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, 1998
----------------
[_] 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 0-17916
JONES GROWTH PARTNERS L.P.
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Exact name of registrant as specified in charter
Colorado 84-1143409
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State of Organization IRS 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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JONES GROWTH PARTNERS L.P.
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(A Limited Partnership)
UNAUDITED BALANCE SHEETS
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March 31, December 31,
ASSETS 1998 1997
------ ------------- -------------
CASH $ 47,277 $ 109,356
TRADE RECEIVABLES, less allowance for doubtful
receivables of $60,887 and $16,173 at March 31, 1998
and December 31, 1997, respectively 445,407 212,268
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 57,895,522 57,002,036
Less- accumulated depreciation (32,506,377) (31,394,808)
------------ ------------
25,389,145 25,607,228
Franchise costs and other intangible assets, net of
accumulated amortization of $66,709,521 and $66,319,098
at March 31, 1998 and December 31, 1997, respectively 10,546,290 10,936,713
------------ ------------
Total investment in cable
television properties 35,935,435 36,543,941
DEPOSITS, PREPAID EXPENSES AND OTHER ASSETS 924,020 705,625
------------ ------------
Total assets $ 37,352,139 $ 37,571,190
============ ============
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
2
JONES GROWTH PARTNERS L.P.
--------------------------
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
------------------------
March 31, December 31,
1998 1997
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LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
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LIABILITIES:
Credit facility and capital lease obligations $ 36,241,496 $ 36,219,526
Trade accounts payable and accrued liabilities 3,011,623 2,512,156
Accrued interest 356,197 381,284
Subscriber prepayments 70,001 220,759
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Total liabilities 39,679,317 39,333,725
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PARTNERS' CAPITAL (DEFICIT):
General Partners-
Contributed capital 1,000 1,000
Accumulated deficit (769,668) (764,022)
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(768,668) (763,022)
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Limited Partners-
Net contributed capital (85,740 units outstanding at
March 31, 1998 and December 31, 1997) 73,790,065 73,790,065
Accumulated deficit (75,348,575) (74,789,578)
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(1,558,510) (999,513)
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Total partners' capital (deficit) (2,327,178) (1,762,535)
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Total liabilities and partners' capital (deficit) $ 37,352,139 $ 37,571,190
============ ============
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
3
JONES GROWTH PARTNERS L.P.
--------------------------
(A Limited Partnership)
UNAUDITED STATEMENTS OF OPERATIONS
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For the Three Months Ended
March 31,
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1998 1997
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REVENUES $6,035,005 $ 5,873,292
COSTS AND EXPENSES:
Operating expenses 3,664,093 3,545,094
Management and supervisory fees to the General
Partners and allocated administrative costs
from the Managing General Partner 699,921 749,341
Depreciation and amortization 1,580,169 2,710,935
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OPERATING INCOME (LOSS) 90,822 (1,132,078)
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OTHER INCOME (EXPENSE):
Interest expense (655,569) (574,348)
Interest income 853 923
Other, net (749) 14,250
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Total other income (expense) net (655,465) (559,175)
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NET LOSS $ (564,643) $(1,691,253)
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ALLOCATION OF NET LOSS:
Managing General Partner $ (5,646) $ (16,913)
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Limited Partners $ (558,997) $(1,674,340)
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NET LOSS PER LIMITED PARTNERSHIP UNIT $(6.52) $(19.53)
========== ===========
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 85,740 85,740
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The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
4
JONES GROWTH PARTNERS L.P.
--------------------------
(A Limited Partnership)
UNAUDITED STATEMENTS OF CASH FLOWS
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For the Three Months Ended
March 31,
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1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (564,643) $(1,691,253)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 1,580,169 2,710,935
Decrease (increase) in trade receivables (233,139) 21,700
Increase in deposits, prepaid expenses
and other assets (296,572) (281,809)
Increase (decrease) in trade accounts payable,
accrued liabilities, accrued interest and
subscriber prepayments 323,622 (83,399)
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Net cash provided by operating activities 809,437 676,174
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (893,486) (711,989)
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Net cash used in investing activities (893,486) (711,989)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 42,005 -
Repayment of borrowings (20,035) (34,030)
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Net cash provided by (used in) financing activities 21,970 (34,030)
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DECREASE IN CASH (62,079) (69,845)
CASH, BEGINNING OF PERIOD 109,356 345,480
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CASH, END OF PERIOD $ 47,277 $ 275,635
========= ==========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 680,656 $ 837,069
========= ==========
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
5
JONES GROWTH PARTNERS L.P.
--------------------------
(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 complete 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 L.P. (the
"Partnership") at March 31, 1998 and December 31, 1997, and its results of
operations and cash flows for the three month periods ended March 31, 1998 and
1997. Results of operations for these periods are not necessarily indicative of
results to be expected for the full year.
The Partnership owns the cable television system serving the municipalities
of Addison, Glen Ellyn, St. Charles, Warrenville, West Chicago, Wheaton,
Winfield and Geneva, and certain portions of unincorporated areas of Du Page and
Kane counties, all in the State of Illinois (the "Wheaton System").
(2) Jones Spacelink Cable Corporation, a wholly owned subsidiary of Jones
Intercable, Inc. ("Intercable"), a Colorado corporation, is the "Managing
General Partner." The Managing General Partner 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 Managing General Partner
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 month periods ended March 31, 1998 and 1997 were
$301,750 and $293,665, respectively.
Growth Partners Inc. (the "Associate General Partner"), an affiliate of
Lehman Brothers Inc., participates with the Managing General Partner in certain
management decisions affecting the Partnership and receives a supervisory fee of
the lesser of 1 percent of the gross revenues of the Partnership, excluding
revenues from the sale of cable television systems or franchises, or $200,000,
accrued monthly and payable annually. Supervisory fees accrued to the Associate
General Partner by the Partnership for the three month periods ended March 31,
1998 and 1997 were $50,000 and $50,000, respectively.
The Partnership reimburses the Managing General Partner and certain of its
affiliates for certain allocated overhead and administrative costs. 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 primarily based upon actual time spent by employees of the
Managing 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 cable
television 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 Managing General Partner believes that the methodology
used in allocating overhead and administrative costs is reasonable.
Reimbursements by the Partnership to the Managing General Partner for allocated
overhead and administrative costs for three month periods ended March 31, 1998
and 1997 were $348,171 and $405,676, respectively.
(3) In April 1998, the Partnership signed a letter of intent to sell the
Wheaton System to an unaffiliated party for a sales price of $103,000,000,
subject to customary closing adjustments. The sale of the Wheaton System is
contingent upon the Partnership and the prospective buyer negotiating a
definitive asset purchase agreement and the consent of the Associate General
Partner, neither of which can be assured. Closing of the sale, which is expected
to occur in the first quarter of 1999, will be subject to several conditions,
including necessary governmental and other third party consents. In addition,
because the Wheaton System constitutes all of the assets of the Partnership, the
sale must be approved by the owners of a majority of the interests of the
Partnership. Upon the proposed sale of the Wheaton System, the Partnership will
repay all of its indebtedness, which totaled $36,241,496 at March 31, 1998,
leaving the Partnership with no debt outstanding, settle working capital
adjustments, and then deposit $3,118,500 into an indemnity escrow account. The
remaining net sale proceeds of approximately $61,600,000 will be distributed to
the Partnership's partners of record as of
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the closing date of the sale of the Wheaton System. Because limited partners
will not receive distributions in an amount equal to 100 percent of the capital
initially contributed to the Partnership by the limited partners plus an amount
equal to 8 percent per annum, cumulative and noncompounded, on an amount equal
to their initial capital contributions, neither the Managing General Partner or
the Associate General Partner will receive a general partner distribution from
the sale of the Wheaton System. Based upon financial information as of March 31,
1998, this distribution will give the Partnership's limited partners an
approximate return of $719 for each $1,000 limited partnership interest.
The $3,118,500 of the sale proceeds to be placed in the indemnity escrow
account will remain in escrow until the fourth quarter of 1999 as security for
the Partnership's agreement to indemnify the buyer under the asset purchase
agreement. The Partnership's primary exposure, if any, will relate to the
representations and warranties to be made about the Wheaton System in the asset
purchase agreement. Any amounts remaining from this indemnity escrow account
and not claimed by the buyer at the end of the escrow period will be distributed
to the Partnership. If the entire $3,118,500 escrow amount is available, the
Partnership would then distribute the $3,118,500 to the limited partners. This
limited partner distribution would represent $36 for each $1,000 limited
partnership interest. The Partnership will continue in existence at least until
any amounts remaining from the indemnity escrow account have been distributed.
Since the Wheaton System represents the only asset of the Partnership, the
Partnership will be liquidated and dissolved upon the final distribution of any
amounts remaining from the indemnity escrow account. If any disputes with
respect to the indemnification arise, the Partnership would not be dissolved
until such disputes were resolved, which could result in the Partnership
continuing in existence beyond 1999.
7
JONES GROWTH PARTNERS L.P.
--------------------------
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
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FINANCIAL CONDITION
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In April 1998, the Partnership signed a letter of intent to sell the
Wheaton System to an unaffiliated party for a sales price of $103,000,000,
subject to customary closing adjustments. The sale of the Wheaton System is
contingent upon the Partnership and the prospective buyer negotiating a
definitive asset purchase agreement and the consent of the Associate General
Partner, neither of which can be assured. Closing of the sale, which is expected
to occur in the first quarter of 1999, will be subject to several conditions,
including necessary governmental and other third party consents. In addition,
because the Wheaton System constitutes all of the assets of the Partnership, the
sale must be approved by the owners of a majority of the interests of the
Partnership. Upon the proposed sale of the Wheaton System, the Partnership will
repay all of its indebtedness, which totaled $36,241,496 at March 31, 1998,
leaving the Partnership with no debt outstanding, settle working capital
adjustments, and then deposit $3,118,500 into an indemnity escrow account. The
remaining net sale proceeds of approximately $61,600,000 will be distributed to
the Partnership's partners of record as of the closing date of the sale of the
Wheaton System. Because limited partners will not receive distributions in an
amount equal to 100 percent of the capital initially contributed to the
Partnership by the limited partners plus an amount equal to 8 percent per annum,
cumulative and noncompounded, on an amount equal to their initial capital
contributions, neither the Managing General Partner or the Associate General
Partner will receive a general partner distribution from the sale of the Wheaton
System. Based upon financial information as of March 31, 1998, this distribution
will give the Partnership's limited partners an approximate return of $719 for
each $1,000 limited partnership interest.
The $3,118,500 of the sale proceeds to be placed in the indemnity escrow
account will remain in escrow until the fourth quarter of 1999 as security for
the Partnership's agreement to indemnify the buyer under the asset purchase
agreement. The Partnership's primary exposure, if any, will relate to the
representations and warranties to be made about the Wheaton System in the asset
purchase agreement. Any amounts remaining from this indemnity escrow account
and not claimed by the buyer at the end of the escrow period will be distributed
to the Partnership. If the entire $3,118,500 escrow amount is available, the
Partnership would then distribute the $3,118,500 to the limited partners. This
limited partner distribution would represent $36 for each $1,000 limited
partnership interest. The Partnership will continue in existence at least until
any amounts remaining from the indemnity escrow account have been distributed.
Since the Wheaton System represents the only asset of the Partnership, the
Partnership will be liquidated and dissolved upon the final distribution of any
amounts remaining from the indemnity escrow account. If any disputes with
respect to the indemnification arise, the Partnership would not be dissolved
until such disputes were resolved, which could result in the Partnership
continuing in existence beyond 1999.
For the three months ended March 31, 1998, the Partnership generated net
cash from operating activities totaling $809,437, which is available to fund
capital expenditures and non-operating costs. During the first three months of
1998, the Partnership expended approximately $893,000 for capital expenditures
for the Wheaton System. Approximately 47 percent of these expenditures related
to cable, hardware and labor for new subscriber installations. Approximately 35
percent of these expenditures related to the extension of cable plant associated
with new homes passed. Approximately 8 percent was for the purchase of
converters. The remainder was for other capital expenditures to maintain the
value of the Wheaton System. Such expenditures were financed by cash on hand
and cash from operations. Capital expenditures for the remainder of 1998 are
expected to be approximately $3,357,000 which are expected to be financed from
available cash balances and cash flow from operations. For the remainder of
1998, approximately 37 percent of the capital expenditures will relate to cable,
hardware and labor for additional subscriber installations and approximately 31
percent of these expenditures will relate to the extension of cable plant
associated with new homes passed. The remainder of the anticipated expenditures
is for other capital expenditures necessary to maintain the value of the Wheaton
System until it is sold.
Ameritech, which provides telephone service in a multi-state region,
including Illinois, is providing cable television service in a portion of the
Wheaton System. This competition has had an adverse effect on the Wheaton
System's revenues and cash flow. The Managing General Partner is taking prudent
steps necessary to meet this competition from Ameritech.
8
The Partnership has a $36,000,000 revolving credit facility with the entire
commitment available through March 31, 1999, at which time the commitment will
be reduced quarterly until December 31, 1999 when the commitment will reduce to
zero and will be payable in full. At March 31, 1998, the maximum of $36,000,000
was outstanding under the revolving credit facility. The outstanding balance of
the revolving credit facility will be repaid in full upon the sale of the
Wheaton System. Interest on the outstanding principal balance is at the
Partnership's option of the Prime Rate plus 1/8 percent or the London Interbank
Offered Rate plus 1 percent. The effective interest rates on amounts
outstanding as of March 31, 1998 and 1997 were 6.63 percent and 6.57 percent,
respectively.
The Partnership has cash on hand, cash generated from operations and, if
necessary and in its discretion, advances from the Managing General Partner to
meet the liquidity needs of the Partnership.
RESULTS OF OPERATIONS
- ---------------------
Revenues of the Partnership for the three months ended March 31, 1998
increased $161,713, or approximately 3 percent, to $6,035,005 for the three
months ended March 31, 1998 compared to $5,873,292 in 1997. An increase in
basic service rates accounted for approximately 84 percent of the increase in
revenues. No other individual factor significantly affected the increase in
revenues for the period. This increase would have been higher except for the
Wheaton System's competition from Ameritech.
Operating expenses consist primarily of costs associated with the
administration of the Partnership's cable television system. The principal cost
components are salaries paid to system personnel, programming expenses,
professional fees, subscriber billing costs, rent for leased facilities, cable
maintenance expenses and marketing expenses.
Operating expenses increased $118,999, or approximately 3 percent, to
$3,664,093 for the three months ended March 31, 1998 from $3,545,094 in 1997.
The increase in operating expenses was primarily the result of increases in
programming fees. No other individual factor significantly affected the
increase in operating expenses for the period. Operating expenses represented
approximately 61 percent of revenues in 1998 and 60 percent of revenues in 1997.
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
$42,714, or approximately 2 percent, to $2,370,912 for the three months ended
March 31, 1998 from $2,328,198 for the comparable period in 1997. This increase
was a result of the increase in revenues exceeding the increase in operating
expenses.
Management and supervisory fees to the Managing and Associate General
Partners and allocated administrative costs from the Managing General Partner
decreased $49,420, or approximately 7 percent, to $699,921 for the three months
ended March 31, 1998 from $749,341 for the comparable period in 1997. This
decrease was primarily the result of a decrease in allocated administrative
costs from the Managing General Partner.
Depreciation and amortization expense decreased $1,130,766, or
approximately 42 percent, to $1,580,169 for the three months ended March 31,
1998 compared to $2,710,935 for the comparable period in 1997. This decrease
was the result of the maturation of a portion of the asset base.
The Partnership had operating income of $90,822 for the three months ended
March 31, 1998 compared to an operating loss of $1,132,078 for the comparable
period in 1997. This change was due to the increase in operating cash flow and
the decreases in allocated administrative costs from the Managing General
Partner and depreciation and amortization expense.
Interest expense increased $81,221, or approximately 14 percent, to
$655,569 for the three months ended March 31, 1998 from $574,348 for the
comparable period in 1997. This increase in interest expense was primarily due
to higher effective interest rates on interest-bearing obligations.
Net loss decreased $1,126,610, or approximately 67 percent, to $564,643 for
the three months ended March 31, 1998 from $1,691,253 for the comparable period
in 1997. This decrease was the result of the factors discussed above.
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
Report on Form 8-K dated April 8, 1998, reported that on April 8,
1998, Jones Spacelink Cable Corporation, the managing general partner
of the Partnership, executed a letter of intent on behalf of the
Partnership to sell the Wheaton System to an unaffiliated third party.
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of l934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JONES GROWTH PARTNERS L.P.
a Colorado limited partnership
BY: Jones Spacelink Cable Corporation
By: /S/ Kevin P. Coyle
----------------------------------------
Kevin P. Coyle
Vice President/Finance
(Principal Financial Officer)
Dated: May 13, 1998
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