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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, 1994.
( ) 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.
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Exact name of registrant as specified in charter
Colorado #84-1060548
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State of organization I.R.S. employer I.D.#
9697 East Mineral Avenue, P.O. Box 3309, Englewood, Colorado 80155-3309
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Address of principal executive office
(303) 792-3111
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Registrant's telephone number
Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section l3 or l5(d) of the Securities Exchange Act of
l934 during the preceding l2 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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IDS/JONES GROWTH PARTNERS II, L. P.
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1994 1993
------------ ------------
ASSETS
------
CASH $ 31,826 $ 81,997
TRADE RECEIVABLES, less allowance for doubtful receivables
of $39,993 and $34,993 at June 30, 1994 and December 31,
1993, respectively 357,803 365,509
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 32,318,410 30,921,229
Less - accumulated depreciation (12,252,505) (10,370,393)
------------ ------------
20,065,905 20,550,836
Franchise costs, net of accumulated amortization of $28,449,491
and $25,699,750 at June 30, 1994 and December 31, 1993,
respectively 30,117,630 32,867,371
Subscriber lists, net of accumulated amortization of $4,418,030
and $3,884,274 at June 30, 1994 and December 31, 1993,
respectively 3,201,473 3,735,229
Costs in excess of interest in net assets purchased, net of accumulated
amortization of $766,056 and $672,276 at June 30, 1994 and
December 31, 1993, respectively 6,745,315 6,839,095
------------ ------------
Total investment in cable television properties 60,130,323 63,992,531
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 133,105 155,933
------------ ------------
Total assets $ 60,653,057 $ 64,595,970
============ ============
The accompanying notes to unaudited consolidated financial statements
are an integral part of these consolidated balance sheets.
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IDS/JONES GROWTH PARTNERS II, L. P.
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1994 1993
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LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
-------------------------------------------
LIABILITIES:
Debt $ 42,052,002 $ 41,604,580
Accounts payable -
Trade 18,098 9,570
Managing General Partner 1,040,406 1,056,828
Accrued liabilities 808,619 979,721
Subscriber prepayments 56,407 43,602
------------ ------------
Total liabilities 43,975,532 43,694,301
------------ ------------
MINORITY INTEREST IN JOINT VENTURE 5,649,143 7,102,248
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General Partners-
Contributed capital 500 500
Accumulated deficit (265,648) (237,938)
------------ ------------
(265,148) (237,438)
------------ ------------
Limited Partners-
Net contributed capital (174,343 units outstanding
at June 30, 1994 and December 31, 1993) 37,256,546 37,256,546
Accumulated deficit (25,963,016) (23,219,687)
------------ ------------
11,293,530 14,036,859
------------ ------------
Total liabilities and partners' capital (deficit) $ 60,653,057 $ 64,595,970
============ ============
The accompanying notes to unaudited consolidated financial statements
are an integral part of these consolidated balance sheets.
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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,
------------------------------- -------------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
REVENUES $ 3,818,958 $ 3,910,975 $ 7,587,291 $ 7,705,161
COSTS AND EXPENSES:
Operating, general and administrative 2,091,835 2,113,318 4,255,650 4,094,706
Management fees and allocated
overhead from General Partners 493,606 511,445 993,571 1,006,168
Depreciation and amortization 2,557,518 2,707,703 5,259,389 5,408,992
----------- ----------- ----------- -----------
OPERATING LOSS (1,324,001) (1,421,491) (2,921,319) (2,804,705)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (649,011) (546,368) (1,205,582) (1,141,858)
Other, net (52,919) (38,151) (97,243) (64,399)
----------- ----------- ------------ -----------
Total other income (expense), net (701,930) (584,519) (1,302,825) (1,206,257)
----------- ----------- ----------- -----------
CONSOLIDATED LOSS (2,025,931) (2,006,010) (4,224,144) (4,010,962)
MINORITY INTEREST IN
CONSOLIDATED LOSS 696,919 690,067 1,453,105 1,379,771
----------- ----------- ----------- -----------
NET LOSS $(1,329,012) $(1,315,943) $(2,771,039) $(2,631,191)
=========== =========== =========== ===========
ALLOCATION OF NET LOSS:
General Partners $ (13,290) $ (13,160) $ (27,710) $ (26,312)
=========== =========== =========== ===========
Limited Partners $(1,315,722) $(1,302,783) $(2,743,329) $(2,604,879)
=========== =========== =========== ===========
NET LOSS PER LIMITED
PARTNERSHIP UNIT $ (7.55) $ (7.47) $ (15.74) $ (14.94)
=========== =========== =========== ===========
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 consolidated statements.
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IDS/JONES GROWTH PARTNERS II, L. P.
(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended
June 30,
-------------------------------
1994 1993
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,771,039) $(2,631,191)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 5,259,389 5,408,992
Minority interest in net loss (1,453,105) (1,379,771)
Decrease in trade receivables 7,706 52,307
Decrease (increase) in prepaid expenses and other assets 22,828 (26,305)
Decrease in accounts payable, accrued liabilities
and subscriber prepayments (149,769) (31,501)
Decrease in advances from Managing General Partner (16,422) (345,839)
----------- -----------
Net cash provided by operating activities 899,588 1,046,692
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (1,397,181) (927,528)
----------- -----------
Net cash used in investing activities (1,397,181) (927,528)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 2,472,836 -
Repayment of borrowings (2,025,414) (1,044,947)
----------- -----------
Net cash provided by (used in) financing activities 447,422 (1,044,947)
----------- -----------
Decrease in cash (50,171) (925,783)
Cash, beginning of period 81,997 1,369,380
----------- -----------
Cash, end of period $ 31,826 $ 443,597
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 1,181,959 $ 1,155,710
=========== ===========
The accompanying notes to unaudited consolidated financial statements
are an integral part of these consolidated statements.
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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 fair presentation of the Balance Sheets and
Statements of Operations and Cash Flows in conformity with generally accepted
accounting principles. However, in the opinion of management, this data
includes all adjustments, consisting only of normal recurring accruals,
necessary to present fairly the financial position of IDS/Jones Growth Partners
II (the "Partnership") at June 30, 1994 and December 31, 1993 and its
Statements of Operations and Cash Flows for the three and six month periods
ended June 30, 1994 and 1993. Results of operations for these periods are not
necessarily indicative of results to be expected for the full year.
The accompanying financial statements include 100 percent of the
accounts of the Partnership and those of IDS/Jones Joint Venture Partners (the
"Venture") including the cable television systems serving the areas in and
around Aurora, Illinois, reduced by the minority interest in the Venture. All
interpartnership accounts and transactions have been eliminated.
(2) Jones Cable Corporation ("the Managing General Partner") manages the
Partnership and the Venture and receives 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 to the
Managing General Partner for the three and six month periods ended June 30,
1994 were $190,948 and $379,365, respectively, as compared to $195,549 and
$385,258, respectively, for the three and six month periods ended June 30,
1993.
IDS Cable II Corporation ("the Supervising General Partner") and IDS
Cable Corporation (the "Supervising General Partner" of IDS/Jones Growth
Partners 89-B) participate in certain management decisions of the Venture and
receive a fee for their services equal to one-half percent of the gross
revenues of the Venture, excluding revenues from the sale of cable television
systems or franchises. Supervision fees for the three and six month periods
ended June 30, 1994 were $19,094 and $37,936, respectively, as compared to
$19,555 and $38,526, respectively, for the three and six month periods ended
June 30, 1993.
The Venture reimburses Jones Intercable, Inc., an affiliate of the
Managing General Partner ("JIC"), for certain allocated overhead and
administrative expenses. These expenses represent the salaries and related
benefits paid for corporate personnel, rent, data processing services and other
corporate facilities costs. Such personnel provide engineering, marketing,
administrative, accounting, legal and investor relations services to the
Venture. Allocations of personnel costs are based primarily on actual time
spent by employees of JIC with respect to each partnership managed. Remaining
overhead costs are allocated primarily based on revenues and/or the cost of
partnership assets managed. Effective December 1, 1993, the allocation method
was changed to be based only on revenue, which the Managing General Partner
believes provides a more accurate method of allocation. Systems owned by JIC
and all other systems owned by partnerships for which JIC or affiliates are the
general partners are also allocated a proportionate share of these expenses.
JIC believes that the methodology used in allocating overhead and
administrative expenses is reasonable. The Supervising General Partner may
also be reimbursed for certain expenses incurred on behalf of the Partnership.
Reimbursements to JIC for allocated overhead and administrative expenses during
the three and six month periods ended June 30, 1994 were $283,564 and $576,270,
respectively, as compared to $296,341 and $582,384, respectively, for the three
and six month periods ended June 30, 1993. There were no reimbursements made
to the Supervising General Partner for allocated overhead and administrative
expenses during the three and six month periods ended June 30, 1994 and 1993.
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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 an approximate 66 percent interest in the
Venture. The accompanying financial statements include the accounts of the
Partnership and the Venture, reduced by the approximate 34 percent minority
interest in the Venture. The Venture owns the cable television system serving
certain areas in and around Aurora, Illinois.
During the first six months of 1994, the Venture expended
approximately $1,397,000 on capital expenditures. Approximately 37 percent of
the expenditures related to plant extensions. Approximately 35 percent of the
expenditures related to construction of service drops to subscriber homes.
Approximately 12 percent of the expenditures related to system rebuilds and
upgrades. The remainder of the expenditures was for various enhancements in
the Aurora System. Funding for these expenditures was provided by cash on
hand, cash generated from operations and advances from the General Partners.
Anticipated capital expenditures for the remainder of 1994 are approximately
$1,793,000. Approximately 59 percent of the expenditures are for plant
extensions. Approximately 21 percent of the expenditures are for construction
of service drops to subscriber homes. Approximately 9 percent of the
anticipated capital expenditures are for system rebuilds and upgrades. The
actual level of capital expenditures will depend, in part, upon the Managing
General Partner's determination as to the proper scope and timing of such
expenditures in light of the 1992 Cable Act and the Venture's liquidity
position. Funding for the expenditures is expected to be provided by cash on
hand, cash generated from operations and, if available, borrowings under a
renegotiated credit facility, as discussed below. Such capital expenditures
may be reduced to provide the Venture with the liquidity to fund loan
repayments due under its credit facility if the Venture is unable to refinance
such credit facility. The effect of any such reduction would be the deferral
of revenue from potential subscribers that would have been reached by plant
extensions.
The Venture's $40,000,000 revolving credit facility converted to a
term loan on January 1, 1993. The outstanding balance is payable in
installments on or before December 31, 1999. At June 30, 1994, $36,000,000 was
outstanding under the term loan. During the first six months of 1994, the
Venture repaid $2,000,000 under the term loan. Such installments were funded
by a loan from the Supervising General Partner and an advance from the Managing
General Partner. Installments for the remainder of 1994 are $2,000,000. The
Venture had intended to fund such installments with cash on hand and cash
generated from operations. Because (due, in part, to FCC-mandated rate
reductions) it now appears that cash on hand and cash generated from operations
will be insufficient to fund the loan repayments, the Managing General Partner
is seeking to refinance the credit facility to establish a revolving credit
period and increase the maximum amount available. If the Venture is not
successful in refinancing its credit facility, the Venture will have to rely on
cash generated from operations and, in their discretion, advances from the
General Partners to fund the loan repayments. There is no obligation on the
part of the General Partners to make any such advances and there is no
assurance that any would be made. The Venture's ability to refinance its credit
facility may be adversely affected by FCC mandated rate reductions and their
impact on the value of the Aurora System. In addition, the effect of the FCC's
new rate regulations on revenue and operating income has caused the Venture to
be in default of certain leverage covenants under the credit facility. The
Managing General Partner has obtained a waiver of such defaults and will seek
to obtain different covenants in the refinancing negotiations. If the credit
facility is not refinanced and payments are not made when due, there would be a
default and the lender could enforce its remedies under the credit facility.
Interest on amounts outstanding is at the Venture's option of the base rate
plus 1/2 percent, where the base rate is the higher of the bank's prime rate or
the Federal Funds Rate plus 1/2 percent, LIBOR plus 1-1/2 percent or the CD
rate plus 1-5/8 percent. The effective interest rates on outstanding
obligations as of June 30, 1994 and 1993 were 6.13 percent and 4.55 percent,
respectively.
In the fourth quarter of 1991, due to the necessity for additional
funding for the Venture, JIC made an equity investment in the Venture in the
amount of $2,872,000 and a loan of $1,800,000 to the Venture. IDS Management
Corporation also made an equity investment of $2,872,000 in the Venture and a
loan to the Venture in the amount of $1,800,000. Such equity investments and
loans were used to repay the balance outstanding on the Venture's bridge
facility, pay acquisition fees of $3,244,000 and the remainder of such funds
were used for Venture working capital needs. The loans are subordinate to the
revolving credit and term loan and mature in the fourth quarter of 1994. In
the first quarter of 1994, JIC made an additional loan of $1,406,647 to the
Venture and IDS Management Corporation also made an
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additional loan of $1,000,000 to the Venture to provide liquidity and fund
principal repayments. The interest rates on the respective loans, which will
vary from time to time, with respect to IDS Management Corporation's loan, are
at its cost of borrowing, and, with respect to JIC's loan, are at its weighted
average cost of borrowing. If these loans are not paid at maturity, JIC and
IDS Management Corporation will have the right, among other rights, to convert
these loans to equity in the Venture.
As a result of their equity contributions to the Venture, IDS
Management Corporation and JIC each have an approximate 5 percent equity
interest in the Venture, the Partnership has a 66 percent interest and
IDS/Jones 89-B has a 24 percent interest. If the subordinated loans are
converted to equity, the ownership percentages will be adjusted accordingly.
The first appraisal of the Aurora System was conducted during the
fourth quarter of 1993. The appraised value was below the initial purchase
price. The appraised value in part reflects the depressed conditions in the
cable system marketplace caused by the new federal regulations imposed on the
cable television industry last year. There are no present plans to sell the
Aurora System nor can the Managing General Partner predict whether market
conditions will improve in the future or whether the Aurora System will
ultimately appreciate in value.
Regulation and Legislation
Congress enacted the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act"), which became effective on
December 4, 1992. This legislation has caused significant changes to the
regulatory environment in which the cable television industry operates. The
1992 Cable Act generally allows for a greater degree of regulation of the cable
television industry. Under the 1992 Cable Act's definition of effective
competition, nearly all cable systems in the United States, including the
Aurora System, are subject to rate regulation of basic cable services. In
addition, the 1992 Cable Act allows the FCC to regulate rates for non-basic
service tiers other than premium services in response to complaints filed by
franchising authorities and/or cable subscribers. In April 1993, the FCC
adopted regulations governing rates for basic and non-basic services. The
FCC's rules became effective on September 1, 1993.
In compliance with these rules, the Partnership and the Venture
reduced rates charged for certain regulated services effective September 1,
1993. These reductions resulted in some decrease in revenues and operating
income before depreciation and amortization, however the decrease was not as
severe as originally anticipated. The Managing General Partner has undertaken
actions to mitigate a portion of these reductions primarily through (a) new
service offerings in some systems, (b) product re-marketing and re-packaging
and (c) marketing efforts directed at non-subscribers.
On February 22, 1994, the FCC adopted several additional rate orders
including an order which revised its earlier-announced regulatory scheme with
respect to rates. The FCC's new regulations will generally require rate
reductions, absent a successful cost-of-service showing, of 17 percent of
September 30, 1992 rates, adjusted for inflation, channel modifications,
equipment costs, and increases in programming costs. However, the FCC held
rate reductions in abeyance in certain systems. The new regulations became
effective on May 15, 1994, but operators could elect to defer rate reductions
to July 14, 1994, so long as they made no changes in their rates and did not
restructure service offerings between May 15 and July 14.
On February 22, 1994, the FCC also adopted interim cost-of-service
regulations. Rate reductions will not be required where it is successfully
demonstrated that rates for basic and other regulated programming services are
justified and reasonable using cost-of-service standards. The FCC established
an interim industry-wide 11.25 percent permitted rate of return, and requested
comments on whether this standard and other interim cost-of-service standards
should be made permanent. The FCC also established a presumption that
acquisition costs above a system's book value should be excluded from the rate
base, but the FCC will consider individual showings to rebut this presumption.
The need for special rate relief will also be considered by the FCC if an
operator demonstrates that the rates set by a cost-of-service proceeding would
constitute confiscation of investment, and that, absent a higher rate, the
credit necessary to operate and to attract
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investment could not be maintained. The FCC will establish a uniform system of
accounts for operators that elect cost-of-service rate regulation, and the FCC
has adopted affiliate transaction regulations. The FCC also proposed adopting
a productivity factor to be offset against future inflation increases to be
applied regardless of which form of regulation is used, cost of service or
benchmark regulation. After a rate has been set pursuant to a cost-of-service
showing, rate increases for regulated services will be indexed for inflation,
and operators will also be permitted to increase rates in response to increases
in costs beyond their control, such as taxes and increased programming costs.
The Venture has elected to file cost-of-service showings in the Aurora
System. The General Partner anticipates no further reduction in revenues or
operating income before depreciation and amortization.
The 1992 Cable Act contains new broadcast signal carriage
requirements, and the FCC has adopted regulations implementing the statutory
requirements. These new rules allow a local commercial broadcast television
station to elect whether to demand that a cable system carry its signal or to
require the cable system to negotiate with the station for "retransmission
consent." A cable system is generally required to devote up to one-third of
its activated channel capacity for the mandatory carriage of local commercial
broadcast television stations, and non-commercial television stations are also
given mandatory carriage rights, although such stations are not given the
option to negotiate retransmission consent for the carriage of their signals by
cable systems. Additionally, cable systems also are required to obtain
retransmission consent from all commercial television stations (except for
commercial satellite-delivered independent "superstations"), which do not elect
mandatory carriage, commercial radio stations and, in some instances, low-power
television stations carried by cable systems.
The retransmission consent rules went into effect on October 6, 1993.
In the cable television system owned by the Venture no television stations
withheld their consent to retransmission of their signal. Certain broadcast
signals are being carried pursuant to extensions, and the Managing General
Partner expects to finally conclude retransmission consent negotiations with
those remaining stations without having to terminate the distribution of any of
those signals. However, there can be no assurance that such will occur. If
any broadcast station currently being carried pursuant to an extension is
dropped, there could be a negative effect on the system in which it is dropped
if a significant number of subscribers in such system were to disconnect their
service. However, in most cases, only one broadcaster in any market is being
carried pursuant to an extension arrangement, and the dropping of such
broadcaster, were that to occur, is not expected to have a negative effect on
the system.
There have been several lawsuits filed by cable operators and
programmers in Federal court challenging various aspects of the 1992 Cable Act,
including provisions relating to mandatory broadcast signal carriage,
retransmission consent, access to cable programming, rate regulations,
commercial leased channels and public access channels. On April 8, 1993, a
three-judge Federal district court panel issued a decision upholding the
constitutionality of the mandatory signal carriage requirements of the 1992
Cable Act. That decision was appealed directly to the United States Supreme
Court. The United States Supreme Court vacated the lower court decision on
June 27, 1994 and remanded the case to the district court for further
development of a factual record. The Court's majority determined that the
must-carry rules were content neutral, but that it was not yet proven that the
rules were needed to preserve the economic health of the broadcasting industry.
In the interim, the must-carry rules will remain in place during the pendency
of the proceedings in district court. In 1993, a Federal district court for
the District of Columbia upheld provisions of the 1992 Cable Act concerning
rate regulation, retransmission consent, restrictions on vertically integrated
cable television operators and programmers, mandatory carriage of programming
on commercial leased channels and public, educational and governmental access
channels and the exemption for municipalities from civil damage liability
arising out of local regulation of cable services. The 1992 Cable Act's
provisions providing for multiple ownership limits for cable operators and
advance notice of free previews for certain programming services have been
found unconstitutional, and these decisions have been appealed. In November
1993, the United States Court of Appeals for the District of Columbia held that
the FCC's regulations implemented pursuant to Section 10 of the 1992 Cable Act,
which permit cable operators to ban indecent programming on public, educational
or governmental access channels or leased access channels, were
unconstitutional, but the court has agreed to reconsider its decision. All of
these decisions construing provisions of the 1992 Cable Act and the FCC's
implementing regulations have been or are expected to be appealed.
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RESULTS OF OPERATIONS
Revenues of the Venture's Aurora System decreased $92,017, or
approximately 2 percent, from $3,910,975 for the three month period ended June
30, 1993 to $3,818,958 for the comparable 1994 period. Revenues of the
Venture's Aurora System decreased $117,870, or approximately 2 percent, from
$7,705,161 for the first six months of 1993 to $7,587,291 for the comparable
1994 period. Although basic subscribers increased 3,412, or approximately 9
percent, from 35,940 at June 30, 1993 to 39,352 at June 30, 1994, revenues
decreased due to the reduction in basic rate due to new basic rate regulations
issued by the FCC in May 1993 with which the Venture complied effective
September 1, 1993. No other individual factor was significant to the decreases
in revenues.
Operating, general and administrative expense decreased $21,483, or
approximately 1 percent, from $2,113,318 for the three months ended June 30,
1993 to $2,091,835 for the comparable 1994 period. The decrease for the three
month period was due to a decrease in personnel related costs and advertising
sales expense which were partially offset by increases in programming fees and
marketing related costs. Operating, general and administrative expense
increased $160,944, or approximately 4 percent, from $4,094,706 for the six
months ended June 30, 1993 to $4,255,650 for the comparable 1994 period. The
increase for the six month period was due to increases in programming fees and
marketing related costs which were partially offset by decreases in personnel
related costs, plant maintenance costs and marketing related costs. Operating,
general and administrative expense represented 54 percent and 55 percent,
respectively, of revenues for the three month periods ended June 30, 1993 and
1994 and 53 percent and 56 percent, respectively, for the six month periods
ended June 30, 1993 and 1994. No other individual factors contributed
significantly to the increase. Management fees and allocated overhead from the
General Partners decreased $17,839, or approximately 3 percent, from $511,445
for the three month period ended June 30, 1993 to $493,606 for the comparable
1994 period. Management fees and allocated overhead from the General Partners
decreased $12,597, or approximately 1 percent, from $1,006,168 for the six
month period ended June 30, 1993 to $993,571 for the comparable 1994 period.
These decreases are due to the decreases in revenues, upon which management
fees and allocated overhead are based, and decreases in allocated expenses from
the Managing General Partner, due to an adjustment in the allocation method.
Depreciation and amortization expense decreased $150,185, or
approximately 6 percent, for the three month periods from $2,707,703 in 1993 to
$2,557,518 in 1994. Depreciation and amortization expense decreased $149,603,
or approximately 3 percent, for the six month periods from $5,408,992 in 1993
to $5,259,389 in 1994. These decreases were due to the maturation of a portion
of the Venture's intangible asset base.
Operating loss decreased $97,490, or approximately 7 percent, for the
three month periods from $1,421,491 in 1993 to $1,324,001 in 1994. The
decrease was due to the decreases in operating, general and administrative
expense, management fees and allocated overhead from the General Partners and
depreciation and amortization expense exceeding the decrease in revenues.
Operating loss increased $116,614, or approximately 4 percent, for the six
month periods from $2,804,705 in 1993 to $2,921,319 in 1994. This increase was
due to the increases in operating, general and administrative expenses
exceeding the decreases in revenues, management fees and allocated overhead
from the General Partners and depreciation and amortization expense.
Operating income before depreciation and amortization decreased
$52,695, or approximately 4 percent, for the three month periods from
$1,286,212 in 1993 to $1,233,517 in 1994. The decrease was due to the decrease
in revenues exceeding the decrease in operating, general and administrative
expense and management fees and allocated overhead from the General Partner.
Operating income before depreciation and amortization decreased $266,217, or
approximately 10 percent, for the six month periods from $2,604,287 in 1993 to
$2,338,070 in 1994. The decrease was due to the decrease in revenues and the
increase in operating, general and administrative expense. The decreases in
operating income before depreciation and amortization reflect the current
operating environment of the cable television industry. The FCC rate
regulations under the 1992 Cable Act have caused revenues to decrease. In
turn, this has caused certain expenses which are a function of revenue, such as
franchise fees, copyright fees and management fees to decrease. However, other
operating costs such as programming fees, salaries and benefits, and marketing
costs as well as certain costs incurred by the General Partner which are
allocated to the Partnership, continue to increase. This situation has led to
reductions in operating income before depreciation and amortization as a
percent of revenue ("Operating Margin"). Such reductions in Operating Margins
may continue in the near term as the Partnership and the General Partner incur
cost increases (due to, among other things, programming fees, reregulation and
competition) that exceed increases in revenue. The General Partner will
attempt to mitigate a portion of these reductions through (a) rate adjustments;
(b) new service offerings; (c) product re-marketing and re-packaging and (d)
targeted non-subscriber acquisition marketing.
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Interest expense increased $102,643, or approximately 19 percent, from
$546,368 for the three month period ended June 30, 1993 to $649,011 for the
comparable 1994 period. Interest expense increased $63,724, or approximately 6
percent, from $1,141,858 for the six month period ended June 30, 1993 to
$1,205,582 for the comparable 1994 period. These increases are due to higher
effective interest rates and higher outstanding balances on interest bearing
obligations. Consolidated loss increased $19,921, or approximately 1 percent,
from $2,006,010 for the three month period ended June 30, 1993 to $2,025,931
for the comparable 1994 period. Consolidated loss increased $213,182, or
approximately 5 percent, from $4,010,962 for the six month period ended June
30, 1993 to $4,224,144 for the comparable 1994 period. These increases are due
to the factors discussed above. Such losses are expected to continue.
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PART II - OTHER INFORMATION
NONE
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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/ KEVIN P. COYLE
Kevin P. Coyle
Group Vice President/Finance
(Principal Financial Officer)
Dated: August 12, 1994
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