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
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Commission File Number: 0-16183
IDS/JONES GROWTH PARTNERS 87-A, LTD.
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Exact name of registrant as specified in charter
Colorado 84-1060544
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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
------------------------------------
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 87-A, LTD.
------------------------------------
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
------------------------
September 30, December 31,
ASSETS 1997 1996
- ------ -------------- -------------
CASH $ 368,058 $ 478,797
TRADE RECEIVABLES, less allowance for
doubtful receivables of $34,906 and $32,637
at September 30, 1997 and December 31, 1996,
respectively 334,851 373,301
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 17,394,979 16,234,764
Less- accumulated depreciation (8,083,489) (7,195,326)
----------- -----------
9,311,490 9,039,438
Franchise costs and other intangible assets, net of
accumulated amortization of $12,636,869 and
$12,551,102 at September 30, 1997 and
December 31, 1996, respectively 2,564,681 2,650,448
----------- -----------
Total investment in cable television properties 11,876,171 11,689,886
DEPOSITS, PREPAID EXPENSES AND OTHER ASSETS 652,329 185,611
----------- -----------
Total assets $13,231,409 $12,727,595
=========== ===========
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
2
IDS/JONES GROWTH PARTNERS 87-A, LTD.
------------------------------------
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
------------------------
September 30, December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1997 1996
- ------------------------------------------- -------------- -------------
LIABILITIES:
Debt $ 10,000,000 $ 9,850,000
Managing General Partner advances 235,245 43,813
Trade accounts payable and accrued liabilities 478,260 349,695
Subscriber prepayments 30,638 23,086
------------ ------------
Total liabilities 10,744,143 10,266,594
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General Partners-
Contributed capital 500 500
Accumulated deficit (3,593) (3,856)
------------ ------------
(3,093) (3,356)
------------ ------------
Limited Partners-
Net contributed capital (164,178 units
outstanding at September 30, 1997 and
December 31, 1996) 35,824,200 35,824,200
Accumulated deficit (3,333,841) (3,359,843)
Distributions (30,000,000) (30,000,000)
------------ ------------
2,490,359 2,464,357
------------ ------------
Total liabilities and partners' capital (deficit) $ 13,231,409 $ 12,727,595
============ ============
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
3
IDS/JONES GROWTH PARTNERS 87-A, LTD.
------------------------------------
(A Limited Partnership)
UNAUDITED STATEMENTS OF OPERATIONS
----------------------------------
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
-------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- -----------
REVENUES $1,985,086 $1,820,069 $5,796,023 $ 6,649,872
COSTS AND EXPENSES:
Operating expenses 1,153,796 1,084,676 3,478,545 4,133,452
Management fees and allocated overhead
from General Partners 227,515 214,590 695,868 815,814
Depreciation and amortization 349,441 279,754 1,009,236 1,471,847
---------- ---------- ---------- -----------
OPERATING INCOME 254,334 241,049 612,374 228,759
---------- ---------- ---------- -----------
OTHER INCOME (EXPENSE):
Interest expense (178,490) (163,629) (517,631) (585,258)
Gain on sale of cable television system - - - 21,096,325
Other, net (3,851) (38,647) (68,478) 2,615
---------- ---------- ---------- -----------
Total other income (expense) (182,341) (202,276) (586,109) 20,513,682
---------- ---------- ---------- -----------
NET INCOME $ 71,993 $ 38,773 $ 26,265 $20,742,441
========== ========== ========== ===========
ALLOCATION OF NET INCOME:
General Partners $ 710 $ 388 $ 263 $ 241,805
========== ========== ========== ===========
Limited Partners $ 71,283 $ 38,385 $ 26,002 $20,500,636
========== ========== ========== ===========
NET INCOME PER LIMITED
PARTNERSHIP UNIT $.43 $.23 $.16 $124.87
========== ========== ========== ===========
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 164,178 164,178 164,178 164,178
========== ========== ========== ===========
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
4
IDS/JONES GROWTH PARTNERS 87-A, LTD.
------------------------------------
(A Limited Partnership)
UNAUDITED STATEMENTS OF CASH FLOWS
----------------------------------
For the Nine Months Ended
September 30,
---------------------------
1997 1996
------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 26,265 $ 20,742,441
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,009,236 1,471,847
Gain on sale of cable television system - (21,096,325)
Decrease in trade receivables 38,450 346,163
Increase in deposits, prepaid expenses and
deferred charges (502,024) (196,317)
Increase (decrease) in trade accounts payable,
accrued liabilities and subscriber prepayments 136,117 (896,903)
----------- ------------
Net cash provided by operating activities 708,044 370,906
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,160,215) (1,419,289)
Proceeds from sale of cable television system - 44,235,333
----------- ------------
Net cash provided by (used in) investing activities (1,160,215) 42,816,044
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 350,000 9,895,965
Repayment of debt (200,000) (23,027,192)
Distribution to Limited Partners - (30,000,000)
Increase (decrease) in Managing General Partner
advances 191,432 (448,872)
----------- ------------
Net cash provided by (used in) financing activities 341,432 (43,580,099)
----------- ------------
Decrease in cash (110,739) (393,149)
Cash, beginning of period 478,797 557,506
----------- ------------
Cash, end of period $ 368,058 $ 164,357
=========== ============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 575,256 $ 878,928
=========== ============
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
5
IDS/JONES GROWTH PARTNERS 87-A, LTD.
------------------------------------
(A Limited Partnership)
NOTES TO UNAUDITED 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 87-A, Ltd.
(the "Partnership") at September 30, 1997 and December 31, 1996, its results of
operations for the three and nine month periods ended September 30, 1997 and
1996 and its cash flows for the nine months 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 Partnership owns and operates the cable television system serving the
areas in and around Roseville, California (the "Roseville System").
(2) On October 14, 1996, the Partnership entered into an asset purchase
agreement pursuant to which it agreed to sell the Roseville System to an
unaffiliated party (the "Purchaser"). This agreement has been amended to extend
the outside closing date to December 15, 1997. The sales price is $30,983,500,
including $83,500 attributable to revenue and subscriber adjustments, and is
subject to customary closing adjustments. The sale was approved by the holders
of a majority of the limited partnership interests in the Partnership. Closing
of the sale nevertheless is still subject to a material closing condition.
Because the Purchaser is affiliated with the company that provides telephone
services in the geographical area in which the Roseville System provides cable
television services, a waiver from the Federal Communications Commission (the
"FCC") of Section 652 of the Telecommunications Act of 1996, which prohibits the
acquisition by a telephone company and its affiliates of cable systems in the
telephone company's service area, is necessary to permit the Purchaser to
consummate the purchase of the Roseville System. The Purchaser is actively
seeking this waiver from the FCC but there can be no assurance if or when the
waiver will be granted. If the FCC denies the waiver request, the closing may
not occur until such decision is appealed and reversed or at all.
If the proposed sale of the Roseville System closes by December 15, 1997,
the Partnership will pay all of its indebtedness, which totaled $10,000,000 at
September 30, 1997, a brokerage fee of $387,294 to The Jones Group, Ltd., a
wholly owned subsidiary of Jones Intercable, Inc. ("Intercable") and a brokerage
fee of $387,294 to IDS Management Corporation, an affiliate of the Supervising
General Partner. For a period of one year following the closing date,
$1,550,000 of the sale proceeds will remain in escrow as security for the
Partnership's agreement to indemnify the Purchaser under the asset purchase
agreement. Because the $1,550,000 will remain in escrow for one year following
the closing date, this portion of the net sales proceeds, net of claims against
such escrow, will not be distributed to limited partners until late 1998, if at
all. If the sale closes, the Partnership will distribute the approximate
$18,945,472 remaining net proceeds to its limited partners. This distribution
would give the Partnership's limited partners an approximate return of $462 per
$1,000 invested in the Partnership. Taking into account the prior distribution
to limited partners made on the sale of the Partnership's Carmel, Indiana system
in 1996 and the anticipated distribution to be made on the sale of the Roseville
System in 1997, the limited partners are expected to receive a total of $1,193
for each $1,000 invested in the Partnership. Because the limited partners will
receive total distributions that are less than 125 percent of their initial
capital contributions, the general partners of the Partnership will receive no
general partner distributions from the Partnership. Upon the completion of the
escrow period related to the sale of the Roseville System, the Partnership will
distribute the remaining proceeds to limited partners, which, if no claims are
made against the escrow, would total approximately $38 for each $1,000 invested
in the Partnership and then the Partnership will be dissolved.
(3) Jones Cable Corporation (the "Managing General Partner"), a wholly owned
subsidiary of Intercable, manages the Partnership and receives a fee for its
services equal to 5 percent of the gross revenues of the Partnership, excluding
revenues from the sale of cable television systems or franchises. Management
fees paid to the Managing General Partner by the Partnership for the three and
nine month periods ended September 30, 1997 were $99,254 and $289,801,
respectively, compared to $91,003 and $332,494, respectively, for the three and
nine month periods ended September 30, 1996.
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IDS Cable Corporation (the "Supervising General Partner") participates in
certain management decisions of the Partnership and receives a fee for its
services equal to one-half percent of the gross revenues of the Partnership,
excluding revenue from the sale of cable television systems or franchises.
Supervision fees paid to the Supervising General Partner by the Partnership for
the three and nine month periods ended September 30, 1997 were $9,925 and
$28,980, respectively, compared to $9,100 and $33,249, respectively, for the
three and nine month periods ended September 30, 1996.
The Partnership reimburses Intercable 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
Partnership. Such services, and their related costs, are necessary to the
operations of the Partnership and would have been incurred by the Partnership if
it was a stand alone entity. Allocations of personnel costs are based primarily
on actual time spent by employees of Intercable with respect to each partnership
managed. Remaining overhead costs are allocated based on revenues of the
Partnership as a percentage of total revenues of owned and managed partnerships
of Intercable. 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 Managing General Partner believes
that the methodology used in allocating overhead and administrative expense is
reasonable. Reimbursements made to Intercable by the Partnership for allocated
overhead and administrative expenses during the three and nine month periods
ended September 30, 1997 were $118,336 and $377,087, respectively, compared to
$114,487 and $450,071, respectively, for the three and nine month periods ended
September 30, 1996.
The Supervising General Partner also may be reimbursed for certain expenses
incurred on behalf of the Partnership. There were no reimbursements made to the
Supervising General Partner by the Partnership for allocated overhead and
administrative expenses during the three and nine month periods ended September
30, 1997 and 1996.
(4) Certain prior year amounts have been reclassified to conform to the 1997
presentation.
7
IDS/JONES GROWTH PARTNERS 87-A, LTD.
------------------------------------
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
FINANCIAL CONDITION
- -------------------
On October 14, 1996, the Partnership entered into an asset purchase
agreement pursuant to which it agreed to sell the Roseville System to an
unaffiliated party (the "Purchaser"). This agreement has been amended to extend
the outside closing date to December 15, 1997. The sales price is $30,983,500,
including $83,500 attributable to revenue and subscriber adjustments, and is
subject to customary closing adjustments. The sale was approved by the holders
of a majority of the limited partnership interests in the Partnership. Closing
of the sale nevertheless is still subject to a material closing condition.
Because the Purchaser is affiliated with the company that provides telephone
services in the geographical area in which the Roseville System provides cable
television services, a waiver from the Federal Communications Commission (the
"FCC") of Section 652 of the Telecommunications Act of 1996, which prohibits the
acquisition by a telephone company and its affiliates of cable systems in the
telephone company's service area, is necessary to permit the Purchaser to
consummate the purchase of the Roseville System. The Purchaser is actively
seeking this waiver from the FCC but there can be no assurance if or when the
waiver will be granted. If the FCC denies the waiver request, the closing may
not occur until such decision is appealed and reversed or at all.
If the proposed sale of the Roseville System closes by December 15, 1997,
the Partnership will pay all of its indebtedness, which totaled $10,000,000 at
September 30, 1997, a brokerage fee of $387,294 to The Jones Group, Ltd., a
wholly owned subsidiary of Jones Intercable, Inc. ("Intercable") and a brokerage
fee of $387,294 to IDS Management Corporation, an affiliate of the Supervising
General Partner. For a period of one year following the closing date,
$1,550,000 of the sale proceeds will remain in escrow as security for the
Partnership's agreement to indemnify the Purchaser under the asset purchase
agreement. Because the $1,550,000 will remain in escrow for one year following
the closing date, this portion of the net sales proceeds, net of claims against
such escrow, will not be distributed to limited partners until late 1998, if at
all. If the sale closes, the Partnership will distribute the approximate
$18,945,472 remaining net proceeds to its limited partners. This distribution
would give the Partnership's limited partners an approximate return of $462 per
$1,000 invested in the Partnership. Taking into account the prior distribution
to limited partners made on the sale of the Partnership's Carmel, Indiana system
in 1996 and the anticipated distribution to be made on the sale of the Roseville
System in 1997, the limited partners are expected to receive a total of $1,193
for each $1,000 invested in the Partnership. Because the limited partners will
receive total distributions that are less than 125 percent of their initial
capital contributions, the general partners of the Partnership will receive no
general partner distributions from the Partnership. Upon the completion of the
escrow period related to the sale of the Roseville System, the Partnership will
distribute the remaining proceeds to limited partners, which, if no claims are
made against the escrow, would total approximately $38 for each $1,000 invested
in the Partnership and then the Partnership will be dissolved.
For the nine months ended September 30, 1997, the Partnership generated net
cash from operating activities totaling approximately $708,044. The Partnership
expended approximately $1,160,000 in capital improvements during the first nine
months of 1997. Of these improvements, approximately 56 percent related to
plant extensions. Approximately 24 percent related to service drops to homes.
The remainder of the expenditures was used to maintain the value of the
Roseville System. Funding for these expenditures was provided by cash on hand,
cash generated from operations, borrowings under the Partnership's credit
facility and advances from the Managing General Partner. Budgeted capital
expenditures for the remainder of 1997 in the Partnership's Roseville System are
approximately $321,000. Plant extensions will account for approximately 42
percent of these expenditures. Service drops to homes will account for
approximately 36 percent of the anticipated expenditures. The remainder of the
anticipated expenditures is necessary to maintain the value of the Roseville
System until it is sold. Funding for these expenditures is expected to be
provided by cash on hand, cash generated from operations and, if necessary and
in its discretion, advances from the Managing General Partner.
At September 30, 1997, the outstanding balance was the maximum of
$10,000,000. The reducing revolving credit period expires December 31, 2003.
The commitment amount reduces quarterly, beginning March 31, 1999. The credit
facility will be repaid in full if and when the sale of the Roseville System is
closed. Interest on the revolving credit
8
facility is at the Partnership's option of the Prime Rate or the London
Interbank Offered Rate plus 1-1/4 percent. The effective interest rates on
amounts outstanding as of September 30, 1997 and 1996 were 6.94 and 6.75,
respectively.
The Partnership believes that cash on hand, cash generated from operations
and, if necessary and in its discretion, advances from the Managing General
Partner will be sufficient to fund capital expenditures and other liquidity
needs of the Partnership until the Roseville System is sold.
RESULTS OF OPERATIONS
- ---------------------
The Partnership sold its Carmel System in February 1996. The following
discussion of the Partnership's results of operations, through operating income,
pertains only to the results of operations of the Roseville System for all
periods discussed.
Revenues of the Roseville System increased $165,017, or approximately 9
percent, to $1,985,086 for the three month period ended September 30, 1997 from
$1,820,069 for the similar period in 1996. Revenues increased $504,120, or
approximately 10 percent, to $5,796,023 for the nine month period ended
September 30, 1997 from $5,291,903 for the similar period in 1996. Increases in
the number of basic subscribers in the Partnership's Roseville System accounted
for approximately 50 and 54 percent, respectively, of the increase in revenues
for the three and nine month periods ended September 30, 1997. The number of
basic subscribers in the Roseville System increased by 1,244 subscribers, or
approximately 7 percent, to 18,819 subscribers at September 30, 1997 from 17,575
subscribers for the similar period in 1996. Basic service rate increases
accounted for approximately 49 and 46 percent, respectively, of the increase in
revenues for the three and nine month periods ended September 30, 1997. No
other single factor significantly contributed to the increase in revenues.
Operating expenses consist primarily of costs associated with the operation
and administration of the Partnership's Roseville 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 increased $69,120, or approximately 6 percent, to
$1,153,796 for the three month period ended September 30, 1997 from $1,084,676
for the similar period in 1996. Operating expenses increased $280,695, or
approximately 9 percent, to $3,478,545 for the nine month period ended September
30, 1997 from $3,197,850 for the similar period in 1996. These increases were
primarily due to increases in programming fees. No other single factor
significantly affected the increase in operating expenses. Operating expenses
represented 58 and 60 percent, respectively, of revenues for the three month
periods ended September 30, 1997 and 1996, and 60 percent for both 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
$95,897, or approximately 13 percent, to $831,290 for the three months ended
September 30, 1997 compared to $735,393 for the similar 1996 period. Operating
cash flow increased $223,425, or approximately 11 percent, to $2,317,478 for the
nine months ended September 30, 1997 compared to $2,094,053 for the similar 1996
period. These increases were the result of the increases in revenues exceeding
the increases in operating expenses.
Management fees and allocated overhead from the General Partners increased
$12,925, or approximately 6 percent, to $227,515 for the three month period
ended September 30, 1997 from $214,590 for the similar period in 1996.
Management fees and allocated overhead from the General Partner increased
$49,437, or approximately 8 percent, to $695,868 for the nine month period ended
September 30, 1997 from $646,431 for the similar period in 1996. These
increases were due to the increases in revenues, upon which such management fees
and allocations are based.
Depreciation and amortization expense increased $69,687, or approximately
25 percent, to $349,441 for the three month period ended September 30, 1997 from
$279,754 for the similar period in 1996. This increase was due to an increase
in the Partnership's asset base. Depreciation and amortization expense
decreased $16,382, or approximately 2 percent, to $1,009,236 for the nine month
period ended September 30, 1997 from $1,025,618 for the similar period in 1996.
This decrease was primarily due to the maturation of a portion of the
Partnership's asset base.
9
Operating income increased $13,285, or approximately 6 percent, to $254,334
for the three month period ended September 30, 1997 from $241,049 for the
similar period in 1996. This increase was due to the increase in operating cash
flow exceeding the increase in depreciation and amortization expense. Operating
income increased $190,370, or approximately 45 percent, to $612,374 for the nine
month period ended September 30, 1997 compared to $422,004 for the similar
period in 1996. This increase was due to the increase in operating cash flow and
decrease in depreciation and amortization expense.
Interest expense of the Partnership increased $14,861, or approximately 9
percent, to $178,490 for the three month period ended September 30, 1997 from
$163,629 for the similar period in 1996. This increase was due to higher
effective interest rates and higher outstanding balances. Interest expense of
the Partnership decreased $67,627, or approximately 12 percent, to $517,631 for
the nine month period ended September 30, 1997 from $585,258 for the similar
period in 1996. This decrease was a result of lower outstanding balances on the
Partnership's interest bearing obligations.
The Partnership reported a gain on the sale of its Carmel System of
$21,096,325 for the nine month period ended September 30, 1996. No similar gain
was reported in 1997.
The Partnership reported net income of $71,993 for the three months ended
September 30, 1997 compared to net income of $38,773 for the similar 1996
period. This change was due to the factors discussed above. The Partnership
reported net income of $26,265 for the nine months ended September 30, 1997
compared to net income of $20,742,441 for the similar 1996 period. This change
was primarily due to the gain on the sale of the Carmel System.
10
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The sale of the Roseville System was subject to the approval of the holders of a
majority of the limited partnership interests in the Partnership. Limited
partners of record at the close of business on May 30, 1997 were entitled to
notice of, and to participate in, this vote of limited partners. A proxy
statement dated June 16, 1997 was mailed to all limited partners of record as of
May 30, 1997 in connection with this vote. Following are the results of the
vote of the limited partners:
No. of
Interests Approved Against Abstained Did Note Vote
Entitled to ----------- --------- --------- -------------
Vote No. % No. % No. % No. %
------------ --- --- --- --- --- --- ---- ---
164,178 88,932 54.2 1,165 0.7 2,000 1.2 72,081 43.9
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
27) Financial Data Schedule
b) Reports on Form 8-K
None
11
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 87-A, LTD.
BY: JONES CABLE CORPORATION
Managing General Partner
By: /S/ Kevin P. Coyle
----------------------------------
Kevin P. Coyle
Group Vice President/Finance
(Principal Financial Officer)
Dated: November 13, 1997
12