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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 September 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.
Exact name of registrant as specified in charter
Colorado #84-1060548
State of organization I.R.S. employer I.D.#
9697 East Mineral Avenue, P.O. Box 3309, Englewood, Colorado 80112-3309
Address of principal executive office
(303) 792-3111
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
September 30, December 31,
ASSETS 1994 1993
------ ------------ ------------
CASH $ 70,251 $ 81,997
TRADE RECEIVABLES, less allowance for doubtful
receivables of $47,993 and $34,993 at
September 30, 1994 and December 31, 1993,
respectively 355,394 365,509
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 33,392,877 30,921,229
Less - accumulated depreciation (13,199,077) (10,370,393)
------------ ------------
20,193,800 20,550,836
Franchise costs, net of accumulated amortization
of $29,840,535 and $25,699,750 at September 30,
1994 and December 31, 1993, respectively 28,726,586 32,867,371
Subscriber lists, net of accumulated amortization
of $4,684,583 and $3,884,274 at September 30,
1994 and December 31, 1993, respectively 2,934,920 3,735,229
Costs in excess of interest in net assets
purchased, net of accumulated amortization of
$812,946 and $672,276 at September 30, 1994 and
December 31, 1993, respectively 6,698,425 6,839,095
------------ ------------
Total investment in cable television
properties 58,553,731 63,992,531
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 143,881 155,933
------------ ------------
Total assets $ 59,123,257 $ 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
September 30, December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1994 1993
------------------------------------------- ------------ ------------
LIABILITIES:
Debt $ 42,036,878 $ 41,604,580
Accounts payable -
Trade 417 9,570
Managing General Partner 1,276,484 1,056,828
Accrued liabilities 1,300,491 979,721
Subscriber prepayments 58,469 43,602
------------ ------------
Total liabilities 44,672,739 43,694,301
------------ ------------
MINORITY INTEREST IN JOINT VENTURE 4,883,053 7,102,248
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General Partners-
Contributed capital 500 500
Accumulated deficit (280,258) (237,938)
------------ ------------
(279,758) (237,438)
------------ ------------
Limited Partners-
Net contributed capital (174,343 units
outstanding at September 30, 1994
and December 31, 1993, respectively) 37,256,546 37,256,546
Accumulated deficit (27,409,323) (23,219,687)
------------ ------------
9,847,223 14,036,859
------------ ------------
Total liabilities and partners'
capital (deficit) $ 59,123,257 $ 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 Nine Months Ended
September 30, September 30,
------------------------------ -------------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
REVENUES $ 3,866,424 $ 3,815,292 $11,453,715 $11,520,453
COSTS AND EXPENSES:
Operating, general and
administrative 2,173,770 1,872,235 6,429,420 5,966,941
Management fees and
allocated overhead
from General Partners 476,153 505,223 1,469,724 1,511,391
Depreciation and amortization 2,651,059 2,723,517 7,910,448 8,132,509
----------- ----------- ----------- -----------
OPERATING LOSS (1,434,558) (1,285,683) (4,355,877) (4,090,388)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (726,878) (548,910) (1,932,460) (1,690,768)
Other, net (65,571) (77,262) (162,814) (141,661)
----------- ----------- ----------- -----------
Total other income
(expense), net (792,449) (626,172) (2,095,274) (1,832,429)
----------- ----------- ----------- -----------
CONSOLIDATED LOSS (2,227,007) (1,911,855) (6,451,151) (5,922,817)
MINORITY INTEREST IN
CONSOLIDATED LOSS 766,090 657,678 2,219,195 2,037,449
----------- ----------- ----------- -----------
NET LOSS $(1,460,917) $(1,254,177) $(4,231,956) $(3,885,368)
=========== =========== =========== ===========
ALLOCATION OF NET LOSS:
General Partners $ (14,610) $ (12,542) $ (42,320) $ (38,854)
=========== =========== =========== ===========
Limited Partners $(1,446,307) $(1,241,635) $(4,189,636) $(3,846,514)
=========== =========== =========== ===========
NET LOSS PER LIMITED
PARTNERSHIP UNIT $ (8.29) $ (7.12) $ (24.03) $ (22.06)
=========== =========== =========== ===========
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 Nine Months Ended
September 30,
----------------------------
1994 1993
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(4,231,956) $(3,885,368)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization 7,910,448 8,132,509
Minority interest in net loss (2,219,195) (2,037,449)
Decrease (increase) in trade receivables 10,115 (46,914)
Decrease in prepaid expenses and other assets 12,052 24,592
Increase (decrease) in accounts payable,
accrued liabilities and subscriber
prepayments 326,484 265,418
Increase (decrease) in advance from Managing
General Partner 219,656 (131,109)
----------- -----------
Net cash provided by operating activities 2,027,604 2,321,679
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (2,471,648) (2,031,735)
----------- -----------
Net cash used in investing activities (2,471,648) (2,031,735)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 2,472,836 -
Repayment of borrowings (2,040,538) (1,563,268)
----------- -----------
Net cash provided by (used in) financing activities 432,298 (1,563,268)
----------- -----------
Decrease in cash (11,746) (1,273,324)
Cash, beginning of period 81,997 1,369,380
----------- -----------
Cash, end of period $ 70,251 $ 96,056
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 1,774,634 $ 1,543,133
=========== ===========
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, L.P. (the "Partnership") at September 30, 1994 and December 31, 1993 and
its Statements of Operations and Cash Flows for the three and nine month
periods ended September 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 interests 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 by the Venture for the three and nine month periods
ended September 30, 1994 were $193,321 and $572,686, respectively, as compared
to $190,765 and $576,023, respectively, for the three and nine month periods
ended September 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 paid to the Supervising General Partner by the
Venture for the three and nine month periods ended September 30, 1994 were
$19,332 and $57,269, respectively, as compared to $19,076 and $57,602,
respectively, for the three and nine month periods ended September 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 to 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 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 will also be
reimbursed for certain expenses incurred on behalf of the Partnership.
Reimbursements made to JIC by the Venture for allocated overhead and
administrative expenses during the three and nine month periods ended September
30, 1994 were $263,500 and $839,769, respectively, as compared to $295,382 and
$877,766, respectively, for the three and nine month periods ended September
30, 1993. There were no reimbursements made to the Supervising General Partner
for allocated overhead and administrative expenses during the three and nine
month periods ended September 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 nine months of 1994, the Venture expended
approximately $2,472,000 on capital expenditures. Approximately 41 percent of
the expenditures related to plant extensions. Approximately 39 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
$718,000. Approximately 40 percent of the anticipated capital expenditures are
for system rebuilds and upgrades. Approximately 37 percent of the expenditures
are for plant extensions. 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.
On December 5, 1991, 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. On that
date, 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. A
portion of this loan was repaid in November 1994. See discussion below. The
loans are subordinate to the Venture's new revolving credit and term loan and
mature in December 1994. It is anticipated that the maturity dates of such
loans will be extended beyond December 1994. In the first quarter of 1994, JIC
agreed to subordinate to all other Venture debt the $1,406,647 advance to the
Venture outstanding at March 30, 1994 and IDS Management Corporation made an
additional loan of $1,000,000 to the Venture to fund principal repayments. In
the second quarter of 1994, JIC made a loan of $1,000,000 to the Venture to
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. It is anticipated that the remaining loans
will be repaid over time with borrowings from the Venture's new credit
facility, as discussed below. If the December 5, 1991 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.
In November 1994, the Venture entered into a new revolving credit and
term loan agreement with a commercial bank. The new credit facility has a
maximum amount available of $40,000,000 through March 31, 1995, at which time
the maximum amount available will increase to $45,000,000. At November 10,
1994, $38,300,000 was outstanding under this agreement. Borrowings from this
new credit facility were used to repay the balance of the Venture's previous
credit facility of $36,000,000, to repay to JIC the $1,000,000 advanced by JIC
to fund the Venture's second quarter debt repayment plus interest, to repay to
IDS Management Corporation $880,000 of principle plus interest on the
$1,800,000 loan from IDS Management Corporation dated December 5, 1991 and to
pay certain fees incurred in obtaining the new credit facility. The revolving
credit period expires December 31, 1996, at which time the then-outstanding
balance converts to a term loan payable in 28 consecutive quarterly
installments. Interest on the new credit facility is at the Venture's option
of the base rate plus .75 percent, LIBOR plus 1.75 percent or the CD rate plus
1.875 percent. The Venture anticipates repaying the remaining notes
outstanding to related parties with borrowings from this new credit facility.
As borrowings become available, subject to leverage covenants, the related
parties, notes will be repaid including accrued interest in the following
order: First, to IDS Management Corporation the remaining $920,000 of the
$1,800,000 note dated December 5, 1991; second, to JIC the $1,800,000 note
dated December 5, 1991; third, to IDS Management Corporation the $1,000,000
note dated March 30, 1994; and fourth, to JIC the $1,406,647 outstanding
advance.
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.
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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 Venture reduced rates charged for
certain regulated services effective September 1, 1993. These initial
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 undertook 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, however, 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
return necessary to operate and to attract 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. 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.
After analyzing the effects of the two methods of rate regulation, the
Managing General Partner concluded that the Venture should elect to file
cost-of-service showings in the Aurora System. The Managing General Partner
anticipates no further reduction in revenues or operating income before
depreciation and amortization resulting from the FCC's rate regulations.
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
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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.
RESULTS OF OPERATIONS
Revenues of the Venture's Aurora System increased $51,132, or
approximately 1 percent, from $3,815,292 for the three month period ended
September 30, 1993 to $3,866,424 for the comparable 1994 period. Increases in
installation and premium service revenues were primrily responsible for the
increase in revenues. The effect of such increases was somewhat mitigated by a
decrease in basic revenues, as discussed below, for the three month period.
Revenues of the Venture's Aurora System decreased $66,738, or less than 1
percent, from $11,520,453 for the first nine months of 1993 to $11,453,715 for
the comparable 1994 period. Although basic subscribers increased 3,852, or
approximately 11 percent, from 36,156 at September 30, 1993 to 40,008 at
September 30, 1994, basic revenues decreased for the three and nine month
periods due to the reduction in basic rates resulting from new basic rate
regulations issued by the FCC in regard to the 1992 Cable Act. No other
individual factor was significant to the decreases in revenues.
Operating, general and administrative expense increased $301,535, or
approximately 16 percent, from $1,872,235 for the three months ended September
30, 1993 to $2,173,770 for the comparable 1994 period. Operating, general and
administrative expense increased $462,479, or approximately 8 percent, from
$5,966,941 for the nine months ended September 30, 1993 to $6,429,420 for the
comparable 1994 period. Increases in programming expenses were primarily
responsible for the three and nine month increase in operating, general and
administrative expense. The increases in programming fees were due, in part,
to increases in the subscriber base. Operating, general and administrative
expense represented 49 percent and 56 percent, respectively, of revenues for
the three month periods ended September 30, 1993 and 1994 and 52 percent and 56
percent, respectively, for the nine month periods ended September 30, 1993 and
1994. No other individual factors contributed significantly to the increase.
Management fees and allocated overhead from the General Partners decreased
$29,070, or approximately 6 percent, from $505,223 for the three month period
ended September 30, 1993 to $476,153 for the comparable 1994 period.
Management fees and allocated overhead from the General Partners decreased
$41,667, or approximately 3 percent, from $1,511,391 for the nine month period
ended September 30, 1993 to $1,469,724 for the comparable 1994 period. These
decreases are due primarily to decreases in allocated expenses from the
Managing General Partner resulting from a change in allocation methods
effective December 1, 1993.
Depreciation and amortization expense decreased $72,458, or
approximately 3 percent, for the three month periods from $2,723,517 in 1993 to
$2,651,059 in 1994. Depreciation and amortization expense decreased $222,061,
or approximately 3 percent, for the nine month periods from $8,132,509 in 1993
to $7,910,448 in 1994. These decreases were due to the maturation of a portion
of the Venture's intangible asset base.
Operating loss increased $148,875, or approximately 12 percent, for
the three month periods from $1,285,683 in 1993 to $1,434,558 in 1994 due to
increase in operating, general and administrative expenses exceeding the
increase in revenues and the decreases in management fees and allocated
overhead from the General Partners and depreciation and amortization expense.
Operating loss increased $265,489, or approximately 6 percent, for the nine
month periods from $4,090,388 in 1993 to $4,355,877 in 1994 due to the decrease
in revenues and the increase in operating, general and administrative expense
exceeding the decreases in management fees and allocated overhead from the
General Partners and depreciation and amortization expense.
Operating income before depreciation and amortization decreased
$221,333, or approximately 15 percent for the three month periods from
$1,437,834 in 1993 to $1,216,501 in 1994 due primarily to the increase in
operating, general and
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administrative expense exceeding the increase in revenues. Operating income
before depreciation and amortization decreased $487,550, or approximately 12
percent, for the nine month periods from $4,042,121 in 1993 to $3,554,571 in
1994 due to the decrease in revenues and the increase in operating, general
and administrative expense exceeding the decrease in management fees and
allocated overhead from the General Partners.
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
Managing 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 Managing General Partner incur cost increases (due to,
among other things, increases in programming fees, compliance costs associated
with reregulation and competition) that exceed increases in revenue. The
Managing 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) marketing efforts targeted at
non-subscribers.
Interest expense increased $177,968, or approximately 32 percent, from
$548,910 for the three month period ended September 30, 1993 to $726,878 for
the comparable 1994 period. Interest expense increased $241,692, or
approximately 14 percent, from $1,690,768 for the nine month period ended
September 30, 1993 to $1,932,460 for the comparable 1993 period. These
increases are due to higher effective interest rates and higher outstanding
balances on interest bearing obligations. Consolidated loss increased
$315,152, or approximately 16 percent, from $1,911,855 for the three month
period ended September 30, 1993 to $2,227,007 for the comparable 1994 period.
Consolidated loss increased $528,334, or approximately 9 percent, from
$5,922,817 for the nine month period ended September 30, 1993 to $6,451,151 for
the comparable 1994 period. These increases are due to the factors discussed
above. Such losses are expected to continue in the future.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
27) Financial Data Schedule
b) Reports on Form 8-K
None
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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: November 11, 1994
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EXHIBIT INDEX
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
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27 Financial Data Schedule