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FORM 10-K 405
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ________ to ________
Commission file number: 0-18133
IDS/JONES GROWTH PARTNERS II, L.P.
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(Exact name of registrant as specified in its charter)
Colorado 84-1060548
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State of Organization (IRS Employer
Identification No.)
P.O. Box 3309, Englewood,
Colorado 80155-3309 (303) 792-3111
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(Address of principal executive (Registrant's telephone no.
office and Zip Code including area code)
Securities registered pursuant to Section
12(b) of the Act: None
Securities registered pursuant to Section
12(g) of the Act: Limited Partnership Interests
Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
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State the aggregate market value of the voting stock held by non-affiliates of
the registrant: N/A
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. x
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DOCUMENTS INCORPORATED BY REFERENCE: None
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PART I.
ITEM 1. BUSINESS
THE PARTNERSHIP. IDS/Jones Growth Partners II, L.P. (the
"Partnership") is a Colorado limited partnership that was formed to acquire,
own and operate cable television systems in the United States. Jones Cable
Corporation, a Colorado corporation, is the managing general partner (the
"Managing General Partner") and IDS Cable II Corporation, a Minnesota
corporation, is the supervising general partner (the "Supervising General
Partner") of the Partnership. The Managing General Partner is a wholly owned
subsidiary of Jones Intercable, Inc. ("Intercable"), which is also a Colorado
corporation and one of the largest cable television system operators in the
nation. The Supervising General Partner is a wholly owned subsidiary of IDS
Management Corporation, a Minnesota corporation, which in turn is a wholly
owned subsidiary of American Express Financial Corporation, a Delaware
corporation.
The Partnership and IDS/Jones Growth Partners 89-B, Ltd., an
affiliated Colorado limited partnership ("Growth Partners 89-B"), formed a
Colorado general partnership known as IDS/Jones Joint Venture Partners (the
"Venture") for the purpose of acquiring cable television systems. IDS Cable
Corporation, a wholly owned subsidiary of IDS Management Corporation, which is
a wholly owned subsidiary of American Express Financial Corporation, acts as
supervising general partner of Growth Partners 89-B. IDS Management
Corporation and Intercable each have an approximate 5 percent equity interest
in the Venture, the Partnership has a 66 percent interest in the Venture, and
Growth Partners 89-B has a 24 percent interest in the Venture.
The Partnership does not directly own any cable television system.
The Venture owns the cable television systems serving the communities of
Aurora, North Aurora, Montgomery, Plano, Oswego, Sandwich, Yorkville and
certain unincorporated areas of Kendall and Kane Counties, all in the State of
Illinois (the "Aurora System"). See Item 2.
CABLE TELEVISION SERVICES. The Aurora System offers to its
subscribers various types of programming, which include basic service, tier
service, premium service, pay-per-view programs and packages including several
of these services at combined rates.
Basic cable television service usually consists of signals of all four
national television networks, various independent and educational television
stations (both VHF and UHF) and certain signals received from satellites.
Basic service also usually includes programs originated locally by the system,
which may consist of music, news, weather reports, stock market and financial
information and live or videotaped programs of a public service or
entertainment nature. FM radio signals are also frequently distributed to
subscribers as part of the basic service.
The Aurora System offers tier services on an optional basis to its
subscribers. A tier generally includes most of the cable networks such as
Entertainment and Sports Programming Network (ESPN), Cable News Network (CNN),
Turner Network Television (TNT), Family Channel, Discovery and others, and the
cable television operators buy tier programming from these networks. The
Aurora System also offers a package that includes the basic service channels
and the tier services.
The Aurora System also offers premium services to its subscribers,
which consist of feature films, sporting events and other special features that
are presented without commercial interruption. The cable television operators
buy premium programming from suppliers such as HBO, Showtime, Cinemax or others
at a cost based on the number of subscribers the cable operator serves.
Premium service programming usually is significantly more expensive than the
basic service or tier service programming, and consequently cable operators
price premium service separately when sold to subscribers.
The Aurora System also offers to subscribers pay-per-view programming.
Pay-per-view is a service that allows subscribers to receive single programs,
frequently consisting of motion pictures that have recently
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completed their theatrical exhibitions and major sporting events, and to pay
for such service on a program-by-program basis.
REVENUES. Monthly service fees for basic, tier and premium services
constitute the major source of revenue for the Aurora System. At December 31,
1995, the Aurora System's monthly basic service rates ranged from $10.54 to
$10.62, monthly basic and tier ("basic plus") service rates ranged from $22.50
to $22.58, and monthly premium services ranged from $4.95 to $12.95 per premium
service. In addition, the Aurora System's pay-per-view programs and
advertising fees generate revenues. Related charges may include a nonrecurring
installation fee that ranges from $1.99 to $42.45; however, from time to time
the Aurora System has followed the common industry practice of reducing or
waiving the installation fee during promotional periods. Commercial
subscribers such as hotels, motels and hospitals are charged a nonrecurring
connection fee that usually covers the cost of installation. Except under the
terms of certain contracts with commercial subscribers and residential
apartment and condominium complexes, the subscribers are free to discontinue
the service at any time without penalty. For the year ended December 31, 1995,
of the total fees received by the Aurora System, basic service and tier service
fees accounted for approximately 65% of total revenues, premium service fees
accounted for approximately 16% of total revenues, pay-per-view fees were
approximately 3% of total revenues, advertising fees were approximately 5% of
total revenues and the remaining 11% of total revenues came principally from
equipment rentals, installation fees and program guide sales. The Aurora
System is dependent upon the timely receipt of service fees to provide for
maintenance and replacement of plant and equipment, current operating expenses
and other costs.
FRANCHISES. The Aurora System is constructed and operated under
non-exclusive, fixed-term franchises or other types of operating authorities
(referred to collectively herein as "franchises") granted by local governmental
authorities. These franchises typically contain many conditions, such as time
limitations on commencement and completion of construction, conditions of
service, including the number of channels, types of programming and the
provision of free service to schools and certain other public institutions, and
the maintenance of insurance and indemnity bonds. The provisions of local
franchises are subject to federal regulation.
The Venture holds 9 franchises for the Aurora System. These
franchises provide for the payment of fees to the issuing authorities and
generally range from 3% to 5% of the gross revenues of a cable television
system. The 1984 Cable Act prohibits franchising authorities from imposing
annual franchise fees in excess of 5% of gross revenues and also permits the
cable television system operator to seek renegotiation and modification of
franchise requirements if warranted by changed circumstances.
The Venture has never had a franchise revoked. The Venture's
franchise expiration dates range from October 1996 to November 2008. The
Venture is currently negotiating the renewal of the 1 franchise that will
expire prior to December 31, 1996, and the Managing General Partner has no
reason to believe that such franchise will not be renewed in due course.
Intercable recently has experienced lengthy negotiations with some franchising
authorities for the granting of franchise renewals. Some of the issues involved
in recent renewal negotiations include rate regulation, customer service
standards, cable plant upgrade or replacement and shorter terms of franchise
agreements.
COMPETITION. Cable television systems currently experience
competition from several sources. A potential source of significant
competition is Direct Broadcast Satellite ("DBS") services that use video
compression technology to increase channel capacity and provide packages of
movies, network and other program services that are competitive with those of
cable television systems. Two companies offering DBS services began operations
in 1994, and two other companies offering DBS service recently began
operations. In addition, a joint venture has won the right to provide a DBS
service through a FCC spectrum auction. Not all subscribers terminate cable
television service upon acquiring a DBS system. The Managing General Partner
has observed that a number of DBS subscribers also elect to subscribe to cable
television service in order to obtain the greatest
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variety of programming on multiple television sets, including local video
services programming not available through DBS service.
Although neither the Venture, the Managing General Partner nor
Intercable has yet encountered competition from a telephone company providing
video services as a cable operator or video dialtone operator, it is
anticipated that the cable television systems owned or managed by the
Intercable will face such competition in the near future. Legislation recently
enacted into law will make it possible for companies with considerable
resources to enter the business. For example, in February 1996, one of the
regional Bell operating companies entered into an agreement to acquire the
nation's third largest cable television company. In addition, several
telephone companies have begun seeking cable television franchises from local
governmental authorities as a consequence of litigation that successfully
challenged the constitutionality of the cable television/telephone company
cross-ownership rules. The Managing General Partner cannot predict at this
time when and to what extent telephone companies will provide cable television
service within service areas in competition with cable television systems owned
or managed by the Intercable.
The Managing General Partner is aware of the following imminent
competition from telephone companies: Ameritech, one of the seven
regional Bell operating companies, which provides telephone service in a
multi-state region including Illinois, has just obtained a franchise that will
allow it to provide cable television service in Naperville, Illinois, a
community currently served by a cable system owned by another one of the public
limited partnerships managed by Intercable. Ameritech in the future may seek
franchises in areas served by the Aurora System. Chesapeake and Potomac
Telephone Company of Virginia and Bell Atlantic Video Service Company, both
subsidiaries of Bell Atlantic, another of the regional Bell operating companies,
have announced their intention to build a cable television system in Alexandria,
Virginia in competition with a cable television system owned by Intercable.
Bell Atlantic is preparing for the operation of a telecommunications and video
business in northern Virginia, including the Alexandria metropolitan area. The
FCC has granted GTE Virginia's application for authority to construct, operate,
own and maintain video dialtone facilities in northern Virginia, including in
the service area of a cable television system owned by Intercable. To date, GTE
has not begun construction of a video distribution system. The entry of
telephone companies as direct competitors could adversely affect the
profitability and market value of Intercable's owned and managed systems.
Additional competition is present from several sources, including the
following: Master Antenna Television and Satellite Master Antenna Television
systems that serve multi-unit dwellings such as condominiums, apartment
complexes, motels, hotels and private residential communities; private cable
television/telephonic companies that have secured exclusive contracts to
provide video and telephony services to multi-unit dwellings and similar
complexes; and multichannel, multipoint distribution service ("MMDS") systems,
commonly called wireless cable which generally focus on providing service to
residents of rural areas. In addition, the FCC has established a new wireless
telecommunications service known as Personal Communications Service ("PCS")
that would provide portable non-vehicular mobile communications services
similar to that available from cellular telephone companies, but at a lower
cost. Several cable television multiple system operators hold or have
requested experimental licenses from the FCC to test PCS technology.
REGULATION AND LEGISLATION. The cable industry is regulated under the
Telecommunications Act of 1996 (the "1996 Act"), the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act") and the Cable
Communications Policy Act of 1984 (the "1984 Cable Act") and the regulations
implementing these statutes. The Federal Communications Commission (the "FCC")
has promulgated regulations covering such areas as the registration of cable
television systems and other communications businesses, carriage of television
broadcast programming, consumer education and lockbox enforcement, origination
cablecasting and sponsorship identification, children's programming, the
regulation of basic cable and cable programming service rates in areas where
cable television systems are not subject to effective competition, signal
leakage and frequency use, technical performance, maintenance of various
records, equal employment opportunity, and antenna structure notification,
marking and lighting. In addition, cable operators periodically are required
to file various informational reports with the FCC. The FCC has the authority
to enforce these regulations through the imposition of substantial fines, the
issuance of cease and desist orders and/or the imposition of administrative
sanctions, such as the revocation of FCC licenses needed to operate certain
transmission facilities often used in
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connection with cable operations. State or local franchising authorities, as
applicable, also have the right to enforce various regulations, impose fines or
sanctions, issue orders or seek revocation subject to the limitations imposed
upon such franchising authorities by federal, state and local laws and
regulations. Several states have assumed regulatory jurisdiction of the cable
television industry, and it is anticipated that other states will do so in the
future. To the extent the cable television industry begins providing telephone
service, additional state regulations will be applied to the cable television
industry. Cable television operations are subject to local regulation insofar
as systems operate under franchises granted by local authorities.
The following is a summary of federal laws and regulations materially
affecting the cable television industry, and a description of state and local
laws with which the cable industry must comply.
Telecommunications Act of 1996. The 1996 Act, which became law on
February 28, 1996, substantially revised the Communications Act of 1934, as
amended, including the 1984 Cable Act and the 1992 Cable Act, and has been
described as one of the most significant changes in communications regulation
since the original Communications Act of 1934. The 1996 Act is intended, in
part, to promote substantial competition in the telephone local exchange and in
the delivery of video and other services. As a result of the 1996 Act, local
telephone companies (also known as local exchange carriers or "LECs") and other
service providers are permitted to provide video programming, and cable
television operators are permitted entry into the telephone local exchange
market. The FCC is required to conduct rulemaking proceedings over the next
several months to implement various provisions of the 1996 Act.
Among other provisions, the 1996 Act modified the 1992 Cable Act by
deregulating the cable programming service tier of large cable operators
effective March 31, 1999 and the cable programming service tier of small cable
operators (those that provide service to 50,000 or fewer subscribers) effective
immediately. The 1996 Act also revised the procedures for filing a cable
programming service tier rate complaint and adds a new effective competition
test.
The most far-reaching changes in the communications business will
result from the telephony provisions of the 1996 Act. The statute expressly
preempts any legal barriers to competition in the local telephone business that
previously existed in state and local laws and regulations. Many of these
barriers had been lifted by state actions over the last few years, but the 1996
Act completes the task. The 1996 Act also establishes new requirements for
maintaining and enhancing universal telephone service and new obligations for
telecommunications providers to maintain privacy of customer information. The
1996 Act establishes uniform requirements and standards for entry, competitive
carrier interconnection and unbundling of LEC monopoly services.
The 1996 Act repealed the cable television/telephone cross-ownership
ban adopted in the 1984 Cable Act. The federal cross-ownership ban was
particularly important to the cable industry because telephone companies
already own certain facilities such as poles, ducts and associated rights of
way. While this ban had been overturned by several courts, formal removal of
the ban ended the last legal constraints on telephone company plans to enter
the cable market. Under the 1996 Act, telephone companies in their capacity as
common carriers now may lease capacity to others to provide cable television
service. Telephone companies have the option of providing video service as
cable operators or through "open video systems" ("OVS"), a regulatory regime
that may provide more flexibility than traditional cable service. The 1996 Act
exempts OVS operators from many of the regulatory obligations that currently
apply to cable operators, such as rate regulation and franchise fees, although
other requirements are still applicable. OVS operators, although not subject
to franchise fees as defined by the 1992 Cable Act, are subject to fees charged
by local franchising authorities or other governmental entities in lieu of
franchise fees. (Under certain circumstances, cable operators also will be
able to offer service through open video systems.) In addition, the 1996 Act
eliminated the requirement that telephone companies file Section 214
applications (applications to provide video dialtone services) with the FCC
before providing video service. This limits the opportunity of cable operators
to mount challenges at the FCC regarding telephone company entry
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into the video market. The 1996 Act also contains restrictions on buying out
incumbent cable operators in a telephone company's service area, especially in
suburban and urban markets.
Other parts of the 1996 Act also will affect cable operators. Under
the 1996 Act, the FCC is required to revise the current pole attachment rate
formula. This revision will result in an increase in the rates paid by
entities, including cable operators, that provide telecommunication services.
The rates will be phased in after a five-year period. (Cable operators that
provide only cable services will be unaffected.) Under the V-chip provisions
of the 1996 Act, cable operators and other video providers are required to pass
along any program rating information that programmers include in video signals.
Cable operators also are subject to new scrambling requirements for sexually
explicit programming, and cable operators that provide Internet access or other
online services are subject to the new indecency limitations for computer
services. In addition, cable operators that provide Internet access or other
online services are subject to the new indecency limitations for computer
services, although these provisions already have been challenged in court, and
the courts have preliminarily enjoined the enforcement of these content-based
provisions.
Under the 1996 Act, a franchising authority may not require a cable
operator to provide telecommunications services or facilities, other than an
institutional network, as a condition to a grant, renewal or transfer of a
cable franchise, and franchising authorities are preempted from regulating
telecommunications services provided by cable operators and from requiring
cable operators to obtain a franchise to provide such services. The 1996 Act
also repealed the 1992 Cable Act's anti-trafficking provision, which generally
required the holding of cable television systems for three years.
It is premature to predict the specific effects of the 1996 Act on the
cable industry in general or the Partnership in particular. The FCC shortly
will be undertaking numerous rulemaking proceedings to interpret and implement
the 1996 Act. It is not possible at this time to predict the outcome of those
proceedings or their effect on the Partnership.
Cable Television Consumer Protection and Competition Act of 1992. The
1992 Cable Act, which became effective on December 4, 1992, caused significant
changes to the regulatory environment in which the cable television industry
operates. The 1992 Cable Act generally mandated a greater degree of regulation
of the cable television industry. Under the 1992 Cable Act's definition of
effective competition, nearly all cable television systems in the United
States, including those owned and managed by the General Partner, became
subject to rate regulation of basic cable services. In addition, the 1992
Cable Act allowed 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 General Partner on behalf of the
Partnership reduced rates charged for certain regulated services in the
Partnership's cable systems effective September 1, 1993. These reductions
resulted in some decrease in Partnership revenues and operating income before
depreciation and amortization; however, the decrease was not as severe as
originally anticipated. The 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, 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 generally required 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. Further rate reductions
for cable systems whose rates are below the revised benchmark levels, as well
as reductions that would require operators to reduce rates below benchmark
levels in order to achieve a 17 percent rate reduction, were held in abeyance
pending completion of cable system cost studies. The FCC recently requested
some of these "low price" systems to complete cost study questionnaires. After
review of these questionnaires, the FCC could decide to permanently defer any
further rate reductions, or require the additional 7
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percent rate roll back for some or all of these systems. The FCC has also
adopted its proposed upgrade methodology by which operators would be permitted
to recover the costs of upgrading their plant.
After analyzing the effects of the two methods of rate regulation, the
Venture elected to file cost-of-service showings for the Aurora System. The
Managing General Partner thus anticipates no further reduction in revenues or
operating income before depreciation and amortization resulting from the FCC's
rate regulations. At this time, however, the regulatory authorities have not
approved the cost-of-service showings, and there can be no assurance that the
Venture's cost-of-service showings will prevent further rate reductions until
such final approval is received.
On November 10, 1994, the FCC also announced a revision to its
regulations governing the manner in which cable operators may charge
subscribers for new cable programming services. In addition to the present
formula for calculating the permissible rate for new services, the FCC
instituted a three-year flat fee mark-up plan for charges relating to new
channels of cable programming services. Commencing on January 1, 1995, cable
system operators may charge for new channels of cable programming services
added after May 14, 1994 at a rate of up to 20 cents per channel, but may not
make adjustments to monthly rates totaling more than $1.20 plus an additional
30 cents for programming license fees per subscriber over the first two years
of the three-year period for these new services. Operators may charge an
additional 20 cents in the third year only for channels added in that year plus
the costs for the programming. Operators electing to use the 20 cent per
channel adjustment may not also take a 7.5 percent mark-up on programming cost
increases, which is permitted under the FCC's current rate regulations. The
FCC has requested further comment as to whether cable operators should continue
to receive the 7.5 percent mark-up on increases in license fees on existing
programming services.
The FCC also announced that it will permit operators to offer a "new
product tier" ("NPT"). Operators will be able to price the NPT as they elect
so long as, among other conditions, other channels that are subject to rate
regulation are priced in conformity with applicable regulations and operators
do not remove programming services from existing tiers and offer them on the
NPT.
In September 1995, the FCC authorized a new, alternative method of
implementing rate adjustments which will allow cable operators to increase
rates for programming annually on the basis of projected increases in external
costs (inflation, costs for programming, franchise-related obligations and
changes in the number of regulated channels) rather than on the basis of cost
increases incurred in the preceding calendar quarter. Operators that elect not
to recover all of their accrued external costs and inflation pass-throughs each
year may recover them (with interest) in subsequent years.
In December 1995, the FCC adopted final cost-of-service rate
regulations requiring, among other things, cable operators to exclude 34
percent of system acquisition costs related to intangible and tangible assets
used to provide regulated services. The FCC also reaffirmed the industry-wide
11.25 percent after tax rate of return on an operator's allowable rate base,
but initiated a further rulemaking in which it proposes to use an operator's
actual debt cost and capital structure to determine an operator's cost of
capital or rate of return. After a rate has been set pursuant to a
cost-of-service showing, rate increases for regulated services are indexed for
inflation, and operators are permitted to increase rates in response to
increases in costs beyond their control, such as taxes and increased
programming costs.
The United States Court of Appeals for the District of Columbia
Circuit recently upheld the FCC's rate regulations implemented pursuant to the
1992 Cable Act, but ruled that the FCC impermissibly failed to permit cable
operators to adjust rates for certain cost increases incurred during the period
between the date the 1992 Cable Act was passed through the initial date of rate
regulation. The FCC has not yet implemented the court's ruling.
There have been several lawsuits filed by cable operators and
programmers in federal court challenging various aspects of the 1992 Cable Act
including its 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
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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. On December 12, 1995, the three-judge federal
district court again upheld the must-carry rules' validity. This decision has
been appealed to the United States Supreme Court.
In 1993, a federal district court 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. The
FCC's regulations relating to the carriage of indecent programming, which were
recently upheld by the United States Court of Appeals for the District of
Columbia, have been appealed to the United States Supreme Court.
Franchising. The responsibility for franchising or other
authorization of cable television systems is left to state and local
authorities. There are, however, several provisions in the 1984 Cable Act that
govern the terms and conditions under which cable television systems provide
service. These include uniform standards and policies that are applicable to
cable television operators seeking renewal of a cable television franchise.
The procedures established provide for a formal renewal process should the
franchising authority and the cable television operator decline to use an
informal procedure. A franchising authority unable to make a preliminary
determination to renew a franchise is required to hold a hearing in which the
operator has the right to participate. In the event a determination is made
not to renew the franchise at the conclusion of the hearing, the franchising
authority must provide the operator with a written decision stating the
specific reasons for non-renewal. Generally, the franchising authority can
finally decide not to renew a franchise only if it finds that the cable
operator has not substantially complied with the material terms of the present
franchise, has not provided reasonable service in light of the community's
needs, does not have the financial, legal or technical ability to provide the
services being proposed for the future, or has not presented a reasonable
proposal for future service. A final decision of non-renewal by the
franchising authority is appealable in court.
A provision of the 1996 Act preempts franchising authorities from
regulating telecommunications services provided by cable operators and from
requiring cable operators to obtain a franchise to provide such services. A
franchising authority may not require a cable operator to provide
telecommunications services or facilities, other than an institutional network,
as a condition to a grant, renewal or transfer of a cable franchise.
GENERAL. The Aurora System's business consists of providing cable
television services to a large number of customers, the loss of any one of
which would have no material effect on its business. The Aurora System has had
some subscribers who later terminated the service. Terminations occur
primarily because people move to another home or to another city. In other
cases, people terminate on a seasonal basis or because they no longer can
afford or are dissatisfied with the service. The amount of past due accounts
in the Aurora System is not significant. The Managing General Partner's policy
with regard to past due accounts is basically one of disconnecting service
before a past due account becomes material.
The Aurora System does not depend to any material extent on the
availability of raw materials; it carries no significant amounts of inventory
and it has no material backlog of customer orders. The Aurora System has no
employees because all properties are managed by employees of Intercable.
Intercable has engaged in research and development activities relating to the
provision of new services but the amount of the Partnership's funds expended
for such research and development has never been material.
Compliance with federal, state and local provisions that have been
enacted or adopted regulating the discharge of materials into the environment
or otherwise relating to the protection of the environment has had no material
effect upon the capital expenditures, earnings or competitive position of the
Partnership.
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ITEM 2. PROPERTIES
The Aurora System was acquired by the Venture in May 1990. The
following sets forth (i) the monthly basic plus service rates charged to
subscribers, (ii) the number of basic subscribers and pay units and (iii) the
range of franchise expiration dates for the Aurora System. The monthly basic
service rates set forth herein represent, with respect to systems with multiple
headends, the basic service rate charged to the majority of the subscribers
within the system. In cable television systems, basic subscribers can
subscribe to more than one pay TV service. Thus, the total number of pay
services subscribed to by basic subscribers are called pay units. As of
December 31, 1995, the Aurora System operated approximately 700 miles of cable
plant, passing approximately 69,500 homes, representing an approximate 63%
penetration rate. Figures for numbers of subscribers, miles of cable plant and
homes passed are compiled from the Managing General Partner's records and may
be subject to adjustments.
At December 31,
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AURORA SYSTEM 1995 1994 1993
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Monthly basic plus service rate $ 22.58 $ 21.08 $ 21.08
Basic subscribers 43,982 40,666 37,426
Pay units 25,938 27,856 28,283
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK
AND RELATED SECURITY HOLDER MATTERS
While the Partnership is publicly held, there is no public market for
the limited partnership interests, and it is not expected that a market will
develop in the future. As of February 15, 1996, the number of equity security
holders in the Partnership was 6,946.
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ITEM 6. SELECTED FINANCIAL DATA
For the Year Ended December 31,
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1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
Revenues $16,860,900 $15,388,489 $15,196,068 $14,486,583 $13,196,389
Depreciation and Amortization 10,317,694 10,601,501 10,883,845 10,507,110 10,474,319
Operating Loss (5,411,813) (5,888,186) (5,816,179) (5,481,821) (6,105,858)
Minority Interest in Net Loss 3,154,893 3,061,563 2,836,367 2,827,893 3,178,872
Net Loss (6,016,306) (5,838,329) (5,408,884) (5,392,724) (6,979,500)
Net Loss per Limited
Partnership Unit (34.16) (33.15) (30.71) (30.62) (49.39)
Weighted Average Number of Limited
Partnership Units Outstanding 174,343 174,343 174,343 174,343 139,901
General Partners' Deficit (355,984) (295,821) (237,438) (183,349) (129,422)
Limited Partners' Capital 2,300,770 8,256,913 14,036,859 19,391,654 24,730,451
Total Assets 51,448,914 57,752,046 64,595,970 73,796,057 80,534,496
Debt 45,909,122 43,566,064 41,604,580 43,678,543 41,825,847
Managing General Partner Advances 331,185 933,949 1,056,828 345,839 486,652
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
IDS/JONES GROWTH PARTNERS II, L.P.
RESULTS OF OPERATIONS
All of the operations of IDS/Jones Growth Partners II, L.P. (the
"Partnership"), a Colorado limited partnership, are represented exclusively by
its 66 percent interest in IDS/Jones Joint Venture Partners (the "Venture").
Refer to Management's Discussion and Analysis of Financial Condition and
Results of Operations for the Venture for details pertaining to its operations.
FINANCIAL CONDITION
The Partnership owns a 66 percent interest in the Venture. The
Partnership's interest in the Venture decreased $6,016,306 to $1,944,286 at
December 31, 1995. This decrease represents the Partnership's proportionate
share of losses generated by the Venture in 1995. Such losses are anticipated
to continue. Refer to Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Venture for details pertaining to
its financial condition.
10
11
IDS/JONES JOINT VENTURE PARTNERS
RESULTS OF OPERATIONS
1995 Compared to 1994
Revenues of the Venture's Aurora System totaled $16,860,900 in 1995
compared to $15,388,489 in 1994, an increase of $1,472,411, or approximately 10
percent. An increase in the number of basic subscribers accounted for
approximately 57 percent of the increase in revenues. The number of basic
subscribers totaled 43,982 at December 31, 1995 compared to 40,666 at December
31, 1994, an increase of 3,316, or approximately 8 percent. Basic service rate
adjustments accounted for approximately 40 percent of the increase in revenues.
The increase in revenues was partially offset by a decrease in premium service
subscriptions. The number of premium service subscriptions decreased 1,918, or
approximately 7 percent, to 25,938 at December 31, 1995 from 27,856 at December
31, 1994. No other individual factor was significant to the increase in
revenues.
Operating expenses consist primarily of costs associated with the
administration of the Aurora System. 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 totaled $9,809,178 in 1995 compared to $8,655,004
in 1994, an increase of $1,154,174, or approximately 13 percent. Operating
expenses represented 58 percent of revenues in 1995 and 56 percent of revenues
in 1994. Increases in programming fees, personnel expenses and office related
expenses primarily accounted for the increase in operating expenses in 1995.
No other individual factor contributed significantly to the increase.
Management and supervision fees and allocated overhead from the
General Partners totaled $2,145,841 in 1995 compared to $2,020,170 in 1994, an
increase of $125,671, or approximately 6 percent. The increase was primarily
due to the increase in revenues, upon which such management and supervision
fees are based.
Depreciation and amortization expense totaled $10,317,694 in 1995
compared to $10,601,501 in 1994, a decrease of $283,807, or approximately 3
percent. The decrease was due to the maturation of a portion of the tangible
asset base.
Operating loss totaled $5,411,813 in 1995 compared to $5,888,186 in
1994, a decrease of $476,373, or approximately 8 percent. The decrease was due
to the increase in revenues and the decrease in depreciation and amortization
expense exceeding the increases in operating expenses and management and
supervision fees and allocated overhead from the General Partners.
The cable television industry generally measures the financial
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 totaled $4,905,881 in
1995 compared to $4,713,315 in 1994, an increase of $192,566, or approximately
4 percent. The increase was due to the increase in revenues exceeding the
increases in operating expenses and management and supervision fees and
allocated overhead from the General Partners.
Interest expense totaled $3,767,376 in 1995 compared to $2,856,678 in
1994, an increase of $910,698, or approximately 32 percent. The increase was
due to higher effective interest rates and higher outstanding balances on
interest bearing obligations.
Consolidated loss totaled $9,171,199 in 1995 compared to $8,899,892 in
1994, an increase of $271,307, or approximately 3 percent. This increase was
due to the factors discussed above.
1994 Compared to 1993
Revenues of the Venture increased $192,421, or approximately 1
percent, to $15,388,489 in 1994 from $15,196,068 in 1993. An increase in the
subscriber base primarily accounted for the increase in revenues. Basic
subscribers increased 3,240, or approximately 9 percent, from 37,426 at
December 31, 1993 to 40,666 at December 31, 1994. The increase in revenues
would have been greater but for the reduction in basic rates due to basic rate
regulations issued by the FCC in April 1993 with which the Venture complied
effective September 1993. No other individual factor was significant to the
increase in revenues.
Operating expenses increased $545,609, or approximately 7 percent, to
$8,655,004 in 1994 from $8,109,395 in 1993. Operating expenses represented 53
percent of revenue in 1993 and 56 percent in 1994. Increases in programming
expenses, due in
11
12
part to the increase in the subscriber base, were primarily responsible for the
increase in operating expenses. No other individual factors contributed
significantly to the increase.
Management and supervision fees and allocated overhead from the
General Partners increased $1,163, less than 1 percent, to $2,020,170 in 1994
from $2,019,007 in 1993 due primarily to the increase in revenues, upon which
management and supervision fees and allocated overhead are based. The increase
was partially offset by a decrease in allocated expenses from the Managing
General Partner resulting from a change in allocation methods effective
December 1, 1993.
Depreciation and amortization expense decreased $282,344, or
approximately 3 percent, to $10,601,501 in 1994 from $10,883,845 in 1993 due to
the maturation of a portion of the Venture's intangible asset base.
Operating loss increased $72,007, or approximately 1 percent, to
$5,888,186 in 1994 from $5,816,179 in 1993 due to the increases in operating
expenses and management and supervision fees from the General Partners
exceeding the increase in revenues and the decrease in depreciation and
amortization expense.
Operating income before depreciation and amortization decreased
$354,351, or approximately 7 percent, to $4,713,315 in 1994 from $5,067,666 in
1993 due to the increases in operating expenses and management and supervision
fees from the General Partners exceeding the increase in revenues.
Interest expense increased $606,572, or approximately 27 percent, to
$2,856,678 in 1994 from $2,250,106 in 1993 due to higher effective interest
rates and higher outstanding balances on interest bearing obligations.
Consolidated loss increased $654,641, or approximately 8 percent, to
$8,899,892 in 1994 from $8,245,251 in 1993. This loss was due to the factors
discussed above.
FINANCIAL CONDITION
For the year ended December 31, 1995, the Venture generated net cash
from operating activities totaling $1,583,254, which is available to fund
capital expenditures and non-operating costs. During 1995, the Venture
expended approximately $3,872,000 on capital expenditures. Approximately 50
percent of the expenditures related to plant extensions. Approximately 28
percent of the expenditures related to construction of service drops to
subscriber homes. The remainder of the expenditures was used for various
enhancements in the Aurora System. Funding for these expenditures was provided
by cash on hand, cash generated from operations and borrowings from the
Venture's credit facility. Budgeted capital expenditures for 1996 are
approximately $4,061,000. Approximately 33 percent of the expenditures are for
plant extensions. Approximately 13 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
remainder is for various enhancements in the Aurora System. Funding for the
expenditures is expected to be provided by cash generated from operations and,
if available, borrowings under the Venture's credit facility, as discussed
below.
On December 5, 1991, Jones Intercable, Inc. ("Intercable") 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 the $1,800,000 loan from IDS Management
Corporation has been repaid. See discussion below. The loans from Intercable
and IDS Management Corporation are subordinate to the Venture's revolving
credit and term loan. These loans have matured. Although IDS Management
Corporation and Intercable have not formally extended their loans, they have
not demanded repayment. In the first quarter of 1994, Intercable agreed to
subordinate to all other Venture debt its $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 due at the end
of March 1994 on the Venture's then-outstanding term loan. In the second
quarter of 1994, Intercable made a loan of $1,000,000 to the Venture to fund
principal repayments due at the end of June 1994 on the Venture's
then-outstanding term loan. This loan has been repaid. See discussion below.
The interest rates on the respective loans, which will vary from time to time,
with respect to IDS Management Corporation's loans, are at its cost of
borrowing, and, with respect to Intercable's loans, 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 revolving credit and term loan, as
discussed below. If the December 5, 1991 loans are not fully repaid,
Intercable and IDS Management Corporation, respectively, will have the right,
among other rights, to convert the unpaid portion of these loans to equity in
the Venture.
12
13
In November 1994, the Venture entered into a revolving credit and term
loan agreement with a commercial bank. This credit facility has a maximum
amount available of $45,000,000. At December 31, 1995, $40,800,000 was
outstanding under this agreement, leaving $4,200,000 available for future needs
of the Venture. Borrowings from this credit facility were used to repay the
balance of the Venture's previous term loan of $36,000,000, to repay to
Intercable the $1,000,000 advanced by Intercable to fund the Venture's June
1994 debt repayment plus interest, to repay to IDS Management Corporation
$880,000 of principal plus interest on the $1,800,000 loan from IDS Management
Corporation dated December 5, 1991, to pay certain fees incurred in obtaining
the new credit facility and to provide liquidity for capital expenditures.
During the second quarter of 1995, the Venture repaid IDS Management
Corporation an additional $120,000 of principal plus interest on the $1,800,000
loan dated December 5, 1991, leaving $800,000 of principal remaining to be
repaid on this loan. The revolving credit period of the Venture's credit
facility expires January 1, 1997, at which time the then-outstanding balance
converts to a term loan payable in 28 consecutive quarterly installments.
Interest on the credit facility is at the Venture's option of the Base Rate
plus .75 percent, the London Interbank Offered Rate ("LIBOR") plus 1.75 percent
or the Certificate of Deposit Rate plus 1.875 percent. The Venture anticipates
repaying the remaining notes outstanding to related parties with borrowings
from this 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
$800,000 of the $1,800,000 note dated December 5, 1991; second, to Intercable
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 Intercable
the $1,406,647 subordinated advance.
As a result of their equity contributions to the Venture, IDS
Management Corporation and Intercable each have 5 percent equity interest in
the Venture, the Partnership has a 66 percent interest and IDS/Jones Growth
Partners 89-B, Ltd. has a 24 percent interest. If any unpaid portion of the
December 5, 1991 subordinated loans are converted to equity, the ownership
percentages will be adjusted accordingly.
REGULATION AND LEGISLATION
The Venture has filed cost-of-service showings in response to
rulemakings concerning the 1992 Cable Act for its Aurora System and thus
anticipates no further reductions in rates in these systems. The
cost-of-service showings have not yet received final approvals from regulatory
authorities, however, and there can be no assurance that the Partnership's
cost-of-service showings will prevent further rate reductions in these systems
until such final approvals are received.
The Telecommunications Act of 1996 (the "1996 Act"), which became law
on February 8, 1996, substantially revised the Communications Act of 1934, as
amended, including the 1984 Cable Act and the 1992 Cable Act, and has been
described as one of the most significant changes in communications regulation
since the original Communications Act of 1934. The 1996 Act is intended, in
part, to promote substantial competition in the telephone local exchange and in
the delivery of video and other services. As a result of the 1996 Act, local
telephone companies (also known as local exchange carriers or "LECs") and other
service providers are permitted to provide video programming, and cable
television operators are permitted entry into the telephone local exchange
market. The FCC is required to conduct rulemaking proceedings over the next
several months to implement various provisions of the 1996 Act.
Among other provisions, the 1996 Act modified the 1992 Cable Act by
deregulating the cable programming service tier of large cable operators
including the Venture effective March 31, 1999 and the cable programming
service tier of "small" cable operators in systems providing service to 50,000
or fewer subscribers effective immediately. The 1996 Act also revised the
procedures for filing cable programming service tier rate complaints and adds a
new effective competition test.
It is premature to predict the specific effects of the 1996 Act on the
cable industry in general or the Venture in particular. The FCC will be
undertaking numerous rulemaking proceedings to interpret and implement the 1996
Act. It is not possible at this time to predict the outcome of those
proceedings or their effect on the Venture. See Item 1.
13
14
Item 8. Financial Statements
IDS/JONES GROWTH PARTNERS II
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 and 1994
INDEX
Page
-----
Report of Independent Public Accountants 15
Consolidated Balance Sheets 16
Consolidated Statements of Operations 18
Consolidated Statements of Partners' Capital (Deficit) 19
Consolidated Statements of Cash Flows 20
Notes to Consolidated Financial Statements 21
14
15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of IDS/Jones Growth Partners II, L.P.:
We have audited the accompanying consolidated balance sheets of IDS/JONES
GROWTH PARTNERS II, L.P. (a Colorado limited partnership) as of December 31,
1995 and 1994, and the related consolidated statements of operations, partners'
capital (deficit) and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Managing General Partner's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of IDS/Jones Growth Partners II,
L.P. as of December 31, 1995 and 1994, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 8, 1996.
15
16
IDS/JONES GROWTH PARTNERS II, L.P.
(A Limited Partnership)
CONSOLIDATED BALANCE SHEETS
December 31,
-------------------------------
ASSETS 1995 1994
------ ------------- ------------
CASH $ 6,803 $ 57,284
TRADE RECEIVABLES, less allowance for
doubtful receivables of $49,993 and $50,993 at
December 31, 1995 and 1994, respectively 463,098 403,428
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 38,380,661 34,508,868
Less- accumulated depreciation (17,672,119) (14,180,482)
------------- ------------
20,708,542 20,328,386
Franchise costs, net of accumulated amortization
of $36,763,405 and $31,231,579 at December 31, 1995
and 1994, respectively 21,803,716 27,335,542
Subscriber lists, net of accumulated amortization
of $6,020,842 and $4,951,136 at December 31, 1995
and 1994, respectively 1,598,661 2,668,367
Costs in excess of interests in net assets
purchased, net of accumulated amortization
of $1,045,974 and $859,836 at December 31, 1995
and 1994, respectively 6,465,397 6,651,535
------------- ------------
Total investment in cable television properties 50,576,316 56,983,830
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 402,697 307,504
------------- ------------
Total assets $ 51,448,914 $ 57,752,046
============= ============
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
16
17
IDS/JONES GROWTH PARTNERS II, L.P.
(A Limited Partnership)
CONSOLIDATED BALANCE SHEETS
December 31,
------------------------------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1995 1994
------------------------------------------- -------------- ------------
LIABILITIES:
Debt $ 45,909,122 $ 43,566,064
Accounts payable-Managing General Partner 331,185 933,949
Accrued liabilities 2,315,455 1,195,393
Subscriber prepayments 62,574 54,863
-------------- ------------
Total liabilities 48,618,336 45,750,269
-------------- ------------
COMMITMENTS AND CONTINGENCIES (Note 7)
MINORITY INTEREST IN JOINT VENTURE 885,792 4,040,685
PARTNERS' CAPITAL (DEFICIT):
General Partners-
Contributed capital 500 500
Accumulated deficit (356,484) (296,321)
-------------- ------------
(355,984) (295,821)
-------------- ------------
Limited Partners-
Net contributed capital (174,343 units
outstanding at December 31, 1995 and 1994) 37,256,546 37,256,546
Accumulated deficit (34,955,776) (28,999,633)
-------------- ------------
2,300,770 8,256,913
-------------- ------------
Total liabilities and partners'
capital (deficit) $ 51,448,914 $ 57,752,046
============== ============
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
17
18
IDS/JONES GROWTH PARTNERS II, L.P.
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
-----------------------------------------------------------------
1995 1994 1993
-------------- ------------- -------------
REVENUES $ 16,860,900 $ 15,388,489 $ 15,196,068
COSTS AND EXPENSES:
Operating expenses 9,809,178 8,655,004 8,109,395
Management and supervision
fees and allocated overhead
from General Partners 2,145,841 2,020,170 2,019,007
Depreciation and amortization 10,317,694 10,601,501 10,883,845
-------------- ------------- -------------
OPERATING LOSS (5,411,813) (5,888,186) (5,816,179)
-------------- ------------- -------------
OTHER INCOME (EXPENSE):
Interest expense (3,767,376) (2,856,678) (2,250,106)
Other, net 7,990 (155,028) (178,966)
-------------- ------------- -------------
Total other income (expense) (3,759,386) (3,011,706) (2,429,072)
-------------- ------------- -------------
CONSOLIDATED LOSS (9,171,199) (8,899,892) (8,245,251)
MINORITY INTEREST IN CONSOLIDATED
LOSS 3,154,893 3,061,563 2,836,367
-------------- ------------- -------------
NET LOSS $ (6,016,306) $ (5,838,329) $ (5,408,884)
============== ============= =============
ALLOCATION OF NET LOSS:
General Partners $ (60,163) $ (58,383) $ (54,089)
============== ============= =============
Limited Partners $ (5,956,143) $ (5,779,946) $ (5,354,795)
============== ============= =============
NET LOSS PER LIMITED PARTNERSHIP
UNIT $ (34.16) $ (33.15) $ (30.71)
============== ============= =============
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 174,343 174,343 174,343
============== ============= =============
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
18
19
IDS/JONES GROWTH PARTNERS II, L.P.
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
Year Ended December 31,
-------------------------------------------------------
1995 1994 1993
---------- ------------ -------------
GENERAL PARTNERS:
Jones Cable Corporation
Balance, beginning of year $ (147,911) $ (118,719) $ (91,675)
Net loss for year (30,081) (29,192) (27,044)
---------- ------------ -------------
Balance, end of year $ (177,992) $ (147,911) $ (118,719)
========== ============ =============
IDS Cable II Corporation
Balance, beginning of year $ (147,910) $ (118,719) $ (91,674)
Net loss for year (30,082) (29,191) (27,045)
---------- ------------ -------------
Balance, end of year $ (177,992) $ (147,910) $ (118,719)
========== ============ =============
Total
Balance, beginning of year $ (295,821) $ (237,438) $ (183,349)
Net loss for year (60,163) (58,383) (54,089)
---------- ------------ -------------
Balance, end of year $ (355,984) $ (295,821) $ (237,438)
========== ============ =============
LIMITED PARTNERS:
Balance, beginning of year $8,256,913 $ 14,036,859 $ 19,391,654
Net loss for year (5,956,143) (5,779,946) (5,354,795)
---------- ------------ -------------
Balance, end of year $2,300,770 $ 8,256,913 $ 14,036,859
========== ============ =============
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
19
20
IDS/JONES GROWTH PARTNERS II, L.P.
(A Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
-------------------------------------------------
1995 1994 1993
------------- ------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (6,016,306) $ (5,838,329) $(5,408,884)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation and amortization 10,317,694 10,601,501 10,883,845
Minority interest in consolidated loss (3,154,893) (3,061,563) (2,836,367)
Amortization of interest rate protection contract 52,500 - -
Decrease (increase) in trade receivables (59,670) (37,919) 15,099
Decrease (increase) in deposits, prepaid expenses
and deferred charges (81,080) (156,732) 11,335
Increase in trade accounts
payable, accrued liabilities and
subscriber prepayments 1,127,773 217,363 408,138
Increase (decrease) in advances from
Managing General Partner (602,764) (122,879) 710,989
------------- ------------ -----------
Net cash provided by
operating activities 1,583,254 1,601,442 3,784,155
------------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (3,871,793) (3,587,639) (2,997,575)
------------- ------------ -----------
Net cash used in investing activities (3,871,793) (3,587,639) (2,997,575)
------------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 3,016,410 40,900,085 -
Repayment of debt (673,352) (38,938,601) (2,073,963)
Purchase of interest rate protection contract (105,000) - -
------------- ------------ -----------
Net cash provided by (used in)
financing activities 2,238,058 1,961,484 (2,073,963)
------------- ------------ -----------
Decrease in cash (50,481) (24,713) (1,287,383)
Cash, beginning of year 57,284 81,997 1,369,380
------------- ------------ -----------
Cash, end of year $ 6,803 $ 57,284 $ 81,997
============= ============ ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 2,974,550 $ 2,516,358 $ 2,069,821
============= ============ ===========
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
20
21
IDS/JONES GROWTH PARTNERS II, L.P.
(A Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND PARTNERS' INTERESTS
Formation and Business
IDS/Jones Growth Partners II, L.P. (the "Partnership"), a Colorado
limited partnership, was formed on November 9, 1989, pursuant to a public
offering. The Partnership was formed to acquire, develop and operate cable
television systems. Jones Cable Corporation, a Colorado corporation, is the
"Managing General Partner" and manager of the Partnership. IDS Cable II
Corporation, a Minnesota corporation, is the "Supervising General Partner" of
the Partnership. IDS Cable Corporation is the "Supervising General Partner" of
IDS/Jones Growth Partners 89-B, Ltd. ("IDS/Jones 89-B"). Jones Intercable,
Inc. ("Intercable"), the parent of Jones Cable Corporation, manages the cable
television system purchased by IDS/Jones Joint Venture Partners (the
"Venture"). Intercable and its subsidiaries also own and operate cable
television systems as well as manage cable television systems for other limited
partnerships for which it is general partner and, also, for affiliated
entities. The Managing General Partner and the Supervising General Partners
are referred to as the "General Partners".
Contributed Capital, Commissions and Syndication Costs
The capitalization of the Partnership is set forth in the accompanying
consolidated statements of partners' capital (deficit). No limited partner is
obligated to make any additional contributions to partnership capital.
The Managing General Partner and the Supervising General Partner
purchased their interests in the Partnership by contributing $250 each to
partnership capital.
All profits and losses of the Partnership are allocated 99 percent to
the limited partners, 1/2 percent to the Managing General Partner and 1/2
percent to the Supervising General Partner, except for income or gain from the
sale or disposition of cable television properties, which will be allocated to
the partners based upon the formula set forth in the partnership agreement and
interest income earned prior to the first acquisition by the Partnership of a
cable television system, which was allocated 100 percent to the limited
partners.
Formation of Joint Venture
On May 30, 1990, the Partnership and IDS/Jones 89-B formed the
Venture. The Partnership's offering closed on September 30, 1991 with limited
partner subscriptions totaling $43,585,750, of which $37,592,709 was
contributed to the Venture. In the fourth quarter of 1991, due to the
necessity for additional funding for the Venture, Intercable and IDS Management
Corporation each made equity investments of $2,872,000 in the Venture under the
joint venture agreement between the joint venture partners. Profits, losses,
and distributions of the Venture will be shared in proportion to total capital
contributions made by the individual venture partners. In addition, on
December 5, 1991, Intercable and IDS Management Corporation made subordinated
loans to the Venture each in the principal amount of $1,800,000. See Note 5
for further information about the status of such loans. As a result of their
equity contributions to the Venture described above, ownership percentages of
the Venture are detailed below:
The Partnership 66%
IDS/Jones 89-B 24%
Intercable 5%
IDS Management Corporation 5%
----
100%
If any of the December 5, 1991 loans discussed in Note 5 are converted
to equity, the ownership percentages will be adjusted accordingly.
The Venture was formed for the purpose of acquiring the cable
television system serving the communities of Aurora, North Aurora, Montgomery,
Plano, Oswego, Sandwich, Yorkville and certain unincorporated areas of Kendall
and Kane Counties, all in the state of Illinois (the "Aurora System").
21
22
(2) SUMMARY OF SIGIFICANT ACCOUNTING POLICIES
Accounting Records
The accompanying consolidated financial statements have been prepared
on the accrual basis of accounting in accordance with generally accepted
accounting principles. The Partnership's tax returns are also prepared on the
accrual basis.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the General Partner's management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Principles of Consolidation
The accompanying consolidated financial statements include 100 percent
of the accounts of the Partnership and those of the Venture, reduced by the
minority interest in the Venture. All inter-partnership accounts and
transactions have been eliminated.
Allocation of Cost of Purchased Cable Television Systems
The total purchase price of the Aurora System purchased by the Venture
was allocated as follows: first, to the fair value of net tangible assets
acquired; second, to the value of subscriber lists; third, to franchise costs;
and fourth, to costs in excess of interests in net assets purchased.
Acquisition fees paid to affiliates of the General Partners and other
acquisition costs were capitalized and charged to intangible assets.
Property, Plant and Equipment
Depreciation of property, plant and equipment is provided primarily
using the straight-line method over the following estimated service lives:
Cable distribution systems 5 - 15 years
Equipment and tools 5 years
Office furniture and equipment 5 years
Buildings 10 - 20 years
Vehicles 3 years
Replacements, renewals and improvements are capitalized and
maintenance and repairs are charged to expense as incurred.
Intangible Assets
Costs assigned to franchises, subscriber lists and costs in excess of
interests in net assets purchased will be amortized using the straight-line
method over their remaining estimated useful lives.
Franchise costs 5 years
Subscriber lists 2 years
Costs in excess of interests in
net assets purchased 35 years
Revenue Recognition
Subscriber prepayments will be initially deferred and recognized as
revenue when earned.
Reclassification
Certain prior year amounts have been reclassified to conform to the
1995 presentation.
22
23
(3) TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES
Management Fees, Supervision Fees, Distribution Ratios and
Reimbursements
Intercable manages 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
by the Venture to Intercable during the years ended December 31, 1995, 1994 and
1993 were $843,045, $769,424 and $759,803, respectively.
The Supervising General Partner participates in certain management
decisions of the Venture and receive a fee for their services equal to 1/2
percent of the gross revenues of the Venture, excluding revenues from the sale
of cable television systems or franchises. Supervision fees paid by the
Venture to the Supervising General Partners during the years ended December 31,
1995, 1994 and 1993 were $84,305, $76,942 and $75,980, respectively.
The Venture reimburses Intercable 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 on actual time spent by
employees of Intercable with respect to each partnership managed. Remaining
expenses are allocated based on the pro rata relationship of the Venture's
revenues to the total revenues of all systems owned or managed by Intercable
and certain of its affiliates. Systems owned by Intercable and all other
systems owned by partnerships for which Intercable or affiliates are the
general partners are also allocated a proportionate share of these expenses.
Intercable believes that the methodology used in allocating overhead and
administrative expenses is reasonable. Reimbursements made to Intercable by
the Venture for allocated overhead and administrative expenses during the years
ended December 31, 1995, 1994 and 1993 were $1,218,491, $1,173,804 and
$1,183,224, respectively. The Supervising General Partners may also be
reimbursed for certain expenses incurred on behalf of the Venture. There were
no reimbursements made to the Supervising General Partners by the Venture for
allocated overhead and administrative expenses during the years ended December
31, 1995, 1994 and 1993.
During 1995, the Venture was charged interest by Intercable at an
average interest rate of 10.5 percent on amounts due Intercable and on the
subordinated loans from Intercable, which approximated Intercable's weighted
average cost of borrowing. Total interest charged to the Venture by Intercable
during the years ended December 31, 1995, 1994 and 1993 was $481,211, $386,257
and $192,746, respectively.
The Venture was charged interest on the subordinated loans from IDS
Management Corporation at an average interest rate of 7 percent, which
approximated IDS Management Corporation's cost of borrowing. Total interest
charged to the Venture by IDS Management Corporation during 1995, 1994, and
1993 was $120,970, $113,458 and $65,653, respectively.
Any Partnership distributions made from cash flow (defined as cash
receipts derived from routine operations, less debt principal and interest
payments and cash expenses) are allocated 99 percent to the limited partners,
1/2 percent to the Managing General Partner and 1/2 percent to the Supervising
General Partner. Any distributions other than interest income on limited
partner subscriptions earned prior to the acquisition of the Partnership's
first cable television system or from cash flow, such as from the sale or
refinancing of a system or upon dissolution of the Partnership, will be made as
follows: first, to the limited partners in an amount which, together with all
prior distributions, will equal 100 percent of the amount initially contributed
to the Partnership by the limited partners; second, to the General Partners in
an amount which, together with all prior distributions, will equal the amount
contributed to the capital of the partnership by the General Partners; third,
to the limited partners in an amount which, together with all prior
distributions, will equal a 6 percent per annum cumulative and noncompounded
return on the capital contributions of the limited partners; the balance, 75
percent to the limited partners, 12-1/2 percent to the Managing General Partner
and 12-1/2 percent to the Supervising General Partner.
Payments to/from Affiliates for Programming Services
The Venture receives programming from Product Information Network,
Superaudio, Mind Extension University and Jones Computer Network, all of which
are affiliates of Intercable.
Payments to Superaudio totaled $23,928, $23,558 and $22,627,
respectively, in 1995, 1994 and 1993. Payments to Mind Extension University
totaled $25,603, $21,347 and $13,168, respectively, in 1995, 1994 and 1993.
Payments to Jones Computer Network, which initiated service in 1994, totaled
$51,138 and $12,421 in 1995 and 1994, respectively.
23
24
The Venture receives a commission from Product Information Network
based on a percentage of advertising revenue and number of subscribers.
Product Information Network, which initiated service in 1994, paid commissions
to the Venture totaling $29,347 and $11,442 in 1995 and 1994, respectively.
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of December 31, 1995 and 1994,
consisted of the following:
1995 1994
------------ ------------
Cable distribution systems $ 36,726,927 $ 33,009,001
Equipment and tools 661,881 545,129
Office furniture and equipment 290,671 271,414
Vehicles 622,722 604,864
Buildings 78,460 78,460
------------ ------------
38,380,661 34,508,868
Less- accumulated depreciation (17,672,119) (14,180,482)
------------ ------------
$ 20,708,542 $ 20,328,386
============ ============
(5) DEBT
Debt consists of the following: December 31,
-------------------------------------
1995 1994
------------ -----------
Lending institutions-
Revolving credit agreement $ 40,800,000 $38,300,000
Affiliated entities-
Subordinated loans 5,006,647 5,126,647
Capital lease obligations 102,475 139,417
------------ -----------
$ 45,909,122 $43,566,064
============ ===========
On December 5, 1991, Jones Intercable, Inc. ("Intercable") 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 the $1,800,000 loan from IDS Management
Corporation has been repaid. See discussion below. The loans from Intercable
and IDS Management Corporation are subordinate to the Venture's revolving
credit and term loan. These loans have matured. Although IDS Management
Corporation and Intercable have not formally extended their loans, they have
not demanded repayment. In the first quarter of 1994, Intercable agreed to
subordinate to all other Venture debt its $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 due at the end
of March 1994 on the Venture's then-outstanding term loan. In the second
quarter of 1994, Intercable made a loan of $1,000,000 to the Venture to fund
principal repayments due at the end of June 1994 on the Venture's
then-outstanding term loan. This loan has been repaid. See discussion below.
The interest rates on the respective loans, which will vary from time to time,
with respect to IDS Management Corporation's loans, are at its cost of
borrowing, and, with respect to Intercable's loans, 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 revolving credit and term loan, as
discussed below. If the December 5, 1991 loans are not fully repaid,
Intercable and IDS Management Corporation, respectively, will have the right,
among other rights, to convert the unpaid portion of these loans to equity in
the Venture.
In November 1994, the Venture entered into a revolving credit and term
loan agreement with a commercial bank. This credit facility has a maximum
amount available of $45,000,000. At December 31, 1995, $40,800,000 was
outstanding under this agreement, leaving $4,200,000 available for future needs
of the Venture. Borrowings from this credit facility were used to repay the
balance of the Venture's previous term loan of $36,000,000, to repay to
Intercable the $1,000,000 advanced by Intercable to fund the Venture's June
1994 debt repayment plus interest, to repay to IDS Management Corporation
$880,000 of principal plus interest on the $1,800,000 loan from IDS Management
Corporation dated December 5, 1991, to pay certain fees incurred in obtaining
the new credit facility and to provide liquidity for capital expenditures.
During the second quarter of 1995, the Venture repaid IDS Management
Corporation an additional $120,000 of principal plus interest on the $1,800,000
loan dated December 5,
24
25
1991, leaving $800,000 of principal remaining to be repaid on this loan. The
revolving credit period of the Venture's credit facility expires January 1,
1997, at which time the then-outstanding balance converts to a term loan
payable in 28 consecutive quarterly installments. Interest on the credit
facility is at the Venture's option of the Base Rate plus .75 percent, the
London Interbank Offered Rate ("LIBOR") plus 1.75 percent or the Certificate of
Deposit Rate plus 1.875 percent. The Venture anticipates repaying the
remaining notes outstanding to related parties with borrowings from this 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 $800,000
of the $1,800,000 note dated December 5, 1991; second, to Intercable 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 Intercable the
$1,406,647 subordinated advance.
In January 1995, the Venture entered into an interest rate protection
contract covering outstanding debt obligations of $25,000,000. The Venture
paid a fee of $105,000. The agreement protects the Venture from LIBOR interest
rates that exceed 9 percent for two years from the date of the agreement. The
fee is being charged to interest expense over the life of the agreement using
the straight-line method.
Installments due on debt principal for each of the five years in the
period ending December 31, 2000 and thereafter, respectively, are: $5,037,389,
$2,070,742, $4,110,743, $4,906,248, $6,120,000 and $23,664,000.
At December 31, 1995, the carrying amount of the Venture's long-term
debt did not differ significantly from the estimated fair value of the
financial instruments. The fair value of the Venture's long-term debt is
estimated based on the discounted amount of future debt service payments using
rates of borrowing for a liability of similar risk.
(6) INCOME TAXES
Income taxes have not been recorded in the accompanying financial
statements because they accrue directly to the partners. The federal and state
income tax returns of the Partnership are prepared and filed by the Managing
General Partner.
The Partnership's tax returns, the qualification of the Partnership as
such for tax purposes, and the amount of distributable Partnership income or
loss are subject to examination by federal and state taxing authorities. If
such examinations result in changes with respect to the Partnership's
qualification as such, or in changes with respect to the Partnership's recorded
income or loss, the tax liability of the general and limited partners would
likely be changed accordingly.
Taxable income or loss reported by the partners is different from that
reported in the statements of operations due to the difference in depreciation
recognized under generally accepted accounting principles and the expense
allowed for tax purposes under the Modified Accelerated Cost Recovery System
(MACRS). There are no other significant differences between taxable loss and
the net loss reported in the statements of operations.
(7) COMMITMENTS AND CONTINGENCIES
The Partnership has filed cost-of-service showings in response to
rulemakings concerning the 1992 Cable Act for its Aurora System and thus
anticipates no further reductions in rates in these systems. The
cost-of-service showings have not yet received final approvals from regulatory
authorities, however, and there can be no assurance that the Partnership's
cost-of-service showings will prevent further rate reductions in these systems
until such final approvals are received.
The Venture rents office and other facilities under various long-term
lease arrangements. Rent paid under such lease arrangements totaled $105,400,
$60,313 and $106,840, respectively, for the years ended December 31, 1995, 1994
and 1993. Minimum commitments under operating leases for each of the five
years in the period ending December 31, 2000, and thereafter are as follows:
1996 $ 105,240
1997 16,730
1998 16,730
1999 16,730
2000 1,394
Thereafter -
----------
$ 156,824
==========
25
26
(8) SUPPLEMENTARY PROFIT AND LOSS INFORMATION
Supplementary profit and loss information for the respective years is presented
below:
Year Ended December 31,
----------------------------------------------
1995 1994 1993
----------- ---------- -----------
Maintenance and repairs $ 152,338 $ 133,849 $ 115,863
=========== ========== ===========
Taxes, other than income and payroll taxes $ 23,470 $ 11,949 $ 25,485
=========== ========== ===========
Advertising $ 374,340 $ 423,866 $ 346,457
=========== ========== ===========
Depreciation of property, plant and equipment $ 3,491,637 $3,810,089 $ 3,467,318
=========== ========== ===========
Amortization of intangible assets $ 6,826,057 $6,791,412 $ 7,416,527
=========== ========== ===========
26
27
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership itself has no officers or directors. Certain
information concerning the directors and executive officers of the Managing
General Partner is set forth below.
Name Age Positions with the Managing General Partner
---- --- -------------------------------------------
Glenn R. Jones 66 Chairman of the Board and Chief Executive Officer
James B. O'Brien 46 President
Kevin P. Coyle 44 Vice President of Finance
Elizabeth M. Steele 44 Vice President and Secretary
Mr. Glenn R. Jones has been Chairman of the Board of the Managing
General Partner since its formation in October 1986. Mr. Jones served as
President of the Managing General Partner until September of 1990 at which time
he was elected Chief Executive Officer. Mr. Jones has served as Chairman of
the Board of Directors and Chief Executive Officer of Jones Intercable, Inc.
since its formation in 1970, and he was President from June 1984 until April
1988. Mr. Jones is the sole shareholder, President and Chairman of the Board
of Directors of Jones International, Ltd. He is also Chairman of the Board of
Directors of the subsidiaries of Jones Intercable, Inc. and of certain other
affiliates of Jones Intercable, Inc. Mr. Jones has been involved in the cable
television business in various capacities since 1961, is a past and present
member of the Board of Directors and the Executive Committee of the National
Cable Television Association. He also is on the Executive Committee of Cable
in the Classroom, an organization dedicated to education via cable.
Additionally, in March 1991, Mr. Jones was appointed to the Board of Governors
for the American Society for Training and Development, and in November 1992 to
the Board of Education Council of the National Alliance of Business. Mr. Jones
is also a founding member of the James Madison Council of the Library of
Congress. Mr. Jones is a past director and member of the Executive Committee
of C-Span. Mr. Jones has been the recipient of several awards including the
Grand Tam Award in 1989, the highest award from the Cable Television
Administration and Marketing Society; the Chairman's Award from the Investment
Partnership Association, which is an association of sponsors of public
syndications; the cable television industry's Public Affairs Association
President's Award in 1990, the Donald G. McGannon award for the advancement of
minorities and women in cable; the STAR Award from American Women in Radio and
Television, Inc. for exhibition of a commitment to the issues and concerns of
women in television and radio; the Women in Cable Accolade in 1990 in
recognition of support of this organization; the Most Outstanding Corporate
Individual Achievement award from the International Distance Learning
Conference; the Golden Plate Award from the American Academy of Achievement for
his advances in distance education; the Man of the Year named by the Denver
chapter of the Achievement Rewards for College Scientists; and in 1994 Mr.
Jones was inducted into Broadcasting and Cable's Hall of Fame.
Mr. James B. O'Brien was elected President of the Managing General
Partner in September of 1990. Mr. O'Brien joined Jones Intercable, Inc. in
January 1982. Mr. O'Brien was elected President and a Director of Jones
Intercable, Inc. in December 1989. Prior to being elected President and a
Director of Jones Intercable, Inc., Mr. O'Brien served as a Division Manager,
Director of Operations Planning/Assistant to the CEO, Fund Vice President and
Group Vice President/Operations. As President, he is responsible for the
day-to-day operations of the cable television systems managed and owned by
Jones Intercable, Inc. Mr. O'Brien is a board member of Cable Labs, Inc., the
research arm of the cable television industry. He also serves as a director of
the Cable Television Administration and Marketing Association and as a director
of the Walter Kaitz Foundation, a
27
28
foundation that places people of any ethnic minority group in positions with
cable television systems, networks and vendor companies.
Mr. Kevin P. Coyle was elected Vice President of Finance of the
Managing General Partner in February 1989. Mr. Coyle is the principal
financial and accounting officer of the Managing General Partner. Mr. Coyle
joined The Jones Group, Ltd. in July 1981 as Vice President/Financial Services.
He was elected Treasurer of Jones Intercable, Inc. in August 1987, Vice
President/Treasurer in April 1988 and Group Vice President/Finance in October
1990.
Ms. Elizabeth M. Steele has served as Secretary of the Managing
General Partner since August 1987 and Vice President since February 1989. Ms.
Steele joined Jones Intercable, Inc. in August 1987 as Vice President/General
Counsel and Secretary. From August 1980 until joining Jones Intercable, Inc.,
Ms. Steele was an associate and then a partner at the Denver law firm of Davis,
Graham & Stubbs, which serves as counsel to Jones Intercable, Inc.
Certain information concerning directors and executive officers of the
Supervising General Partner is set forth below:
Name Age Positions with the Supervising General Partner
---- --- ----------------------------------------------
Janis E. Miller 44 President and Director
Morris Goodwin, Jr. 44 Vice President, Treasurer and Director
Lori J. Larson 37 Vice President and Director
Ronald W. Powell 51 Vice President
Bradley C. Nelson 31 Vice President
John M. Knight 43 Vice President
Ms. Janis E. Miller has served as Vice President of Variable Assets of
American Express Financial Corporation since December 1993. From June 1990 to
November 1993, Ms. Miller held the position of Vice President of Mutual
Funds/Limited Partnership Product Development and Marketing with American
Express Financial Corporation.
Mr. Morris Goodwin, Jr. has served as Vice President and Treasurer of
American Express Financial Corporation since July 1989. From January 1988 to
July 1989, he had been the Chief Financial Officer and Treasurer of IDS Bank &
Trust Company. From January 1980 to January 1988, he was a Vice President with
Morgan Stanley, an investment banking business headquartered in New York.
Ms. Lori J. Larson has been employed by American Express Financial
Corporation since 1981 and currently holds the title of Vice President. Since
August 1988, she has been responsible for day-to-day management of vendor
relationships, due diligence review, and operational aspects for various
limited partnerships distributed by American Express Financial Advisors Inc.
In addition, Ms. Larson is responsible for product development of the publicly
offered mutual funds in the IDS Mutual Fund Group.
Mr. Ronald W. Powell has held the position of Vice President and
Assistant General Counsel with American Express Financial Corporation since
November 1985. He has been a member of the American Express Financial
Corporation law department since 1975.
Mr. Bradley C. Nelson joined American Express Financial Corporation in
1991 as an Investment Department analyst following his graduation from Cornell
University's Johnson Graduate School of Management where he earned an MBA with
a concentration in finance.
Mr. John M. Knight joined American Express Financial Corporation in
July 1975. He is currently Controller-Variable Assets and charged with the
overall finance responsibilities for Mutual Funds, Limited
28
29
Partnerships, Variable Annuities and Wealth Management Services. From 1981 to
March 1994, he held a number of positions in the IDS Certificate Company,
leading to Controller of that organization.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no employees; however, various personnel are
required to operate cable television systems owned by the Venture. Such
personnel are employed by Intercable and, pursuant to the terms of the
Partnership's limited partnership agreement, the cost of such employment is
charged by the Managing General Partner to the Partnership as a direct
reimbursement item. See Item 13.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
No person or entity owns more than 5 percent of the limited
partnership interests of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Managing General Partner and its affiliates engage in certain
transactions with the Partnership as contemplated by the limited partnership
agreement of the Partnership. The Managing General Partner believes that the
terms of such transactions are generally as favorable as could be obtained by
the Partnership from unaffiliated parties. This determination has been made by
the Managing General Partner in good faith, but none of the terms were or will
be negotiated at arm's-length and there can be no assurance that the terms of
such transactions have been or will be as favorable as those that could have
been obtained by the Partnership from unaffiliated parties.
The Supervising General Partner and its affiliates engage in certain
transactions with the Partnership as contemplated by the limited partnership
agreement of the Partnership. The Supervising General Partner believes that
the terms of such transactions, which are set forth in the Partnership's
limited partnership agreement, are generally as favorable as could be obtained
by the Partnership from unaffiliated parties. This determination has been made
by the Supervising General Partner in good faith, but none of the terms were or
will be negotiated at arm's-length and there can be no assurance that the terms
of such transactions have been or will be as favorable as those that could have
been obtained by the Partnership from unaffiliated parties.
The Managing General Partner charges the Partnership a management fee,
and the Partnership reimburses Intercable, the parent of the Managing General
Partner, for certain allocated overhead and administrative expenses. These
expenses represent the salaries and benefits paid to corporate personnel, rent,
data processing services and other facilities costs. 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 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 or its affiliates. Systems owned by Intercable
and all other systems owned by partnerships for which Intercable serves as
general partner, are also allocated a proportionate share of these expenses.
The Supervising General Partner, IDS Cable Corporation, charges the Partnership
for supervision fees in accordance with the limited partnership agreement of
the Partnership.
Intercable, the parent of the Managing General Partner, also advances
funds and charges interest on the balance payable. The interest rate charged
approximates Intercable's weighted average cost of borrowing.
The Aurora System receives stereo audio programming from Superaudio, a
joint venture owned 50% by an affiliate of the Managing General Partner and 50%
by an unaffiliated party, educational video
29
30
programming from Mind Extension University, Inc., an affiliate of the Managing
General Partner, and computer video programming from Jones Computer Network,
Ltd., an affiliate of the Managing General Partner, for fees based upon the
number of subscribers receiving the programming.
Product Information Network ("PIN"), an affiliate of the Managing
General Partner, provides advertising time for third parties on the Aurora
System. In consideration, the revenues generated from the third parties are
shared two-thirds and one-third between PIN and the Venture. During the year
ended December 31, 1995, the Venture received revenues from PIN of $29,347.
The activities of the Partnership are limited to its equity ownership
in the Venture. The charges to the Venture for related party transactions are
as follows for the periods indicated:
At December 31,
----------------------------------------------
1995 1994 1993
---- ---- ----
Management fees $ 843,045 $769,424 $759,803
Supervision fees 84,305 76,942 75,980
Allocation of expenses 1,218,491 1,173,804 1,183,224
Interest expense on advances and loans from the
Managing General Partner and Intercable 481,211 386,257 258,399
Interest expense re loan from IDS Management
Corporation 120,970 113,458 65,653
Amount of notes and advances outstanding 331,185 933,949 1,056,828
Highest amount of notes and advances outstanding 331,185 1,040,406 1,056,828
Programming fees:
Superaudio 23,928 23,558 22,627
Mind Extension University 25,603 21,347 13,168
Jones Computer Network 51,138 12,421 -0-
30
31
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. See index to financial statements for list of
financial statements and exhibits thereto filed as
part of this report.
3. The following exhibits are filed herewith:
4.1 Limited Partnership Agreement for IDS/Jones Growth
Partners 89-B, Ltd. (1)
10.1.1 Copy of franchise and related documents granting a
cable television system franchise for the City of
Aurora, Illinois (IDS/Jones Joint Venture Partners).
(1)
10.1.2 Copy of franchise and related documents granting a
cable television system franchise for Kane County,
Illinois (IDS/Jones Joint Venture Partners). (2)
10.1.3 Resolution No. 91-49 dated March 12, 1991 of Kane
County extending the term of the franchise. (2)
10.1.4 Franchise Extension Agreement dated March 29, 1991
of Kane County extending the term of the franchise.
(2)
10.1.5 Resolution No. 92-54 dated March 12, 1991 of Kane
County extending the term of the franchise. (2)
10.1.6 Ordinance No. 92-133 dated June 9, 1992 of Kane
County renewing the franchise. (2)
10.1.7 Copy of franchise and related documents granting a
cable television system franchise for Kendall
County, Illinois (IDS/Jones Joint Venture Partners).
(1)
10.1.8 Copy of franchise and related documents granting a
cable television system franchise for the Village of
Montgomery, Illinois (IDS/Jones Joint Venture
Partners). (1)
10.1.9 Copy of franchise and related documents granting a
cable television system franchise for the Village of
North Aurora, Illinois (IDS/Jones Joint Venture
Partners). (1)
10.1.10 Copy of franchise and related documents granting a
cable television system franchise for the Village of
Oswego, Illinois (IDS/Jones Joint Venture Partners).
(1)
10.1.11 Copy of franchise and related documents granting a
cable television system franchise for the City of
Plano, Illinois (IDS/Jones Joint Venture Partners).
(1)
10.1.12 Copy of franchise and related documents granting a
cable television system franchise for the City of
Sandwich, Illinois (IDS/Jones Joint Venture
Partners). (1)
10.1.12 Copy of franchise and related documents granting a
cable television system franchise for the Village of
Yorkville, Illinois (IDS/Jones Joint Venture
Partners). (1)
10.2.1 Credit Agreement dated as of November 3, 1994 among
the Venture, IDS/Jones 89-B, Growth Partners II and
Shawmut Bank Connecticut, N.A., as agent for various
lenders. (5)
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10.2.2 Two Promissory Notes both dated December 5, 1991,
each in the principal amount of $1,800,000 from the
Venture, payable to the order, respectively, of IDS
Management Corporation and Jones Intercable, Inc.
(3)
27 Financial Data Schedule
__________
(1) Incorporated by reference from the Annual Report on
Form 10-K of IDS/Jones Growth Partners II
(Commission File No. 0-18133) for fiscal year ended
December 31, 1990.
(2) Incorporated by reference from the Annual Report on
Form 10-K of IDS/Jones Growth Partners II
(Commission File No. 0-18133) for fiscal year ended
December 31, 1992.
(3) Incorporated by reference from the Annual Report on
Form 10-K of IDS/Jones Growth Partners II
(Commission File No. 0-18133) for fiscal year ended
December 31, 1991.
(5) Incorporated by reference from the Annual Report on
Form 10-K of IDS/Jones Growth Partners II, L.P.
(Commission File No. 0-18133) for fiscal year ended
December 31, 1994.
(b) Reports on Form 8-K
None.
32
33
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
IDS/JONES GROWTH PARTNERS II, L.P.
a Colorado limited partnerships
By Jones Cable Corporation,
their Managing General Partner
By: /s/ GLENN R. JONES
----------------------------------
Glenn R. Jones
Chairman of the Board and
Dated: March 25, 1996 Chief Executive Officer
By IDS Cable II Corporation,
their Supervising General Partner
By: /s/ JANIS E. MILLER
----------------------------------
Janis E. Miller
Dated: March 25, 1996 President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OFFICERS AND DIRECTORS OF JONES CABLE CORPORATION:
By: /s/ GLENN R. JONES
----------------------------------
Glenn R. Jones
Chairman of the Board and
Chief Executive Officer
Dated: March 25, 1996 (Principal Executive Officer)
By: /s/ KEVIN P. COYLE
----------------------------------
Kevin P. Coyle
Vice President/Finance
(Principal Financial and
Dated: March 25, 1996 Accounting Officer)
33
34
OFFICERS AND DIRECTORS OF IDS CABLE II CORPORATION:
By: /s/ JANIS E. MILLER
-----------------------------------
Janis E. Miller
President and Director
Dated: March 25, 1996 (Principal Executive Officer)
By: /s/ MORRIS GOODWIN, JR.
-----------------------------------
Morris Goodwin, Jr.
Vice President, Treasurer and
Director (Principal Financial and
Dated: March 25, 1996 Accounting Officer)
By: /s/ LORI J. LARSON
-----------------------------------
Lori J. Larson
Dated: March 25, 1996 Vice President and Director
34
35
EXHIBIT INDEX
Exhibit
Number Exhibit Description Page
- ------- ------------------- ----
4.1 Limited Partnership Agreement for IDS/Jones Growth Partners
89-B, Ltd. (1)
10.1.1 Copy of franchise and related documents granting a cable
television system franchise for the City of Aurora, Illinois
(IDS/Jones Joint Venture Partners). (1)
10.1.2 Copy of franchise and related documents granting a cable
television system franchise for Kane County, Illinois
(IDS/Jones Joint Venture Partners). (2)
10.1.3 Resolution No. 91-49 dated March 12, 1991 of Kane County
extending the term of the franchise. (2)
10.1.4 Franchise Extension Agreement dated March 29, 1991 of Kane
County extending the term of the franchise. (2)
10.1.5 Resolution No. 92-54 dated March 12, 1991 of Kane County
extending the term of the franchise. (2)
10.1.6 Ordinance No. 92-133 dated June 9, 1992 of Kane County
renewing the franchise. (2)
10.1.7 Copy of franchise and related documents granting a cable
television system franchise for Kendall County, Illinois
(IDS/Jones Joint Venture Partners). (1)
10.1.8 Copy of franchise and related documents granting a cable
television system franchise for the Village of Montgomery,
Illinois (IDS/Jones Joint Venture Partners). (1)
10.1.9 Copy of franchise and related documents granting a cable
television system franchise for the Village of North Aurora,
Illinois (IDS/Jones Joint Venture Partners). (1)
10.1.10 Copy of franchise and related documents granting a cable
television system franchise for the Village of Oswego,
Illinois (IDS/Jones Joint Venture Partners). (1)
10.1.11 Copy of franchise and related documents granting a cable
television system franchise for the City of Plano, Illinois
(IDS/Jones Joint Venture Partners). (1)
10.1.12 Copy of franchise and related documents granting a cable
television system franchise for the City of Sandwich,
Illinois (IDS/Jones Joint Venture Partners). (1)
10.1.12 Copy of franchise and related documents granting a cable
television system franchise for the Village of Yorkville,
Illinois (IDS/Jones Joint Venture Partners). (1)
10.2.1 Credit Agreement dated as of November 3, 1994 among the
Venture, IDS/Jones 89-B, Growth Partners II and Shawmut Bank
Connecticut, N.A., as agent for various lenders. (5)
36
Exhibit
Number Exhibit Description Page
- ------- ------------------- ----
10.2.2 Two Promissory Notes both dated December 5, 1991, each in the
principal amount of $1,800,000 from the Venture, payable to
the order, respectively, of IDS Management Corporation and
Jones Intercable, Inc. (3)
27 Financial Data Schedule
__________
(1) Incorporated by reference from the Annual Report on Form 10-K
of IDS/Jones Growth Partners II (Commission File No. 0-18133)
for fiscal year ended December 31, 1990.
(2) Incorporated by reference from the Annual Report on Form 10-K
of IDS/Jones Growth Partners II (Commission File No. 0-18133)
for fiscal year ended December 31, 1992.
(3) Incorporated by reference from the Annual Report on Form 10-K
of IDS/Jones Growth Partners II (Commission File No. 0-18133)
for fiscal year ended December 31, 1991.
(5) Incorporated by reference from the Annual Report on Form 10-K
of IDS/Jones Growth Partners II, L.P. (Commission File No.
0-18133) for fiscal year ended December 31, 1994.