<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 March 31, 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: 0-19259
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
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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
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JONES GROWTH PARTNERS II L.P.
-----------------------------
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
------------------------
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
- ----------------------------------------------------------- ------------ -------------
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 114,716 $ 60,263
TRADE RECEIVABLES, less allowance
for doubtful receivables of $30,830 and $27,667 at
March 31, 1996 and December 31, 1995, respectively 254,948 235,967
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment, at cost 16,859,895 16,508,040
Less- accumulated depreciation (5,180,099) (4,705,821)
----------- -----------
11,679,796 11,802,219
Franchise costs and other intangible assets, net of
accumulated amortization of $8,167,410 at
March 31, 1996 and $7,651,621 at
December 31, 1995, respectively 9,720,478 10,236,267
----------- -----------
Total investment in cable television properties 21,400,274 22,038,486
DEPOSITS, PREPAID EXPENSES AND OTHER 281,867 349,130
----------- -----------
Total assets $22,051,805 $22,683,846
=========== ===========
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
2
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JONES GROWTH PARTNERS II L.P.
-----------------------------
(A Limited Partnership)
UNAUDITED BALANCE SHEETS
------------------------
<TABLE>
<CAPTION>
March 31, December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) 1996 1995
- ------------------------------------------------------------- ------------ -------------
<S> <C> <C>
LIABILITIES:
Credit facility and other debt $12,744,548 $12,754,960
Trade accounts payable and accrued liabilities 462,928 489,853
Subscriber prepayments and deposits 301,762 293,302
----------- -----------
Total liabilities 13,509,238 13,538,115
----------- -----------
PARTNERS' CAPITAL (DEFICIT):
General Partner-
Contributed capital 1,000 1,000
Accumulated deficit (85,381) (79,349)
----------- -----------
(84,381) (78,349)
----------- -----------
Limited Partners-
Contributed capital, net of related
commissions, syndication costs and
interest distribution (19,785 units
outstanding at March 31, 1996 and
December 31, 1995) 16,746,882 16,746,882
Accumulated deficit (8,119,934) (7,522,802)
----------- -----------
8,626,948 9,224,080
----------- -----------
Total partners' capital (deficit) 8,542,567 9,145,731
----------- -----------
Total liabilities and partners' capital (deficit) $22,051,805 $22,683,846
=========== ===========
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these unaudited balance sheets.
3
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JONES GROWTH PARTNERS II L.P.
-----------------------------
(A Limited Partnership)
UNAUDITED STATEMENTS OF OPERATIONS
----------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
----------------------------
1996 1995
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<S> <C> <C>
REVENUES $1,862,130 $1,617,699
COSTS AND EXPENSES:
Operating expenses 1,005,358 970,844
Management fees and allocated administrative
costs from General Partner 219,731 202,322
Depreciation and amortization 1,000,647 907,324
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OPERATING LOSS (363,606) (462,791)
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OTHER INCOME (EXPENSE):
Interest expense (239,369) (199,493)
Other, net (189) 266
---------- ----------
NET LOSS $ (603,164) $ (662,018)
========== ==========
ALLOCATION OF NET LOSS
General Partner $ (6,032) $ (6,620)
========== ==========
Limited Partners $ (597,132) $ (655,398)
========== ==========
NET LOSS PER LIMITED
PARTNERSHIP UNIT $(30.18) $(33.13)
========== ==========
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
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JONES GROWTH PARTNERS II L.P.
-----------------------------
(A Limited Partnership)
UNAUDITED STATEMENTS OF CASH FLOWS
----------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
----------------------------
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (603,164) $(662,018)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 1,000,647 907,324
Amortization of interest rate protection contract - 5,658
Decrease (increase) in trade receivables (18,981) 49,192
Increase in deposits, prepaid expenses and
other 56,683 27,494
Decrease in trade accounts payable and
accrued liabilities and subscriber
prepayments and deposits (18,465) (160,130)
Increase in advances from
General Partner - 195,011
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Net cash provided by operating activities 416,720 362,531
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment, net (351,855) (659,748)
---------- ---------
Net cash used in investing activities (351,855) (659,748)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings - 300,000
Repayment of borrowings (10,412) (7,018)
---------- ---------
Net cash provided by (used in) financing activities (10,412) 292,982
---------- ---------
INCREASE (DECREASE) IN CASH 54,453 (4,235)
CASH, AT BEGINNING OF PERIOD 60,263 61,131
---------- ---------
CASH, AT END OF PERIOD $ 114,716 $ 56,896
========== =========
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 156,826 $ 289,982
========== =========
</TABLE>
The accompanying notes to unaudited financial statements
are an integral part of these unaudited statements.
5
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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, 1996 and December 31,
1995, and its results of operations and changes in its cash flows for the three
month periods ended March 31, 1996 and 1995. 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 is a wholly owned subsidiary of Jones
Intercable, Inc. ("Intercable"), a Colorado corporation. Intercable 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. The General
Partner manages the Partnership and receives a fee for its services equal to 5
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,
1996 and 1995 were $93,107 and $80,885, respectively.
The Partnership reimburses the General Partner and certain of its
affiliates for certain allocated general and administrative costs. These
expenses represent the salaries and related benefits paid for 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 expenses
are allocated based on the pro rata relationship of the Partnership's revenues
to the total revenues of all systems owned or managed by Intercable and certain
of its affiliates. Systems owned by Intercable and all other systems owned by
partnerships for which Intercable is the general partner are also allocated a
proportionate share of these expenses. 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 periods ended March 31, 1996 and
1995 were $126,624 and $121,437, respectively.
(3) On May 3, 1996, the Partnership entered into a letter of intent to sell the
Yorba Linda System to an unaffiliated third party for a sales price of
$36,000,000, subject to normal working capital adjustments. Upon the successful
completion of the sale of the Yorba Linda System, which is expected to occur by
the end of 1996, the Partnership will be liquidated and dissolved.
6
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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, 1996, the Partnership generated net
cash from operating activities of approximately $416,720, which is available to
fund capital expenditures and non-operating costs. During the first quarter of
1996, the Partnership purchased approximately $352,000 of plant and equipment
for its Yorba Linda System. Approximately 47 percent of the expenditures
related to construction of service drops to subscribers' homes. Approximately
19 percent of the expenditures related to the purchase of converters and
approximately 16 percent related to new plant construction. The remainder of
the expenditures related to various enhancements in the Yorba Linda System.
Anticipated capital expenditures for the remainder of 1996 are approximately
$1,934,000. Approximately 35 percent will be used for the purchase of
converters. Approximately 23 percent will be related to new plant construction
and approximately 20 percent will be related to the construction of service
drops to subscribers' homes. The remainder of the anticipated capital
expenditures will be for various other enhancements throughout the Yorba Linda
System.
As of March 31, 1996, $12,650,000 was outstanding under the Partnership's
$13,000,000 credit facility, leaving $350,000 for future borrowings. At
December 31, 1996, the revolving credit facility's 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 the London Interbank Offered Rate plus 1-1/4 percent
to 1-1/2 percent, depending upon the ratio of the Partnership debt to operating
cash flow. The effective interest rates on amounts outstanding as of March 31,
1996 and 1995 were 6.71 and 7.49 percent, respectively.
The General Partner presently believes cash flow from operations and
available borrowings under the Partnership's credit facility and, if necessary
and in its discretion, advances from the General Partner, will be sufficient to
fund capital expenditures and other liquidity needs of the Partnership.
REGULATION AND LEGISLATION
- --------------------------
The Partnership has filed a cost-of-service showing in response to
rulemakings concerning the Cable Television Consumer Protection and Competition
Act of 1992 (the "1992 Cable Act") 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 regulatory 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.
The Telecommunications Act of 1996 (the "1996 Act"), which became law on
February 8, 1996, substantially revised the Communications Act of 1934, as
amended, including the Cable Communications Policy Act of 1984 and the 1992
Cable Act, and has been described as one of the most significant changes in
communications regulation since the original Communications Act of 1934. The
1996 Act is intended, in part, to promote substantial competition in the
telephone local exchange and in the delivery of video and other services. As a
result of the 1996 Act, local telephone companies (also known as local exchange
carriers or "LECs") and other service providers are permitted to provide video
programming, and cable television operators are permitted entry into the
telephone local exchange market. The FCC is required to conduct rulemaking
proceedings over the next several months to implement various provisions of the
1996 Act.
Among other provisions, the 1996 Act modified the 1992 Cable Act by
deregulating the cable programming service tier of large cable operators
effective March 31, 1999 and the cable programming service tier of "small" cable
operators in systems providing service to 50,000 or fewer subscribers effective
immediately. The 1996 Act also revised the procedures for filing cable
programming service tier rate complaints and adds a new effective competition
test.
7
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It is premature to predict the specific effects of the 1996 Act on the
cable industry in general or the Partnership in particular. The FCC will be
undertaking numerous rulemaking proceedings to interpret and implement the 1996
Act. It is not possible at this time to predict the outcome of those
proceedings or their effect on the Partnership.
RESULTS OF OPERATIONS
- ---------------------
Revenues of the Partnership increased $244,431, or approximately 15
percent, to $1,862,130 for the three months ended March 31, 1996 from $1,617,699
for the three months ended March 31, 1995. Basic service rate adjustments and
an incease in equipment rental revenues accounted for approximately 56 percent
and 25 percent, respectively, of the increase in revenues. The number of basic
subscribers increased to 16,723 at March 31, 1996 compared to 16,156 at March
31, 1995, an increase of 567 basic subscribers, or approximately 4 percent. The
increase in the number of basic subscribers accounted for approximately 18
percent of 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 $34,514, or approximately 4 percent, to
$1,005,358 for the three months ended March 31, 1996 from $970,844 for the three
months ended March 31, 1995. Operating expenses represented approximately 54
percent and 60 percent of revenues for the three months ended March 31, 1996 and
1995, respectively. The increase in operating expenses was primarily the result
of increases in programming costs, which were partially offset by decreases in
personnel and advertising costs. No other individual factor significantly
affected the increase in operating expenses.
Management fees and allocated administrative costs from the General Partner
increased $17,409, or approximately 9 percent, to $219,731 for the quarter ended
March 31, 1996 from $202,322 for the similar period in 1995. The increase is
primarily due to an increase in revenues, upon which such fees are based.
Depreciation and amortization increased $93,323, or approximately 10
percent, to $1,000,647 for the quarter ended March 31, 1996 from $907,324 for
the quarter ended March 31, 1995. The increase was primarily due to capital
additions in 1995.
Operating loss decreased $99,185, or approximately 21 percent, to $363,606
for the three months ended March 31, 1996 from $462,791 for the comparable 1995
period. This decrease was due to the increase in revenues exceeding the
increases in operating expenses, management fees and allocated administrative
costs from the General Partner and depreciation and amortization.
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 increased $192,508, or approximately 43
percent, to $637,041 for the three months ended March 31, 1996 from $444,533 for
the comparable period in 1995. The increase was due to the increase in revenues
exceeding the increases in operating expenses and management fees and allocated
administrative costs from the General Partner.
Interest expense increased $39,876, or approximately 20 percent to $239,369
for the three month period ended March 31, 1996 from $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 during the three
month period ended March 31, 1996 as compared to the similar period in 1995.
Net loss decreased by $58,854, or approximately 9 percent, to $603,164 for
the three month period ended March 31, 1996 from $662,018 for the three month
period ended March 31, 1995. The decrease was a result of the factors discussed
above and the losses are expected to continue.
8
<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
9
<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.
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 Financial Officer)
Dated: May 13, 1996
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 114,716
<SECURITIES> 0
<RECEIVABLES> 254,948
<ALLOWANCES> (30,830)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 16,859,895
<DEPRECIATION> 5,180,099
<TOTAL-ASSETS> 22,051,805
<CURRENT-LIABILITIES> 764,690
<BONDS> 12,744,548
<COMMON> 0
0
0
<OTHER-SE> 8,542,567
<TOTAL-LIABILITY-AND-EQUITY> 22,051,805
<SALES> 0
<TOTAL-REVENUES> 1,862,130
<CGS> 0
<TOTAL-COSTS> 2,225,736
<OTHER-EXPENSES> 189
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 239,369
<INCOME-PRETAX> (603,164)
<INCOME-TAX> 0
<INCOME-CONTINUING> (603,164)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (603,164)
<EPS-PRIMARY> (30.18)
<EPS-DILUTED> (30.18)
</TABLE>
