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, 1996, the Yorba Linda System operated cable plant passing approximately 23,300 homes, with an approximate 73% 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 14, 1997, the number of equity security holders in the Partnership was 2,300.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA - -------------------------------
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - ------------------------------------------------------------------------------- OF OPERATIONS - -------------
The following discussion of Jones Growth Partners II L.P.'s (the "Partnership") financial condition and results of operations contains, in addition to historical information, forward-looking statements that are based upon certain assumptions and are subject to a number of risks and uncertainties. The Partnership's actual results may differ significantly from the results predicted in such forward-looking statements.
FINANCIAL CONDITION - -------------------
On August 16, 1996, the Partnership entered into an asset purchase agreement providing for the sale of the Yorba Linda System by the Partnership to an unaffiliated party for a sales price of $36,000,000, subject to normal working capital adjustments. Closing of this sale is subject to a number of conditions, including the approval of governmental franchising authorities and the approval of the transaction by the holders of a majority of the Partnership's limited partnership interests. The General Partner, on behalf of the Partnership, is preparing proxy solicitation materials and intends to conduct a vote of the limited partners of the Partnership by mail in the second quarter of 1997. Upon the consummation of the proposed sale of the Yorba Linda System, the Partnership will repay the outstanding balance on its credit facility, which totaled $12,790,000 at December 31, 1996, and then the Partnership will distribute the sale proceeds, net of working capital adjustments, to its limited partners. Because limited partners will not receive distributions in an amount equal to 100 percent of the capital initially contributed to the Partnership by the limited partners plus an amount equal to 8 percent per annum, cumulative and noncompounded, on an amount equal to their initial capital contributions, the General Partner will not receive any of the net proceeds from the Yorba Linda System's sale. As a result of the Yorba Linda System's sale, the limited partners of the Partnership, as a group, will receive approximately $22,823,356. Limited partners will receive from $1,101 to $1,209 for each $1,000 limited partnership interest from the net proceeds of the Yorba Linda System's sale. The specific amount of a limited partner's distribution will be dependent upon a limited partner's date of investment. Upon the successful completion of the sale of the Yorba Linda System, which is expected to occur during the second quarter of 1997, the Partnership will be liquidated and dissolved.
For the year ended December 31, 1996, the Partnership generated net cash from operating activities totaling $1,778,948 which is available to fund capital expenditures and non-operating costs. The Partnership's capital expenditures for 1996 totaled approximately $1,700,000. Approximately 34 percent of these expenditures was for the construction of service drops to subscribers homes. Approximately 22 percent of these expenditures was for the purchase of converters and approximately 18 percent of these expenditures was for new plant construction. The remainder of the capital expenditures was for various enhancements in the Yorba Linda System. Such expenditures were funded from cash from operations and borrowings under the Partnership's credit facility. Capital expenditures for 1997 are expected to be
approximately $1,600,000 and will be financed principally from cash flow from operations and, if necessary and in its discretion, advances from the General Partner borrowings under the Partnership's credit facility. As a result of the pending sale of the Yorba Linda System, as discussed above, capital expenditures for 1997 will be only for various enhancements necessary to maintain the value of the Yorba Linda System until it is sold. Depending upon the timing of the closing of the sale of the Yorba Linda System, the Partnership likely will make only the portion of budgeted capital expenditures scheduled to be made during the Partnership's continued ownership of the Yorba Linda System.
As of December 31, 1996, $12,790,000 was outstanding under the Partnership's $13,000,000 credit facility. At December 31, 1996, the revolving credit facility's outstanding principal balance converted to a term loan, payable in quarterly installments with a final maturity date of December 31, 2002. Payments due in 1997 total $639,500 and will be funded primarily from cash generated from operations. The loan will be repaid in full upon the sale of the Yorba Linda System. 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, 1996 and 1995 were 6.75 percent and 7.45 percent, respectively.
The Partnership will rely on cash on hand, cash flow from operations and, if necessary, and in its discretion, advances from the General Partner to fund capital expenditures and other liquidity needs of the Partnership until the Yorba Linda System is sold.
RESULTS OF OPERATIONS - ---------------------
1996 Compared to 1995-
Revenues of the Partnership increased $793,156, or approximately 11 percent, to $7,696,684 in 1996 compared to $6,903,528 for the comparable 1995 period. The increase in revenues was primarily due to basic service rate increases and an increase in the number of basic subscribers. Basic service rate increases accounted for approximately 35 percent of the increase in revenues and an increase in the number of basic subscribers accounted for approximately 21 percent of the increase in revenues for the year ended December 31, 1996. The number of basic subscribers increased 562, or approximately 3 percent, to 17,173 subscribers at year end December 31, 1996 from 16,611 subscribers at year end December 31, 1995. An increase in converter and cable remote rental revenues accounted for approximately 19 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 operation and administration of the Partnership's cable television 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 marketing expenses.
Operating expenses increased $276,768, or approximately 7 percent, to $4,284,935 in 1996 from $4,008,167 in 1995. Operating expenses represented approximately 56 percent and 58 percent of revenues in 1996 and 1995, 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 $77,250, or approximately 9 percent, to $914,068 in 1996 from $836,818 in 1995. This increase was primarily a result of the increase in revenues, upon which such management fees and allocated administrative costs are based.
Depreciation and amortization expense increased $279,672, or approximately 8 percent, to $3,932,348 in 1996 from $3,652,676 in 1995. This increase in depreciation and amortization expense was attributable to additions to the Partnership's depreciable asset base.
Operating loss decreased $159,466, or approximately 10 percent, to $1,434,667 in 1996 from $1,594,133 in 1995. This decrease was due to the increase in revenues exceeding the increases in operating expenses, management fees to the General Partner and allocated administrative expenses from Intercable and depreciation and amortization expense.
The cable television industry generally measures the financial performance of a cable television system in terms of operating income before depreciation and amortization. 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 $439,138, or approximately 21 percent, to $2,497,681 in 1996 from $2,058,543 in 1995. 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 decreased $54,617, or approximately 6 percent, to $904,667 in 1996 from $959,284 in 1995. The decrease was primarily due to lower effective interest rates on outstanding obligations during 1996.
Net loss decreased $182,047, or approximately 7 percent, to $2,371,593 in 1996 from $2,553,640 in 1995. The decrease was a result of the factors discussed above.
1995 Compared to 1994-
Revenues of the Partnership increased $557,657, or approximately 9 percent, to $6,903,528 in 1995 compared to $6,345,871 in 1994. 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 increases accounted for approximately 21 percent of the increase in revenues. No other individual factor was significant to the increase in revenues.
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 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.
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.
Item 8.
Item 8. Financial Statements - -----------------------------
JONES GROWTH PARTNERS II L.P. -----------------------------
FINANCIAL STATEMENTS --------------------
AS OF DECEMBER 31, 1996 AND 1995 --------------------------------
AND FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 --------------------------------------------------------
INDEX -----
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, 1996 and 1995, and the related statements of operations, partners' capital (deficit) and cash flows for the three years in the period ended December 31, 1996. 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, 1996 and 1995, and the results of its operations and its cash flows for the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado, March 7, 1997.
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 is a wholly owned subsidiary of Jones Intercable, Inc. ("Intercable"), a Colorado corporation. 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.
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 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").
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.
Cable Television System Sale ----------------------------
On August 16, 1996, the Partnership entered into an asset purchase agreement providing for the sale of the Yorba Linda System by the Partnership to an unaffiliated party for a sales price of $36,000,000, subject to normal working capital adjustments. Closing of this sale is subject to a number of conditions, including the approval of governmental franchising authorities and the approval of the transaction by the holders of a majority of the Partnership's limited partnership interests. The General Partner, on behalf of the Partnership, is preparing proxy solicitation materials and intends to conduct a vote of the limited partners of the Partnership by mail in the second quarter of 1997. Upon the consummation of the proposed sale of the Yorba Linda System, the Partnership will repay the outstanding balance on its credit facility, which totaled $12,790,000 at December 31, 1996, and then the Partnership will distribute the sale proceeds, net of working capital adjustments, to its limited partners. Because limited partners will not receive distributions in an amount equal to 100 percent of the capital initially contributed to the Partnership by the limited partners plus an amount equal to 8 percent per annum, cumulative and noncompounded, on an amount equal to their initial capital contributions, the General Partner will not receive any of the net proceeds from the Yorba Linda System's sale. As a result of the Yorba Linda System's sale, the limited partners of the Partnership, as a group, will receive approximately $22,823,356. Limited partners will receive from $1,101 to $1,209 for each $1,000 limited partnership interest from the net proceeds of the Yorba Linda System's sale. The specific amount of a limited partner's distribution will be dependent upon a limited partner's date of investment. Upon the successful completion of the sale of the Yorba Linda System, which is expected to occur during the second quarter of 1997, the Partnership will be liquidated and dissolved.
(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.
Property, plant and equipment and the corresponding accumulated depreciation are written off as certain assets become fully depreciated and are no longer in service.
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 2 - 6 years Subscriber lists 2 years Costs in excess of interests in net assets purchased 35 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 1996 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, 1996, 1995 and 1994 were $384,834, $345,176 and $317,294, 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 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. Such services, and their related costs, are necessary to the operation of the Partnership and would have been incurred by the Partnership, if it was a stand alone entity. 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. 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 years ended December 31, 1996, 1995 and 1994 were $529,234, $491,642 and $485,234, respectively.
The Partnership was charged interest during 1996 at an average rate of 8.58 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 $-0-, $10,802 and $10,276 during 1996, 1995 and 1994, respectively.
Payments to/from Affiliates for Programming Services ----------------------------------------------------
The Partnership receives programming from Jones Education Company, Great American Country, Inc. and Product Information Network, all of which are affiliates of Intercable.
Payments to Jones Education Company for the years ended December 31, 1996, 1995 and 1994 totaled $34,112, $30,109 and $14,541, respectively. Payments to Great American Country, Inc., which initiated service in 1996, totaled $14,534 in 1996.
The Partnership receives a commission from Product Information Network based on a percentage of advertising revenue and number of subscribers. Product Information Network paid commissions to the Partnership totaling $17,958, $14,601 and $2,389 for the years ended December 31, 1996, 1995 and 1994, respectively.
(4) PROPERTY, PLANT AND EQUIPMENT: -----------------------------
Property, plant and equipment as of December 31, 1996 and 1995, 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, 1996, $12,790,000 was outstanding under the Partnership's $13,000,000 credit facility. At December 31, 1996, the revolving credit facility's outstanding principal balance converted 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, 1996 and 1995 were 6.75 percent and 7.45 percent, respectively.
The Partnership's debt consists of the following:
Maturities of the revolving credit and term loan facility and capital lease obligations for each of the five years in the period ended December 31, 2001 and thereafter are as follows:
At December 31, 1996, 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 rents office and other facilities under various long-term lease arrangements. Rent paid under such lease arrangements totaled $91,128, $67,319 and $84,194 for the years ended December 31, 1996, 1995 and 1994, respectively. Future minimum lease payments, as of December 31, 1996, under noncancelable operating leases for each of the five years in the period ending December 31, 2001, and thereafter are as follows:
(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. Directors of the General Partner serve until the next annual meeting of the General Partner and until their successors shall be elected and qualified.
Mr. Glenn R. Jones has served as Chief Executive Officer of the 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 member of the Board of Directors and the Executive Committee of the National Cable Television Association. Additionally, Mr. Jones is a member of the Board of Governors for the American Society for Training and Development, and a member of 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 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 President's Award from the Cable Television Public Affairs Association in recognition of Jones International's educational efforts through Mind Extension University (now Knowledge TV); the Donald G. McGannon Award for the advancement of minorities and women in cable from the United Church of Christ Office of Communications; 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 Cableforce 2000 Accolade awarded by Women in Cable in recognition of the General Partner's innovative employee programs; the Most Outstanding Corporate Individual Achievement Award from the International Distance Learning Conference for his contributions to distance education; 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 Vice Chairman and a director of the Cable Television Administration and
Marketing Association and as a member of the Executive Committee and a director of the Walter Kaitz Foundation, a foundation that places people of ethnic minority groups 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.
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 ----------------------------------------------------------------------
As of March 4, 1997, no person or entity owned more than 5 percent of the limited partnership interests of the Partnership, except for the Naomi Ruth Wilden Trust, which owned 1,000 limited partnership interests, representing 5.05% of the outstanding limited partnership interests.
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.
TRANSACTIONS WITH THE GENERAL PARTNER
The General Partner charges a management fee, and the General Partner is reimbursed for certain allocated overhead and administrative expenses. These expenses represent the salaries and benefits paid to 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 Partnership. Allocations of personnel costs are based primarily on actual time spent by employees Intercable 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 subsidiaries. Systems owned by Intercable and all other systems owned by partnerships for which Jones Intercable, Inc. is 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. The interest rate charged approximates the General Partner's weighted average cost of borrowing.
TRANSACTIONS WITH AFFILIATES
Jones Education Company ("JEC") is owned 63% by Jones International, Ltd. ("International"), an affiliate of the General Partner, 9% by Glenn R. Jones, 12% by Bell Canada International Inc. ("BCI") and 16% by the General Partner. JEC operates two television networks, JEC Knowledge TV and Jones Computer Network. JEC Knowledge TV provides programming related to computers and technology; business, careers and finance; health and wellness; and global culture and languages. Jones Computer Network provides programming focused primarily on computers and technology. JEC sells its programming to certain cable television systems owned or managed by Intercable.
The Great American Country network provides country music video programming to certain cable television systems owned or managed by Intercable. This network is owned and operated by Great American Country, Inc., a subsidiary of Jones International Networks, Ltd., an affiliate of International.
Jones Galactic Radio, Inc. is a company now owned by Jones International Networks, Ltd., an affiliate of International. Superaudio, a joint venture between Jones Galactic Radio, Inc. and an unaffiliated entity, provides satellite programming to certain cable television systems owned or managed by Intercable.
The Product Information Network Venture (the "PIN Venture") is a venture among a subsidiary of Jones International Networks, Ltd., an affiliate of International, and two unaffiliated cable system operators. The PIN Venture operates the Product Information Network ("PIN"), which is a 24-hour network that airs long-form advertising generally known as "infomercials." The PIN Venture generally makes incentive payments of approximately 60% of its net advertising revenue to the cable systems that carry its programming. Most of Intercable's owned and managed systems carry PIN for all or part of each day. Revenues received by the Partnership from the PIN Venture relating to the Yorba Linda System totaled approximately $17,958 for the year ended December 31, 1996.
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 -------------------------------------------------------------------------
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 24, 1997 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 24, 1997 (Principal Executive Officer)
By:/s/ Kevin P. Coyle ________________________________ Kevin P. Coyle Vice President/Finance Dated: March 24, 1997 (Principal Financial Officer)
By:/s/ Larry Kaschinske ________________________________ Larry Kaschinske Controller Dated: March 24, 1997 (Principal Accounting Officer)