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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 November 30, 1994
[ ] 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 0-8947
JONES INTERCABLE, INC.
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Exact name of registrant as specified in charter
Colorado #84-0613514
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State of incorporation I.R.S. employer I.D.#
9697 East Mineral Avenue, Englewood, Colorado 80112
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Address of principal executive office
(303) 792-3111
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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
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Shares outstanding of each of the registrant's classes of Common Stock, as of
January 4, 1995.
5,113,021 -- Common Stock, $.01 Par Value
26,131,388 -- Class A Common Stock, $.01 Par Value
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JONES INTERCABLE, INC. AND SUBSIDIARIES
I N D E X
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Number
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PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets
November 30, 1994 and May 31, 1994 3
Unaudited Consolidated Statements of Operations
Three and Six Months Ended November 30, 1994 and 1993 5
Unaudited Consolidated Statements of Cash Flows
Six Months Ended November 30, 1994 and 1993 6
Notes to Unaudited Consolidated Financial Statements
November 30, 1994 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11
PART II. OTHER INFORMATION.
Item 6. Exhibits and Reports on Form 8-K 19
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UNAUDITED CONSOLIDATED Jones Intercable, Inc.
BALANCE SHEETS and Subsidiaries
As of November 30 and May 31, 1994
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November 30 May 31
ASSETS (Stated in Thousands)
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CASH AND CASH EQUIVALENTS $ 2,633 $ 4,239
RECEIVABLES:
Trade receivables, net of allowance for
doubtful accounts of $464,000 in November
and $393,900 in May 5,527 5,563
Affiliated entities 18,340 15,611
Other 736 715
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 285,753 292,381
Less-accumulated depreciation (123,353) (121,235)
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162,400 171,146
Franchise costs, net of accumulated
amortization of $78,607,400 in November
and $76,113,800 in May 65,797 73,769
Cost in excess of interests in net assets
purchased, net of accumulated amortization
of $5,488,400 in November and $5,918,600 in May 33,323 39,306
Noncompete agreement, net of accumulated
amortization of $795,400 in November and
$737,900 in May 355 412
Subscriber lists, net of accumulated
amortization of $31,430,700 in November and
$30,421,500 in May 14,343 18,524
Investments in domestic cable television partnerships
and affiliates 37,399 34,346
Investments in foreign cable television properties 60,977 57,752
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TOTAL INVESTMENT IN CABLE TELEVISION PROPERTIES 374,594 395,255
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DEFERRED TAX ASSET, net of valuation
allowance of $35,989,000 in November and
$37,785,000 in May 3,862 3,862
DEPOSITS, PREPAID EXPENSES AND OTHER ASSETS 26,927 23,240
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TOTAL ASSETS $ 432,619 $ 448,485
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</TABLE>
The accompanying notes to unaudited consolidated financial
statements are an integral part of these balance sheets.
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UNAUDITED CONSOLIDATED Jones Intercable, Inc.
BALANCE SHEETS and Subsidiaries
As of November 30 and May 31, 1994
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November 30 May 31
LIABILITIES AND SHAREHOLDERS' INVESTMENT (Stated in Thousands)
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LIABILITIES:
Accounts payable and accrued liabilities $ 40,965 $ 37,260
Subscriber prepayments and deposits 5,484 5,275
Subordinated debentures and other debt 280,918 280,907
Credit facility 38,000 63,000
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TOTAL LIABILITIES 365,367 386,442
SHAREHOLDERS' INVESTMENT:
Class A Common Stock, $.01 par value, 30,000,000
shares authorized; 14,817,088 shares issued
at November 30 and May 31 148 148
Common Stock, $.01 par value, 5,550,000 shares
authorized; 4,913,021 shares issued
at November 30 and May 31 49 49
Additional paid-in capital 175,447 175,316
Accumulated deficit (108,392) (113,470)
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TOTAL SHAREHOLDERS' INVESTMENT 67,252 62,043
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TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 432,619 $448,485
========== ========
</TABLE>
The accompanying notes to unaudited consolidated financial
statements are an integral part of these balance sheets.
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UNAUDITED CONSOLIDATED Jones Intercable, Inc.
STATEMENTS OF OPERATIONS and Subsidiaries
For the three and six months ended November 30, 1994 and 1993
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For the Three Months Ended For the Six Months Ended
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November 30, November 30, November 30, November 30,
1994 1993 1994 1993
(In Thousands Except Per Share Data)
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REVENUES FROM CABLE
TELEVISION OPERATIONS:
Subscriber service fees $ 29,918 $ 28,203 $ 59,623 $ 56,216
Management fees 4,562 4,276 9,066 8,636
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TOTAL REVENUES 34,480 32,479 68,689 64,852
COSTS AND EXPENSES:
Operating expenses 18,631 16,688 37,239 32,948
General and administrative expenses* 1,937 2,308 3,671 4,316
Depreciation and amortization 10,627 10,468 21,639 20,982
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OPERATING INCOME 3,285 3,015 6,140 6,606
OTHER INCOME (EXPENSE):
Interest expense (9,047) (8,881) (18,329) (17,550)
Gain on sale of assets - - 15,496 -
Equity in losses of affiliated entities (370) (1,170) (917) (2,079)
Interest income 1,056 987 2,197 1,776
Other, net (139) 273 491 (381)
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INCOME (LOSS) BEFORE INCOME TAXES (5,215) (5,776) 5,078 (11,628)
Income tax benefit - - - -
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NET INCOME (LOSS) $ (5,215) $ (5,776) $ 5,078 $ (11,628)
======== ========= ======== =========
NET INCOME (LOSS) PER CLASS A
COMMON AND COMMON SHARE $ (.26) $ (.34) $ .26 $ (.68)
======== ========= ======== =========
AVERAGE NUMBER OF CLASS A
COMMON AND COMMON SHARES OUTSTANDING 19,730 17,163 19,730 17,157
======== ========= ======== =========
</TABLE>
* Of the total general and administrative expenses, approximately $752,000
and $1,223,200 for the three months ended November 30, 1994 and 1993,
respectively, and approximately $1,629,000 and $2,372,200 for the six months
ended November 30, 1994 and 1993, respectively, represent related party
expenses.
The accompanying notes to unaudited consolidated financial
statements are an integral part of these statements.
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UNAUDITED CONSOLIDATED Jones Intercable, Inc.
STATEMENTS OF CASH FLOWS and Subsidiaries
For the six months ended November 30, 1994 and 1993
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For the Six Months Ended
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November 30, November 30,
1994 1993
(Stated in Thousands)
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 5,078 $ (11,628)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Gain on sale of assets (15,496) -
Depreciation and amortization 21,639 20,982
Decrease (increase) in trade receivables 36 (912)
Equity in losses of affiliated entities 917 2,079
Class A stock option expense 131 -
Increase in other receivables,
deposits, prepaid expenses and other assets (1,297) (2,057)
Increase in accounts payable,
accrued liabilities and subscriber
prepayments and deposits 3,653 979
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Net cash provided by operating activities 14,661 9,443
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CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in Mind Extension University (4,242) (8,451)
Purchase of property and equipment (15,383) (8,589)
Sale of cable television system 35,587 -
Investments in cable television partnerships
and affiliates (3,349) (8,204)
Deferred acquisition costs (2,696) -
Other, net 1,534 1,599
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Net cash provided by (used in) investing activities 11,451 (23,645)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt (41,500) -
Proceeds from borrowings 16,500 17,000
Proceeds from the issuance of Class A
Common Stock - 305
Increase in accounts receivable from
affiliated entities (2,729) (1,957)
Other, net 11 (263)
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Net cash provided by (used in) financing activities (27,718) 15,085
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Increase (Decrease) In Cash and Cash Equivalents (1,606) 883
Cash and Cash Equivalents, beginning of period 4,239 1,131
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Cash and Cash Equivalents, end of period $ 2,633 $ 2,014
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</TABLE>
The accompanying notes to unaudited consolidated financial
statements are an integral part of these statements.
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NOTES TO UNAUDITED CONSOLIDATED Jones Intercable, Inc.
FINANCIAL STATEMENTS and Subsidiaries
(1) This Form 10-Q is being filed by Jones Intercable, Inc. (the
"Company") 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 November 30, 1994 and May 31, 1994
and its results of operations and cash flows for the three and six months ended
November 30, 1994 and 1993. Results of operations for these periods are not
necessarily indicative of results to be expected for the full year.
(2) On December 19, 1994, the shareholders of the Company approved an
Exchange Agreement and Plan of Reorganization and Liquidation dated May 31,
1994, as amended, between the Company and Jones Spacelink, Ltd. ("Spacelink")
providing for the acquisition by the Company of substantially all of the assets
of Spacelink and the assumption by the Company of all of the liabilities of
Spacelink. On December 20, 1994, the Company acquired all of the assets of
Spacelink (except for the 2,859,240 shares of the Company's Common Stock owned
by Spacelink) and assumed all of the liabilities of Spacelink (other than
liabilities with respect to shareholders exercising dissenters' rights) in
exchange for 3,900,000 shares of the Company's Class A Common Stock. Spacelink
will effect its complete liquidation and distribute the aforesaid shares of the
Company's Class A Common Stock and Common Stock to its shareholders, other than
to any dissenting shareholders. The Company incurred costs related to this
transaction, totaling $3,255,000 at November 30, 1994, which have been deferred
and were considered part of the purchase price of Spacelink. The pro forma
effect of this transaction, which will be accounted for using the purchase
method, on the Company's results of operations is presented in the following
unaudited tabulation:
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Six months ended November 30, 1994:
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(In thousands except per share data)
As Pro Forma
Reported Adjustments Balance
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Revenues $ 68,689 $ 19,113 $ 87,802
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Operating Income $ 6,140 $ (1,163) $ 4,977
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Net Income $ 5,078 $ (4,154) $ 924
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Net Income per Class A Common
and Common Share $ .26 $ .04
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Six months ended November 30, 1993:
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(In thousands except per share data)
As Pro Forma
Reported Adjustments Balance
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Revenues $ 64,852 $ 17,133 $ 81,895
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Operating Income $ 6,606 $ (436) $ 6,170
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Net Loss $(11,628) $ (1,802) $(13,430)
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Net Loss per Class A Common
and Common Share $ (.68) $ (.64)
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(3) The Company and Bell Canada International Inc. ("BCI") entered into
an agreement whereby BCI would acquire an approximate 30 percent equity
interest in the Company through the purchase of Class A Common Stock of the
Company. On December 19, 1994, the shareholders of the Company approved the
agreement. Under the terms of the agreement, BCI is to invest $400,000,000 over
time. The original investment was made in two installments: the purchase by BCI
of 2,500,000 newly issued shares of Class A Common Stock of the Company at $22
per share for $55,000,000 in the fourth quarter of fiscal 1994, and the
purchase by BCI on December 20, 1994 of 7,414,300 newly issued shares of Class
A Common Stock of the Company at $27.50 per share for $203,893,250, resulting
in BCI owning an approximate 30 percent equity interest in the Company for a
total consideration of approximately $258,900,000. The $55,000,000 was used to
reduce amounts outstanding under the Company's revolving credit facility. A
portion of the $203,893,250 was used to repay amounts then outstanding under
the Company's and Spacelink's credit facilities of $38,000,000 and $75,000,000,
respectively, to pay fees of $2,000,000, to Jones Financial Group, an affiliate
of International, with the remainder being held for future needs. BCI also has
committed to invest up to an additional $141,100,000 to maintain its 30 percent
interest in the event the Company offers additional Class A Common Stock. BCI
has the right to maintain or increase its ownership by investing amounts beyond
the $400,000,000 commitment.
In addition, Jones International, Ltd. ("International"), which is
wholly-owned by Glenn R. Jones, Chairman and Chief Executive Officer of the
Company, as well as certain subsidiaries of International, and Mr. Jones
individually, have granted BCI options to acquire 2,878,151 shares of the
Common Stock of the Company. Except in limited circumstances, the option will
only be exercisable during the eighth year after the December 20, 1994 closing.
The exercise of such options would result in BCI holding a sufficient number of
shares of the Common Stock of the Company to enable it to elect 75 percent of
the Company's Board of Directors. BCI also has invested in a number of
affiliates of International which are engaged in the telecommunications and
distribution businesses.
(4) On January 7, 1994, the Company entered into an agreement with
Bresnan Communications Company ("Bresnan") to sell the Company's Gaston County,
North Carolina cable television system (the "Gaston System") to Bresnan for
$36,500,000, subject to normal closing adjustments. Closing on this transaction
occurred July 25, 1994. The Company paid The Jones Group, Ltd., an affiliate,
$912,500 for brokerage services related to this sale. Proceeds from the sale of
the Gaston System were used to repay amounts then outstanding on the Company's
credit facility. The Company recognized a gain before income taxes of
$15,496,400, or $.88 per share, related to this transaction.
(5) During fiscal 1992 and 1993, the Company invested $10,000,000 in
Mind Extension University, Inc., ("ME/U"), an affiliate of International that
provides educational programming through affiliated and unaffiliated cable
television systems, for 25% of the stock of ME/U, which also received certain
advertising avails and administrative and marketing considerations from the
Company. In 1993, the Company also made advances totaling $15,000,000 to ME/U.
Of these advances, one-half will be converted into shares of Class A Common
Stock of ME/U at a price per share equal to the value of such shares as
established by the next equity investment in ME/U by an unaffiliated party. Any
amount not converted into equity will earn interest at the Company's weighted
average cost of borrowing plus two percent. In 1994, Company made an additional
$5,000,000 advance to ME/U; interest is at the Company's weighted average cost
of borrowing plus two percent. Interest on all advances to ME/U has been paid
through November 30, 1994. These advances have been reflected as investments in
cable television partnerships and affiliates on the Company's Consolidated
Balance Sheets due to their expected long-term nature. At November 30, 1994,
the Company's aggregate investment in ME/U totaled $30,000,000.
(6) The Company entered into a license agreement with Jones Space
Segment, Inc. ("Space Segment"), an affiliate of International, to use a
non-preemptible transponder on a domestic communications satellite that Space
Segment currently leases. Under the license agreement, which expired December
31, 1994, the Company, Jones Infomercial Networks, Inc. ("PIN") and Jones
Computer Network, Ltd. ("JCN"), both of which are affiliates of International,
had a license to use the transponder for their respective purposes. Under the
terms of
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the agreement, the Company agreed to pay Space Segment $200,000 per month from
January 1994 through March 1994 and the Company and PIN each agreed to pay
$100,000 per month beginning April 1994 and until the launch of JCN, in
September 1994. Thereafter the Company, PIN and JCN each paid $66,667 per
month. The Company recognized $505,000 and $1,450,000 of rental expense related
to these lease agreements during the six months ended November 30, 1994 and
1993, respectively.
(7) The Company owns a 38% interest in Jones Global Group, Ltd. ("Jones
Global Group"), a Colorado corporation of which 62% is owned by International.
On July 22, 1994, Jones Global Group and certain of Jones Global Group's
wholly- owned subsidiaries transferred all of their interests in their
cable/telephony properties in the United Kingdom to Bell Cablemedia plc, a
public limited company incorporated under the laws of England and Wales, in
exchange for 3,663,584 American Depository Shares ("ADSs") representing
18,317,920 Ordinary Shares of Bell Cablemedia. Also on July 22, 1994, the
Company and certain of its wholly-owned subsidiaries transferred all of their
interests in their cable/telephony properties in the United Kingdom to Bell
Cablemedia in exchange for 6,035,648 ADSs representing 30,178,240 Ordinary
Shares of Bell Cablemedia. As a result of these transactions, the Company and
Jones Global Group no longer own any direct interest in cable/telephony
properties in the United Kingdom. Jones Spanish Holdings, Inc. ("Spanish
Holdings") is an affiliate indirectly owned 38% by the Company and 62% by
International. On October 13, 1994, Spanish Holdings and Jones International
Spanish Investments, Inc. transferred all of their interests in their
cable/telephony properties in Spain to Bell Cablemedia in exchange for a total
of 190,148 ADSs representing 950,740 Ordinary Shares of Bell Cablemedia. Such
shares subsequently were transferred to the Company in repayment of advances
made to finance the Spanish operations. As a result of this transaction, the
Company and its affiliates no longer own any direct interest in cable/telephony
properties in Spain.
Prior to the closing of these transactions, Bell Cablemedia was
indirectly owned 80% by BCI and 20% by Cable and Wireless plc ("C&W"). The
Company's, Jones Global Group's and Spanish Holdings' agreement to contribute
their United Kingdom and Spanish holdings to Bell Cablemedia was contingent
upon the successful completion of Bell Cablemedia's initial public offering,
which closed on July 22, 1994. The initial offering price for the ADSs was
$17.00 per ADS. As part of the initial offering, Jones Global Group sold
1,100,000 ADSs providing net cash proceeds of $17,547,888.
The ADSs received by the Company are "restricted securities" within
the meaning of Rule 144 promulgated under the Securities Act of 1933 (the
"Securities Act"), and the Company will not be able to sell its ADSs unless an
exemption from registration under the Securities Act is available or unless its
ADSs are sold under the terms of a recently effective shelf registration
statement which will be available for the next three years.
The Company directly or indirectly owns approximately 11.6% of
the issued and outstanding shares of Bell Cablemedia. Directly, the Company
owns 6,225,796 ADSs. Indirectly, the Company owns 974,162 ADSs, representing
38% of the 2,563,584 ADSs owned by Jones Global Group. In the aggregate, the
Company's direct and indirect investment in 7,199,958 ADSs had a quoted market
value of approximately $142,200,000, based on the quoted market price of $19.75
per ADS on January 10, 1995. Due to the affiliated nature of the transaction
and the Company's indirect continuing interest in the UK properties, the
investment in Bell Cablemedia is reflected at the Company's cost. At November
30, 1994, the Company's net investment in Bell Cablemedia totaled approximately
$60,977,000.
The Company paid an advisory fee of L.414,854 (approximately
$632,600) to Jones Financial Group in fiscal 1995 for its services to the
Company in connection with the aforementioned United Kingdom transactions.
Jones Global Group paid an advisory fee of L.251,812 (approximately $384,000)
to Jones Financial Group for its services to Jones Global Group in connection
with the aforementioned United Kingdom transactions. Jones Financial Group is
owned by International and Glenn R. Jones.
(8) On June 18, 1993, the Company filed two shelf registration
statements with the Securities and Exchange Commission relating to $500,000,000
of Senior Debt Securities, Senior Subordinated Debt Securities
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and Subordinated Debt Securities and 6,000,000 shares of Class A Common Stock
of the Company. These registration statements are effective, but no securities
have been sold pursuant thereto except for 2,500,000 shares of Class A Common
Stock sold to BCI in the fourth quarter of fiscal 1994. The proceeds from the
sale of these securities, if any, would be added to the general funds of the
Company and may be used to make acquisitions of cable television systems or
interests therein.
(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. Conversion of the Convertible Subordinated
Debentures to Class A Common Stock was assumed for calculation of fully diluted
earnings per share and is not presented for the period in which the calculation
was anti-dilutive.
(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 six months ended November 30, 1994 and
1993. Approximately $18,207,900 and $17,049,300 of interest expense was paid
during the six months ended November 30, 1994 and 1993, respectively. No
material non-cash investing or financing transactions were recorded during the
first six months of fiscal 1994 and 1993, except as described in Note 7 above.
(11) Due to an amendment to the Colorado Business Corporation Act
effective July 1, 1994, the Company changed its accounting for treasury stock.
Shares held in treasury have been retired and classified as authorized but
unissued shares.
(12) Certain prior period amounts have been reclassified to conform to the
current period presentation.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Company historically has grown by acquiring, constructing and
managing cable television systems for the account of public limited
partnerships that it has sponsored. In addition to acquisitions through
Company-managed limited partnerships, the Company has acquired systems and
franchises for its own account, which have been financed primarily through
borrowed funds. The Company currently plans to focus the majority of its
acquisition efforts on acquiring cable television systems for its own account,
subject to the availability of debt and/or equity financing. No more systems
will be acquired for the managed partnerships.
On December 19, 1994, the shareholders of the Company approved an
Exchange Agreement and Plan of Reorganization and Liquidation dated May 31,
1994, as amended, between the Company and Jones Spacelink, Ltd. ("Spacelink")
providing for the acquisition by the Company of substantially all of the assets
of Spacelink and the assumption by the Company of all of the liabilities of
Spacelink. On December 20, 1994, the Company acquired all of the assets of
Spacelink (except for the 2,859,240 shares of the Company's Common Stock owned
by Spacelink) and assumed all of the liabilities of Spacelink (other than
liabilities with respect to shareholders exercising dissenters' rights) in
exchange for 3,900,000 shares of the Company's Class A Common Stock. Spacelink
will effect its complete liquidation and distribute the aforesaid shares of the
Company's Class A Common Stock and Common Stock to its shareholders, other than
to any dissenting shareholders. The Company incurred costs related to this
transaction, totaling $3,255,000 at November 30, 1994, which have been deferred
and were considered part of the purchase price of Spacelink. The Company will
account for this transaction using the purchase method.
The Company and Bell Canada International Inc. ("BCI") entered into
an agreement whereby BCI would acquire an approximate 30 percent equity
interest in the Company through the purchase of Class A Common Stock of the
Company. On December 19, 1994, the shareholders of the Company approved the
agreement. Under the terms of the agreement, BCI is to invest $400,000,000 over
time. The original investment was made in two installments: the purchase by BCI
of 2,500,000 newly issued shares of Class A Common Stock of the Company at $22
per share for $55,000,000 in the fourth quarter of fiscal 1994, and the
purchase by BCI on December 20, 1994 of 7,414,300 newly issued shares of Class
A Common Stock of the Company at $27.50 per share for $203,893,250, resulting
in BCI owning an approximate 30 percent equity interest in the Company for a
total consideration of approximately $258,900,000. The $55,000,000 was used to
reduce amounts outstanding under the Company's revolving credit facility. A
portion of the $203,893,250 was used to repay amounts outstanding under the
Company's and Spacelink's credit facilities of $38,000,000 and $75,000,000,
respectively, pay fees of $2,000,000 to Jones Financial Group, an affiliate of
International, with the remainder being held for future needs. BCI also has
committed to invest up to an additional $141,100,000 to maintain its 30 percent
interest in the event the Company offers additional Class A Common Stock. BCI
has the right to maintain or increase its ownership by investing amounts beyond
the $400,000,000 commitment.
In addition, Jones International, Ltd. ("International"), which is
wholly-owned by Glenn R. Jones, Chairman and Chief Executive Officer of the
Company, as well as certain subsidiaries of International and Mr. Jones
individually, have granted BCI options to acquire 2,878,151 shares of the
Common Stock of the Company. Except in limited circumstances, the option will
only be exercisable during the eighth year after the December 20, 1994 closing.
The exercise of such options would result in BCI holding a sufficient number of
shares of the Common Stock of the Company to enable it to elect 75 percent of
the Company's Board of Directors. BCI also has invested in a number of
affiliates of International which are engaged in the telecommunications and
distribution businesses.
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The Company purchased property, plant and equipment totaling
approximately $15,380,000 during the six months ended November 30, 1994. Such
expenditures were principally the result of the following: (a) the upgrade and
rebuild of the cable plant in the Alexandria, Virginia and Anne Arundel,
Maryland systems; (b) new extension projects, drop materials and various
maintenance projects in the Pima County, Arizona, Anne Arundel, Maryland,
Alexandria, Virginia and Charles County, Maryland systems; and (c) converters
and drop materials in the Walnut Valley, California and Oxnard, California
systems. Estimated capital expenditures for the remainder of fiscal 1995 are
approximately $20,000,000. The level of expenditures will depend, in part, upon
the Company's determination as to the proper scope and timing of such
expenditures in light of the rules and regulations adopted in connection with
the 1992 Cable Act, and the Company's liquidity position.
On January 7, 1994, the Company entered into an agreement with
Bresnan Communications Company ("Bresnan") to sell the Company's Gaston County,
North Carolina cable television system (the "Gaston System") to Bresnan for
$36,500,000, subject to normal closing adjustments. Closing on this transaction
occurred July 25, 1994. The Company paid The Jones Group, Ltd., an affiliate,
$912,500 for brokerage services related to this sale. Proceeds from the sale of
the Gaston System were used to repay amounts then outstanding on the Company's
credit facility. The Company recognized a gain before income taxes of
$15,496,400, or $.88 per share, related to this transaction.
The Company owns a 38% interest in Jones Global Group, Ltd. ("Jones
Global Group"), a Colorado corporation of which 62% is owned by International.
On July 22, 1994, Jones Global Group and certain of Jones Global Group's
wholly- owned subsidiaries transferred all of their interests in their
cable/telephony properties in the United Kingdom to Bell Cablemedia plc, a
public limited company incorporated under the laws of England and Wales, in
exchange for 3,663,584 American Depository Shares ("ADSs") representing
18,317,920 Ordinary Shares of Bell Cablemedia. Also on July 22, 1994, the
Company and certain of its wholly-owned subsidiaries transferred all of their
interests in their cable/telephony properties in the United Kingdom to Bell
Cablemedia in exchange for 6,035,648 ADSs representing 30,178,240 Ordinary
Shares of Bell Cablemedia. As a result of these transactions, the Company and
Jones Global Group no longer own any direct interest in cable/telephony
properties in the United Kingdom. Jones Spanish Holdings, Inc. ("Spanish
Holdings") is an affiliate indirectly owned 38% by the Company and 62% by
International. On October 13, 1994, Spanish Holdings and Jones International
Spanish Investments, Inc. transferred all of their interests in their
cable/telephony properties in Spain to Bell Cablemedia in exchange for a total
of 190,148 ADSs representing 950,740 Ordinary Shares of Bell Cablemedia. Such
shares were subsequently transferred to the Company in repayment of advances
made to finance the Spanish operations. As a result of this transaction, the
Company and its affiliates no longer own any direct interest in cable/telephony
properties in Spain.
Prior to the closing of these transactions, Bell Cablemedia was
indirectly owned 80% by BCI and 20% by Cable and Wireless plc ("C&W"). The
Company's, Jones Global Group's and Spanish Holdings' agreement to contribute
their United Kingdom and Spanish holdings to Bell Cablemedia was contingent
upon the successful completion of Bell Cablemedia's initial public offering,
which closed on July 22, 1994. The initial offering price for the ADSs was
$17.00 per ADS. As part of the initial offering, Jones Global Group sold
1,100,000 ADSs providing net cash proceeds of $17,547,888.
The ADSs received by the Company are "restricted securities" within
the meaning of Rule 144 promulgated under the Securities Act of 1933 (the
"Securities Act"), and the Company will not be able to sell its ADSs unless an
exemption from registration under the Securities Act is available or unless its
ADSs are sold under the terms of a recently effective shelf registration
statement which will be available for the next three years.
The Company directly and indirectly owns approximately 11.6% of
the issued and outstanding shares of Bell Cablemedia. Directly, the Company
owns 6,225,796 ADSs. Indirectly, the Company owns 974,162 ADSs, representing
38% of the 2,563,584 ADSs owned by Jones Global Group. In the aggregate, the
Company's direct and indirect investment in 7,199,958 ADSs had a quoted market
value of approximately $142,200,000, based on the quoted market price of $19.75
per ADS on January 10, 1995. Due to the affiliated
-12-
<PAGE> 13
nature of the transaction and the Company's indirect continuing interest in the
UK properties, the investment in Bell Cablemedia is reflected at the Company's
cost. At November 30, 1994, the Company's net investment in Bell Cablemedia
totaled approximately $60,977,000.
The Company paid an advisory fee of L.414,854 (approximately
$632,600) to Jones Financial Group in fiscal 1995 for its services to the
Company in connection with the aforementioned United Kingdom transactions.
Jones Global Group paid an advisory fee of L.251,812 (approximately $384,000)
to Jones Financial Group for its services to Jones Global Group in connection
with the aforementioned United Kingdom transactions. Jones Financial Group is
owned by International and Glenn R. Jones.
During fiscal 1992 and 1993, the Company invested $10,000,000 in
Mind Extension University, Inc., ("ME/U"), an affiliate of International that
provides educational programming through affiliated and unaffiliated cable
television systems, for 25% of the stock of ME/U, which also received certain
advertising avails and administrative and marketing considerations from the
Company. In 1993 the Company also made advances totaling $15,000,000 to ME/U.
Of these advances, one-half will be converted into shares of Class A Common
Stock of ME/U at a price per share equal to the value of such shares as
established by the next equity investment in ME/U by an unaffiliated party. Any
amount not converted into equity will earn interest at the Company's weighted
average cost of borrowing plus two percent. In 1994, the Company made an
additional $5,000,000 advance to ME/U; interest is at the Company's weighted
average cost of borrowing plus two percent. Interest on all advances to ME/U
has been paid through November 30, 1994. These advances have been reflected as
investments in cable television partnerships and affiliates on the Company's
Consolidated Balance Sheets due to their expected long-term nature. At November
30, 1994, the Company's aggregate investment in ME/U totaled $30,000,000.
On December 8, 1992, the Company entered into a $300,000,000
reducing revolving credit agreement with a number of commercial banks. The
amount of borrowings available under this agreement remains at $300,000,000
through May 31, 1995, after which availability is reduced quarterly until
expiration on November 30, 2000. Interest on amounts outstanding under the
credit facility range from LIBOR plus 1 3/8% to LIBOR plus 2 1/2% depending
upon whether certain financial ratios have been achieved. For the six months
ended November 30, 1994, the Company's effective interest rate on the credit
facility was 7.43%. A fee of 3/16% to 3/8% per annum on the unused portion of
the new commitment is also required. Substantially all of the Company's
domestic cable television related assets are pledged as security under the
agreement. At November 30, 1994, the Company had $38,000,000 outstanding under
the credit facility, leaving $262,000,000 of potential availability on this
credit facility. The Company repaid the $38,000,000 outstanding on December 20,
1994 upon receipt of the investment by BCI. Based on the Company's current cash
flow, the Company could currently borrow up to $93,000,000 under this credit
facility.
From time to time, the Company may make loans to its managed
limited partnerships. As of November 30, 1994, the Company had advanced funds
to various managed partnerships and other affiliates of the Company totaling
approximately $18,340,000, an increase of approximately $2,729,000 over the
amount advanced at May 31, 1994. A significant portion of these advances
represents funds for capital expansion and improvements of properties owned by
partnerships where additional credit sources were not then available to the
partnerships. These advances reduce the Company's available cash and its
liquidity. The Company anticipates the repayment of these advances over time.
These advances bear interest at rates equal to the Company's weighted average
cost of borrowing.
The Company entered into a license agreement with Jones Space
Segment, Inc. ("Space Segment"), an affiliate of International, to use a
non-preemptible transponder on a domestic communications satellite that Space
Segment currently leases. Under the license agreement, which expired December
31, 1994, the Company, Jones Infomercial Networks, Inc. ("PIN") and Jones
Computer Network, Ltd. ("JCN"), both of which are affiliates of International,
had a license to use the transponder for their respective purposes. Under the
terms of the agreement, the Company agreed to pay Space Segment $200,000 per
month from January 1994 through March 1994 and the Company and PIN each agreed
to pay $100,000 per month beginning April 1994 and until
-13-
<PAGE> 14
the launch of JCN, in September 1994. Thereafter the Company, PIN and JCN each
paid $66,667 per month. The Company recognized $505,000 and $1,450,000 of
rental expense related to these lease agreements during the six months ended
November 30, 1994 and 1993, respectively.
On June 18, 1993, the Company filed two shelf registration
statements with the Securities and Exchange Commission relating to $500,000,000
of Senior Debt Securities, Senior Subordinated Debt Securities and Subordinated
Debt Securities and 6,000,000 shares of Class A Common Stock of the Company.
These registration statements are effective, but no securities have been sold
pursuant thereto except for 2,500,000 shares of Class A Common Stock sold to
BCI in the fourth quarter of fiscal 1994. The proceeds from the sale of these
securities, if any, would be added to the general funds of the Company and may
be used to make acquisitions of cable television systems or interests therein
and for general corporate purposes. At November 30, 1994, the Company has
$279,368,000 of Subordinated Debentures outstanding. These debentures do not
require any cash payments for sinking fund requirements until June 2002. The
Company is in compliance with covenant restrictions regarding these debentures.
The Company has sufficient liquidity from cash on hand, cash flow
from operations and borrowings available under the credit facility to meet its
current needs.
Regulatory Matters
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 has caused significant changes to the
regulatory environment in which the cable television industry operates. The
1992 Cable Act generally allows for a greater degree of regulation of the cable
television industry. Under the 1992 Cable Act's definition of effective
competition, nearly all cable systems in the United States, including those
owned and managed by the Company, are subject to rate regulation of basic cable
services. In addition, the 1992 Cable Act allows the FCC to regulate rates for
non-basic service tiers other than premium services in response to complaints
filed by franchising authorities and/or cable subscribers. In April 1993, the
FCC adopted regulations governing rates for basic and non-basic services. The
FCC's rules became effective on September 1, 1993.
In compliance with these rules, the Company reduced rates charged
for certain regulated services effective September 1, 1993. These reductions
resulted in some decrease in revenues and operating income before depreciation
and amortization; however the decrease was not as severe as originally
anticipated. The Company has undertaken actions to mitigate a portion of these
reductions primarily through (a) new service offerings in some systems, (b)
product re- marketing and re-packaging and (c) marketing efforts directed at
non-subscribers.
On February 22, 1994, however, the FCC adopted several additional
rate orders including an order which revised its earlier-announced regulatory
scheme with respect to rates. The FCC's new regulations generally require rate
reductions, absent a successful cost-of-service showing, of 17% of September
30, 1992 rates, adjusted for inflation, channel modifications, equipment costs,
and increases in programming costs. However, the FCC held rate reductions in
abeyance in certain systems. The new regulations became effective on May 15,
1994, but operators could elect to defer rate reductions to July 14, 1994, so
long as they made no changes in their rates and did not restructure service
offerings between May 15 and July 14.
On February 22, 1994, the FCC also adopted interim cost-of-service
regulations. Rate reductions will not be required where it is successfully
demonstrated that rates for basic and other regulated programming services are
justified and reasonable using cost-of-service standards. The FCC established
an interim industry-wide 11.25% permitted rate of return, and requested
comments on whether this standard and other interim cost-of-service standards
should be made permanent. The FCC also established a presumption that
acquisition costs above a system's book value should be excluded from the rate
base, but the FCC will consider individual showings to rebut this presumption.
The need for special rate relief will also be considered by the FCC if an
operator demonstrates that the rates set by a cost-of- service proceeding would
constitute confiscation of
-14-
<PAGE> 15
investment, and that, absent a higher rate, the return necessary to operate and
to attract investment could not be maintained. The FCC will establish a uniform
system of accounts for operators that elect cost-of-service rate regulation,
and the FCC has adopted affiliate transaction regulations. After a rate has
been set pursuant to a cost-of- service showing, rate increases for regulated
services will be indexed for inflation, and operators will also be permitted to
increase rates in response to increases in costs beyond their control, such as
taxes and increased programming costs.
After analyzing the effects of the two methods of rate regulation,
the Company elected to file cost-of-service showings for the following
Company-owned cable television systems: Jefferson County, Colorado; Charles
County, Maryland; Pima County, Arizona; Alexandria, Virginia; and North
Augusta, South Carolina. For these systems, the Company anticipates no further
reductions in revenues or operating income before depreciation and amortization
resulting from the FCC's rate regulations. The Company's Anne Arundel, Maryland
cable television system is subject to effective competition as defined by the
1992 Cable Act and as a result, is not subject to the rate regulation. The
Company complied with the new benchmark regulations and reduced rates in its
Oxnard and Walnut Valley, California cable television systems. The annualized
reduction of revenues and operating income before depreciation and amortization
in these two systems is approximately $800,000, or 1%, and approximately
$800,000, or 2%, respectively. The Company will continue its efforts to
mitigate the effect of such rate reductions. In addition, as a result of the
Company's managed partnerships' compliance with the 1992 Cable Act and the
corresponding reduction in Partnership revenues, the Company anticipates an
annualized reduction in management fee revenue of approximately $100,000, or
1%.
The Company's ability to borrow under its credit facility, as
discussed above, is in part a function of the Company's ratio of debt to cash
flow. Based upon the effect of the 1992 Cable Act and the reduction in the
Company's annualized cash flow, the Company's borrowing base has
correspondingly been decreased. However, after consideration of such decreases
in revenues and cash flow, the Company has maintained compliance with the terms
of its debt agreements, as amended, for the six months ended November 30, 1994
and expects to maintain compliance through fiscal 1995.
Among other issues addressed by the FCC in its February rate orders
was the treatment of packages of a la carte channels. The FCC in its
regulations adopted April 1, 1993, exempted from rate regulation the price of
packages of a la carte channels upon the fulfillment of certain conditions. On
November 10, 1994, the FCC reversed its policy regarding rate regulation of
packages of a la carte services. A la carte services that are offered in a
package will not be subject to rate regulation by the FCC, although the FCC
indicated that it cannot envision circumstances in which any price for a
collective offering of premium channels that have traditionally been offered on
a per-channel basis would be found to be unreasonable.
On November 10, 1994, the FCC also announced a revision to its
regulations governing the manner in which cable operators may charge
subscribers for new cable programming services. In addition to the present
formula for calculating the permissible rate for new services, the FCC
instituted a three-year flat fee mark-up plan for charges relating to new
channels of cable programming services. Commencing on January 1, 1995,
operators may charge for new channels of cable programming services added after
May 14, 1994 at a rate of up to 20 cents per channel, but may not make
adjustments to monthly rates totaling more than $1.20 plus an additional 30
cents for programming license fees per subscriber over the first two years of
the three-year period for these new services. Operators may charge an
additional 20 cents in the third year only for channels added in that year plus
the costs for the programming. Operators electing to use the 20 cent per
channel adjustment may not also take a 7.5% mark-up on programming cost
increases, which is permitted under the FCC's current rate regulations. The FCC
has requested further comment as to whether cable operators should continue to
receive the 7.5% mark-up on increases in license fees on existing programming
services.
The FCC also announced that it will permit operators to offer a "new
product tier" ("NPT"). Operators will be able to price this tier as they elect
so long as, among other conditions, other channels that are subject to rate
regulation are priced in conformity with applicable regulations and operators
do not remove programming services from existing tiers and offer them on the
NPT.
-15-
<PAGE> 16
There have been several lawsuits filed by cable operators and
programmers in Federal court challenging various aspects of the 1992 Cable Act,
including provisions relating to mandatory broadcast signal carriage,
retransmission consent, access to cable programming, rate regulations,
commercial leased channels and public access channels. On April 8, 1993, a
three-judge Federal district court panel issued a decision upholding the
constitutionality of the mandatory signal carriage requirements of the 1992
Cable Act. That decision was appealed directly to the United States Supreme
Court. The United States Supreme Court vacated the lower court decision on June
27, 1994 and remanded the case to the district court for further development of
a factual record. The Court's majority determined that the must-carry rules
were content neutral, but that it was not yet proven that the rules were needed
to preserve the economic health of the broadcasting industry. In the interim,
the must-carry rules will remain in place during the pendency of the
proceedings in district court. In 1993, a Federal district court for the
District of Columbia upheld provisions of the 1992 Cable Act concerning rate
regulation, retransmission consent, restrictions on vertically integrated cable
television operators and programmers, mandatory carriage of programming on
commercial leased channels and public, educational and governmental access
channels and the exemption for municipalities from civil damage liability
arising out of local regulation of cable services. The 1992 Cable Act's
provisions providing for multiple ownership limits for cable operators and
advance notice of free previews for certain programming services have been
found unconstitutional, and these decisions have been appealed. In November
1993, the United States Court of Appeals for the District of Columbia held that
the FCC's regulations implemented pursuant to Section 10 of the 1992 Cable Act,
which permit cable operators to ban indecent programming on public, educational
or governmental access channels or leased access channels, were
unconstitutional, but the court has agreed to reconsider its decision. All of
these decisions construing provisions of the 1992 Cable Act and the FCC's
implementing regulations have been or are expected to be appealed.
RESULTS OF OPERATIONS
Revenues. The Company derives its revenues from three primary
sources: subscriber fees from Company-owned cable television systems,
management fees from revenues earned by managed limited partnerships, and fees
and distributions payable upon the sale of cable television properties owned by
managed limited partnerships. Total revenues for the three months ended
November 30, 1994 increased $2,001,000, or 6%, from $32,479,000 reported in
fiscal 1994 to $34,480,000 reported in fiscal 1995. Total revenues for the six
months ended November 30, 1994 increased $3,837,000, or 6%, from $64,852,000 in
fiscal 1994 to $68,689,000 in fiscal 1995. This increase is reflective of the
Company's purchase of the cable television system serving North Augusta, South
Carolina (the "North Augusta System") in December 1993. The effect of this
acquisition was somewhat mitigated by the effect of the sale of the Company's
Gaston County, North Carolina cable television system (the "Gaston System") on
July 22, 1994. On a pro forma basis, disregarding the effect of these
transactions, total revenues would have increased $2,351,000, or 8%, and
$3,419,000, or 6%, respectively, for the three and six month periods ending
November 30, 1994.
The Company's subscriber service fees increased $1,715,000, or 6%,
for the three months ended November 30, 1994 as compared to 1993, to
$29,918,000 in the current fiscal year versus $28,203,000 for fiscal 1994.
Disregarding the net effect of the purchase of the North Augusta System and the
sale of the Gaston System, subscriber service fees increased $2,065,000, or 8%.
Such increase is due primarily to increases in the number of basic subscribers
and increases in advertising sales revenue which somewhat mitigated the effect
of the reduction in basic rates due to rate regulations issued by the FCC in
implementing the 1992 Cable Act. For the six months ended November 30, 1994, as
compared to 1993, subscriber service fees increased $3,407,000, or 6%, to
$59,623,000 in the current year versus $56,216,000 in the prior year.
Disregarding the effect of the purchase of the North Augusta System and the
sale of the Gaston system, revenues increased $2,989,000, or 6%. This increase
was due primarily to increases in the number of basic subscribers and increases
in advertising sales revenue, which somewhat mitigated the effect of the
reduction in basic rates due to rate regulations issued by the FCC in
implementing the 1992 Cable Act.
The Company receives management fees generally equal to 5% of the
gross operating revenues from its managed partnerships. For the three months
ended November 30, 1994 as compared to 1993, management
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<PAGE> 17
fees increased $286,000, or 7%, from $4,276,000 in fiscal 1994 to $4,562,000 in
fiscal 1995. For the six months ended November 30, 1994 as compared to the
similar period in 1993, management fees increased $430,000, or 5%, to
$9,066,000 in the current fiscal year from $8,636,000 in the prior year. The
growth in management fee revenue is the result of increases in operating
revenues of the Company's managed partnerships. Partnership revenues increased
as a result of increases in basic subscribers as well as increases in revenues
from pay-per-view, advertising sales and the installation of service. These
increases somewhat mitigated the effect of the reduction in basic rates in the
Company's managed partnerships due to the FCC's basic rate regulations.
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 received during the first six months of fiscal 1995 or 1994.
Expenses. Operating and general and administrative expenses
consist primarily of costs associated with the administration of Company-owned
cable television systems and the administration of the managed partnerships.
The Company is reimbursed by its managed partnerships for costs associated with
the administration of the Partnerships. The principal 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.
Operating expense increased $1,943,000, or 12%, for the three
months ended November 30, 1994 as compared to 1993 to $18,631,000 in the
current fiscal year from $16,688,000 in the prior fiscal year. Increases in
premium service fees, satellite fees, and advertising sales costs accounted for
approximately $625,000, $413,000 and $228,000, or 32%, 21% and 12%,
respectively, of the increase in operating expenses. In addition, the Company
incurred marketing, public relations and other costs associated with the FCC's
new rate regulations. For the six month periods, operating expense increased
$4,291,000, or 13%, to $37,239,000 for the six months ended November 30, 1994
from $32,948,000 in 1993. Increases in satellite fees, premium service fees,
and advertising sales costs accounted for approximately $1,312,000, $1,210,000
and $507,000, or 31%, 28% and 12%, respectively, of the increase in operating
expense for the six month periods. In addition, the Company incurred costs
associated with the FCC's new rate regulations.
General and administrative expense decreased $371,000, or 16%, for
the three months ended November 30, 1994 as compared to 1993 to $1,937,000 in
the current fiscal year from $2,308,000 in the prior fiscal year. For the six
month periods, general and administrative expense decreased $645,000, or 15%,
to $3,671,000 in the current fiscal year from $4,316,000 in the prior fiscal
year. Such decreases are primarily due to decreases in transponder fees paid to
Space Segment, as described above.
For the three months ended November 30, 1994 as compared with
1993, depreciation and amortization expense increased $159,000, or 2%, from
$10,468,000 in fiscal 1994 to $10,627,000 in fiscal 1995. For the six months
ended November 30, 1994, depreciation and amortization increased $657,000, or
3%, to $21,639,000 in the current fiscal year from $20,982,000 in the previous
fiscal year. These increases are due primarily to the purchase of the North
Augusta System in December 1993.
Interest expense increased $166,000, or 2%, for the three months
ended November 30, 1994, from $8,881,000 reported in the second quarter of
fiscal 1994 to $9,047,000 in fiscal 1995 due primarily to higher effective
interest rates on the Company's revolving credit facility. For the six months
ended November 30, 1994, interest expense increased $779,000, or 4%, due to
higher average outstanding balances and higher effective interest rates on the
Company's revolving credit facility.
Equity in losses of affiliates decreased $800,000, or 68%, and
$1,162,000, or 56%, for the three and six months ended November 30, 1994 from
$1,170,000 and $2,079,000 in fiscal 1994 to $370,000 and $917,000 in fiscal
1995, respectively. These decreases are due to the reduction in the losses
recognized by the Company related to its 25% investment in Mind Extension
University, Inc., to the elimination of the equity
-17-
<PAGE> 18
losses on the Company's foreign investments and an increase in income
recognized by the Company related to its investment in Jones Intercable
Investors L.P.
Interest income increased $69,000, or 7%, and $421,000, or 24%, for
the three and six months ended November 30, 1994 from $987,000 and $1,776,000
in fiscal 1994 to $1,056,000 and $2,197,000 in fiscal 1995. These increases are
primarily due to interest income earned on advances made to the Mind Extension
University, Inc.
For the six months ended November 30, 1994, the Company recognized a
gain on the sale of the Gaston System of $15,496,000. No similar transaction
was recognized in fiscal 1994.
For the three months ended November 30, 1994, net loss decreased
$561,000, or 10%, to $5,215,000 in the current fiscal year from $5,776,000 in
fiscal 1994. This decrease is due primarily to the increase in operating income
and the decrease in equity in losses of affiliates. The Company recorded net
income of $5,078,000 for the six months ended November 30, 1994, compared to a
net loss of $11,628,000 for the first six months of fiscal 1994. This change
was primarily the result of the $15,496,000 gain recognized on the sale of the
Gaston System in July 1994. The Company anticipates the continued recognition
of operating income prior to depreciation and amortization charges, but losses
resulting from depreciation, amortization and interest charges may occur in the
future.
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<PAGE> 19
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
15) Letter Regarding Unaudited Interim Financial Statements.
27) Financial Data Schedule
28) Accountants' Review letter, dated January 11, 1995.
b) Reports on Form 8-K
Current report on form 8-K dated December 23, 1994 reporting (i)
Shareholder approval on December 19, 1994 and subsequent
acquisition of Spacelink on December 20, 1994, (ii) Shareholder
approval on December 19, 1994 and subsequent closing on December
20, 1994 of the Stock Purchase Agreement between the Company and
BCI.
-19-
<PAGE> 20
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: January 13, 1995
-20-
<PAGE> 21
Exhibit Index
<TABLE>
<CAPTION>
Exhibits Page
- -------- ----
<S> <C> <C>
15) Letter Regarding Unaudited Interim Financial Statements.
27) Financial Data Schedule
28) Accountants' Review letter, dated January 11, 1995.
</TABLE>
<PAGE> 1
Exhibit 15
January 13, 1995
Jones Intercable, Inc. and Subsidiaries:
We are aware that Jones Intercable, Inc., and subsidiaries has
incorporated by reference in its Registration Statement Nos. 33-25577,
33-3087, 33-41392, 33-45161, 33-47030, 33-52813, 33-54527, 33-54596, 33-64602
and 33-64604 in its Form 10-Q for the quarter ended November 30, 1994,
which includes our report dated January 11, 1995 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 prepared or certified by our firm 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,
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> 0
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JUN-01-1994
<PERIOD-END> NOV-01-1994
<EXCHANGE-RATE> 1
<CASH> 2,633
<SECURITIES> 0
<RECEIVABLES> 5,527
<ALLOWANCES> 464
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 285,753
<DEPRECIATION> (123,353)
<TOTAL-ASSETS> 432,619
<CURRENT-LIABILITIES> 0
<BONDS> 318,918
<COMMON> 197
0
0
<OTHER-SE> 67,055
<TOTAL-LIABILITY-AND-EQUITY> 432,619
<SALES> 0
<TOTAL-REVENUES> 68,689
<CGS> 0
<TOTAL-COSTS> 62,549
<OTHER-EXPENSES> (17,267)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,329
<INCOME-PRETAX> 5,078
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,078
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,078
<EPS-PRIMARY> .26
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
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 November 30, 1994, and the related condensed consolidated statements of
operations and cash flows for the three- and six-month periods ended November
30, 1994 and 1993. 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 May 31, 1994 (not presented herein), and, in our report
dated August 22, 1994, we expressed an unqualified opinion on that
statement. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of May 31, 1994, is fairly stated
in all material respects in relation to the consolidated balance sheet from
which it has been derived.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Denver, Colorado,
January 11, 1995
