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
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
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Commission File Number: 0-19259
JONES GROWTH PARTNERS II L.P.
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Exact name of registrant as specified in charter
Colorado #84-1126141
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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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JONES GROWTH PARTNERS II L.P.
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(A Limited Partnership)
UNAUDITED BALANCE SHEETS
------------------------
June 30, December 31,
ASSETS 1996 1995
------ ------------ ------------
CASH AND CASH EQUIVALENTS $ 112,717 $ 60,263
TRADE RECEIVABLES, less allowance
for doubtful receivables of $39,316 and $27,667 at
June 30, 1996 and December 31, 1995, respectively 68,748 235,967
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 17,349,029 16,508,040
Less- accumulated depreciation (5,653,400) (4,705,821)
----------- -----------
11,695,629 11,802,219
Franchise costs and other intangible assets, net of
accumulated amortization of $8,683,198 at
June 30, 1996 and $7,651,621 at
December 31, 1995, respectively 9,204,690 10,236,267
----------- -----------
Total investment in cable television properties 20,900,319 22,038,486
DEBT PLACEMENT COSTS, net of accumulated amortization
of $157,274 and $138,588 at June 30, 1996 and December 31,
1995, respectively 126,131 144,817
DEPOSITS, PREPAID EXPENSES AND OTHER 49,780 204,313
----------- -----------
Total assets $21,257,695 $22,683,846
=========== ===========
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
2
JONES GROWTH PARTNERS II L.P.
-----------------------------
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
------------------------
June 30, December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1996 1995
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LIABILITIES:
Credit facility and other debt $12,732,725 $12,754,960
Trade accounts payable and accrued liabilities 327,943 489,853
Subscriber prepayments and deposits 292,664 293,302
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Total liabilities 13,353,332 13,538,115
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (91,763) (79,349)
----------- -----------
(90,763) (78,349)
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Limited Partners-
Contributed capital, net of related
commissions, syndication costs and
interest distribution (19,785 units
outstanding at June 30, 1996 and
December 31, 1995) 16,746,882 16,746,882
Accumulated deficit (8,751,756) (7,522,802)
----------- -----------
7,995,126 9,224,080
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Total partners' capital (deficit) 7,904,363 9,145,731
----------- -----------
Total liabilities and partners' capital (deficit) $21,257,695 $22,683,846
=========== ===========
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
3
JONES GROWTH PARTNERS II L.P.
-----------------------------
(A Limited Partnership)
UNAUDITED STATEMENTS OF OPERATIONS
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For The Three Months Ended For The Six Months Ended
June 30, June 30,
-------------------------- -------------------------
1996 1995 1996 1995
------------ ----------- ----------- -----------
REVENUES $1,917,300 $1,745,294 $ 3,779,430 $ 3,362,993
COSTS AND EXPENSES:
Operating expenses 1,073,326 965,557 2,094,046 1,936,401
Management fees and allocated administrative
costs from General Partner 225,839 201,147 445,570 403,469
Depreciation and amortization 999,917 905,966 2,000,564 1,813,290
---------- ---------- ----------- -----------
OPERATING LOSS (381,782) (327,376) (760,750) (790,167)
---------- ---------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (226,731) (247,604) (466,100) (447,097)
Other, net (14,329) (154) (14,518) 112
---------- ---------- ----------- -----------
NET LOSS $ (622,842) $ (575,134) $(1,241,368) $(1,237,152)
========== ========== =========== ===========
ALLOCATION OF NET LOSS:
General Partner $ (6,228) $ (5,752) $ (12,414) $ (12,372)
========== ========== =========== ===========
Limited Partners $ (616,614) $ (569,382) $(1,228,954) $(1,224,780)
========== ========== =========== ===========
NET LOSS PER LIMITED
PARTNERSHIP UNIT $(31.17) $(28.78) $(62.12) $(61.90)
========== ========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
LIMITED PARTNERSHIP UNITS
OUTSTANDING 19,785 19,785 19,785 19,785
========== ========== =========== ===========
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
4
JONES GROWTH PARTNERS II L.P.
-----------------------------
(A Limited Partnership)
UNAUDITED STATEMENTS OF CASH FLOWS
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For the Six Months Ended
June 30,
---------------------------
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,241,368) $(1,237,152)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 2,000,564 1,813,290
Amortization of interest rate protection contract - 11,316
Decrease (increase) in trade receivables 167,219 (38,060)
Decrease in deposits, prepaid expenses and other 151,811 112,008
Decrease in trade accounts payable and accrued
liabilities and subscriber
prepayments and deposits (162,548) (307,315)
Increase in advances from General Partner - 66,286
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Net cash provided by operating activities 915,678 420,373
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment, net (840,989) (1,562,346)
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Net cash used in investing activities (840,989) (1,562,346)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings - 1,437,512
Repayment of borrowings (22,235) (28,413)
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Net cash provided by (used in) financing activities (22,235) 1,409,099
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INCREASE IN CASH 52,454 267,126
CASH, AT BEGINNING OF PERIOD 60,263 61,131
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CASH, AT END OF PERIOD $ 112,717 $ 328,257
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 484,457 $ 343,570
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The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
5
JONES GROWTH PARTNERS II L.P.
-----------------------------
(A Limited Partnership)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
---------------------------------------
(1) This Form 10-Q is being filed in conformity with the Securities and
Exchange Commission 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 of normal
recurring accruals, necessary to present fairly the financial position of Jones
Growth Partners II L.P. (the "Partnership") at June 30, 1996 and December 31,
1995, its Statements of Operations for the three and six month periods ended
June 30, 1996 and 1995 and its Statements of Cash Flows for the six month
periods ended June 30, 1996. Results of operations for these periods are not
necessarily indicative of results to be expected for the full year.
The Partnership owns and operates the cable television system serving the
areas in and around the communities of Yorba Linda, certain portions of Anaheim
Hills, and certain portions of unincorporated Orange County, all in the state of
California (the "Yorba Linda System").
(2) The Partnership was formed pursuant to a public offering of limited
partnership interests sponsored by Jones Spacelink Cable Corporation (the
"General Partner"). The General Partner is a wholly owned subsidiary of Jones
Intercable, Inc. ("Intercable"), a Colorado corporation. Intercable and certain
of its affiliates also own and operate cable television systems for their own
account and for the account of other managed limited partnerships. The General
Partner manages the Partnership and receives a fee for its services equal to
five percent of the gross revenues of the Partnership, excluding revenues from
the sale of cable television systems or franchises. Management fees paid to the
General Partner by the Partnership for the three and six month periods ended
June 30, 1996 were $95,865 and $188,972, respectively, compared to $87,265 and
$168,150, respectively, for the comparable periods in 1995.
The Partnership reimburses the General Partner and certain of its
affiliates for certain allocated general and administrative costs. These
expenses represent the salaries and related benefits paid for corporate
personnel, office rent and related facilities expense. Such personnel provide
engineering, marketing, administrative, accounting, legal, and investor
relations services to the Partnership. Allocations of personnel costs are based
primarily on actual time spent by employees of the General Partner and certain
of its affiliates with respect to each partnership managed. Remaining expenses
are allocated based on the pro rata relationship of the Partnership's revenues
to the total revenues of all systems owned or managed by Intercable and certain
of its affiliates. Systems owned by Intercable and all other systems owned by
partnerships for which Intercable is the general partner are also allocated a
proportionate share of these expenses. The General Partner believes that the
methodology used in allocating general and administrative costs is reasonable.
Reimbursements by the Partnership to the General Partner for allocated general
and administrative costs for the three and six month periods ended June 30, 1996
were $129,974 and $256,598, respectively, compared to $113,882 and $235,319,
respectively, for the comparable periods in 1995.
(3) On May 3, 1996, the Partnership entered into a letter of intent to sell the
Yorba Linda System to an unaffiliated third party for a sales price of
$36,000,000, subject to normal working capital adjustments. Closing of this sale
is subject to a number of conditions, including the negotiation of a definitive
asset purchase agreement, the approval of governmental authorities and the
approval of the transaction by the holders of a majority of the Partnership's
limited partnership interests. Upon the successful completion of the sale of the
Yorba Linda System, which is expected to occur during the first half of 1997,
the Partnership will be liquidated and dissolved.
6
JONES GROWTH PARTNERS II L.P.
-----------------------------
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
FINANCIAL CONDITION
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On May 3, 1996, the Partnership entered into a letter of intent to sell the
Yorba Linda System to an unaffiliated third party for a sales price of
$36,000,000, subject to normal working capital adjustments. Proceeds from the
sale of the Yorba Linda System are expected to be used to repay the outstanding
balance of the Partnership's $13,000,000 credit facility, with the remainder of
the proceeds to be distributed to the limited partners. Closing of this sale is
subject to a number of conditions, including the negotiation of a definitive
asset purchase agreement, the approval of governmental authorities and the
approval of the transaction by the holders of a majority of the Partnership's
limited partnership interest. Upon the successful completion of the sale of the
Yorba Linda System, which is expected to occur during the first half of 1997,
the Partnership will be liquidated and dissolved.
For the six months ended June 30, 1996, the Partnership generated net cash
from operating activities of $915,678 which is available to fund capital
expenditures and non-operating costs. During the first six months of 1996, the
Partnership purchased approximately $841,000 of plant and equipment for its
Yorba Linda System. Approximately 31 percent of these expenditures were for
service drops to subscribers' homes. Approximately 26 percent of these
expenditures were for the purchase of converters. The remainder of the capital
expenditures were for various enhancements in the Yorba Linda System. Such
expenditures were funded from cash from operations and borrowings under the
Partnership's credit facility. Anticipated capital expenditures for the
remainder of 1996 are approximately $1,445,000. Approximately 37 percent of the
expected capital expenditures will be used for the purchase of converters.
Approximately 23 percent will be related to new plant construction and
approximately 19 percent relates to service drops. The remainder of the
anticipated capital expenditures will be for various other enhancements
throughout the Yorba Linda System. These capital expenditures are for various
enhancements necessary to maintain the value of the Yorba Linda System. These
capital expenditures are expected to be funded from cash from operations and, if
necessary, borrowings under the Partnership's credit facility.
As of June 30, 1996, $12,650,000 was outstanding under the Partnership's
$13,000,000 credit facility, leaving $350,000 for future borrowings. At
December 31, 1996, the revolving credit facility's outstanding principal balance
will convert to a term loan, payable in quarterly installments with a final
maturity date of December 31, 2002. Generally, the interest on the outstanding
principal balance is at the Partnership's option of the Prime Rate plus 1/4
percent to 1/2 percent or the London Interbank Offered Rate plus 1-1/4 percent
to 1-1/2 percent, depending upon the ratio of the Partnership debt to operating
cash flow. The effective interest rates on amounts outstanding as of June 30,
1996 and 1995 were 7.01 and 7.64 percent, respectively.
The General Partner presently believes cash flow from operations, available
borrowings under the Partnership's credit facility and, if necessary, in its
discretion, advances from the General Partner, will be sufficient to fund
capital expenditures and other liquidity needs of the Partnership.
RESULTS OF OPERATIONS
- ---------------------
Revenues of the Partnership increased $172,006, or approximately 10
percent, to $1,917,300 for the three month period ended June 30, 1996 compared
to $1,745,294 for the comparable 1995 period. Revenues of the Partnership
increased $416,437, or approximately 12 percent, to $3,779,430 for the six month
period ended June 30, 1996, compared to $3,362,993 for the comparable 1995
period. These increases in revenues were primarily due to increases in the
number of basic subscribers and basic service rate adjustments. Basic service
rate adjustments accounted for approximately 42 percent and 51 percent,
respectively, of the increase in revenues for the three and six month periods
ended June 30, 1996. The number of basic subscribers increased to 16,802 at
June 30, 1996 from 16,305 basic subscribers at June 30, 1995. The increase in
basic subscribers accounted for approximately 20 percent of the increase in
revenues for the three and six month periods ended June 30, 1996.
Operating expenses consist primarily of costs associated with the
administration of the Partnership's cable television systems. 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.
7
Operating expenses increased $107,769, or approximately 11 percent, to
$1,073,326 for the three month period ended June 30, 1996 compared to $965,557
for the comparable 1995 period. This increase in operating expenses was
primarily due to increases in programming and personnel costs, which were
partially offset by a decrease in plant related costs. For the six months ended
June 30, 1996, operating expenses increased $157,645, or approximately 8
percent, to $2,094,046 from $1,936,401 for the comparable 1995 period. This
increase in operating expenses was primarily due to increases in programming
costs, which were partially offset by decreases in marketing costs. Operating
expenses accounted for approximately 56 percent and 55 percent of revenues for
the three months ended June 30, 1996 and 1995 and approximately 55 percent and
58 percent of revenues for the six months ended June 30, 1996 and 1995. No
other individual factor significantly affected the increase in operating
expenses for the periods discussed.
Management fees and allocated administrative costs from the General Partner
increased $24,692, or approximately 12 percent, to $225,839 for the three months
ended June 30, 1996 from $201,147 for the similar period in 1995. Management
fees and allocated administrative costs from the General Partner increased
$42,101, or approximately 10 percent, to $445,570 for the six months ended June
30, 1996 from $403,469 for the similar period in 1995. These increases were
primarily due to an increase in revenues, upon which such fees are based.
Depreciation and amortization expense increased $93,951, or approximately
10 percent, to $999,917 for the three month period ended June 30, 1996 from
$905,966 for the similar period in 1995. Depreciation and amortization expense
increased $187,274, or approximately 10 percent, to $2,000,564 for the six month
period ended June 30, 1996 from $1,813,290 for the similar period in 1995.
These increases were due to increases in the Partnership's depreciable asset
base.
Operating loss increased $54,406, or approximately 17 percent, to $381,782
for the three months ended June 30, 1996 from $327,376 for the similar 1995
period. This increase was due to the increases in operating expenses,
management fees and allocated administrative costs from the General Partner and
depreciation and amortization expenses exceeding the increase in revenues.
Operating loss decreased $29,417, or approximately 4 percent, to $760,750 for
the six months ended June 30, 1996 from $790,167 for the similar 1995 period.
This decrease was due to the increase in revenues exceeding the increases in
operating expenses, management fees and allocated administrative costs from the
General Partner and depreciation and amortization 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 increased $39,545, or approximately 7
percent, to $618,135 for the three month period ended June 30, 1996 from
$578,590 for the comparable period in 1995. For the six month period ended June
30, 1996, operating income before depreciation and amortization increased
$216,691, or approximately 21 percent, to $1,239,814 from $1,023,123 for the
comparable period in 1995. These increases were due to the increases in revenues
exceeding the increases in operating expenses and management fees and allocated
administrative costs from the General Partner.
Interest expense decreased $20,873, or approximately 8 percent, to $226,731
for the three months ended June 30, 1996 compared to $247,604 for the comparable
1995 period. This decrease was due to lower effective interest rates on
outstanding obligations. Interest expense increased $19,003, or approximately 4
percent, to $466,100 for the six month periods ended June 30, 1996 compared to
$447,097 for the comparable 1995 period. This increase was primarily the result
of higher outstanding balances on interest bearing obligations during the six
month period ended June 30, 1996 compared to the similar 1995 period.
Net loss increased by $47,708, or approximately 8 percent, to $622,842 for
the three month period ended June 30, 1996 from $575,134 for the comparable
period in 1995. Net loss increased $4,216, or less than one percent, to
$1,241,368 for the six month period ended June 30, 1996 compared to $1,237,152
for the comparable 1995 period. These increases were the result of the factors
discussed above.
8
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
9
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 GROWTH PARTNERS II L.P.
BY: JONES SPACELINK CABLE
CORPORATION, its General Partner
By: /S/ Kevin P. Coyle
---------------------------------------
Kevin P. Coyle
Group Vice President/Finance
(Principal Financial Officer)
Dated: August 14, 1996
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