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 September 30, 1997.
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ______________.
Commission File Number: 0-18133
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 (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 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.
-----------------------------------
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
-------------------------------------
September 30, December 31,
ASSETS 1997 1996
------ -------------- -------------
CASH $ 18,441 $ 39,236
TRADE RECEIVABLES, less allowance for doubtful receivables
of $112,737 and $183,205 at September 30, 1997 and December 31,
1996, respectively 330,827 486,278
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 45,548,269 42,616,023
Less - accumulated depreciation (22,843,454) (20,360,651)
------------ ------------
22,704,815 22,255,372
Franchise costs and other intangible assets, net of accumulated
amortization of $54,750,922 and $50,617,891 at September 30, 1997
and December 31, 1996, respectively 18,947,073 23,080,104
------------ ------------
Total investment in cable television properties 41,651,888 45,335,476
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 463,088 397,014
------------ ------------
Total assets $ 42,464,244 $ 46,258,004
============ ============
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.
-----------------------------------
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
-------------------------------------
September 30, December 31,
LIABILITIES AND PARTNERS' DEFICIT 1997 1996
--------------------------------- ------------- ------------
LIABILITIES:
Debt $ 49,500,989 $ 48,693,134
Managing General Partner advances 218,649 398,507
Accrued liabilities 3,009,279 2,649,331
Subscriber prepayments 62,706 64,694
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Total liabilities 52,791,623 51,805,666
------------ ------------
MINORITY INTEREST IN JOINT VENTURE (3,640,546) (1,996,323)
------------ ------------
PARTNERS' DEFICIT:
General Partners-
Contributed capital 500 500
Accumulated deficit (442,800) (411,445)
------------ ------------
(442,300) (410,945)
------------ ------------
Limited Partners-
Net contributed capital (174,343 units outstanding
at September 30, 1997 and December 31, 1996) 37,256,546 37,256,546
Accumulated deficit (43,501,079) (40,396,940)
------------ ------------
(6,244,533) (3,140,394)
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Total liabilities and partners' deficit $ 42,464,244 $ 46,258,004
============ ============
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.
-----------------------------------
(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
---------------------------- ---------------------------
1997 1996 1997 1996
------------- ------------- ------------- ------------
REVENUES $ 4,855,813 $ 4,600,144 $14,497,368 $13,642,183
COSTS AND EXPENSES:
Operating expenses 2,628,395 2,678,295 8,028,851 7,933,866
Management and supervision fees
and allocated overhead from
General Partners 528,250 529,174 1,618,281 1,621,631
Depreciation and amortization 2,017,835 2,475,875 6,816,498 7,382,858
----------- ----------- ----------- -----------
OPERATING LOSS (318,667) (1,083,200) (1,966,262) (3,296,172)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (1,002,985) (952,771) (2,828,040) (2,782,025)
Other, net 28,026 (41,566) 14,585 (37,387)
----------- ----------- ----------- -----------
Total other income (expense), net (974,959) (994,337) (2,813,455) (2,819,412)
----------- ----------- ----------- -----------
CONSOLIDATED LOSS (1,293,626) (2,077,537) (4,779,717) (6,115,584)
MINORITY INTEREST IN
CONSOLIDATED LOSS 445,007 714,673 1,644,223 2,103,761
----------- ----------- ----------- -----------
NET LOSS $ (848,619) $(1,362,864) $(3,135,494) $(4,011,823)
=========== =========== =========== ===========
ALLOCATION OF NET LOSS:
General Partners $ (8,486) $ (13,628) $ (31,355) $ (40,118)
=========== =========== =========== ===========
Limited Partners $ (840,133) $(1,349,236) $(3,104,139) $(3,971,705)
=========== =========== =========== ===========
NET LOSS PER LIMITED
PARTNERSHIP UNIT $(4.81) $(7.74) $(17.80) $(22.78)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
LIMITED PARTNERSHIP UNITS
OUTSTANDING 174,343 174,343 174,343 174,343
=========== =========== =========== ===========
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated statements.
4
IDS/JONES GROWTH PARTNERS II, L. P.
-----------------------------------
(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
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For the Nine Months Ended
September 30,
---------------------------
1997 1996
------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,135,494) $(4,011,823)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 6,816,498 7,382,858
Minority interest in consolidated loss (1,644,223) (2,103,761)
Amortization of interest rate protection contract - 39,375
Decrease in trade receivables 155,451 10,438
Increase in deposits, prepaid expenses and
deferred charges (266,738) (67,183)
Increase in accrued liabilities and subscriber
prepayments 357,960 2,399,062
Increase (decrease) in advances from
Managing General Partner (179,858) 15,266
----------- -----------
Net cash provided by operating activities 2,103,596 3,664,232
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (2,932,246) (3,264,615)
----------- -----------
Net cash used in investing activities (2,932,246) (3,264,615)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 831,266 2,729,712
Repayment of debt (23,411) (3,035,338)
----------- -----------
Net cash provided by (used in) financing activities 807,855 (305,626)
----------- -----------
Increase (decrease) in cash (20,795) 93,991
Cash, beginning of period 39,236 6,803
----------- -----------
Cash, end of period $ 18,441 $ 100,794
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 2,998,629 $ 2,460,629
=========== ===========
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated statements.
5
IDS/JONES GROWTH PARTNERS II, L. P.
-----------------------------------
(A Limited Partnership)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(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 September 30, 1997 and December 31, 1996, its Statements of
Operations for the three and nine month periods ended September 30, 1997 and
1996 and its Statements of Cash Flows for the nine month periods ended September
30, 1997 and 1996. Results of operations for these periods 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 (the "Aurora System"), reduced by the 34 percent
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 and nine month periods ended September 30, 1997
were $242,790 and $724,868, respectively, compared to $230,007 and $682,109,
respectively, for the three and nine month periods ended September 30, 1996.
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 and nine month periods ended
September 30, 1997 were $24,279 and $72,487, respectively, compared to $23,001
and $68,211, respectively, for the three and nine month periods ended September
30, 1996.
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. Such services, and their related costs, are necessary to the
operations of the Venture and would have been incurred by the Venture if it was
a stand alone entity. 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 are 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 made to JIC by the Venture for allocated overhead
and administrative expenses during the three and nine month periods ended
September 30, 1997 were $261,181 and $820,926, respectively, compared to
$276,166 and $871,311, respectively, for the three and nine month periods ended
September 30, 1996.
The Supervising General Partner may also be reimbursed for certain expenses
incurred on behalf of the Venture. There were no reimbursements made to the
Supervising General Partner for allocated overhead and administrative expenses
during the three and nine month periods ended September 30, 1997 and 1996.
(3) Certain prior year amounts have been reclassified to conform to the 1997
presentation.
6
IDS/JONES GROWTH PARTNERS II, L. P.
-----------------------------------
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
FINANCIAL CONDITION
- -------------------
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. The Venture owns the Aurora System. The accompanying
financial statements include the accounts of the Partnership and the Venture,
reduced by the 34 percent minority interest in the Venture.
It is JIC's publicly announced policy that it intends to liquidate its
managed partnerships, including the Partnership, as opportunities for sales of
partnership cable television systems arise in the marketplace over the next
several years. In accordance with JIC's policy, the Aurora System has been
marketed for sale and JIC is continuing to seek out opportunities to sell the
Aurora System. There is no assurance as to the timing or terms of any sales.
For the nine months ended September 30, 1997, the Venture generated net
cash from operating activities totaling $2,103,596, which is available to fund
capital expenditures and non-operating costs. During the first nine months of
1997, the Venture expended approximately $2,932,000 on capital expenditures.
Approximately 49 percent of the expenditures related to construction of service
drops to subscriber homes. Approximately 36 percent of the expenditures related
to plant extensions. The remaining expenditures were used to maintain the value
of the Aurora System. Funding for these expenditures was provided by cash
generated from operations and borrowings from the Venture's credit facility.
Anticipated capital expenditures for the remainder of 1997 are approximately
$1,158,000. Approximately 72 percent of the anticipated capital expenditures is
for plant extensions. Approximately 17 percent of the expenditures is for
converters. The remainder of anticipated expenditures is necessary to maintain
the value of the Aurora System until it is sold. Funding for these expenditures
is expected to be provided by cash generated from operations and, if necessary,
borrowings from the Venture's credit facility.
On December 5, 1991, JIC made a $1,800,000 loan to the Venture, of which
$1,200,000 had been repaid as of September 30, 1997. Any amounts not repaid to
JIC are convertible into equity in the Venture at JIC's option. 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 31, 1994 and IDS
Management Corporation made a loan of $1,000,000 to the Venture to fund
principal repayments due on March 31, 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 loan is 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 cash generated from operations and borrowings from the Venture's
revolving credit and term loan. The related parties' notes will be repaid
including accrued interest in the following order: first, to JIC the remaining
$600,000 of the $1,800,000 note dated December 5, 1991; second, to IDS
Management Corporation the $1,000,000 note dated March 30, 1994; and third, to
JIC the $1,406,647 subordinated advance.
The Venture is a party to a $47,000,000 revolving credit and term loan
agreement with commercial banks. The agreement allows for a reducing revolving
commitment that will begin to reduce quarterly on June 30, 1999 until December
31, 1999, at which time the commitment will reduce to zero and all principal and
interest amounts will be due and payable in full. At September 30, 1997,
$46,400,000 was outstanding under this agreement, leaving $600,000 available for
future needs of the Venture, subject to certain financial covenants that may
limit borrowing. Interest on the credit facility is at the Venture's option of
the Prime Rate plus .625 percent, the London Interbank Offered Rate plus 1.625
percent or the Certificate of Deposit Rate plus 1.75 percent. The effective
interest rates on outstanding obligations to non-affiliates as of September 30,
1997 and 1996 were 7.32 percent and 7.41 percent, respectively.
7
RESULTS OF OPERATIONS
---------------------
Revenues of the Venture's Aurora System increased $255,669, or
approximately 6 percent, to $4,855,813 for the three month period ended
September 30, 1997 compared to $4,600,144 for the comparable 1996 period.
Revenues increased $855,185, or approximately 6 percent, to $14,497,368 for the
nine months ended September 30, 1997 compared to $13,642,183 for the comparable
1996 period. Increases in basic service revenues primarily accounted for the
increases in revenues for the three and nine month periods ended September 30,
1997. Basic service rate increases accounted for approximately 48 percent and
44 percent, respectively, of the increases in revenues for the three and nine
month periods ended September 30, 1997. Increases in the number of basic
service subscribers accounted for approximately 52 percent and 56 percent,
respectively, of the increases in revenues for the three and nine month periods.
The number of basic service subscribers increased 2,722, or approximately 6
percent, to 48,611 at September 30, 1997 compared to 45,889 at September 30,
1996. No other individual factor was significant to the increases in revenues.
Operating expenses consist primarily of costs associated with the operation
and 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 marketing expenses.
Operating expenses decreased $49,900, or approximately 2 percent, to
$2,628,395 for the three month period ended September 30, 1997 compared to
$2,678,295 for the comparable 1996 period. Decreases in marketing and
advertising expenses primarily accounted for the decrease in operating expenses
for the three month period. Operating expenses increased $94,985, or
approximately 1 percent, to $8,028,851 for the nine months ended September 30,
1997 compared to $7,933,866 for the comparable 1996 period. Increases in
programming fees primarily accounted for the increase in operating expenses for
the nine month period. Operating expenses represented 54 percent and 58
percent, respectively, of revenues for the three month periods ended September
30, 1997 and 1996, and 55 percent and 58 percent, respectively, for the nine
month periods ended September 30, 1997 and 1996.
The cable television industry generally measures the financial performance
of a cable television system in terms of operating cash flow (revenues less
operating expenses). 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 cash flow increased
$305,569, or approximately 16 percent, to $2,227,418 for the three month period
ended September 30, 1997 compared to $1,921,849 for the comparable 1996 period.
The increase for the three month period was due to the increase in revenues and
the decrease in operating expenses. Operating cash flow increased $760,200, or
approximately 13 percent, to $6,468,517 for the nine months ended September 30,
1997 compared to $5,708,317 for the comparable 1996 period. The increase for
the nine month period was due to the increase in revenues exceeding the increase
in operating expenses.
Management and supervision fees and allocated overhead from the General
Partners decreased $924, or less than 1 percent, to $528,250 for the three month
period ended September 30, 1997 compared to $529,174 for the comparable 1996
period. Management and supervision fees and allocated overhead from the General
Partners decreased $3,350, or less than 1 percent, to $1,618,281 for the nine
months ended September 30, 1997 compared to $1,621,631 for the comparable 1996
period. Although management and supervision fees increased, due primarily to
the increase in revenues upon which management and supervision fees are based,
allocated overhead from the General Partners decreased, which was primarily due
to the timing of certain expenses allocated from the General Partners.
Depreciation and amortization expense decreased $458,040, or approximately
19 percent, to $2,017,835 for the three month period ended September 30, 1997
compared to $2,475,875 for the comparable 1996 period. Depreciation and
amortization expense decreased $566,360, or approximately 8 percent, to
$6,816,498 for the nine months ended September 30, 1997 compared to $7,382,858
for the comparable 1996 period. These decreases were due to the maturation of a
portion of the intangible asset base.
Operating loss decreased $764,533, or approximately 71 percent, to $318,667
for the three month period ended September 30, 1997 compared to $1,083,200 for
the similar 1996 period. Operating loss decreased $1,329,910, or approximately
40 percent, to $1,966,262 for the nine months ended September 30, 1997 compared
to $3,296,172 in 1996. These decreases for the three and nine month periods
were due to the increases in operating cash flow and the decreases in
depreciation and amortization expense.
8
Interest expense increased $50,214, or approximately 5 percent, to
$1,002,985 for the three month period ended September 30, 1997 compared to
$952,771 for the comparable 1996 period. Interest expense increased $46,015, or
approximately 2 percent, to $2,828,040 for the nine months ended September 30,
1997 compared to $2,782,025 for the comparable 1996 period. The increases were
due to higher outstanding balances on interest bearing obligations.
Consolidated loss decreased $783,911, or approximately 38 percent, to
$1,293,626 for the three month period ended September 30, 1997 compared to
$2,077,537 for the comparable 1996 period. Consolidated loss decreased
$1,335,867, or approximately 22 percent, to $4,779,717 for the nine months ended
September 30, 1997 compared to $6,115,584 for the comparable 1996 period. These
decreases were due to the factors discussed above and are expected to continue
in future periods.
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
10
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
--------------------------------
Kevin P. Coyle
Group Vice President/Finance
(Principal Financial Officer)
Dated: November 12, 1997
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