FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1996
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to to
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Commission File Number: 0-18133
IDS/JONES GROWTH PARTNERS II, L.P.
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Exact name of registrant as specified in charter
Colorado #84-1060548
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State of organization I.R.S. employer I.D.#
9697 East Mineral Avenue, P.O. Box 3309, Englewood, Colorado 80155-3309
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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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IDS/JONES GROWTH PARTNERS II, L.P.
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(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
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March 31, December 31,
ASSETS 1996 1995
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CASH $ 86,855 $ 6,803
RECEIVABLES:
Trade receivables, less allowance for doubtful receivables of
$46,993 and $49,993 at March 31, 1996 and December 31, 1995 447,060 463,098
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 39,224,338 38,380,661
Less - accumulated depreciation (18,406,164) (17,672,119)
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20,818,174 20,708,542
Franchise costs and other intangible assets, net of
accumulated amortization of $45,589,773 at
March 31, 1996 and $43,830,221 at
December 31, 1995, respectively 28,108,222 29,867,774
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Total investment in cable television properties 48,926,396 50,576,316
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 444,208 402,697
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Total assets $ 49,904,519 $ 51,448,914
============ ============
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated balance sheets.
2
IDS/JONES GROWTH PARTNERS II, L.P.
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(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
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March 31, December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1996 1995
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LIABILITIES:
Debt $ 45,398,028 $ 45,909,122
Accounts payable - Managing General Partner 1,556,731 331,185
Accrued liabilities 2,163,402 2,315,455
Subscriber prepayments 69,299 62,574
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Total liabilities 49,187,460 48,618,336
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MINORITY INTEREST IN JOINT VENTURE 158,741 885,792
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PARTNERS' CAPITAL (DEFICIT):
General Partners-
Contributed capital 500 500
Accumulated deficit (370,348) (356,484)
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(369,848) (355,984)
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Limited Partners-
Net contributed capital (174,343 units outstanding at
March 31, 1996 and December 31, 1995) 37,256,546 37,256,546
Accumulated deficit (36,328,380) (34,955,776)
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928,166 2,300,770
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Total liabilities and partners' capital (deficit) $ 49,904,519 $ 51,448,914
============ ============
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated balance sheets.
3
IDS/JONES GROWTH PARTNERS II, L.P.
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(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
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For the Three Months Ended
March 31,
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1996 1995
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REVENUES $ 4,445,486 $ 4,016,495
COSTS AND EXPENSES:
Operating expenses 2,599,332 2,345,384
Management fees and allocated overhead from General Partners 524,567 537,441
Depreciation and amortization 2,514,725 2,820,010
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OPERATING LOSS (1,193,138) (1,686,340)
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OTHER INCOME (EXPENSE):
Interest expense (913,174) (1,020,491)
Other, net (7,207) (3,571)
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Total other income (expense), net (920,381) (1,024,062)
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CONSOLIDATED LOSS (2,113,519) (2,710,402)
MINORITY INTEREST IN CONSOLIDATED LOSS 727,051 932,378
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NET LOSS $(1,386,468) $(1,778,024)
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ALLOCATION OF NET LOSS:
General Partners $ (13,864) $ (17,780)
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Limited Partners $(1,372,604) $(1,760,244)
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NET LOSS PER LIMITED PARTNERSHIP UNIT $ (7.87) $ (10.10)
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WEIGHTED AVERAGE NUMBER OF LIMITED PARTNERSHIP
UNITS OUTSTANDING 174,343 174,343
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The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated statements.
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IDS/JONES GROWTH PARTNERS II, L.P.
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(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
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For the Three Months Ended
March 31,
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1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,386,468) $(1,778,024)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 2,514,725 2,820,010
Minority interest in consolidated loss (727,051) (932,378)
Amortization of interest rate protection contract 13,125 13,125
Decrease in trade receivables 16,038 78,781
Increase in deposits, prepaid expenses and other assets (75,764) (37,076)
Increase (decrease) in accrued liabilities
and subscriber prepayments (145,328) 68,763
Increase (decrease) in advances from Managing General Partner 1,225,546 (933,949)
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Net cash provided by (used in) operating activities 1,434,823 (700,748)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (843,677) (633,278)
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Net cash used in investing activities (843,677) (633,278)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings - 1,500,000
Repayment of debt (511,094) (17,328)
Purchase of interest rate protection contract - (105,000)
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Net cash provided by (used in) financing activities (511,094) 1,377,672
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Increase in cash 80,052 43,646
Cash, beginning of period 6,803 57,284
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Cash, end of period $ 86,855 $ 100,930
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SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 853,606 $ 177,122
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The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated statements.
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IDS/JONES GROWTH PARTNERS II, L.P.
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(A Limited Partnership)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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(1) 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 and
Statements of Operations and 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 financial position of IDS/Jones Growth Partners II, L.P. (the
"Partnership") at March 31, 1996 and December 31, 1995 and its Statements of
Operations and Cash Flows for the three month periods ended March 31, 1996 and
1995. Results of operations for this period are not necessarily indicative of
results to be expected for the full year.
The accompanying financial statements include 100 percent of the accounts
of the Partnership and those of IDS/Jones Joint Venture Partners (the
"Venture"), including the cable television systems serving the areas in and
around Aurora, Illinois, reduced by the minority interest in the Venture. All
interpartnership accounts and transactions have been eliminated.
(2) Jones Cable Corporation ("the Managing General Partner") manages the
Partnership and the Venture and receives a fee for its services equal to 5
percent of the gross revenues of the Venture, excluding revenues from the sale
of cable television systems or franchises. Management fees paid to the Managing
General Partner for the three month periods ended March 31, 1996 and 1995 were
$222,274 and $200,825, respectively.
IDS Cable II Corporation ("the Supervising General Partner") and IDS Cable
Corporation (the supervising general partner of IDS/Jones Growth Partners 89-B,
Ltd.) participate in certain management decisions of the Venture and receive a
fee for their services equal to 1/2 percent of the gross revenues of the
Venture, excluding revenues from the sale of cable television systems or
franchises. Supervision fees for the three month periods ended March 31, 1996
and 1995 were $22,227 and $20,082, respectively.
The Venture reimburses Jones Intercable, Inc.("JIC"), the parent of the
Managing General Partner, for certain allocated overhead and administrative
expenses. These expenses represent the salaries and related benefits paid for
corporate personnel, rent, data processing services and other corporate
facilities costs. Such personnel provide engineering, marketing, administrative,
accounting, legal and investor relations services to the Venture. Allocations of
personnel costs are based primarily on actual time spent by employees of JIC
with respect to each partnership managed. Remaining expenses are allocated based
on the pro rata relationship of the Venture's revenues to the total revenues of
all systems owned or managed by JIC and certain of its affiliates. Systems owned
by JIC and all other systems owned by partnerships for which JIC or affiliates
of the general partners are also allocated a proportionate share of these
expenses. JIC believes that the methodology used in allocating overhead and
administrative expenses is reasonable. Reimbursements to JIC for allocated
overhead and administrative expenses during the three month periods ended March
31, 1996 and 1995 were $280,066 and $316,534, respectively. The Supervising
General Partner may also be reimbursed for certain expenses incurred on behalf
of the Partnership. There were no reimbursements made to the Supervising General
Partner for allocated overhead and administrative expenses during the three
month periods ended March 31, 1996 and 1995.
6
IDS/JONES GROWTH PARTNERS II, L.P.
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(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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RESULTS OF OPERATIONS
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FINANCIAL CONDITION
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The Partnership owns a 66 percent interest in the Venture. The accompanying
financial statements include the accounts of the Partnership and the Venture,
reduced by the 34 percent minority interest in the Venture. The Venture owns the
cable television system serving certain areas in and around Aurora, Illinois.
For the three months ended March 31, 1996, the Venture generated net cash
from operating activities totaling $1,434,823, which is available to fund
capital expenditures and non-operating costs. During the first three months of
1996, the Venture expended approximately $844,000 on capital expenditures.
Approximately 45 percent of the expenditures related to construction of service
drops to subscriber homes. Approximately 35 percent of the expenditures related
to plant extensions. The remainder of the expenditures were used for various
enhancements in the Aurora System. Funding for these expenditures was provided
by borrowings from the Venture's credit facility and cash generated from
operations. Anticipated capital expenditures for the remainder of 1996 are
approximately $3,216,000. Approximately 36 percent of the expenditures are for
construction of service drops to subscriber homes. Approximately 33 percent of
the anticipated capital expenditures are for plant extensions. Funding for the
expenditures is expected to be provided by cash on hand, cash generated from
operations and borrowings from the Venture's credit facility.
On December 5, 1991, JIC made an equity investment in the Venture in the
amount of $2,872,000 and a loan of $1,800,000 to the Venture. On that date, IDS
Management Corporation also made an equity investment of $2,872,000 in the
Venture and a loan to the Venture in the amount of $1,800,000. Over half of the
$1,800,000 loan from IDS Management Corporation has been repaid. The loans from
JIC and IDS Management Corporation are subordinate to the Venture's revolving
credit and term loan. These loans have matured. Although IDS Management
Corporation and JIC have not formally extended their loans, they have not
demanded repayment. In the first quarter of 1994, JIC agreed to subordinate to
all other Venture debt its $1,406,647 advance to the Venture outstanding at
March 30, 1994 and IDS Management Corporation made an additional loan of
$1,000,000 to the Venture to fund principal repayments due at the end of March
1994 on the Venture's then-outstanding term loan. The interest rates on the
respective loans, which will vary from time to time, with respect to IDS
Management Corporation's loans, are at its cost of borrowing, and, with respect
to JIC's loans, are at its weighted average cost of borrowing. It is anticipated
that the remaining loans will be repaid over time with borrowings from the
Venture's revolving credit and term loan, as discussed below. If the December 5,
1991 loans are not repaid, JIC and IDS Management Corporation, respectively,
will have the right, among other rights, to convert the unpaid portion of these
loans to equity in the Venture.
The Venture is a party to a revolving credit and term loan agreement with a
commercial bank. This credit facility has a maximum amount available of
$45,000,000. At March 31, 1996, $40,300,000 was outstanding under this
agreement, leaving $4,700,000 available for future needs of the Venture, subject
to certain financial covenants. The revolving credit period of the Venture's
credit facility expires January 1, 1997, at which time the then-outstanding
balance converts to a term loan payable in 28 consecutive quarterly
installments. Interest on the credit facility is at the Venture's option of the
Base Rate plus .75 percent, the London Interbank Offered Rate plus 1.75 percent
or the Certificate of Deposit Rate plus 1.875 percent. The effective interest
rates on outstanding obligations to non-affiliates as of March 31, 1996 and 1995
were 7.52 percent and 8.11 percent, respectively. The Venture anticipates
repaying the remaining notes outstanding to related parties with borrowings from
this credit facility. As borrowings become available, subject to leverage
covenants, the related parties' notes will be repaid including accrued interest
in the following order: first, to IDS Management Corporation the remaining
$800,000 of the $1,800,000 note dated December 5, 1991; second, to JIC the
$1,800,000 note dated December 5, 1991; third, to IDS Management Corporation the
$1,000,000 note dated March 30, 1994; and fourth, to JIC the $1,406,647
subordinated advance.
As a result of their equity contributions to the Venture, IDS Management
Corporation and JIC each have a 5 percent equity interest in the Venture, the
Partnership has a 66 percent interest and IDS/Jones Growth Partners 89-B, Ltd.
has a 24 percent interest. If the December 5, 1991 subordinated loans are
converted to equity, the ownership percentages will be adjusted accordingly.
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REGULATION AND LEGISLATION
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The Venture has filed cost-of-service showings in response to rulemakings
concerning the 1992 Cable Act for its Aurora System and thus anticipates no
further reductions in rates in these systems. The cost-of-service showings have
not yet received final approvals from regulatory authorities, however, and there
can be no assurance that the Partnership's cost-of-service showings will prevent
further rate reductions in these systems until such final approvals are
received.
The Telecommunications Act of 1996 (the "1996 Act"), which became law on
February 8, 1996, substantially revised the Communications Act of 1934, as
amended, including the 1984 Cable Act and the 1992 Cable Act, and has been
described as one of the most significant changes in communications regulation
since the original Communications Act of 1934. The 1996 Act is intended, in
part, to promote substantial competition in the telephone local exchange and in
the delivery of video and other services. As a result of the 1996 Act, local
telephone companies (also known as local exchange carriers or "LECs") and other
service providers are permitted to provide video programming, and cable
television operators are permitted entry into the telephone local exchange
market. The FCC is required to conduct rulemaking proceedings over the next
several months to implement various provisions of the 1996 Act.
Among other provisions, the 1996 Act modified the 1992 Cable Act by
deregulating the cable programming service tier of large cable operators
effective March 31, 1999 and the cable programming service tier of "small" cable
operators in systems providing service to 50,000 or fewer subscribers effective
immediately. The 1996 Act also revised the procedures for filing cable
programming service tier rate complaints and adds a new effective competition
test.
It is premature to predict the specific effects of the 1996 Act on the
cable industry in general or the Venture in particular. The FCC will be
undertaking numerous rulemaking proceedings to interpret and implement the 1996
Act. It is not possible at this time to predict the outcome of those proceedings
or their effect on the Venture.
RESULTS OF OPERATIONS
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Revenues of the Venture's Aurora System totaled $4,445,486 in the first
quarter of 1996 compared to $4,016,495 in the first quarter of 1995, an increase
of $428,991, or approximately 11 percent. An increase in the number of basic
subscribers accounted for approximately 49 percent of the increase in revenues.
The number of basic subscribers totaled 44,737 at March 31, 1996 compared to
41,667 at March 31, 1995, an increase of 3,070, or approximately 7 percent.
Basic service rate adjustments accounted for approximately 29 percent of the
increase in revenues. No other individual factor was significant to the increase
in revenues.
Operating expenses consist primarily of costs associated with the
administration of the Aurora System. The principal cost components are salaries
paid to system personnel, programming expenses, professional fees, subscriber
billing costs, rent for leased facilities, cable system maintenance expenses and
consumer marketing expenses.
Operating expenses totaled $2,599,332 for the three month period ended
March 31, 1996 compared to $2,345,384 for the similar 1995 period, an increase
of $253,948, or approximately 11 percent. Operating expenses represented 58
percent of revenues for the three month periods ended March 31, 1996 and 1995,
respectively. Increases in programming fees accounted for approximately 69
percent of the increase in operating expenses and were due in part to the
increase in the subscriber base. No other individual factor contributed
significantly to the increase.
Management and supervision fees and allocated overhead from the General
Partners totaled $524,567 for the three month period ended March 31, 1996
compared to $537,441 for the similar 1995 period, a decrease of $12,874, or
approximately 2 percent. The decrease was due to a decrease in allocated
expenses from JIC.
Depreciation and amortization expense totaled $2,514,725 for the first
three months of 1996 compared to $2,820,010 for the first three months of 1995,
a decrease of $305,285, or approximately 11 percent. The decrease was due to the
maturation of a portion of the tangible asset base.
Operating loss totaled $1,193,138 for the three month period ended March
31, 1996 compared to $1,686,340 for the similar 1995 period, a decrease of
$493,202, or approximately 29 percent. The decrease was due to the increase in
8
revenues and the decreases in depreciation and amortization expense and
management and supervision fees and allocated overhead from the General
Partners exceeding the increases in operating expenses.
The cable television industry generally measures the financial performance
of a cable television system in terms of cash flow or operating income before
depreciation and amortization. The value of a cable television system is often
determined using multiples of cash flow. This measure is not intended to be a
substitute or improvement upon the items disclosed on the financial statements,
rather it is included because it is an industry standard. Operating income
before depreciation and amortization totaled $1,321,587 at March 31, 1996
compared to $1,133,670 in 1995, an increase of $187,917, or approximately 17
percent. The increase was due to the increase in revenues and the decrease in
management and supervision fees and allocated overhead from the General
Partners exceeding the increases in operating expenses.
Interest expense totaled $913,174 for the three months ended March 31, 1996
compared to $1,020,491 for the comparable 1995 period, a decrease of $107,317,
or approximately 11 percent. The decrease was due to lower effective interest
rates on interest bearing obligations.
Net loss totaled $2,113,519 for the three months ended March 31, 1996
compared to $2,710,402 for the comparable 1995 period, a decrease of $596,883,
or approximately 22 percent. This decrease was due to the factors discussed
above and the losses are expected to continue.
9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
27) Financial Data Schedule
b) Reports on Form 8-K
None
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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.
IDS/JONES GROWTH PARTNERS II, L.P.
BY: JONES CABLE CORPORATION
its Managing General Partner
By: /S/ Kevin P. Coyle
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Kevin P. Coyle
Group Vice President/Finance
(Principal Financial Officer)
Dated: May 13, 1996
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