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 September 30, 1997.
Commission file number: (S-1) 333-3084
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
RIFKIN ACQUISITION CAPITAL CORP.
(Exact name of registrant as specified in its charter.)
Colorado 84-1317717
Colorado 84-1341424
(State of Incorporation)(I.R.S. Employer Identification No.)
360 South Monroe St., Suite 600
Denver, Colorado 80209
(Address of principal executive offices)(zip code)
Registrant's Telephone Number: (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.
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............ 7
d. Consolidated Statement of Partners' Capital
(Deficit)...................................... 9
e. Notes to Consolidated Financial Statements...... 11
Rifkin Acquisition Capital Corp.
a. Balance Sheet................................... 13
b. Notes to Balance Sheet.......................... 14
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 15
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.......... 21
Item 6. Exhibits and Reports on Form 8-K--(none)
Signatures.................................................. 23
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
<TABLE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<CAPTION>
Three Months Ended
September 30,
1997 1996
<S> <C> <C>
Revenue:
Service................................ $20,021,657 $17,498,967
Installation and other................. 1,436,465 1,146,782
Total revenue 21,458,122 18,645,749
Costs and Expenses:
Operating expense...................... 3,792,107 2,695,345
Programming expense.................... 4,669,012 3,837,395
Selling, general and administrative
expense.............................. 2,551,723 2,891,333
Depreciation and amortization.......... 9,767,522 9,331,709
Management fees........................ 751,033 652,602
Loss on disposal of assets............. 2,704,207 195,360
Total costs and expenses......... 24,235,604 19,603,744
Operating loss......................... (2,777,482) (957,995)
Interest expense....................... 6,123,146 5,501,220
Loss before income taxes............... (8,900,628) (6,459,215)
Income tax benefit..................... (774,000) (783,719)
Net loss............................... $(8,126,628) $(5,675,496)
Adjusted EBITDA........................ $ 9,884,246 $ 8,744,073
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<CAPTION>
Nine Months Ended
September 30,
1997 1996
<S> <C> <C>
Revenue:
Service................................ $ 58,347,858 $ 48,764,840
Installation and other................. 3,778,003 3,667,296
Total revenue 62,125,861 52,432,136
Costs and Expenses:
Operating expense...................... 10,683,440 7,591,555
Programming expense.................... 13,650,763 10,813,312
Selling, general and administrative
expense.............................. 8,218,367 7,734,856
Depreciation and amortization.......... 29,136,224 25,858,464
Management fees........................ 2,174,405 1,815,516
Loss on disposal of assets............. 5,077,721 784,618
Total costs and expenses......... 68,940,920 54,598,321
Operating loss......................... (6,815,059) (2,166,185)
Interest expense....................... 17,631,516 16,094,577
Loss before income taxes............... (24,446,575) (18,260,762)
Income tax benefit..................... (3,432,000) (2,554,719)
Net loss............................... $(21,014,575) $(15,706,043)
Adjusted EBITDA........................ $ 28,068,879 $ 24,441,629
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED BALANCE SHEET
<CAPTION>
September 30, December 31,
1997 1996
(Unaudited)
<S> <C> <C>
ASSETS
Cash.................................... $ 2,234,780 $ 1,387,232
Subscriber accounts receivable,
net of allowance for doubtful
accounts of $397,536 in 1997
and $381,197 in 1996.................. 1,198,623 1,184,074
Other receivables....................... 3,512,758 2,622,375
Prepaid expenses and other.............. 1,675,239 1,776,272
Property, plant and equipment at cost:
Cable television transmission and
distribution systems and related
equipment........................... 129,903,938 110,600,391
Land, building, vehicles and
furniture and fixtures.............. 7,220,271 5,726,169
137,124,209 116,326,560
Less accumulated depreciation........... (23,854,082) (14,264,937)
Net property, plant and
equipment.................... 113,270,127 102,061,623
Franchise costs and other intangible
assets, net of accumulated
amortization of $47,437,542 in 1997
and $28,849,916 in 1996............... 186,065,104 190,801,885
Total assets................... $307,956,631 $299,833,461
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Accounts payable and accrued
liabilities........................... $ 12,717,718 $ 9,937,238
Subscriber deposits and prepayments..... 1,494,015 1,272,279
Interest payable........................ 3,851,790 6,784,261
Deferred taxes payable.................. 14,041,000 17,473,000
Notes payable........................... 231,000,000 198,500,000
Total liabilities.............. 263,104,523 233,966,778
Commitments
Redeemable partners' interests.......... 6,228,800 4,861,840
Partners' capital (deficit):
General partner....................... (1,690,370) (1,309,354)
Limited partners...................... 40,007,260 61,881,692
Preferred equity interest............. 306,418 432,505
Total partners' capital........ 38,623,308 61,004,843
Total liabilities and partners'
capital...................... $307,956,631 $299,833,461
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
<CAPTION>
September 30, September 30,
1997 1996
<S> <C> <C>
ASSETS
Cash................................... $ 2,234,780 $ 1,243,117
Subscriber accounts receivable,
net of allowance for doubtful
accounts of $397,536 in 1997
and $337,800 in 1996............... 1,198,623 1,054,397
Other receivables...................... 3,512,758 2,156,141
Prepaid expenses and other............. 1,675,239 1,549,287
Property, plant and equipment at cost:
Cable television transmission and
distribution systems and related
equipment.......................... 129,903,938 107,194,770
Land, building, vehicles and
furniture and fixtures............. 7,220,271 5,387,434
137,124,209 112,582,204
Less accumulated depreciation.......... (23,854,082) (11,152,610)
Net property, plant and equipment 113,270,127 101,429,594
Franchise costs and other intangible
assets, net of accumulated
amortization of 47,437,542 in 1997
and $22,457,616 in 1996............ 186,065,104 196,610,720
Total assets................. $307,956,631 $304,043,256
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Accounts payable and accrued
liabilities.......................... $ 12,717,718 $ 9,298,005
Subscriber deposits and prepayments.... 1,494,015 1,103,044
Interest payable....................... 3,851,790 3,286,225
Deferred taxes payable................. 14,041,000 18,564,000
Notes payable.......................... 231,000,000 200,000,000
Total liabilities............. 263,104,523 232,251,274
Commitments
Redeemable partners' interests....... 6,228,800 4,540,000
Partners' capital (deficit)
General partner...................... (1,690,370) (1,209,872)
Limited partners..................... 40,007,260 67,993,797
Preferred equity interest............ 306,418 468,057
Total partners' capital...... 38,623,308 67,251,982
Total liabilities and
partners' Capital.......... $307,956,631 $304,043,256
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED STATEMENT OF CASH FLOW (UNAUDITED)
<CAPTION>
Three Months Ended
September 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss................................. $(8,126,628) $(5,675,496)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization........ 9,767,522 9,331,709
Amortization of deferred loan cost... 247,440 247,247
Loss on disposal of fixed assets..... 2,704,207 195,360
Deferred tax benefit................. (774,000) (784,000)
Decrease in subscriber
accounts receivable................ 56,345 30,586
Increase in other receivables........ (282,749) (397,101)
Increase in prepaid
expenses and other................. (153,112) (554,719)
Increase in accounts payable
and accrued liabilities........... 376,537 594,690
Increase (decrease) in subscriber
deposits and prepayment............ 120,131 (21,922)
Decrease in interest
payable............................ (3,368,170) (2,893,142)
Net cash provided by operating
activities...................... 567,523 73,212
Cash flows from investing activities:
Additions to property, plant and
equipment.............................. (6,879,091) (5,296,563)
Additions to cable television
franchises, net of retirements
and changes in other intangible
assets................................. (166,269) (210,120)
Net proceeds from the sale of assets..... 89,890 49,883
Net cash used in investing
activities...................... (6,955,470) (5,456,800)
Cash flows from financing activities:
Proceeds from long-term bank debt........ 8,000,000 7,500,000
Deferred loan costs...................... - (89,347)
Payments of long term-bank debt.......... (1,000,000) (2,500,000)
Net cash provided by financing
activities...................... 7,000,000 4,910,653
Net increase (decrease) in cash.......... 612,053 (472,935)
Cash at beginning of quarter............. 1,622,727 1,716,052
Cash at end of quarter................... $ 2,234,780 $ 1,243,117
<FN>
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED STATEMENT OF CASH FLOW (UNAUDITED)
<CAPTION>
Nine Months Ended
September 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss................................. $(21,014,575) $(15,706,043)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization........ 29,136,224 25,858,464
Amortization of deferred loan cost... 742,320 723,313
Loss on disposal of fixed assets..... 5,077,721 784,618
Deferred tax benefit................. (3,432,000) (2,563,000)
Increase in subscriber
accounts receivable................ (14,549) (169,489)
Increase in other receivables........ (890,383) (613,474)
Decrease (increase) in prepaid
expenses and other................. 101,033 (625,058)
Increase in accounts payable
and accrued liabilities........... 2,780,480 3,430,421
Increase in subscriber deposits
and prepayment..................... 221,736 141,516
Increase (decrease) in interest
payable............................ (2,932,471) 3,194,952
Net cash provided by operating
activities...................... 9,775,536 14,456,220
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.............................. (27,211,002) (12,392,908)
Additions to cable television
franchises, net of retirements
and changes in other intangible
assets................................. (14,449,055) (708,026)
Net proceeds from the sale of assets..... 232,069 116,132
Net cash used in investing
activities...................... (41,427,988) (84,948,150)
Cash flows from financing activities:
Proceeds from issuance of Senior
subordinated notes..................... - 125,000,000
Proceeds from long-term bank debt........ 37,000,000 17,000,000
Deferred loan costs...................... - (6,082,973)
Payments of long term-bank debt.......... (4,500,000) (79,500,000)
Partners' capital contributions.......... - 15,000,000
Net cash provided by financing
activities...................... 32,500,000 71,417,027
Net increase in cash..................... 847,548 925,097
Cash at beginning of period.............. 1,387,232 318,020
Cash at end of period.................... $ 2,234,780 $ 1,243,117
<FN>
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
RIFKIN ACQUISTION PARTNERS, L.L.L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(UNAUDITED)
Three Months Ended September 30, 1997 and 1996
<CAPTION>
Preferred
Equity General Limited
Interest Partner Partners Total
<S> <C> <C> <C> <C>
Partners' capital (deficit)
at 6/30/97................ $ 355,177 $(1,648,183) $47,730,302 $46,437,296
Net loss for the quarter
ended 9/30/97............. (48,759) (81,267) (7,996,602) (8,126,628)
Decrement of redeemable
partners' interest........ - 39,080 273,560 312,640
Partners' capital (deficit)
at 9/30/97................ $ 306,418 $(1,690,370) $40,007,260 $38,623,308
Partners' capital (deficit)
at 6/30/96................ $ 502,110 $(1,114,617) $73,847,985 $73,235,478
Net loss for the quarter
ended 9/30/96............. (34,053) (56,755) (5,584,688) (5,675,496)
Accretion of redeemable
partners' interest........ - (38,500) (269,500) (308,000)
Partners' capital (deficit)
at 9/30/96................ $ 468,057 $(1,209,872) $67,993,797 $67,251,982
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
RIFKIN ACQUISTION PARTNERS, L.L.L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(UNAUDITED)
Nine Months Ended September 30, 1997 and 1996
<CAPTION>
Preferred
Equity General Limited
Interest Partner Partners Total
<S> <C> <C> <C> <C>
Partners' capital (deficit)
at 12/31/96............... $ 432,505 $(1,309,354) $61,881,692 $61,004,843
Net loss for the nine months
ended 9/30/97............. (126,087) (210,146) (20,678,342) (21,014,575)
Accretion of redeemable
partners' interest........ - (170,870) (1,196,090) (1,366,960)
Partners' capital (deficit)
at 9/30/97................ $ 306,418 $(1,690,370) $40,007,260 $38,623,308
Partners' capital (deficit)
at 12/31/95............... $ 562,293 $(1,085,311) $69,421,043 $68,898,025
Net loss for the nine months
ended 9/30/96............. (94,236) (157,061) (15,454,746) (15,706,043)
Partners' contributions..... - 150,000 14,850,000 15,000,000
Accretion of redeemable
partners' interest........ - (117,500) (822,500) (940,000)
Partners' capital (deficit)
at 9/30/96................ $ 468,057 $(1,209,872) $67,993,797 $67,251,982
<FN>
See accompanying notes to financial statement.
</TABLE>
<PAGE>
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 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 September 30, 1997, December 31,
1996 and September 30,1996, its consolidated results of operations for
the nine months and three months ended September 30, 1997 and 1996, and
its consolidated cash flows for the nine months ended September 30,
1997 and 1996. The consolidated financial statements should be read in
conjunction with the Company's annual consolidated financial statements
and notes thereto included on Form 10-K, No. 333-3084, for the year
ended 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 Cablevison of Tennessee, Ltd. were affiliates of the General
Partner. The acquisition cost was 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.
The acquisitions were accounted for using the purchase method of
accounting, and 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. <PAGE>
<PAGE>
2. Acquisition of Cable Properties (continued)
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 acquisitions had occurred at the beginning of
1996, 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):
Quarter ended Nine Months Ended
September 30, September 30
1997 1996 1997 1996
Total revenues............. $21,458 $18,645 $ 62,126 $ 55,492
Net loss................... (8,127) (5,675) (21,015) (16,632)
The pro forma financial information is not necessarily indicative of
the operating results that would have occurred had the Mid-Tennessee
and RCT Systems actually been acquired on January 1, 1996.
On April 1, 1997, the Company acquired the cable operating assets of
two cable systems serving the Tennessee communities of Shelbyville and
Manchester from Act V (the "Act V Systems"), for an aggregate purchase
price of approximately $19.7 million. The acquisition was funded by
proceeds from the Company's reducing revolving loan with a financial
institution.
<PAGE>
RIFKIN ACQUISITION CAPITAL CORP.
BALANCE SHEET
September 30, December 31,
1997 1996
(Unaudited)
Assets
Cash.......................................... $ 1,000 $ 1,000
Total assets............................ $ 1,000 $ 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 $ 1,000
Total stockholder's equity....... $ 1,000 $ 1,000
The accompanying notes are an integral part of the balance sheet
<PAGE>
RIFKIN ACQUISITION CAPITAL CORP.
NOTES TO BALANCE SHEET
1. Organization and Summary of Significant Accounting Policies
Organization
Rifkin Acquisition Capital Corp. ("RACC"), 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") which were used to repay
advances under the Partnership's term debt and to fund the
Partnership's acquisitions of certain cable television systems.
Upon closing of the Notes issuance on January 26, 1996, none of the
Notes were issued by RACC; accordingly, no debt is reflected on its
balance sheet. In addition, RACC does not, and is not expected to
have, any other operations; as such, no statements of operations,
stockholder's equity or cash flows are presented.
<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 1/8% Senior Subordinated Notes due 2006 ("Notes")
and amended its Credit Agreement to provide ongoing borrowing
availability, including availability to finance acquisitions.
THREE MONTHS ENDED September 30, 1997 COMPARED TO THREE MONTHS ENDED
September 30, 1996
Revenue increased 15.1%, or approximately $2.8 million, to
approximately $21.5 million for the three months ended September 30,
1997 from approximately $18.6 million for the three months ended
September 30, 1996. This increase resulted primarily from growth in
basic customers and increases in basic and tier rates as well as
additional revenues in the approximate amount of $1.1 million as a
result of the April 1, 1997 acquisition of cable systems serving
Manchester and Shelbyville, Tennessee (the "ACT V Acquisition"). Basic
customers increased 9.0% to approximately 199,600 at September 30, 1997
from approximately 183,100 at September 30, 1996. This increase was
attributable to the acquired customers related to the ACT V Acquisition
(11,600) as well as continued growth in the Tennessee (600) and
Georgia (3,800) systems. Average monthly revenue per customer
increased 5.2% from $34.12 for the three months ended September 30,
1996 to $35.90 for 1997. Premium service units increased 2.0% to
approximately 109,500 as of September 30, 1997, from 107,300 as of
September 30, 1996. This increase was a result of the acquired units
related to the ACT V Acquisition (7,400), growth in the Illinois
systems (1,100), offset by losses in the Tennessee and Georgia systems.
The Company's premium penetration decreased to 54.9% from 58.6% between
the periods in 1997 and 1996 due mainly to decreased premium
penetrations in Georgia and Tennessee as a result of moving the Disney
Channel from premium to tier.
Operating expense, which includes costs related to technical personnel,
franchise fees and repairs and maintenance, increased 40.7% or
approximately $1.1 million to approximately $3.8 million for the three
months ended September 30, 1997 from approximately $2.7 million in
1996, and increased as a percentage of revenue to 17.7% from 14.5%.
Approximately $300,000 of the increase relates to higher salaries and
benefits as a result of added technical personnel and annual wage
increases while approximately $200,000 of the increase relates to the
operating expense of the acquired systems in the ACT V Acquisition.
Programming expense, which includes costs related to basic, tier and
premium services, increased 21.7%, or approximately $800,000, to
approximately $4.7 million for the three months ended September 30,
1997 from approximately $3.8 million for the three months ended
September 30, 1996, and increased as a percentage of revenue to 21.8%
from 20.6%. The increase is mainly due to program vendor rate
increases and the addition of programming in certain systems as well as
approximately $300,000 related to the programming expense of the
acquired systems in the ACT V Acquisition.
Selling, general and administrative expense, which includes expenses
related to on-site office and customer-service personnel, customer
billing and postage and marketing, decreased 11.8%, or approximately
$300,000 to approximately $2.6 million for the three months ended
September 30, 1997 from approximately $2.9 million for the same period
in 1996 due primarily to a $500,000 increase in program supplier co-op
reimbursements. As a percentage of revenue, selling, general and
administrative expense decreased to 11.9% for the three months ended
September 30, 1997 from 15.5% for the same period in 1996. Selling,
general and administrative expense of the acquired systems in the ACT
V Acquisition contributed approximately $200,000 in increased expense.
Depreciation and amortization expense of approximately $9.8 million for
the three months ended September 30, 1997 increased approximately
$400,000 from depreciation and amortization expense for the same period
in 1996. The increases in depreciation resulted primarily from
increases of approximately $6.9 million in the third quarter of 1997
and approximately $5.3 million in the comparable period in 1996 in
property, plant and equipment. As a percentage of revenue,
depreciation and amortization expenses decreased to 45.5% in the third
quarter of 1997 from 50.0% in the comparable period in 1996.
Management fees, equal to 3.5% of gross revenue, increased to
approximately $800,000 in the third quarter of 1997 from management
fees of approximately $700,000 in the comparable period of 1996, due to
the increase in the Company's revenue as a result of rate increases and
revenues related to the acquired systems in the ACT V Acquisition.
The loss on disposal of assets, primarily the write-off of replaced
house drops and rebuilt trunk and distribution equipment increased to
approximately $2.7 million in the third quarter of 1997 from
approximately $200,000 in the third quarter of 1996.
Interest expense in the third quarter of 1997 increased by
approximately $600,000 or 11.3% over interest for the same period in
1996 and decreased as a percentage of revenue from 29.5% to 28.5%.
Interest expense was based on an average debt balance of $229.4 million
with an average interest rate of 10.7% and an average debt balance of
$199 million with an average interest rate of 11.1% for the third
quarters of 1997 and 1996, respectively. This increase was primarily a
result of a greater debt level in 1997.
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 $800,000 was recorded in each of the three month periods
ended September 30, 1997 and 1996 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 43.2%,
or approximately $2.5 million in the three months ended September 30,
1997 compared to the comparable period of 1996.
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 11.5%, or approximately $1.1 million, to approximately $9.9
million in 1997 from $8.7 million in 1996. As a percentage of revenue,
Adjusted EBITDA decreased to 46.1% in the third quarter of 1997 from
46.9% in the comparable period in 1996 as the Company's expense growth
exceeded its 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.
NINE MONTHS ENDED September 30, 1997 COMPARED TO NINE MONTHS ENDED
September 30, 1996
Revenue increased 18.5%, or approximately $9.7 million, to
approximately $62.1 million for the nine months ended September 30,
1997 from approximately $52.4 million for the nine months ended
September 30, 1996. This increase resulted from the following: (a)
approximately $4.1 million from growth in basic customers and increases
in basic and tier rates, (b) approximately $2.3 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"),(c) approximately $1.1 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") and (d) approximately $2.2 million in total revenue as a
result of the April 1, 1997 acquisition of cable systems serving
Manchester and Shelbyville, Tennessee (the "ACT V Acquisition"). Basic
customers increased 9.0% to approximately 199,600 at September 30, 1997
from approximately 183,100 at September 30, 1996. This increase was
attributable to the acquired customers related to the ACT V Acquisition
(11,600), continued growth in the Tennessee (600) and Georgia (4,300)
systems. Average monthly revenue per customer decreased 2.9% from
$36.94 for the nine months ended September 30, 1996 to $35.87 for 1997
due to the non-recurrence of approximately $600,000 in escrow earnings
in 1996. Premium service units increased 2.0% to approximately 109,500
as of September 30, 1997, from approximately 107,300 as of September
30, 1996. This increase was a result of the acquired units related to
the ACT V Acquisition (7,400) offset by losses in Georgia and
Tennessee. The Company's premium penetration decreased to 54.9% from
58.6% between the comparable periods in 1997 and 1996 due mainly to
decreased premium penetrations in certain systems as a result of moving
the Disney Channel from premium to tier.
Operating expense, which includes costs related to technical personnel,
franchise fees and repairs and maintenance, increased 40.8%, or
approximately $3.1 million to approximately $10.7 million for the nine
months ended September 30, 1997 from approximately $7.6 million in
1996, and increased as a percentage of revenue to 17.2% from 14.4%.
Approximately $500,000, $200,000 and $400,000 of the increase relates
to the operating expense of the acquired systems in the Mid-Tennessee
Acquisition, RCT Acquisition and ACT V Acquisition, respectively.
Approximately $1.1 million of the increase relates to higher salaries
and benefits as a result of added technical personnel and annual wage
increases, and approximately $400,000 relates to increased franchise
fees as a result of higher revenues.
Programming expense, which includes costs related to basic, tier and
premium services, increased 26.2%, or approximately $2.8 million, to
approximately $13.7 million for the nine months ended September 30,
1997 from approximately $10.8 million for the nine months ended
September 30, 1996, and increased as a percentage of revenue to 22.0%
from 20.6%. Approximately $500,000, $300,000 and $500,000 of the
increase relates to the programming expenses of the acquired systems in
the Mid-Tennessee Acquisition, RCT Acquisition and ACT V Acquisition,
respectively. The remainder of the increase is due to program vendor
rate increases and the addition of programming in certain systems.
Selling, general and administrative expense, which includes expenses
related to on-site office and customer-service personnel, customer
billing and postage and marketing, increased 6.3%, or approximately
$500,000 to approximately $8.2 million for the nine months ended
September 30, 1997 from approximately $7.7 million for the same period
in 1996. As a percentage of revenue, selling, general and
administrative expense decreased to 13.2% for the nine months ended
September 30, 1997 from 14.8% for the same period in 1996.
Approximately $300,000, $200,000 and $300,000 related to the selling,
general and administrative expense of the acquired systems in the Mid-
Tennessee Acquisition, RCT Acquisition and ACT V Acquisition,
respectively. These increases were offset by an approximate $800,000
increase in program supplier co-op reimbursement.
Depreciation and amortization expense of approximately $29.1 million
for the nine months ended September 30, 1997 increased approximately
$3.3 million from depreciation and amortization expense for the same
period in 1996. The increase in depreciation resulted primarily from
increases of approximately $12.4 million in the first three-quarters of
1996 and approximately $22.5 million in the comparable period in 1997
in property, plant and equipment along with approximately $4.8 million
attributable to the fixed assets added in relation to the acquired
systems in the ACT V Acquisition. The increases in amortization
expense resulted primarily from the amortization of franchise cost
related to the Mid-Tennessee Acquisition, RCT Acquisition and ACT V
Acquisition, respectively. As a percentage of revenue, depreciation
and amortization expenses decreased to 46.9% in the first three-
quarters of 1997 from 49.3% in the comparable period in 1996.
Management fees, equal to 3.5% of gross revenue, increased to
approximately $2.2 million in the first three-quarters of 1997 from
management fees of approximately $1.8 million in the comparable period
of 1996, due to the increase in the Company's revenue as a result of
increases in customers and rates as well as the Mid-Tennessee
Acquisition, RCT Acquisition and ACT V Acquisition.
The loss on disposal of assets, primarily the write-off of replaced
house drops and rebuilt trunk and distribution equipment increased to
approximately $5.1 million in the first three-quarters of 1997 from
approximately $800,000 in the first three-quarters of 1996.
Interest expense in the first three quarters of 1997 increased by
approximately $1.5 million or 9.6% over interest for the same period in
1996 and decreased as a percentage of revenue from 30.7% to 28.4%.
Interest expense was based on an average debt balance of $217.6 million
with an average interest rate of 10.8% and an average debt balance of
$204.2 million with an average interest rate of 10.5% for the first
nine months of 1997 and 1996, respectively. This increase was primarily
a result of the greater debt level in 1997.
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 $3.4 million and $2.6 million was recorded in the nine
month periods ended September 30, 1997 and 1996, respectively 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 33.8%,
or approximately $5.3 million in the nine months ended September 30,
1997 compared to the comparable period of 1996.
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 14.8%, or approximately $3.6 million, to approximately $28.1
million in 1997 from approximately $24.4 million in 1996. As a
percentage of revenue, Adjusted EBITDA decreased to 45.2% in the first
nine months of 1997 from 46.6% in the comparable period in 1996 as the
Company's expense growth exceeded its 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 September 30, 1997 and 1996,
net cash provided by operations (including changes in working capital)
of the Company was approximately $600,000 and $100,000, respectively.
During the comparable nine month periods ended September 30, 1997 and
1996, net cash provided by operations (including changes in working
capital) of the Company was approximately $9.8 million and $14.5
million, respectively.
From December 31, 1996, the Company's available cash increased from
approximately $1.4 million to approximately $2.2 million. For the same
comparable dates, accounts payable and accrued liabilities increased by
approximately $2.8 million to approximately $12.7 million. Interest
payable decreased from approximately $6.8 million to approximately $3.9
million for the same comparable dates due primarily to the effect of
the timing of payments. Also, for the same comparable dates, deferred
taxes payable decreased approximately $3.4 million to approximately
$14.0 million as a result of differences in book and tax depreciation
and amortization lives and methods. Notes payable increased by $32.5
million from December 31, 1996 to September 30, 1997 primarily due to
capital expenditures related to the acquisition of two non-material
cable systems in Tennessee along with planned Georgia and Tennessee
plant upgrades.
The Company has increased its total consolidated debt to $231 million
as of September 30, 1997 from $198.5 million at December 31, 1996. The
Company has unused commitments under the Amended and Restated Credit
Agreement of $36.4 million, $5.8 million of which is available for
general corporate purposes. Access to the remaining $30.6 million of
availability under the 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 6.00x. As of September 30, 1997, the Company's Total Funded Debt
Ratio was 5.85x. 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, which has reduced to $74.4 million as of September
30, 1997, with a final maturity date of March 31, 2003. 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 capital 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>
PART II: OTHER INFORMATION
ITEM 5. Other Information
<TABLE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
REVENUE AND OPERATING CASH FLOW REPORT
(UNAUDITED)
Three Months Ended September 30, 1997 and 1996
<CAPTION>
REVENUES:
1997 1996
<S> <C> <C>
Georgia................................ $ 6,546,724 $ 5,820,814
Illinois............................... 2,528,892 2,342,937
Michigan............................... 1,146,635 1,064,640
RTL-Tennessee.......................... 5,368,663 5,021,119
RAP-Tennessee.(3)...................... 5,836,682 4,363,337
Other(2)............................... 30,526 32,902
Total............................... $21,458,122 $18,645,749
OPERATING CASH FLOW(1):
Georgia................................ $ 2,987,191 $ 3,005,628
Illinois............................... 1,253,284 1,208,603
Michigan............................... 602,310 540,109
RTL-Tennessee.......................... 3,006,506 2,580,686
RAP-Tennessee.(3)...................... 2,768,981 2,046,377
Other.................................. 17,006 15,272
Total............................... $10,635,278 $ 9,396,675
OPERATING CASH FLOW AS A PERCENT OF REVENUES:
Georgia................................ 45.6% 51.6%
Illinois............................... 49.6% 51.6%
Michigan............................... 52.5% 50.7%
RTL-Tennessee.......................... 56.0% 51.4%
RAP-Tennessee.(3)...................... 47.4% 46.9%
Total (excluding other)............. 49.6% 50.4%
<FN>
(1) Excludes management fee expense of $751,033 and $652,602, net
losses related to the disposition of certain plant assets of
$2,704,207 and $195,360 for the three months ended September 30,
1997 and 1996, respectively, and non-cash management incentive
plan expense of $189,999 and $174,999 for the three month periods
ended September 30, 1997 and 1996, respectively.
(2) Principally interest income.
(3) Activity relates to the Mid-Tennessee Systems acquired on March 1,
1996, the RCT Systems acquired on April 1, 1996, and ACT V Systems
acquired on April 1, 1997.
</TABLE>
<PAGE>
<TABLE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
REVENUE AND OPERATING CASH FLOW REPORT
(UNAUDITED)
Nine months Ended September 30, 1997 and 1996
<CAPTION>
REVENUES:
1997 1996
<S> <S> <S>
Georgia................................ $19,095,311 $16,948,578
Illinois............................... 7,553,970 7,081,187
Michigan............................... 3,387,840 3,163,046
RTL-Tennessee.......................... 15,884,713 14,883,618
RAP-Tennessee.(3)...................... 16,122,319 9,670,118
Other(2)............................... 81,708 685,589
Total............................... $62,125,861 $52,432,136
OPERATING CASH FLOW(1):
Georgia................................ $ 8,964,379 $ 8,694,950
Illinois............................... 3,826,968 3,549,816
Michigan............................... 1,694,622 1,576,670
RTL-Tennessee.......................... 8,400,705 7,818,369
RAP-Tennessee.(3)...................... 7,333,490 4,537,642
Other.................................. 23,119 639,963
Total............................... $30,243,283 $26,817,410
OPERATING CASH FLOW AS A PERCENT OF REVENUES:
Georgia................................ 46.9% 51.3%
Illinois............................... 50.7% 50.1%
Michigan............................... 50.0% 49.8%
RTL-Tennessee.......................... 52.9% 52.5%
RAP-Tennessee.(3)...................... 45.5% 46.9%
Total (excluding other)............. 48.7% 50.6%
<FN>
(1) Excludes management fee expense of $2,174,405 and $1,815,516, net
losses related to the disposition of certain plant assets of
$5,077,721 and $784,618 for the nine months ended September 30,
1997 and 1996, respectively, and non-cash management incentive
plan expense of $669,993 and 524,997 for the nine months ended
September 30, 1997 and 1996, respectively.
(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, the RCT Systems acquired on April 1, 1996, and Act V Systems
acquired on April 1, 1997.
</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 November 14, 1997.
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> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,235
<SECURITIES> 0
<RECEIVABLES> 1,199
<ALLOWANCES> 398
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 137,124
<DEPRECIATION> 23,854
<TOTAL-ASSETS> 307,957
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 231,000
0
0
<COMMON> 0
<OTHER-SE> 44,852
<TOTAL-LIABILITY-AND-EQUITY> 307,957
<SALES> 0
<TOTAL-REVENUES> 62,126
<CGS> 0
<TOTAL-COSTS> 63,863
<OTHER-EXPENSES> 5,078
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,632
<INCOME-PRETAX> (24,447)
<INCOME-TAX> (3,432)
<INCOME-CONTINUING> (21,015)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,015)
<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>
