<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1995
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission File Number 0-17916
JONES GROWTH PARTNERS L.P.
- - --------------------------------------------------------------------------------
Exact name of registrant as specified in charter
Colorado 84-1143409
- - --------------------------------------------------------------------------------
State of Organization IRS employer I.D. #
9697 East Mineral Avenue, P.O. Box 3309, Englewood, Colorado 80155-3309
-----------------------------------------------------------------------
Address of principal executive office
(303) 792-3111
-----------------------------
Registrant's telephone number
Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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JONES GROWTH PARTNERS L.P.
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1995 1994
------ -------------- -------------
<S> <C> <C>
CASH $ 298,986 $ 170,648
TRADE ACCOUNTS RECEIVABLE, less allowance
for doubtful receivables of $9,042 and $21,597 at March 31,
1995 and December 31, 1994, respectively 22,728 66,829
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 44,316,166 43,210,371
Less- accumulated depreciation (20,857,928) (20,003,575)
------------- ------------
23,458,238 23,206,796
Franchise costs, net of accumulated amortization
of $36,849,677 and $35,174,652 at March 31, 1995 and
December 31, 1994, respectively 23,007,271 24,682,296
Subscriber lists, net of accumulated amortization
of $7,389,079 and $7,053,212 at March 31, 1995 and
December 31, 1994, respectively 2,015,203 2,351,070
Costs in excess of interests in net assets purchased,
net of accumulated amortization of $1,092,995 and
$1,043,313 at March 31, 1995 and December 31,
1994, respectively 6,848,060 6,897,742
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Total investment in cable
television properties 55,328,772 57,137,904
DEPOSITS, PREPAID EXPENSES AND OTHER ASSETS 909,958 942,774
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Total assets $ 56,560,444 $ 58,318,155
============= ============
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
2
<PAGE> 3
JONES GROWTH PARTNERS L.P.
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
- - -------------------------------------------
LIABILITIES:
Credit facility and other debt $ 35,221,788 $ 35,245,699
Trade accounts payable and accrued liabilities 1,312,761 989,457
Accrued interest 314,480 16,780
Subscriber prepayments 77,589 50,301
------------ ------------
Total liabilities 36,926,618 36,302,237
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PARTNERS' CAPITAL (DEFICIT):
General Partners-
Contributed capital 1,000 1,000
Accumulated deficit (550,058) (526,237)
------------ ------------
(549,058) (525,237)
------------ ------------
Limited Partners-
Net contributed capital (85,740 units outstanding at
March 31, 1995 and December 31, 1994) 73,790,065 73,790,065
Accumulated deficit (53,607,181) (51,248,910)
------------ ------------
20,182,884 22,541,155
------------ ------------
Total partners' capital (deficit) 19,633,826 22,015,918
------------ ------------
Total liabilities and partners' capital (deficit) $ 56,560,444 $ 58,318,155
============ ============
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
3
<PAGE> 4
JONES GROWTH PARTNERS L.P.
(A Limited Partnership)
UNAUDITED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
------------------------------------
1995 1994
------------ -------------
<S> <C> <C>
REVENUES $ 5,045,181 $ 4,769,490
COSTS AND EXPENSES:
Operating expenses 3,093,999 2,703,079
Management and supervisory fees to the General
Partners and allocated administrative costs
from the Managing General Partner 688,320 694,444
Depreciation and amortization 2,938,268 3,254,148
------------ -------------
OPERATING LOSS (1,675,406) (1,882,181)
------------ -------------
OTHER INCOME (EXPENSE):
Interest expense (708,830) (436,730)
Interest income 7,112 9,168
Other, net (4,968) (10,674)
------------ -------------
NET LOSS $ (2,382,092) $ (2,320,417)
============ =============
ALLOCATION OF NET LOSS:
Managing General Partner $ (23,821) $ (23,204)
============ =============
Limited Partners $ (2,358,271) $ (2,297,213)
============ =============
NET LOSS PER LIMITED PARTNERSHIP UNIT $ (27.50) $ (26.79)
============ =============
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING 85,740 85,740
============ =============
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
4
<PAGE> 5
JONES GROWTH PARTNERS L.P.
(A Limited Partnership)
UNAUDITED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
-----------------------------------
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,382,092) $ (2,320,417)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 2,927,122 3,245,001
Amortization of capitalized loan fees 11,146 9,147
Amortization of interest rate protection contract 16,167 16,167
Decrease in trade accounts receivable 37,015 29,416
Decrease in deposits, prepaid expenses and other assets (6,692) (17,749)
Increase in accrued liabilities, accrued interest
and subscriber prepayments 655,378 241,450
------------ ------------
Net cash provided by operating activities 1,258,044 1,203,015
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,105,795) (875,539)
------------ ------------
Net cash used in investing activities (1,105,795) (875,539)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of borrowings (23,911) (744,468)
------------ ------------
Net cash used in financing activities (23,911) (744,468)
------------ ------------
INCREASE (DECREASE) IN CASH 128,338 (416,992)
CASH, BEGINNING OF PERIOD 170,648 1,646,850
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CASH, END OF PERIOD $ 298,986 $ 1,229,858
============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 394,963 $ 436,489
============ ============
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
5
<PAGE> 6
JONES GROWTH PARTNERS L.P.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) This Form 10-Q is being filed in conformity with the Securities and
Exchange Commission requirements for unaudited financial statements and does
not contain all of the necessary footnote disclosures required for a fair
presentation of the Balance Sheets and Statements of Operations and Cash Flows
in conformity with generally accepted accounting principles. However, in the
opinion of management, this data includes all adjustments, consisting of normal
recurring accruals, necessary to present fairly the financial position of Jones
Growth Partners L.P. (the "Partnership") at March 31, 1995 and December 31,
1994, and its results of operations and cash flows for the three month periods
ended March 31, 1995 and 1994. Results of operations for these periods are not
necessarily indicative of results to be expected for the full year.
The Partnership owns the cable television system serving the
municipalities of Addison, Glen Ellyn, St. Charles, Warrenville, West Chicago,
Wheaton, Winfield and Geneva, and certain portions of unincorporated areas of
Du Page and Kane counties, all in the State of Illinois (the "Wheaton System").
(2) The Partnership was formed pursuant to a public offering of limited
partnership interests sponsored by Jones Spacelink Cable Corporation (the
"Managing General Partner"). The Managing General Partner was a wholly owned
subsidiary of Jones Spacelink, Ltd. ("Spacelink") until December 20, 1994. On
that date, Jones Intercable, Inc. ("Intercable"), a Colorado corporation that
also was a subsidiary of Spacelink, acquired substantially all of the assets of
Spacelink, including all of the shares of the Managing General Partner. The
Managing Genral Partner is thus now a wholly owned subsidiary of Intercable.
Intercable is one of the largest multiple system operators in the United
States. The Managing General Partner and certain of its affiliates also owned
and operated cable television systems for their own account and for the account
of other managed limited partnerships. The Partnership receives a fee for its
services equal to five percent of the gross revenues of the Partnership,
excluding revenues from the sale of cable television systems or franchises.
Management fees paid to the Managing General Partner by the Partnership for the
three month periods ended March 31, 1995 and 1994 were $252,259 and $238,475,
respectively. Growth Partners Inc. (the "Associate General Partner"), an
affiliate of Lehman Brothers Inc., participates with the Managing General
Partner in certain management decisions affecting the Partnership and receives
a supervisory fee of the lesser of one percent of the gross revenues of the
Partnership, excluding revenues from the sale of cable television systems or
franchises, or $200,000, accrued monthly and payable annually. Supervisory
fees accrued to the Associate General Partner by the Partnership for the three
month period ended March 31, 1995 were $50,452. Supervisory fees accrued to the
Associate General Partner by the Partnership for the three month period ended
March 31, 1994 were $47,695.
The Partnership reimburses the Managing General Partner and certain of
its subsidiaries for certain allocated general and administrative costs. These
expenses include salaries and benefits paid to corporate personnel, office rent
and related facilities expense. Such personnel provide engineering, marketing,
administrative, accounting, legal, and investor relations services to the
Partnership. Allocations of personnel costs are based primarily on actual time
spent by employees of the Managing General Partner and certain of its
affiliates with respect to each partnership managed. Remaining expenses are
allocated based upon the pro rata relationship of the Partnership's revenues to
the total revenues of all cable television systems owned or managed by the
Managing General Partner and certain of its affiliates. All cable television
systems owned or managed by the Managing General Partner and certain of its
affiliates are allocated a proportionate share of these expenses. Included in
the costs allocated from the Managing General Partner and certain of its
affiliates are expenses allocated to the Managing General Partner and certain
of its affiliates from affiliated entities for information processing and
administrative services. The Managing General Partner believes that the
methodology used in allocating general and administrative costs is reasonable.
Reimbursements by the Partnership to the Managing General Partner for allocated
general and administrative costs for three month periods ended March 31, 1995
and 1994 were $385,609 and $408,274, respectively.
(3) Certain prior year amounts have been reclassified to conform to the
1995 presentation.
6
<PAGE> 7
JONES GROWTH PARTNERS L.P.
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
For the three months ended March 31, 1995, the Partnership generated
net cash from operating activities totaling $1,258,044, which is available to
fund capital expenditures and non-operating costs. During the first three
months of 1995, the Partnership expended approximately $1,106,000 for capital
expenditures for the Wheaton System. Approximately 44 percent of these
expenditures related to cable, hardware and labor for new subscriber
installations, to extend the cable plant to serve additional customers and to
replace equipment. Approximately 22 percent was for the purchase of pay
security equipment and the remainder of these expenditures was for various
system enhancements. Such expenditures were financed primarily from cash from
operations. Capital expenditures for the remainder of 1995 are expected to be
approximately $2,272,000 which is expected to be financed from available cash
balances and cash flow from operations. For the remainder of 1995,
approximately 39 percent will relate to cable, hardware and labor to extend the
cable plant, to make additional subscriber installations and to replace
equipment in the Wheaton System. The remainder of the expected capital
expenditures will be for the replacement and repair of converters and for
various other enhancements.
In December 1994, the Partnership entered into a new $36,000,000
revolving credit facility. The revolving credit facility converts to a term
loan on December 31, 1996, at which time the then-outstanding balance is
payable in quarterly installments through December 30, 2002. At March 31,
1995, $35,000,000 was outstanding under the new agreement, leaving $1,000,000
available for future needs of the Partnership. Interest on the outstanding
principal balance is at the Partnership's option of Prime plus 1/4 percent or
the London Interbank Offered Rate plus 1-1/4 percent. A fee of 3/8 of one
percent per annum on the unused portion of the commitment is also required.
The effective interest rates on amounts outstanding as of March 31, 1995 and
1994 were 7.55 percent and 4.83 percent, respectively.
On January 12, 1993, the Partnership entered into an interest rate cap
agreement covering outstanding debt obligations of $20,000,000. The
Partnership paid a fee of $194,000 for the rate cap agreement. The agreement
protects the Partnership from LIBOR interest rates that exceed 7 percent for
three years from the date of the agreement.
The Managing General Partner presently believes cash flow from
operations and available borrowings under the Partnership's revolving credit
facility will be sufficient to fund capital expenditures and other liquidity
needs of the Partnership.
Regulation and Legislation
Congress enacted the Cable Television Consumer Protection and
Competition Act of 1992 (the "1992 Cable Act"), which became effective on
December 4, 1992. This legislation has caused significant changes to the
regulatory environment in which the cable television industry operates. The
1992 Cable Act generally imposes 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 the Wheaton System, are subject to rate regulation of basic cable
services. In addition, the 1992 Cable Act allows the FCC to regulate rates for
non-basic service tiers other than premium services in response to complaints
filed by franchising authorities and/or cable subscribers. In April 1993, the
FCC adopted regulations governing rates for basic and non-basic services. The
FCC's rules became effective on September 1, 1993. In compliance with these
rules, the Partnership reduced rates charged for certain regulated services
effective September 1, 1993.
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 and established interim cost-of-service regulations. The
FCC's February 22, 1994 regulations will generally require rate reductions,
absent a successful cost-of-service showing, of 17 percent of September 30,
1992 rates, adjusted for inflation, channel modifications, equipment costs, and
increases in programming costs. The new regulations became effective on May
15, 1994, but operators could elect to defer rate
7
<PAGE> 8
reductions to July 14, 1994, so long as they made no changes in their rates and
did not restructure service offerings between May 15, 1994 and July 14, 1994.
The Partnership has filed a cost-of-service showing for its Wheaton
System and thus anticipates no further reductions in rates. The
cost-of-service showing has not yet received final approval from franchising
authorities, however, and there can be no assurance that the Partnership's
cost-of-service showing will prevent further rate reductions until such final
approval is received.
RESULTS OF OPERATIONS
Revenues of the Partnership for the three months ended March 31, 1995
totaled $5,045,181, compared to $4,769,490 for the comparable 1994 period, an
increase of $275,691, or approximately 6 percent. The total increase in
revenues for the three month period ended March 31, 1995, related primarily to
an increase in basic service revenues. Between March 31, 1994 and 1995, the
Partnership added 3,577 basic subscribers, an increase of approximately 8
percent.
Operating expenses consist primarily of costs associated with the
administration of the Partnership's cable television systems. The principal
cost components are salaries paid to system personnel, programming expenses,
professional fees, subscriber billing costs, rent for leased facilities, cable
system maintenance expenses and consumer marketing expenses.
Operating expenses increased $390,920, or approximately 14 percent,
from $2,703,079 for the three months ended March 31, 1994 to $3,093,999 for the
comparable period in 1995. Operating expenses represented approximately 57
percent and 61 percent, respectively, of revenues for the three months ended
March 31, 1994 and 1995. This increase in operating expenses was primarily due
to increases in programming fees and personnel related costs, which accounted
for approximately 41 percent and 30 percent, respectively, of the total
increase. No other individual factor significantly affected the increase in
operating expenses for the periods discussed.
Management and supervisory fees paid to the Managing and Associate
General Partners and allocated administrative costs from the Managing General
Partner decreased $6,124, or approximately one percent, from $694,444 for the
three month period ended March 31, 1994 to $688,320 for the three month period
ended March 31, 1995. This decrease was primarily the result of a decrease in
allocated administrative costs from the Managing General Partner for the three
month period ended March 31, 1995, as compared to the similar period one year
ago. The change of ownership of the Managing General Partner will not have any
material effect on the management fees and allocated administrative costs to
the Partnership.
Operating income before depreciation and amortization expense
decreased $109,105, or approximately 8 percent, from $1,371,967 for the three
month period ended March 31, 1994 to $1,262,862 for the comparable period in
1995. This decrease in operating income before depreciation and amortization
expense was a result of the increase in operating expenses described above and
was partially offset by the increase in revenues. The decrease in operating
income before depreciation and amortization reflects the current operating
environment of the cable television industry. The FCC rate regulations under
the 1992 Cable Act have caused revenues to increase more slowly than otherwise
would have been the case. In turn, this has caused certain expenses which are
a function of revenue, such as franchise fees, copyright fees and management
fees to increase more slowly than in prior years. However, other operating
costs such as programming fees, salaries and benefits, and marketing costs as
well as certain costs incurred by the Managing General Partner, which are
allocated to the Partnership, continue to increase at historical rates. This
situation has led to reductions in operating income before depreciation and
amortization as a percent of revenue ("Operating Margin"). Such reductions in
Operating Margins may continue in the near term as the Partnership and the
Managing General Partner incur cost increases (due to, among other things,
increases in programming fees, compliance costs associated with reregulation
and competition) that exceed increases in revenue. The Managing General
Partner will attempt to mitigate a portion of these reductions through (a) new
service offerings; (b) product re-marketing and re-packaging; and (c) marketing
efforts targeted at non-subscribers.
Interest expense increased $272,100, or approximately 62 percent, from
$436,730 for the three months ended March 31, 1994 to $708,830 for the similar
period in 1995. This increase in interest expense is primarily due to higher
interest rates on interest bearing obligations during the three month period of
1995 as compared to the similar period one year ago.
8
<PAGE> 9
Net loss increased $61,675, from $2,320,417 for the three month period
ended March 31, 1994 to $2,382,092 for the comparable period in 1995. These
losses are the result of the factors discussed above, and are expected to
continue in the future.
9
<PAGE> 10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
27) Financial Data Schedule
b) Reports on Form 8-K
None
10
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JONES GROWTH PARTNERS L.P.
a Colorado limited partnership
BY: Jones Spacelink Cable Corporation
By: /s/ Kevin P. Coyle
Kevin P. Coyle
Vice President/Finance
(Principal Accounting and Financial Officer)
Dated: May 12, 1995
11
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description Page
- - ----------- ----------- ----
<S> <C> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 298,986
<SECURITIES> 0
<RECEIVABLES> 22,728
<ALLOWANCES> (9,042)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 44,316,166
<DEPRECIATION> (20,857,928)
<TOTAL-ASSETS> 56,560,444
<CURRENT-LIABILITIES> 1,704,830
<BONDS> 35,221,788
<COMMON> 0
0
0
<OTHER-SE> 19,633,826
<TOTAL-LIABILITY-AND-EQUITY> 56,560,444
<SALES> 0
<TOTAL-REVENUES> 5,045,181
<CGS> 0
<TOTAL-COSTS> 6,720,587
<OTHER-EXPENSES> (2,144)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 708,830
<INCOME-PRETAX> (2,382,092)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,382,092)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,382,092)
<EPS-PRIMARY> (27.50)
<EPS-DILUTED> (27.50)
</TABLE>
