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 June 30, 1999
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____ to _____
Commission File Number: 0-18133
IDS/JONES GROWTH PARTNERS II, L.P.
- --------------------------------------------------------------------------------
Exact name of registrant as specified in charter
Colorado 84-1060548
- --------------------------------------------------------------------------------
State of organization I.R.S. employer I.D. #
c/o Comcast Corporation
1500 Market Street, Philadelphia, PA 19102-2148
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Address of principal executive office
(215) 665-1700
-----------------------------
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 ___
IDS/JONES GROWTH PARTNERS II, L.P.
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
ASSETS 1999 1998
------ ------------ ------------
Proceeds from sale in escrow $ 3,369,692 $ 3,283,500
----------- -----------
Total assets $ 3,369,692 $ 3,283,500
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
LIABILITIES:
Accounts payable and accrued liabilities $ 1,906,550 $ 1,587,562
----------- -----------
Total liabilities 1,906,550 1,587,562
----------- -----------
MINORITY INTEREST IN JOINT VENTURE 503,149 583,231
----------- -----------
PARTNERS' CAPITAL:
General Partners-
Contributed capital 500 500
Accumulated deficit (500) (500)
----------- -----------
- -
----------- -----------
Limited Partners-
Net contributed capital (174,343 units outstanding at
June 30, 1999 and December 31, 1998) 37,256,546 37,256,546
Distributions (33,678,970) (33,678,970)
Accumulated deficit (2,617,583) (2,464,869)
----------- -----------
959,993 1,112,707
----------- -----------
Total liabilities and partners' capital $ 3,369,692 $ 3,283,500
=========== ===========
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated balance sheets.
2
IDS/JONES GROWTH PARTNERS II, L. P.
(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended For the Six Months Ended
June 30, June 30,
------------------------------------- -----------------------------------
1999 1998 1999 1998
---------------- ---------------- ---------------- ---------------
REVENUES $ - $ 5,484,098 $ - $ 10,622,039
COSTS AND EXPENSES:
Operating expenses - 2,977,427 - 5,757,426
Management and supervision fees
and allocated overhead from
General Partners - 631,168 - 1,208,607
Depreciation and amortization - 2,160,854 - 4,105,942
---------------- ---------------- ---------------- ---------------
OPERATING LOSS - (285,351) - (449,936)
---------------- ---------------- ---------------- ---------------
OTHER INCOME (EXPENSE):
Interest expense (24,839) (949,601) (56,879) (1,894,764)
Interest income on escrowed proceeds 36,939 - 86,192 -
Other, net 103,560 (14,120) (262,109) (16,876)
---------------- ---------------- ---------------- ---------------
Total other income (expense), net 115,660 (963,721) (232,796) (1,911,640)
---------------- ---------------- ---------------- ---------------
CONSOLIDATED INCOME (LOSS) 115,660 (1,249,072) (232,796) (2,361,576)
MINORITY INTEREST IN
CONSOLIDATED (INCOME) LOSS (39,787) 429,681 80,082 812,382
---------------- ---------------- ---------------- ---------------
NET INCOME (LOSS) $ 75,873 $ (819,391) $ (152,714) $ (1,549,194)
================ ================ ================ ===============
ALLOCATION OF NET
INCOME (LOSS):
General Partners $ - $ (8,194) $ - $ (15,492)
================ ================ ================ ===============
Limited Partners $ 75,873 $ (811,197) $ (152,714) $ (1,533,702)
================ ================ ================ ===============
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ .43 $ (4.66) $ (.88) $ (8.80)
================ ================ ================ ===============
WEIGHTED AVERAGE NUMBER OF
LIMITED PARTNERSHIP UNITS
OUTSTANDING 174,343 174,343 174,343 174,343
================ ================ ================ ===============
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated statements.
3
IDS/JONES GROWTH PARTNERS II, L. P.
(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended
June 30,
-------------------------------
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (152,714) $(1,549,194)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization - 4,105,942
Minority interest in consolidated loss (80,082) (812,382)
Increase in trade receivables - (219)
Increase in proceeds from sale in escrow (86,192) -
Increase in deposits, prepaid expenses and
deferred charges - (52,982)
Increase in accounts payable, accrued liabilities and
subscriber prepayments 318,988 493,144
Decrease in advances from Managing General Partner - (6,805)
----------- -----------
Net cash provided by operating activities - 2,177,504
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net - (2,189,555)
----------- -----------
Net cash used in investing activities - (2,189,555)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt - (14,392)
----------- -----------
Net cash used in financing activities - (14,392)
----------- -----------
Decrease in cash - (26,443)
Cash, beginning of period - 124,766
----------- -----------
Cash, end of period $ - $ 98,323
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ - $ 1,746,469
=========== ===========
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated statements.
4
IDS/JONES GROWTH PARTNERS II, L.P.
(A Limited Partnership)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) This Form 10-Q is being filed in conformity with the SEC requirements for
unaudited financial statements and does not contain all of the necessary
footnote disclosures required for a 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 only of normal recurring accruals,
necessary to present fairly the financial position of IDS/Jones Growth Partners
II, L.P. (the "Partnership") at June 30, 1999 and December 31, 1998 and its
Statements of Operations for the three and six month periods ended June 30, 1999
and 1998 and its Statements of Cash Flows for the six month periods ended June
30, 1999 and 1998.
The accompanying financial statements include 100 percent of the
accounts of the Partnership and those of IDS/Jones Joint Venture Partners (the
"Venture"), which 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"), reduced by the 34.4 percent minority interests in the
Venture. All interpartnership accounts and transactions have been eliminated. As
discussed below, the Venture sold the Aurora System on December 4, 1998. Jones
Cable Corporation, a Colorado corporation, is the "Managing General Partner."
On April 7, 1999, Comcast Corporation ("Comcast") completed the acquisition
of a controlling interest in Jones Intercable, Inc. ("Intercable"). As of April
7, 1999, Comcast owned approximately 12.8 million shares of Intercable's Class A
Common Stock and approximately 2.9 million shares of Intercable's Common Stock,
representing approximately 37% of the economic interest and 47% of the voting
interest in Intercable. Also on that date, Comcast contributed its shares in
Intercable to Comcast's wholly owned subsidiary, Comcast Cable Communications,
Inc. ("Comcast Cable"). The approximately 2.9 million shares of Common Stock of
Intercable owned by Comcast represents approximately 57% of the outstanding
Common Stock, which class of stock is entitled to elect 75% of the Board of
Directors of Intercable. As a result of this transaction, Intercable is now a
consolidated public company subsidiary of Comcast Cable.
Also on April 7, 1999, the bylaws of Intercable were amended to establish
the size of Intercable's Board of Directors as a range from eight to thirteen
directors and the board was reconstituted so as to have eight directors and the
following directors of Intercable resigned: Robert E. Cole, Josef J. Fridman,
James J. Krejci, James B. O'Brien, Raphael M. Solot, Robert Kearney, Howard O.
Thrall, Siim Vanaselja, Sanford Zisman and Glenn R. Jones. In addition, Donald
L. Jacobs resigned as a director elected by the holders of Class A Common Stock
and was elected by the remaining directors as a director elected by the holders
of Common Stock. The remaining directors elected the following persons to fill
the vacancies on the board created by such resignations: Ralph J. Roberts, Brian
L. Roberts, John R. Alchin, Stanley Wang and Lawrence S. Smith. All of the newly
elected directors, with the exception of Mr. Jacobs, are officers of Comcast.
Also on April 7, 1999, the following executive officers of Intercable resigned:
Glenn R. Jones, James B. O'Brien, Ruth E. Warren, Kevin P. Coyle, Cynthia A.
Winning, Elizabeth M. Steele, Wayne H. Davis and Larry W. Kaschinske. The
following persons were appointed as executive officers of Intercable on April 7,
1999: Ralph J. Roberts, Brian L. Roberts, Lawrence S. Smith, John R. Alchin and
Stanley Wang.
Comcast is principally engaged in the development, management and operation
of broadband cable networks and in the provision of content through programming
investments. Comcast Cable is principally engaged in the development, management
and operation of broadband cable networks. The address of Comcast's principal
office is 1500 Market Street, Philadelphia, Pennsylvania 19102-2148, which is
also now the address of the principal office of Intercable and of the Managing
General Partner. The address of Comcast Cable's principal office is 1201 Market
Street, Suite 2201, Wilmington, Delaware 19801.
(2) On December 4, 1998, the Venture sold the Aurora System, its only operating
asset, to an unaffiliated party for a sales price of $108,500,000. The Venture
repaid all of its indebtedness, settled working capital adjustments, deposited
$3,283,500 into an interest-bearing indemnity escrow account and distributed the
remaining net sales proceeds of $51,374,610 to its four partners. The
Partnership received $33,678,970, or 65.6 percent, of the $51,374,610
distribution. The Partnership in turn distributed these funds to its limited
partners.
The $3,283,500 of the sale proceeds placed in the interest-bearing
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 its remaining liabilities, which totaled
$1,906,550 at June 30, 1999, and then the Venture will distribute the remaining
balance, if any, to its four partners. From its share of this amount, the
Partnership will retain funds necessary to cover the administrative expenses of
the Partnership and it will then distribute the balance, if any, to the limited
partners. 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.
Although the sale of the Aurora System represented the sale of the only
remaining operating asset of the Venture, the Venture and the Partnership will
not be dissolved until all proceeds from escrow have been distributed and the
Partnership will not be liquidated and dissolved until the pending litigation in
which the Partnership is a named defendant has been resolved and terminated.
(See Part II, Item 1).
(3) The Managing General Partner manages the Partnership and the Venture and
received a fee for its services equal to 5 percent of the gross revenues of the
Aurora System, excluding revenues from the sale of cable television systems or
franchises, until its sale on December 4, 1998. The Managing General Partner has
not received and will not receive a management fee after December 4, 1998.
Management fees paid to the Managing General Partner for the three and six month
periods ended June 30, 1998 were $274,205 and $531,102, respectively.
IDS Cable II Corporation (the "Supervising General Partner") and IDS Cable
Corporation (the supervising general partner of IDS/Jones Growth Partners 89-B,
Ltd.) participated in certain management decisions of the Venture and received a
fee for their services equal to 1/2 percent of the gross revenues of the Aurora
System, excluding revenues from the sale of cable television systems or
franchises. The Supervising General Partner and IDS Cable Corporation have not
received and will not receive a supervision fee after December 4, 1998.
Supervision fees for the three and six month periods ended June 30, 1998 were
$27,420 and $53,110, respectively.
5
The Venture will continue to reimburse Jones Intercable, Inc., the
parent of the Managing General Partner, for certain administrative expenses.
These expenses represent the salaries and related benefits paid for corporate
personnel. Such personnel provide administrative, accounting, tax, legal and
investor relations services to the Venture. Such services, and their related
costs, are necessary to the administration of the Venture. Reimbursements made
to Jones Intercable, Inc. by the Venture for overhead and administrative
expenses during the three and six month periods ended June 30, 1999 were $10,694
and $15,808, respectively, compared to $329,543 and $624,395, respectively, for
the three and six month periods ended June 30, 1998.
The Supervising General Partner and IDS Cable Corporation may also be
reimbursed for certain expenses incurred on behalf of the Venture. There were no
reimbursements made to the Supervising General Partner or IDS Cable Corporation
for overhead and administrative expenses during the three and six month periods
ended June 30, 1999 and 1998.
6
IDS/JONES GROWTH PARTNERS II, L.P.
----------------------------------
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
FINANCIAL CONDITION
- -------------------
The Partnership owns a 65.6 percent interest in the Venture. The
accompanying financial statements include the accounts of the Partnership and
the Venture, reduced by the 34.4 percent minority interests in the Venture. The
Venture owned the Aurora System until its sale on December 4, 1998.
On December 4, 1998, the Venture sold the Aurora System, its only
operating asset, to an unaffiliated party for a sales price of $108,500,000. The
Venture repaid all of its indebtedness, settled working capital adjustments,
deposited $3,283,500 into an interest-bearing indemnity escrow account and
distributed the remaining net sales proceeds of $51,374,610 to its four
partners. The Partnership received $33,678,970, or 65.6 percent, of the
$51,374,610 distribution. The Partnership in turn distributed these funds to its
limited partners.
The $3,283,500 of the sale proceeds placed in the interest-bearing
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 its remaining liabilities, which totaled
$1,906,550 at June 30, 1999, and then the Venture will distribute the remaining
balance, if any, to its four partners. From its share of this amount, the
Partnership will retain funds necessary to cover the administrative expenses of
the Partnership and it will then distribute the balance, if any, to the limited
partners. 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.
Although the sale of the Aurora System represented the sale of the only
remaining operating asset of the Venture, the Venture and the Partnership will
not be dissolved until all proceeds from escrow have been distributed and the
Partnership will not be liquidated and dissolved until the pending litigation in
which the Partnership is a named defendant has been resolved and terminated.
(See Part II, Item 1).
Because the Venture has sold all of its assets and further
distributions, if any, will be made to the limited partners of record as of the
closing date of the sale of the Venture's last remaining cable television
system, new limited partners would not be entitled to any distributions from the
Partnership and transfers of limited partnership interests would have no
economic or practical value. The Managing General Partner therefore has
determined, in accordance with the authority granted to it under Section 3.5 of
the Partnership's limited partnership agreement, that it will not process any
transfers of limited partnership interests in the Partnership during the
remainder of the Partnership's term.
RESULTS OF OPERATIONS
- ---------------------
The Venture sold its Aurora System on December 4, 1998 and ceased
operations as of such date. Because the Aurora System was the Venture's only
operating asset, a discussion of results of operations would not be meaningful.
Other expenses of $262,109 incurred in the first six months of 1999 related to
various costs associated with the sale of the Venture's Aurora System. 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 and the Partnership will be liquidated and dissolved upon the resolution
and termination of the pending litigation.
7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In July 1999, Jones Intercable, Inc., each of its subsidiaries that
serve as general partners of managed public partnerships and most of its managed
public partnerships, including the Partnership, were named defendants in a case
styled Everest Cable Investors, LLC, Everest Properties, LLC, Everest Properties
II, LLC and KM Investments, LLC, plaintiffs v. Jones Intercable, Inc., et al.,
defendants (Superior Court, Los Angeles County, State of California, Case No.
C213638). Plaintiffs, all of which are affiliated with each other, are in the
business of, among other things, investing in limited partnerships that own and
operate cable television systems. Plaintiffs allege that one of the plaintiffs
has been a limited partner or has obtained a valid power-of-attorney from a
limited partner in each of Jones Intercable, Inc.'s managed public partnerships
and that they had formed a coordinated plan amongst themselves to acquire up to
4.9% of the limited partnership interests in each of Jones Intercable, Inc.'s
managed public partnerships during the latter half of 1996. Plaintiffs'
complaint alleges that they were frustrated in this purpose by Jones Intercable,
Inc.'s refusal to provide plaintiffs with lists of the names and addresses of
the limited partners of Jones Intercable, Inc.'s managed public partnerships.
The complaint alleges that Jones Intercable Inc.'s actions constituted a breach
of contract, a breach of Jones Intercable, Inc.'s implied covenant of good faith
and fair dealing owed to the plaintiffs as limited partners, a breach of Jones
Intercable, Inc.'s fiduciary duty owed to the plaintiffs as limited partners and
tortious interference with prospective economic advantage. Plaintiffs allege
that Jones Intercable, Inc.'s failure to provide them with the partnership lists
prevented them from making their tender offers and the plaintiffs claim that
they have been injured by such action in an amount to be proved at trial, but
not less than $17 million. Given the fact that this case was only recently filed
and that the time for Jones Intercable, Inc.'s response to the complaint has not
yet expired, Jones Intercable, Inc. has not yet responded to this complaint.
Jones Intercable, Inc. believes, however, that it and the defendant subsidiaries
and managed public partnerships have defenses to the plaintiffs' claims for
relief, and Jones Intercable, Inc. intends to defend this lawsuit vigorously
both on its own behalf and on behalf of its subsidiaries and its managed public
partnerships.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
27) Financial Data Schedule
b) Reports on Form 8-K
Report on Form 8-K dated April 7, 1999, filed on April 15,
1999, reported that on April 7, 1999, Comcast Corporation completed
the acquisition of a controlling interest in Jones Intercable,
Inc., the parent of the Managing General Partner.
8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IDS/JONES GROWTH PARTNERS II, L.P.
BY: JONES CABLE CORPORATION
its Managing General Partner
By: /S/ Lawrence S. Smith
---------------------------------
Lawrence S. Smith
Principal Accounting Officer
By: /S/ Joseph J. Euteneuer
---------------------------------
Joseph J. Euteneuer
Vice President (Authorized Officer)
Dated: August 16, 1999
9