<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: 0-19259
JONES GROWTH PARTNERS II L.P.
- - --------------------------------------------------------------------------------
Exact name of registrant as specified in charter
Colorado #84-1126141
- - --------------------------------------------------------------------------------
State of organization I.R.S. employer I.D.#
9697 East Mineral Avenue, P.O. Box 3309, Englewood, Colorado 80155-3309
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Address of principal executive office
(303) 792-9191
-----------------------------
Registrant's telephone number
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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JONES GROWTH PARTNERS II L.P.
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1995 1994
------ ------------- ------------
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 56,896 $ 61,131
TRADE RECEIVABLE, less allowance
for doubtful receivables of $14,103 and $4,291 at
March 31, 1995 and December 31, 1994, respectively 339,699 338,891
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 14,671,134 14,011,386
Less- accumulated depreciation (3,539,570) (3,158,613)
------------- ------------
11,131,564 10,852,773
Franchise costs, net of accumulated amortization
of $3,048,816 and $2,791,240 at March 31, 1995
and December 31, 1994, respectively 7,254,184 7,511,760
Subscriber lists, net of accumulated amortization of
$1,626,661 and $1,489,195 at March 31, 1995 and
December 31, 1994, respectively 2,222,339 2,359,804
Noncompete agreement, net of accumulated amortization
of $1,295,415 and $1,185,944 at March 31, 1995 and
December 31, 1994, respectively 638,585 748,056
Costs in excess of interests in net assets purchased, net
of accumulated amortization of $133,365 and $122,089
at March 31, 1995 and December 31, 1994, respectively 1,668,524 1,679,800
------------- ------------
Total investment in cable television properties 22,915,196 23,152,193
DEBT PLACEMENT COSTS, net of accumulated
amortization of $110,559 and $101,216 at
March 31, 1995 and December 31, 1994,
respectively 172,846 182,189
DEPOSITS, PREPAID EXPENSES AND OTHER 146,045 230,433
------------- ------------
Total assets $ 23,630,682 $ 23,964,837
============= ============
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
2
<PAGE> 3
JONES GROWTH PARTNERS II L.P.
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1995 1994
------------------------------------------- ----------- ------------
<S> <C> <C>
LIABILITIES:
Credit facility and other debt $11,540,332 $11,247,350
Accounts payable to Jones Intercable, Inc. 266,281 71,270
Trade accounts payable and accrued liabilities 460,993 622,661
Subscriber prepayments and deposits 325,723 324,185
----------- -----------
Total liabilities 12,593,329 12,265,466
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (60,433) (53,813)
----------- -----------
(59,433) (52,813)
----------- -----------
Limited Partners-
Contributed capital, net of related
commissions, syndication costs and
interest distribution (19,785 units
outstanding at March 31, 1995 and
December 31, 1994) 16,746,882 16,746,882
Accumulated deficit (5,650,096) (4,994,698)
----------- -----------
11,096,786 11,752,184
----------- -----------
Total partners' capital (deficit) 11,037,353 11,699,371
----------- -----------
Total liabilities and partners' capital (deficit) $23,630,682 $23,964,837
=========== ===========
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
3
<PAGE> 4
JONES GROWTH PARTNERS II L.P.
(A Limited Partnership)
UNAUDITED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
-----------------------------------
1995 1994
----------- -----------
<S> <C> <C>
REVENUES $ 1,617,699 $ 1,546,822
COSTS AND EXPENSES:
Operating expenses 970,844 868,850
Management fees and allocated administrative
costs from General Partner 202,322 197,889
Depreciation and amortization 907,324 856,989
----------- -----------
OPERATING LOSS (462,791) (376,906)
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (199,493) (144,644)
Other, net (266) 1,691
----------- -----------
NET LOSS $ (662,018) $ (519,859)
=========== ===========
ALLOCATION OF NET LOSS
General Partner $ (6,620) $ (5,199)
=========== ===========
Limited Partners $ (655,398) $ (514,660)
=========== ===========
NET LOSS PER LIMITED
PARTNERSHIP UNIT $ (33.13) $ (26.01)
=========== ===========
WEIGHTED AVERAGE NUMBER OF LIMITED
PARTNERSHIP UNITS OUTSTANDING $ 19,785 19,785
=========== ===========
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
4
<PAGE> 5
JONES GROWTH PARTNERS II 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 $ (662,018) $ (519,859)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 907,324 856,989
Amortization of interest rate protection contract 5,658 5,658
Decrease (increase) in trade receivables 49,192 (16,764)
Increase in deposits, prepaid expenses and
other 27,494 69,533
Decrease in trade accounts payable,
accrued liabilities and subscriber
prepayments and deposits (160,130) (144,272)
Increase in advances from
General Partner 195,011 52,132
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Net cash provided by operating activities 362,531 303,417
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment (659,748) (215,161)
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Net cash used in investing activities (659,748) (215,161)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 300,000 -
Repayment of borrowings (7,018) (123,024)
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Net cash provided by (used in) financing activities 292,982 (123,024)
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DECREASE IN CASH (4,235) (34,768)
CASH, AT BEGINNING OF PERIOD 61,131 757,270
---------- ----------
CASH, AT END OF PERIOD $ 56,896 $ 722,502
========== ==========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 289,982 $ 156,398
========== ==========
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
5
<PAGE> 6
JONES GROWTH PARTNERS II L.P.
(A Limited Partnership)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(1) This Form 10-Q is being filed in conformity with the 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 II L.P. (the "Partnership") at March 31, 1995 and December 31,
1994, and its results of operations and changes in its 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 and operates the cable television system serving
the areas in and around the communities of Yorba Linda, certain portions of
Anaheim Hills, and certain portions of unincorporated Orange County, all in the
state of California (the "Yorba Linda System").
(2) The Partnership was formed pursuant to a public offering of limited
partnership interests sponsored by Jones Spacelink Cable Corporation (the
"General Partner"). The General Partner was a wholly owned subsidiary of Jones
Spacelink, Ltd. ("Spacelink") until December 20, 1994. On that date, Jones
Intercable, Inc. ("Intercable"), a Colorado corporation that also was a
subsidiary of Spacelink, acquired substantially all of the assets of Spacelink
including all of the shares of the General Partner. The General Partner is
thus now a wholly owned subsidiary of Intercable. Intercable is one of the
largest multiple system operators in the United States. The General Partner
and certain of its affiliates also own and operate cable television systems for
their own account and for the account of other managed limited partnerships.
Intercable manages the Partnership and 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 General Partner by the Partnership for the three month period ended March
31, 1995 and 1994 were $80,885 and $77,341, respectively.
The Partnership reimburses the General Partner and certain of its
affiliates for certain allocated general and administrative costs. These
expenses include salaries and benefits paid to corporate personnel, office rent
and related facilities expense. Such personnel provide engineering, marketing,
administrative, accounting, legal, and investor relations services to the
Partnership. Allocations of personnel costs are based primarily on actual time
spent by employees of the General Partner and certain of its affiliates with
respect to each partnership managed. Remaining overhead costs are allocated
based on revenues of the Partnership as a percentage of total revenues of owned
and managed partnerships of Intercable. All cable television systems owned or
managed by the General Partner and certain of its affiliates are allocated a
proportionate share of these expenses. Included in the costs allocated from
Intercable and certain of its affiliates are expenses allocated to the General
Partner and certain of its affiliates from affiliated entities for information
processing and administrative services. The General Partner believes that the
methodology used in allocating general and administrative costs is reasonable.
Reimbursements by the Partnership to the General Partner for allocated general
and administrative costs for the three month period ended March 31, 1995 were
$121,437. Reimbursements by the Partnership to Spacelink for the similar
period ended March 31, 1994 were $120,548.
6
<PAGE> 7
JONES GROWTH PARTNERS II L.P.
(A Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
For the three months ended March 31, 1995, the Partnership generated
net cash from operating activities totaling $362,531, which is available to
fund capital expenditures and non-operating costs. During the first quarter of
1995, the Partnership purchased $660,000 of plant and equipment for its Yorba
Linda System. Approximately 59 percent of these expenditures were for
pay-per-view equipment. Such expenditures were funded from cash from
operations and borrowings under the Partnership's credit facility. Capital
expenditures for the remainder of 1995 are expected to be approximately
$2,468,000 and will be financed principally from cash flow from operations and
available borrowings under the Partnership's credit facility. Approximately 57
percent of these expenditures will be for pay-per-view equipment, and the
remainder of these expenditures will be for various other enhancements
throughout the Yorba Linda System.
On September 30, 1994, an amendment was signed to extend the revolving
aspect of the Partnership's $13,000,000 credit facility to December 31, 1996,
at which time the outstanding principal balance will convert to a term loan,
payable in quarterly installments with a final maturity date of December 31,
2002. Generally, the interest on the outstanding principal balance is at the
Partnership's option of the Prime rate plus 1/4 percent to 1/2 percent or LIBOR
plus 1-1/4 percent to 1-1/2 percent, depending upon the ratio of the
Partnership debt to operating cash flow. As of March 31, 1995, $11,461,375 was
outstanding under the Partnership's $13,000,000 credit facility, leaving
$1,538,625 for future borrowings.
On January 12, 1993, the Partnership entered into an interest rate cap
agreement covering outstanding debt obligations of $7,000,000. The Partnership
paid a fee of $67,900 for the rate cap agreement. The agreement protects the
Partnership from LIBOR interest rates that exceed 7 percent for three years
from the date of the agreement. At March 31, 1995, the Partnership was paying
an average of 7.55 percent on the total outstanding borrowings under its credit
facility.
The General Partner presently believes cash flow from operations and
available borrowings under the Partnership's 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 on the cable
television industry. Under the 1992 Cable Act's definition of effective
competition, nearly all cable systems in the United States, including the Yorba
Linda 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 orders 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 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 and July 14.
7
<PAGE> 8
The Partnership has filed cost-of-service showings for the Yorba Linda
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 increased $70,877, or approximately 5
percent, from $1,546,822 for the three months ended March 31, 1994 to
$1,617,699 for the three months ended March 31, 1995. This increase was
primarily the result of increases in basic subscribers and advertising
revenues. Since March 31, 1994, the Partnership's cable systems added 522
basic subscribers representing approximately 46 percent of the increase in
revenues. The number of basic subscribers increased from 15,634 basic
subscribers at March 31, 1994 to 16,156 basic subscribers at March 31, 1995.
An increase in advertising revenues accounted for approximately 42 percent of
the increase in revenues. No other individual factor was significant to the
increase in revenues.
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 $101,994, or approximately 12 percent,
from $868,850 for the three months ended March 31,1994 to $970,844 for the
three months ended March 31,1995. Operating expenses represented approximately
56 percent and 60 percent of revenues for the three months ended March 31, 1994
and 1995, respectively. The increase in operating expenses was primarily the
result of increases in programming costs which accounted for approximately 78
percent of the increase. No other individual factor significantly affected the
increase in operating expenses.
Management fees and allocated administrative costs from the General
Partner increased $4,433, or approximately 2 percent, from $197,889 for the
quarter ended March 31, 1994 to $202,322 for the similar period in 1995. The
increase is primarily due to an increase in revenues, upon which such fees are
based, and an increase in allocated expenses from the General Partner. The
General Partner has experienced increases in expenses, including personnel
costs, a portion of which is allocated to the Partnership. Depreciation and
amortization increased $50,335, or approximately 6 percent, from $856,989 for
the quarter ended March 31, 1994 to $907,324 for the quarter ended March 31,
1995. The increase was primarily due to capital additions during 1994.
Operating loss increased $85,885, or approximately 23 percent, from
$376,906 for the three months ended March 31, 1994 to $462,791 for the
comparable 1995 period. This increase was due to the increase in operating
expenses, management fees and allocated administrative costs from the General
Partner and depreciation and amortization exceeding the increase in revenues.
Operating income before depreciation and amortization decreased $35,550, or
approximately 7 percent, from $480,083 in 1994 to $444,533 in 1995. The
decrease was primarily due to the increase in operating expenses and management
fees and allocated adminstrative costs from the General Partner exceeding 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
otherwise would have been the case. However, other operating costs such as
programming fees, salaries and benefits, and marketing costs as well as other
costs incurred by the 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 General Partner incur cost
increases due to, among other things, programming fees, reregulation and
competition, that exceed increases in revenue. The 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
directed at non-subscribers.
Interest expense increased $54,849, or approximately 38 percent from
$144,644 for the three month period ended March 31, 1994 to $199,493 for the
three month period ended March 31, 1995. This increase was primarily the
result of higher outstanding balances on interest bearing obligations and
higher interest rates during the three month period ended March 31, 1995 as
compared to the similar period one year ago.
8
<PAGE> 9
Net loss increased by $142,159, or approximately 27 percent, from
$591,859 for the three month period ended March 31, 1994 to $662,018 for the
three month period ended March 31, 1995. The increase was a result of the
factors discussed above.
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 II L.P.
BY: JONES SPACELINK CABLE
CORPORATION, its General Partner
By: /s/ Kevin P. Coyle
Kevin P. Coyle
Group Vice President/Finance
(Principal Accounting and Financial Officer)
Dated: 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> 56,896
<SECURITIES> 0
<RECEIVABLES> 339,699
<ALLOWANCES> (14,103)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 14,671,134
<DEPRECIATION> (3,539,570)
<TOTAL-ASSETS> 23,630,682
<CURRENT-LIABILITIES> 1,052,997
<BONDS> 11,540,332
<COMMON> 0
0
0
<OTHER-SE> 11,037,353
<TOTAL-LIABILITY-AND-EQUITY> 23,630,682
<SALES> 0
<TOTAL-REVENUES> 1,617,699
<CGS> 0
<TOTAL-COSTS> 2,080,490
<OTHER-EXPENSES> 266
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 199,493
<INCOME-PRETAX> (662,018)
<INCOME-TAX> 0
<INCOME-CONTINUING> (662,018)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (662,018)
<EPS-PRIMARY> (33.13)
<EPS-DILUTED> (33.13)
</TABLE>
