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, 1998
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[_] 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 0-17916
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.
--------------------------
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
------------------------
September 30, December 31,
ASSETS 1998 1997
------ -------------- -------------
CASH $ 184,609 $ 109,356
TRADE RECEIVABLES, less allowance for doubtful
receivables of $60,974 and $16,173 at September 30, 1998
and December 31, 1997, respectively 301,688 212,268
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 60,768,471 57,002,036
Less- accumulated depreciation (34,885,532) (31,394,808)
------------ ------------
25,882,939 25,607,228
Franchise costs and other intangible assets, net of
accumulated amortization of $67,829,564 and
$66,319,098 at September 30, 1998 and December 31, 1997,
respectively 9,426,247 10,936,713
------------ ------------
Total investment in cable television properties 35,309,186 36,543,941
DEPOSITS, PREPAID EXPENSES AND OTHER ASSETS 595,685 705,625
------------ ------------
Total assets $ 36,391,168 $ 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
------------------------
September 30, December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1998 1997
- ------------------------------------------- ------------- -------------
LIABILITIES:
Credit facility and other debt $ 36,221,252 $ 36,219,526
Accounts payable and accrued liabilities 3,548,300 2,512,156
Accrued interest 376,090 381,284
Subscriber prepayments 68,320 220,759
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Total liabilities 40,213,962 39,333,725
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PARTNERS' CAPITAL (DEFICIT):
General Partners-
Contributed capital 1,000 1,000
Accumulated deficit (784,625) (764,022)
------------ ------------
(783,625) (763,022)
------------ ------------
Limited Partners-
Net contributed capital (85,740 units outstanding at
September 30, 1998 and December 31, 1997) 73,790,065 73,790,065
Accumulated deficit (76,829,234) (74,789,578)
------------ ------------
(3,039,169) (999,513)
------------ ------------
Total partners' capital (deficit) (3,822,794) (1,762,535)
------------ ------------
Total liabilities and partners' capital (deficit) $ 36,391,168 $ 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 For the Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
1998 1997 1998 1997
------------ ----------- ----------- -----------
REVENUES $6,306,176 $ 5,826,658 $18,578,044 $17,761,928
COSTS AND EXPENSES:
Operating expenses 3,796,708 3,491,230 11,234,109 10,732,033
Management and supervisory fees to the
General Partners and allocated administrative
costs from the Managing General Partner 716,512 654,607 2,150,153 2,058,567
Depreciation and amortization 1,873,028 2,802,310 5,251,058 8,278,749
---------- ----------- ----------- -----------
OPERATING LOSS (80,072) (1,121,489) (57,276) (3,307,421)
---------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (697,723) (688,732) (1,982,953) (1,890,597)
Interest income 1,177 - 2,734 1,679
Other, net (24,504) 9,922 (22,764) 34,774
---------- ----------- ----------- -----------
NET LOSS $ (801,122) $(1,800,299) $(2,060,259) $(5,161,565)
========== =========== =========== ===========
ALLOCATION OF NET LOSS:
Managing General Partner $ (8,011) $ (18,003) $ (20,603) $ (51,616)
========== =========== =========== ===========
Limited Partners $ (793,111) $(1,782,296) $(2,039,656) $(5,109,949)
========== =========== =========== ===========
NET LOSS PER LIMITED PARTNERSHIP
UNIT $ (9.25) $ (20.79) $ (23.79) $ (59.60)
========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
LIMITED PARTNERSHIP UNITS
OUTSTANDING 85,740 85,740 85,740 85,740
========== =========== =========== ===========
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
----------------------------------
For the Nine Months Ended
September 30,
----------------------------
1998 1997
------------ --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,060,259) $(5,161,565)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 5,251,058 8,278,749
Decrease (increase) in trade receivables (89,420) 25,970
Increase in deposits, prepaid expenses and
other assets (139,928) (256,405)
Increase in accounts payable, accrued
liabilities, accrued interest and subscriber prepayments 878,511 259,743
----------- -----------
Net cash provided by operating activities 3,839,962 3,146,492
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (3,766,435) (3,388,269)
Franchise renewal - (25,000)
----------- -----------
Net cash used in investing activities (3,766,435) (3,413,269)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 68,599 79,242
Repayment of borrowings (66,873) (82,725)
----------- -----------
Net cash provided by (used in) financing activities 1,726 (3,483)
----------- -----------
INCREASE (DECREASE) IN CASH 75,253 (270,260)
CASH, BEGINNING OF PERIOD 109,356 345,480
----------- -----------
CASH, END OF PERIOD $ 184,609 $ 75,220
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 1,988,147 $ 2,000,609
=========== ===========
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 September 30, 1998 and December 31, 1997, its results of
operations for the three and nine month periods ended September 30, 1998 and
1997 and its cash flows for the nine month periods ended September 30, 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." 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. Intercable 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
Intercable by the Partnership for the three and nine month periods ended
September 30, 1998 were $315,309 and $928,902, respectively, compared to
$291,333 and $888,096, respectively, for the three and nine month periods ended
September 30, 1997.
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 and nine month periods ended
September 30, 1998 were $50,000 and $150,000, respectively, compared to $50,000
and $150,000, respectively, for the three and nine month periods ended September
30, 1997.
The Partnership reimburses Intercable 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 Intercable 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. Intercable
believes that the methodology used in allocating overhead and administrative
costs is reasonable. Reimbursements by the Partnership to Intercable for
allocated overhead and administrative costs for three and nine month periods
ended September 30, 1998 were $351,203 and $1,071,251, respectively, compared to
$313,274 and $1,020,471, respectively, for the three and nine month periods
ended September 30, 1997.
(3) In August 1998, the Partnership signed an asset purchase agreement to sell
the Wheaton System to an unaffiliated party for a sales price of $103,000,000,
subject to customary closing adjustments. The Associate General Partner
consented to the sale in October 1998. Closing of the sale, which is expected to
occur in the first quarter of 1999, also will be subject to several customary
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. The Managing General Partner is conducting a vote
of the limited partners on the proposed sale of the Wheaton System in the fourth
quarter of 1998.
6
Upon the proposed sale of the Wheaton System, based upon financial
information as of September 30, 1998, the Partnership will repay all of its
indebtedness, which totaled $36,221,252, settle working capital adjustments, and
then deposit $3,118,500 into an indemnity escrow account. The remaining net sale
proceeds, expected to total approximately $60,700,000, will be distributed to
the Partnership's partners of record as of the closing date of the sale of the
Wheaton System. Based upon financial information as of September 30, 1998, this
distribution will give the Partnership's limited partners an approximate return
of only $708 for each $1,000 limited partnership interest. 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, the Managing General Partner and
the Associate General Partner will not receive general partner distributions
from the proceeds of the sale of the Wheaton System and they will not be paid
disposition fees for their services as brokers and financial advisors in this
transaction.
The $3,118,500 of the sale proceeds to be placed in the indemnity escrow
account will remain in escrow from the closing date until November 15, 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
returned to and distributed by 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, most
likely in the fourth quarter of 1999. 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
---------------------
FINANCIAL CONDITION
- -------------------
In August 1998, the Partnership signed an asset purchase agreement to sell
the Wheaton System to an unaffiliated party for a sales price of $103,000,000,
subject to customary closing adjustments. The Associate General Partner
consented to the sale in October 1998. Closing of the sale, which is expected to
occur in the first quarter of 1999, also will be subject to several customary
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. The Managing General Partner is conducting a vote
of the limited partners on the proposed sale of the Wheaton System in the fourth
quarter of 1998.
Upon the proposed sale of the Wheaton System, based upon financial
information as of September 30, 1998, the Partnership will repay all of its
indebtedness, which totaled $36,221,252, settle working capital adjustments, and
then deposit $3,118,500 into an indemnity escrow account. The remaining net sale
proceeds, expected to total approximately $60,700,000, will be distributed to
the Partnership's partners of record as of the closing date of the sale of the
Wheaton System. Based upon financial information as of September 30, 1998, this
distribution will give the Partnership's limited partners an approximate return
of only $708 for each $1,000 limited partnership interest. 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, the Managing General Partner and
the Associate General Partner will not receive general partner distributions
from the proceeds of the sale of the Wheaton System and they will not be paid
disposition fees for their services as brokers and financial advisors in this
transaction.
The $3,118,500 of the sale proceeds to be placed in the indemnity escrow
account will remain in escrow from the closing date until November 15, 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
returned to and distributed by 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, most
likely in the fourth quarter of 1999. 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 nine months ended September 30, 1998, the Partnership generated net
cash from operating activities totaling approximately $3,840,000, which is
available to fund capital expenditures and non-operating costs. During the first
nine months of 1998, the Partnership expended approximately $3,766,000 for
capital expenditures for the Wheaton System. Approximately 43 percent of these
expenditures related to cable, hardware and labor for new subscriber
installations. Approximately 30 percent of these expenditures related to the
extension of cable plant associated with new homes passed. Approximately 5
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 from cash on hand and cash from operations. Capital expenditures for
the remainder of 1998 are expected to be approximately $712,000 which are
expected to be financed from cash generated from operations. For the remainder
of 1998, approximately 32 percent of the capital expenditures will relate to the
extension of cable plant associated with new homes passed and approximately 16
percent of these expenditures will relate to cable, hardware and labor for
additional subscriber installations. The remainder of the anticipated
expenditures is for other capital expenditures necessary to maintain the value
of the Wheaton System until it is sold. The Partnership is obligated to the
prospective buyer of the Wheaton System to conduct its business in the ordinary
course until the Wheaton System is sold.
8
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 a negative effect on the Wheaton
System's increases in revenues and cash flow. The Managing General Partner is
taking prudent steps necessary to meet this competition from Ameritech until the
Wheaton System is sold early next year.
The Partnership's $36,000,000 revolving credit facility allows for the
entire commitment to be 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 September 30, 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, which is expected to occur before March 31,
1999. 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
September 30, 1998 and 1997 were 6.70 for both periods.
The Partnership will rely on cash generated from operations and, if
necessary and in its discretion, advances from the Managing General Partner to
meet its liquidity needs until the Wheaton System is sold.
RESULTS OF OPERATIONS
- ---------------------
Revenues of the Partnership increased $479,518, or approximately 8 percent,
to $6,306,176 for the three months ended September 30, 1998 compared to
$5,826,658 for the comparable period in 1997. Revenues increased $816,116, or
approximately 5 percent, to $18,578,044 for the nine months ended September 30,
1998 compared to $17,761,928 for the comparable period in 1997. An increase in
basic service rates accounted for approximately 57 percent and 81 percent,
respectively, of the increases in revenues for the three and nine month periods.
Increases in the number of basic service subscribers accounted for approximately
19 percent of the increases in revenues for both the three and nine month
periods. The number of basic service subscribers increased by 811 subscribers,
or approximately 1 percent, to 55,615 at September 30, 1998 from 54,804 at
September 30, 1997. No other individual factor contributed significantly to the
increases 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 operation
and 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 $305,478, or approximately 9 percent, to
$3,796,708 for the three months ended September 30, 1998 from $3,491,230 for the
comparable period in 1997. Operating expenses increased $502,076, or
approximately 5 percent, to $11,234,109 for the nine months ended September 30,
1998 from $10,732,033 for the comparable period in 1997. These increases in
operating expenses were due primarily to increases in programming fees. No other
individual factor significantly affected the increases in operating expenses for
these periods. Operating expenses represented approximately 60 percent of
revenues for the three and nine month periods ended September 30, 1998 and 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
$174,040, or approximately 7 percent, to $2,509,468 for the three months ended
September 30, 1998 from $2,335,428 for the comparable period in 1997. Operating
cash flow increased $314,040, or approximately 4 percent, to $7,343,935 for the
nine months ended September 30, 1998 from $7,029,895 for the comparable period
in 1997. These increases were due to the increases in revenues exceeding the
increases in operating expenses.
Management and supervisory fees to the Managing and Associate General
Partners and allocated administrative costs from the Managing General Partner
increased $61,905, or approximately 9 percent, to $716,512 for the three months
ended September 30, 1998 from $654,607 for the comparable period in 1997.
Management and supervisory fees to the Managing and Associate General Partners
and allocated administrative costs from the Managing General Partner increased
$91,586, or approximately 4 percent, to $2,150,153 for the nine month period
ended September 30, 1998 from $2,058,567 for the nine month period ended
September 30, 1997. These increases were due to increases in revenues, upon
which such management fees are based, and increases in allocated administrative
costs from the Managing General Partner.
9
Depreciation and amortization expense decreased $929,282, or approximately
33 percent, to $1,873,028 for the three months ended September 30, 1998 compared
to $2,802,310 for the comparable period in 1997. Depreciation and amortization
expense decreased $3,027,691, or approximately 37 percent, to $5,251,058 for the
nine months ended September 30, 1998 compared to $8,278,749 for the comparable
period in 1997. These decreases were primarily due to the maturation of a
portion of the asset base.
Operating loss decreased $1,041,417, or approximately 93 percent, to
$80,072 for the three months ended September 30, 1998 from $1,121,489 for the
comparable period in 1997. Operating loss decreased $3,250,145, or approximately
98 percent, to $57,276 for the nine months ended September 30, 1998 from
$3,307,421 for the comparable period in 1997. These changes were due to the
increases in operating cash flow and the decreases in depreciation and
amortization expense exceeding the increases in management fees and allocated
administrative costs from the Managing General Partner.
Interest expense increased $8,991, or approximately 1 percent, to $697,723
for the three months ended September 30, 1998 from $688,732 for the comparable
period in 1997. Interest expense increased $92,356, or approximately 5 percent,
to $1,982,953 for the nine months ended September 30, 1998 from $1,890,597 for
the nine months ended September 30, 1997. These increases in interest expense
were primarily due to higher outstanding balances on interest-bearing
obligations during 1998.
Net loss decreased $999,177, or approximately 56 percent, to $801,122 for
the three months ended September 30, 1998 from $1,800,299 for the comparable
period in 1997. Net loss decreased $3,101,306, or approximately 60 percent, to
$2,060,259 for the nine month period ended September 30, 1998 from $5,161,565
for the comparable period in 1997. These decreases were the result of the
factors discussed above.
10
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
11
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: November 13, 1998
12