") in exchange for 25,017,385 ordinary shares of C&W. (9) Net income (loss) per share of Class A Common Stock and Common Stock is based on the weighted average number of shares outstanding during the periods. Common stock equivalents were not significant to the computation of primary earnings (loss) per share. (10) For purposes of the Consolidated Statements of Cash Flows, the Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. No amounts were paid or received relating to income taxes during the three months ended March 31, 1997 and 1996. Approximately $31,590,000 and $22,509,000 of interest expense was paid during the three months ended March 31, 1997 and 1996, respectively. No material non- cash investing or financing transactions were recorded during the first three months of fiscal 1997 and 1996. (11) Certain prior period amounts have been reclassified to conform to the current period presentation. -9- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL - ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS - ----------------------------------- The following discussion of the Company's financial condition and results of operations contains, in addition to historical information, forward-looking statements that are based upon certain assumptions and are subject to a number of risks and uncertainties. The Company's actual results may differ significantly from the results predicted in such forward-looking statements. FINANCIAL CONDITION The Company is implementing a balanced strategy of acquiring cable television systems from its managed partnerships and from third parties. As part of this process, certain systems owned by the Company and its managed partnerships will be sold to third parties and Company-owned systems will be exchanged for systems owned by other cable system operators. It is the Company's plan to cluster its cable television properties on the basis of operating characteristics and/or geographic areas. Clustering systems should enable the Company to obtain operating efficiencies, and it should position the Company to capitalize on new revenue and business opportunities as the telecommunications industry evolves. The Company intends to liquidate its managed partnerships as such partnerships achieve their investment objectives and as opportunities for sales of partnership cable television systems arise in the marketplace. In accordance with this strategy, the Company is marketing for sale many of the cable television systems owned by its managed partnerships. The Company also intends to maintain and enhance the value of its current cable television systems through capital expenditures. Such expenditures will include, among others, cable television plant extensions and the upgrade and rebuild of certain systems. The Company also intends to institute new services as they are developed and become economically viable. Acquisitions of cable television systems, the development of new services and capital expenditures for system extensions and upgrades are subject to the availability of cash generated from operations, borrowings under the Company's revolving credit facilities, debt and/or equity financing. In addition, the Company is exploring other financing options such as private equity capital and/or the sale of additional non-strategic assets. There can be no assurance that the capital resources necessary to accomplish the Company's acquisition and development plans will be available on terms and conditions acceptable to the Company, or at all. In implementing the Company's acquisition strategy, the Company acquired the North Prince Georges County System in January 1997 and the Annapolis System in April 1997 because they are near other systems owned by the Company in the Washington DC area. The net effect of the acquisition of such systems and the disposition of the Company's Colorado cable television systems has increased the Company's basic subscriber base by approximately 86,000 basic subscribers to approximately 680,000 basic subscribers at March 31, 1997. These transactions are described in detail in Note 2 of the Notes to Unaudited Consolidated Financial Statements. The North Prince Georges System was purchased for $231,367,000. Funding was provided by borrowings available under JCH's revolving credit facility. The Annapolis System was acquired in exchange for the Colorado cable television systems owned by the Company. -10- In addition to the systems already acquired during 1997, the Company has entered into agreements to acquire two additional cable television systems. In September 1995, the Company entered into an agreement to purchase the Manitowoc System. As amended in September 1996, this agreement provides for a purchase price of $16,122,333 for the Manitowoc System. Funding for this purchase is expected to be provided by borrowings under the Company's revolving credit facilities. This transaction is expected to close in the second quarter of 1997. In February 1997, the Company entered into an agreement to purchase the Independence System for $171,213,667. Funding for this purchase, which is expected to close in the second half of 1997, is expected to be provided by borrowings available under JCH II's revolving credit facility. These transactions are described in detail in the Notes to Unaudited Consolidated Financial Statements. From time to time, the Company makes loans to its managed partnerships, although it is not required to do so. As of March 31, 1997, the Company had advanced funds to various managed partnerships totaling approximately $3,199,000, a decrease of approximately $797,000 over the amount advanced at December 31, 1996. These advances represent funds for capital expansion and improvements of properties owned by the Company's 23 managed partnerships where additional credit sources were not then available to the partnerships. None of these advances are individually significant. These advances reduce the Company's available cash and its liquidity. The Company anticipates the repayment of these advances over time. The Company does not anticipate significant increases in the amount advanced to its managed partnerships during the remainder of 1997. These advances bear interest at rates equal to the Company's weighted average cost of borrowing. The Company purchased property, plant and equipment totaling approximately $24,346,000 during the first three months of 1997. Such expenditures included $1,400,000 expended related to the development of a new customer care/billing system and $3,200,000 related to the development of telephone service in Maryland and Virginia. The remainder of the capital expenditures, totaling $19,746,000, is principally the result of the following: (a) the upgrade and rebuild of the cable plant in the Company's cable television systems in the Washington DC area; and (b) new extension projects, drop materials, converters and various maintenance projects in the Pima County, Arizona; Anne Arundel, Maryland; South Prince Georges County, Maryland; and Augusta, Georgia systems. Estimated capital expenditures for the remainder of 1997 are approximately $80,600,000. Of these capital expenditures, approximately $68,800,000 is for cable extensions, rebuilds and other enhancements in the cable television systems owned by the Company, $10,600,000 is for the development of a customer care/billing system and $1,200,000 is for the development of telephone service in Maryland and Virginia. Funding for such expenditures is expected to be provided by cash generated from operations and borrowings available under the Company's revolving credit facilities, as discussed below. Sources of Funds The Company's main sources of capital consist of cash generated from operations and borrowings available under the Company's two revolving credit facilities, each of which has maximum available borrowings of $600 million. The $600 million JCH revolving credit facility is a reducing revolving credit facility. The entire $600 million commitment is available through March 31, 1999, at which time the commitment will be reduced quarterly with a final maturity date of December 31, 2004. The balance outstanding on the JCH revolving credit facility at March 31, 1997 was $162,000,000. The $600 million JCH II Revolving Credit Facility consists of a $300 million reducing revolving credit facility and a $300 million 364 day revolving credit facility. The reducing revolving credit facility allows for borrowings through the final maturity date of December 31, 2005. The maximum amount available reduces quarterly beginning March 31, 2000 through the final maturity date of December 31, 2005. The 364 day revolving credit facility allows for borrowings through the 364th day subsequent to the closing date of the loan, at which time any outstanding borrowings convert to a term loan payable in semi- annual installments commencing June 30, 2001 with a final maturity date of December 31, 2005. The balance outstanding on the -11- JCH II Revolving Credit Facility at March 31, 1997 was $167,000,000. This amount was borrowed under the reducing revolving credit facility. The Company has an effective registration statement relating to the sale of $600 million of senior debt securities, senior subordinated debt securities, subordinated debt securities and Class A Common Stock. The Company may, from time to time, issue securities not to exceed $600 million pursuant to this registration statement. On March 18, 1997, the Company issued and sold $250,000,000 of its 8 7/8% Senior Notes due April 1, 2007. Proceeds from the sale of the Senior Notes will be used to retire the Company's $160 million 11.5% Subordinated Debentures (the "11.5% Debentures") due 2004 and for general corporate purposes. The 11.5% Debentures are redeemable on July 15, 1997 at 106.75% of the par value. Pending the redemption of the 11.5% Debentures, the Company used the proceeds from the 8 7/8% Senior Notes to reduce amounts outstanding under the Company's credit facilities. The Company, in its capacity as the general partner of its managed partnerships, may from time to time receive distributions upon the sale of cable television systems owned by such partnerships. No such distributions were received during the three months ended March 31, 1997. In addition, The Jones Group, Ltd., a wholly owned subsidiary of the Company, may receive brokerage fees upon the sale of the managed partnerships' cable television systems to third parties. During the three months ended March 31, 1997, the Company received brokerage fees of $3,193,000, less expenses of $663,000, upon the sale of certain cable television systems owned by managed partnerships. On August 16, 1996, the Company entered into an agreement with an unaffiliated party to sell the cable television systems serving areas in and around Walnut Valley and Oxnard, both in the state of California, for $104,000,000. The closing of this transaction is subject to a number of conditions including obtaining necessary governmental and other third party consents. Closing is expected to occur in the second quarter of 1997. Proceeds from this sale will be used to repay a portion of the amounts outstanding on the Company's revolving credit facilities. On December 23, 1996, the Company redeemed 225 of its 380 shares of Global Group in exchange for a $8,950,188 note receivable from Global Group. The note was repaid during the first quarter of 1997. As a result of this transaction, the Company recognized a gain of $2,979,000 in the first quarter of 1997. The Company has sufficient sources of capital available, consisting of cash generated from operations and available borrowings from its revolving credit facilities, to fund its committed acquisition requirements and to meet its operational needs. RESULTS OF OPERATIONS Revenues The Company derives its revenues from four primary sources: subscriber fees from Company-owned cable television systems, management fees from revenues earned by managed limited partnerships, fees and distributions payable upon the sale of cable television properties owned by managed limited partnerships and revenues from non-cable television subsidiaries. Total revenues for the three months ended March 31, 1997, totaled $83,064,000, an increase of $16,077,000, or 24%, over the total of $66,987,000 for the three months ended March 31, 1996. This increase reflects the Company's acquisition of the following: the cable television system serving Manassas, Virginia on January 10, 1996; the cable television system serving South Prince Georges County, Maryland on February 29, 1996; the cable television system serving Reston, Virginia on February 29, 1996; the cable television system serving Savannah, Georgia on April 12, 1996 and the cable television system serving North Prince Georges County, Maryland on January 31, 1997 (the "Acquired Systems"). The increase in revenues from the acquisition of the Acquired Systems was offset, in part, by the sale of Jones Galactic Radio, Inc. ("Galactic Radio") on June 14, 1996 and the sale of the assets of Jones Satellite Programming, Inc. ("JSP") on July 31, 1996 (the "Asset Sales"), as well as a decrease in management -12- fees due to the sale of certain cable television systems owned by managed partnerships. Adjusting for the effect of the Acquired Systems, the Asset Sales and the reduction in management fees due to the sale of cable television systems owned by managed partnerships (the "Pro Forma Adjustments"), total revenues would have increased $5,654,000, or 8%. The Company's subscriber service fees increased $22,333,000, or 43%, to $74,675,000 for the three months ended March 31, 1997 from $52,342,000 for the three months ended March 31, 1996. The acquisition of the Acquired Systems accounted for $17,026,000, or 76%, of this increase. With the Pro Forma Adjustments, subscriber service fees would have increased $5,307,000, or 8%. This increase was due primarily to an increase in the number of basic subscribers and basic service rate adjustments in the cable television systems owned by the Company. Disregarding the effect of acquisitions during the first quarter of 1997, basic subscribers increased 7,733, an annualized increase of 5.3%. The Company receives management fees generally equal to 5% of the gross operating revenues of its managed partnerships. Management fees totaled $4,446,000 for the three months ended March 31, 1997, a decrease of $634,000, or 12%, over the total of $5,080,000 reported for the months ended March 31, 1996. The decrease in management fees was a result of the sale of certain managed systems in 1996 and 1997. With the Pro Forma Adjustments, management fees increased 6%. In its capacity as the general partner of its managed partnerships, the Company also receives revenues in the form of distributions upon the sale of cable television properties owned by such partnerships. No such revenues were recognized during the three month periods ended March 31, 1997 and 1996. In addition, The Jones Group, Ltd., a wholly owned subsidiary of the Company, earns brokerage fees upon the sale of managed cable television systems to third parties. During the first quarter of 1997, the Company earned brokerage fees of $3,193,000, less expenses of $663,000 on the sale of certain cable television systems owned by managed partnerships. The Company also operates certain non-cable subsidiaries. Non-cable revenue totaled $1,413,000 for the three months ended March 31, 1997, a decrease of $8,152,000, or 85%, over the $9,565,000 recorded for the three months ended March 31, 1996. This decrease was due primarily to the sale of Galactic Radio and the assets of JSP in 1996. Costs and Expenses Operating, general and administrative expenses consist primarily of costs associated with the operation and administration of Company-owned cable television systems, the administration of managed partnerships and the operation and administration of the non-cable television entities. The Company is reimbursed by its managed partnerships for costs associated with the administration of the partnerships. The principal administrative cost components are salaries paid to corporate and system personnel, programming expenses, professional fees, subscriber billing costs, data processing costs, rent for leased facilities, cable system maintenance expenses and consumer marketing expenses. Cable operating expenses increased $10,951,000, or 39%, to $38,835,000 for the three months ended March 31, 1997 compared to $27,884,000 for the three months ended March 31, 1996. The acquisition of the Acquired Systems accounted for approximately 78% of this increase. With the Pro Forma Adjustments, cable operating expenses would have increased $2,363,000, or 6%. This increase was due primarily to increases in premium and satellite programming costs. Cable general and administrative expense increased $966,000, or 28%, to $4,403,000 for the three months ended March 31, 1997 from $3,437,000 for the three months ended March 31, 1996. As the Company acquires cable television systems for its own account and sells cable television systems owned by managed partnerships, and thereby transitions from a management company to an operating company, the Company's proportionate percentage of total general and administrative expenses will increase. With the Pro Forma -13- Adjustments, cable general and administrative expenses decreased $189,000, or 4%. The decrease is due to effective cost controls relating to general and administrative expense. Non-cable operating, general and administrative expense decreased $8,022,000, or 81%, to $1,910,000 for the three months ended March 31, 1997 from $9,932,000 for the three months ended March 31, 1996. This decrease is due primarily to the sales of Galactic Radio and the assets of JSP. Depreciation and amortization expense increased $10,171,000, or 40%, to $35,532,000 for the three months ended March 31, 1997 from $25,361,000 for the three months ended March 31, 1996. Depreciation and amortization relating to the Acquired Systems was primarily responsible for this increase. Operating Income Operating income increased $2,011,000 to $2,384,000 for the three months ended March 31, 1997 from $373,000 for the three months ended March 31, 1996. The cable television industry generally measures the performance of a cable television company in terms of cash flow or operating income before depreciation and amortization. The value of a cable television company is often determined using multiples of cable television system 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 increased $12,182,000, or 47%, to $37,916,000 for the three months ended March 31, 1997 from $25,734,000 for the three months ended March 31, 1996. On a pro forma basis, operating income before depreciation and amortization would have increased $3,383,000, or 11%. Other Income (Expense) Interest expense increased $4,566,000, or 30%, to $19,665,000 for the three months ended March 31, 1997 from $15,099,000 for the three months ended March 31, 1996. This increase was due to higher outstanding balances on interest bearing obligations. Proceeds from borrowings were used to fund the acquisition of the Acquired Systems. Equity in losses of affiliated entities increased $809,000, or 91%, to $1,695,000 for the three months ended March 31, 1997 from $886,000 for the three months ended March 31, 1996. This increase was due primarily to an increase in the net losses of Jones Education Company. Interest income decreased to $382,000 for the three months ended March 31, 1997 from $1,026,000 for the three months ended March 31, 1996, due to a reduction in receivable from managed partnerships. Net loss increased $1,052,000 to $15,841,000 for the three months ended March 31, 1997 from $14,789,000 for the three months ended March 31, 1996, due primarily to the increases in depreciation and amortization expense and interest expense. The Company anticipates the continued recognition of operating income prior to depreciation and amortization charges, but net losses resulting from depreciation, amortization and interest expenses may continue in the future. To the extent the Company recognizes general partner distributions from its managed partnerships and/or gains on the sale of Company-owned systems in the future, such losses may be reduced or eliminated; however, there is no assurance as to the timing or recognition of these distributions or sales. -14- PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 10-K. a) Exhibits 15) Letter Regarding Unaudited Interim Financial Statements. 27) Financial Data Schedule 28) Accountants' Review report, dated May 2, 1997. b) Reports on Form 8-K Report on Form 8-K dated March 21, 1997, describing the issuance and sale of $250,000,000 of 8 7/8% Senior Notes on March 18, 1997. -15- 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, thereunto duly authorized. JONES INTERCABLE, INC. /s/ Kevin P. Coyle ------------------------------ Kevin P. Coyle (Group Vice President/Finance) Dated: May 7, 1997 -16- EX-15 2 LETTER RE: UNAUDITED INTERIM FINANCIAL INFORMATION EXHIBIT 15 May 2, 1997 Jones Intercable, Inc. and Subsidiaries: We are aware that Jones Intercable, Inc. has incorporated by reference in its Registration Statements on Form S-8, File Nos. 33-3087, 33-25577, 33-52813, and 33-54596, and on Form S-3, File Nos. 33-62537, and 33-62539 its Form 10-Q for the quarter ended March 31, 1997, which includes our report dated May 2, 1997 covering the unaudited interim financial information contained therein. Pursuant to Regulation C of the Securities Act of 1933, that report is not considered a part of the registration statements or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Securities Act of 1933. Very truly yours, ARTHUR ANDERSEN LLP EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 1 3,232 0 14,129 1,647 0 0 652,021 (201,952) 1,348,781 86,976 1,040,472 0 0 314 221,019 1,348,781 0 83,064 0 0 79,240 0 19,665 (15,841) 0 (15,841) 0 0 0 (15,841) (.50) 0
EX-28 4 REVIEW REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS EXHIBIT 28 REVIEW REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------------- To the Board of Directors and Shareholders of Jones Intercable, Inc.: We have made a review of the accompanying condensed consolidated balance sheet of JONES INTERCABLE, INC. (a Colorado corporation) and subsidiaries as of March 31, 1997, and the related condensed consolidated statements of operations and cash flows for the three-month periods ended March 31, 1997 and 1996. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists primarily of applying analytical review procedures to the financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Jones Intercable, Inc., and subsidiaries as of December 31, 1996 (not presented herein), and, in our report dated February 14, 1997, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of March 31, 1997, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. ARTHUR ANDERSEN LLP Denver, Colorado, May 2, 1997 -----END PRIVACY-ENHANCED MESSAGE-----