<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
--------------- --------------
Commission File Number: 0-18133
IDS/JONES GROWTH PARTNERS II, L.P.
- - --------------------------------------------------------------------------------
Exact name of registrant as specified in charter
Colorado #84-1060548
- - --------------------------------------------------------------------------------
State of organization I.R.S. employer I.D.#
9697 East Mineral Avenue, P.O. Box 3309, Englewood, Colorado 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
----- -----
<PAGE> 2
IDS/JONES GROWTH PARTNERS II, L.P.
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1995 1994
------ ------------- ------------
<S> <C> <C>
CASH $ 100,930 $ 57,284
RECEIVABLES:
Trade receivables, less allowance for doubtful receivables of
$47,493 and $50,993 at March 31, 1995 and December 31, 1994 324,647 403,428
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 35,142,146 34,508,868
Less - accumulated depreciation (15,233,200) (14,180,482)
------------- -----------
19,908,946 20,328,386
Franchise costs, net of accumulated amortization of $32,675,616
and $31,231,579 at March 31, 1995 and December 31, 1994, respectively 25,891,505 27,335,542
Subscriber lists, net of accumulated amortization of $5,221,183 and $4,951,136
at March 31, 1995 and December 31, 1994, respectively 2,398,320 2,668,367
Costs in excess of interests in net assets purchased, net of accumulated
amortization of $905,304 and $859,836 at March 31, 1995 and
December 31, 1994, respectively 6,606,067 6,651,535
------------- ------------
Total investment in cable television properties 54,804,838 56,983,830
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 428,715 307,504
------------- ------------
Total assets $ 55,659,130 $ 57,752,046
============= ============
</TABLE>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated balance sheets.
2
<PAGE> 3
IDS/JONES GROWTH PARTNERS II, L.P.
(Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1995 1994
------------------------------------------- ------------ -------------
<S> <C> <C>
LIABILITIES:
Debt $ 45,048,736 $ 43,566,064
Accounts payable - Managing General Partner - 933,949
Accrued liabilities 1,255,612 1,195,393
Subscriber prepayments 63,407 54,863
------------ -------------
Total liabilities 46,367,755 45,750,269
------------ -------------
MINORITY INTEREST IN JOINT VENTURE 3,108,307 4,040,685
------------ -------------
PARTNERS' CAPITAL (DEFICIT):
General Partners-
Contributed capital 500 500
Accumulated deficit (314,101) (296,321)
------------ -------------
(313,601) (295,821)
------------ -------------
Limited Partners-
Net contributed capital (174,343 units outstanding at
March 31, 1995 and December 31, 1994) 37,256,546 37,256,546
Accumulated deficit (30,759,877) (28,999,633)
------------ -------------
6,496,669 8,256,913
------------ -------------
Total liabilities and partners' capital (deficit) $ 55,659,130 $ 57,752,046
============ =============
</TABLE>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated balance sheets.
3
<PAGE> 4
IDS/JONES GROWTH PARTNERS II, L.P.
(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
----------------------------------
1995 1994
-------------- -------------
<S> <C> <C>
REVENUES $ 4,016,495 $ 3,768,333
COSTS AND EXPENSES:
Operating expenses 2,345,384 2,163,815
Management fees and allocated overhead from General Partners 537,441 499,965
Depreciation and amortization 2,820,010 2,701,871
-------------- -------------
OPERATING LOSS (1,686,340) (1,597,318)
-------------- -------------
OTHER INCOME (EXPENSE):
Interest expense (1,020,491) (556,571)
Other, net (3,571) (44,324)
-------------- -------------
Total other income (expense), net (1,024,062) (600,895)
-------------- -------------
CONSOLIDATED LOSS (2,710,402) (2,198,213)
MINORITY INTEREST IN CONSOLIDATED LOSS 932,378 756,186
-------------- -------------
NET LOSS $ (1,778,024) $ (1,442,027)
============== ============
ALLOCATION OF NET LOSS:
General Partners $ (17,780) $ (14,420)
============== ============
Limited Partners $ (1,760,244) $ (1,427,607)
============== ============
NET LOSS PER LIMITED PARTNERSHIP UNIT $ (10.10) $ (8.19)
============== ============
WEIGHTED AVERAGE NUMBER OF LIMITED PARTNERSHIP
UNITS OUTSTANDING 174,343 174,343
============== =============
</TABLE>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated statements.
4
<PAGE> 5
IDS/JONES GROWTH PARTNERS II, L.P.
(A Limited Partnership)
UNAUDITED CONSOLIDATED 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 $(1,778,024) $(1,442,027)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 2,812,270 2,701,871
Amortization of capitalized loan fees 7,740 -
Minority interest in consolidated loss (932,378) (756,186)
Amortization of interest rate protection contract 13,125 -
Decrease in trade receivables 78,781 73,887
Decrease (increase) in deposits, prepaid expenses and other assets (37,076) 30,850
Increase (decrease) in accrued liabilities
and subscriber prepayments 68,763 (203,436)
Decrease in advances from Managing General Partner (933,949) (1,056,828)
------------ -----------
Net cash used in operating activities (700,748) (651,869)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (633,278) (433,170)
------------ -----------
Net cash used in investing activities (633,278) (433,170)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 1,500,000 2,406,647
Repayment of borrowings (17,328) (1,010,694)
Purchase of interest rate protection contract (105,000) -
------------ -----------
Net cash provided by financing activities 1,377,672 1,395,953
------------ -----------
Increase in cash 43,646 310,914
Cash, beginning of period 57,284 81,997
------------ ------------
Cash, end of period $ 100,930 $ 392,911
============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 177,122 $ 550,080
============ ============
</TABLE>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited onsolidated statements.
5
<PAGE> 6
IDS/JONES GROWTH PARTNERS II, L.P.
(A Limited Partnership)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) This Form 10-Q is being filed in conformity with the SEC requirements
for unaudited financial statements and does not contain all of the necessary
footnote disclosures required for a fair presentation of the Balance Sheets and
Statements of Operations and Cash Flows in conformity with generally accepted
accounting principles. However, in the opinion of management, this data
includes all adjustments, consisting only of normal recurring accruals,
necessary to present fairly the financial position of IDS/Jones Growth Partners
II (the "Partnership") at March 31, 1995 and December 31, 1994 and its
Statements of Operations and Cash Flows for the three month periods ended March
31, 1995 and 1994. Results of operations for this period are not necessarily
indicative of results to be expected for the full year.
The accompanying financial statements include 100 percent of the
accounts of the Partnership and those of IDS/Jones Joint Venture Partners (the
"Venture"), including the cable television systems serving the areas in and
around Aurora, Illinois, reduced by the minority interest in the Venture. All
interpartnership accounts and transactions have been eliminated.
(2) Jones Cable Corporation ("the Managing General Partner") manages the
Partnership and the Venture and receives a fee for its services equal to 5
percent of the gross revenues of the Venture, excluding revenues from the sale
of cable television systems or franchises. Management fees paid to the
Managing General Partner for the three month periods ended March 31, 1995 and
1994 were $200,825 and $188,417, respectively.
IDS Cable II Corporation ("the Supervising General Partner") and IDS
Cable Corporation (the supervising general partner of IDS/Jones Growth Partners
89-B) participate in certain management decisions of the Venture and receive a
fee for their services equal to one-half percent of the gross revenues of the
Venture, excluding revenues from the sale of cable television systems or
franchises. Supervision fees for the three month periods ended March 31, 1995
and 1994 were $20,082 and $18,842, respectively.
The Venture reimburses Jones Intercable, Inc.("JIC"), the parent of
the Managing General Partner, for certain allocated overhead and administrative
expenses. These expenses represent the salaries and related benefits paid for
corporate personnel, rent, data processing services and other corporate
facilities costs. Such personnel provide engineering, marketing,
administrative, accounting, legal and investor relations services to the
Venture. Allocations of personnel costs are based primarily on actual time
spent by employees of JIC with respect to each partnership managed. Remaining
overhead costs are allocated based on revenues of the Partnership as a
percentage of total revenues of owned and managed partnerships of JIC. Systems
owned by JIC and all other systems owned by partnerships for which JIC or
affiliates of the general partners are also allocated a proportionate share of
these expenses. JIC believes that the methodology used in allocating overhead
and administrative expenses is reasonable. Reimbursements to JIC for allocated
overhead and administrative expenses during the three month periods ended March
31, 1995 and 1994 were $316,534 and $292,706, respectively. The Supervising
General Partner may also be reimbursed for certain expenses incurred on behalf
of the Partnership. There were no reimbursements made to the Supervising
General Partner for allocated overhead and administrative expenses during the
three month periods ended March 31, 1995 and 1994.
6
<PAGE> 7
IDS/JONES GROWTH PARTNERS II, L.P.
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Partnership owns an approximate 66 percent interest in IDS/Jones
Joint Venture Partners (the "Venture"). The accompanying financial statements
include the accounts of the Partnership and the Venture, reduced by the
approximate 34 percent minority interest in the Venture. The Venture owns the
cable television system serving certain areas in and around Aurora, Illinois.
During the first three months of 1995, the Venture expended
approximately $633,000 on capital expenditures. Approximately 42 percent of
the expenditures related to construction of service drops to subscriber homes.
Approximately 29 percent of the expenditures related to plant extensions. The
remainder of the expenditures were used for various enhancements in the Aurora
System. Funding for these expenditures was provided by borrowings from the
Venture's credit facility and cash generated from operations. Anticipated
capital expenditures for the remainder of 1995 are approximately $2,622,000.
Approximately 62 percent of the anticipated capital expenditures are for plant
extensions. Approximately 28 percent of the expenditures are for construction
of service drops to subscriber homes. Funding for the expenditures is expected
to be provided by cash on hand, cash generated from operations and borrowings
under a renegotiated credit facility, as discussed below.
On December 5, 1991, Jones Intercable, Inc. ("JIC") made an equity
investment in the Venture in the amount of $2,872,000 and a loan of $1,800,000
to the Venture. On that date, IDS Management Corporation also made an equity
investment of $2,872,000 in the Venture and a loan to the Venture in the amount
of $1,800,000. A portion of the $1,800,000 loan from IDS Management
Corporation was repaid in November 1994. See discussion below. The loans from
JIC and IDS Management Corporation are subordinate to the Venture's new
revolving credit and term loan. These loans matured in the fourth quarter of
1994. IDS Management Corporation extended its loan until December 5, 1995 and,
although JIC has not formally extended its loan, it has not demanded repayment.
In the first quarter of 1994, JIC agreed to subordinate to all other Venture
debt the $1,406,647 advance to the Venture outstanding at March 30, 1994 and
IDS Management Corporation made an additional loan of $1,000,000 to the Venture
to fund principal repayments due on the Venture's then-outstanding term loan.
In the second quarter of 1994, JIC made a loan of $1,000,000 to the Venture to
fund principal repayments due on the Venture's then-outstanding term loan.
This loan was repaid with interest in November 1994. 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 JIC'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 new revolving credit and term loan, as discussed below. If
the December 5, 1991 loans are not repaid, JIC and IDS Management Corporation
will have the right, among other rights, to convert these loans to equity in
the Venture.
In November 1994, the Venture entered into a new revolving credit and
term loan agreement with a commercial bank. The new credit facility had a
maximum amount available of $40,000,000 through March 31, 1995, at which time
the maximum amount available increased to $45,000,000. At March 31, 1995,
$39,300,000 was outstanding under this agreement. Borrowings from this new
credit facility were used to repay the balance of the Venture's previous term
loan of $36,000,000, to repay to JIC the $1,000,000 advanced by JIC to fund the
Venture's second quarter debt repayment plus interest, to repay to IDS
Management Corporation $880,000 of 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. The revolving credit period expires December 31, 1996,
at which time the then-outstanding balance converts to a term loan payable in
28 consecutive quarterly installments. Interest on the new credit facility is
at the Venture's option of the Base Rate plus .75 percent, the London Interbank
Offered Rate ("LIBOR") plus 1.75 percent or the Certificate of Deposit Rate
plus 1.875 percent. The effective interest rates on outstanding obligations to
third parties as of March 31, 1995 and 1994 were 7.84 percent and 4.65 percent,
respectively. The Venture anticipates repaying the remaining notes outstanding
to related parties with borrowings from this new credit facility. As
borrowings
7
<PAGE> 8
become available, subject to leverage covenants, the related parties' notes
will be repaid including accrued interest in the following order: first, to
IDS Management Corporation the remaining $920,000 of the $1,800,000 note dated
December 5, 1991; second, to JIC the $1,800,000 note dated December 5, 1991;
third, to IDS Management Corporation the $1,000,000 note dated March 30, 1994;
and fourth, to JIC the $1,406,647 outstanding advance.
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.
As a result of their equity contributions to the Venture, IDS
Management Corporation and JIC each have an approximate 5 percent equity
interest in the Venture, the Partnership has an approximate 66 percent interest
and IDS/Jones 89-B has an approximate 24 percent interest. If the December 5,
1991 subordinated loans are converted to equity, the ownership percentages will
be adjusted accordingly.
Regulation and Legislatio
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 Aurora System, are subject to rate regulation of basic cable
services. In addition, the 1992 Cable Act allows the FCC to regulate rates for
non-basic service tiers other than premium services in response to complaints
filed by franchising authorities and/or cable subscribers. In April 1993, the
FCC adopted regulations governing rates for basic and non-basic services. The
FCC's rules became effective on September 1, 1993. In compliance with these
rules, the Venture reduced rates charged for certain regulated services
effective September 1, 1993.
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 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 Venture has filed a cost-of-service showing for its Aurora 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 Venture's cost-of-service
showing will prevent further rate reductions in that system until such final
approval is received.
RESULTS OF OPERATIONS
Revenues of the Venture's Aurora System increased $248,162, or
approximately 7 percent, from $3,768,333 for the first quarter of 1994 to
$4,016,495 for the comparable 1995 period. An increase in the subscriber base
primarily accounted for the increase in revenues. The number of basic
subscribers increased 3,171, or approximately 8 percent, from 38,496 at March
31, 1994 to 41,667 at March 31, 1995. Premium service subscriptions increased
2,388, or approximately 9 percent, from 25,650 at March 31, 1994 to 28,038 at
March 31, 1995. No other individual factor was significant to the increases in
revenues.
Operating expenses consist primarily of costs associated with the
administration of the Venture'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.
8
<PAGE> 9
Operating expenses increased $181,569, or approximately 8 percent,
from $2,163,815 for the first quarter of 1994 to $2,345,384 for the comparable
1995 period. Operating expense represented 57 percent of revenues in 1994 and
58 percent of revenues in 1995. Increases in programming fees and personnel
related expenses, due in part to the increase in the subscriber base, primarily
accounted for the increase in operating expenses. No other individual factors
contributed significantly to the increase. Management fees and allocated
overhead from the General Partners increased $37,476, or approximately 8
percent, from $499,965 for the first three months of 1994 to $537,441 for the
comparable 1995 period due to an increase in allocated expenses from the
Managing General Partner and the increase in revenues, upon which management
and supervision fees and allocated overhead are based. The Managing General
Partner has experienced increases in expenses, including personnel costs, a
portion of which are allocated to the Venture. Depreciation and amortization
expense increased $118,139, or approximately 4 percent, from $2,701,871 at
March 31, 1994 to $2,820,010 at March 31, 1995 primarily due to capital
additions in 1994.
Operating loss increased $89,022, or approximately 6 percent, from
$1,597,318 for the first three months of 1994 to $1,686,340 for the comparable
1995 period due to the increases in operating expenses, management fees and
allocated overhead from the General Partners and depreciation and amortization
expense exceeding the increase in revenues. Operating income before
depreciation and amortization increased $29,117, or approximately 2 percent,
from $1,104,553 for the three months ended March 31, 1994 to $1,133,670 for the
similar period in 1995. This increase was due to the increase in revenues
exceeding the increases in operating expenses and management fees and allocated
overhead from the General Partners.
Interest expense increased $463,920, or approximately 83 percent, from
$556,571 for the first quarter of 1994 to $1,020,491 for the comparable 1995
period. This increase was due to higher effective interest rates and higher
outstanding balances on interest bearing obligations. Consolidated loss
increased $512,189, or approximately 23 percent, from $2,198,213 for the first
quarter of 1994 to $2,710,402 for the comparable 1995 period due to the factors
discussed above. Such losses are expected to continue in the future.
9
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
27) Financial Data Schedule
b) Reports on Form 8-K
None
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.
IDS/JONES GROWTH PARTNERS II, L.P.
BY: JONES CABLE CORPORATION
its Managing General Partner
By: /s/ Kevin P. Coyle
Kevin P. Coyle
Group Vice President/Finance
(Principal Financial Officer)
Dated: 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> 100,930
<SECURITIES> 0
<RECEIVABLES> 324,647
<ALLOWANCES> (47,493)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 35,142,146
<DEPRECIATION> (15,233,200)
<TOTAL-ASSETS> 55,659,130
<CURRENT-LIABILITIES> 1,319,019
<BONDS> 45,048,736
<COMMON> 0
0
0
<OTHER-SE> 9,291,375
<TOTAL-LIABILITY-AND-EQUITY> 55,659,130
<SALES> 0
<TOTAL-REVENUES> 4,016,495
<CGS> 0
<TOTAL-COSTS> 5,702,835
<OTHER-EXPENSES> (928,807)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,020,491
<INCOME-PRETAX> (1,778,024)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,778,024)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,778,024)
<EPS-PRIMARY> (10.10)
<EPS-DILUTED> (10.10)
</TABLE>
