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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, 1995
[ ] 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: 0-19259
JONES GROWTH PARTNERS II L.P.
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Exact name of registrant as specified in charter
Colorado #84-1126141
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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 (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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JONES GROWTH PARTNERS II L.P.
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
September 30, December 31,
ASSETS 1995 1994
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CASH $ 22,420 $ 61,131
TRADE RECEIVABLES, less allowance for doubtful
receivables of $18,475 and $4,291 at September 30, 1995
and December 31, 1994, respectively 420,914 338,891
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 15,976,548 14,011,386
Less- accumulated depreciation (4,296,192) (3,158,613)
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11,680,356 10,852,773
Franchise costs, net of accumulated amortization
of $3,563,968 and $2,791,240 at September 30, 1995
and December 31, 1994, respectively 6,739,032 7,511,760
Subscriber lists, net of accumulated amortization of
$1,901,588 and $1,489,195 at September 30, 1995 and
December 31, 1994, respectively 1,947,411 2,359,804
Noncompete agreement, net of accumulated amortization
of $1,514,359 and $1,185,944 at September 30, 1995 and
December 31, 1994, respectively 419,641 748,056
Costs in excess of interests in net assets purchased, net
of accumulated amortization of $155,918 and $122,089
at September 30, 1995 and December 31, 1994, respectively 1,645,971 1,679,800
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Total investment in cable
television properties 22,432,411 23,152,193
DEBT PLACEMENT COSTS, net of accumulated
amortization of $129,245 and $101,216 at
September 30, 1995 and December 31, 1994,
respectively 154,160 182,189
DEPOSITS, PREPAID EXPENSES AND OTHER ASSETS 311,862 230,433
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Total assets $ 23,341,767 $ 23,964,837
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The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
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JONES GROWTH PARTNERS II L.P.
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
September 30, December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1995 1994
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LIABILITIES:
Credit facility and other debt $12,746,422 $11,247,350
Accounts payable to Jones Intercable, Inc. 45,579 71,270
Trade accounts payable and accrued liabilities 399,346 622,661
Subscriber prepayments and deposits 308,287 324,185
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Total liabilities 13,499,634 12,265,466
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PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (72,385) (53,813)
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(71,385) (52,813)
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Limited Partners-
Net contributed capital (19,785 units
outstanding at September 30, 1995 and
December 31, 1994) 16,746,882 16,746,882
Accumulated deficit (6,833,364) (4,994,698)
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9,913,518 11,752,184
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Total partners' capital (deficit) 9,842,133 11,699,371
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Total liabilities and partners' capital (deficit) $23,341,767 $23,964,837
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The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
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JONES GROWTH PARTNERS II L.P.
(A Limited Partnership)
UNAUDITED STATEMENTS OF OPERATIONS
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
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1995 1994 1995 1994
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REVENUES $ 1,777,406 $1,585,945 $ 5,140,399 $ 4,705,680
COSTS AND EXPENSES:
Operating expenses 1,036,495 893,158 2,972,896 2,667,696
Management fees and allocated administrative
costs from General Partner 209,178 188,491 612,647 582,924
Depreciation and amortization 903,390 856,971 2,716,680 2,570,931
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OPERATING LOSS (371,657) (352,675) (1,161,824) (1,115,871)
OTHER INCOME (EXPENSE):
Interest expense (247,880) (185,687) (694,977) (488,970)
Other, net (549) 3,730 (437) (5,910)
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NET LOSS $ (620,086) $ (534,632) $(1,857,238) $(1,610,751)
=========== ========== =========== ===========
ALLOCATION OF NET LOSS:
General Partner $ (6,201) $ (5,347) $ (18,572) $ (16,108)
=========== ========== =========== ===========
Limited Partners $ (613,885) $ (529,285) $(1,838,666) $(1,594,643)
=========== ========== =========== ===========
NET LOSS PER LIMITED
PARTNERSHIP UNIT $ (31.03) $ (26.75) $ (92.93) $ (80.60)
=========== ========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
LIMITED PARTNERSHIP UNITS
OUTSTANDING 19,785 19,785 19,785 19,785
=========== ========== =========== ===========
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
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JONES GROWTH PARTNERS II L.P.
(A Limited Partnership)
UNAUDITED STATEMENTS OF CASH FLOWS
For the Nine Months Ended
September 30,
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1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,857,238) $ (1,610,751)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 2,716,680 2,570,931
Amortization of interest rate protection contract 16,974 11,316
Increase in trade receivables (82,023) (229,769)
Increase in deposits, prepaid expenses and
other assets (102,110) (121,004)
Decrease in trade accounts payable,
accrued liabilities and subscriber
prepayments and deposits (239,213) (174,201)
Increase (decrease) in accounts payable to
Jones Intercable, Inc. (25,691) 75,414
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Net cash provided by operating activities 427,379 521,936
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment (1,965,162) (928,638)
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Net cash used in investing activities (1,965,162) (928,638)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 1,537,512 -
Repayment of borrowings (38,440) (249,761)
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Net cash provided by (used in) financing activities 1,499,072 (249,761)
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DECREASE IN CASH (38,711) (656,463)
CASH, BEGINNING OF PERIOD 61,131 757,270
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CASH, END OF PERIOD $ 22,420 $ 100,807
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SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 454,051 $ 486,278
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The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
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JONES GROWTH PARTNERS II L.P.
(A Limited Partnership)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) This Form 10-Q is being filed in conformity with the SEC requirements
for unaudited financial statements and does not contain all of the necessary
footnote disclosures required for a 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 of normal recurring accruals, necessary to
present fairly the financial position of Jones Growth Partners II L.P. (the
"Partnership") at September 30, 1995 and December 31, 1994, and its results of
operations for the three and nine month periods ended September 30, 1995 and
1994, and changes in its cash flows for the nine month periods ended September
30, 1995 and 1994. Results of operations for these periods are not necessarily
indicative of results to be expected for the full year.
The Partnership owns and operates the cable television system serving
the areas in and around the communities of Yorba Linda, certain portions of
Anaheim Hills, and certain portions of unincorporated Orange County, all in the
state of California (the "Yorba Linda System").
(2) The Partnership was formed pursuant to a public offering of limited
partnership interests sponsored by Jones Spacelink Cable Corporation (the
"General Partner"). The General Partner was a wholly owned subsidiary of Jones
Spacelink, Ltd. ("Spacelink") until December 20, 1994. On that date, Jones
Intercable, Inc. ("Intercable"), a Colorado corporation that also was a
subsidiary of Spacelink, acquired substantially all of the assets of Spacelink
including all of the shares of the General Partner. The General Partner is now
a wholly owned subsidiary of Intercable. Intercable and certain of its
affiliates also own and operate cable television systems for their own account
and for the account of other managed limited partnerships. The General Partner
manages the Partnership and receives a fee for its services equal to 5 percent
of the gross revenues of the Partnership, excluding revenues from the sale of
cable television systems or franchises. Management fees paid to the General
Partner by the Partnership for the three and nine month periods ended September
30, 1995 were $88,870 and $257,020, respectively, compared to $79,297 and
$235,284, respectively, for the comparable period in 1994.
The Partnership reimburses the General Partner and certain of its
affiliates for certain allocated general and administrative costs. These
expenses include salaries and benefits paid to corporate personnel, office rent
and related facilities expense. Such personnel provide engineering, marketing,
administrative, accounting, legal, and investor relations services to the
Partnership. Allocations of personnel costs are based primarily on actual time
spent by employees of the General Partner and certain of its affiliates with
respect to each partnership managed. Remaining expenses are allocated based on
the pro rata relationship of the Partnership's revenues to the total revenues
of all systems owned or managed by Intercable and certain of its affiliates.
Systems owned by Intercable and all other systems owned by partnerships for
which Intercable is the general partner are also allocated a proportionate
share of these expenses. The General Partner believes that the methodology
used in allocating general and administrative costs is reasonable.
Reimbursements by the Partnership to the General Partner for allocated general
and administrative costs for the three and nine month periods ended September
30, 1995 were $120,308 and $355,627, respectively, compared to $109,194 and
$347,640, respectively, for the comparable period in 1994.
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JONES GROWTH PARTNERS II L.P.
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
For the nine months ended September 30, 1995, the Partnership
generated net cash from operating activities of approximately $427,000, which
is available to fund capital expenditures and non-operating costs. During the
first nine months of 1995, the Partnership purchased approximately $1,965,000
of plant and equipment for its Yorba Linda System. Approximately 45 percent of
these expenditures were for pay-per-view equipment. Approximately 25 percent
of these expenditures were for service drops to subscribers' homes. The
remainder of these expenditures were for various enhancements in the Yorba
Linda System. Such expenditures were funded from cash from operations and
borrowings under the Partnership's credit facility. Capital expenditures for
the remainder of 1995 are expected to be approximately $492,000 and will be
financed principally from cash flow from operations, available borrowings under
the Partnership's credit facility and, in its discretion, advances from the
General Partner. Approximately 63 percent of the expected capital expenditures
relates to pay-per-view equipment and approximately 19 percent relates to cable
plant expansions. The remainder of these expenditures will be for various
other enhancements throughout the Yorba Linda System.
On September 30, 1994, an amendment was signed to extend the revolving
aspect of the Partnership's $13,000,000 credit facility to December 31, 1996,
at which time the outstanding principal balance will convert to a term loan,
payable in quarterly installments with a final maturity date of December 31,
2002. As of September 30, 1995, $12,650,000 was outstanding under the
Partnership's $13,000,000 credit facility, leaving $350,000 for future
borrowings. Generally, the interest on the outstanding principal balance is at
the Partnership's option of the Prime rate plus 1/4 percent to 1/2 percent or
the London Interbank Offered Rate ("LIBOR") plus 1-1/4 percent to 1-1/2
percent, depending upon the ratio of the Partnership debt to operating cash
flow. The effective interest rates on amounts outstanding as of September 30,
1995 and 1994 were 7.49 percent and 6.52 percent, respectively.
On January 12, 1993, the Partnership entered into an interest rate cap
agreement covering outstanding debt obligations of $7,000,000. The Partnership
paid a fee of $67,900 for the rate cap agreement. The agreement protects the
Partnership from LIBOR interest rates that exceed 7 percent for three years
from the date of the agreement.
The General Partner presently believes cash flow from operations,
available borrowings under the Partnership's credit facility and, if necessary,
in its discretion, advances from the General Partner, will be sufficient to
fund capital expenditures and other liquidity needs of the Partnership.
Regulatory Matters
The FCC's rate regulations related to the 1992 Cable Act contain
provisions for increasing rates for added channels, external costs and
inflation. The Partnership has been able to adjust rates recently under such
provisions. Such adjustments, together with a reduction in the cost of
implementing the 1992 Cable Act compared to such costs in prior periods, are
expected to cause the Partnership's revenue and cash flow to increase in fiscal
1996.
Currently, there is legislation before Congress which, if enacted,
would significantly change the regulatory environment in which the cable
industry operates. Such legislation may eliminate rate regulation and allow
telephone companies and others much broader entry into the cable television
business and, in turn, may allow cable operators into the telephone and other
telecommunications businesses. While the General Partner is encouraged by
provisions of the legislation, it is too early to assess the impact such
legislation, if enacted, would have on the Partnership.
RESULTS OF OPERATIONS
Revenues of the Partnership increased $191,461, or approximately 12
percent, to $1,777,406 for the three month period ended September 30, 1995 from
$1,585,945 for the comparable period in 1994. Revenues of the Partnership
increased $434,719, or approximately 9 percent, to $5,140,399 for the nine
month period ended September 30, 1995, from $4,705,680 for the comparable
period in 1994. These increases in revenues were primarily due to rate
adjustments, which accounted for approximately 30 percent and 28 percent,
respectively, of the increase in revenues for the three and nine
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month periods. The Yorba Linda System added 600 basic subscribers, increasing
to 16,402 basic subscribers at September 30, 1995 from 15,802 basic subscribers
at September 30, 1994. The increase in basic subscribers accounted for
approximately 21 percent and 26 percent, respectively, of the increase in
revenues for the three and nine month periods. Equipment rental revenue
accounted for approximately 29 percent and 25 percent of the revenue increase
for the three and nine month periods, respectively.
Operating expenses consist primarily of costs associated with the
administration of the Partnership's cable television systems. The principal
cost components are salaries paid to system personnel, programming expenses,
professional fees, subscriber billing costs, rent for leased facilities, cable
system maintenance expenses and consumer marketing expenses.
Operating expenses increased $143,337, or approximately 16 percent, to
$1,036,495 for the three months ended September 30, 1995 from $893,158 for the
three months ended September 30, 1994. This increase in operating expenses was
primarily due to increases in programming costs, advertising costs and plant
related costs. Operating expenses increased $305,200, or approximately 11
percent, to $2,972,896 for the nine months ended September 30, 1995 from
$2,667,696 for the nine months ended September 30, 1994. This increase in
operating expenses was due to increases in programming costs and advertising
costs, which were partially offset by decreases in personnel and allocated
costs. Operating expenses represented approximately 58 percent and 56 percent
of revenues for the three months ended September 30, 1995 and 1994,
respectively, and approximately 58 percent and 57 percent of revenues for the
nine months ended September 30, 1995 and 1994, respectively. No other
individual factor significantly affected the increase in operating expenses for
the periods discussed.
Management fees and allocated administrative costs from the General
Partner increased $20,687, or approximately 11 percent, to $209,178 for the
three months ended September 30, 1995 from $188,491 for the similar period in
1994. Management fees and allocated administrative costs from the General
Partner increased $29,723, or approximately 5 percent, to $612,647 for the nine
months ended September 30, 1995 from $582,924 for the similar period in 1994.
These increases were primarily due to an increase in revenues, upon which such
fees are based, as well as an increase in allocated expenses from the General
Partner. The General Partner has experienced increases in expenses, a portion
of which is allocated to the Partnership.
Depreciation and amortization expense increased $46,419, or
approximately 5 percent, to $903,390 for the three month period ended September
30, 1995 from $856,971 for the similar period in 1994. Depreciation and
amortization expense increased $145,749, or approximately 6 percent, to
$2,716,680 for the nine month period ended September 30, 1995 from $2,570,931
for the similar period in 1994. These increases were due to increases in the
Partnership's depreciable asset base.
Operating loss increased $18,982, or approximately 5 percent, to
$371,657 for the three months ended September 30, 1995 from $352,675 for the
similar 1994 period. Operating loss increased $45,953, or approximately 4
percent, to $1,161,824 for the nine months ended September 30, 1995 from
$1,115,871 for the similar 1994 period. These increases were due to the
increase in operating expenses, management fees and allocated administrative
costs from the General Partner and depreciation and amortization exceeding the
increase in revenues.
The cable television industry generally measures the performance of a
cable television system in terms of cash flow or operating income before
depreciation and amortization. The value of a cable television system is often
determined using multiples of cash flow. This measure is not intended to be a
substitute or improvement upon the items disclosed on the financial statements,
rather it is included because it is an industry standard. Operating income
before depreciation and amortization increased $27,437, or approximately 5
percent, to $531,733 for the three month period ended September 30, 1995 from
$504,296 for the comparable period in 1994. Operating income before
depreciation and amortization increased $99,796, or approximately 7 percent, to
$1,554,856 for the nine month period ended September 30, 1995 from $1,455,060
for the comparable period in 1994. These increases were due to the increase in
revenues exceeding the increases in operating expenses and management fees and
allocated administrative costs from the General Partner.
Interest expense increased $62,193, or approximately 33 percent, to
$247,880 for the three month period ended September 30, 1995 from $185,687 for
the three month period ended September 30, 1994. Interest expense increased
$206,007, or approximately 42 percent, to $694,977 for the nine month period
ended September 30, 1995 from $488,970 for the comparable period in 1994.
These increases were primarily the result of higher outstanding balances on
interest bearing obligations and to higher interest rates during 1995 as
compared to 1994.
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Net loss increased by $85,454, or approximately 16 percent, to
$620,086 for the three month period ended September 30, 1995 from $534,632 for
the comparable period in 1994. Net loss increased $246,487, or approximately
15 percent, to $1,857,238 for the nine month period ended September 30, 1995
from $1,610,751 for the comparable period in 1994. These increases were the
result of the factors discussed above.
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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.
JONES GROWTH PARTNERS II L.P.
BY: JONES SPACELINK CABLE
CORPORATION, its General Partner
By: /S/ Kevin P. Coyle
Kevin P. Coyle
Group Vice President/Finance
(Principal Accounting and
Financial Officer)
Dated: November 13, 1995
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EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE
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27 Financial Data Schedule