<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1996.
------------------
[ ] 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 (l) has filed all reports required
to be filed by Section l3 or l5(d) of the Securities Exchange Act of l934 during
the preceding l2 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
<PAGE>
IDS/JONES GROWTH PARTNERS II, L. P.
-----------------------------------
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1996 1995
------- -------------- -------------
<S> <C> <C>
CASH $ 100,794 $ 6,803
TRADE RECEIVABLES, less allowance for doubtful receivables
of $144,041 and $49,993 at September 30, 1996 and December 31,
1995, respectively 452,660 463,098
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 41,645,276 38,380,661
Less - accumulated depreciation (19,870,952) (17,672,119)
------------ ------------
21,774,324 20,708,542
Franchise costs and other intangible assets, net of accumulated
amortization of $48,913,405 and $43,830,221 at September 30, 1996
and December 31, 1995, respectively 24,784,590 29,867,774
------------ ------------
Total investment in cable television properties 46,558,914 50,576,316
DEPOSITS, PREPAID EXPENSES AND DEFERRED CHARGES 329,664 402,697
------------ ------------
Total assets $ 47,442,032 $ 51,448,914
============ ============
</TABLE>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated balance sheets.
2
<PAGE>
IDS/JONES GROWTH PARTNERS II, L. P.
-----------------------------------
(A Limited Partnership)
UNAUDITED CONSOLIDATED BALANCE SHEETS
-------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1996 1995
------------------------------------------- ---------------- -----------------
LIABILITIES:
<S> <C> <C>
Debt $ 45,603,496 $ 45,909,122
Accounts payable - Managing General Partner 346,451 331,185
Accrued liabilities 4,713,467 2,315,455
Subscriber prepayments 63,624 62,574
------------ ------------
Total liabilities 50,727,038 48,618,336
------------ ------------
MINORITY INTEREST IN JOINT VENTURE (1,217,969) 885,792
------------ ------------
PARTNERS' CAPITAL (DEFICIT):
General Partners-
Contributed capital 500 500
Accumulated deficit (396,602) (356,484)
------------ ------------
(396,102) (355,984)
------------ ------------
Limited Partners-
Net contributed capital (174,343 units outstanding
at September 30, 1996 and December 31, 1995) 37,256,546 37,256,546
Accumulated deficit (38,927,481) (34,955,776)
------------ ------------
(1,670,935) 2,300,770
------------ ------------
Total liabilities and partners' capital (deficit) $ 47,442,032 $ 51,448,914
============ ============
</TABLE>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated balance sheets.
3
<PAGE>
IDS/JONES GROWTH PARTNERS II, L. P.
-----------------------------------
(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
---------------------------- ---------------------------
1996 1995 1996 1995
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
REVENUES $ 4,600,144 $ 4,247,004 $13,642,183 $12,548,419
COSTS AND EXPENSES:
Operating expenses 2,678,295 2,453,694 7,933,866 7,334,738
Management fees and allocated
overhead from General Partners 529,174 526,279 1,621,631 1,577,888
Depreciation and amortization 2,457,184 2,466,310 7,345,404 7,872,219
----------- ----------- ----------- -----------
OPERATING LOSS (1,064,509) (1,199,279) (3,258,718) (4,236,426)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (952,771) (908,219) (2,782,025) (2,802,227)
Other, net (60,257) 34,197 (74,841) (5,106)
----------- ----------- ----------- -----------
Total other income (expense), net (1,013,028) (874,022) (2,856,866) (2,807,333)
----------- ----------- ----------- -----------
CONSOLIDATED LOSS (2,077,537) (2,073,301) (6,115,584) (7,043,759)
MINORITY INTEREST IN
CONSOLIDATED LOSS 714,673 713,215 2,103,761 2,423,053
----------- ----------- ----------- -----------
NET LOSS $(1,362,864) $(1,360,086) $(4,011,823) $(4,620,706)
=========== =========== =========== ===========
ALLOCATION OF NET LOSS:
General Partners $ (13,628) $ (13,601) $ (40,118) $ (46,207)
=========== =========== =========== ===========
Limited Partners $(1,349,236) $(1,346,485) $(3,971,705) $(4,574,499)
=========== =========== =========== ===========
NET LOSS PER LIMITED
PARTNERSHIP UNIT $(7.74) $(7.72) $(22.78) $(26.24)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
LIMITED PARTNERSHIP UNITS
OUTSTANDING 174,343 174,343 174,343 174,343
=========== =========== =========== ===========
</TABLE>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated statements.
4
<PAGE>
IDS/JONES GROWTH PARTNERS II, L. P.
-----------------------------------
(A Limited Partnership)
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
---------------------------
1996 1995
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(4,011,823) $(4,620,706)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 7,345,404 7,872,219
Minority interest in consolidated loss (2,103,761) (2,423,053)
Amortization of interest rate protection contract 39,375 39,375
Decrease in trade receivables 10,438 15,258
Increase in deposits, prepaid expenses and
deferred charges (29,729) (46,658)
Increase in accrued liabilities and subscriber
prepayments 2,399,062 579,406
Increase (decrease) in advances from
Managing General Partner 15,266 (933,949)
----------- -----------
Net cash provided by operating activities 3,664,232 481,892
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (3,264,615) (2,667,566)
----------- -----------
Net cash used in investing activities (3,264,615) (2,667,566)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 2,729,712 3,000,000
Repayment of debt (3,035,338) (662,258)
Purchase of interest rate protection contract - (105,000)
----------- -----------
Net cash provided by (used in) financing activities (305,626) 2,232,742
----------- -----------
Increase in cash 93,991 47,068
Cash, beginning of period 6,803 57,284
----------- -----------
Cash, end of period $ 100,794 $ 104,352
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 2,460,629 $ 2,161,139
=========== ===========
</TABLE>
The accompanying notes to unaudited consolidated financial statements
are an integral part of these unaudited consolidated statements.
5
<PAGE>
IDS/JONES GROWTH PARTNERS II, L. P.
-----------------------------------
(A Limited Partnership)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(1) This Form 10-Q is being filed in conformity with the SEC requirements for
unaudited financial statements and does not contain all of the necessary
footnote disclosures required for a fair presentation of the Balance Sheets and
Statements of Operations and Cash Flows in conformity with generally accepted
accounting principles. However, in the opinion of management, this data includes
all adjustments, consisting only of normal recurring accruals, necessary to
present fairly the financial position of IDS/Jones Growth Partners II, L.P. (the
"Partnership") at September 30, 1996 and December 31, 1995, its Statements of
Operations for the three and nine month periods ended September 30, 1996 and
1995 and its Statements of Cash Flows for the nine month periods ended September
30, 1996 and 1995. Results of operations for these periods are not necessarily
indicative of results to be expected for the full year.
The accompanying financial statements include 100 percent of the accounts
of the Partnership and those of IDS/Jones Joint Venture Partners (the "Venture")
including the cable television systems serving the areas in and around Aurora,
Illinois, reduced by the minority 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 and nine month periods ended September 30, 1996
were $230,007 and $682,109, respectively, compared to $212,350 and $627,421,
respectively, for the three and nine month periods ended September 30, 1995.
IDS Cable II Corporation (the "Supervising General Partner") and IDS Cable
Corporation (the supervising general partner of IDS/Jones Growth Partners 89-B,
Ltd.) participate 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 for the three and nine month periods ended
September 30, 1996 were $23,001 and $68,211, respectively, compared to $21,235
and $62,742, respectively, for the three and nine month periods ended September
30, 1995.
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
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 JIC and
certain of its affiliates. 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 and nine month periods ended September 30, 1996 were
$276,166 and $871,311, respectively, compared to $292,694 and $887,725,
respectively, for the three and nine month periods ended September 30, 1995.
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 and nine month periods ended September 30, 1996 and 1995.
(3) Certain prior year amounts have been reclassified to conform to the 1996
presentation.
6
<PAGE>
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 a 66 percent interest in the Venture. The Venture
owns the cable television system serving certain areas in and around Aurora,
Illinois (the "Aurora System"). The accompanying financial statements include
the accounts of the Partnership and the Venture, reduced by the 34 percent
minority interest in the Venture. The Partnership's share of losses generated by
the Venture has exceeded the Partnership's initial investment in the Venture;
therefore, the Partnership's minority interest in the Venture has a negative
balance.
It is JIC's publicly announced policy that it intends to liquidate its
managed limited partnerships, including the Partnership, as opportunities for
sales of partnership cable television systems arise in the marketplace over the
next several years. In accordance with JIC's policy, the Aurora System, along
with other Chicago-area systems owned or managed by JIC and its affiliates, was
recently marketed for sale. The deadline set by JIC for receipt of indications
of interest for the Aurora System from prospective buyers was October 15, 1996.
JIC did not receive any offer for the Aurora System. The Managing General
Partner will continue to explore other alternatives for sale; however, no
specific plans have yet been determined. There is no assurance as to the timing
or terms of any sale.
For the nine months ended September 30, 1996, the Venture generated net
cash from operating activities totaling $3,664,232, which is available to fund
capital expenditures and non-operating costs. During the first nine months of
1996, the Venture expended approximately $3,265,000 on capital expenditures.
Approximately 46 percent of the expenditures related to plant extensions.
Approximately 38 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 generated from operations. Anticipated capital expenditures
for the remainder of 1996 are approximately $870,000. Approximately 72 percent
of the anticipated expenditures are for construction of service drops to
subscriber homes. These capital expenditures are necessary to maintain the
value of the Venture's Aurora System. Funding for the expenditures is expected
to be provided by cash on hand, cash generated from operations and, if
necessary, borrowings from the Venture's credit facility.
On December 5, 1991, JIC made an equity investment in the Venture in the
amount of $2,872,000 and a loan of $1,800,000 to the Venture. On that date, IDS
Management Corporation also made an equity investment of $2,872,000 in the
Venture and a loan to the Venture in the amount of $1,800,000. Of the
$1,800,000 loan from IDS Management Corporation, $1,000,000 has been repaid.
The loans from JIC and IDS Management Corporation are subordinate to the
Venture's revolving credit and term loan. These loans have matured. Although
IDS Management Corporation and JIC have not formally extended their loans, they
have not demanded repayment. In the first quarter of 1994, JIC 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. 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 revolving credit and term loan, as discussed below. If the
December 5, 1991 loans are not repaid, JIC 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.
The Venture is a party to a revolving credit and term loan agreement with
two commercial banks. This credit facility has a maximum amount available of
$45,000,000. At September 30, 1996, $40,500,000 was outstanding under this
agreement, leaving $4,500,000 available for future needs of the Venture, subject
to certain financial covenants. 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; however, the General Partner intends to amend the credit facility
to extend the revolving period for an additional year. Interest on the credit
facility is at the Venture's option of the Prime Rate plus .75 percent, the
London Interbank Offered Rate plus 1.75 percent or the Certificate of Deposit
Rate plus 1.875 percent. The effective interest rates on outstanding
obligations to non-affiliates as of
7
<PAGE>
September 30, 1996 and 1995 were 7.59 percent and 7.73 percent, respectively.
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 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 subordinated advance.
As a result of their equity contributions to the Venture, IDS Management
Corporation and JIC each have a 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 the December 5, 1991 subordinated loans are
converted to equity, the ownership percentages will be adjusted accordingly.
RESULTS OF OPERATIONS
- ---------------------
Revenues of the Venture's Aurora System increased $353,140, or
approximately 8 percent, to $4,600,144 for the three month period ended
September 30, 1996 compared to $4,247,004 for the comparable 1995 period.
Revenues increased $1,093,764, or approximately 9 percent, to $13,642,183 for
the nine months ended September 30, 1996 compared to $12,548,419 for the
comparable 1995 period. An increase in basic service revenues primarily
accounted for the increases in revenues for the three and nine month periods
ended September 30, 1996. Increases in the number of basic service subscribers
accounted for approximately 54 percent and 53 percent, respectively, of the
increases in basic service revenues for the three and nine month periods. Basic
service rate adjustments accounted for approximately 46 percent and 47 percent,
respectively, of the increase in basic service revenues for the three and nine
month periods. The number of basic service subscribers increased 2,918, or
approximately 7 percent, to 45,889 at September 30, 1996 compared to 42,971 at
September 30, 1995. No other individual factor was significant to the increases
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 increased $224,601, or approximately 9 percent, to
$2,678,295 for the three month period ended September 30, 1996 compared to
$2,453,694 for the comparable 1995 period. Operating expenses increased
$599,128, or approximately 8 percent, to $7,933,866 for the nine months ended
September 30, 1996 compared to $7,334,738 for the comparable 1995 period.
Operating expenses represented approximately 58 percent of revenues for the
three and nine month periods ended September 30, 1996 and 1995. Increases in
programming fees, due in part to the increase in the subscriber base, primarily
accounted for the increase in operating expenses for the three and nine month
periods. No other individual factors contributed significantly to the increase.
Management fees and supervision fees and allocated overhead from the
General Partners increased $2,895, or less than 1 percent, to $529,174 for the
three month period ended September 30, 1996 compared to $526,279 for the
comparable 1995 period. Management fees and supervision fees and allocated
overhead from the General Partners increased $43,743, or approximately 3
percent, to $1,621,631 for the nine months ended September 30, 1996 compared to
$1,577,888 for the comparable 1995 period. The increases for the three and nine
month periods were due to the increases in management fees and supervision fees,
which increases were due to the increases in revenues, upon which management
fees and supervision fees are based.
Depreciation and amortization expense decreased $9,126, or less than 1
percent, to $2,457,184 for the three month period ended September 30, 1996
compared to $2,466,310 for the comparable 1995 period. Depreciation and
amortization expense decreased $526,815, or approximately 7 percent, to
$7,345,404 for the nine months ended September 30, 1996 compared to $7,872,219
for the comparable 1995 period. These decreases were due to the maturation of a
portion of the tangible asset base.
Operating loss decreased $134,770, or approximately 11 percent, to
$1,064,509 for the three month period ended September 30, 1996 compared to
$1,199,279 for the similar 1995 period. Operating loss decreased $977,708, or
approximately 23 percent, to $3,258,718 for the nine months ended September 30,
1996 compared to $4,236,426 in 1995. The decreases for the three and nine month
periods were due to the increases in revenues and the decreases in depreciation
and amortization expense exceeding the increases in operating expenses and
management fees and allocated overhead from the General Partners.
8
<PAGE>
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 expense increased $125,644, or
approximately 10 percent, to $1,392,675 for the three month period ended
September 30, 1996 compared to $1,267,031 for the comparable 1995 period.
Operating income before depreciation and amortization expense increased
$450,893, or approximately 12 percent, to $4,086,686 for the nine months ended
September 30, 1996 compared to $3,635,793 for the comparable 1995 period. The
increases for the three and nine month periods were due to the increases in
revenues exceeding the increases in operating expenses and management fees and
allocated overhead from the General Partners.
Interest expense increased $44,552, or approximately 5 percent, to $952,771
for the three month period ended September 30, 1996 compared to $908,219 for the
comparable 1995 period. This increase was due to higher outstanding balances on
interest bearing obligations. Interest expense decreased $20,202, or less than
1 percent, to $2,782,025 for the nine months ended September 30, 1996 compared
to $2,802,227 for the comparable 1995 period. This decrease was due to lower
effective interest rates.
Consolidated loss decreased $4,236, or less than 1 percent, to $2,077,537
for the three month period ended September 30, 1996 compared to $2,073,301 for
the comparable 1995 period. Consolidated loss decreased $928,175, or
approximately 13 percent, to $6,115,584 for the nine months ended September 30,
1996 compared to $7,043,759 for the comparable 1995 period. These decreases
were due to the factors discussed above. Such losses are expected to continue.
9
<PAGE>
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>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IDS/JONES GROWTH PARTNERS II, L.P.
BY: JONES CABLE CORPORATION
its Managing General Partner
By: /S/ Kevin P. Coyle
--------------------------------
Kevin P. Coyle
Group Vice President/Finance
(Principal Financial Officer)
Dated: November 13, 1996
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 100,794
<SECURITIES> 0
<RECEIVABLES> 452,660
<ALLOWANCES> (144,041)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 41,645,276
<DEPRECIATION> (19,870,952)
<TOTAL-ASSETS> 47,442,032
<CURRENT-LIABILITIES> 5,123,542
<BONDS> 45,603,496
0
0
<COMMON> 0
<OTHER-SE> (3,285,006)
<TOTAL-LIABILITY-AND-EQUITY> 47,442,032
<SALES> 0
<TOTAL-REVENUES> 13,642,183
<CGS> 0
<TOTAL-COSTS> 16,900,901
<OTHER-EXPENSES> 74,841
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,782,025
<INCOME-PRETAX> (4,011,823)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,011,823)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,011,823)
<EPS-PRIMARY> (22.78)
<EPS-DILUTED> (22.78)
</TABLE>
