UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Quarterly Period Ended:
MARCH 31, 2000
OR
( ) 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
COMCAST JOIN HOLDINGS, INC.
(SUCCESSOR TO JONES INTERCABLE, INC.)
(Exact name of registrant as specified in charter)
DELAWARE 23-3025248
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 Market Street, Philadelphia, PA 19102-2148
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (215) 665-1700
--------------------------
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 twelve 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
----- ----
--------------------------
As of March 31, 2000, there were 100 shares of Common Stock outstanding.
The Registrant meets the conditions set forth in General Instructions H(1)(a)
and (b) of Form 10-Q and is therefore filing this form with the reduced
disclosure format.
<PAGE>
COMCAST JOIN HOLDINGS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements
Condensed Consolidated Balance Sheet as of
March 31, 2000 and December 31, 1999 (Unaudited).............................2
Condensed Consolidated Statement of Operations for the
Three Months Ended March 31, 2000 and 1999 (Unaudited).......................3
Condensed Consolidated Statement of Cash Flows for the
Three Months Ended March 31, 2000 and 1999 (Unaudited).......................4
Condensed Consolidated Statement of Stockholders' Equity
(Deficiency) for the Three Months Ended March 31, 2000
(Unaudited)..................................................................5
Notes to Condensed Consolidated Financial Statements (Unaudited)........6 - 10
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations....................................11 - 12
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings...........................................................13
ITEM 6 Exhibits and Reports on Form 8-K............................................13
SIGNATURE..............................................................................14
</TABLE>
-----------------------------------
This Quarterly Report on Form 10-Q is for the three months ended March 31,
2000. This Quarterly Report modifies and supersedes documents filed prior to
this Quarterly Report. The SEC allows us to "incorporate by reference"
information that we file with them, which means that we can disclose important
information to you by referring you directly to those documents. Information
incorporated by reference is considered to be part of this Quarterly Report. In
addition, information that we file with the SEC in the future will automatically
update and supersede information contained in this Quarterly Report. In this
Quarterly Report, "Comcast JOIN Holdings," the "Company," "we," "us" and "our"
refer to Comcast JOIN Holdings, Inc. and its subsidiaries.
You should carefully review the information contained in this Quarterly
Report and in other reports or documents that we file from time to time with the
SEC. In this Quarterly Report, we state our beliefs of future events and of our
future financial performance. In some cases, you can identify those so-called
"forward-looking statements" by words such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential," or "continue" or the negative of those words and other comparable
words. You should be aware that those statements are only our predictions.
Actual events or results may differ materially. In evaluating those statements,
you should specifically consider various factors, including the risks outlined
below. Those factors may cause our actual results to differ materially from any
of our forward-looking statements.
Factors Affecting Future Operations
We have in the past acquired and will be acquiring cable communications
systems in new communities in which we do not have established relationships
with the franchising authority, community leaders and cable subscribers.
Further, a substantial number of new employees must be integrated into our
business practices and operations. Our results of operations may be
significantly affected by our ability to efficiently and effectively manage
these changes.
In addition, the cable communications industry may be affected by, among
other things:
o changes in laws and regulations,
o changes in the competitive environment,
o changes in technology,
o franchise related matters,
o market conditions that may adversely affect the availability of debt
and equity financing for working capital, capital expenditures or
other purposes; and
o general economic conditions.
<PAGE>
COMCAST JOIN HOLDINGS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
(Predecessor
Corporation)
March 31, December 31,
2000 1999
------------- ----------------
(Dollars in thousands, except share data)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.................................................... $11,284 $23,027
Accounts receivable, less allowance for doubtful
accounts of $5,574 and $5,265.............................................. 30,722 40,137
Other current assets......................................................... 12,864 6,502
----------- -------------
Total current assets..................................................... 54,870 69,666
----------- -------------
INVESTMENTS..................................................................... 56,431 54,525
----------- -------------
PROPERTY AND EQUIPMENT.......................................................... 545,186 962,147
Accumulated depreciation..................................................... (3,425) (303,875)
----------- -------------
Property and equipment, net.................................................. 541,761 658,272
----------- -------------
DEFERRED CHARGES................................................................ 4,623,836 1,650,849
Accumulated amortization..................................................... (164,210) (597,060)
----------- -------------
Deferred charges, net........................................................ 4,459,626 1,053,789
----------- -------------
$5,112,688 $1,836,252
-========== -============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Accounts payable and accrued expenses........................................ $183,274 $120,326
Accrued interest............................................................. 21,827 25,892
Current portion of long-term debt............................................ 2,460 2,460
Due to affiliates............................................................ 98,792 67,375
----------- -------------
Total current liabilities................................................ 306,353 216,053
----------- -------------
LONG-TERM DEBT, less current portion............................................ 1,692,091 1,672,716
----------- -------------
OTHER LIABILITIES............................................................... 33,212 29,837
----------- -------------
DEFERRED INCOME TAXES, due to affiliate......................................... 815,610
----------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock, $1 par value - authorized and issued, 100 and zero shares......
Class A common stock, $.01 par value - authorized, zero and
60,000,000 shares; issued, zero and 36,937,420............................. 369
Common stock, $.01 par value - authorized, zero and 5,500,000
shares; issued, zero and 5,113,021......................................... 51
Additional capital........................................................... 2,286,921 504,472
Accumulated deficit.......................................................... (21,639) (588,227)
Accumulated other comprehensive income....................................... 140 981
----------- -------------
Total stockholders' equity (deficiency).................................. 2,265,422 (82,354)
----------- -------------
$5,112,688 $1,836,252
=========== =============
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
COMCAST JOIN HOLDINGS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
(Predecessor
Corporation)
Three Months Ended March 31,
2000 1999
----------- -----------
(Dollars in thousands)
-----------
<S> <C> <C>
REVENUES
Cable Communications Revenues
Subscriber service fees....................................................... $140,420 $127,579
Management fees............................................................... 880
Distributions and brokerage fees.............................................. 3,193
Non-cable revenue............................................................... 304 867
----------- -----------
140,724 132,519
----------- -----------
COSTS AND EXPENSES
Cable Communications Expenses
Operating..................................................................... 52,409 44,711
Selling, general and administrative........................................... 33,856 29,570
Non-cable operating, selling, general and administrative........................ 558 711
Depreciation and amortization................................................... 102,128 58,625
----------- -----------
188,951 133,617
----------- -----------
OPERATING LOSS..................................................................... (48,227) (1,098)
OTHER (INCOME) EXPENSE
Interest expense................................................................ 32,009 27,836
Equity in net losses of affiliates.............................................. 42 1,481
Investment income............................................................... (2,842) (303)
Other expense................................................................... 30 800
----------- -----------
29,239 29,814
----------- -----------
LOSS BEFORE INCOME TAX BENEFIT..................................................... (77,466) (30,912)
INCOME TAX BENEFIT................................................................. (15,559)
----------- -----------
NET LOSS........................................................................... ($61,907) ($30,912)
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
COMCAST JOIN HOLDINGS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(Predecessor
Corporation)
Three Months Ended March 31,
2000 1999
--------- ---------
(Dollars in thousands)
---------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss......................................................................... ($61,907) ($30,912)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization.................................................. 102,128 58,625
Non-cash interest expense...................................................... 97 89
Equity in net losses of affiliates............................................. 42 1,481
Deferred income tax benefit.................................................... (15,559)
--------- ---------
24,801 29,283
Changes in working capital and other liabilities............................... (12,052) (710)
--------- ---------
Net cash provided by operating activities................................ 12,749 28,573
--------- ---------
FINANCING ACTIVITIES
Proceeds from borrowings......................................................... 20,000 37,000
Repayments of long-term debt..................................................... (722) (23)
Proceeds from Class A Common Stock options exercised............................. 1,772
Net transactions with affiliates................................................. 31,417 (5,035)
--------- ---------
Net cash provided by financing activities................................ 50,695 33,714
--------- ---------
INVESTING ACTIVITIES
Acquisition, net of cash acquired................................................ (10,720)
Proceeds from distribution from investment....................................... 3,180
Capital expenditures............................................................. (59,967) (20,947)
Additions to deferred charges.................................................... (18,659) (25,053)
Other, net....................................................................... 259 (237)
--------- ---------
Net cash used in investing activities.................................... (75,187) (56,957)
--------- ---------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS.................................... (11,743) 5,330
CASH AND CASH EQUIVALENTS, beginning of period...................................... 23,027 2,586
--------- ---------
CASH AND CASH EQUIVALENTS, end of period............................................ $11,284 $7,916
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
COMCAST JOIN HOLDINGS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(Unaudited)
<TABLE>
<CAPTION>
Accum-
Predecessor Corporation The Company ulated
--------------------------------- ---------------- Other
Class A Compre-
Common Stock Common Stock Common Stock Additional Accum- hensive
----------------- --------------- ---------------- Paid-In ulated Income
Shares Amount Shares Amount Shares Amount Capital Deficit (Loss) Total
-------- -------- ------ ------- ------- -------- ------------ ----------- ---------- ---------
(Amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Predecessor Corporation
Balance at January 1, 2000..... 36,937 $369 5,113 $51 $ $504,472 ($588,227) $981 ($82,354)
Comprehensive loss:
Net loss, January 1, 2000 through
March 2, 2000............... (40,268)
Unrealized gains on marketable
securities, net of tax...... 462
Total comprehensive loss....... (39,806)
-------- -------- ------ ------- ------- -------- ------------ ----------- --------- -----------
Balance at March 2, 2000....... 36,937 $369 5,113 $51 $ $504,472 ($628,495) $1,443 ($122,160)
======== ======== ====== ======= ======= ======== ============ =========== ========= ===========
The Company
Balance at March 3, 2000....... $ $ $ $ $ $ $
Capital contribution to Company 2,286,921 2,286,921
Comprehensive loss:
Net loss, March 3, 2000 through
March 31, 2000.............. (21,639)
Unrealized gains on marketable
securities, net of tax...... 140
Total comprehensive loss....... (21,499)
Balance at March 31, 2000...... $ $ $ $2,286,921 ($21,639) $140 $2,265,422
======== ======== ====== ======= ======= ======== ============ =========== ========= ===========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
COMCAST JOIN HOLDINGS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The condensed consolidated balance sheet as of December 31, 1999 has been
condensed from the audited consolidated balance sheet as of that date of
Jones Intercable, Inc. ("Jones Intercable" or the "Predecessor
Corporation"), the predecessor to Comcast JOIN Holdings, Inc. (the
"Company") (see "Merger of Jones Intercable, Inc." below). The condensed
consolidated balance sheet as of March 31, 2000, the condensed consolidated
statements of operations and of cash flows for the three months ended March
31, 2000 and 1999, and the condensed consolidated statement of
stockholders' equity (deficiency) for the three months ended March 31, 2000
have been prepared by the Company and have not been audited by the
Company's independent auditors. In the opinion of management, all
adjustments necessary to present fairly the financial position, results of
operations and cash flows as of March 31, 2000 and for all periods
presented have been made.
Certain information and note disclosures normally included in the Company's
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with the
Jones Intercable financial statements and notes thereto included in the
Company's December 31, 1999 Annual Report on Form 10-K filed with the
Securities and Exchange Commission. The results of operations for the
period ended March 31, 2000 are not necessarily indicative of operating
results for the full year.
Merger of Jones Intercable, Inc.
In March 2000, the Jones Intercable shareholders approved a merger
agreement pursuant to which, upon closing, the Jones Intercable
shareholders received 1.4 shares of Comcast Corporation ("Comcast") Class A
Special Common Stock in exchange for each share of Jones Intercable Class A
Common Stock and Common Stock, and Jones Intercable was merged with and
into the Company, with the Company as the successor to Jones Intercable
(the "Jones Merger"). The Company is a wholly owned subsidiary of Comcast.
In connection with the closing of the Jones Merger, the Company exchanged
the approximately 58.9 million shares of Comcast Class A Special Common
Stock that had been contributed to the Company by Comcast for all of the
Jones Intercable common stock. Approximately 23.3 million shares of the
Comcast Class A Special Common Stock were issued to Comcast Cable
Communications, Inc. ("Comcast Cable"), a wholly owned subsidiary of
Comcast that held approximately 39.6% of the Jones Intercable common stock.
Approximately 35.6 million shares of the Comcast Class A Special Common
Stock with a value of $1.727 billion were issued to the Jones Intercable
public shareholders' for their approximate 60.4% interest in the Jones
Intercable common stock. The cost basis of Comcast Cable's interest in
Jones Intercable was $560.0 million. The acquisition was accounted for
under the purchase method of accounting. The allocation of the purchase
price of the public shareholders interest in Jones Intercable is
preliminary pending completion of a final appraisal. During the three
months ended March 31, 2000, depreciation and amortization expense includes
approximately $24.1 million related to the purchase for the period from
March 3, 2000 to March 31, 2000. As the contribution of Comcast's Class A
Special Common Stock from Comcast to the Company and the exchange of the
Comcast Class A Special Common Stock by the Company for the Jones
Intercable common stock were non-cash transactions, such transactions had
no significant impact on the Company's condensed consolidated statement of
cash flows during the three months ended March 31, 2000 (see Note 7).
Restructuring Costs
In connection with Comcast's acquisition of a controlling interest in Jones
Intercable in April 1999, in order to facilitate an orderly change in
control to Comcast, Jones Intercable established retention and severance
programs for its corporate and field office employees who were to be
terminated due to the change in control. The programs provide for cash
severance payments to employees that have been or will be terminated due to
the change in control. Jones Intercable incurred expense relating to the
severance of approximately 350 corporate and field office employees
totaling $39.1 million, of which $37.6 million had been paid and $1.5
million was accrued at March 31, 2000. In addition, Jones Intercable
incurred an additional $16.3 million of restructuring costs related to the
change in control including an employment contract termination, costs
associated with the termination of an information
6
<PAGE>
COMCAST JOIN HOLDINGS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
technology services agreement with a former affiliated entity and lease
termination costs. Of this total, $13.7 million had been paid and $2.6
million was accrued at March 31, 2000. Such costs were included in
restructuring charges in Jones Intercable's condensed consolidated
statement of operations for the three months ended June 30, 1999.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." This statement establishes the accounting and reporting
standards for derivatives and hedging activity. Upon the adoption of SFAS
No. 133, all derivatives are required to be recognized in the statement of
financial position as either assets or liabilities and measured at fair
value. In July 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective
Date of FASB Statement No. 133 - an amendment of FASB Statement No. 133"
deferring the effective date for implementation of SFAS No. 133 to fiscal
years beginning after June 15, 2000. The Company is currently evaluating
the impact the adoption of SFAS No. 133 will have on its financial position
and results of operations.
Loss for Common Stockholders Per Common Share
Loss for common stockholders per common share is computed by dividing net
loss by the weighted average number of common shares outstanding during the
period. For the three months ended March 31, 1999, Jones Intercable's basic
loss for common stockholders per common share was $0.75 per share and the
basic weighted average number of common shares outstanding was
approximately 41.3 million shares. For the three months ended March 31,
1999, potentially dilutive securities related to the Jones Intercable stock
option plan have been excluded in determining the total weighted average
number of common shares outstanding because of their antidilutive effect on
loss for common stockholders per common share.
Comprehensive Loss
Total comprehensive loss for the three months ended March 31, 1999 was
$30.9 million. Total comprehensive loss includes net loss and unrealized
gains (losses) on marketable securities for the periods presented.
Reclassifications
Certain reclassifications have been made to the prior year condensed
consolidated financial statements to conform to those classifications used
in 2000.
3. INVESTMENTS
Excite@Home Warrants
In June 1998, Jones Intercable entered into a six year Distribution
Agreement with Excite@Home, which provides for the distribution of high
speed Internet services to the Company's cable communications systems.
Deployment began in December 1998. In conjunction with the Distribution
Agreement, Jones Intercable and Excite@Home entered into a Warrant Purchase
Agreement providing for the Company's purchase of up to a maximum of
4,092,200 shares of Excite@Home Series A Common Stock at $5.25 per share
(as adjusted for Excite@Home's 2-for-1 stock split in June 1999). The
warrants become exercisable after March 31 each year, beginning in 1999, as
the Company launches Excite@Home services in its cable communications
systems. As of March 31, 2000 and December 31, 1999, warrants to purchase
819,268 and 584,172 shares, respectively, of Excite@Home Series A Common
Stock were exercisable. The Company's investment in Excite@Home warrants at
March 31, 2000 and December 31, 1999 was $52.0 million and $44.2 million,
respectively. Due to restrictions on the stock underlying the warrants, the
Company's investment is not adjusted to fair value.
In March 2000, Excite@Home and its principal cable partners, including
Comcast, entered into an agreement pursuant to which Comcast agreed to
enter into a new distribution agreement with Excite@Home for the period
from June 2002 through June 2006, give up its Board level veto rights and
resign from the Excite@Home Board of Directors. Comcast may elect to
terminate the existing or the new distribution agreement beginning June
2001
7
<PAGE>
COMCAST JOIN HOLDINGS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
on at least six months notice. Under the terms of the agreement, the
existing Excite@Home warrants held by the Company will be amended to
eliminate any performance vesting conditions. The agreement is subject to
the receipt of necessary stockholder and other approvals and is expected to
close in the third quarter of 2000.
4. LONG-TERM DEBT
Interest Rates
As of March 31, 2000 and December 31, 1999, the Company's effective
weighted average interest rate on its long- term debt outstanding was 7.51%
and 7.70%, respectively.
Lines of Credit
As of March 31, 2000, certain subsidiaries of the Company had unused lines
of credit of $180.5 million which is restricted by the covenants of the
related debt agreements.
5. RELATED PARTY TRANSACTIONS
Management Agreement
Effective April 1999, Jones Intercable and Comcast entered into a
management agreement pursuant to which Comcast manages the operations of
the Company and its subsidiaries, subject to such direction and control of
the Company as the Company may reasonably determine from time to time. The
management agreement generally provides that Comcast will supervise the
management and operations of the Company's cable systems and arrange for
and supervise certain administrative functions. As compensation for such
services the management agreement provides for Comcast to charge management
fees of 4.5% of gross cable communications revenues (as defined). During
the three months ended March 31, 2000, Comcast charged the Company
management fees of $6.2 million. These management fees are included in
selling, general and administrative expenses in the Company's condensed
consolidated statement of operations.
On behalf of the Company, Comcast seeks and secures long-term programming
contracts that generally provide for payment based on either a monthly fee
per subscriber per channel or a percentage of certain subscriber revenues.
Amounts charged to the Company by Comcast for programming (the "Programming
Charges") are in an amount equal to the sum of (i) the actual cost incurred
by Comcast plus (ii) one-half of the difference between the cost the
Company would pay in an arms-length transaction if the Company were a
stand-alone multiple cable communications systems operator with a
subscriber base equal to that of the Company's cable systems, and the
actual cost incurred by Comcast. The Programming Charges are included in
operating expenses in the Company's condensed consolidated statement of
operations. The Company purchases certain other services, including
insurance, from Comcast under cost-sharing arrangements on terms that
reflect Comcast's actual cost. The Company reimburses Comcast for certain
other costs (primarily salaries) under cost-reimbursement arrangements.
Under all of these arrangements, the Company incurred total expenses of
$35.0 million, including $34.3 million of Programming Charges, during the
three months ended March 31, 2000. The Programming Charges include $3.3
million during the three months ended March 31, 2000 relating to the
programming purchased by the Company, through Comcast, from suppliers in
which Comcast holds an equity interest.
Due to affiliates in the Company's condensed consolidated balance sheet
primarily consists of amounts due to Comcast and its affiliates under the
cost-sharing arrangements described above and amounts payable to Comcast
and its affiliates as reimbursement for payments made, in the ordinary
course of business, by such affiliates on behalf of the Company.
E! Entertainment Television
E! Entertainment Television is an affiliate of Comcast that provides cable
television programming. During the three months ended March 31, 2000, the
Company made payments to E! Entertainment Television totaling $0.2 million
for programming provided to cable systems owned by the Company.
8
<PAGE>
COMCAST JOIN HOLDINGS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
QVC, Inc.
Comcast, on behalf of the Company, has an affiliation agreement with QVC,
Inc. ("QVC"), an electronic retailer and a majority-owned and controlled
subsidiary of Comcast, to carry its programming. In return for carrying QVC
programming, the Company receives an allocated portion, based upon market
share, of a percentage of net sales of merchandise sold to QVC customers
located in the Company's service area. For the three months ended March 31,
2000, the Company's subscriber service fees revenue includes $0.3 million
relating to QVC.
Jones Intercable
Jones Intercable had certain transactions with related parties for
programming services, employment costs, information technology services and
rent for leased facilities which totaled $2.0 million during the three
months ended March 31, 1999.
6. INCOME TAXES
Effective upon the Jones Merger, the Company will join with Comcast in
filing consolidated federal income tax returns. Net operating losses of the
Company incurred prior to the merger will be available to offset taxable
income of Comcast, subject to certain limitations, and it is expected that
the tax benefits of such losses will be realized by Comcast. As a result,
as part of the purchase price allocation the Company has reversed a $189.4
million valuation allowance which had been established against the
Company's deferred tax assets.
7. STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
During the three months ended March 31, 2000, the Company acquired all of
the common stock of Jones Intercable held by Comcast Cable and the Jones
Intercable public shareholders in exchange for approximately 58.9 million
shares of Comcast Class A Special Common Stock (see Note 1). The values
attributable to the assets and liabilities acquired by the Company during
the three months ended March 31, 2000 are presented as follows (in
millions):
Property, plant & equipment........................ ($149.7)
Deferred charges................................... 3,464.0
Current liabilities................................ (72.1)
Deferred incomes taxes and other................... (955.3)
----------
Net assets acquired....................... $2,286.9
==========
The Company made cash payments for interest of $36.0 million and $27.3
million during the three months ended March 31, 2000 and 1999,
respectively.
The Company's investment in Excite@Home warrants (see Note 3) had no impact
on the Company's condensed consolidated statement of cash flows due to its
non-cash nature.
8. COMMITMENTS AND CONTINGENCIES
The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. In the opinion of management, the amount
of ultimate liability with respect to these actions will not materially
affect the financial position, results of operations or liquidity of the
Company.
The Company and certain of its subsidiaries are general partners of 13
Colorado limited partnerships that were formed to acquire, construct,
develop and operate cable communications systems. The sales of all
remaining partnership-owned cable communications systems were completed in
July 1999 and the Company is in the final stages of liquidating its managed
partnerships.
A consolidated case representing seven lawsuits filed by limited partners
of five of the Company's managed partnerships is pending in federal court
against the Company relating to the sales of four cable communications
9
<PAGE>
COMCAST JOIN HOLDINGS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
(Unaudited)
systems by Company-managed partnerships to the Company or one of its
subsidiaries. The complaints generally allege that the Company acquired
those systems at a price that did not reflect their fair value and that the
proxy statements mailed to the limited partners of the partnerships that
owned these systems were false, misleading and failed to disclose material
facts about the cable communications system market place. The Company has
filed motions to dismiss this case and discovery is stayed pending the
court's decision on these motions. The Company intends to continue to
vigorously defend these lawsuits.
The Company and certain of its subsidiaries and managed partnerships are
defendants in a lawsuit that alleges that they withheld information,
including lists of the names and addresses of limited partners, from the
plaintiffs. The plaintiffs allege that they were injured by not receiving
the information and by not being able to conduct tender offers for the
limited partnership interests. The Company intends to defend this lawsuit
vigorously on its own behalf and on behalf of its subsidiaries and managed
partnerships.
10
<PAGE>
COMCAST JOIN HOLDINGS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information for this item is omitted pursuant to Securities and Exchange
Commission General Instruction H to Form 10-Q, except as noted below.
Results of Operations
Our summarized consolidated financial information for the three months
ended March 31, 2000 and 1999 is as follows (dollars in millions, "NM" denotes
percentage is not meaningful):
<TABLE>
<CAPTION>
Three Months Ended
March 31, Increase / (Decrease)
2000 1999 $ %
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues............................................... $140.7 $132.5 $8.2 6.2%
Operating, selling, general and administrative
expenses............................................ 86.8 75.0 11.8 15.7
-------- --------
Operating income before depreciation and
amortization (1).................................... 53.9 57.5 (3.6) (6.3)
Depreciation and amortization.......................... 102.1 58.6 43.5 74.2
-------- --------
Operating loss......................................... (48.2) (1.1) 47.1 NM
-------- --------
Interest expense....................................... 32.0 27.8 4.2 15.1
Equity in net losses of affiliates..................... 1.5 (1.5) (100.0)
Investment income...................................... (2.8) (0.3) 2.5 NM
Other expense.......................................... 0.8 (0.8) (100.0)
Income tax benefit..................................... (15.5) 15.5 NM
-------- --------
Net loss............................................... ($61.9) ($30.9) $31.0 NM
======== ========
<FN>
- ------------
(1) Operating income before depreciation and amortization is commonly referred
to in the cable communications business as "operating cash flow." Operating
cash flow is a measure of a company's ability to generate cash to service
its obligations, including debt service obligations, and to finance capital
and other expenditures. In part due to the capital intensive nature of the
cable communications business and the resulting significant level of
non-cash depreciation and amortization expense, operating cash flow is
frequently used as one of the bases for comparing businesses in the cable
communications industry, although our measure of operating cash flow may
not be comparable to similarly titled measures of other companies.
Operating cash flow is the primary basis used by our management to measure
the operating performance of our business. Operating cash flow does not
purport to represent net income or net cash provided by operating
activities, as those terms are defined under generally accepted accounting
principles, and should not be considered as an alternative to such
measurements as an indicator of our performance.
</FN>
</TABLE>
Revenues
Of the $8.2 million increase for the three month period from 1999 to 2000,
$12.8 million is attributable to increases in subscriber service fees, offset by
a $0.9 million decrease in management fees, a $3.2 million decrease in
distributions and brokerage fees, and a $0.5 million decrease in non-cable
revenue. We will no longer be receiving management fees or distributions and
brokerage fees as all of our managed partnership systems have been sold. Of the
$12.8 million increase in subscriber service fees, $2.5 million is attributable
to the effects of the acquisitions of cable communications systems, $3.7 million
is attributable to subscriber growth, $2.7 million relates to changes in rates,
$0.8 million is attributable to growth in cable advertising sales and $3.1
million relates to other product offerings.
Operating, Selling, General & Administrative
Expenses
Of the $11.8 million increase for the three month period from 1999 to 2000,
$1.5 million is attributable to the effects of the acquisitions of cable
communications systems and $10.3 million result from increases in the cost of
labor, the effects of an adjustment to the cost component factor used to
capitalize indirect costs relating to network construction activity, other
volume related expenses and costs associated with new product offerings.
11
<PAGE>
COMCAST JOIN HOLDINGS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
Management Agreement
See Note 5 to our condensed consolidated financial statements included in
Item 1.
Depreciation and Amortization Expense
The $43.5 million increase for the three month period from 1999 to 2000 is
primarily a result of the effects of our merger with Jones Intercable, Inc.
("Jones Intercable") in March 2000 and to the effects of our capital
expenditures.
Interest Expense
The $4.2 million increase for the three month period from 1999 to 2000 is
due to higher outstanding balances on our long-term debt and to increases in the
effective weighted average interest rate on our long-term debt.
Equity in Net Losses of Affiliates
The $1.5 million decrease for the three month period from 1999 to 2000 is
due to the effects of the sale of Knowledge TV, Inc. in November 1999 and to the
effects of the sales of certain cable communications systems owned by managed
partnerships during 1999.
Investment Income
During the three months ended March 31, 2000, in connection with the merger
of two publicly traded companies, one of which was held by us and accounted for
as an investment available for sale, we recognized a pre-tax gain of $2.5
million, representing the difference between the fair value of the securities
received by us and our basis in the securities exchanged. Such gain was recorded
as a reclassification from accumulated other comprehensive income to investment
income.
Other Expense
The $0.8 million decrease for the three month period from 1999 to 2000 is
primarily due to costs incurred during the three months ended March 31, 1999
related to Jones Intercable's change in control.
Income Tax Benefit
The $15.5 million income tax benefit for the three months ended March 31,
2000 is primarily related to the effects of our merger with Jones Intercable in
March 2000 (see Note 6 to our condensed consolidated financial statements
included in Item 1).
We believe that our operations are not materially affected by inflation.
12
<PAGE>
COMCAST JOIN HOLDINGS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
The Company is subject to legal proceedings and claims which arise in
the ordinary course of its business. In the opinion of the Company's
management, the amount of ultimate liability with respect to these
actions will not materially affect the Company's financial position,
results of operations or liquidity.
The Company and certain of its subsidiaries are general partners of
13 Colorado limited partnerships that were formed to acquire,
construct, develop and operate cable communications systems. The
sales of all remaining partnership-owned cable communications systems
were completed in July 1999 and the Company is in the final stages of
liquidating its managed partnerships.
A consolidated case representing seven lawsuits filed by limited
partners of five of the Company's managed partnerships is pending in
federal court against the Company relating to the sales of four cable
communications systems by Company-managed partnerships to the Company
or one of its subsidiaries. The complaints generally allege that the
Company acquired those systems at a price that did not reflect their
fair value and that the proxy statements mailed to the limited
partners of the partnerships that owned these systems were false,
misleading and failed to disclose material facts about the cable
communications system market place. The Company has filed motions to
dismiss this case and discovery is stayed pending the court's
decision on these motions. The Company intends to continue to
vigorously defend these lawsuits.
The Company and certain of its subsidiaries and managed partnerships
are defendants in a lawsuit that alleges that they withheld
information, including lists of the names and addresses of limited
partners, from the plaintiffs. The plaintiffs allege that they were
injured by not receiving the information and by not being able to
conduct tender offers for the limited partnership interests. The
Company intends to defend this lawsuit vigorously on its own behalf
and on behalf of its subsidiaries and managed partnerships.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required to be filed by Item 601 of Regulation S-K:
27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
(i) Jones Intercable, Inc. filed a Current Report on Form 8-K
under Items 5 and 7 on February 29, 2000 which included its
audited financial statements as of December 31, 1999 and
1998 and for each of the three years in the period ended
December 31, 1999.
(ii) We filed a Current Report on Form 8-K under Item 5 on March
3, 2000 relating to our announcement that we had completed
our merger with Jones Intercable, Inc.
13
<PAGE>
COMCAST JOIN HOLDINGS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 2000
SIGNATURE
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.
COMCAST JOIN HOLDINGS, INC.
------------------------------------------
/S/ LAWRENCE J. SALVA
------------------------------------------
Lawrence J. Salva
Senior Vice President
(Principal Accounting Officer)
Date: May 15, 2000
14
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