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, 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, CO 80209
(Address of principal executive offices)(zip code)
Registrant's Telephone Number: (303) 333-1215
Indicated by check mark 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 X No
<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)...................................... 8
e. Notes to Consolidated Financial Statements....... 10
Rifkin Acquisition Capital Corp.
a. Balance Sheet................................... 12
b. Notes to Balance Sheet.......................... 13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 14
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,
1997 1996
<S> <C> <C>
Revenue:
Service................................ $20,025,026 $17,195,007
Installation and other................. 1,306,384 1,108,650
Total revenue 21,331,410 18,303,657
Costs and Expenses:
Operating expense...................... 3,415,570 2,685,354
Programming expense.................... 4,773,361 3,866,940
Selling, general and administrative
expense.............................. 3,128,773 2,764,270
Depreciation and amortization.......... 9,840,514 9,240,572
Management fees........................ 746,601 640,628
Loss on disposal of assets............. 2,244,511 449,013
Total costs and expenses......... 24,149,330 19,646,777
Operating loss......................... (2,817,920) (1,343,120)
Interest expense....................... 5,942,188 5,440,313
Loss before income taxes............... (8,760,108) (6,783,433)
Income tax benefit..................... (1,870,000) (926,000)
Net loss............................... $(6,890,108) $(5,857,433)
Adjusted EBITDA........................ $ 9,582,099 $ 8,531,463
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<CAPTION>
Six Months Ended
June 30,
1997 1996
<S> <C> <C>
Revenue:
Service................................ $ 38,326,201 $ 31,265,873
Installation and other................. 2,341,538 2,520,514
Total revenue 40,667,739 33,786,387
Costs and Expenses:
Operating expense...................... 6,891,333 4,896,210
Programming expense.................... 8,981,751 6,975,917
Selling, general and administrative
expense.............................. 5,666,644 4,843,523
Depreciation and amortization.......... 19,368,702 16,526,755
Management fees........................ 1,423,372 1,162,914
Loss on disposal of assets............. 2,373,514 589,258
Total costs and expenses......... 44,705,316 34,994,577
Operating loss......................... (4,037,577) (1,208,190)
Interest expense....................... 11,508,370 10,593,357
Loss before income taxes............... (15,545,947) (11,801,547)
Income tax benefit..................... (2,658,000) (1,771,000)
Net loss............................... $(12,887,947) $(10,030,547)
Adjusted EBITDA........................ $ 18,184,633 $ 15,697,556
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED BALANCE SHEET
<CAPTION>
ASSETS
June 30, December 31,
1997 1996
(Unaudited)
<S> <C> <C>
Cash.................................... $ 1,622,727 $ 1,387,232
Subscriber accounts receivable,
net of allowance for doubtful
accounts of $347,861 in 1997
and $381,197 in 1996................... 1,254,968 1,184,074
Other receivables....................... 3,230,009 2,622,375
Prepaid expenses and other.............. 1,522,127 1,776,272
Property, plant and equipment at cost:
Cable television transmission and
distribution systems and related
equipment............................ 126,908,200 110,600,391
Land, building, vehicles and
furniture and fixtures............... 6,750,641 5,726,169
133,658,841 116,326,560
Less accumulated depreciation........... (20,778,091) (14,264,937)
Net property, plant and
equipment..................... 112,880,750 102,061,623
Franchise costs and other intangible
assets, net of accumulated
amortization of $41,716,408 in 1997
and $28,849,916 in 1996................ 192,218,180 190,801,885
Total assets.................... $312,728,761 $299,833,461
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Accounts payable and accrued
liabilities............................ $ 12,341,181 $ 9,937,238
Subscriber deposits and prepayments..... 1,373,884 1,272,279
Interest payable........................ 7,219,960 6,784,261
Deferred taxes payable.................. 14,815,000 17,473,000
Notes payable........................... 224,000,000 198,500,000
Total liabilities............... 259,750,025 233,966,778
Commitments
Redeemable partners' interests.......... 6,541,440 4,861,840
Partners' capital (deficit):
General partner........................ (1,648,183) (1,309,354)
Limited partners....................... 47,730,302 61,881,692
Preferred equity interest.............. 355,177 432,505
Total partners' capital......... 46,437,296 61,004,843
Total liabilities and partners'
capital....................... $312,728,761 $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>
ASSETS
June 30, June 30,
1997 1996
<S> <S> <S>
Cash................................... $ 1,622,727 $ 1,716,052
Subscriber accounts receivable,
net of allowance for doubtful
accounts of $347,861 in 1997
and $351,253 in 1996............... 1,254,968 1,084,983
Other receivables...................... 3,230,009 1,759,040
Prepaid expenses and other............. 1,522,127 994,568
Property, plant and equipment at cost:
Cable television transmission and
distribution systems and related
equipment........................... 126,908,200 102,449,204
Land, building, vehicles and
furniture and fixtures.............. 6,750,641 5,132,344
133,658,841 107,581,548
Less accumulated depreciation.......... (20,778,091) (8,070,734)
Net property, plant and equipment 112,880,750 99,510,814
Franchise costs and other intangible
assets, net of accumulated
amortization of 41,716,408 in 1997
and $16,119,518 in 1996............. 192,218,180 202,757,670
Total assets.................. $312,728,761 $307,823,127
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Accounts payable and accrued
liabilities.......................... $ 12,341,181 $ 8,703,316
Subscriber deposits and prepayments.... 1,373,884 1,124,966
Interest payable....................... 7,219,960 6,179,367
Deferred taxes payable................. 14,815,000 19,348,000
Notes payable.......................... 224,000,000 195,000,000
Total liabilities.............. 259,750,025 230,355,649
Commitments
Redeemable partners' interests....... 6,541,440 4,232,000
Partners' capital (deficit)
General partner...................... (1,648,183) (1,114,617)
Limited partners..................... 47,730,302 73,847,985
Preferred equity interest............ 355,177 502,110
Total partners' capital....... 46,437,296 73,235,478
Total liabilities and
partners' Capital........... $312,728,761 $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,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss................................ $(12,887,947) $(10,030,547)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization....... 19,368,702 16,526,755
Amortization of deferred loan cost... 494,880 476,066
Loss on disposal of fixed assets..... 2,373,514 589,258
Deferred tax benefit................. (2,658,000) (1,779,000)
Increase in subscriber
accounts receivable................ (70,894) (200,075)
Decrease in other receivables........ (607,634) (216,373)
Decrease (increase) in prepaid
expenses and other................. 254,145 (70,339)
Increase in accounts payable
and accrued liabilities........... 2,403,943 2,835,731
Increase in subscriber deposits
and prepayment..................... 101,605 163,438
Increase in interest
payable........................... 435,699 6,088,094
Net cash provided by operating
activities...................... 9,208,013 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............................. (20,331,911) (7,096,345)
Additions to cable television
franchises, net of retirements
and changes in other intangible
assets................................ (14,282,786) (497,906)
Net proceeds from the sale of assets.... 142,179 66,249
Net cash used in investing
activities...................... (34,472,518) (79,491,350)
Cash flows from financing activities:
Proceeds from issuance of Senior
subordinated notes.................... - 125,000,000
Proceeds from long-term bank debt....... 29,000,000 9,500,000
Deferred loan costs..................... - (5,993,626)
Payments of long term-bank debt......... (3,500,000) (77,000,000)
Partners' capital contributions......... - 15,000,000
Net cash provided by financing
activities...................... 25,500,000 66,506,374
Net increase in cash.................... 235,495 1,398,032
Cash at beginning of period............. 1,387,232 318,020
Cash at end of period................... $ 1,622,727 $ 1,716,052
<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 June 30, 1997 and 1996
<CAPTION>
Preferred
Equity General Limited
Interest Partner Partners Total
<S> <C> <C> <C> <C>
Partners' capital (deficit)
at 3/31/97................ $ 396,518 $(1,587,362) $54,453,608 $53,262,764
Net loss for the quarter
ended 6/30/97............. (41,341) (68,901) (6,779,866) (6,890,108)
Accretion of redeemable
partners' interest........ - 8,080 56,560 64,640
Partners' capital (deficit)
at 6/30/97................ $ 355,177 $(1,648,183) $47,730,302 $46,437,296
Partners' capital (deficit)
at 3/31/96................ $ 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)
Accretion of redeemable
partners' interest........ - (44,000) (308,000) (352,000)
Partners' capital (deficit)
at 6/30/96................ $ 502,110 $(1,114,617) $73,847,985 $73,235,478
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
RIFKIN ACQUISTION PARTNERS, L.L.L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(UNAUDITED)
Six Months Ended June 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 six months
ended 6/30/97............. (77,328) (128,879) (12,681,740) (12,887,947)
Accretion of redeemable
partners' interest........ - (209,950) (1,469,650) (1,679,600)
Partners' capital (deficit)
at 6/30/97................ $ 355,177 $(1,648,183) $47,730,302 $46,437,296
Partners' capital (deficit)
at 12/31/95............... $ 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
Accretion of redeemable
partners' interest........ - (79,000) (553,000) (632,000)
Partners' capital (deficit)
at 6/30/96................ $ 502,110 $(1,114,617) $73,847,985 $73,235,478
<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 June 30, 1997, December 31, 1996
and June 30,1996, its consolidated results of operations for the six
months and three months ended June 30, 1997 and 1996, and its
consolidated cash flows for the six months ended June 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 Six Months Ended
June 30, June 30
1997 1996 1997 1996
Total revenues.......... $21,331 $18,304 $ 40,668 $ 36,847
Net loss................ (6,890) (5,857) (12,888) (10,957)
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>
<TABLE>
RIFKIN ACQUISITION CAPITAL CORP.
BALANCE SHEET
<CAPTION>
June 30, December 31,
1997 1996
Assets
<S> <C> <C>
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
<FN>
The accompanying notes are an integral part of the balance sheet.
</TABLE>
<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 JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED
JUNE 30, 1996
Revenue increased 16.5%, or approximately $3.0 million, to
approximately $21.3 million for the three months ended June 30,
1997 from approximately $18.3 million for the three months ended
June 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 $1.0 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 9.7% to approximately 198,800 at June 30,
1997 from approximately 181,200 at June 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
(1,600) and Georgia (4,500) systems. Average monthly revenue per
customer increased 5.3% from $35.06 for the three months ended June
30, 1996 to $36.91 for 1997. Premium service units increased 4.0%
to approximately 111,000 as of June 30, 1997, from 106,800 as of
June 30, 1996. This increase was a result of the acquired units
related to the ACT V Acquisition (7,400) offset by losses in
certain Tennessee systems. The Company's premium penetration
decreased to 55.9% from 58.9% 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
27.2%, or approximately $700,000 to approximately $3.4 million for
the three months ended June 30, 1997 from approximately $2.7
million in 1996, and increased as a percentage of revenue to 16.0%
from 14.7%. 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 23.4%, or approximately $900,000,
to approximately $4.8 million for the three months ended June 30,
1997 from approximately $3.9 million for the three months ended
June 30, 1996, and increased as a percentage of revenue to 22.4%
from 21.1%. 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, increased 13.2%, or
approximately $400,000 to approximately $3.1 million for the three
months ended June 30, 1997 from approximately $2.8 million for the
same period in 1996. As a percentage of revenue, selling, general
and administrative expense decreased to 14.7% for the three months
ended June 30, 1997 from 15.1% for the same period in 1996.
Approximately $100,000 of the increase related to the selling,
general and administrative expense of the acquired systems in the
ACT V Acquisition.
Depreciation and amortization expense of approximately $9.8 million
for the three months ended June 30, 1997 increased approximately
$600,000 from depreciation and amortization expense for the same
period in 1996. The increases in depreciation resulted primarily
from increases of approximately $9.1 million in the second quarter
of 1997 along with $4.8 million attributable to the fixed assets
added in relation to the acquired systems in the ACT V Acquisition
and approximately $4.1 million in the comparable period in 1996 in
property, plant and equipment. As a percentage of revenue,
depreciation and amortization expenses decreased to 46.1% in the
second quarter of 1997 from 50.5% in the comparable period in 1996.
Management fees, equal to 3.5% of gross revenue, increased to
approximately $700,000 in the second quarter of 1997 from
management fees of approximately $600,000 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 $2.2 million in the first quarter of 1997 from
approximately $400,000 in the first quarter of 1996.
Interest expense in the second quarter of 1997 increased by
approximately $500,000 or 9.2% over interest for the same period in
1996 and decreased as a percentage of revenue from 29.7% to 27.9%.
Interest expense was based on an average debt balance of $218.5
million with an average interest rate of 10.9% and an average debt
balance of $196.3 million with an average interest rate of 11.1%
for the second 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 $1.9 million and $900,000 was recorded in the
three month periods ended June 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
17.6%, or approximately $1.0 million in the three months ended June
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 12.3%, or approximately $1.1 million, to
approximately $9.6 million in 1997 from $8.5 million in 1996. As
a percentage of revenue, Adjusted EBITDA decreased to 44.9% in the
second quarter 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.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE
30, 1996
Revenue increased 20.4%, or approximately $6.9 million, to
approximately $40.7 million for the six months ended June 30, 1997
from approximately $33.8 million for the six months ended June 30,
1996. This increase resulted from the following: (a)
approximately $2.5 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
$1.0 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
9.7% to approximately 198,800 at June 30, 1997 from approximately
181,200 at June 30, 1996. This increase was attributable to the
acquired customers related to the ACT V Acquisition (11,600),
continued growth in the Tennessee (1,600) and Georgia (4,500)
systems. Average monthly revenue per customer decreased 1.8% from
$35.93 for the six months ended June 30, 1996 to $35.30 for 1997
due to the non-recurrence of approximately $600,000 in escrow
earnings in 1997. Premium service units increased 4.0% to
approximately 111,000 as of June 30, 1997, from 106,800 as of June
30, 1996. This increase was a result of the acquired units related
to the ACT V Acquisition (7,400) offset by losses in certain
Tennessee systems. The Company's premium penetration decreased to
55.9% from 58.9% 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 $2.0 million to approximately $6.9 million
for the six months ended June 30, 1997 from approximately $4.9
million in 1996, and increased as a percentage of revenue to 17.0%
from 14.5%. Approximately $500,000, $200,000 and $200,000 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 $600,000 of the increase
relates to higher salaries and benefits as a result of added
technical personnel and annual wage increases, and approximately
$200,000 relates to increased franchise fees as a result of higher
revenues.
Programming expense, which includes costs related to basic, tier
and premium services, increased 28.8%, or approximately $2.0
million, to approximately $9.0 million for the six months ended
June 30, 1997 from approximately $7.0 million for the six months
ended June 30, 1996, and increased as a percentage of revenue to
22.1% from 20.6%. Approximately $500,000, $300,000 and $300,000 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 17.0%, or
approximately $800,000 to approximately $5.7 million for the six
months ended June 30, 1997 from approximately $4.8 million for the
same period in 1996. As a percentage of revenue, selling, general
and administrative expense decreased to 13.9% for the six months
ended June 30, 1997 from 14.3% for the same period in 1996.
Approximately $300,000, $200,000 and $100,000 related to the
selling, general and administrative expense of the acquired systems
in the Mid-Tennessee Acquisition, RCT Acquisition and ACT V
Acquisition, respectively.
Depreciation and amortization expense of approximately $19.4
million for the six months ended June 30, 1997 increased
approximately $2.8 million from depreciation and amortization
expense for the same period in 1996. The increases in depreciation
resulted primarily from increases of approximately $7.1 million in
the first half of 1996 and approximately $15.5 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 47.8% in the first half of 1997 from 48.9% in the
comparable period in 1996.
Management fees, equal to 3.5% of gross revenue, increased to
approximately $1.4 million in the first half of 1997 from
management fees of approximately $1.2 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 $2.4 million in the first half of 1997 and from
approximately $600,000 in the first half of 1996.
Interest expense in the first half of 1997 increased by
approximately $900,000 or 8.6% over interest for the same period in
1996 and decreased as a percentage of revenue from 31.4% to 28.3%.
Interest expense was based on an average debt balance of $211.8
million with an average interest rate of 10.9% and an average debt
balance of $205.8 million with an average interest rate of 10.3%
for the first six 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 $2.7 million and $1.8 million was recorded in the
six month periods ended June 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
28.5%, or approximately $2.9 million in the six months ended June
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 15.8%, or approximately $2.5 million, to
approximately $18.2 million in 1997 from approximately $15.7
million in 1996. As a percentage of revenue, Adjusted EBITDA
decreased to 44.7% in the first half of 1997 from 46.5% 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
June 30, 1997 and 1996, net cash provided by operations (including
changes in working capital) of the Company was approximately $8.6
million and $8.5 million, respectively. During the comparable six
month periods ended June 30, 1997 and 1996, net cash provided by
operations (including changes in working capital) of the Company
was approximately $9.2 million and $14.4 million, respectively.
From December 31, 1996, the Company's available cash increased from
approximately $1.4 million to approximately $1.6 million. For the
same comparable dates, accounts payable and accrued liabilities
increased by approximately $2.4 million to approximately $12.3
million. Interest payable increased from approximately $6.8
million to approximately $7.2 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 $2.7 million to approximately $14.8 million as a
result of differences in book and tax depreciation and amortization
lives and methods. Notes payable increased by $25.5 million from
December 31, 1996 to June 30, 1997 due to capital expenditures
primarily a result of 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 $224
million as of June 30, 1997 from $198.5 million at December 31,
1996. The Company has unused commitments under the Amended and
Restated Credit Agreement of $45.2 million, $5.3 million of which
is available for general corporate purposes. Access to the
remaining $39.9 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 June
30, 1997, the Company's Total Funded Debt Ratio was 5.86x.
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 $76.3 million as of June
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 June 30, 1997 and 1996
<CAPTION>
REVENUES:
1997 1996
<S> <C> <C>
Georgia................................ $ 6,489,276 $ 5,630,730
Illinois............................... 2,570,031 2,359,475
Michigan............................... 1,151,017 1,046,437
RTL-Tennessee.......................... 5,353,501 4,976,633
RAP-Tennessee.(3)...................... 5,739,272 4,248,249
Other(2)............................... 28,313 42,113
Total............................... $21,331,410 $18,303,657
OPERATING CASH FLOW(1):
Georgia................................ $ 3,064,791 $ 2,871,409
Illinois............................... 1,339,324 1,129,489
Michigan............................... 548,347 500,815
RTL-Tennessee.......................... 2,793,838 2,684,394
RAP-Tennessee.(3)...................... 2,577,319 1,963,450
Other.................................. 5,081 22,534
Total............................... $10,328,700 $ 9,172,091
OPERATING CASH FLOW AS A PERCENT OF REVENUES:
Georgia................................ 47.2% 51.0%
Illinois............................... 52.1% 47.9%
Michigan............................... 47.6% 47.9%
RTL-Tennessee.......................... 52.2% 53.9%
RAP-Tennessee.(3)...................... 44.9% 46.2%
Total (excluding other)............. 48.5% 50.1%
<FN>
(1) Excludes management fee expense of $746,601 and $640,628 net losses related to
the disposition of certain plant assets of $2,244,511 and $449,013 for the
three months ended June 30, 1997 and 1996, respectively, and non-cash
management incentive plan expense of $314,994 AND $184,998 for the three month
periods ended June 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)
Six Months Ended June 30, 1997 and 1996
<CAPTION>
REVENUES:
1997 1996
<S> <C> <C>
Georgia................................ $12,548,587 $11,127,764
Illinois............................... 5,025,078 4,738,250
Michigan............................... 2,241,205 2,098,406
RTL-Tennessee.......................... 10,516,050 9,862,499
RAP-Tennessee.(3)...................... 10,285,637 5,306,781
Other(2)............................... 51,182 652,687
Total............................... $40,667,739 $33,786,387
OPERATING CASH FLOW(1):
Georgia................................ $ 5,977,188 $ 5,689,322
Illinois............................... 2,573,684 2,341,213
Michigan............................... 1,092,312 1,036,561
RTL-Tennessee.......................... 5,394,199 5,237,683
RAP-Tennessee.(3)...................... 4,564,509 2,491,265
Other.................................. 6,113 624,691
Total............................... $19,608,005 $17,420,735
OPERATING CASH FLOW AS A PERCENT OF REVENUES:
Georgia................................ 47.6% 51.1%
Illinois............................... 51.2% 49.4%
Michigan............................... 48.7% 49.4%
RTL-Tennessee.......................... 51.3% 53.1%
RAP-Tennessee.(3)...................... 44.4% 46.9%
Total (excluding other)............. 48.3% 50.7%
<FN>
(1) Excludes management fee expense of $1,423,372 and $1,162,914, net
losses related to the disposition of certain plant assets of
$2,373,514 and $589,258 for the six months ended June 30, 1997 and
1996, respectively, and non-cash management incentive plan expense
of $479,994 and $349,998 for the quarters ended June 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 August 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,623
<SECURITIES> 0
<RECEIVABLES> 1,255
<ALLOWANCES> 348
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 133,659
<DEPRECIATION> 20,778
<TOTAL-ASSETS> 312,729
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 224,000
0
0
<COMMON> 0
<OTHER-SE> 52,979
<TOTAL-LIABILITY-AND-EQUITY> 312,729
<SALES> 0
<TOTAL-REVENUES> 40,668
<CGS> 0
<TOTAL-COSTS> 42,332
<OTHER-EXPENSES> 2,374
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,508
<INCOME-PRETAX> (15,546)
<INCOME-TAX> (2,658)
<INCOME-CONTINUING> (12,888)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,888)
<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>
