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SUPPLEMENT DATED MARCH 25, 1994
TO PROSPECTUS DATED JULY 7, 1993
______________________
JONES INTERCABLE, INC.
CLASS A COMMON STOCK
______________________
SALE OF 2,500,000 SHARES. Of the 6,000,000 shares of Class A
Common Stock available for sale pursuant to this offering, Jones Intercable,
Inc. (the "Company") proposes to sell 2,500,000 shares to Bell Canada
International Inc. ("BCI"), as hereafter described. In December 1993, the
Company and BCI signed a letter of intent to enter into a strategic
relationship whereby BCI would acquire an approximate 30 percent equity
interest in the Company through the purchase of Class A Common Stock of the
Company. As part of such equity interest, the Company has agreed to sell
2,500,000 shares of Class A Common Stock of the Company to BCI at a price of
$22.00 per share. This sale will occur regardless of the closing of any of the
other transactions contemplated by the letter of intent. BCI is owned by BCE,
Inc., the largest publicly-held company in Canada, whose family of companies
includes Bell Canada, Northern Telecom and Bell Northern Research. BCI and the
Company are partners in the United Kingdom, offering cable television and
telephone services to residences and businesses in a large area of London.
The Company's authorized capital stock consists of 5,550,000
shares of Common Stock, $.01 par value per share, of which 4,913,021 shares
were outstanding at February 28, 1994, and 30,000,000 shares of Class A Common
Stock, $.01 par value per share, of which 12,275,088 shares were outstanding at
such date.
As of February 28, 1994, the outstanding shares of Class A Common
Stock constituted approximately 71% of the total outstanding shares of capital
stock of the Company but were entitled to cast only 20% of the votes to be cast
in matters to be acted upon by shareholders of the Company not requiring a
class vote, and the outstanding shares of the Company's Common Stock
constituted approximately 29% of the outstanding capital stock of the Company,
but were entitled to cast approximately 80% of the votes to be cast by
shareholders of the Company in connection with such matters.
USE OF PROCEEDS. The $55,000,000 of proceeds to the Company from
the sale of the 2,500,000 shares to BCI will be used to repay a portion of
outstanding indebtedness under the Company's revolving credit facility. As of
February 28, 1994, the Company had outstanding indebtedness under its revolving
credit facility of
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approximately $115,000,000. Interest on amounts outstanding under the
revolving credit facility range from LIBOR plus 1 3/8% to LIBOR plus 2 1/2%,
depending upon whether certain financial ratios have been achieved. The
effective interest rate on revolving credit facility borrowings for the nine
months ended February 28, 1994 was 5.47%. All outstanding borrowings under the
facility are due November 30, 2000. $52,000,000 of indebtedness under the
revolving credit facility was incurred in the third quarter of fiscal 1994 to
fund the purchase of the cable television system serving North Augusta, South
Carolina, in December 1993, the purchase of an interest in four United Kingdom
companies engaged in the cable television/telephony business in February 1994
and other investments made by the Company. Remaining indebtedness was incurred
in December 1992 when the revolving credit agreement was entered into in
connection with the refinancing of the Company's prior bank agreement.
RECENT DEVELOPMENTS
RATE REREGULATION. On October 5, 1992, Congress enacted the Cable
Television Consumer Protection and Competition Act of 1992 (the "1992 Cable
Act"), which became effective on December 4, 1992. This legislation effected
significant changes to the regulatory environment in which the cable television
industry operates. In April 1993, the Federal Communications Commission
("FCC") adopted regulations governing rates for basic and non-basic services
and ordered an interim freeze on these rates effective on April 15, 1993. The
rate freeze recently was extended by the FCC until the earlier of May 15, 1994,
or the date on which a cable system's basic service rate is regulated by a
franchising authority. The FCC's original rate regulations became effective on
September 1, 1993.
On February 22, 1994, the FCC announced a revision of its rate
regulations which it believes will generally result in a further reduction of
rates for basic and non-basic services. The further reductions in the rates
permitted to be charged are the result of the FCC's reevaluation of the
difference between rates charged by cable systems which are subject to
"effective competition", under the FCC's definition thereof, and those systems
which are not. The FCC's original analysis led it to the conclusion that this
competitive differential was 10 percent and its rate regulations as originally
enacted were designed to lower rates by such percentage. The FCC has now
concluded that the competitive differential is actually 17 percent, and it is
expected that the revised rate regulations will reflect an additional 7 percent
reduction in permitted rates.
The revised rate regulations will be issued by the FCC in an Order
expected to be released in late March 1994. Until the Order has been issued,
and the Company has reviewed it, the precise impact of the revised rate
regulations on the revenue and cash flow of the Company cannot be ascertained.
However, if the effect of the revised rate regulations is to reduce the
permitted charges for regulated services in all cable systems
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by 7 percent, this could have a negative impact on the revenue and cash flow of
the Company.
LITIGATION. On February 22, 1994, the Company and The Jones
Group, Ltd., an affiliate engaged in the cable brokerage business, were named
as defendants in a lawsuit brought by three individuals who are Class A
Unitholders in Jones Intercable Investors, L.P., a publicly-traded master
limited partnership in which the Company is the general partner (the "MLP").
The litigation, entitled Luva Vaughan et al v. Jones Intercable, Inc. et al,
Case No. CV 94-3652, was filed in the Circuit Court for Jackson County,
Missouri, and purports to be "for the use and benefit of" the MLP. The suit
seeks rescission of the sale of the Alexandria, Virginia cable television
system (the "Alexandria System") by the MLP to the Company, which sale was
completed on November 2, 1992. It also seeks a constructive trust on the
profits derived from the operation of the Alexandria System since the date of
the sale, and seeks an accounting and other equitable relief. The plaintiffs
also allege that the $1,800,000 commission paid to The Jones Group, Ltd. by the
MLP in connection with such sale was improper, and seek that such commission be
repaid to the MLP.
Under the terms of the partnership agreement of the MLP, the
Company has the right to acquire cable television systems from the MLP at a
purchase price equal to the average of three independent appraisals of the
system to be acquired. The plaintiffs claim that the appraisals obtained in
connection with the sale of the Alexandria System were improperly obtained,
were not made by qualified appraisers and were otherwise improper. The
purchase price paid by the Company for the Alexandria System was approximately
$73,200,000. A portion of the net proceeds received by the MLP upon such sale
was used to repay then outstanding debt under the MLP's credit facility and to
make distributions to Class A Unitholders. The remaining net proceeds were
retained by the MLP for working capital purposes.
The Company believes both that the appraisals were properly
obtained and that the brokerage commission was properly paid to The Jones
Group, Ltd. in accordance with the express terms of the partnership agreement.
The Company further believes that its defenses are meritorious and it intends
to vigorously defend the litigation.
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PROSPECTUS
6,000,000 SHARES
JONES INTERCABLE, INC.
CLASS A COMMON STOCK
This Prospectus relates to 6,000,000 shares of Class A
Common Stock, $.01 par value per share, of Jones Intercable, Inc. (the
"Company"), which may be offered and sold from time to time by the Company on
terms to be determined at the time of offering. These shares may be sold
directly or through agents designated from time to time, or through dealers or
underwriters also to be designated, on terms and at prices to be determined at
the time of sale. To the extent required, the specific number of shares to be
sold, the terms of the offering, including selling price, the names of any
agent, dealer or underwriter, and any applicable commission, discount or other
compensation with respect to a particular offer will be set forth in a
supplement to this Prospectus. See "Plan of Distribution." The net proceeds
to the Company will be added to its general funds, and may be used to make
acquisitions of domestic cable television systems or interests therein,
investments in cable/telephony systems in the United Kingdom, or for general
corporate purposes.
The Company's Class A Common Stock is quoted on the NASDAQ
National Market System under the symbol "JOINA." On June 15, 1993, the quoted
closing sales price of the Company's Class A Common Stock was $14.00. See
"Price Range of Class A Common Stock."
Broker-dealers, agents or underwriters that participate in
the distribution of the Company's Class A Common Stock offered hereby may be
deemed to be underwriters within the meaning of the Securities Act of 1933 and
any commissions received by them and any profits on the resale of the Class A
Common Stock purchased by them may be deemed to be underwriting commissions or
discounts under the Act. See "Plan of Distribution" for indemnification
arrangements.
FOR A DISCUSSION OF SIGNIFICANT INVESTMENT CONSIDERATIONS
CONCERNING AN INVESTMENT IN THE CLASS A COMMON STOCK OFFERED HEREBY, SEE "RISK
FACTORS."
_______________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAVE THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
_______________
The date of this Prospectus is July 7, 1993
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AVAILABLE INFORMATION
The Company is subject to the informational reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy statements and other information filed by the Company with the
Commission may be inspected at the public reference facilities maintained by
the Commission at 450 Fifth Street, N.W., Room 1024, Judiciary Plaza,
Washington, D.C. 20549, and at the following Regional Offices: 500 West Madison
Street, Suite 2400, Chicago, Illinois 60661 and 7 World Trade Center, New York,
New York 10048. Copies of any such material may be obtained at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. In addition, the Company's Class A Common Stock
is listed on the NASDAQ National Market System, and such reports, proxy
statements and other information are on file with the National Association of
Securities Dealers, Inc. (the "NASD") and can be inspected at the offices of
the NASD at 1735 K Street, N.W., Washington, D.C. 20006. This Prospectus does
not contain all information set forth in the Registration Statement on Form S-3
and the exhibits thereto which the Company has filed with the Commission under
the Securities Act of 1933, as amended (the "Act"), and to which reference is
made. The Company furnishes holders of the Class A Common Stock with annual
reports containing audited financial statements and a report thereon by the
Company's independent certified public accountants.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, which have been filed by the
Company with the Commission pursuant to the requirements of the Exchange Act,
are hereby incorporated by reference into this Prospectus: the Company's Annual
report on Form 10-K for the fiscal year ended May 31, 1992, the Company's
Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31 and
November 30, 1992 and February 28, 1993, the Company's Proxy Statement dated
December 18, 1992, the Company's Current Reports on Form 8-K filed on February
19, 1993, March 1 and 15, 1993 and June 15, 1993 and the Company's Form 10-C
filed on March 1, 1993. The discussion of "Risks Associated with Government
Regulation of the Cable Television Industry" appearing on page 6 of this
Prospectus should be read in conjunction with the financial statements
incorporated herein by reference.
All documents subsequently filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
prior to the termination of the offering of the Company's Class A Common Stock
pursuant to this Prospectus also shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of filing
of such documents. Any statements contained in a document incorporated by
reference herein shall be deemed to be modified or superseded for purposes
hereof to the extent that a statement contained herein (or in any other
subsequently filed document which also is incorporated by reference herein)
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed to constitute a part hereof except as so modified or
superseded.
The Company will provide without charge to each person, including
any beneficial owner, to whom a copy of this Prospectus is delivered, upon
written or oral request of such person, a copy of any and all of the
information that has been incorporated by reference in this Prospectus (other
than exhibits unless such exhibits are specifically incorporated by reference
into such document). Any person desiring any of the information incorporated
by reference should request it of Elizabeth M. Steele, Vice President/General
Counsel and Secretary, Jones Intercable, Inc., 9697 East Mineral Avenue,
Englewood, Colorado 80112, (303) 792-3111.
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THE COMPANY
The Company acquires, develops and operates cable
television systems for itself and for its managed public limited partnerships
(the "Partnerships"). Based on the number of basic subscribers served by the
Company's owned and managed cable television systems, the Company is one of the
largest cable television operators in the United States. As of May 31, 1993,
the Company owned or managed 42 cable television systems serving a total of
approximately 1,067,000 basic subscribers in 20 states. Glenn R. Jones, the
founder, Chairman, Chief Executive Officer and controlling shareholder of the
Company is one of the pioneers in the cable television industry and has been
involved in the ownership and operation of cable television systems since 1970.
The Company has grown by acquiring and developing cable
television systems for both itself and its Partnerships, primarily in suburban
areas with attractive demographic characteristics. One of the primary factors
utilized by the Company in deciding to acquire a particular cable television
system is the potential of the system for operating cash flow growth and value
appreciation. Key elements of the Company's operating strategy include
increasing basic penetration levels and revenue per subscriber through targeted
marketing, superior customer service and maintenance of high technical
standards. The Company has deployed fiber optic cable wherever practical in
its current rebuild and upgrade projects, which improves system reliability and
picture quality, increases channel capacity and provides the potential for new
business opportunities. Additionally, the Company has focused on pay-per-view
and advertising as revenue growth opportunities, and expects to continue to do
so in the future.
Within the past several years, and at an increasing pace
recently, the cable television industry has seen much change. With recent
announcements of alliances between cable industry companies and telephone,
computer and software companies, the Company believes that the nature of the
cable television business is changing from the traditional coaxial network
delivering video entertainment to a more sophisticated, digital platform
environment where cable systems could be capable of delivering the traditional
programming as well as other services, including data, telephone and expanded
educational and entertainment sevices on an interactive basis. As this
convergence of various technologies progresses, it likely will require cable
television companies to reevaluate their system architecture and to upgrade
their cable plants if they want to take advantage of the new opportunities for
revenue and growth that are expected to result. The Company is, on an ongoing
basis, evaluating its position in this changing marketplace and intends, where
possible, to pursue these opportunities as they evolve. The ability of the
Company to do so, however, will be dependent in large part on the availability
of debt and equity financing and/or its ability to structure strategic
alliances with companies engaged and experienced in compatible businesses. As
part of its efforts, the Company has had discussions with possible strategic
partners; however, no agreements have been made. There can be no assurance
that the Company will be successful in structuring any such strategic alliance
or in securing the necessary debt or equity financing needed to take full
advantage of any new revenue streams or opportunities that may develop.
In 1972, the Company originated the use of public
offerings of limited partnership interests in order to finance the acquisition
and development of cable television systems. Pursuant to the terms of the
various limited partnership agreements of the Partnerships, the Company, as
general partner, has full operational control of the management and day-to-day
business of the Partnerships. The Company earns management fees for operating
the cable television systems owned by the Partnerships. The Company's
management fee generally is 5 percent of the gross revenues of each
Partnership. The Company makes advances to certain of its Partnerships and
defers collection of management fees and expense reimbursements owed by certain
of its Partnerships, primarily to accommodate expansion and other financing
needs of such Partnerships. At February 28, 1993, the Company had receivables
from its
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Partnerships totalling approximately $15,488,000, and had no outstanding
deferred management fees and expense reimbursements. In addition to receiving
on-going management fees and expense reimbursements, upon the dissolution of a
Partnership or the sale or refinancing of a cable television system owned by a
Partnership, the Company is generally entitled to receive 25% of the net
remaining assets of such Partnership, after payment of Partnership debts and
after limited partners have received an amount equal to their capital
contributions plus, in most cases, a preferential return on their investment.
From time to time, the Company has acquired cable
television systems from certain Partnerships. The most recent such acquisition
was the cable television system located in Alexandria, Virginia, purchased from
the Company sponsored master limited partnership, Jones Intercable Investors,
L.P. (the "Alexandria System"). The Company acquired the Alexandria System for
$73,200,000 in November 1992. When acquired by the Company, the Alexandria
System served approximately 34,300 basic subscribers and had approximately
27,900 premium subscriptions.
The Company is also engaged in the construction and
development of cable television/telephony systems in the United Kingdom.
Through its wholly-owned subsidiary, Jones U.K. Holdings, Inc., the Company
owns a 15% interest in a venture with BCE Telecom International to own and
operate a cable television/telephony system in an eastern section of London,
England. There are approximately 675,000 homes in the franchise areas and
construction is ongoing. As of May 31, 1993, the cable system passed
approximately 62,100 marketed homes and served 10,800 cable television
subscribers and had 980 telephone service customers. The Company is a
shareholder in Jones Global Group, Ltd. which, through a wholly-owned
subsidiary, acts as the general partner of Jones United Kingdom Fund, Ltd. (the
"U.K. Fund"). The U.K. Fund owns the principal interest in a United Kingdom
corporation which has the licenses to construct, develop and operate a cable
television/telephony system in South Hertfordshire, located in the northwestern
suburbs of London, England (the "South Herts System"). There are
approximately 95,000 homes in the South Herts franchise areas, of which
approximately 85,000 will be passed by the South Herts System when construction
is completed. As of May 31, 1993, the South Herts System passed approximately
15,000 marketed homes and served approximately 3,400 cable television
subscribers and had approximately 1,400 telephone service customers. The
Company has committed to make a $5 million equity investment in South
Hertfordshire and has agreed to loan an additional $10 million to the project
on an interim basis. In addition, the Company, through affiliates, has
interests in franchises awarded for the areas of Leeds and Aylesbury-Chiltern.
The Leeds franchise area covers 286,000 homes. Construction has not yet begun
and the Company expects it will commence only after the debt and equity
financing required to develop the franchise area is secured. Such financing is
currently being sought in the United Kingdom.
The Company currently envisions growth principally through
acquisitions of certain of the cable television systems currently owned by its
Partnerships, subject to the Company's determination that an available system
meets the Company's investment objectives at the time the various Partnerships
achieve their investment objectives. The Company has the right under the terms
of the limited partnership agreements to acquire the cable television systems
held by such Partnerships at fair market value based upon independent
appraisals. The approval of the holders of a majority of the limited
partnership interests in a selling Partnership is generally required in the
event that the proposed sale to the Company would constitute the sale of all or
substantially all of the assets of that Partnership. The process of soliciting
proxies in favor of a sale to the Company can be time consuming and there can
be no assurance that such approval will be obtained. The Company may also
acquire cable television systems from unaffiliated parties if such systems
because of their size, geographic location and income and/or growth potential,
would meet the Company's investment objectives, including opportunities for
consolidation. The Company intends to finance future acquisitions through a
combination of the proceeds of the public or private sale of debt and/or equity
securities of the Company, borrowings from
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commercial banks, the proceeds received by the Company as the general partner
of Partnerships that have sold their assets and, in some circumstances, equity
contributions of joint venture partners.
Glenn R. Jones, the Chairman of the Board of Directors and
Chief Executive Officer, is deemed to be the beneficial owner of all shares of
Class A Common Stock and Common Stock owned by him, Jones Spacelink, Ltd., a
public company which he controls, and Jones International, Ltd., a private
company owned 100% by Mr. Jones. Mr. Jones' direct and indirect stock
ownership in the Company enables him to control the election of a majority of
the Company's board of directors and gives him voting power over approximately
50% of votes to be cast by all shareholders of the Company on matters not
requiring a class vote. See "Description of Capital Stock."
At May 31, 1993, the Company had a total of approximately
2,780 employees. The executive offices of the Company are located at 9697 East
Mineral Avenue, Englewood, Colorado 80112, and its telephone number is (303)
792-3111.
RISK FACTORS
Purchasers of the Company's Class A Common Stock offered
hereby should review the following investment considerations before making an
investment decision.
1. RISKS ASSOCIATED WITH GOVERNMENT REGULATION OF
THE CABLE TELEVISION INDUSTRY. The cable television industry is subject to
regulation by Federal, state and local governmental agencies. Governmental
regulations, individually and collectively, may impact the profitability and
value of the cable television systems owned or managed by the Company. These
regulations are also subject to amendment and judicial challenge.
On October 5, 1992, Congress enacted the Cable Television
Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), which
generally became effective on December 4, 1992, although certain provisions
became effective at later dates and those dealing with rate regulation and
retransmission consent become effective in June 1993 and October 1993,
respectively. On an industry-wide basis, the 1992 Cable Act will significantly
expand the scope of cable television regulation and increase the administrative
costs of complying with such regulations. On May 3, 1993, the Federal
Communications Commission (the "FCC") promulgated regulations that will reduce
rates currently charged by the Company and the Partnerships for certain cable
television services in most of the Company's owned or managed systems and will
limit the ability of the Company and the Partnerships to increase rates in the
future. The regulations require current rates charged for cable television
services (other than programming on a per-channel or per-program basis) to be
reduced to rates established either by application of the FCC's benchmarks or a
cost- of-service showing by a cable television operator and require rates for
equipment to be cost-based. If the FCC's benchmarks were applied to all of the
Company's owned or managed systems (without giving effect to any
cost-of-service showings or any other mitigating factors), the resulting
reduction in revenues, together with other potential effects on the Company
resulting from the implementation of the 1992 Cable Act, would significantly
decrease the Company's cash flow from its owned systems, as well as the
management fees from the Partnership systems. Because the FCC has not yet
adopted the cost-of-service standards and the Company is not able at this time
to assess its ability to offset potential revenue losses with other sources of
revenues or to quantify the extent to which it will be able to take any other
mitigating actions, the Company is not able to determine the actual impact of
such regulations on its business. However, the Company believes it will
continue to be able to meet its obligations as they become due, and does not
currently expect to be in default under any of its outstanding debt or credit
instruments. The Company intends to continue to
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assess the effect of the FCC rate regulations and to develop strategies to
mitigate the adverse impact of such regulations and other provisions of the
1992 Cable Act on the Company's business. No assurances can be given as to the
Company's ability to mitigate any such impact on any owned or managed systems.
For additional information about other regulation and
legislation affecting the cable television industry, prospective investors are
advised to review the discussion under the caption "Regulation and Legislation"
in Item 1 of the Company's 1992 Form 10-K Annual Report and the Company's Form
10-Q for the quarter ended February 28, 1993, which are incorporated by
reference herein.
2. RISKS ASSOCIATED WITH COMPETITION FROM MMDS AND
DBS SYSTEMS. Cable television systems currently experience competition from
several sources, but two technologies, Multichannel Multipoint Distribution
Service ("MMDS") systems, commonly called wireless cable systems, and Direct
Broadcast Satellite ("DBS") systems, which distribute programming to home
satellite dishes, pose the greatest potential threat to the cable television
industry. Both DBS and MMDS systems will likely focus on providing service to
residents of rural areas that are not served by cable television systems, but
providers of programming via these technologies will generally have the
potential to compete directly with cable television systems in urban areas as
well, and in some areas of the country, including the area served by the
Company's Pima County, Arizona cable television system (the "Pima County
System"), MMDS systems are now in direct competition with cable television
systems. To date, the Company has not lost a significant number of
subscribers, nor a significant amount of revenue, to the MMDS operator
competing with the Company's Pima County System. However, given the fact that
these are emerging services, the effect of competition from these technologies
on the overall profitability of the cable television industry, and the Pima
County System specifically, is difficult to predict at this time. While the
MMDS industry is less capital intensive than the cable television industry, and
it is therefore more practical to construct MMDS systems in areas of lower
subscriber penetration, the previous unavailability of frequency spectrum,
programming services and the regulatory delays encountered by MMDS systems in
obtaining licenses have delayed the growth of the MMDS industry. It is
anticipated that these problems will be alleviated in the future as the FCC
processes applications for MMDS licenses and programming becomes more available
to the MMDS industry. Although the channel capacity of MMDS and DBS systems
will be limited, it is expected that developments in compression technology
will enable them to provide a sufficient number of channels that, while not
comparable to the number of channels that will be provided by cable television
systems using fiber-optic and compression technology, may nevertheless be
attractive to subscribers.
An emerging technology, Local Multipoint Distribution
Service ("LMDS"), could also pose a significant threat to the cable television
industry, if and when it becomes established. LMDS, sometimes referred to as
cellular television, could have the capability of delivering approximately 50
channels of video programming to a subscriber's home, which capacity could be
increased by using video compression technology. The potential impact,
however, of LMDS is difficult to assess due to the newness of the technology
and the absence of any current fully operational LMDS systems.
For an in-depth discussion of the various forms of
competition in the cable television industry and with respect to the Company
and its owned and managed cable television systems, prospective investors are
advised to review the discussion under the caption "Competition" in Item 1 of
the Company's 1992 Form 10-K Annual Report, which is incorporated herein by
reference.
3. RISKS ASSOCIATED WITH SYSTEM OVERBUILDS. Cable
television franchises are not exclusive, so that more than one cable television
system may be built in the same area (known as an "overbuild"), with potential
loss of revenues to the operator of the original cable television system. The
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Company has experienced overbuilds in connection with certain systems that it
has owned or managed for limited partnerships, and currently there are several
overbuilds in the Company's owned or managed systems. It is the Company's
belief, however, that not all overbuilds are economically successful and could
result in the overbuilder abandoning the overbuild or selling its system to the
existing cable operator. Constructing and developing a cable television system
is a capital intensive process and, because most cable television systems
provide essentially the same programming, it is often difficult for a new cable
system operator to create a marketing edge over the existing system.
Generally, an overbuilder also would be required to obtain franchises from the
local governmental authorities, although in some instances, the overbuilder
could be the local government, such as a city or town, and in some such cases,
no franchise would be required. In any case, an overbuilder would be required
to obtain programming contracts from entertainment programmers and, in most
cases, would have to build a complete cable system, including headends, trunk
lines and drops to individual subscribers homes, throughout the franchise
areas.
4. RISKS ASSOCIATED WITH TELEPHONE COMPANY
COMPETITION. Although the Company has not yet encountered competition from a
telephone company entering into the cable television business, the Company's
cable television systems could potentially face competition from telephone
companies doing so.
The FCC conducted a comprehensive proceeding examining
whether and under what circumstances telephone companies should be allowed to
provide cable television services, including video programming, to their
customers. The FCC has concluded that neither the 1984 Cable Act nor its rules
apply to prohibit interexchange carriers (i.e., long distance telephone
companies such as AT&T) from providing such services to their customers.
Additionally, the FCC has also concluded that where a local exchange telephone
company ("LEC") makes its facilities available on a common carrier basis for
the provision of video programming to the public, the 1984 Cable Act does not
require either the LEC or its programmer customers to obtain a franchise to
provide such service. This decision has been appealed. Because cable
operators are required to bear the costs of complying with local franchise
requirements, the FCC's decision could place cable operators at a competitive
disadvantage vis-a-vis local telephone companies seeking to offer competing
services on a common carrier basis.
As part of the same proceeding, the FCC recommended that
Congress amend the 1984 Cable Act to allow LECs to provide their own video
programming services over their facilities. The FCC recently decided to loosen
ownership and affiliation restrictions currently applicable to telephone
companies, and has proposed to increase the numerical limit on the population
of areas qualifying as "rural" and in which LECs can provide cable service
without an FCC waiver.
A provision of a Federal court antitrust consent decree
also prohibited the regional Bell Operating Companies ("RBOCs") from engaging
in cable television operations, but this prohibition was recently removed when
the court retaining jurisdiction over the consent decree ruled that the RBOCs
could provide information services over their facilities. The decision has
been appealed. If upheld on appeal, this decision would enable the RBOCs to
acquire or construct cable television systems within their own service areas.
The 1984 Cable Act codified existing FCC cross-ownership
regulations, which, in part, prohibit LECs, including the regional RBOCs, from
providing video programming directly to subscribers within their local exchange
telephone service areas, except in rural areas or by specific waiver of FCC
rules. In December 1992, the Chesapeake and Potomac Telephone Company of
Virginia and Bell Atlantic Video Services Company (collectively, "Bell
Atlantic"), both wholly-owned subsidiaries of Bell Atlantic Corporation (one of
the RBOCs), filed suit in the United States District Court for the Eastern
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District of Virginia (Alexandria Division) seeking to have declared
unconstitutional the provision of the 1984 Cable Act which prohibits a
telephone company from owning a cable television system in its own service
area. This federal cross-ownership rule is particularly important to the cable
industry since these telephone companies already own certain facilities needed
for cable television operation, such as poles, ducts and associated
rights-of-way. In its complaint, Bell Atlantic states that, if permitted, it
will build and operate a cable television system in the City of Alexandria,
Virginia. This system, if built, would constitute direct competition for the
Company's Alexandria System. The Company is not a party to this litigation,
although the National Cable Television Association ("NCTA"), an industry group
of which the Company is a member, has intervened in the case. The court will
hold arguments on cross-motions for summary judgment filed by both sides on
June 17, 1993, and a decision is expected shortly thereafter. The Company
currently expects that if the court declares the provision of the 1984 Cable
Act unconstitutional, that the decision will be appealed, and that Bell
Atlantic will not be permitted to begin construction or operation of a cable
television system in Alexandria, Virginia until the appeal is resolved.
However, if Bell Atlantic prevails, or even if it does not, Congress could
enact legislation lifting the current prohibition in the 1984 Cable Act, at
which time, Bell Atlantic would be free to compete with the Company in
Alexandria, and other RBOCs could compete with the Company and other cable
operators throughout the country.
There is currently a bill pending in Congress that would
permit the LECs to provide cable television service over their own facilities
conditioned on establishing a video programming affiliate that will maintain
separate records to prevent cross-subsidization. The bill would, among other
things, also prohibit telephone companies from purchasing existing cable
systems within their telephone service areas.
In recent months, Southwestern Bell Telephone Company and
US West, both RBOC's, have separately evidenced an interest in the cable
television industry. According to public announcements, Southwestern Bell has
entered into an agreement to acquire certain cable television systems from
Hauser Communications, and US West has entered into an agreement to make a
significant investment in a subsidiary of Time Warner, one of the largest cable
television operators in the country. These announced transactions indicate to
the Company a strong intention on the part of telephone companies to enter the
cable television business.
5. RISKS ASSOCIATED WITH THE CHANGING CABLE
TELEVISION SYSTEM MARKETPLACE. The Company has observed, during the past
several years, that general market values of cable television systems have not
appreciated as quickly or as significantly as they did during the decade 1980
to 1990, and it is expected that the 1992 Cable Act and the FCC's rate
regulations, must-carry rules and retransmission consent rules will create some
additional uncertainty in the system marketplace at least in the near term.
The ultimate effect of the new regulatory environment is not known. A decline
in cable system values could adversely affect the value of the Company's owned
cable television systems, and the value of the Company's residual interests in
the systems owned by its managed limited partnerships. At the same time, any
decline would present an opportunity to the Company as a buyer of cable
television systems. The ability and inclination of the Company to purchase
cable systems if there is a decline in values would be dependent upon many
factors, including the availability of financing (which might be adversely
affected by a decline in value of the Company's existing systems caused by rate
regulation), and the Company's assessment of the future of the industry, which
is positive.
6. RISKS ASSOCIATED WITH FINANCING. The Company
generally has good relationships with commercial banks and has had available to
it bank credit arrangements which have allowed it to pursue its growth plans.
The recent FCC regulations with respect to rate regulation may impact the
availability of commercial bank debt financing in the future, although the
Company currently
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expects to be in compliance with the debt covenants of its present bank credit
facility even after giving effect to the new rate regulation requirements of
the FCC. However, the banking industry in general may react negatively to the
new regulatory environment and could impose stricter limits on the availability
of commercial bank debt.
7. RISKS ASSOCIATED WITH THE COMPANY'S CONTINUING
LOSSES. The Company reported net income for the fiscal year ended May 31,
1992, but it recognized net losses in each of the three prior fiscal years.
Although the Company anticipates the continued recognition of operating income
prior to depreciation and amortization charges, net losses resulting from
depreciation, amortization and interest expenses may continue in the future.
To the extent the Company recognizes liquidation distributions from its
Partnerships in the future, losses may be eliminated; however, there is no
assurance as to the amount, timing or recognition of such distributions.
8. RISKS ASSOCIATED WITH CONFLICTS OF INTEREST. The
Company faces both potential competition and certain conflicts of interest with
Jones Spacelink, Ltd. and its other affiliates. Jones Spacelink, Ltd. also is
engaged in the ownership and operation of cable television systems for itself
and for private and public limited partnerships that it and its wholly owned
subsidiaries have sponsored. The Company also routinely engages in
transactions with its affiliates. For a detailed discussion of these matters,
prospective investors are advised to review the discussion under the caption
"Potential Competition with Jones Spacelink, Ltd." in Item 1, and the
discussion about transactions between the Company and its affiliates in Item
13, of the Company's 1992 Form 10-K Annual Report, which is incorporated herein
by reference.
9. RISKS ASSOCIATED WITH A CONTROLLING SHAREHOLDER.
As a result of the direct and indirect stock ownership of the Company by Glenn
R. Jones, Mr. Jones has the power to elect 75% of the total membership of the
Board of Directors of the Company. This enables Mr. Jones to effectively
direct and control certain fundamental policy and management decisions of the
Company.
10. RISKS ASSOCIATED WITH OPERATING IN THE UNITED
KINGDOM. A portion of the proceeds of this offering may be invested in cable
television/telephony systems in the United Kingdom. Cable television is not
yet well-established in the United Kingdom, and there are risks that the
business will not develop as rapidly as it has in the United States. Because
the Company has limited experience constructing and operating cable
television/telephony systems in the United Kingdom, there is no assurance that
the Company's investments in the United Kingdom will be as successful as its
investments in cable television systems in the United States. Also, the
Company will face competition from both competing technologies, such as DBS and
SMATV, as well as from more established companies with greater financial
resources than the Company which are currently engaged in the provision of
telephony services in the United Kingdom.
USE OF PROCEEDS
The net proceeds of this offering will be added to the
general funds of the Company, and may be used to make acquisitions of domestic
cable television systems or interests therein, investments in cable
television/telephony systems in the United Kingdom, or for general corporate
purposes. The expenses of the offering are estimated at approximately $32,994,
not taking into account any possible brokerage commissions, underwriting
discounts or similar costs.
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PRICE RANGE OF CLASS A COMMON STOCK
The Company's Class A Common Stock is traded in the over-the-counter
market and is quoted in the National Market System of the National Association
of Securities Dealers Automated Quotation System ("NASDAQ") under the symbol
"JOINA." The following table sets forth for each quarterly period of fiscal
1993, 1992 and 1991 the high and low reported closing prices (rounded to the
nearest 1/8) of the Company's Class A Common Stock as reported by NASDAQ.
Period High Low
------ ---- ---
1993 First Quarter......... 13 1/2 10
Second Quarter........ 13 9 1/2
Third Quarter......... 16 12 1/4
Fourth Quarter........ 16 1/4 10
1992 First Quarter......... 11 1/4 8
Second Quarter........ 13 1/2 9
Third Quarter......... 14 11 1/4
Fourth Quarter........ 12 1/2 9 1/2
1991 First Quarter......... 11 3/4 5 3/4
Second Quarter........ 8 3/4 4 3/4
Third Quarter......... 11 5 1/4
Fourth Quarter........ 12 3/4 9 1/2
On June 15, 1993, the closing price for a share of the Company's
Class A Common Stock as reported on NASDAQ was $14.00. At June 15, 1993, the
Class A Common Stock of the Company was held of record by approximately 1,500
shareholders.
The Company's Common Stock also is traded in the over-the-counter
market and is quoted in the National Market System of NASDAQ under the symbol
"JOIN."
DIVIDEND POLICY
The Company has never paid a cash dividend, and it has no present
intention to pay cash dividends in the foreseeable future. The current policy
of the Company is to retain earnings to provide working capital for the
operation, expansion and development of its business. Future dividends, if
any, will be determined by the board of directors in light of the circumstances
then existing, including the Company's earnings and financial requirements and
general business conditions. The Company's credit agreements restrict the
right of the Company to declare and pay cash dividends without the consent of
the lenders. If cash dividends are paid in the future, the holders of the
Class A Common Stock will be paid $.005 (1/2c.) per share per quarter in
addition to the amount payable per share to the holders of the Company's Common
Stock. Such additional dividends on the Class A Common Stock are not
cumulative but would be adjusted appropriately if cash dividends are declared
with respect to a period other than a quarterly period.
The Company has paid stock dividends in Class A Common Stock to
holders of Common Stock and Class A Common Stock in prior years. The Company
paid a 7% stock dividend in
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Class A Common Stock to holders of Common Stock and Class A Common Stock in
fiscal year 1982, and the Company paid a 5% stock dividend in Class A Common
Stock to such shareholders in each of the fiscal years 1983, 1984 and 1985.
The Company has not paid any dividends in Class A Common Stock since that time,
and it has no present intention to pay any such dividends in the foreseeable
future.
CONCURRENT OFFERINGS
The Company also has an effective registration statement under the
Act relating to the sale of 482,458 shares of its Class A Common Stock held by
various affiliates of the Company. The Company will receive none of the
proceeds of the concurrent offering. As of the date of this Prospectus, there
remain only 30,000 shares which are the subject of the concurrent offering,
which will expire in November 1993.
The Company also has an effective registration statement under the
Act that allows the Company, from time to time, to offer up to $400,000,000 of
senior debt securities, senior subordinated debt securities and subordinated
debt securities. In July 1992, the Company sold $160,000,000 of 11 1/2% Senior
Subordinated Debentures due 2004, and in March 1993, the Company sold
$100,000,000 of 10 1/2% Senior Subordinated Debentures due 2008 as part of such
offering. The net proceeds of these offerings were used to redeem all of the
remaining principal amount of the Company's 9.75% Subordinated Debentures and
13% Subordinated Debentures, to repay certain then outstanding indebtedness
under the Company's revolving credit facility and for general corporate
purposes. This registration statement will expire in June 1994.
In addition, the Company has filed a registration statement under
the Act for the offering, from time to time, of up to $500,000,000 of senior
debt securities, senior subordinated debt securities and subordinated debt
securities. This registration statement has not yet been declared effective.
The Company may file additional registration statements to offer
equity securities or additional debt securities during the effectiveness of the
offering made by this Prospectus.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 5,550,000 shares
of Common Stock, $.01 par value per share, of which 4,913,021 shares were
outstanding at May 31, 1993, and 30,000,000 shares of Class A Common Stock,
$.01 par value per share, of which 12,235,866 shares were outstanding at such
date.
The outstanding shares of both classes of common stock are not
subject to redemption or to any liability for further calls or assessments, and
the holders of such shares do not have pre-emptive or other rights to subscribe
for additional shares of the Company. All issued and outstanding shares of
Common Stock and Class A Common Stock are validly issued, fully paid and
nonassessable. Dividends in cash, property or shares of the Company may be
paid upon the Common Stock and Class A Common Stock, if declared by the board
of directors out of any funds legally available therefor, and holders of Class
A Common Stock have a cash dividend preference over holders of Common Stock, as
described below. Holders of Common Stock and Class A Common Stock are entitled
to share ratably in assets available for distribution upon any liquidation of
the Company, subject to the prior rights of creditors, although holders of
Class A Common Stock have a preference on liquidation over holders of Common
Stock, as described below.
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The Class A Common Stock has certain preferential rights with
respect to cash dividends and upon liquidation of the Company. In the event
that cash dividends are paid, the holders of the Class A Common Stock will be
paid $.005 (1/2c.) per share per quarter in addition to the amount payable per
share for each share of Common Stock. In the case of liquidation, holders of
Class A Common Stock will be entitled to a preference of $1 per share. After
such amount is paid, holders of the Common Stock will then be entitled to
receive $1 per share for each share of Common Stock outstanding. Any remaining
amount will be distributed to the holders of Class A Common Stock and Common
Stock on a pro rata basis.
The Class A Common Stock has voting rights that are generally 1/10th
of those held by the Common Stock. In the election of directors, the holders
of Class A Common Stock, voting as a separate class, are entitled to elect that
number of directors that constitute 25% of the total membership of the board of
directors. Holders of the Common Stock, also voting as a separate class, are
entitled to elect the remaining directors.
As of May 31, 1993, the outstanding shares of Class A Common Stock
constituted approximately 71% of the total outstanding shares of capital stock
of the Company but cast only 20% of the votes to be cast in matters to be
acted upon by shareholders of the Company not requiring a class vote, and the
outstanding shares of the Company's Common Stock constituted approximately 29%
of the outstanding capital stock of the Company, but cast approximately 80% of
the votes to be cast by shareholders of the Company in connection with such
matters.
The Company is a Colorado corporation organized in 1970. Jones
Spacelink, Ltd. ("Spacelink"), a Colorado corporation organized in 1980 that
also is engaged in, among other things, the business of owning and operating
cable television systems, as of May 31, 1993, owned approximately 58% of the
Company's outstanding Common Stock (or approximately 17% of all outstanding
shares of the Company taking into account both classes of the Company's capital
stock). Spacelink is publicly held and is controlled by Glenn R. Jones, the
Chairman of the Board of Directors and Chief Executive Officer of both the
Company and Spacelink. Approximately 82% of Spacelink's Class A Common Stock
and 100% of its Class B Common Stock are owned by Jones International, Ltd.
("International"), also a Colorado corporation. Mr. Jones is the sole owner of
all of the outstanding stock of International. Mr. Jones also directly owns
approximately 4% of Spacelink's Class A Common Stock. Mr. Jones' direct and
indirect stock ownership enables him to control the election of a majority of
the board of directors of Spacelink and gives him voting power over
approximately 87% of votes to be cast by all of Spacelink's shareholders on
matters not requiring a class vote. International also directly owns
approximately 4% of the Company's Common Stock; International owns none of the
Class A Common Stock of the Company. Mr. Jones is deemed to be the beneficial
owner of all shares of both the Company and Spacelink owned by International
and his direct and indirect stock ownership enables him to control the election
of a majority of the Company's board of directors and gives him voting power of
approximately 50% of votes to be cast by all shareholders of the Company on
matters not requiring a class vote.
PLAN OF DISTRIBUTION
The shares of Class A Common Stock offered hereby may be sold from
time to time to purchasers directly by the Company. Alternatively, the Company
may from time to time offer the shares of Class A Common Stock through
underwriters, dealers or agents, who may receive compensation in the form of
underwriting discounts, concessions or commissions from the Company and/or the
purchasers of the shares for whom they may act as agent. Any underwriters,
dealers or agents that participate in the distribution of the shares of Class A
Common Stock may be deemed to be underwriters and any profit on
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the sale of shares by them and any discounts, commissions or concessions
received by any such underwriters, dealers or agents might be deemed to be
underwriting discounts and commissions under the Act. At the time a particular
offer of shares is made, to the extent required, a supplement to this
Prospectus will be distributed. The supplement will disclose the specific
number of shares to be sold and the terms of the offering, including the name
or names of any underwriters, dealers, agents, any discounts, commissions and
other items constituting compensation and any discounts, commissions or
concessions allowed or reallowed or paid to dealers. The shares of the
Company's Class A Common Stock may be sold from time to time in one or more
transactions at a fixed offering price, which may be changed, or at varying
prices determined at the time of sale, or at negotiated prices.
The Company will pay all of the expenses of this offering, including
commissions and discounts of any underwriters, dealers or agents employed by
it. Underwriters, dealers or agents may be entitled under agreements entered
into with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act of 1933, as
amended, or to contribution with respect to payments which the underwriters,
dealers or agents may be required to make in respect thereof.
LEGAL MATTERS
The legality and the validity of the shares of Class A Common Stock
offered hereby have been passed upon for the Company by Elizabeth M. Steele,
Vice President/General Counsel of the Company.
EXPERTS
The consolidated financial statements and related schedules of the
Company and its subsidiaries included in the Company's Annual Report on Form
10-K for the fiscal year ended May 31, 1992, which are incorporated herein by
reference, have been audited by Arthur Andersen & Co., independent certified
public accountants, as indicated in their reports with respect thereto, and are
incorporated herein by reference upon the authority of said firm as experts in
giving said reports.
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