ITEM 1. BUSINESS
THE PARTNERSHIP. Jones Growth Partners II L.P. (the "Partnership") is a Colorado limited partnership that was formed to acquire, own and operate cable television systems in the United States. Jones Spacelink Cable Corporation, a Colorado corporation, is the general partner (the "General Partner") of the Partnership. The General Partner is a wholly-owned subsidiary of Jones Intercable, Inc. ("Intercable"). Intercable is a Colorado corporation engaged in the business of owning and operating cable television systems. The Partnership owns the cable television systems serving Yorba Linda and certain portions of Anaheim Hills, all in the State of California (the "Yorba Linda System"). See Item 2.
ITEM 2. PROPERTIES
The Partnership acquired the Yorba Linda System in April 1992. The following sets forth (i) the monthly basic plus service rates charged to subscribers and (ii) the number of basic subscribers and pay units for the Yorba Linda System. The monthly basic service rates set forth herein represent, with respect to systems with multiple headends, the basic service rate charged to the majority of the subscribers within the Yorba Linda System. In cable television systems, basic subscribers can subscribe to more than one pay TV service. Thus, the total number of pay services subscribed to by basic subscribers are called pay units. As of December 31, 1995, the Yorba Linda System operated cable plant passing approximately 23,000 homes, representing an approximate 72% penetration rate. Figures for numbers of subscribers, miles of cable plant and homes passed are compiled from the General Partner's records and may be subject to adjustments.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II.
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS
While the Partnership's interests are publicly held, there is no established public market for the interests, and it is not expected that such a market will develop in the future. As of February 15, 1995, the number of equity security holders in the Partnership was 2,307.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1995 Compared to 1994-
Revenues of the Partnership for the year ended December 31, 1995 totaled $6,903,528 compared to $6,345,871 in 1994, an increase of $557,657, or approximately 9 percent. Increases in equipment rental revenue accounted for approximately 30 percent of the increase in revenues. The number of basic subscribers increased to 16,611 at December 31, 1995, compared to 15,961 at December 31, 1994, an increase of 650 basic subscribers, or approximately 4 percent. This increase in basic subscribers accounted for approximately 28 percent of the increase in revenues. Basic service rate adjustments accounted for approximately 21 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 Yorba Linda 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 $370,068, or approximately 10 percent, to $4,008,167 in 1995 from $3,638,099 in 1994. Operating expenses represented approximately 58 percent and 57 percent of revenues in 1995 and 1994, respectively. The increase in operating expenses was primarily due to increases in programming costs which were due, in part, to the increases in subscribers. No other individual factor significantly affected the increase in operating expense.
Management fees to the General Partner and allocated administrative costs from Jones Intercable, Inc. ("Intercable") increased $34,290, or approximately 4 percent, to $836,818 in 1995 from $802,528 in 1994. This increase was primarily the result of increases in revenues upon which such management fees are based.
Depreciation and amortization expense increased $208,649, or approximately 6 percent, to $3,652,676 in 1995 from $3,444,027 in 1994. This increase in depreciation and amortization expense was attributable to additions to the Partnership's depreciable asset base.
Operating loss increased $55,350, or approximately 4 percent, to $1,594,133 in 1995 from $1,538,783 in 1994. This increase was due to the increases in operating expenses, management fees to the General Partner and allocated administrative expenses from Intercable and depreciation and amortization exceeding the increase in revenues.
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 $153,299, or approximately 8 percent, to $2,058,543 in 1995 from $1,905,244 in 1994. The increase was due to the increases in revenues exceeding the increase in operating expenses and management fees to the General Partner and allocated administrative expenses from Intercable.
Interest expense increased $239,372, or approximately 33 percent, to $959,284 in 1995 from $719,912 in 1994. The increase was primarily due to higher outstanding balances on interest bearing obligations during 1995.
Net loss increased $289,498, or approximately 13 percent, to $2,553,640 in 1995 from $2,264,142 in 1994. The increase was a result of the factors discussed above.
1994 Compared to 1993-
Revenues of the Partnership for the year ended December 31, 1994 totaled $6,345,871, compared to $6,198,092 in 1993, an increase of $147,779, or approximately 2 percent. This increase is primarily the result of increases in advertising revenues, which were offset by decreases in equipment rental and additional outlet revenue. The increase in revenues would have been greater if not for the reduction in basic rates due to basic rate regulations issued by the FCC in April 1993, with which the Partnership complied effective September 1, 1993. No other individual factor was significant to the increase in revenues.
Operating expenses increased $177,926, or approximately 5 percent, to $3,638,099 in 1994 from $3,460,174 in 1993. Operating expenses represented approximately 57 percent and 56 percent of revenues in 1994 and 1993, respectively. Of the total net increase in operating expenses, advertising related costs increased $158,613, representing approximately 89 percent of the total increase. No other individual factor significantly affected the increase in operating expense for the periods discussed.
Management fees to the General Partner and allocated administrative costs from Intercable increased $35,519, or approximately 5 percent, to $802,528 in 1994 from $767,009 in 1993. This increase was primarily the result of increases in allocated expenses from the General Partner. The General Partner has experienced increases in expenses during 1994, including personnel costs and reregulation costs, a portion of which are allocated to the Partnership.
Operating loss increased $222,642, or approximately 17 percent, to $1,538,783 in 1994 from $1,316,141 in 1993. This increase was due to the increases in operating expenses, management fees to the General Partner and allocated administrative expenses from Intercable and depreciation and amortization exceeding the increase in revenues.
Operating income before depreciation and amortization decreased $65,665, or approximately 3 percent, to $1,905,244 in 1994 from $1,970,909 in 1993. The decrease was due to the increases in operating expenses and management fees to the General Partner and allocated administrative expenses from Intercable exceeding the increase in revenues.
Interest expense increased $128,337, or approximately 22 percent, to $719,912 in 1994 from $591,575 in 1993. The increase was primarily due to higher average interest rates and increased amounts due to the General Partner.
Net loss increased $351,269, or approximately 18 percent, to $2,264,142 in 1994 from $1,912,873 in 1993. The increase was a result of the factors discussed above.
FINANCIAL CONDITION
For the year ended December 31, 1995, the Partnership generated net cash from operating activities totaling $988,176 which is available to fund capital expenditures and non-operating costs. During 1995, the Partnership purchased approximately $2,500,000 of plant and equipment for the Yorba Linda System. Approximately 76 percent of these expenditures was for cable plant extensions, cable, hardware and labor for new subscriber installations and to replace equipment in the Yorba Linda System. The remainder of the capital expenditures was for enhancements to the Yorba
Linda System. Capital expenditures for 1996 are expected to be approximately $2,300,000 and will be financed principally from cash flow from operations and borrowings under the Partnership's credit facility. For 1996, approximately 72 percent of the expected capital expenditures will be for cable, hardware and labor to extend the cable plant and to make additional subscriber installations in the Yorba Linda System, and the remainder of these expenditures will be for various other enhancements throughout the Yorba Linda System.
As of December 31, 1995, $12,650,000 was outstanding under the Partnership's $13,000,000 revolving credit facility, leaving $350,000 for borrowings during 1996. 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 December 31, 1995 and 1994 were 7.45 percent and 7.51 percent, respectively.
The General Partner presently believes cash flow from operations and available borrowings under the 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 in 1996.
REGULATION AND LEGISLATION
The Partnership has filed a cost-of-service showing in response to rulemakings concerning 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 1984 Cable Act 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 including the Partnership 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.
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. See Item 1.
Item 8.
Item 8. Financial Statements
JONES GROWTH PARTNERS II L.P.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1994
AND FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
INDEX
Report of Independent Public Accountants 14
Balance Sheets 15
Statements of Operations 17
Statements of Partners' Capital (Deficit) 18
Statements of Cash Flows 19
Notes to Financial Statements 20
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Jones Growth Partners II L.P.:
We have audited the accompanying balance sheets of Jones Growth Partners II L.P. (a Colorado limited partnership) as of December 31, 1995 and 1994, and the related statements of operations, partners' capital (deficit) and cash flows for the three years in the period ended December 31, 1995. These financial statements are the responsibility of the General Partner's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Jones Growth Partners II L.P. as of December 31, 1995 and 1994, and the results of its operations and its cash flows for the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP ARTHUR ANDERSEN LLP
Denver, Colorado, March 8, 1996.
JONES GROWTH PARTNERS II L.P. (A Limited Partnership)
BALANCE SHEETS
The accompanying notes to financial statements are an integral part of these balance sheets.
JONES GROWTH PARTNERS II L.P. (A Limited Partnership)
BALANCE SHEETS
The accompanying notes to financial statements are an integral part of these balance sheets.
JONES GROWTH PARTNERS II L.P. (A Limited Partnership)
STATEMENTS OF OPERATIONS
The accompanying notes to financial statements are an integral part of these statements.
JONES GROWTH PARTNERS II L.P. (A Limited Partnership)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
The accompanying notes to financial statements are an integral part of these statements.
JONES GROWTH PARTNERS II L.P. (A Limited Partnership)
STATEMENTS OF CASH FLOWS
The accompanying notes to financial statements are an integral part of these statements.
JONES GROWTH PARTNERS II L.P. (A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION AND PARTNERS' INTERESTS:
Formation and Business
Jones Growth Partners II L.P. (the "Partnership"), a Colorado limited partnership, was formed on March 27, 1991, pursuant to a public offering of limited partnership interests sponsored by Jones Spacelink Cable Corporation (the "General Partner"). The Partnership was formed to acquire, construct, develop and operate cable television systems. 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 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. The General Partner and certain of its affiliates also owned and operated cable television systems for their own account and for the account of other managed limited partnerships.
Contributed Capital
The capitalization of the Partnership is set forth in the accompanying statements of partners' capital (deficit). No limited partner is obligated to make any additional contributions to Partnership capital. The General Partner purchased its general partner interest in the Partnership by contributing $1,000 to Partnership capital.
Cable Television System Acquisition
On April 17, 1992, the Partnership purchased the cable television systems 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").
All profits and losses of the Partnership are allocated 99 percent to the limited partners and 1 percent to the General Partner, except for income or gain from the sale or disposition of cable television properties, which will be allocated to the partners based upon the formula set forth in the Partnership's agreement and interest income earned prior to the first acquisition by the Partnership of a cable television system, which was allocated 100 percent to the limited partners.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Accounting Records
The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles. The Partnership's tax returns are also prepared on the accrual basis.
The preparation of financial statements in conformity with generally accepted accounting principles requires the General Partner's management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, amounts held in banks and highly liquid investments with a maturity at purchase of three months or less.
Property, Plant and Equipment
Depreciation of property, plant and equipment is provided using the straight-line method over the following estimated service lives:
Cable distribution systems 5-15 years Equipment and tools 5 years Office furniture and equipment 5 years Buildings 10-20 years Vehicles 3 years
Replacements, renewals and improvements are capitalized and maintenance and repairs are charged to expense as incurred.
Allocation of Cost of Purchased Cable Television Systems
Based on an independent appraisal, the Partnership allocated the total purchase price of the Yorba Linda System acquired as follows: first, to the fair value of net tangible assets acquired; second, to franchise costs in an amount equal to the estimated value of franchise agreements; third, to subscriber lists; fourth, to the noncompete agreement; and fifth, to costs in excess of interests in net assets purchased. The brokerage fee paid to an affiliate of the General Partner upon acquisition of the Yorba Linda System and other acquisition costs were capitalized and charged to investment in cable television properties in the accompanying balance sheets.
Intangible Assets
Costs assigned to intangible assets are being amortized using the straight-line method over the following estimated useful lives:
Franchise costs 3-6 years Subscriber lists 3 years Noncompete agreement 1 year Costs in excess of interests in net assets purchased 36 years
Revenue Recognition
Subscriber prepayments are initially deferred and recognized as revenue when earned.
Reclassifications
Certain prior year amounts have been reclassified to conform to the 1995 presentation.
(3) TRANSACTIONS WITH THE GENERAL PARTNER AND CERTAIN OF ITS AFFILIATES:
Management Fees, Distribution Ratios and Reimbursements
The General Partner 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 years ended December 31, 1995, 1994 and 1993 were $345,176, $317,294 and $309,905, respectively.
Any partnership distributions made from cash flow (defined as cash receipts derived from routine operations, less debt principal and interest payments and cash expenses) are generally allocated 99 percent to the limited partners and one percent to the General Partner. Any distributions other than from cash flow are generally made as follows: first, to the limited partners in an amount which, together with all prior distributions made from sources other than cash flow, will equal the amount initially contributed to partnership capital by the limited partners; second, to the limited partners an amount equal to eight percent per annum, cumulative and noncompounded, on an amount equal to their initial capital contributions (less any portion of such initial capital contributions returned by the distribution to limited partners from prior sale or refinancing proceeds) provided, however, that the eight percent return will be reduced by all prior distributions of cash flow from the partnership and prior distributions of proceeds of sales or refinancings that exceed an amount equal to the limited partner's initial capital contributions; third, any remaining distribution shall be allocated 80 percent to the limited partners and 20 percent to the General Partner until the limited partners have received 250 percent of their initial capital contribution, after which any remaining distribution shall be allocated 75 percent to the limited partners and 25 percent to the General Partner.
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 expenses are allocated based upon the pro rata relationship of the Partnership's revenues to the total revenues of all cable television systems owned or managed by the General Partner and certain of its affiliates. 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 years ended December 31, 1995, 1994 and 1993 were $491,642, $485,234 and $457,104, respectively.
The Partnership was charged interest during 1995 at an average rate of 10.51 percent on the amounts due to the General Partner, which approximated the General Partner's weighted average cost of borrowing. Interest charged to the Partnership by the General Partner totaled $10,802, $10,276 and $-0- during 1995, 1994 and 1993, respectively.
Payments to/from Affiliates for Programming Services
The Partnership receives programming from Product Information Network, Mind Extension University and Jones Computer Network, all of which are affiliates of Intercable.
Payments to Mind Extension University for the years ended December 31, 1995, 1994 and 1993 totaled $10,072, $8,770 and $5,578, respectively. Payments to Jones Computer Network, which initiated service in 1994, totaled $20,037 in 1995 and $5,771 in 1994.
The Partnership receives a commission from Product Information Network based on a percentage of advertising revenue and number of subscribers. Product Information Network, which initiated service in 1994, paid commissions to the Partnership totaling $14,601 in 1995 and $2,389 in 1994.
(4) PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment as of December 31, 1995 and 1994, consisted of the following:
(5) INCOME TAXES:
Income taxes have not been recorded in the accompanying financial statements because they accrue directly to the partners. The federal and state income tax returns of the Partnership are prepared and filed by the General Partner.
The Partnership's tax returns, the qualification of the Partnership as such for tax purposes, and the amount of distributable income or loss are subject to examination by federal and state taxing authorities. If such examinations result in changes with respect to the Partnership's qualification as such, or in changes with respect to the Partnership's recorded income or loss, the tax liability of the General Partner and limited partners would likely be changed accordingly.
Taxable income or loss to the Partners is different from that reported in the statements of operations due to the difference in depreciation recognized under generally accepted accounting principles and the expense allowed for tax purposes under the Modified Accelerated Cost Recovery System (MACRS). There are no other significant differences between taxable income or loss and the net income or loss reported in the statements of operations.
(6) DEBT:
As of December 31, 1995, $12,650,000 was outstanding under the Partnership's $13,000,000 revolving credit facility, leaving $350,000 for borrowings during 1996. 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 ("LIBOR") 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 December 31, 1995 and 1994 were 7.45 percent and 7.51 percent, respectively.
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 protected the Partnership from LIBOR interest rates that exceeded 7 percent for three years from the date of the agreement. The agreement expired in January 1996.
The Partnership's debt consists of the following:
Maturities of the revolving credit and term loan facility and capital lease obligations for the five years in the period ended December 31, 2000 and thereafter are as follows:
At December 31, 1995, the carrying amount of the Partnership's long-term debt did not differ significantly from the estimated fair value of the financial instruments. The fair value of the Partnership's long-term debt is estimated based on the discounted amount of future debt service payments using rates of borrowing for a liability of similar risk.
(7) COMMITMENTS AND CONTINGENCIES:
The Partnership has filed a cost-of-service showing in response to rulemakings covering 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 Partnership rents office and other facilities under various long-term lease arrangements. Rent paid under such lease arrangements totaled $67,319, $84,194 and $74,079 for the years ended December 31, 1995, 1994 and 1993, respectively. Future minimum lease payments, as of December 31, 1995, under noncancelable operating leases for the five years in the period ending December 31, 2000, and thereafter are as follows:
1996 $ 74,223 1997 74,223 1998 51,575 1999 51,575 2000 51,575 Thereafter 39,806 -------- Total future minimum lease payments $342,977 ======== (8) SUPPLEMENTARY PROFIT AND LOSS INFORMATION:
Supplementary profit and loss information is presented below:
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III.
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership itself has no officers or directors. Certain information concerning the directors and executive officers of the General Partner is set forth below.
Mr. Glenn R. Jones has served as Chief Executive Officer of the Managing General Partner since its inception in November 1988. Mr. Jones has served as Chairman of the Board of Directors and Chief Executive Officer of Intercable since its formation in 1970, and he was President from June 1984 until April 1988. Mr. Jones is the sole shareholder, President and Chairman of the Board of Directors of Jones International, Ltd. He is also Chairman of the Board of Directors of the subsidiaries of Intercable and of certain other affiliates of Intercable. Mr. Jones has been involved in the cable television business in various capacities since 1961, is a past and present member of the Board of Directors and the Executive Committee of the National Cable Television Association. He also is on the Executive Committee of Cable in the Classroom, an organization dedicated to education via cable. Additionally, in March 1991, Mr. Jones was appointed to the Board of Governors for the American Society for Training and Development, and in November 1992 to the Board of Education Council of the National Alliance of Business. Mr. Jones is also a founding member of the James Madison Council of the Library of Congress. Mr. Jones is a past director and member of the Executive Committee of C-Span. Mr. Jones has been the recipient of several awards including the Grand Tam Award in 1989, the highest award from the Cable Television Administration and Marketing Society; the Chairman's Award from the Investment Partnership Association, which is an association of sponsors of public syndications; the cable television industry's Public Affairs Association President's Award in 1990, the Donald G. McGannon award for the advancement of minorities and women in cable; the STAR Award from American Women in Radio and Television, Inc. for exhibition of a commitment to the issues and concerns of women in television and radio; the Women in Cable Accolade in 1990 in recognition of support of this organization; the Most Outstanding Corporate Individual Achievement award from the International Distance Learning Conference; the Golden Plate Award from the American Academy of Achievement for his advances in distance education; the Man of the Year named by the Denver chapter of the Achievement Rewards for College Scientists; and in 1994 Mr. Jones was inducted into Broadcasting and Cable's Hall of Fame.
Mr. James B. O'Brien was appointed President of the General Partner in January 1995. Mr. O'Brien joined Intercable in January 1982. Prior to being elected President and a Director of Intercable in December 1989, Mr. O'Brien served as a Division Manager, Director of Operations Planning/Assistant to the CEO, Fund Vice President and Group Vice President/Operations. Mr. O'Brien was appointed to Intercable's Executive Committee in August 1993. As President, he is responsible for the day-to-day operations of the cable television systems managed and owned by Intercable. Mr. O'Brien is a board member of Cable Labs, Inc., the research
arm of the U.S. cable television industry. He also serves as a director of the Cable Television Administration and Marketing Association and as a director of the Walter Kaitz Foundation, a foundation that places people of any ethnic minority group in positions with cable television systems, networks and vendor companies.
Ms. Ruth E. Warren, the General Partner's Vice President/Operations, joined Intercable in August 1980 and has served in various operational capacities, including system manager and Fund Vice President, since then. Ms. Warren was elected Group Vice President/Operations of Intercable in September 1990.
Ms. Elizabeth M. Steele, the General Partner's Vice President and Secretary, joined Intercable in August 1987 as Vice President/General Counsel and Secretary. From August 1980 until joining Intercable, Ms. Steele was an associate and then a partner at the Denver law firm of Davis, Graham & Stubbs, which serves as counsel to Intercable.
Mr. Kevin P. Coyle was appointed Vice President/Finance of the General Partner in March 1995. Mr. Coyle joined The Jones Group, Ltd. in July 1981 as Vice President/Financial Services. In September 1985, he was appointed Senior Vice President/Financial Services. He was elected Treasurer of Intercable in August 1987, Vice President/Treasurer in April 1988 and Group Vice President/Finance and Chief Financial Officer in October 1990.
Mr. Larry Kaschinske was appointed Controller of the General Partner in March 1995. Mr. Kaschinske joined Intercable in 1984 as a staff accountant in Intercable's former Wisconsin Division; was promoted to Assistant Controller in 1990 and named Controller in August 1994.
Mr. Timothy J. Burke joined Intercable in August 1982 as corporate tax manager, was elected Vice President/Taxation in November 1986 and Group Vice President/Taxation/Administration in October 1990.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership has no employees; however, various personnel are required to operate the Yorba Linda System. Such personnel are employed by the General Partner and, pursuant to the terms of the limited partnership agreement of the Partnership, the cost of such employment is charged by the General Partner to the Partnership as a direct reimbursement item. See Item 13.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS
No person or entity owns more than 5 percent of the limited partnership interests of the Partnership.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The General Partner and its affiliates engage in certain transactions with the Partnership as contemplated by the limited partnership agreement of the Partnership. The General Partner believes that the terms of such transactions are generally as favorable as could be obtained by the Partnership from unaffiliated parties. This determination has been made by the General Partner in good faith, but none of the terms were or will be negotiated at arm's-length and there can be no assurance that the terms of such transactions have been or will be as favorable as those that could have been obtained by the Partnership from unaffiliated parties.
The General Partner charges the Partnership a management fee, and the Partnership reimburses the General Partner for certain allocated overhead and administrative expenses in accordance with the terms of the limited partnership agreement of the Partnership. These expenses consist primarily of salaries and benefits paid to corporate personnel, rent, data processing services and other facilities costs. 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 with respect to the
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 subsidiaries. Systems owned by Intercable and all other systems owned by partnerships for which Intercable and its affiliates are the general partner, are also allocated a proportionate share of these expenses.
The General Partner also advances funds and charges interest on the balance payable from the Partnership. The interest rate charged the Partnership approximates the General Partner's weighted average cost of borrowing.
The Yorba Linda System receives educational video programming from Mind Extension University, Inc., an affiliate of the General Partner, and computer video programming from Jones Computer Network, Ltd., an affiliate of the General Partner, for fees based upon the number of subscribers receiving the programming.
Product Information Network ("PIN"), an affiliate of the General Partner, provides advertising time for third parties on the Yorba Linda System. In consideration, the revenues generated from the third parties are shared two-thirds and one-third between PIN and the Partnership. During the year ended December 31, 1995, the Partnership received revenues from PIN of $14,601.
The charges to the Partnership for related party transactions are as follows for the periods indicated:
PART IV.
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1. See index to financial statements for the list of financial statements and exhibits thereto filed as part of this report.
3. The following exhibits are filed herewith.
4.1 Agreement of Limited Partnership. (1)
10.1.1 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the City of Anaheim, California. (3)
10.1.2 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the County of Orange, California. (3)
10.1.3 Copy of a franchise and related documents thereto granting a community antenna television system franchise for the City of Yorba Linda, California. (3)
10.2.1 Credit and Security Agreement dated as of April 15, 1992 among the Partnership and Credit Lyonnais New York Branch, as agent for various lenders. (3)
10.2.2 Amendment No. 1 dated as of September 30, 1994 to the Credit and Security Agreement dated as of April 15, 1992 among Jones Growth Partners II L.P. and Credit Lyonnais New York Branch, as agent for various lenders. (4)
10.3.1 Purchase and Sale Agreement dated August 24, 1990, by and among Empire Partners, a California general partnership, Empire Cable Television, Inc., a California corporation, Yorba Linda Television Co., Inc., a California corporation, and Crown Valley Cable Television, Inc., a California corporation, as sellers, and Jones Spacelink, Ltd., a Colorado corporation, as buyer. (2)
10.3.2 Letter Agreement dated October 16, 1990, amending Purchase and Sale Agreement. (2)
10.3.3 Second Amendment to Purchase and Sale Agreement dated May 31, 1991. (2)
10.3.4 Third Amendment to Purchase and Sale Agreement dated June 14, 1991. (2)
10.3.5 Fourth Amendment to Purchase and Sale Agreement dated August 9, 1991. (2)
27 Financial Data Schedule.
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(1) Incorporated by reference from the Form 8-A Registration Statement of Jones Growth Partners II L.P. filed with the Securities and Exchange Commission on May 6, 1991 (Commission File No. 0-19259).
(2) Incorporated by reference from the Form S-1 Registration Statement of Jones Growth Partners II L.P. filed with the Securities and Exchange Commission (Registration No. 33- 32169).
(3) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1992.
(4) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1994.
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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. a Colorado limited partnership By: Jones Spacelink Cable Corporation
By: /s/ GLENN R. JONES ---------------------------------- Glenn R. Jones Chairman of the Board and Chief Dated: March 25, 1996 Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ GLENN R. JONES ----------------------------------- Glenn R. Jones Chairman of the Board and Chief Executive Officer Dated: March 25, 1996 (Principal Executive Officer)
By: /s/ KEVIN P. COYLE ----------------------------------- Kevin P. Coyle Vice President/Finance Dated: March 25, 1996 (Principal Financial Officer)
By: /s/ LARRY KASCHINSKE ----------------------------------- Larry Kaschinske Controller Dated: March 25, 1996 (Principal Accounting Officer)
By: /s/ TIMOTHY J. BURKE ----------------------------------- Timothy J. Burke Dated: March 25, 1996 Director
EXHIBIT INDEX
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(1) Incorporated by reference from the Form 8-A Registration Statement of Jones Growth Partners II L.P. filed with the Securities and Exchange Commission on May 6, 1991 (Commission File No. 0-19259).
(2) Incorporated by reference from the Form S-1 Registration Statement of Jones Growth Partners II L.P. filed with the Securities and Exchange Commission (Registration No. 33- 32169).
(3) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1992.
(4) Incorporated by reference from Registrant's Report on Form 10-K for the fiscal year ended December 31, 1994.