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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 June 30, 1996
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[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ___________
Commission File Number 1-9953
JONES INTERCABLE, INC.
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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
July 26, 1996.
26,264,523 - Common Stock, $.01 par value per share
5,113,021 - Class A Common Stock, $.01 par value per share
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JONES INTERCABLE, INC. AND SUBSIDIARIES
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I N D E X
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Page
Number
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PART I. FINANCIAL INFORMATION.
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Item 1. Financial Statements
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Unaudited Consolidated Balance Sheets
June 30, 1996 and December 31, 1995 3
Unaudited Consolidated Statements of Operations
Three and Six Months Ended June 30, 1996 and 1995 5
Unaudited Consolidated Statements of Cash Flows
Six Months Ended June 30, 1996 and 1995 6
Notes to Unaudited Consolidated Financial Statements
June 30, 1996 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11
</TABLE>
PART II. OTHER INFORMATION.
Item 6. Exhibits and Reports on Form 8-K 17
2
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UNAUDITED CONSOLIDATED Jones Intercable, Inc.
BALANCE SHEETS and Subsidiaries
As of June 30, 1996 and December 31, 1995
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<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
ASSETS (Stated in Thousands)
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<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 7,043 $ 2,314
RESTRICTED CASH 1,766 6,357
RECEIVABLES:
Trade receivables, net of allowance for
doubtful accounts of $1,357,000 in June 1996
and $1,056,000 in December 1995 14,763 19,332
Affiliated entities 7,583 14,311
Other 2,110 2,442
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 588,704 475,436
Less-accumulated depreciation (192,180) (171,948)
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396,524 303,488
Franchise costs and other intangible assets, net of
accumulated amortization of $204,523,000 in June
1996 and $171,497,000 in December 1995 501,309 309,813
Investments in domestic cable television
partnerships and affiliates 41,573 45,745
Investment in Bell Cablemedia plc 120,780 99,613
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TOTAL INVESTMENT IN CABLE TELEVISION PROPERTIES 1,060,186 758,659
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DEFERRED TAX ASSET, net of valuation
allowance of $34,420,000 in June 1996 and
$29,253,000 in December 1995 3,862 3,862
DEPOSITS, PREPAID EXPENSES AND OTHER ASSETS 60,178 53,222
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TOTAL ASSETS $ 1,157,491 $ 860,499
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</TABLE>
The accompanying notes to unaudited consolidated financial
statements are an integral part of these balance sheets.
3
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<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED Jones Intercable, Inc.
BALANCE SHEETS and Subsidiaries
As of June 30, 1996 and December 31, 1995
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June 30, 1996 December 31, 1995
LIABILITIES AND SHAREHOLDERS' INVESTMENT (Stated in Thousands)
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<S> <C> <C>
LIABILITIES:
Accounts payable and accrued liabilities $ 75,857 $ 69,411
Subscriber prepayments and deposits 5,887 5,579
Subordinated debentures and other debt 462,548 462,714
Credit Facility 320,000 30,000
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TOTAL LIABILITIES 864,292 567,704
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SHAREHOLDERS' INVESTMENT:
Class A Common Stock, $.01 par value, 60,000,000
shares authorized; 26,264,523 and 26,212,055 shares issued
at June 30, 1996 and December 31, 1995, respectively 263 262
Common Stock, $.01 par value, 5,550,000 shares
authorized; 5,113,021 shares issued at June 30, 1996
and December 31, 1995 51 51
Additional paid-in capital 395,149 394,875
Unrealized holding gain on marketable securities 56,531 42,504
Accumulated deficit (158,795) (144,897)
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TOTAL SHAREHOLDERS' INVESTMENT 293,199 292,795
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TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 1,157,491 $ 860,499
========= ===========
</TABLE>
The accompanying notes to unaudited consolidated financial
statements are an integral part of these balance sheets.
4
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<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED Jones Intercable, Inc.
STATEMENTS OF OPERATIONS and Subsidiaries
For the three and six months ended June 30, 1996 and 1995
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<S> <C> <C> <C> <C>
For the Three Months Ended For the Six Months Ended
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June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
(Stated in Thousands Except Per Share Data)
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REVENUES FROM OPERATIONS:
Cable Television Revenue
Subscriber service fees $ 63,800 $ 32,381 $ 116,142 $ 64,221
Management fees 4,774 5,400 9,854 10,627
Fund Fee and Brokerage Fee 16,100 - 16,100 -
Non-cable Revenue 9,109 6,824 18,674 12,859
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TOTAL REVENUES 93,783 44,605 160,770 87,707
COSTS AND EXPENSES:
Cable Television Expenses
Operating expenses 33,696 19,069 61,580 37,945
General and administrative expenses * 4,008 2,065 6,945 4,033
Non-cable operating, general and administrative 8,857 7,350 18,789 13,735
Depreciation and amortization 28,677 12,811 54,038 24,825
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OPERATING INCOME 18,545 3,310 19,418 7,169
OTHER INCOME (EXPENSE):
Interest expense (17,469) (13,419) (32,568) (23,053)
Equity in losses of affiliated entities (1,122) (950) (2,008) (1,896)
Interest income 1,466 4,879 2,492 7,803
Other, net (529) (15) (1,232) (73)
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INCOME (LOSS) BEFORE INCOME TAXES 891 (6,195) (13,898) (10,050)
Income tax benefit - - - -
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NET INCOME (LOSS) $ 891 $ (6,195) $ (13,898) $ (10,050)
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PRIMARY INCOME (LOSS) PER SHARE: $ .03 $ (.20) $ (.44) $ (.32)
======= ======= ============== ==========
AVERAGE NUMBER OF CLASS A COMMON AND
COMMON SHARES OUTSTANDING 31,377 31,271 31,367 31,259
======= ======= ============== ==========
</TABLE>
* Of the total general and administrative expenses, approximately $973,000 and
$612,000 for the three months ended June 30, 1996 and 1995, respectively, and
approximately $1,864,000 and $1,220,000 for the six months ended June 30, 1996
and 1995, respectively, represent related party expenses.
The accompanying notes to unaudited consolidated financial
statements are an integral part of these statements.
5
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<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED STATEMENTS OF Jones Intercable, Inc.
CASH FLOWS and Subsidiaries
<S> <C> <C>
For the six months ended June 30, 1996 and 1995
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For the Six Months Ended
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June 30, 1996 June 30, 1995
(Stated in Thousands)
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (13,898) $ (10,050)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 54,038 24,825
Equity in losses of affiliates 2,008 1,896
Class A Stock option expense 126 126
Decrease in restricted cash 4,591 -
Decrease in trade receivables 2,983 2,341
Decrease (increase) in other receivables, prepaid
expenses and other assets (9,704) (14,545)
Increase (decrease) in accounts payable, accrued
liabilities and subscriber prepayments and deposits 6,741 (3,069)
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Net cash provided by operating activities 46,885 1,524
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of cable television systems (299,475) -
Purchase of property and equipment (41,373) (30,719)
Other, net 1,981 -
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Net cash used in investing activities (338,867) (30,719)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 290,000 -
Proceeds from the sale of Senior Notes, net - 196,500
Decrease (increase) in accounts receivable from affiliated entities 6,728 10,575
Proceeds from Class A stock options 149 -
Other, net (166) -
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Net cash provided by financing activities 296,711 207,075
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Increase in Cash and Cash Equivalents 4,729 177,880
Cash and Cash Equivalents, beginning of period 2,314 79,842
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Cash and Cash Equivalents, end of period $ 7,043 $ 257,722
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</TABLE>
The accompanying notes to unaudited consolidated financial
statements are an integral part of these statements.
6
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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. and its
subsidiaries (the "Company"). This Form 10-Q is being filed in conformity with
the SEC requirements for unaudited financial statements and does not contain all
of the necessary footnote disclosures required for a fair presentation of the
Balance Sheets, Statements of Operations and Statements of Cash Flows in
conformity with generally accepted accounting principles. However, in the
opinion of management, this data includes all adjustments, consisting only of
normal recurring accruals, necessary to present fairly the Company's financial
position at June 30, 1996 and December 31, 1995 and its results of operations
and cash flows for the three and six months ended June 30, 1996 and 1995.
Results of operations for these periods are not necessarily indicative of
results to be expected for the full year.
(2) The Company has completed the following acquisitions, exchanges and sales
in 1996:
Acquisitions
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On January 10, 1996, the Company purchased the cable television systems
serving Manassas, Manassas Park, Haymarket and portions of unincorporated Prince
William County, all in the State of Virginia (the "Manassas System") from an
unaffiliated party. The purchase price of the Manassas System was $71,000,000,
subject to normal closing adjustments. The purchase was funded by borrowings
available under the Company's revolving credit facility. The Company paid Jones
Financial Group, Ltd. ("Financial Group"), a subsidiary of Jones International,
Ltd., a fee of $896,000 upon closing of this transaction for acting as the
Company's financial advisor in connection with this transaction. All fees paid
to Financial Group by the Company are based upon 90% of the estimated commercial
rate charged by financial advisors. At acquisition, the Manassas System passed
approximately 39,300 homes and served approximately 26,600 basic subscribers.
On February 28, 1996, the Company purchased pursuant to a purchase and
sale agreement with IDS/Jones Growth Partners 87-A, Ltd., one of the Company's
managed limited partnerships, the cable television system serving areas in and
around Carmel, Indiana (the "Carmel System"). The purchase price was
$44,235,333, which was the average of three separate independent appraisals of
the fair market value of the Carmel System. The purchase of the Carmel System
was funded by borrowings available under the Company's revolving credit
facility. At acquisition, the Carmel System passed approximately 24,400 homes
and served approximately 19,200 basic subscribers.
On February 28, 1996, the Company purchased pursuant to a purchase and
sale agreement with Jones Cable Income Fund 1-B, Ltd., one of the Company's
managed limited partnerships, the cable television system serving areas in and
around Orangeburg, South Carolina (the "Orangeburg System"). The purchase price
was $18,347,667, which was the average of three separate independent appraisals
of the fair market value of the Orangeburg System. The purchase of the
Orangeburg System was funded by borrowings available under the Company's
revolving credit facility. At acquisition, the Orangeburg System passed
approximately 16,530 homes and served approximately 12,500 basic subscribers.
On February 28, 1996, the Company purchased pursuant to a purchase and
sale agreement with the Cable TV Fund 12-BCD Venture (the "Venture"), a joint
venture of three of the Company's managed limited partnerships, the cable
television system serving areas in and around Tampa, Florida (the "Tampa
System"). The purchase price was $110,395,667, which was the average of three
separate independent appraisals of the fair market value of the Tampa System.
The purchase of the Tampa System was funded by borrowings available under the
Company's revolving credit facility. At acquisition, the Tampa System passed
approximately 128,500 homes and served approximately 65,000 basic subscribers.
7
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On April 11, 1996, the Company purchased pursuant to an asset purchase
agreement with Jones Spacelink Income Partners 87-1, L.P., a Colorado limited
partnership managed by the Company, the cable television systems serving the
communities of Lodi, Burbank, Lafayette Township, New London, Bailey Lakes,
Savannah Shreve, Jeromesville, West Lafayette, Loudonville, Perrysville,
Creston, Gloria Glens, Sterling, Seville, Westfield Center, Chippewa, Lake Area,
Rittman, West Salem, Bloomville, Spencer, Polk and Congress, all in the State of
Ohio (the "Lodi System"). The purchase price was $25,706,000, which was the
average of three separate independent appraisals of the fair market value of the
Lodi System. The purchase of the Lodi System was funded by available borrowings
under the Company's revolving credit facility. At acquisition, the Lodi System
passed approximately 20,600 homes and served approximately 15,200 basic
subscribers.
On April 11, 1996, the Company purchased pursuant to an asset purchase
agreement with Jones Spacelink Income/Growth Fund 1-A, Ltd., a Colorado limited
partnership managed by the Company, the cable television system serving the
areas in and around Ripon, Wisconsin (the "Ripon System"). The purchase price
was $3,712,667, which was the average of three separate independent appraisals
of the fair market value of the Ripon System. The purchase of the Ripon System
was funded by available borrowings under the Company's revolving credit
facility. At acquisition, the Ripon System passed approximately 2,500 homes and
served approximately 2,450 basic subscribers.
On April 11, 1996, the Company purchased pursuant to a second asset
purchase agreement with Jones Spacelink Income/Growth Fund 1-A, Ltd. the cable
television system serving the areas in and around Lake Geneva, Wisconsin (the
"Lake Geneva System"). The purchase price was $6,345,667, which was the average
of three separate independent appraisals of the fair market value of the Lake
Geneva System. The purchase of the Lake Geneva System was funded by available
borrowings under the Company's revolving credit facility. At acquisition, the
Lake Geneva System passed approximately 5,400 homes and served approximately
3,600 basic subscribers.
Exchanges
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On February 29, 1996, the Company, pursuant to an asset exchange agreement
(the "TWEAN Exchange Agreement") with Time Warner Entertainment-Advance/Newhouse
Partnership ("TWEAN"), an unaffiliated cable television system operator,
conveyed to TWEAN the Carmel System, the Orangeburg System and the Tampa System
and cash in the amount of $3,500,000 (subject to normal closing adjustments).
In return, the Company received from TWEAN the cable television systems serving
Andrews Air Force Base, Capitol Heights, Cheltenham, District Heights, Fairmount
Heights, Forest Heights, Morningside, Seat Pleasant, Upper Marlboro, and
portions of Prince Georges County, all in Maryland (the "Prince Georges County
System"), and portions of Fairfax County, Virginia (the "Reston System"). At
acquisition, these systems served approximately 86,500 subscribers. This
transaction was considered a non-monetary exchange of similar productive assets
for accounting purposes and the Prince Georges County System and the Reston
System were recorded at the historical cost of the assets given up plus the
$3,500,000 cash consideration. The Company paid Financial Group a $1,668,000
fee upon the completion of the TWEAN Exchange Agreement as compensation to it
for acting as the Company's financial advisor. All fees paid to Financial Group
by the Company are based upon 90% of the estimated commercial rate charged by
unaffiliated financial advisors.
On April 12, 1996, the Company, pursuant to an asset exchange agreement
(the "Time Warner Exchange Agreement") with Time Warner Entertainment Company,
L.P. ("Time Warner"), an unaffiliated cable television operator, conveyed to
Time Warner the cable television systems serving Hilo, Hawaii (the "Hilo
System") and Kenosha, Wisconsin (the "Kenosha System") as well as the Lodi
System, the Ripon System, the Lake Geneva System and cash in the amount of
$11,735,667. The Hilo System and the Kenosha System served approximately 17,300
and 28,400 basic subscribers, respectively, and passed approximately 23,000 and
39,000 homes, respectively. In return, the Company received from Time Warner
the cable television systems serving the communities in and around Savannah,
Georgia (the "Savannah System"). This transaction was considered a
8
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non-monetary exchange of similar productive assets for accounting purposes and
the Savannah System was recorded at the historical cost of the assets given up
plus the $11,735,667 cash consideration. At acquisition, the Savannah System
passed approximately 100,000 homes and served approximately 63,000 subscribers.
The Company paid Financial Group a $1,286,000 fee upon the completion of the
Time Warner Exchange Agreement as compensation to it for acting as the Company's
financial advisor. All fees paid to Financial Group by the Company are based
upon 90% of the estimated commercial rate charged by unaffiliated financial
advisors.
Sales
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On June 14, 1996, the Company completed the sale of Galactic Radio, Inc.,
a wholly-owned subsidiary, to Jones Global Group, Inc., an affiliated company.
Galactic Radio, Inc. owns and operates Jones Satellite Networks, Inc. and
Superaudio. The sale price was $17.2 million. The Company's Board of Directors
requested and received a fairness opinion related to this sale from an
unaffiliated investment banking firm. The sales price was paid in the form of
984,968 ADSs of Bell Cablemedia plc. The number of ADSs represents the purchase
price of $17.2 million divided by the 30-day average closing price of an ADS for
the 30-day period immediately preceding the closing date. As a result of this
transaction, the Company now directly owns 7.2 million ADSs of Bell Cablemedia.
Due to the related party nature of this transaction, no gain is reflected in the
accompaying financial statements.
On July 31, 1996, the Company sold Jones Satellite Programming, Inc.
("JSP"), a wholly-owned subsidiary, to an unaffiliated party for $2,873,871,
subject to customary closing adjustments. JSP provides satellite programming to
satellite dish owners.
The pro forma effect of the above-described acquisitions and exchanges of
cable television properties and the sales of non-strategic subsidiaries on the
Company's results of operations for the six months ended June 30, 1996 are
presented in the following unaudited tabulation:
For the six months ended June 30, 1996:
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<TABLE>
<CAPTION>
Acquisitions/
As Reported Exchanges Sales Pro Forma
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<S> <C> <C> <C> <C>
Revenues $ 160,770 $ 10,874 $ (8,252) $ 163,392
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Operating Income $ 19,418 $ 416 $ 191 $ 20,025
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Net Loss $ (13,898) $ (2,935) $ 191 $ (16,642)
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Loss Per Share $ (.44) $ (.53)
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</TABLE>
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The pro forma effect of the above-described acquisitions and exchanges of
cable television properties and the sales of non-strategic subsidiaries as well
as the acquisition of the cable television system serving areas in and around
Augusta, Georgia (the "Augusta System") in October 1995 and the cable television
system serving areas in and around Dale City, Virginia in November 1995 on the
Company's results of operations for the six months ended June 30, 1995 are
presented in the following unaudited tabulation:
For the six months ended June 30, 1995:
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<TABLE>
<CAPTION>
Acquisitions/
As Reported Exchanges Sales Pro Forma
------------ ----------- ------- ----------
<S> <C> <C> <C> <C>
Revenues $ 87,707 $ 58,161 $ (8,809) $ 137,059
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Operating Income $ 7,169 $ (2,436) $ 510 $ 5,243
======= ======= ====== =======
Net Loss $ (10,050) $ (20,768) $ 510 $ (30,308)
======= ======= ====== =======
Loss Per Share $ (.32) $ (.97)
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</TABLE>
(3) On May 3, 1996, the Company entered into a letter of intent with an
unaffiliated party to sell the cable television systems serving areas in and
around Walnut Valley and Oxnard, both in the state of California, for
$104,000,000. The closing of this transaction is subject to a number of
conditions including the negotiation of definitive asset purchase agreements and
obtaining necessary governmental and other third party consents.
(4) On April 1, 1996, Cable TV Fund 11-B, Ltd. ("Fund 11-B"), one of the
Company's managed limited partnerships, sold the cable television system serving
areas in and around Lancaster, New York to an unaffiliated third party for
$84,000,000. Upon closing, Fund 11-B repaid its indebtedness, a sales tax
liability and a $2,100,000 brokerage fee to The Jones Group, Ltd., a wholly
owned subsidiary of the Company. The remaining proceeds were distributed to Fund
11-B's partners. The Company, as general partner of Fund 11-B, received a
distribution of $14,000,000 related to this transaction. Funds received in
payment of the brokerage fee and the general partner distribution were reflected
as revenues from operations and were used to reduce amounts outstanding on the
Company's revolving credit facility.
(5) On July 30, 1996, the Company entered into an agreement with Maryland Cable
Partners, L.P., an unaffiliated party, to purchase the cable television system
serving the communities of Berwyn Heights, Bladensburg, Bowie, Brentwood,
Cheverly, College Park, Colmar Manor, Cottage City, Edmonston, Glenarden,
Greenbelt, Hyattsville, Landover Hills, Laurel, Mt. Rainier, New Carrollton,
North Brentwood, Riverdale, Takoma Park, University Park and portions of Prince
Georges County, all in the State of Maryland (the "North Prince Georges County
System"). The purchase price is $235,000,000, subject to downward adjustment if
the seller does not meet certain equivalent basic subscriber and/or annualized
gross revenue thresholds as of the closing date. The North Prince Georges County
System passes approximately 150,000 homes and is expected to serve approximately
87,000 equivalent basic subscribers generating approximately $52,000,000 in
annualized gross revenues at closing. This transaction is expected to close in
the first half of 1997. It is expected that the purchase of the North Prince
Georges County System will be funded by cash on hand and by borrowings under the
Company's revolving credit facility. The Company will pay Financial Group a fee
of $2,115,000 upon closing of this transaction for acting as the Company's
financial advisor in connection with this transaction. The North Prince Georges
County System is contiguous to the Company's Prince Georges County System, which
serves communities in the southern portion of Prince Georges County. The
acquisition of the North Prince Georges County System will allow the Company to
serve all 160,000 subscribers in Prince Georges County and bring the Company's
total subscriber count in the Washington, D.C. area to approximately 384,000
subscribers.
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(6) 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.
(7) For purposes of the Consolidated Statements of Cash Flows, the Company
considers all highly liquid investments purchased with a maturity of three
months or less to be cash equivalents. No amounts were paid or received relating
to income taxes during the three and six months ended June 30, 1996 and 1995.
Approximately $30,438,000 and $17,009,000 of interest expense was paid during
the six months ended June 30, 1996 and 1995, respectively. Other than the sale
of Galactic Radio, Inc. described in Note 2, there were no material non-cash
investing or financing transactions recorded during the six month periods
ended June 30, 1996 and 1995.
(8) Certain prior period amounts have been reclassified to conform to the
current period presentation.
11
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
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CONDITION AND RESULTS OF OPERATIONS
- -----------------------------------
FINANCIAL CONDITION
The Company historically has grown by acquiring and developing cable
television systems for both itself and its managed limited partnerships,
primarily in suburban areas with attractive demographic characteristics. The
Company intends to liquidate its Company-managed limited partnerships as such
partnerships achieve their investment objectives and as opportunities for sales
of partnership cable television systems arise in the marketplace over the next
several years. In accordance with this strategy, the Company has begun to
market certain of the cable television systems owned by its managed limited
partnerships, including all of the Company's managed systems in the suburban
Chicago, Illinois area owned by six Company managed limited partnerships.
The Company is implementing a balanced strategy of acquiring cable
television systems from Company-managed limited partnerships and from third
parties. As part of this process, certain systems owned by the Company and its
managed partnerships may be sold to third parties and Company-owned systems may
be exchanged for systems owned by other cable system operators. It is the
Company's plan to cluster its cable television properties, to the extent
feasible, in geographic areas. Clustering systems should enable the Company to
obtain operating efficiencies, and it should position the Company to capitalize
on new revenue and business opportunities as the telecommunications industry
evolves. The Company also intends to maintain and enhance the value of its
current cable television systems through capital expenditures. Such
expenditures will include, among others, cable television plant extensions and
the upgrade and rebuild of certain systems. The Company also intends to
institute new services as they are developed and become economically viable.
Acquisitions of cable television systems, the development of new services
and capital expenditures for system extensions and upgrades are subject to the
availability of cash generated from operations, borrowings under the Company's
$500 million revolving credit facility, debt and/or equity financing. In
addition, the Company may explore other financing options such as private equity
capital and/or the sale of additional non-strategic assets. There can be no
assurance that the capital resources necessary to accomplish the Company's
acquisition and development plans will be available on terms and conditions
acceptable to the Company, or at all.
In conjunction with the Company's acquisition strategy, the Company has
acquired the Manassas System, the Prince Georges County System, the Reston
System and the Savannah System during 1996. The acquisition of such systems has
increased the Company's basic subscriber base by approximately 139,000 basic
subscribers to approximately 575,000 basic subscribers at June 30, 1996. In
addition, these transactions are part of the Company's strategy to cluster its
cable systems. The Manassas System, the Prince Georges County System and the
Reston System are near other Company-owned and Company-managed systems in the
Washington DC area. The Savannah System is in relative close proximity to the
Company's Augusta System. These transactions are described in detail in Note 2
of the Notes to Unaudited Consolidated Financial Statements.
The Manassas System was purchased for $71,000,000. Funding was provided by
borrowings available under the Company's revolving credit facility. The Prince
Georges County System and the Reston System were acquired in exchange for three
systems that the Company purchased from managed partnerships. The $176,479,000
of capital required by this transaction was provided by borrowings available
under the Company's revolving credit facility. The Savannah System was acquired
in exchange for two Company owned cable television systems and three cable
television systems purchased from managed partnerships. In addition to the two
Company-owned cable television systems exchanged, $47,500,000 of capital was
required by this transaction and it was provided by borrowings available under
the Company's revolving credit facility.
From time to time, the Company makes loans to its managed partnerships,
although it is not required to do so. As of June 30, 1996, the Company had
advanced funds to various managed partnerships and other
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affiliates of the Company totaling approximately $7,583,000, a decrease of
approximately $6,728,000 over the amount advanced at December 31, 1995. Of the
total balance of $7,583,000, an advance to Spacelink Fund 4, Ltd. ("Fund 4"),
net of reserve, accounted for approximately $3,421,000, or 45%, of the advance.
Funds were advanced to Fund 4 to fund operations and capital expenditures as
well as to repay amounts outstanding on Fund 4's credit facility. The Company
expects to recover this advance upon the eventual liquidation of Fund 4. The
Company has reserved the portion of its advance to Fund 4 that exceeds the fair
value of Fund 4's assets. In addition, an advance to Cable TV Fund 14-A, Ltd.
("Fund 14-A") accounted for approximately $2,257,000, or 30%, of the outstanding
balance. It is anticipated that Fund 14-A will repay this advance in the first
quarter of 1997 upon the sale of its cable television system serving
Turnersville, New Jersey. The remainder of the advances represent funds for
capital expansion and improvements of properties owned by 23 partnerships where
additional credit sources were not then available to the partnerships. None of
these advances are individually significant. These advances reduce the Company's
available cash and its liquidity. The Company anticipates the repayment of these
advances over time. The Company does not anticipate significant increases in the
amount advanced to its managed partnerships during 1996. These advances bear
interest at rates equal to the Company's weighted average cost of borrowing.
The Company purchased property, plant and equipment totaling approximately
$41,373,000 during the six months ended June 30, 1996. Such expenditures were
principally the result of the following: (a) the upgrade and rebuild of the
cable plant in the Alexandria, Virginia and Augusta, Georgia systems; and (b)
new extension projects, drop materials, converters and various maintenance
projects in the Pima County, Arizona; Anne Arundel, Maryland; Prince Georges
County, Maryland; and Augusta, Georgia systems. Estimated capital expenditures,
excluding acquisitions, for the remainder of 1996 are approximately $37,000,000.
Funding for such expenditures is expected to be provided by cash generated from
operations and borrowings available under the Company's credit facility, as
discussed below.
Sources of Funds
On October 31, 1995, the Company, through
Jones Cable Holdings, Inc. ("JCH"), a wholly owned subsidiary, entered into a
$500,000,000 reducing revolving credit facility with a group of commercial
banks. This credit facility required the transfer of a majority of the Company's
cable television properties to JCH. The entire $500,000,000 commitment is
available through March 31, 1999, at which time the commitment will be reduced
quarterly with a final maturity of December 31, 2004. As of June 30, 1996,
$320,000,000 was outstanding under this agreement. Interest on outstanding
obligations ranges from Base Rate to Base Rate plus 1/8% or LIBOR plus 5/8% to
LIBOR plus 1 1/8% based on certain leverage covenants. In addition, a commitment
fee of 3/16% to 3/8% on the unused commitment is also required. The effective
interest rate on amounts outstanding at March 31, 1996 was 5.97%.
On April 1, 1996, Cable TV Fund 11-B, Ltd. ("Fund 11-B"), one of the
Company's managed limited partnerships, sold the cable television system serving
areas in and around Lancaster, New York to an unaffiliated third party for
$84,000,000. Upon closing, Fund 11-B repaid its indebtedness, a sales tax
liability and a $2,100,000 brokerage fee to The Jones Group, Ltd., a wholly
owned subsidiary of the Company. The remaining proceeds were distributed to
Fund 11-B's partners. The Company, as general partner of Fund 11-B, received a
distribution of $14,000,000 related to this transaction. Funds received in
payment of the brokerage fee and the general partner distribution were used to
reduce amounts outstanding on the Company's revolving credit facility.
On May 3, 1996, the Company entered into a letter of intent with an
unaffiliated party to sell the cable television systems serving areas in and
around Walnut Valley and Oxnard, both in the state of California, for
$104,000,000. The closing of this transaction is subject to a number of
conditions including the negotiation of definitive asset purchase agreements and
obtaining necessary governmental and other third party consents.
13
<PAGE>
As part of the Company's strategy to simplify its corporate structure and
concentrate on its core communications business, the Company has sold two of its
subsidiaries engaged in non-cable businesses, as described below.
On June 14, 1996, the Company completed the sale of Galactic Radio, Inc.,
a wholly-owned subsidiary, to Jones Global Group, Inc., an affiliated company.
Galactic Radio, Inc. owns and operates Jones Satellite Networks, Inc. and
Superaudio. The sale price was $17.2 million. The Company's Board of Directors
requested and received a fairness opinion related to this sale from an
unaffiliated investment banking firm. The sales price was paid in the form of
984,968 ADSs of Bell Cablemedia plc. The number of ADSs represents the purchase
price of $17.2 million divided by the 30-day average closing price of an ADS for
the 30-day period immediately preceding the closing date. As a result of this
transaction, the Company now directly owns 7.2 million ADSs of Bell Cablemedia.
On July 31, 1996, the Company sold Jones Satellite Programming, Inc.
("JSP"), a wholly-owned subsidiary, to an unaffiliated party for $2,873,871,
subject to customary closing adjustments. JSP provides satellite programming to
satellite dish owners.
The Company has an effective registration statement relating to the sale of
$600 million of senior debt securities, senior subordinated debt securities,
subordinated debt securities and Class A Common Stock. The Company may, from
time to time, issue securities not to exceed $600 million pursuant to this
registration statement. Proceeds would be used for general corporate purposes,
which may include acquisitions of cable television systems from managed
partnerships and/or from unaffiliated parties, refinancings of indebtedness,
working capital, capital expenditures, and repurchases and redemptions of
securities.
The Company has sufficient sources of capital available, consisting of cash
generated from operations and available borrowings from its credit facility, to
meet its operational needs. Future acquisitions of cable television systems are
subject to the availability of additional debt and/or equity financing as
discussed above.
14
<PAGE>
RESULTS OF OPERATIONS
Revenues
The Company derives its revenues from four primary sources: subscriber fees
from Company-owned cable television systems, management fees from revenues
earned by managed limited partnerships, fees and distributions payable upon the
sale of cable television properties owned by managed limited partnerships and
revenues from non-cable television subsidiaries. Total revenues for the three
months ended June 30, 1996 totaled $93,783,000, an increase of $49,178,000, or
110%, over the total of $44,605,000 for the three months ended June 30, 1995.
Total revenues for the six months ended June 30, 1996 totaled $160,770,000, an
increase of $73,063,000, or 83%, over the total of $87,707,000 for the six
months ended June 30, 1995. These increases reflect the Company's acquisition
of the following cable television systems: the Augusta System on October 20,
1995; the Dale City System on November 29, 1995; the Manassas System on January
10, 1996; the Prince Georges County System on February 29, 1996; the Reston
System on February 29, 1996; and the Savannah System on April 12, 1996 (the
"Acquired Systems"). Disregarding the effect of the acquisition of the Acquired
Systems and the sale of Galactic Radio, Inc. on June 14, 1996, total revenues
would have increased $4,415,000, or 12%, and $10,429,000, or 15%, respectively,
for the three and six months ended June 30, 1996.
The Company's subscriber service fees increased $31,419,000, or 97%, to
$63,800,000 for the three months ended June 30, 1996 from $32,381,000 for the
three months ended June 30, 1995. Subscriber service fees for the six months
ended June 30, 1996 increased $51,921,000, or 81%, to $116,142,000 from
$64,221,000 for the six months ended June 30, 1995. The effect of the
acquisition of the Acquired Systems accounted for $29,783,000, or 95%, and
$47,772,000, or 92%, respectively, of the increases in subscriber service fees
for the three and six month periods. Disregarding the effect of the acquisition
of the Acquired Systems, subscriber service fees would have increased
$1,636,000, or 6%, and $4,149,000, or 8%, respectively, for the three and six
month periods ended June 30, 1996. These increases were due primarily to
increases in the number of basic subscribers and basic service rate adjustments
in the cable television systems owned by the Company.
The Company receives management fees generally equal to 5% of the gross
operating revenues of its managed partnerships. Management fees totaled
$4,774,000 for the three months ended June 30, 1996, a decrease of $626,000, or
12%, over the total of $5,400,000 reported for the three months ended June 30,
1995. For the six months ended June 30, 1996, management fees totaled
$9,854,000 compared to $10,627,000 in 1995, a decrease of $773,000, or 7%.
These decreases in management fees are the result of the sale of certain managed
systems in 1995 and 1996. Disregarding the effect of the sale of such managed
systems, management fees would have increased $347,000, or 8%, and $695,000, or
8%, respectively, for the three and six months ended June 30, 1996.
In its capacity as the general partner of its managed partnerships, the
Company receives revenues in the form of distributions upon the sale of cable
television properties owned by such partnerships. The Company received a
distribution of $14,000,000 upon the sale of Cable TV Fund 11-B's Lancaster, New
York System in April 1996. No such revenue was recognized during the three and
six month periods ended June 30, 1995. In addition, The Jones Group, Ltd., a
wholly owned subsidiary of the Company, earns brokerage fees upon the sale of
managed cable television systems to third parties. A brokerage fee of
$2,100,000 was earned upon the sale of Cable TV Fund 11-B's Lancaster, New York
system in April 1996. No such fees were recognized during the three and six
month periods ended June 30, 1995.
The Company also operates certain non-cable subsidiaries. Such
subsidiaries include Jones Satellite programming, Inc. ("JSP"), a distributor of
satellite programming to satellite dish owners; and Jones Futurex, Inc.
("Futurex"), a manufacturer of various electronic components. In addition, the
Company owned and operated Jones Satellite Networks, Inc. ("JSN"), a distributor
of radio programming to radio stations, a subsidiary of Jones Galactic Radio,
Inc., until its sale on June 14, 1996. Non-cable revenue totaled $9,109,000 for
the three months ended June 30, 1996, an increase of $2,285,000, or 33%, over
the $6,824,000 recorded for the three months ended June 30, 1995. For the six
months ended June 30, 1996, non-cable revenue totaled
15
<PAGE>
$18,674,000, compared to
$12,859,000 in 1995, an increase of $5,815,000, or 45%. This increase was due
primarily to an increase in the sales of Futurex.
Costs and Expenses
Operating, general and administrative expenses consist primarily of costs
associated with the administration of Company-owned cable television systems,
the administration of managed partnerships and the administration of the non-
cable television entities. The Company is reimbursed by its managed
partnerships for costs associated with the administration of the partnerships.
The principal administrative cost components are salaries paid to corporate and
system personnel, programming expenses, professional fees, subscriber billing
costs, data processing costs, rent for leased facilities, cable system
maintenance expenses and consumer marketing expenses.
Cable operating expenses increased $14,627,000, or 77%, to $33,696,000 for
the three months ended June 30, 1996 from $19,069,000 in 1995. For the six
months ended June 30, 1996, cable operating expenses increased $23,635,000, or
62%, to $61,580,000 in 1996 from $37,945,000 in 1995. The effect of the
acquisition of the acquired systems accounted for $14,118,000, or 97%, and
$21,794,000, or 92%, respectively, of the increases for the three and six month
periods. Disregarding the effect of the acquisition of the acquired systems,
cable operating expense would have increased $509,000, or 3%, and $1,841,000, or
6%, respectively, for the three and six months ended June 30, 1996. These
increases were due primarily to increases in basic and tier programming costs
and property tax expense.
Cable general and administrative expense increased $1,943,000, or 94%, to
$4,008,000 for the three months ended June 30, 1996 from $2,065,000 in 1995.
For the six months ended June 30, 1996, cable general and administrative expense
increased $2,912,000, or 72%, to $6,945,000 in 1996 from $4,033,000 in 1995.
These increases are due to the revenue increases resulting from the acquisition
of the Acquired Systems, since the allocation of general and administrative
expenses is based on the revenues of owned and managed cable systems.
Disregarding the effect of the Acquired Systems, cable general and
administrative expenses would have decreased $22,000, or 1%, and $126,000, or
4%, respectively, for the three and six month periods ended June 30, 1996.
These decreases are due to effective cost controls relating to general and
administrative expense.
Non-cable operating, general and administrative expense increased
$1,507,000, or 21%, to $8,857,000 for the three months ended June 30, 1996 from
$7,350,000 in 1995. For the six months ended June 30, 1996, non-cable
operating, general and administrative expense increased $5,054,000, or 37%, to
$18,789,000 in 1996 from $13,735,000 in 1995. These increases are due primarily
to increases in the expenses of Futurex.
Depreciation and amortization increased $15,866,000, or 124%, to
$28,677,000 for the three months ended June 30, 1996 from $12,811,000 in 1995.
For the six months ended June 30, 1996, depreciation and amortization increased
$29,213,000, or 118%, to $54,038,000 in 1996 from $24,825,000 in 1995.
Depreciation and amortization relating to the Acquired Systems was primarily
responsible for these increases.
Operating Income
Operating income increased $15,866,000 to $18,545,000 for the three months
ended June 30, 1996 from $3,310,000 in 1995. For the six months ended June 30,
1996, operating income increased $12,249,000, or 171%, to $19,418,000 in 1996
form $7,169,000 in 1995. These increases were due primarily to the fee and
distribution revenue recognized upon the sale of Cable TV Fund 11-B's Lancaster,
New York cable television system in April 1996.
The cable television industry generally measures the performance of a cable
television company in terms of cash flow or operating income before depreciation
and amortization. The value of a cable television company is often determined
using multiples of cable television system cash flow. This measure is not
intended to be a substitute or improvement upon the items disclosed on the
financial statements, rather it is included because it is
16
<PAGE>
an industry standard. Operating income before depreciation and amortization
increased $31,101,000, or 193%, to $47,222,000 for the three months ended June
30, 1996 from $16,121,000 in 1995. For the six months ended June 30, 1996,
operating income before depreciation and amortization increased $41,462,000, or
130%, to $73,456,000 in 1996 from $31,994,000 in 1995. Disregarding the effect
of the acquisition of the Acquired Systems, operating income before depreciation
and amortization would have increased $2,185,000, or 16%, and $3,580,000, or
13%, respectively for the three and six month periods ended June 30, 1996.
Other Income (Expense)
Interest expense increased $4,050,000, or 30%, to $17,469,000 for the three
months ended June 30, 1996 from $13,419,000 in 1995. For the six months ended
June 30, 1996, interest expense increased $9,515,000, or 41%, to $32,568,000 in
1996 from $23,053,000 in 1995. These increases are due to higher outstanding
balances on the Company's revolving credit facility. Borrowings under the
credit facility were used in the acquisition of the Acquired Systems.
Equity in losses of affiliated entities increased $172,000, or 18%, to
$1,122,000 for the three months ended June 30, 1996 from $950,000 in 1995. For
the six month periods, equity in losses of affiliated entities increased
$112,000, or 6%, to $2,008,000 in 1996 from $1,896,000 in 1995.
Interest income decreased $3,413,000, or 70%, to $1,466,000 for the three
months ended June 30, 1996 from $4,879,000 in 1995. For the six months ended
June 30, 1996, interest income decreased $5,311,000, or 68%, to $2,492,000 in
1996 from $7,803,000 in 1995. These decreases were due to a reduction in cash
and cash equivalents. Such cash and cash equivalents were used in the
acquisition of certain of the Acquired Systems.
The Company recognized net income of $891,000 for the three months ended
June 30, 1996 compared to net loss of $6,195,000 in 1995. This change is due
primarily to the fee and distribution revenue recognized upon the sale of Cable
TV Fund 11-B's Lancaster, New York cable television system in April 1996. For
the six months ended June 30, 1996, net loss increased $3,848,000, or 38%, to
$13,898,000 in 1996 from $10,050,000 in 1995. This increase was due primarily
to the increases in depreciation and amortization expense and interest expense,
which were offset, in part, by the increase in fee and distribution revenue
related to the sale by Cable TV Fund 11-B of the Lancaster, New York cable
television system.
17
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Tampa Litigation
- ----------------
In August 1995, Cable TV Fund 12-BCD Venture (the "Venture"), a Colorado
joint venture in which Cable TV Fund 12-B, Ltd., Cable TV Fund 12-C, Ltd. and
Cable TV Fund 12-D, Ltd., Colorado limited partnerships, are general partners,
entered into a purchase and sale agreement pursuant to which the Venture agreed
to sell its Tampa, Florida cable television system (the "Tampa System") to the
Company. The Company is the general partner of each of Cable TV Fund 12-B,
ltd., Cable TV Fund 12-C, Ltd. and Cable TV Fund 12-D, Ltd. The Company
subsequently assigned its rights and obligations under the purchase and sale
agreement to JCH. JCH acquired the Tampa System of February 28, 1996, and the
Tampa System, together with other systems owned by JCH, was exchanged for
systems owned by an unaffiliated cable television operator on February 29, 1996.
See Note 2 of Notes to Unaudited Consolidated Financial Statements.
On September 20, 1995, a civil action entitled David Hirsch, on behalf of
--------------------------
himself and all others similarly situation, Plaintiff vs. Jones Intercable,
- ---------------------------------------------------------------------------
Inc., Defendant, was filed in the District Court of Arapahoe, State of Colorado
- ----------------
(Case No. 95-CY-1800). The plaintiff brought the action as a class action on
behalf of himself and all other limited partners of Cable TV Fund 12-D, Ltd.
("Fund 12-D") against the Company seeking to recover damages caused by the
Company's alleged breaches of its fiduciary duties to the limited partners of
Fund 12-D in connection with the sale of the Tampa System. On January 25, 1996,
the plaintiff filed an amended complaint and request for a jury trial. On
February 20, 1996, the Company filed a Motion to Dismiss the Hirsch complaint on
------
the ground that it failed to state a claim upon which relief can be granted as a
matter of law. On June 24, 1996, the Court granted the Company's Motion to
Dismiss the Hirsch complaint finding that the action was improperly pled as a
------
class action. On July 25, 1996, the Court granted plaintiff permission to
amend his complaint to allege the facts necessary to state a derivative claim.
The plaintiff filed his second amended complaint, which is pled as a derivative
action, on July 31, 1996. The second amended complaint alleges claims of
breach of fiduciary duty, injust enrichment and breach of implied covenant of
good faith and fair dealing. The Company believes that it has meritorious
defenses, and the Company intends to defend the lawsuit vigorously.
On November 17, 1995, a civil action entitled Martin Ury, derivatively on
---------------------------
behalf of Cable TV Fund 12-B, Ltd., Cable TV Fund 12-C, Ltd. and Cable TV Fund
- ------------------------------------------------------------------------------
12-D, Ltd., Plaintiff vs. Jones Intercable, Inc., Defendant and Cable TV Fund
- -----------------------------------------------------------------------------
12-BCD Venture, Cable TV Fund 12-B, ltd., Cable TV Fund 12-C, Ltd. and Cable TV
- -------------------------------------------------------------------------------
Fund 12-D, Ltd., Nominal Defendants, was filed in the District Court, County of
- -----------------------------------
Arapahoe, State of Colorado (Case No. 95-CV-2212). The plaintiff, a limited
partner of Fund 12-D, brought the action as a derivative action on behalf of the
three partnerships that comprise the Venture against the Company seeking to
recover damages caused by the Company's alleged breaches of its fiduciary duties
to the Venture and to the limited partners of the three partnerships that
comprise the venture in connection with the sale of the Tampa System and the
subsequent exchange of the Tampa System with an unaffiliated cable television
operator in return for systems owned by that operator. On February 1, 1996, the
Company filed a Motion to Dismiss the Ury complaint on the ground that it failed
---
to state a claim upon which relief can be granted as a matter of law. On July
11, 1996, the Court denied the Company's Motion to Dismiss and on July 29, 1996,
the Company filed its answer to the Ury complaint. The Company believes that it
---
has meritorious defenses, and the Company intends to defend this lawsuit
vigorously.
On July 31, 1996, a civil action entitled Jonathan Fussner and Eileen
---------------------------
Fussner, derivatively on behalf of Cable TV Fund 12-B, Ltd., Cable TV Fund 12-C,
- --------------------------------------------------------------------------------
Ltd. and Cable TV Fund 12-D, Ltd., Plaintiffs vs. Jones Intercable, Inc.,
- -------------------------------------------------------------------------
Defendant and Cable TV Fund 12-BCD Venture, Cable TV Fund 12-B, Ltd., Cable TV
- ------------------------------------------------------------------------------
Fund 12-C, Ltd. and Cable TV Fund 12-D, Ltd., Nominal Defendants, was filed in
- ----------------------------------------------------------------
the District Court, County of Arapahoe, State of Colorado (Case No. 96-CV-1672).
Plaintiffs, limited partners of Fund 12-D, brought the
18
<PAGE>
action as a derivative action on behalf of the Venture and the three
partnerships that comprise the Venture against the Company seeking to recover
damages caused by the Company's alleged breaches of its fiduciary duties to the
Venture and to the partnerships and their limited partners. The complaint also
alleges claims against the Company for unjust enrichment and breach of an
implied covenant of good faith and fair dealing. The Company believes that it
has meritorious defenses, and the Company intends to defend this lawsuit
vigorously.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
15) Letter Regarding Unaudited Interim Financial Statements.
23) Accountants' Review letter, dated August 5, 1996.
27) Financial Data Schedule
b) Reports on Form 8-K
Report on Form 8-K dated April 23, 1996, reported that on April 12,
1996, the Company acquired the Savannah System as described in Note 2.
Report on Form 8-K dated May 13, 1996 describing the acquisition of the
Prince Georges County System and the Reston System, together with the
required historical and pro forma financial statements.
Report on Form 8-K dated June 25, 1996 providing the required
historical and pro forma financial statements related to the
acquisition of the Savannah System.
19
<PAGE>
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: August 12, 1996
20
<PAGE>
Exhibit 15
August 5, 1996
Jones Intercable, Inc. and Subsidiaries:
We are aware that Jones Intercable, Inc. has incorporated by reference in its
Registration Statements on Form S-8, File Nos. 33-3087, 33-25577, 33-52813, and
33-54596, and on Form S-3, File Nos. 33-62537, and 33-62539 its Form 10-Q for
the quarter ended June 30, 1996, which includes our report dated August 5, 1996
covering the unaudited interim financial information contained therein.
Pursuant to Regulation C of the Securities Act of 1933, that report is not
considered a part of the registration statements or a report prepared or
certified by our firm within the meaning of Sections 7 and 11 of the Securities
Act of 1933.
Very truly yours,
Arthur Andersen LLP
<PAGE>
Exhibit 23
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 June
30, 1996, and the related condensed consolidated statements of operations and
cash flows for the six-month periods ended June 30, 1996 and 1995. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists primarily of applying analytical review procedures to the
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Jones Intercable, Inc., and
subsidiaries as of December 31, 1995 (not presented herein), and, in our report
dated March 1, 1996, we expressed an unqualified opinion on that statement. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of June 30, 1996, is fairly stated in all material
respects in relation to the consolidated balance sheet from which it has been
derived.
Arthur Andersen LLP
Denver, Colorado,
August 5, 1996
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