FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM ________ TO ________
COMMISSION FILE NUMBER: 0-18133
IDS/JONES GROWTH PARTNERS II, L.P.
----------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
COLORADO 84-1060548
-------- ----------
STATE OF ORGANIZATION (IRS EMPLOYER
IDENTIFICATION NO.)
P.O. BOX 3309, ENGLEWOOD, COLORADO 80155-3309 (303) 792-3111
- --------------------------------------------- --------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE AND ZIP CODE (REGISTRANT'S TELEPHONE
NO. INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: LIMITED PARTNERSHIP
INTERESTS
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
----- -----
STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF
THE REGISTRANT: N/A
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K ((S)229.405) IS NOT CONTAINED HEREIN, AND WILL NOT BE
CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR
INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K
OR ANY AMENDMENT TO THIS FORM 10-K. X
------
DOCUMENTS INCORPORATED BY REFERENCE: NONE
(40966)
Certain information contained in this Form 10-K Report contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. All statements, other than statements of
historical facts, included in this Form 10-K Report that address activities,
events or developments that the Partnership or the General Partner expects,
believes or anticipates will or may occur in the future are forward-looking
statements. These forward-looking statements are based upon certain assumptions
and are subject to risks and uncertainties. Actual events or results may differ
from those discussed in the forward-looking statements as a result of various
factors.
PART I.
-------
ITEM 1. BUSINESS
-----------------
The Partnership. IDS/Jones Growth Partners II, L.P. (the
"Partnership") is a Colorado limited partnership that was formed to acquire, own
and operate cable television systems in the United States. Jones Cable
Corporation, a Colorado corporation, is the managing general partner (the
"Managing General Partner") and IDS Cable II Corporation, a Minnesota
corporation, is the supervising general partner (the "Supervising General
Partner") of the Partnership. The Managing General Partner is a wholly owned
subsidiary of Jones Intercable, Inc. ("Intercable"), which is also a Colorado
corporation and one of the largest cable television system operators in the
nation. The Supervising General Partner is a wholly owned subsidiary of IDS
Management Corporation, a Minnesota corporation, which in turn is a wholly owned
subsidiary of American Express Financial Corporation, a Delaware corporation.
The Partnership and IDS/Jones Growth Partners 89-B, Ltd., an
affiliated Colorado limited partnership ("Growth Partners 89-B"), formed a
Colorado general partnership known as IDS/Jones Joint Venture Partners (the
"Venture") for the purpose of acquiring cable television systems. Jones Cable
Corporation also serves as the managing general partner of Growth Partners 89-B.
IDS Cable Corporation, a wholly owned subsidiary of IDS Management Corporation,
which is a wholly owned subsidiary of American Express Financial Corporation,
acts as supervising general partner of Growth Partners 89-B. IDS Management
Corporation and Intercable each have an approximate 5 percent equity interest in
the Venture, the Partnership has a 65.6 percent interest in the Venture, and
Growth Partners 89-B has a 24.4 percent interest in the Venture.
Neither the Partnership nor the Venture currently own any cable
television system. In December 1998, the Venture sold its cable television
system serving the communities of Aurora, North Aurora, Montgomery, Plano,
Oswego, Sandwich, Yorkville and certain unincorporated areas of Kendall and Kane
Counties, all in the State of Illinois (the "Aurora System"). See Disposition
of Cable Television System below.
It is anticipated that Comcast Corporation ("Comcast") will acquire a
controlling interest in Intercable during April 1999. As a result of this
transaction, it is expected that the current management of Intercable and the
Managing General Partner and a majority of the Board of Directors of Intercable
and the Board of Directors of the Managing General Partner will be replaced by
Comcast.
Disposition of Cable Television System
In December 1998, the Venture sold the Aurora System to an
unaffiliated party for a sales price of $108,500,000, subject to customary
closing adjustments. The sale was approved by the owners of a majority of the
interests of both the Partnership and Growth Partners 89-B, the Managing General
Partner and the Supervising General Partner. Following the sale of the Aurora
System, the Venture repaid all of its indebtedness, including $47,000,000
borrowed under its credit facility, capital lease obligations totaling $118,558,
related parties' notes totaling $1,600,000 and the subordinated advance of
$1,406,647 to Intercable, settled working capital adjustments and deposited
$3,283,500 into an indemnity escrow account. The remaining net sale proceeds of
approximately $51,374,610 were distributed to the Venture's four partners: the
Partnership, Growth Partners 89-B, IDS Management Corporation and Intercable, in
proportion to their ownership interests. The Partnership received $33,678,970,
or 65.6 percent of the $51,374,610 distribution, which the Partnership
distributed in December 1998 to its limited partners of record as of December 4,
1998. This distribution provided the Partnership's limited
2
partners an approximate return of $193 for each $250 limited partnership
interest, or $772 for each $1,000 invested in the Partnership.
The $3,283,500 of the sale proceeds placed in the interest-bearing
indemnity escrow account will remain in escrow from December 4, 1998 until
November 15, 1999 as security for the Venture's agreement to indemnify the buyer
under the asset purchase agreement. The Venture's primary exposure, if any,
will relate to the representations and warranties made about the Aurora System
in the asset purchase agreement. Any amounts remaining from this interest-
bearing indemnity escrow account and not claimed by the buyer at the end of the
escrow period, plus interest earned on escrowed funds, will be returned to the
Venture. From this amount, the Venture will pay any remaining liabilities and
the Venture will then distribute the balance to the Partnership, Growth Partners
89-B, IDS Management Corporation and Intercable. The Partnership would then
distribute 65.5 percent of this amount to its limited partners of record as of
December 4, 1998. The Venture and the Partnership will continue in existence at
least until any amounts remaining from the indemnity escrow account have been
distributed. Since the Aurora System represented the only remaining operating
asset of the Partnership and the Venture, the Partnership and the Venture will
be liquidated and dissolved upon the final distribution of any amount remaining
from the interest-bearing indemnity escrow account, most likely in the fourth
quarter of 1999. If any disputes with respect to the indemnification arise, the
Partnership and the Venture would not be dissolved until such disputes were
resolved, which could result in the Partnership and the Venture continuing in
existence beyond 1999.
Because transferees of limited partnership interests following the
record date for the distribution of the proceeds from the sale of the Aurora
System (December 4, 1998) would not be entitled to any distributions from the
Partnership, a transfer of limited partnership interests following such record
date would have no economic value. The Managing General Partner therefore has
determined that, pursuant to the authority granted to it by the Partnership's
limited partnership agreement, the Managing General Partner will approve no
transfers of limited partnership interests after December 4, 1998.
ITEM 2. PROPERTIES
-------------------
As of December 31, 1998, neither the Partnership nor the Venture owned
any cable television systems.
ITEM 3. LEGAL PROCEEDINGS
--------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
The sale of the Aurora System was subject to the approval of the
holders of a majority of the limited partnership interests of the Partnership.
A vote of the limited partners was conducted by the Managing General Partner by
mail in September and October 1998. Limited partners of record as of the close
of business on August 31, 1998 were entitled to notice of, and to participate
in, this vote of limited partners. Following are the results of the vote of the
limited partners:
No. of Interests
Entitled to Vote Approved Against Abstained Did Not Vote
- ---------------- -------------- ------------ ------------ --------------
No. % No. % No. % No. %
------ ------ ----- ----- ----- ----- ------ ------
174,343 89,211 51.17 3,315 1.90 3,531 2.03 78,286 44.90
3
PART II.
--------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
-------------------------------------------------
AND RELATED SECURITY HOLDER MATTERS
-----------------------------------
While the Partnership is publicly held, there is no public market for
the limited partnership interests, and it is not expected that a market will
develop in the future. During 1998, limited partners of the Partnership
conducted "limited tender offers" for interests in the Partnership at prices
ranging from $55 to $152 per interest. As of February 16, 1999, the number of
equity security holders in the Partnership was 6,618.
4
ITEM 6. SELECTED FINANCIAL DATA
For the Year Ended December 31,
-------------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
Revenues $ 20,456,640 $ 19,713,788 $ 18,394,451 $ 16,860,900 $ 15,388,489
Depreciation and Amortization 8,199,268 9,071,373 9,990,694 10,317,694 10,601,501
Operating Loss (2,021,088) (2,378,678) (4,556,911) (5,411,813) (5,888,186)
Minority Interest in Consolidated
(Income) Loss (22,383,769) 2,108,575 2,882,115 3,154,893 3,061,563
Net Income (Loss) 42,364,019(a) (4,021,003) (5,496,125) (6,016,306) (5,838,329)
Net Income (Loss) per Limited
Partnership Unit 240.40(a) (22.83) (31.21) (34.16) (33.15)
Weighted Average Number of Limited
Partnership Units Outstanding 174,343 174,343 174,343 174,343 174,343
General Partners' Deficit -- (451,155) (410,945) (355,984) (295,821)
Limited Partners' Capital (Deficit) 1,112,707 (7,121,187) (3,140,394) 2,300,770 8,256,913
Total Assets 3,283,500 42,162,099 46,258,004 51,448,914 57,752,046
Debt -- 50,093,792 48,693,134 45,909,122 43,566,064
Managing General Partner Advances -- 343,974 398,507 331,185 933,949
(a) Net income resulted primarily from the sale of the Aurora System in
December 1998 by IDS/Jones Joint Venture Partners.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of the financial condition and results of
operations of IDS/Jones Growth Partners II, L.P. (the "Partnership") and
IDS/Jones Joint Venture Partners (the "Venture") contains, in addition to
historical information, forward-looking statements that are based upon certain
assumptions and are subject to a number of risks and uncertainties. The
Partnership's and Venture's actual results may differ significantly from the
results predicted in such forward-looking statements.
FINANCIAL CONDITION
IDS/Jones Growth Partners II, L.P. -
The Partnership owns a 65.6 percent interest in the Venture. The
Venture owned the cable television system serving the communities of Aurora,
North Aurora, Montgomery, Plano, Oswego, Sandwich, Yorkville and certain
unincorporated areas of Kendall and Kane counties, all in the State of Illinois
(the "Aurora System") until its sale in December 1998. During 1998, the
Partnership's interest in the Venture increased $8,685,049 to a net investment
of $1,112,707 at December 31, 1998. This increase represents the Partnership's
proportionate share of the gain recognized from the sale of the Aurora System
offset by the distributions from and losses generated by the Venture in 1998.
Refer to Management's Discussion and Analysis of Financial Condition and Results
of Operations for the Venture for details pertaining to its financial condition.
IDS/Jones Joint Venture Partners -
On December 4, 1998, the Venture sold the Aurora System to an
unaffiliated party for a sales price of $108,500,000, subject to customary
closing adjustments. The sale was approved by the owners of a majority of the
interests of both the Partnership and IDS/Jones Growth Partners 89-B, Ltd.
("Growth Partners 89-B"). IDS Cable II Corporation (the "Supervising General
Partner") also consented to the transaction. The Venture repaid all of its
indebtedness, including $47,000,000 borrowed under its credit facility, capital
lease obligations totaling $118,558, related parties' notes totaling $1,600,000
and the subordinated advance of $1,406,647 to Jones Intercable, Inc.
("Intercable"), settled working capital adjustments, and deposited $3,283,500
into an interest-bearing indemnity escrow account. The remaining net sale
proceeds of approximately $51,374,610 were distributed to the Venture's four
partners: the Partnership, Growth Partners 89-B, IDS Management Corporation and
Intercable, in proportion to their ownership interests. The Partnership received
$33,678,970, or 65.6 percent of the $51,374,610 distribution, which the
Partnership distributed in December 1998 to its limited partners of record as of
December 4, 1998. This distribution provided the Partnership's limited partners
an approximate return of $193 for each $250 limited partnership interest, or
$772 for each $1,000 invested in the Partnership.
5
The $3,283,500 of the sale proceeds placed in the indemnity escrow
account will remain in escrow until November 15, 1999 as security for the
Venture's agreement to indemnify the buyer under the asset purchase agreement.
The Venture's primary exposure, if any, will relate to the representations and
warranties made about the Aurora System in the asset purchase agreement. Any
amounts remaining from this interest-bearing indemnity escrow account and not
claimed by the buyer at the end of the escrow period, plus interest earned on
escrowed funds, will be returned to the Venture. From this amount, the Venture
will pay any remaining liabilities and then the Venture will distribute the
remaining balance to the Partnership, Growth Partners 89-B, IDS Management
Corporation and Intercable. If the entire $3,283,500 escrow amount is
distributed, the Partnership would receive approximately $2,153,976, or 65.6
percent. The Partnership would then distribute this amount to its limited
partners of record as of December 4, 1998. The Partnership and the Venture will
continue in existence at least until any amounts remaining from the
interest-bearing indemnity escrow account have been distributed. Since the
Aurora System represented the only operating asset of the Partnership and the
Venture, the Partnership and the Venture will be liquidated and dissolved upon
the final distribution of any amounts remaining from the interest-bearing
indemnity escrow account, most likely in the fourth quarter of 1999. If any
disputes with respect to the indemnification arise, the Partnership and the
Venture would not be dissolved until such disputes were resolved, which could
result in the Partnership and the Venture continuing in existence beyond 1999.
Year 2000 Issue
The Year 2000 issue is the result of many computer programs being
written such that they will malfunction when reading a year of "00." This
problem could cause system failure or miscalculations causing disruptions of
business processes. Due to the Aurora System sale on December 4, 1999, and the
planned liquidation and dissolution of the Partnership in 1999, the Year 2000
issue will not have a material effect on the Partnership.
RESULTS OF OPERATIONS
IDS/Jones Growth Partners II, L.P. -
All of the operations of the Partnership are represented exclusively by
its 65.6 percent interest in the Venture. Refer to Management's Discussion and
Analysis of Financial Condition and Results of Operations for the Venture
immediately below for details pertaining to its operations.
IDS/Jones Joint Venture Partners -
Due to the Aurora System sale on December 4, 1998, which was the
Venture's last remaining operating asset, a full discussion of results of
operations would not be comparable. For the year ended December 31, 1998, the
Venture had total revenues of $20,456,640 and generated an operating loss of
$2,021,088. Because of the gain of $70,031,908 on the sale of the Aurora System,
the Partnership realized net income of $42,364,019, or $240.40 per limited
partnership unit, in 1998. The Venture and the Partnership will be liquidated
and dissolved upon the final distribution of any amounts remaining from the
interest-bearing indemnity escrow account referred to above, most likely in the
fourth quarter of 1999.
ITEM 8. FINANCIAL STATEMENTS
The audited financial statements of the Partnership for the year ended
December 31, 1998 follow.
6
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of IDS/Jones Growth Partners II, L.P.:
We have audited the accompanying consolidated balance sheets of
IDS/JONES GROWTH PARTNERS II, L.P. (a Colorado limited partnership) as of
December 31, 1998 and 1997, and the related consolidated statements of
operations, partners' capital (deficit) and cash flows for each of the three
years in the period ended December 31, 1998. These financial statements are the
responsibility of the Managing General Partner's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of IDS/Jones Growth
Partners II, L.P. as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 12, 1999.
7
IDS/JONES GROWTH PARTNERS II, L.P.
(A Limited Partnership)
CONSOLIDATED BALANCE SHEETS
December 31,
---------------------------
ASSETS 1998 1997
------------ ------------
CASH $ -- $ 124,766
TRADE RECEIVABLES, less allowance for
doubtful receivables of $-0- and $91,156 at
December 31, 1998 and 1997, respectively -- 565,702
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost -- 47,080,064
Less- accumulated depreciation -- (23,938,318)
------------ ------------
-- 23,141,746
Franchise costs and other intangible assets, net of
accumulated amortization of $-0- and $55,831,988 at
December 31, 1998 and 1997, respectively -- 17,866,007
------------ ------------
Total investment in cable television properties -- 41,007,753
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 3,283,500 463,878
------------ ------------
Total assets $ 3,283,500 $ 42,162,099
============ ============
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
8
IDS/JONES GROWTH PARTNERS II, L.P.
(A Limited Partnership)
CONSOLIDATED BALANCE SHEETS
December 31,
----------------------------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1998 1997
------------ ------------
LIABILITIES:
Debt $ -- $ 50,093,792
Managing General Partner advances -- 343,974
Trade accounts payable and accrued liabilities 1,587,562 3,342,658
Subscriber prepayments -- 58,915
------------ ------------
Total liabilities 1,587,562 53,839,339
------------ ------------
COMMITMENTS AND CONTINGENCIES (NOTE 6)
MINORITY INTEREST IN JOINT VENTURE 583,231 (4,104,898)
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General Partners-
Contributed capital 500 500
Accumulated deficit (500) (451,655)
------------ ------------
-- (451,155)
------------ ------------
Limited Partners-
Net contributed capital (174,343 units
outstanding at December 31, 1998 and 1997) 37,256,546 37,256,546
Distributions (33,678,970) --
Accumulated deficit (2,464,869) (44,377,733)
------------ ------------
1,112,707 (7,121,187)
------------ ------------
Total liabilities and partners' capital (deficit) $ 3,283,500 $ 42,162,099
============ ============
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
9
IDS/JONES GROWTH PARTNERS II, L.P.
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
REVENUES $ 20,456,640 $ 19,713,788 $ 18,394,451
COSTS AND EXPENSES:
Operating expenses 11,893,511 10,837,726 10,733,857
Management and supervision
fees and allocated overhead
from General Partners 2,384,949 2,183,367 2,226,811
Depreciation and amortization 8,199,268 9,071,373 9,990,694
------------ ------------ ------------
OPERATING LOSS (2,021,088) (2,378,678) (4,556,911)
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (3,440,861) (3,759,271) (3,757,477)
Gain on sale of cable television system 70,031,908 -- --
Other, net 177,829 8,371 (63,852)
------------ ------------ ------------
Total other income (expense), net 66,768,876 (3,750,900) (3,821,329)
------------ ------------ ------------
CONSOLIDATED INCOME (LOSS) BEFORE
MINORITY INTEREST 64,747,788 (6,129,578) (8,378,240)
MINORITY INTEREST IN CONSOLIDATED
(INCOME) LOSS (22,383,769) 2,108,575 2,882,115
------------ ------------ ------------
NET INCOME (LOSS) $ 42,364,019 $ (4,021,003) $ (5,496,125)
============ ============ ============
ALLOCATION OF NET INCOME (LOSS):
General Partners $ 451,155 $ (40,210) $ (54,961)
============ ============ ============
Limited Partners $ 41,912,864 $ (3,980,793) $ (5,441,164)
============ ============ ============
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ 240.40 $ (22.83) $ (31.21)
============ ============ ============
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 174,343 174,343 174,343
============ ============ ============
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
10
IDS/JONES GROWTH PARTNERS II, L.P.
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
Year Ended December 31,
--------------------------------------------
1998 1997 1996
------------- ------------ ------------
GENERAL PARTNERS:
Jones Cable Corporation
Balance, beginning of year $ (225,577) $ (205,472) $ (177,992)
Net income (loss) for year 225,577 (20,105) (27,480)
------------ ------------ ------------
Balance, end of year $ -- $ (225,577) $ (205,472)
============ ============ ============
IDS Cable II Corporation
Balance, beginning of year $ (225,578) $ (205,473) $ (177,992)
Net income (loss) for year 225,578 (20,105) (27,481)
------------ ------------ ------------
Balance, end of year $ -- $ (225,578) $ (205,473)
============ ============ ============
Total
Balance, beginning of year $ (451,155) $ (410,945) $ (355,984)
Net income (loss) for year 451,155 (40,210) (54,961)
------------ ------------ ------------
Balance, end of year $ -- $ (451,155) $ (410,945)
============ ============ ============
LIMITED PARTNERS:
Balance, beginning of year $ (7,121,187) $ (3,140,394) $ 2,300,770
Distributions (33,678,970) -- --
Net income (loss) for year 41,912,864 (3,980,793) (5,441,164)
------------ ------------ ------------
Balance, end of year $ 1,112,707 $ (7,121,187) $ (3,140,394)
============ ============ ============
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
11
IDS/JONES GROWTH PARTNERS II, L.P.
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
-----------------------------------------------
1998 1997 1996
------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 42,364,019 $ (4,021,003) $ (5,496,125)
Adjustments to reconcile net income (loss) to net
cash provided by operating
activities:
Depreciation and amortization 8,199,268 9,071,373 9,990,694
Gain on sale of cable television system (70,031,908) -- --
Minority interest in consolidated income (loss) 22,383,769 (2,108,575) (2,882,115)
Amortization of interest rate protection contract -- -- 52,500
Decrease (increase) in trade receivables, net 565,702 (79,424) (23,180)
Increase in deposits, prepaid expenses and
deferred charges (964,253) (346,473) (194,372)
Increase (decrease) in trade accounts payable and
accrued liabilities and subscriber prepayments (1,814,011) 687,548 335,996
Increase (decrease) in advances from
Managing General Partner (343,974) (54,533) 67,322
------------- ------------- -------------
Net cash provided by
operating activities 358,612 3,148,913 1,850,720
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (4,231,476) (4,464,041) (4,602,299)
Proceeds from sale of cable television system,
net of escrow 105,216,500 -- --
------------- ------------- -------------
Net cash provided by (used in)
investing activities 100,985,024 (4,464,041) (4,602,299)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 47,390 1,431,266 7,829,712
Repayment of debt (50,141,182) (30,608) (5,045,700)
Distribution to limited partners (33,678,970) -- --
Distributions to Venture Partners (17,695,640) -- --
------------- ------------- -------------
Net cash provided by (used in)
financing activities (101,468,402) 1,400,658 2,784,012
------------- ------------- -------------
Increase (decrease) in cash (124,766) 85,530 32,433
Cash, beginning of year 124,766 39,236 6,803
------------- ------------- -------------
Cash, end of year $ -- $ 124,766 $ 39,236
============= ============= =============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 5,334,479 $ 3,644,227 $ 3,434,691
============= ============= =============
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
12
IDS/JONES GROWTH PARTNERS II, L.P.
(A Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND PARTNERS' INTERESTS
Formation and Business
IDS/Jones Growth Partners II, L.P. (the "Partnership"), a Colorado
limited partnership, was formed on November 9, 1989, pursuant to a public
offering. The Partnership was formed to acquire, develop and operate cable
television systems. Jones Cable Corporation, a Colorado corporation, is the
"Managing General Partner" and manager of the Partnership. IDS Cable II
Corporation, a Minnesota corporation, is the "Supervising General Partner" of
the Partnership. IDS Cable Corporation is the supervising general partner of
IDS/Jones Growth Partners 89-B, Ltd. ("Growth Partners 89-B") and Jones Cable
Corporation is the Managing General Partner of Growth Partners 89-B. Jones
Intercable, Inc. ("Intercable"), the parent of Jones Cable Corporation, managed
the cable television system purchased by IDS/Jones Joint Venture Partners (the
"Venture"). Intercable and its subsidiaries also own and operate cable
television systems as well as manage cable television systems for other limited
partnerships for which it is general partner. The Managing General Partner and
the Supervising General Partner are referred to as the "General Partners."
Contributed Capital, Commissions and Syndication Costs
The capitalization of the Partnership is set forth in the accompanying
Consolidated Statements of Partners' Capital (Deficit). No limited partner is
obligated to make any additional contributions to partnership capital.
The Managing General Partner and the Supervising General Partner
purchased their interests in the Partnership by contributing $250 each to
partnership capital.
All profits and losses of the Partnership are allocated 99 percent to
the limited partners, 1/2 percent to the Managing General Partner and 1/2
percent to the Supervising General Partner, except for income or gain from the
sale or disposition of cable television properties, which will be allocated to
the partners based upon the formula set forth in the partnership agreement and
interest income earned prior to the first acquisition by the Partnership of a
cable television system, which was allocated 100 percent to the limited
partners.
Formation of Joint Venture
On May 30, 1990, the Partnership and Growth Partners 89-B formed the
Venture. The Partnership's offering closed on September 30, 1991 with limited
partner subscriptions totaling $43,585,750, of which $37,592,709 was contributed
to the Venture. In the fourth quarter of 1991, due to the necessity for
additional funding for the Venture, Intercable and IDS Management Corporation
each made equity investments of $2,872,000 in the Venture under the joint
venture agreement between the joint venture partners. Profits, losses and
distributions of the Venture will be shared in proportion to total capital
contributions made by the individual venture partners. As a result of their
equity contributions to the Venture described above, ownership percentages of
the Venture are detailed below:
The Partnership 65.6%
Growth Partners 89-B 24.4%
Intercable 5.0%
IDS Management Corporation 5.0%
-------
100.0%
The Venture was formed for the purpose of acquiring the cable
television system serving the communities of Aurora, North Aurora, Montgomery,
Plano, Oswego, Sandwich, Yorkville and certain unincorporated areas of Kendall
and Kane counties, all in the State of Illinois (the "Aurora System").
13
Sale of Cable Television System
On December 4, 1998, the Venture sold the Aurora System to an
unaffiliated party for a sales price of $108,500,000, subject to customary
closing adjustments. The sale was approved by the owners of a majority of the
interests of both the Partnership and Growth Partners 89-B, Ltd. The Supervising
General Partner also consented to the transaction. The Venture repaid all of its
indebtedness, including $47,000,000 borrowed under its credit facility, capital
lease obligations totaling $118,558, related parties' notes totaling $1,600,000
and the subordinated advance of $1,406,647 to Intercable, settled working
capital adjustments, and deposited $3,283,500 into an interest-bearing indemnity
escrow account. The remaining net sale proceeds of approximately $51,374,610
were distributed to the Venture's four partners: the Partnership, Growth
Partners 89-B, IDS Management Corporation and Intercable, in proportion to their
ownership interests. The Partnership received $33,678,970, or 65.6 percent of
the $51,374,610 distribution, which the Partnership distributed in December 1998
to its limited partners of record as of December 4, 1998. This distribution
provided the Partnership's limited partners an approximate return of $193 for
each $250 limited partnership interest, or $772 for each $1,000 invested in the
Partnership.
The $3,283,500 of the sale proceeds placed in the indemnity escrow
account will remain in escrow until November 15, 1999 as security for the
Venture's agreement to indemnify the buyer under the asset purchase agreement.
The Venture's primary exposure, if any, will relate to the representations and
warranties made about the Aurora System in the asset purchase agreement. Any
amounts remaining from this interest-bearing indemnity escrow account and not
claimed by the buyer at the end of the escrow period, plus interest earned on
escrowed funds, will be returned to the Venture. From this amount, the Venture
will pay any remaining liabilities and then the Venture will distribute the
remaining balance to the Partnership, Growth Partners 89-B, IDS Management
Corporation and Intercable. If the entire $3,283,500 escrow amount is
distributed, the Partnership would receive approximately $2,153,976, or 65.6
percent. The Partnership would then distribute this amount to its limited
partners of record as of December 4, 1998. The Partnership and the Venture will
continue in existence at least until any amounts remaining from the
interest-bearing indemnity escrow account have been distributed. Since the
Aurora System represented the only asset of the Partnership and the Venture, the
Partnership and the Venture will be liquidated and dissolved upon the final
distribution of any amounts remaining from the interest-bearing indemnity escrow
account, most likely in the fourth quarter of 1999. If any disputes with respect
to the indemnification arise, the Partnership and the Venture would not be
dissolved until such disputes were resolved, which could result in the
Partnership and the Venture continuing in existence beyond 1999.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Records
The accompanying consolidated financial statements have been prepared
on the accrual basis of accounting in accordance with generally accepted
accounting principles. The Partnership's tax returns are also prepared on the
accrual basis.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Managing General Partner's
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Principles of Consolidation
The accompanying consolidated financial statements include 100 percent
of the accounts of the Partnership and those of the Venture, reduced by the
minority interest in the Venture. All inter-partnership accounts and
transactions have been eliminated.
Property, Plant and Equipment
Depreciation of property, plant and equipment was provided primarily
using the straight-line method over the following estimated service lives:
Cable distribution systems 5 - 15 years
Equipment and tools 5 - 7 years
Office furniture and equipment 3 - 5 years
Buildings 30 years
Vehicles 3 - 4 years
14
Replacements, renewals and improvements were capitalized and
maintenance and repairs were charged to expense as incurred.
Property, plant and equipment and the corresponding accumulated
depreciation were written off as certain assets became fully depreciated and
were no longer in service.
Intangible Assets
Costs assigned to franchises and costs in excess of interests in net
assets purchased were amortized using the straight-line method over the
following estimated useful lives:
Franchise costs 2 years
Costs in excess of interests
in net assets purchased 32 years
Revenue Recognition
Subscriber prepayments were initially deferred and recognized as
revenue when earned.
(3) TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES
Management Fees, Supervision Fees, Distribution Ratios
and Reimbursements
Intercable managed the Aurora System on behalf of the Venture and
received 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 by the Venture to Intercable during the years
ended December 31, 1998, 1997 and 1996 were $1,022,832, $985,689 and $919,723,
respectively. Intercable has not received and will not receive a management fee
after December 4, 1998.
The Supervising General Partners participated in certain management
decisions of the Venture and each received 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 paid by the Venture
to the Supervising General Partners during the years ended December 31, 1998,
1997 and 1996 were $102,283, $98,569 and $91,972, respectively. The Supervising
General Partners have not received and will not receive a supervision fee after
December 4, 1998.
The Venture reimbursed Intercable for certain allocated overhead and
administrative expenses. These expenses represented the salaries and related
benefits paid for corporate personnel, rent, data processing services and other
corporate facilities costs. Such personnel provided engineering, marketing,
administrative, accounting, legal and investor relations services to the
Venture. Such services, and their related costs, were 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 were based on actual time
spent by employees of Intercable with respect to each partnership managed.
Remaining expenses were allocated based on the pro rata relationship of the
Venture's revenues to the total revenues of all systems owned or managed by
Intercable and certain of its affiliates. Systems owned by Intercable and all
other systems owned by partnerships for which Intercable or affiliates are the
general partners were also allocated a proportionate share of these expenses.
Intercable believes that the methodology used in allocating overhead and
administrative expenses was reasonable. Reimbursements made to Intercable by the
Venture for allocated overhead and administrative expenses during the years
ended December 31, 1998, 1997 and 1996 were $1,259,834, $1,099,109 and
$1,215,116, respectively. The Venture will continue to reimburse Intercable for
actual time spent on Venture business by employees of Intercable until the
Venture is liquidated and dissolved, but the Venture will not bear a revenue-
based allocation of overhead and administrative expenses beyond December 4,
1998.
The Supervising General Partners may also be reimbursed for certain
expenses incurred on behalf of the Venture. There were no reimbursements made to
the Supervising General Partners by the Venture for allocated overhead and
administrative expenses during the years ended December 31, 1998, 1997 and 1996.
During 1998, the Venture was charged interest by Intercable at an
average interest rate of 7.05 percent on amounts due Intercable and on the
subordinated loans from Intercable, which approximated Intercable's weighted
average cost of borrowing. Total interest charged to the Venture by Intercable
during the years ended December 31, 1998, 1997 and 1996 was $134,823, $241,938
and $382,725, respectively.
15
The Venture was charged interest on the subordinated loans from IDS
Management Corporation at an average interest rate of 6.11 percent, which
approximated IDS Management Corporation's cost of borrowing. Total interest
charged to the Venture by IDS Management Corporation during 1998, 1997 and 1996
was $58,586, $62,737 and $111,741, respectively.
Any Partnership distributions made from cash flow (defined as cash
receipts derived from routine operations, less debt principal and interest
payments and cash expenses) are allocated 99 percent to the limited partners,
1/2 percent to the Managing General Partner and 1/2 percent to the Supervising
General Partner. Any distributions other than interest income on limited partner
subscriptions earned prior to the acquisition of the Partnership's first cable
television system or from cash flow, such as from the sale or refinancing of a
system or upon dissolution of the Partnership, will be made as follows: first,
to the limited partners in an amount which, together with all prior
distributions, will equal 100 percent of the amount initially contributed to the
Partnership by the limited partners; second, to the General Partners in an
amount which, together with all prior distributions, will equal the amount
contributed to the capital of the partnership by the General Partners; third, to
the limited partners in an amount which, together with all prior distributions,
will equal a 6 percent per annum cumulative and noncompounded return on the
capital contributions of the limited partners; the balance, 75 percent to the
limited partners, 12-1/2 percent to the Managing General Partner and 12-1/2
percent to the Supervising General Partner.
Payments to/from Affiliates for Programming Services
The Venture received programming from Superaudio, Knowledge TV, Inc.,
Jones Computer Network, Ltd., Great American Country, Inc. and Product
Information Network, all of which are affiliates of Intercable.
Payments to Superaudio totaled $38,757, $31,413 and $27,973,
respectively, in 1998, 1997 and 1996. Payments to Knowledge TV, Inc. totaled
$40,244, $34,932 and $30,139, respectively, in 1998, 1997 and 1996. Payments to
Jones Computer Network, Ltd., whose service was discontinued in April 1997,
totaled $22,875 and $60,279, respectively, in 1997 and 1996. Payments to Great
American Country, Inc., which initiated service in 1997, totaled $37,837 and
$35,504, respectively, in 1998 and 1997.
The Venture received a commission from Product Information Network
based on a percentage of advertising revenue and number of subscribers. Product
Information Network paid commissions to the Venture totaling $75,838, $71,847
and $46,841 in 1998, 1997 and 1996, respectively.
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of December 31, 1998 and 1997,
consisted of the following:
1998 1997
------------ ------------
Cable distribution systems $ -- $ 45,270,244
Equipment and tools -- 982,821
Office furniture and equipment -- 331,660
Vehicles -- 416,054
Buildings -- 79,285
------------ ------------
-- 47,080,064
Less- accumulated depreciation -- (23,938,318)
------------ ------------
$ -- $ 23,141,746
============ ============
16
(5) DEBT
Debt consisted of the following:
December 31,
-------------------------
1998 1997
----------- -----------
Lending institutions-
Revolving credit agreement $ -- $47,000,000
Affiliated entities-
Subordinated loans:
Intercable -- 2,006,647
IDS Management Corporation -- 1,000,000
Capital lease obligations -- 87,145
----------- -----------
$ -- $50,093,792
=========== ===========
The Venture had a $47,000,000 revolving credit agreement, which was
paid in full upon the sale of the Aurora System. Interest on the revolving
credit agreement was at the Venture's option of the Prime Rate plus .5 percent,
the London Interbank Offered Rate plus 1.5 percent or the Certificate of Deposit
Rate plus 1.625 percent. The effective interest rate on outstanding obligations
at December 31, 1997 was 7.52 percent.
The Venture's capital lease obligations were paid in December 1998 from
proceeds from the sale of the Aurora System.
At December 31, 1997, the carrying amount of the Venture's long-term
debt did not differ significantly from the estimated fair value of the financial
instruments. The fair value of the Venture's long-term debt was estimated based
on the discounted amount of future debt service payments using rates of
borrowing for a liability of similar risk.
(6) COMMITMENTS AND CONTINGENCIES
From the Venture's sale of the Aurora System, $3,283,500 of the sale
proceeds were placed in an interest-bearing indemnity escrow account and will
remain in escrow until November 15, 1999 as security for the Partnership's
agreement to indemnify the buyer under the asset purchase agreement. The
Venture's primary exposure, if any, will relate to the representations and
warranties made about the Aurora System in the asset purchase agreement. Any
amounts remaining from this interest-bearing indemnity escrow account and not
claimed by the buyer at the end of the escrow period, plus interest earned on
escrowed funds, will be returned to the Venture. From this amount, the Venture
will pay any remaining liabilities and then the Venture will distribute the
remaining balance to the Partnership, Growth Partners 89-B, IDS Management
Corporation and Intercable.
(7) INCOME TAXES
Income taxes have not been recorded in the accompanying financial
statements because they accrue directly to the partners. The federal and state
income tax returns of the Partnership are prepared and filed by the Managing
General Partner.
The Partnership's tax returns, the qualification of the Partnership as
such for tax purposes, and the amount of distributable Partnership income or
loss are subject to examination by federal and state taxing authorities. If such
examinations result in changes with respect to the Partnership's qualification
as such, or in changes with respect to the Partnership's recorded income or
loss, the tax liability of the general and limited partners would likely be
changed accordingly.
Taxable income or loss reported by the partners is different from that
reported in the statements of operations due to the difference in depreciation
recognized under generally accepted accounting principles and the expense
allowed for tax purposes under the Modified Accelerated Cost Recovery System
(MACRS). There are no other significant differences between taxable income and
the net income reported in the statements of operations.
17
(8) SUPPLEMENTARY PROFIT AND LOSS INFORMATION
Supplementary profit and loss information for the respective years is
presented below:
Year Ended December 31,
--------------------------------------
1998 1997 1996
----------- ----------- ----------
Maintenance and repairs $ 133,032 $ 142,981 $ 141,422
=========== =========== ==========
Taxes, other than income and payroll taxes $ 32,175 $ 33,847 $ 25,399
=========== =========== ==========
Advertising $ 248,621 $ 243,977 $ 249,828
=========== =========== ==========
Depreciation of property, plant and equipment $3,763,130 $3,708,135 $3,203,024
========== =========== ==========
Amortization of intangible assets $4,436,138 $5,363,238 $6,787,670
========== =========== ==========
18
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
---------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
None.
PART III.
---------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------
The Partnership itself has no officers or directors. Certain
information concerning the directors and executive officers of the Managing
General Partner is set forth below. Directors of the Managing General Partner
serve until the next annual meeting of the Managing General Partner and until
their successors shall be elected and qualified.
The Partnership itself has no officers or directors. Certain
information concerning the directors and executive officers of the Managing
General Partner is set forth below. Directors of the Managing General Partner
serve until the next annual meeting of the Managing General Partner and until
their successors shall be elected and qualified.
Name Age Positions with the Managing General Partner
- ---- --- -------------------------------------------
Glenn R. Jones 69 Chairman of the Board and Chief Executive Officer
James B. O'Brien 49 President
Kevin P. Coyle 47 Vice President/Finance
Elizabeth M. Steele 47 Vice President and Secretary
Mr. Glenn R. Jones has been Chairman of the Board of the Managing
General Partner since its formation in October 1986. Mr. Jones served as
President of the Managing General Partner until September of 1990 at which time
he was elected Chief Executive Officer. Mr. Glenn R. Jones has served as
Chairman of the Board of Directors and Chief Executive Officer of Jones
Intercable, Inc. since its formation in 1970, and he was President from June
1984 until April 1988. Mr. Jones is the sole shareholder, President and
Chairman of the Board of Directors of Jones International, Ltd. He is also
Chairman of the Board of Directors of the subsidiaries of the Jones Intercable,
Inc. and of certain other affiliates of Jones Intercable, Inc. Mr. Jones has
been involved in the cable television business in various capacities since 1961,
and he is a member of the Board of Directors and of the Executive Committee of
the National Cable Television Association. In addition, Mr. Jones is a member
of the Board and Education Council of the National Alliance of Business. Mr.
Jones is also a founding member of the James Madison Council of the Library of
Congress. Mr. Jones has been the recipient of several awards including: the
Grand Tam Award in 1989, the highest award from the Cable Television
Administration and Marketing Society; the President's Award from the Cable
Television Public Affairs Association in recognition of Jones International's
educational efforts through Mind Extension University (now Knowledge TV); the
Donald G. McGannon Award for the advancement of minorities and women in cable
from the United Church of Christ Office of Communications; the STAR Award from
American Women in Radio and Television, Inc. for exhibition of a commitment to
the issues and concerns of women in television and radio; the Cableforce 2000
Accolade awarded by Women in Cable in recognition of the Company's innovative
employee programs; the Most Outstanding Corporate Individual Achievement Award
from the International Distance Learning Conference for his contributions to
distance education; the Golden Plate Award from the American Academy of
Achievement for his advances in distance education; the Man of the Year named by
the Denver chapter of the Achievement Rewards for College Scientists; and in
1994 Mr. Jones was inducted into Broadcasting and Cable's Hall of Fame.
Mr. James B. O'Brien was elected President of the Managing General
Partner in September of 1990. Mr. James B. O'Brien, Jones Intercable, Inc.'s
President, joined Jones Intercable, Inc. in January 1982. Prior to
19
being elected President and a director of Jones Intercable, Inc. in December
1989, Mr. O'Brien served as a division manager, director of operations
planning/assistant to the CEO, Fund Vice President and Group Vice
President/Operations. Mr. O'Brien was appointed to the Jones Intercable, Inc.'s
Executive Committee in August 1993. As President, he is responsible for the day-
to-day operations of the cable television systems managed and owned by Jones
Intercable, Inc. Mr. O'Brien is a board member of Cable Labs, Inc., the research
arm of the U.S. cable television industry. He also serves as Chairman of the
Board of Directors of CTAM: The Marketing Society for the Cable
Telecommunications Industry and as an executive director of the Walter Kaitz
Foundation, a foundation that places people of ethnic minority groups in
positions with cable television systems, networks and vendor companies. Mr.
O'Brien's numerous industry recognitions include a CTAM Tami Award for marketing
excellence, a Women In Cable and Telecommunications Accolade Award recognizing
his leadership efforts on behalf of women in the telecommunications industry,
The President's Award for Leadership from the Illinois Cable and
Telecommunications Association and a Lifetime Achievement Award from The
National Association of Minorities in Communications. Additionally, Mr. O'Brien
is a member of The Society of UK Cable Pioneers.
Kevin P. Coyle was elected Vice President of Finance of the Managing
General Partner in February 1989. Mr. Coyle is the principal financial and
accounting officer of the Managing General Partner. Mr. Coyle joined The Jones
Group, Ltd. in July 1981 as Vice President/Financial Services. In September
1985, he was appointed Senior Vice President/Financial Services. He was elected
Treasurer of Jones Intercable, Inc. in August 1987, Vice President/Treasurer in
April 1988 and Group Vice President/Finance and Chief Financial Officer in
October 1990. From 1978 to 1981 Mr. Coyle was employed by American Television
and Communications (now Time Warner Cable), and from 1974 to 1978 he was an
associate at Haskins & Sells (now Deloitte & Touche LLP).
Ms. Elizabeth M. Steele has served as Secretary of the Managing
General Partner since August 1987 and Vice President since February 1989. Ms.
Elizabeth M. Steele joined Jones Intercable, Inc. in August 1987 as Vice
President/General Counsel and Secretary. From August 1980 until joining the
Company, Ms. Steele was an associate and then a partner at the Denver law firm
of Davis, Graham & Stubbs, which serves as counsel to Jones Intercable, Inc..
Certain information concerning directors and executive officers of the
Supervising General Partner is set forth below. Directors of the Supervising
General Partner serve until the next annual meeting of the Supervising General
Partner and until their successors shall be elected and qualified.
Name Age Positions with the Supervising General Partner
- ---- --- ---------------------------------------------------
Peter J. Slattery 32 President and Director
John M. Knight 45 Vice President and Director
Jeffrey S. Horton 36 Vice President, Treasurer and Director
Bradley C. Nelson 33 Vice President
Ronald W. Powell 52 Vice President
Mr. Peter J. Slattery is the Director of Non-Proprietary Products for
American Express Financial Advisors' Variable Assets division. During his
tenure he has led the transition to multiple classes for the IDS mutual fund
line, developed five new retail funds and let the creation of the flagship
Flexible Portfolio Annuity. He currently is responsible for all non-proprietary
relationships involving products sold through AEFA's various distribution
channels.
Mr. John M. Knight joined American Express Financial Corporation in
July 1975. He is currently Controller-Variable Assets and charged with the
overall finance responsibilities for Mutual Funds, Limited Partnerships,
Variable Annuities and Wealth Management Services. From 1981 to March 1994, he
held a number of positions in the IDS Certificate Company, leading to Controller
of that organization.
Mr. Jeffrey S. Horton joined American Express Financial Corporation in
July 1987. He was named Vice President - Corporate Treasurer in December 1997.
Prior to December 1997, Mr. Horton has served in various
20
capacities with American Express Financial Corporation including the Director of
Finance (Marketing and Products), Controller for Information Technology and Vice
President Controller for Information Technology.
Mr. Bradley C. Nelson joined American Express Financial Corporation in
1991 as an Investment Department analyst following his graduation from Cornell
University's Johnson Graduate School of Management where he earned an MBA with a
concentration in finance.
Mr. Ronald W. Powell has held the position of Vice President and
Assistant General Counsel with American Express Financial Corporation since
November 1985. He has been a member of the American Express Financial
Corporation law department since 1975.
ITEM 11. EXECUTIVE COMPENSATION
--------------------------------
The Partnership has no employees; however, various personnel were
required to operate cable television systems owned by the Venture. Such
personnel were employed by Intercable and, pursuant to the terms of the
Partnership's limited partnership agreement, the cost of such employment was
charged by the Managing General Partner to the Partnership as a direct
reimbursement item. See Item 13.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
----------------------------------------------------------------------
As of February 16, 1999, no person or entity owned more than 5 percent
of the limited partnership interests of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------
Until December 4, 1998, the Managing General Partner and its
affiliates engaged in certain transactions with the Venture as contemplated by
the limited partnership agreement of the Partnership. The Managing General
Partner believes that the terms of such transactions were generally as favorable
as could be obtained by the Venture from unaffiliated parties. This
determination has been made by the Managing General Partner in good faith, but
none of the terms were negotiated at arm's-length and there can be no assurance
that the terms of such transactions have been as favorable as those that could
have been obtained by the Venture from unaffiliated parties.
Until December 4, 1998, the Supervising General Partner and its
affiliates engaged in certain transactions with the Venture as contemplated by
the limited partnership agreement of the Partnership. The Supervising General
Partner believes that the terms of such transactions, which are set forth in the
Partnership's limited partnership agreement, were generally as favorable as
could be obtained by the Venture from unaffiliated parties. This determination
has been made by the Supervising General Partner in good faith, but none of the
terms were negotiated at arm's-length and there can be no assurance that the
terms of such transactions have been as favorable as those that could have been
obtained by the Venture from unaffiliated parties.
Transactions with the Managing General Partner and the Supervising General
Partner
The Managing General Partner managed the Aurora System on behalf of
the Venture and, until December 4, 1998, the date of the sale of the Aurora
System, the Managing General Partner received 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. The Managing General Partner will
not receive a management fee after December 4, 1998.
The Supervising General Partner participated in certain management
decisions of the Venture and received a fee for its services equal to 1/2
percent of the gross revenues of the Venture, excluding revenues from the sale
of cable television systems or franchises. The Supervising General Partner will
not receive a fee after December 4, 1998.
21
The Venture reimbursed Intercable, the parent of the Managing General
Partner, for certain allocated overhead and administrative expenses. These
expenses represented the salaries and benefits paid to corporate personnel,
rent, data processing services and other facilities costs. Such personnel
provided engineering, marketing, administrative, accounting, legal and investor
relations services to the Venture. Allocations of personnel costs were based
primarily on actual time spent by employees with respect to each partnership
managed. Remaining expenses were allocated based on the pro rata relationship
of the Venture's revenues to the total revenues of all systems owned or managed
by Intercable or its affiliates. Systems owned by Intercable and all other
systems owned by partnerships for which Intercable serves as general partner
were also allocated a proportionate share of these expenses. The Venture will
continue to reimburse the Managing General Partner for actual time spent on
Venture business by employees of the General Partner until Venture and the
Partnership are liquidated and dissolved, but neither the Venture nor the
Partnership will not bear a revenue-based allocation of overhead and
administrative expenses beyond December 4, 1998.
Intercable, the parent of the Managing General Partner, from time to
time has also advanced funds to the Venture and charged interest on the balance
payable. The interest rate charged approximated Intercable's weighted average
cost of borrowing.
Transactions with Affiliates
Jones International, Ltd. ("International"), a company owned by Glenn
R. Jones and certain of its subsidiaries, provided various services to the
Venture, including affiliation agreements for the distribution of programming
owned by affiliated companies on cable television systems owned by the Venture,
as described below.
Knowledge TV, Inc., a company owned by Mr. Jones, affiliates of
International, Intercable and BCI Telecom Holdings, Inc., a principal
shareholder of Intercable, operates the television network Knowledge TV.
Knowledge TV provides programming related to computers and technology; business,
careers and finance; health and wellness; and global culture and languages.
Until December 4, 1998, Knowledge TV, Inc. provided its programming to the
Aurora System.
Until December 4, 1998, the Great American Country network provided
country music video programming to the Aurora System. This network is owned and
operated by Great American Country, Inc., a subsidiary of Jones International
Networks, Ltd.
Jones Galactic Radio, Inc. is a susidiary of Jones International
Networks, Ltd., an affiliate of Intercable. Superaudio, a joint venture between
Jones Galactic Radio, Inc. and an unaffiliated entity, provided satellite
programming to the Aurora System until December 4, 1998.
The Product Information Network Venture (the "PIN Venture") is a
venture among a subsidiary of Jones International Networks, Ltd., an affiliate
of International, and two unaffiliated cable system operators. The PIN Venture
operates the Product Information Network ("PIN"), which is a 24-hour network
that airs long-form advertising generally known as "infomercials." The PIN
Venture generally makes incentive payments of approximately 60 percent of its
net advertising revenue to the cable systems that carry its programming. Most
of Intercable's owned and managed systems carry PIN for all or part of each day.
Revenues received by the Venture from the PIN Venture relating to the Aurora
System totaled approximately $71,847 for the year ended December 31, 1998.
22
The activities of the Partnership are limited to its equity ownership
in the Venture. The charges to the Venture for related party transactions are
as follows for the periods indicated:
For the Year Ended December 31,
---------------------------------------------------------------------
1998 1997 1996
--------------------- ---------------------- ----------------------
Management fees $1,022,832 $ 985,689 $ 919,723
Supervision fees 102,283 98,569 91,972
Allocation of expenses 1,259,834 1,099,109 1,215,116
Interest expense on advances and loans from the
Managing General Partner and Intercable 134,823 241,938 382,725
Interest expense on loan from IDS Management
Corporation 58,586 62,737 111,741
Amount of notes and advances outstanding 0 343,974 382,725
Highest amount of notes and advances outstanding 345,690 343,974 1,556,731
Programming fees:
Knowledge TV, Inc. $ 40,244 $ 34,932 $ 30,139
Great American Country 37,837 35,504 0
Superaudio 38,757 31,413 27,973
23
PART IV.
--------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------
(a)1. See index to financial statements for list of financial statements and exhibits thereto filed
as part of this report.
3. The following exhibits are filed herewith:
4.1 Limited Partnership Agreement for IDS/Jones Growth Partners II, L.P. (1)
10.1 Asset Purchase Agreement dated as of July 10, 1998 between TCI Communications, Inc. and
IDS/Jones Joint Venture Partners. (2)
27 Financial Data Schedule
__________
(1) Incorporated by reference from the Annual Report on Form 10-K of IDS/Jones Growth Partners II
(Commission File No. 0-18133) for fiscal year ended December 31, 1990.
(2) Incorporated by reference from the Preliminary Proxy Statement on Schedule 14A of IDS/Jones
Growth Partners II, L.P. (Commission File No. 0-18133) filed with the Securities and Exchange
Commission on August 7, 1998.
(b) Reports on Form 8-K
-------------------
None.
24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
a Colorado limited partnership
By Jones Cable Corporation,
its Managing General Partner
By: /s/ Glenn R. Jones
------------------
Glenn R. Jones
Chairman of the Board and
Dated: March 24, 1999 Chief Executive Officer
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.
OFFICERS AND DIRECTORS OF JONES CABLE CORPORATION:
By: /s/ Glenn R. Jones
------------------
Glenn R. Jones
Chairman of the Board and
Chief Executive Officer
Dated: March 24, 1999 (Principal Executive Officer)
By: /s/ Kevin P. Coyle
------------------
Kevin P. Coyle
Vice President/Finance
(Principal Financial and
Dated: March 24, 1999 Accounting Officer)
25