UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange act of 1934 For the quarterly period ended
June 30, 1996.
Commission file number: (S-1) 333-3084
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
RIFKIN ACQUISITION CAPITAL CORP.
Colorado 84-1317717
Colorado 84-1341424
360 South Monroe St., Suite 600
Denver, Colorado 80209
(303) 333-1215
Indicate whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes
<PAGE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
RIFKIN ACQUISITION CAPITAL CORP.
INDEX
Page Number
Part I. Financial Information:
Item 1. Financial Statements:
Rifkin Acquisition Partners, L.L.L.P.
a. Consolidated Statement of Operations........... 3
b. Consolidated Balance Sheet..................... 5
c. Consolidated Statement of Cash Flows........... 6
d. Consolidated Statement of Partners' Capital
(Deficit)...................................... 7
e. Notes to Consolidated Financial Statements..... 9
Rifkin Acquisition Capital Corp.
a. Balance Sheet.................................. 11
b. Notes to Balance Sheet......................... 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 13
Part II: Other Information:
Item 1. Legal Proceedings--(none)
Item 2. Changes in Securities--(none)
Item 3. Defaults Upon Senior Securities--(none)
Item 4. Submission of Matters to a Vote of Security
Holders--(none)
Item 5. Other Information:
a. Revenue and Operating Cash Flow Report......... 19
Item 6. Exhibits and Reports on Form 8-K--(none)
Signatures................................................. 21
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<CAPTION>
Three Months Ended
June 30,
1995(a) 1996
__________ ___________
<S> <C> <C>
REVENUE:
Service................................ $11,895,656 $17,195,007
Installation and other................. 688,111 1,108,650
___________ __________
Total Revenue............. 12,583,767 18,303,657
COSTS AND EXPENSES:
Operating Expense...................... 1,634,861 2,685,354
Programming Expense.................... 2,532,585 3,866,940
Selling, general and administrative
expense.............................. 1,694,437 2,764,270
Depreciation and amortization.......... 6,028,049 9,240,572
Management Fees........................ 440,390 640,628
Loss on disposal of assets............. 91,617 449,013
___________ ___________
Total costs and expenses.. 12,421,939 19,646,777
___________ ___________
Operating income (loss)................ 161,828 (1,343,120)
Interest expense....................... 3,155,109 5,440,313
___________ ___________
Loss before income taxes............... (2,993,281) (6,783,433)
Income tax benefit..................... (377,000) (926,000)
___________ ___________
Net loss............................... $(2,616,281) $(5,857,433)
=========== ===========
OTHER FINANCIAL DATA:
Adjusted EBITDA........................ $ 6,281,494 $ 8,531,463
=========== ===========
<FN>
(a) 1995 has been reflected on a pro forma basis to account for the
recapitalization discussed in Note 1.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<CAPTION>
Six Months Ended
June 30,
1995(a) 1996
___________ ____________
<S> <C> <C>
REVENUE:
Service................................ $22,985,337 $ 31,265,873
Installation and other................. 1,418,281 2,520,514
___________ ____________
Total revenue................ 24,403,618 33,786,387
COSTS AND EXPENSES:
Operating Expense...................... 3,563,018 4,896,210
Programming Expense.................... 4,953,156 6,975,917
Selling, general and administrative
expense.............................. 3,353,691 4,843,523
Depreciation and amortization.......... 12,014,457 16,526,755
Management Fees........................ 854,034 1,162,914
Loss on disposal of assets............. 133,051 589,258
___________ ____________
Total costs and expenses..... 24,871,407 34,994,577
___________ ____________
Operating loss......................... (467,789) (1,208,190)
Interest expense....................... 6,310,218 10,593,357
___________ ____________
Loss before income taxes............... (6,778,007) (11,801,547)
Income tax benefit..................... (854,000) (1,771,000)
___________ ____________
Net loss............................... $(5,924,007) $(10,030,547)
=========== ============
OTHER FINANCIAL DATA:
Adjusted EBITDA........................ $11,679,719 $ 15,697,556
=========== ============
<FN>
(a) 1995 has been reflected on a pro forma basis to account for the
recapitalization discussed in Note 1.
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED BALANCE SHEET
<CAPTION>
ASSETS
December 31, June 30,
1995 1996
(UNAUDITED)
_____________ ____________
<S> <C> <C>
Cash................................... $ 318,020 $ 1,716,052
Subscriber accounts receivable,
net of allowance for doubtful
accounts of $292,626 in 1995
and $351,253 in 1996............... 884,908 1,084,983
Other receivables...................... 1,542,667 1,759,040
Prepaid expenses and other............. 924,229 994,568
Property, plant and equipment at cost:
Cable television transmission and
distribution systems and related
equipment.......................... 73,994,528 102,449,204
Land, building, vehicles and
furniture and fixtures............. 3,159,116 5,132,344
____________ ____________
77,153,644 107,581,548
Less accumulated depreciation.......... (2,741,453) (8,070,734)
____________ ____________
Net property, plant and equipment 74,412,191 99,510,814
Franchise costs and other intangible
assets, net of accumulated
amortization of $5,128,754 in 1995
and $16,119,518 in 1996.............. 159,963,395 202,757,670
____________ ____________
Total assets................. $238,045,410 $307,823,127
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued
liabilities.......................... $ 5,867,584 $ 8,703,316
Subscriber deposits and prepayments.... 961,528 1,124,966
Interest payable....................... 91,273 6,179,367
Deferred taxes payable................. 21,127,000 19,348,000
Notes payable.......................... 137,500,000 195,000,000
____________ ____________
Total liabilities............ 165,547,385 230,355,649
Commitments
Redeemable partners' interests....... 3,600,000 4,232,000
Partners' capital (deficit):
General partner...................... (1,085,311) (1,114,617)
Limited partners..................... 69,421,043 73,847,985
Preferred equity interest............ 562,293 502,110
____________ ____________
Total partners' capital...... 68,898,025 73,235,478
____________ ____________
Total liabilities and
partners' capital.......... $238,045,410 $307,823,127
============ ============
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED STATEMENT OF CASH FLOW (UNAUDITED)
<CAPTION>
Six Months Ended
June 30,
1995(a) 1996
___________ ____________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................. $(5,924,007) $(10,030,547)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization........ 12,014,457 16,526,755
Amortization of deferred loan cost... 209,094 476,066
Loss on disposal of fixed assets..... 133,051 589,258
Increase in subscriber
accounts receivable................ (27,816) (200,075)
Decrease (increase) in other
receivables........................ 100,188 (216,373)
Decrease (increase) in prepaid
expenses and other................. 230,517 (70,339)
Increase (decrease) in accounts
payable and accrued liabilities.... (645,647) 2,835,731
Increase in subscriber deposits
and prepayments.................... 331,690 163,438
Decrease in deferred taxes payable... (854,000) (1,779,000)
Increase in interest payable......... 197,036 6,088,094
Net cash provided by operating ___________ ___________
activities...................... 5,764,563 14,383,008
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Mid-Tennessee Systems..... - (61,804,006)
Acquisition of RCT Systems............... - (10,159,342)
Additions to property, plant and
equipment.............................. (3,265,515) (7,096,345)
Additions to cable television
franchises, net of retirements
and changes in other intangible
assets................................. (181,702) (497,906)
Net proceeds from the sale of assets..... 26,913 66,249
Net cash used in investing ___________ ___________
activities...................... (3,420,304) (79,491,350)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of senior
subordinated notes..................... - 125,000,000
Proceeds from long-term bank debt........ 4,000,000 9,500,000
Deferred loan costs...................... - (5,993,626)
Payments of long-term bank debt.......... (6,250,000) (77,000,000)
Partners' capital contributions.......... - 15,000,000
Net cash provided by (used in) ___________ ___________
financing activities. .......... (2,250,000) 66,506,374
___________ ___________
Net increase in cash.......... 94,259 1,398,032
Cash at beginning of period.............. 1,196,651 318,020
___________ ___________
Cash at end of period.................... $ 1,290,910 $ 1,716,052
=========== ===========
<FN>
(a) 1995 has been reflected on a pro forma basis to account for the
recapitalization discussed in Note 1.
See accompanying notes to financial statements RIFKIN ACQUISITION PARTNERS, L.L.L.P.
</TABLE>
<PAGE>
<TABLE>
RIFKIN ACQUISITION PARTNERS, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL(DEFICIT)
(UNAUDITED)
Three Months Ended June 30, 1995 and 1996
<CAPTION>
Preferred
Equity General Limited
Interest Partner Partners Total
__________ ___________ ____________ ____________
<S> <C> <C> <C> <C>
Beginning balance at 4/1/95.. $ - $ (579,672) $(87,022,190) $(87,601,862)
Net loss for the quarter
ended 6/30/95.............. - (24,716) (2,446,916) (2,471,632)
__________ ___________ ____________ ____________
Balance at 6/30/95........... $ - $ (604,388) $(89,469,106) $(90,073,494)
========== =========== ============ ============
Beginning balance at 4/1/96.. $ 537,254 $(1,012,042) $ 79,919,699 $ 79,444,911
Net loss for the quarter
ended 6/30/96.............. (35,144) (58,575) (5,763,714) (5,857,433)
Transfer to Redeemable
Partners' Interest......... - (44,000) (308,000) (352,000)
__________ __________ ___________ ____________
Balance at 6/30/96........... $ 502,110 $(1,114,617) $ 73,847,985 $ 73,235,478
========== =========== ============ ============
<FN>
See accompanying notes to financial statement.
</TABLE>
<PAGE>
<TABLE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
RIFKIN ACQUISITION PARTNERS, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL(DEFICIT)
(UNAUDITED)
Six Months Ended June 30, 1995 and 1996
<CAPTION>
Preferred
Equity General Limited
Interest Partner Partners Total
_________ ___________ ____________ ____________
<S> <C> <C> <C> <C>
Beginning balance at 1/1/95.. $ - $ (554,220) $(84,502,476) $(85,056,696)
Net loss for the six months
ended 6/30/95.............. - (50,168) (4,966,630) (5,016,798)
_________ ___________ ____________ ____________
Balance at 6/30/95........... - $ (604,388) $(89,469,106) $(90,073,494)
========= =========== ============ ============
Beginning balnce at 1/1/96... $ 562,293 $(1,085,311) $ 69,421,043 $ 68,898,025
Net loss for the six months
ended 6/30/96.............. (60,183) (100,306) (9,870,058) $(10,030,547)
Partners' contributions...... - 150,000 14,850,000 15,000,000
Transfer to Redeemable
Partners' Interest......... - (79,000) (553,000) (632,000)
_________ ___________ ____________ ____________
Balance at 6/30/96........... $ 502,110 $(1,114,617) $ 73,847,985 $ 73,235,478
========= =========== ============ ============
<FN>
See accompanying notes to financial statement.
</TABLE>
<PAGE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General Information and Transfer of Net Assets
Rifkin Acquisition Partners, L.P. ("RAP L.P.") was formed on
December 16, 1988, pursuant to the laws of the State of Colorado,
for the purpose of acquiring and operating cable television
(CATV) systems. On September 1, 1995, RAP L.P. registered as a
limited liability limited partnership, Rifkin Acquisition
Partners, L.L.L.P. (the "Partnership"), pursuant to the laws of
the State of Colorado. Rifkin Acquisition Management, L.P., was
the general partner of RAP L.P. and is the general partner of the
Partnership ("General Partner"). The Partnership and its
subsidiaries are hereinafter referred to on a consolidated basis
as the "Company."
The Partnership operates under a limited liability limited
partnership agreement (the "Partnership Agreement") which
establishes contribution requirements, enumerates the rights and
responsibilities of the partners and advisory committee, provides
for allocations of income, losses and distributions, and defines
certain items relating thereto.
On September 1, 1995, unrelated third party investors purchased
the interest of certain limited partners in RAP L.P. and
contributed additional equity for an approximate 89% limited
partner interest. In addition, existing RAP L.P. limited and
general partner interests were carried over and additional equity
contributed for 10% and 1%, respectively (the "Carryover
Interests"). Further, on September 1, 1995, RAP L.P. was renamed
Rifkin Acquisition Partners, L.L.L.P. and a new basis of
accounting was established.
This form 10-Q is being filed in conformity with the SEC
requirements for unaudited consolidated financial statements for
the Company and does not contain all of the necessary footnote
disclosures required for a fair presentation of the balance
sheets, statements of operations, of partners' capital(deficit),
and of cash flows in conformity with generally accepted
accounting principles. However, in the opinion of management,
this data includes all adjustments, consisting only of normal
recurring accruals, necessary to present fairly the Company's
consolidated financial position at June 30, 1996, and its
consolidated results of operations and cash flows for the three
months and six months ended June 30, 1995 and 1996. As a result
of the recapitalization of the Company, the consolidated
statements of operations and cash flows for the three months and
six months ended June 30, 1995 are shown on a pro forma basis to
reflect the recapitalization as if it had occurred on December
31, 1994. The consolidated financial statements should be read
in conjunction with the Company's annual consolidated financial
statements and notes thereto included on Form S-1, No. 333-3084,
for the year ended December 31, 1995. The results of operations
for the three months and six months ended June 30, 1996 may not
be indicative of the results for the year ending December 31,
1996.
2. Acquisition of Cable Properties
On March 1, 1996, the Company acquired certain cable operating
assets ("Mid-Tennessee Systems") from Mid-Tennessee CATV, L.P.,
and on April 1, 1996 acquired certain cable operating assets
("RCT Systems") from Rifkin Cablevision of Tennessee, Ltd. Both
Mid-Tennessee CATV, L.P. and Rifkin Cablevision of Tennessee,
Ltd. are affiliates of the General Partner. The acquisition
costs were funded by $15 million of additional partner
contributions and the remainder from a portion of the proceeds
received from the issuance of $125 million of 11 1/8% Senior
Subordinated Notes due 2006 (see note 3).
The acquisitions were accounted for using the purchase method of
accounting. The results of operations of the Mid-Tennessee
Systems have been included in the consolidated financial
statements since March 1, 1996, and the results of the RCT
Systems have been included in the consolidated financial
statements since April 1, 1996. The purchase price of each was
allocated, based on estimated fair values from an independent
appraisal, to property, plant and equipment and franchise cost as
follows (dollars in thousands):
Mid-Tennessee RCT
Systems Systems
_____________ _______
Cash paid.................. $61,715 $ 9,756
Acquisition costs (appraisal, transfer fees, and other
direct costs).......... 92 27
Working capital assumed.... (3) 376
_______ _______
Total acquisition cost..... $61,804 $10,159
======= =======
Allocation:
Property, plant and equipment. $18,046 $ 5,986
Franchise cost and other
intangible assets...... 43,758 4,173
_______ _______
Total cost allocated........ $61,804 $10,159
======= =======
The following unaudited pro forma information presents a summary of
consolidated results of operations for the Company as if the Mid-
Tennessee and RCT Systems acquisition had occurred at the beginning
of 1995, with pro forma adjustments to show the effect on
depreciation and amortization for the acquired assets, management
fees on additional revenues and interest expense on additional debt
(dollars in thousands):
Three Mos Ended Six Mos Ended
June 30 June 30
__________________ _________________
1995 1996 1995 1996
__________________ _________________
Total revenues....... $16,370 $18,304 $31,867 $36,847
Net Loss............. (5,959) (5,857) (12,512) (10,957)
The pro forma financial information is not necessarily indicative
of the operating results that would have occurred had the Mid-
Tennessee Systems and the RCT Systems actually been acquired on
January 1, 1995.
3. Senior Subordinated Notes
On January 26, 1996, the Company and its wholly-owned subsidiary,
Rifkin Acquisition Capital Corp (RAC), co-issued a $125 million
aggregate principal amount of 11 1/8% Senior Subordinated Notes
("the Notes") to institutional investors. On May 13, 1996, these
notes were registered with the Securities and Exchange
Commission. Interest on the Notes is payable in cash, semi-
annually on January 15 and July 15 of each year, commencing on
July 15, 1996. The Notes, which mature on January 15, 2006, can
be redeemed in whole or in part, at the Issuers' option, at any
time on or after January 15, 2001, at redeemable prices contained
in the Notes plus accrued interest. In addition, at any time on
or prior to January 15, 1999, the Issuers, at their option, may
redeem up to 25% of the principle amount of the notes issued to
institutional investors of not less than $25 million. At June
30, 1996, the Senior Subordinated Notes had a balance of $125
million.
<PAGE>
<TABLE>
RIFKIN ACQUISITION CAPITAL CORP.
BALANCE SHEET (UNAUDITED)
June 30, 1996
<CAPTION>
ASSETS
<S> <C>
Cash................................................................ $1,000
______
Total Assets.................................................. $1,000
======
STOCKHOLDER'S EQUITY
Stockholder's Equity
Common Stock; $1.00 par value; 10,000 shares authorized,
1000 shares issued and outstanding.......................... $1,000
______
Total Stockholder's equity................................ $1,000
======
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
RIFKIN ACQUISITION CAPITAL CORP.
NOTES TO BALANCE SHEET
1. Organization and Summary of Significant Accounting Policies
Organization
Rifkin Acquisition Capital Corp. ("RAC"), a Colorado
corporation, was formed on January 24, 1996, as a wholly-owned
subsidiary of Rifkin Acquisition Partners, L.L.L.P. (the
"Partnership") for the purpose of co-issuing, with the
Partnership, $125.0 million in Senior Subordinated Notes ("the
Notes") used to repay advances under the Partnership's
term debt and to fund the Partnership's expected acquisitions of
certain cable television systems. Although the Notes were
structured to be co-issued, Notes were not issued by RAC.
RAC does not and is not expected to have operations other than
that which is related to its purpose as co-issuer.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
In August 1995, Rifkin Acquisition Partners, L.L.L.P. (the
"Company") effected a recapitalization in which a group led by
VS&A Communications Partners II, L.P. and further comprised of
Greenwich Street (RAP) Partners I, L.P., IEP Holdings I LLC and
Paine Webber Capital, Inc. acquired the interests of certain
limited partners in Rifkin Acquisition Partners, L.P. (the
"Predecessor"). Concurrently, all of the Predecessor's debt was
repaid and the Company entered into a new credit agreement (the
"Credit Agreement") with a syndicate of banks. In addition, in
January 1996, the Company completed the issuance of $125 million
of 11 % Senior Subordinated Notes due 2006 ("Notes") and amended
its Credit Agreement to provide ongoing borrowing availability,
including availability to finance acquisitions.
The recapitalization was accounted for using the purchase method
of accounting, resulting in the restatement of the Company's
assets and liabilities to fair market value as of September 1,
1995. In the discussion of operations which follows, the
Company's results of operations for the three months and six
months ended June 30, 1995 are reflected on a pro forma basis to
account for the recapitalization as if it had occurred on
December 31, 1994.
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO PRO FORMA THREE
MONTHS ENDED JUNE 30, 1995
Revenue increased 45.4%, or approximately $5.7 million, to
approximately $18.3 million for the three months ended June 30,
1996 from approximately $12.6 million for the three months ended
June 30, 1995. This increase resulted from the following: (a)
approximately $1.5 million from growth in basic subscribers and
increases in basic and tier rates, (b) approximately $3.2 million
in total revenue as a result of the March 1, 1996 acquisition of
cable systems serving Hickory Hill, Lebanon and McMinnville,
Tennessee (the "Mid-Tennessee Acquisition"), and (c)
approximately $1.0 million in total revenue as a result of the
April 1, 1996 acquisition of cable systems serving Fayetteville,
Lawrenceburg and Pulaski, Tennessee (the "RCT Acquisition").
Basic subscribers increased 42.7% to approximately 181,200 at
June 30, 1996 from approximately 127,000 at June 30, 1995. This
increase was attributable to the approximate 33,500 subscribers
acquired in the Mid-Tennessee Acquisition, the approximate 12,200
subscribers acquired in the RCT Acquisition, along with the
continued growth in the Georgia (4,800) and Tennessee (2,200)
systems. Average monthly revenue per subscriber increased 5.4%
from $33.23 for the three months ended June 30, 1995 to $35.02
for 1996. Premium service units increased 34.0% to 106,800 as of
June 30, 1996, from 79,700 as of June 30, 1995, largely as a
result of the Mid-Tennessee Acquisition (20,900), the RCT
Acquisition (6,900), and the Company's promotion of discounted
premium service packages designed to enhance subscriber value and
enable the Company to take advantage of programming cost
incentives based on premium service unit growth. The Company's
premium penetration decreased to 58.9% from 62.7% between the
comparable periods in 1996 and 1995 due mainly to decreased
premium penetrations in Tennessee as a result of moving the
Disney Channel from premium to tier in certain of its systems.
Operating expense, which includes costs related to technical
personnel, franchise fees and repairs and maintenance, increased
64.3%, or approximately $1.0 million to approximately $2.7
million for the three months ended June 30, 1996 from
approximately $1.6 million in 1995, and increased as a percentage
of revenue to 14.7% from 13.0% due to labor and benefit costs
increasing at a slightly faster rate than revenue. Approximately
$500,000 and $100,000 of the increase relates to the operating
expense of the acquired systems in the Mid-Tennessee Acquisition
and RCT Acquisition, respectively.
Programming expense, which includes costs related to basic, tier
and premium services, increased 52.7%, or approximately $1.3
million, to approximately $3.9 million for the three months ended
June 30, 1996 from approximately $2.5 million for the three
months ended June 30, 1995, and increased as a percentage of
revenue to 21.1% from 20.1%. Approximately $700,000 and $300,000
of the increase relates to the programming expenses of the
acquired systems in the Mid-Tennessee Acquisition and RCT
Acquisition, respectively.
Selling, general and administrative expense, which includes
expenses related to on-site office and customer-service
personnel, customer billing and postage and marketing, increased
63.1%, or approximately $1.1 million to approximately $2.8
million for the three months ended June 30, 1996 from $1.7
million for the same period in 1995. As a percentage of revenue,
selling, general and administrative expense increased to 15.1%
for the three months ended June 30, 1996 from 13.5% for the same
period in 1995. Approximately $200,000 of the increase resulted
from the provision for the management incentive plan which became
effective January 1, 1996 and approximately $100,000 of the
increase resulted from increases in personnel and related
benefits costs, while approximately $500,000 and $200,000 related
to the selling, general and administrative expense of the
acquired systems in the Mid-Tennessee Acquisition and RCT
Acquisition, respectively.
Depreciation and amortization expense of approximately $9.2
million for the three months ended June 30, 1996 increased
approximately $3.2 million from pro forma depreciation and
amortization expense for the same period in 1995. The increases
in depreciation resulted primarily from increases of
approximately $1.5 million in the second quarter of 1995 and
approximately $4.1 million in the comparable period in 1996 in
property, plant and equipment. The increases in amortization
expense resulted primarily from the additional amortization
related to the Mid-Tennessee Acquisition and RCT Acquisition,
respectively. As a percentage of revenue, depreciation and
amortization expenses increased to 50.5% in the second quarter of
1996 from 47.9% in the comparable period in 1995.
Management fees, equal to 3.5% of gross revenue, increased to
approximately $600,000 in the second quarter of 1996 from pro
forma management fees of approximately $400,000 in the
comparable period of 1995, due to the increase in the Company's
revenue as a result of rate increases as well as the Mid-
Tennessee Acquisition and RCT Acquisition, respectively.
The loss on disposal of assets, primarily the write-off of
replaced house drops and rebuilt trunk and distribution
equipment, increased to approximately $400,000 in the second
quarter of 1996 from approximately $100,000 in the second quarter
of 1995.
Interest expense in the second quarter of 1996 increased by
approximately $2.3 million or 72.4% over pro forma interest for
the same period in 1995 and increased as a percentage of revenue
from 25.1% to 29.7%. Interest expense was based on an average
debt balance of approximately $196.3 million with an average
interest rate of 11.1% and an average debt balance $138.0 million
with an average interest rate of 9.1% for the second quarters of
1996 and 1995, respectively. This increase was primarily a
result of the issuance of the Notes on January 26, 1996 with
proceeds being held in escrow until March 1, 1996, pending the
completion of the Mid-Tennessee Acquisition. The release of the
Note proceeds from escrow resulted in the reduction of the
revolver portion of the Credit Agreement of approximately $66.0
million.
The Company is a "pass-through" entity for income tax purposes.
All income or loss flows through to the partners of the Company
in accordance with the Partnership Agreement. An income tax
benefit of approximately $900,000 was recorded for the three
months ended June 30, 1996 compared to an income tax benefit of
approximately $400,000 for the comparable period in 1995 on a pro
forma basis and relates to deferred income taxes recorded as a
result of the non-cash tax liability of the Company's corporate
subsidiaries in conjunction with the application of Financial
Accounting Standard No. 109 (FAS 109), "Accounting for Income
Taxes."
As a result of the factors discussed above, net loss increased
123.9%, or approximately $3.2 million in the three months ended
June 30, 1996 compared to the comparable period of 1995.
Adjusted EBITDA, defined as income (loss) before interest
expense, income taxes, depreciation and amortization, loss on
disposal of assets, non-recurring interest income (related to the
escrowed Notes proceeds) and the non-cash provision for the
management incentive plan increased 35.8%, or approximately $2.2
million, to approximately $8.5 million in 1996 from a pro forma
$6.3 million in 1995. As a percentage of revenue, Adjusted
EBITDA decreased to 46.6% in the second quarter of 1996 from
49.9% in the comparable period in 1995 as the impact of the
Company's percentage expense growth out paced the percentage
revenue growth. Industry analysts generally consider Adjusted
EBITDA to be an appropriate measure of the performance of multi-
channel television operations. Adjusted EBITDA is not presented
in accordance with generally accepted accounting principles and
should not be considered an alternative to, or more meaningful
than, operating income or operating cash flow as an indication of
the Company's operating performance.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO PRO FORMA SIX MONTHS
ENDED JUNE 30, 1995
Revenue increased 38.4% or approximately $9.4 million, to
approximately $33.8 million for the six months ended June 30,
1996 from approximately $24.4 million for the three months ended
June 30, 1995. This increase resulted from the following: (a)
approximately $3.5 million from growth in basic subscribers and
increases in basic and tier rates, (b) approximately $4.3 million
in total revenue as a result of the March 1, 1996 Mid-Tennessee
Acquisition, (c) approximately $1.0 million in total revenue as
a result of the April 1, 1996 RCT Acquisition, and (d)
approximately $600,000 in non-recurring interest income related
to the escrowed Notes proceeds. Basic subscribers increased
42.7% to approximately 181,200 at June 30, 1996 from
approximately 127,000 at June 30, 1995. This increase was
attributable to the approximate 33,500 subscribers acquired in
the Mid-Tennessee Acquisition, the approximate 12,200 subscribers
acquired in the RCT Acquisition, along with the continued growth
in the Georgia (4,800) and Tennessee (2,200) systems. Average
monthly revenue per subscriber increased 10.9% from $32.40 for
the six months ended June 30, 1995 to $35.93 for 1996. Premium
service units increased 34.0% to 106,800 as of June 30 1996 from
79,700 as of June 30, 1995, largely as a result of the Mid-
Tennessee Acquisition (20,900), the RCT Acquisition (6,900) and
the Company's promotion of discounted premium service packages
designed to enhance subscriber value and enable the Company to
take advantage of programming cost incentives based on premium
service unit growth. The Company's premium penetration decreased
to 58.9% from 62.7% between comparable periods in 1996 and 1995
due mainly to decreased premium penetrations in Tennessee as a
result of moving the Disney Channel from premium to tier in
certain of its systems.
Operating expense, which includes costs related to technical
personnel, franchise fees and repairs and maintenance, increased
37.4%, or approximately $1.3 million to approximately $4.9
million for the six months ended June 30, 1996 from approximately
$3.6 million in 1995, but decreased as a percentage of revenue
to 14.5% from 14.6% due to the impact of basic and tier revenue
rate increases effected in early 1996. Approximately $600,000
and $100,000 of the increase relates to the operating expense of
the acquired systems in the Mid-Tennessee Acquisition and RCT
Acquisition, respectively.
Programming expense, which includes costs related to basic, tier
and premium services, increased 40.8%, or approximately $2.0
million, to approximately $7.0 million for the six months ended
June 30, 1996 from approximately $5.0 million for the six months
ended June 30, 1995, and increased as a percentage of revenue to
20.6% from 20.3%. The respective approximate amounts of $900,000
and $300,000 of the increase relates to the programming expenses
of the acquired systems in the Mid-Tennessee Acquisition and RCT
Acquisition, respectively.
Selling, general and administrative expense, which includes
expenses related to on-site office and customer-service
personnel, customer billing and postage and marketing, increased
44.4%, or approximately $1.5 million, to approximately $4.8
million for the six months ended June 30, 1996 from $3.4 million
for the same period in 1995. As a percentage of revenue,
selling, general and administrative expense increased to 14.3%
for the six months ended June 30, 1996 from 13.7% for the same
period in 1995. Approximately $350,000 of the increase resulted
from the provision for the management incentive plan which became
effective January 1, 1996 and approximately $300,000 of the
increase resulted from increases in personnel and related
benefits costs, while approximately $600,000 and $200,000,
related to the selling, general and administrative expense of the
acquired systems in the Mid-Tennessee Acquisition and RCT
Acquisition, respectively.
Depreciation and amortization expense of approximately $16.5
million for the six months ended June 30, 1996 increased
approximately $4.5 million from pro forma depreciation and
amortization expense for the same period in 1995. The increases
in depreciation resulted primarily from increases of
approximately $3.3 million in first six months of 1995 and
approximately $7.1 million in the comparable period in 1996 in
property, plant and equipment. The increases in amortization
expense resulted primarily from the additional amortization
related to the Mid-Tennessee Acquisition and RCT Acquisition. As
a percentage of revenue, depreciation and amortization expenses
decreased to 48.9% in the first half of 1996 from 49.2% in the
comparable period in 1995.
Management fees, equal to 3.5% of gross revenue, increased to
approximately $1.2 million in the first half of 1996 from pro
forma management fees of approximately $900,000 in the comparable
period of 1995, due to the increase in the Company's revenue as a
result of rate increases as well as the Mid-Tennessee Acquisition
and RCT Acquisition.
The loss on disposal of assets, primarily the write-off of
replaced house drops and rebuilt trunk and distribution
equipment, increased to approximately $600,000 in the first half
of 1996 from approximately $100,000 in the first half of 1995.
Interest expense in the first half of 1996 increased by
approximately $4.3 million or 67.9% over pro forma interest for
the same period in 1995 and increased as a percentage of revenue
from 25.9% to 31.4%. Interest expense was based on an average
debt balance of approximately $205.8 million with average
interest rate of 10.3% and an average debt balance of $138.0
million with average interest rate of 9.1% for the first half of
1996 and 1995, respectively. This increase was primarily a
result of the issuance of the Notes on January 26, 1996 with
proceeds being held in escrow until March 1, 1996, pending the
completion of the Mid-Tennessee Acquisition. The release of the
Note proceeds from escrow resulted in the reduction of the
revolver portion of the Credit Agreement of approximately $66.0
million.
The Company is a "pass-through" entity for income tax purposes.
All income or loss flows through to the partners of the Company
in accordance with the Partnership Agreement. An income tax
benefit of approximately $1.8 million was recorded for the six
months ended June 30, 1996 compared to an income tax benefit of
approximately $900,000 for the comparable period in 1995 on a pro
forma basis and relates to deferred income taxes recorded as a
result of the non-cash tax liability of the Company's corporate
subsidiaries in conjunction with the application of Financial
Accounting Standard No. 109 (FAS 109), "Accounting for Income
Taxes."
As a result of the factors discussed above, net loss increased
80.0%, or approximately $4.7 million in the six months ended June
30, 1996 compared to the comparable period of 1995.
Adjusted EBITDA, defined as income (loss) before interest
expense, income taxes, depreciation and amortization, loss on
disposal of assets, non-recurring interest income related to the
escrowed Notes proceeds) and the non-cash provision for the
management incentive plan increased 34.4%, or approximately $4.0
million, to approximately $15.7 million in 1996 from a pro forma
$11.7 million in 1995. As a percentage of revenue, Adjusted
EBITDA decreased to 46.5% in the first half of 1996 from 47.9% in
the comparable period in 1995 as the impact of the Company's
percentage expense growth slightly out paced the percentage
revenue growth. Industry analysts generally consider Adjusted
EBITDA to be an appropriate measure of the performance of multi-
channel television operations. Adjusted EBITDA is not presented
in accordance with generally accepted accounting principles and
should not be considered an alternative to, or more meaningful
than, operating income or operating cash flow as an indication of
the Company's operating performance.
LIQUIDITY AND CAPITAL RESOURCES
The Company has relied upon cash generated by operations,
borrowing and equity contributions to fund capital expenditures
and acquisitions, service its indebtedness and finance its
working capital needs. During the comparable three month periods
ended June 30, 1996 and 1995, net cash provided by operations
(including changes in working capital) of the Company was
approximately $8.5 million and $3.1 million, respectively.
During the comparable six month periods ended June 30, 1996 and
1995, net cash provided by operations (including changes in
working capital) of the Company was approximately $14.4 million
and $5.8 million, respectively.
From December 31, 1995, the Company's available cash increased
from approximately $300,000 to approximately $1.7 million. For
the same comparable dates, accounts payable and accrued
liabilities increased by approximately $2.8 million to
approximately $8.7 million, due primarily to the liabilities and
accruals related to the systems acquired in the Mid-Tennessee and
RCT Acquisitions. Interest payable increased from approximately
$100,000 to approximately $6.2 million for the same comparable
dates due primarily to the increased debt level as well as the
effect of the timing of payments. Also, for the same comparable
dates, deferred taxes payable decreased approximately $1.8
million to approximately $19.3 million as a result of differences
in book and tax depreciation and amortization lives and methods.
Notes payable increased by $57.5 million from December 31, 1995
to June 30, 1996 due to the January 26, 1996 issuance of the
Notes offset by the paydown of the revolver portion of the Credit
Agreement.
In order to improve liquidity and increase financial flexibility,
the Company completed its recapitalization in August 1995. In
connection with the recapitalization, the Company obtained $41.6
million in new equity, made initial borrowings of $138 million
under the Credit Facility and assumed $3 million of subordinated
debt. The proceeds of such debt and equity financings were used
to refinance or repay all of the Company's indebtedness and
provide ongoing liquidity for the Company.
Additionally, in conjunction with the issuance of the Notes, the
partners of the Company contributed an additional $15 million of
equity.
The Company has increased its total consolidated debt to $195
million as of June 30, 1996 from $137.5 million at December 31,
1995. The Company has unused commitments under the Amended and
Restated Credit Agreement of $78.0 million, $18.0 million of
which is available for general corporate purposes. Access to the
remaining $60 million of availability under the Amended and
Restated Credit Agreement for general corporate purposes or
Permitted Acquisitions (as defined in the Amended and Restated
Credit Agreement) is subject to the Company's compliance with all
covenants in such facility and the Company's Total Funded Debt
Ratio (defined as the ratio of funded indebtedness of the Company
to annualized Adjusted EBITDA based on the most recent quarter)
being below 6.25x. As of June 30, 1996, the Company's Total
Funded Debt Ratio was 5.75. Interest payments on the Notes and
interest and principal payments under the Amended and Restated
Credit Agreement represent significant liquidity requirements for
the Company. The Amended and Restated Credit Agreement provides
for two term loan facilities in a total amount of $65 million.
Term Loan A in the amount of $25 million, matures on March 31,
2003 and begins amortizing on March 31, 2000. Term Loan B in the
amount of $40 million, matures March 31, 2004 and begins
amortizing March 31, 2002. The Amended and Restated Credit
Agreement also provides for an $80 million reducing revolving
facility with a final maturity date of March 31, 2003. The
revolving facility will be subject to permanent annual commitment
reductions commencing in 1997. Borrowings under the Amended and
Restated Credit Agreement will bear interest at floating rates
and will require interest payments on various dates depending
upon the interest rate options selected by the Company.
In addition to its debt service obligations, the Company will
require liquidity for capital expenditures and working capital
needs. The cable television business requires substantial
financing for construction, expansion and maintenance of plant
and the Company has committed substantial capital resources to
(i) expand its cable systems; (ii) conduct routine replacement of
cable television plant; and (iii) increase the channel capacity
of certain systems.
The Company expects that cash flow from operating activities and
available borrowings will be sufficient to meet its debt service
obligations, anticipated capital expenditure requirements and
working capital needs for the next twelve months, as well as
through the maturity date of the Notes.
The Amended and Restated Credit Agreement and the Indenture
restrict, among other things, the Company's and the Subsidiary
Guarantors' ability to incur additional indebtedness, incur
liens, pay distributions or make certain other restricted
payments, consummate certain asset sales, enter into certain
transactions with affiliates, merge or consolidate with any other
person or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of the assets of the Company.
The Amended and Restated Credit Agreement also requires the
Company to maintain specified financial ratios and satisfy
certain financial condition tests. The obligations under the
Amended and Restated Credit Agreement are secured by (i) a pledge
of all of the equity interest of the Company's subsidiaries and
(ii) subject to certain exceptions, a perfected first priority
security interest in all tangible and intangible assets.
<PAGE>
<TABLE>
PART II. FINANCIAL INFORMATION
ITEM 5. Other Information
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
REVENUE AND OPERATING CASH FLOW REPORT
(UNAUDITED)
Three Months Ended June 30, 1995 and 1996
<CAPTION>
REVENUES:
1995 1996
___________ ___________
<S> <C> <C>
Georgia................................ $ 4,962,961 $ 5,630,730
Illinois............................... 2,206,667 2,359,495
Michigan............................... 967,641 1,046,437
RTL-Tennessee.......................... 4,445,655 4,976,633
RAP-Tennessee.(3)...................... - 4,248,249
Other(2)............................... 843 42,113
___________ ___________
Total............................... $12,583,767 $18,303,657
=========== ===========
OPERATING CASH FLOW(1):
Georgia................................ $ 2,577,354 $ 2,871,409
Illinois............................... 1,186,387 1,129,489
Michigan............................... 498,679 500,815
RTL-Tennessee.......................... 2,508,994 2,684,394
RAP-Tennessee.(3)...................... - 1,963,450
Other.................................. (49,530) 22,534
___________ ___________
Total............................... $ 6,721,884 $ 9,172,091
=========== ===========
OPERATING CASH FLOW AS A PERCENT OF REVENUES:
Georgia................................ 51.9% 51.0%
Illinois............................... 53.8% 47.9%
Michigan............................... 51.5% 47.9%
RTL-Tennessee.......................... 56.4% 53.9%
RAP-Tennessee.(3)...................... - 46.2%
Total (excluding other)............. 53.8% 50.1%
<FN>
(1) Excludes management fee expense of $440,390 and $640,628 and net losses related to the
disposition of certain plant assets of $91,617 and $449,013 for the three months ended
June 30, 1995 and 1996, respectively, and non-cash management incentive plan expense of
$184,998 for the three months ended June 30, 1996.
(2) Principally interest income.
(3) Activity relates to the Mid-Tennessee Systems acquired on March 1, 1996 and the RCT
Systems acquired on April 1, 1996.
</TABLE>
<PAGE>
<TABLE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
REVENUE AND OPERATING CASH FLOW REPORT
(UNAUDITED)
Six Months Ended June 30, 1995 and 1996
<CAPTION>
REVENUES:
1995 1996
___________ ___________
<S> <C> <C>
Georgia................................ $ 9,497,116 $11,127,764
Illinois............................... 4,362,847 4,738,250
Michigan............................... 1,897,276 2,098,406
RTL-Tennessee.......................... 8,644,423 9,862,499
RAP-Tennessee.(3)...................... - 5,306,781
Other(2)............................... 1,956 652,687
___________ ___________
Total............................... $24,403,618 $33,786,387
OPERATING CASH FLOW(1):
Georgia................................ $ 4,739,237 $ 5,689,322
Illinois............................... 2,284,612 2,341,213
Michigan............................... 941,056 1,036,561
RTL-Tennessee.......................... 4,628,467 5,237,683
RAP-Tennessee.(3)...................... - 2,491,265
Other.................................. (59,619) 624,691
___________ ___________
Total............................... $12,533,753 $17,420,735
=========== ===========
OPERATING CASH FLOW AS A PERCENT OF REVENUES:
Georgia................................ 49.9% 51.1%
Illinois............................... 52.4% 49.4%
Michigan............................... 49.6% 49.4%
RTL-Tennessee.......................... 53.5% 53.1%
RAP-Tennessee.(3)...................... - 46.9%
Total (excluding other)............. 51.6% 50.7%
<FN>
(1) Excludes management fee expense of $854,034 and $1,162,914 and net losses related to
the disposition of certain plant assets of $133,051 and $589,258 for the six months
ended June 30, 1995 and 1996, respectively, and non-cash management incentive plan
expense of $349,998 for the six months ended June 30, 1996.
(2) Principally interest income. In addition, 1996 includes interest income from Senior
Subordinated Notes proceeds held in escrow from January 31, 1996 through March 1, 1996,
totalling $560,265.
(3) Activity relates to the Mid-Tennessee Systems acquired on March 1, 1996 and the RCT
Systems acquired on April 1, 1996.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, as amended,
the Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the
City of Denver, State of Colorado, as of August 14, 1996.
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
By: Rifkin Acquisition Management, L.P.
a Colorado limited partnership, its
general partner
By: RT Investments Corp., a Colorado
corporation, its general partner
By: /s/ Dale D. Wagner
______________________________________
Dale D. Wagner
Its: Vice President & Assistant
Treasurer (Principal Financial
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001011701
<NAME> RIFKIN ACQUISITION CAPITAL CORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,716
<SECURITIES> 0
<RECEIVABLES> 1,085
<ALLOWANCES> 351
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 107,582
<DEPRECIATION> 8,071
<TOTAL-ASSETS> 307,823
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 195,000
0
0
<COMMON> 0
<OTHER-SE> 77,467
<TOTAL-LIABILITY-AND-EQUITY> 307,823
<SALES> 0
<TOTAL-REVENUES> 33,786
<CGS> 0
<TOTAL-COSTS> 34,405
<OTHER-EXPENSES> 589
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,594
<INCOME-PRETAX> (11,802)
<INCOME-TAX> (1,771)
<INCOME-CONTINUING> (10,031)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,031)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>The amount shown for current assets and current liabilities is
zero due to an unclassified balance sheet in the financial
statements.
</FN>
</TABLE>
