UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or
15(d) of the Securities Exchange act of
1934
For the quarterly period ended June 30, 1998 or
Transition report pursuant to Section 13 or
15(d) of the Securities Exchange Act of
1934
For the transition period from to
.
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
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......... 20
Item 6. Exhibits and Reports on Form 8-K--(none)
Signatures................................................. 22
<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
June 30,
1998 1997
<S> <C> <C>
Revenue:
Service................................ $20,305,435 $20,025,026
Installation and other................. 1,990,831 1,306,384
Total revenue 22,296,266 21,331,410
Costs and Expenses:
Operating expense...................... 3,459,383 3,415,570
Programming expense.................... 4,308,351 4,379,624
Selling, general and administrative
expense.............................. 3,608,785 3,522,510
Depreciation and amortization.......... 9,240,547 9,840,514
Management fees........................ 780,369 746,601
Loss on disposal of assets............. 386,847 2,244,511
Total costs and expenses......... 21,784,282 24,149,330
Operating income (loss)................ 511,984 (2,817,920)
Interest expense....................... 5,772,485 5,942,188
Loss before income taxes............... (5,260,501) (8,760,108)
Income tax benefit..................... (802,000) (1,870,000)
Net income (loss)...................... $(4,458,501) $ 6,890,108
Adjusted EBITDA........................ $10,329,377 $ 9,582,099
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<CAPTION>
Six Months Ended
June 30,
1998 1997
<S> <C> <C>
Revenue:
Service................................ $40,840,852 $38,326,201
Installation and other................. 3,460,924 2,341,538
Total revenue 44,301,776 40,667,739
Costs and Expenses:
Operating expense...................... 7,005,851 6,891,333
Programming expense.................... 9,249,482 8,588,014
Selling, general and administrative
expense.............................. 6,357,755 6,060,381
Depreciation and amortization.......... 18,683,379 19,368,702
Management fees........................ 1,550,562 1,423,372
Loss on disposal of assets............. 647,759 2,373,514
Gain on sale of Michigan assets........ (5,989,846) -
Total costs and expenses......... 37,504,942 44,705,316
Operating income (loss)................ 6,796,834 (4,037,577)
Interest expense....................... 11,717,980 11,508,370
Loss before income taxes............... (4,921,146) (15,545,947)
Income tax benefit..................... (1,900,000) (2,658,000)
Net loss............................... $(3,021,146) $(12,887,947)
Adjusted EBITDA........................ $20,518,124 $ 18,184,633
<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,
1998 1997
(Unaudited)
<S> <C> <C>
Cash................................... $ 1,072,034 $ 1,902,555
Subscriber accounts receivable,
net of allowance for doubtful
accounts of $409,737 in 1998
and $425,843 in 1997............... 1,048,500 1,371,050
Other receivables...................... 4,540,417 4,615,089
Prepaid expenses and other............. 1,519,660 1,753,257
Property, plant and equipment at cost:
Cable television transmission and
distribution systems and related
equipment.......................... 140,150,950 131,806,310
Land, building, vehicles and
furniture and fixtures............. 7,063,061 7,123,429
147,214,011 138,929,739
Less accumulated depreciation.......... (31,964,024) (26,591,458)
Net property, plant and
equipment....................... 115,249,987 112,338,281
Franchise costs and other intangible
assets, net of accumulated
amortization of $60,309,077 in 1998
and $53,449,637 in 1997.............. 162,787,070 180,059,655
Total assets................. $286,217,668 $302,039,887
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued
liabilities.......................... $ 12,802,194 $ 11,690,894
Subscriber deposits and prepayments.... 1,188,515 1,503,449
Interest payable....................... 7,112,070 7,384,509
Deferred taxes payable................. 10,238,000 12,138,000
Notes payable.......................... 218,075,000 229,500,000
Total liabilities............. 249,415,779 262,216,852
Commitments
Redeemable partners' interests......... 8,515,160 7,387,360
Partners' capital (deficit)
General partner...................... (2,056,666) (1,885,480)
Limited partners..................... 30,085,279 34,044,912
Preferred equity interest............ 258,116 276,243
Total partners' capital...... 28,286,729 32,435,675
Total liabilities and
partners' capital.......... $286,217,668 $302,039,887
<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,
1998 1997
<S> <C> <C>
Cash.................................... $ 1,072,034 $ 1,622,727
Subscriber accounts receivable,
net of allowance for doubtful
accounts of $409,737 in 1998
and $347,861 in 1997.................. 1,048,500 1,254,968
Other receivables....................... 4,540,417 3,230,009
Prepaid expenses and other.............. 1,519,660 1,522,127
Property, plant and equipment at cost:
Cable television transmission and
distribution systems and related
equipment........................... 140,150,950 126,908,200
Land, building, vehicles and
furniture and fixtures.............. 7,063,061 6,750,641
147,214,011 133,658,841
Less accumulated depreciation........... (31,964,024) (20,778,091)
Net property, plant and
equipment.................... 115,249,987 112,880,750
Franchise costs and other intangible
assets, net of accumulated
amortization of $60,309,077 in 1998
and $41,716,408 in 1997............... 162,787,070 192,218,180
Total assets................... $286,217,668 $312,728,761
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued
liabilities........................... $ 12,802,194 $ 12,341,181
Subscriber deposits and prepayments..... 1,188,515 1,373,884
Interest payable........................ 7,112,070 7,219,960
Deferred taxes payable.................. 10,238,000 14,815,000
Notes payable........................... 218,075,000 224,000,000
Total liabilities.............. 249,415,779 259,750,025
Commitments
Redeemable partners' interests.......... 8,515,160 6,541,440
Partners' capital (deficit)
General partner....................... (2,056,666) (1,648,183)
Limited partners...................... 30,085,279 47,730,302
Preferred equity interest............. 258,116 355,177
Total partners' capital........ 28,286,729 46,437,296
Total liabilities and partners'
capital...................... $286,217,668 $312,728,761
<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,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net loss................................. $(3,021,146) $(12,887,947)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization........ 18,683,379 19,368,702
Amortization of deferred loan cost 494,880 494,880
Gain on sale of Michigan assets...... (5,989,846) -
Loss on disposal of fixed assets..... 647,759 2,373,514
Deferred taxes benefit............... (1,900,000) (2,658,000)
Decrease (increase) in subscriber
accounts receivable................ 269,303 (70,894)
Decrease (increase) in other
receivables........................ 72,181 (607,634)
Decrease in prepaid expenses
and other.......................... 201,781 254,145
Increase in accounts payable and
accrued liabilities................ 1,135,221 2,403,943
Increase (decrease) in subscriber
deposits and prepayment........... (261,722) 101,605
Increase (decrease) in interest
payable........................... (272,439) 435,699
Net cash provided by operating
activities...................... 10,059,351 9,208,013
Cash flows from investing activities:
Additions to property, plant and
equipment.............................. (15,876,545) (20,331,911)
Additions to cable television
franchises, net of retirements
and changes in other intangible
assets................................. (757,843) (14,282,786)
Net proceeds from sale of Michigan
assets................................. 17,050,564 -
Net proceeds from the disposal of assets
(other than Michigan).................. 118,952 142,179
Net cash provided by (used in)
investing activities............ 535,128 (34,472,518)
Cash flows from financing activities
Proceeds from long-term bank debt........ 12,000,000 29,000,000
Payments of long term-bank debt.......... (23,425,000) (3,500,000)
Net cash provided by (used in)
financing activities............ (11,425,000) 25,500,000
Net decrease (increase) in cash.......... (830,521) 235,495
Cash at beginning of period.............. 1,902,555 1,387,232
Cash at end of period.................... $ 1,072,034 $ 1,622,727
<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, 1998 and 1997
<CAPTION>
Preferred
Equity General Limited
Interest Partner Partners Total
<S> <C> <C> <C> <C>
Partners' capital (deficit)
at 3/31/98................ $284,867 $(2,011,986) $34,473,109 $32,745,990
Net income for the quarter
ended 6/30/98............. (26,751) (44,585) (4,387,165) (4,458,501)
Accretion of redeemable
partners' interest........ - (95) (665) (760)
Partners' capital (deficit)
at 6/30/98................ $258,116 $(2,056,666) $30,085,279 $28,286,729
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
<FN>
See accompanying notes to financial statement.
</TABLE>
<PAGE>
<TABLE>
RIFKIN ACQUISTION PARTNERS, L.L.L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(UNAUDITED)
Six Months Ended June 30, 1998 and 1997
<CAPTION>
Preferred
Equity General Limited
Interest Partner Partners Total
<S> <C> <C> <C> <C>
Partners' capital (deficit)
at 12/31/97............... $276,243 $(1,885,480) $34,044,912 $32,435,675
Net loss for the six months
ended 6/30/98............. (18,127) (30,211) (2,972,808) (3,021,146)
Accretion of redeemable
partners' interest........ - (140,975) (986,825) (1,127,800)
Partners' capital (deficit)
at 6/30/98................ $258,116 $(2,056,666) $30,085,279 $28,286,729
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
<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 partner interests were
carried over and additional equity contributed for 10% and 1%,
respectively (the "Carryover Interests"). Further, on September 1, 1995,
RAP L.P. was renamed Rifkin Acquisition Partners, L.L.L.P. and a new
basis of accounting was established.
This form 10-Q is being filed in conformity with the SEC requirements for
unaudited consolidated financial statements for the Company and does not
contain all of the necessary footnote disclosures required for a fair
presentation of the balance sheets, statements of operations, of
partners' capital(deficit), and of cash flows in conformity with
generally accepted accounting principles. However, in the opinion of
management, this data includes all adjustments, consisting only of normal
recurring accruals, necessary to present fairly the Company's
consolidated financial position at June 30, 1998, December 31, 1997 and
June 30,1997, and its consolidated results of operations and cash flows
for the three months ended June 30, 1998 and 1997. 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, 1997.
2. Reclassification of Financial Statement Presentation
The 1997 results, shown on the Consolidated Statement of Operations,
include the reclasification of $393,737, for both the quarter and six
months ended June 30, 1997, of programmer launch support credits from
selling, general and administrative expense to programming expense to be
consistent with the 1998 presentation.
3. Acquisition of Cable Properties
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 Acquisition"), 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.
4. Sale of Michigan Assets
On February 4, 1998, with an effective date of January 31, 1998, the
Partnership sold all of its operating assets in the state of Michigan
(the "Michigan Sale")to Bresnan Communications Company ("Bresnan"). The
sale resulted in a gain recognized by the Company as follows:
Original cash proceeds $16,931,200
Final adjustment to value of
assets and liabilities assumed 119,364
Net proceeds 17,050,564
Net book value of assets sold 11,060,718
Net gain from sale $ 5,989,846
Proceeds from the sale were used by the Company to reduce its revolving
and term loans with a financial institution.
5. Senior Subordinated Notes
On January 26, 1996, the Company and its wholly-owned subsidiary, Rifkin
Acquisition Capital Corp (RAC), co-issued a $125 million aggregate
principal amount of 11 1/8% Senior Subordinated Notes ("the Notes") to
institutional investors. These Notes were subsequently exchanged on June
18, 1996 for publicly registered notes with identical terms. Interest on
the Notes is payable in cash, semi-annually on January 15 and July 15 of
each year, commencing on July 15, 1996. The Notes, which mature on
January 15, 2006, can be redeemed in whole or in part, at the Issuers'
option, at any time on or after January 15, 2001, at redeemable prices
contained in the Notes plus accrued interest. In addition, at any time
on or prior to January 15, 1999, the Issuers, at their option, may redeem
up to 25% of the principle amount of the notes issued to institutional
investors of not less than $25 million. The Senior Subordinated Notes
had a balance of $125 million At June 30, 1998 and 1997.
<PAGE>
RIFKIN ACQUISITION CAPITAL CORP.
BALANCE SHEET
June 30, December 31,
1998 1997
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
Special Note Regarding Forward-Looking Statements
Certain statements in this Form 10-Q, including the sections entitled
"Management's Discussion and Analysis of Financial Condition and
Results of Operations," constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995
(the "Reform Act"). The words "believes," "expects," "intends,"
"strategy," "considers" or "anticipates" and similar expressions
identify forward-looking statements. The Company does not undertake to
update, revise or correct any of the forward-looking information. Such
forward-looking statements involve known and unknown risks,
uncertainties, and other factors which may cause the actual results,
performance, or achievements of the Company to be materially different
from any future results, performance, or achievements expressed or
implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions;
competition in the cable television industry; substantial leverage and
risk of inability to service or repurchase the Company's and RACC's
debt; restrictions imposed by the terms of indebtedness; the Company's
acquisition strategy; the need for significant capital expenditures;
potential termination of franchises; the non-exclusivity of franchises;
government regulation in the cable television industry; dependence on
key personnel; dependence upon distributions from the Partnership's
subsidiaries; potential conflicts of interest arising out of the
relationship between the Company, RACC, and affiliates and other
factors.
Where any such forward-looking statement includes a statement of the
assumptions or bases underlying such forward-looking statement, the
Company cautions that, while it believes such assumptions or bases to
be reasonable and makes them in good faith, assumed facts or bases
almost always vary from actual results, and the differences between
assumed facts or bases and actual results can be material, depending
upon the circumstances. Where, in any forward-looking statement, the
Company, or its management, expresses an expectation or belief as to
the future results, such expectation or belief is expressed in good
faith and believed to have a reasonable basis, but there can be no
assurance that the statement of expectation or belief will result or be
achieved or accomplished.
Results of Operations
In August 1995, the Partnership 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 (the "Notes"), which were subsequently
publicly registered, and amended its Credit Agreement to provide
ongoing borrowing availability, including availability to finance
acquisitions.
Three Months Ended June 30, 1998 Compared to Three Months Ended June
30, 1997
Revenue increased 4.5%, or approximately $1.0 million, to approximately
$22.3 million for the three months ended June 30, 1998 from
approximately $21.3 million for the three months ended June 30, 1997.
This increase resulted from approximately $2.2 million in growth in
basic customers and increases in basic and tier rates, offset by
approximately $1.2 million in total revenue decreases due to the
January 31, 1998 sale of systems serving Bridgeport and Bad Axe,
Michigan (the "Michigan Sale"). Basic customers decreased 4.3% to
approximately 190,300 at June 30, 1998 from approximately 198,800 at
June 30, 1997. This decrease was attributable to the approximate
11,200 customers related to the Michigan Sale, offset by continued
growth in Georgia (3,900 or 7.1%). Average monthly revenue per
customer increased 8.9% from $35.91 for the three months ended June 30,
1997 to $39.10 for 1998 primarily a result of rate increases. Premium
service units decreased 3.0% to approximately 107,700 as of June 30,
1998, from approximately 111,000 as of June 30, 1997, as a result of
the Michigan Sale (6,100) and decreases in Tennessee (2,800) offset by
increases in Georgia (4,700) and Illinois (900). The Company's premium
penetration increased to 56.6% from 55.8% between 1997 and 1998.
Operating expense, which includes costs related to technical personnel,
franchise fees and repairs and maintenance, increased 1.3%, or
approximately $100,000 to approximately $3.5 million for the three
months ended June 30, 1998, and decreased as a percentage of revenue to
15.5% from 16.0%. The increase relates to the normal annual
inflationary operating expense increases, offset by an approximate
$200,000 decrease related to the Michigan Sale.
Programming expense, which includes costs related to basic, tier and
premium services, decreased 1.6%, or approximately $100,000 to
approximately $4.3 million for the three months ended June 30, 1998
from approximately $4.4 million for the three months ended June 30,
1997, and decreased as a percentage of revenue to 19.3% from 20.5%.
Approximately $300,000 of the decrease related to the Michigan Sale,
offset by increases 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 2.5%, or approximately
$100,000 to approximately $3.6 million for the three months ended June
30, 1998 from approximately $3.5 million for the same period in 1997.
As a percentage of revenue, selling, general and administrative expense
decreased to 16.2% for the three months ended June 30, 1998 from 16.5%
in 1997. Approximately $300,000 of the increase related to the normal
annual inflationary selling, general and administrative expense
increases, offset by an approximate $200,000 decrease related to the
Michigan Sale.
Depreciation and amortization expense of approximately $9.2 million for
the three months ended June 30, 1998 decreased approximately $600,000
from the three months ended June 30, 1997 . The increase in
depreciation resulted primarily from increases of approximately $9.1
million in 1998 and approximately $9.1 million in 1997 in property,
plant and equipment, along with $4.8 million attributable to the fixed
assets added in relation to the acquired systems in Manchester and
Shelbyville, Tennessee (the "Act V Acquisition"). The decreases in
amortization expense resulted primarily from the reduction in franchise
cost related to the Michigan Sale. As a percentage of revenue,
depreciation and amortization expenses decreased to 41.4% in 1998 from
46.1% in 1997.
Management fees, equal to 3.5% of gross revenue, of approximately
$800,000 in 1998 remained consistent with the three months ended June
30, 1997.
The loss on disposal of assets, primarily the write-off of replaced
house drops and rebuilt trunk and distribution equipment, decreased to
approximately $400,000 in 1998 from approximately $2.2 million in 1997.
Interest expense during 1998 increased approximately $200,000 from the
three months ended June 30, 1997 and decreased as a percentage of
revenue from 27.9% to 25.9%. Interest expense was based on an average
debt balance of $218.0 million with an average interest rate of 10.6%
and an average debt balance of $218.5 million with an average interest
rate of 10.9% for 1998 and 1997, respectively.
The Partnership is a "pass-through" entity for income tax purposes.
All income or loss flows through to the partners of the Partnership in
accordance with the Partnership Agreement. An income tax benefit of
approximately $800,000 was recorded in 1998 compared to an income tax
benefit of approximately $1.9 million from the three months ended June
30, 1997. The income tax benefit 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, the Company experienced a
Net Loss of approximately $4.5 million in 1998, compared with an
approximate $6.9 million loss in 1997.
Adjusted EBITDA, defined as income (loss) before interest expense,
income taxes, depreciation and amortization, loss on disposal of
assets, gain on the sale of Michigan assets and the non-cash provision
for the management incentive plan, increased 7.2%, or approximately
$800,000 to $10.3 million in 1998 from $9.6 million for 1997. As a
percent of revenue, Adjusted EBITDA increased to 46.3% in 1998 from
44.9% for 1997. 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, 1998 Compared to Six Months Ended June 30,
1997
Revenue increased 8.9%, or approximately $3.6 million, to $44.3 million
for the six months ended June 30, 1998 from $40.7 million for the six
months ended June 30, 1997. This increase resulted from approximately
$4.3 million in growth in basic customers and increases in basic and
tier rates, and approximately $1.2 million in total revenue as a result
of the ACT V Acquisition offset by approximately $1.9 million in total
revenue decreases due to the Michigan Sale. Basic customers decreased
4.3% to approximately 190,300 at June 30, 1998 from approximately
198,800 at June 30, 1997. This decrease was attributable to the
approximate 11,200 customers related to the Michigan Sale, offset by
growth in Georgia (3,900 or 7.1%). Average monthly revenue per
customer increased 7.3% from $35.30 for the six months ended June 30,
1997 to $37.88 for 1998 primarily a result of acquisition timing and
rate increases. Premium service units decreased 3.0% to approximately
107,700 as of June 30, 1998, from approximately 111,000 as of June 30,
1997, as a result of the Michigan Sale (6,100) and decreases in
Tennessee (2,800) offset by increases in Georgia (4,700) and Illinois
(900). The Company's premium penetration increased to 56.6% from 55.8%
between 1998 and 1997.
Operating expense, which includes costs related to technical personnel,
franchise fees and repairs and maintenance, increased 1.7%, or
approximately $100,000 to approximately $7.0 million for the six
months ended June 30, 1998, and decreased as a percentage of revenue to
15.8% from 16.9%. Approximately $200,000 of the increase relates to
the operating expense of the acquired systems in the ACT V Acquisition,
offset by an approximate $300,000 decrease related to the Michigan
Sale.
Programming expense, which includes costs related to basic, tier and
premium services, increased 7.7%, or approximately $700,000 to
approximately $9.2 million for the six months ended June 30, 1998 from
approximately $8.6 million for the six months ended June 30, 1997, and
decreased as a percentage of revenue to 20.9% from 21.1%.
Approximately $300,000 of the increase relates to the programming
expenses of the acquired systems in the ACT V Acquisition, offset by an
approximate $400,000 decrease related to the Michigan Sale. 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 4.9%, or approximately
$300,000 to approximately $6.4 million for the six months ended June
30, 1998 from $6.1 million for the same period in 1997. As a
percentage of revenue, selling, general and administrative expense
decreased to 14.4% for the six months ended June 30, 1998 from 14.9%
in 1997. Approximately $200,000 of the increase related to the
selling, general and administrative expense of the acquired systems in
the ACT V Acquisition, offset by an approximate $200,000 decrease
related to the Michigan Sale. The remainder of the increase related
primarily to increased wages and benefits.
Depreciation and amortization expense of approximately $18.7 million
for the six months ended June 30, 1998 decreased approximately $700,000
from the six months ended June 30, 1997. The increase in depreciation
resulted primarily from increases of approximately $15.9 million in
1998 and approximately $20.3 million in 1997 in property, plant and
equipment. The decreases in amortization expense resulted primarily
from the amortization of franchise cost related to the ACT V
Acquisition offset by the reduction in franchise cost related to the
Michigan Sale. As a percentage of revenue, depreciation and
amortization expenses decreased to 42.2% in 1998 from 47.6% in 1997.
Management fees, equal to 3.5% of gross revenue, of approximately $1.6
million in 1998 increased approximately $100,000 from the six months
ended June 30, 1997 due to the increase in the Company's revenue as a
result of rate increases and increased customers as well as the ACT V
Acquisition.
The loss on disposal of assets, primarily the write-off of replaced
house drops and rebuilt trunk and distribution equipment, decreased to
approximately $600,000 in 1998 from approximately $2.4 million in 1997.
An approximate $6.0 million gain on the Michigan Sale was recorded for
the six months ended June 30, 1998.
Interest expense during 1998 increased approximately $200,000 from the
six months ended June 30, 1997 and decreased as a percentage of
revenue from 28.3% to 26.5%. Interest expense was based on an average
debt balance of $222.1 million with an average interest rate of 10.6%
and an average debt balance of $211.8 million with an average interest
rate of 10.9% for 1998 and 1997, respectively. The debt increase was
primarily a result of the increased borrowings related to the ACT V
Acquisition offset by the debt retirement related to the Michigan Sale.
The Partnership is a "pass-through" entity for income tax purposes.
All income or loss flows through to the partners of the Partnership in
accordance with the Partnership Agreement. An income tax benefit of
approximately $1.9 million was recorded in 1998 compared to an income
tax benefit of approximately $2.7 million from the six months ended
June 30, 1997. The income tax benefit 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, the Company experienced a
Net Loss of approximately $3.0 million in 1998, compared with an
approximate $12.9 million loss in 1997.
Adjusted EBITDA, defined as income (loss) before interest expense,
income taxes, depreciation and amortization, loss on disposal of
assets, gain on the sale of Michigan assets and the non-cash provision
for the management incentive plan, increased 12.8%, or approximately
$2.3 million to $20.5 million in 1998 from $18.2 million for 1997. As
a percent of revenue, Adjusted EBITDA increased to 46.3% in 1998 from
44.7% for 1997. 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 six month periods ended June 30, 1998 and 1997, net cash
provided by operations (including changes in working capital) of the
Company was approximately $10.0 million and $9.2 million, respectively.
From December 31, 1997 to June 30, 1998, the Company's available cash
decreased from approximately $1.9 million to approximately $1.1
million. Accounts payable increased approximately $1.1 million to
approximately $12.8 million from December 31, 1997 to June 30, 1998
primarily a result of bill payment timing. Subscriber deposits and
prepayments decreased approximately $300,000 to approximately $1.2
million from December to June primarily a result of the timing of
customer payments. Interest payable decreased approximately $300,000
to approximately $7.1 million for the same comparable periods due
primarily to the effect of the timing of payments. Also, for the same
comparable periods, deferred taxes payable decreased approximately $1.9
million to approximately $10.2 million as a result of differences in
book and tax depreciation and amortization lives and methods. Notes
payable decreased by $11.4 million from December 31, 1997 to June 30,
1998 due primarily to the borrowings related to the ACT V Acquisition
offset by the debt retirement related to the proceeds from the Michigan
Sale.
The Company has decreased its total consolidated debt to $218.1 million
as of June 30, 1998 from $229.5 million at December 31, 1997. The
Company has unused commitments under the Amended and Restated Credit
Agreement of $40.3 million, all of which is available for general
corporate and/or acquisition purposes. Access to the remaining
commitments 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 5.65x. As of June 30, 1998, the Company's Total Funded Debt
Ratio was 5.28x. 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
original amount of $25 million was paid down to $21.6 million based
upon a portion of the proceeds from the Michigan Sale, matures on March
31, 2003 and begins amortizing on March 31, 2000. Term Loan B in the
amount of $40 million, matures March 31, 2004 and begins amortizing
March 31, 2002. The Amended and Restated Credit Agreement also
provides for an $80 million reducing revolving facility with a final
maturity date of March 31, 2003. The revolving facility was subject to
permanent annual commitment reductions commencing in 1997 with a
remaining commitment as of June 30, 1998 of $68.8 million.
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
<PAGE>
ITEM 5. Other Information
<TABLE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
REVENUE AND OPERATING CASH FLOW REPORT
(UNAUDITED)
Three Months Ended June 30, 1998 and 1997
<CAPTION>
REVENUES:
1998 1997
<S> <C> <C>
Georgia................................ $ 7,573,049 $ 6,489,276
Illinois............................... 2,624,682 2,570,031
Michigan(3)............................ 8,136 1,151,017
Tennessee.............................. 12,053,904 11,092,773
Other(2)............................... 36,495 28,313
Total............................... $22,296,266 $21,331,410
OPERATING CASH FLOW(1):
Georgia................................ $ 3,732,277 $ 3,064,791
Illinois............................... 1,351,815 1,339,324
Michigan(3)............................ 3,505 548,347
Tennessee.............................. 6,013,085 5,371,157
Other.................................. 9,064 5,081
Total............................... $11,109,746 $10,328,700
OPERATING CASH FLOW AS A PERCENT OF REVENUES:
Georgia................................ 49.3% 47.2%
Illinois............................... 51.5% 52.1%
Michigan(3)............................ 43.1% 47.6%
Tennessee.............................. 49.9% 48.4%
Total (excluding other)............. 49.9% 48.5%
<FN>
(1) Excludes management fee expense of $780,369 and $746,601, net
losses related to the disposition of certain plant assets of
$386,847 and $2,244,511, and non-cash management incentive plan
expense of $189,999 and $314,994 for the quarters ended June 30,
1998 and 1997.
(2) Principally interest income.
(3) Activity relates to the Michigan Systems which were sold
effective January 31, 1998.
</TABLE>
<PAGE>
<TABLE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
REVENUE AND OPERATING CASH FLOW REPORT
(UNAUDITED)
Six Months Ended June 30, 1998 and 1997
<CAPTION>
REVENUES:
1998 1997
<S> <C> <C>
Georgia................................ $14,665,393 $12,548,587
Illinois............................... 5,280,526 5,025,078
Michigan(3)............................ 386,182 2,241,205
Tennessee.............................. 23,904,824 20,801,687
Other(2)............................... 64,851 51,182
Total............................... $44,301,776 $40,667,739
OPERATING CASH FLOW(1):
Georgia................................ $ 7,229,136 $ 5,977,188
Illinois............................... 2,742,004 2,573,684
Michigan(3)............................ 83,733 1,092,312
Tennessee.............................. 12,004,010 9,958,708
Other.................................. 9,803 6,113
Total............................... $22,068,686 $19,608,005
OPERATING CASH FLOW AS A PERCENT OF REVENUES:
Georgia................................ 49.3% 47.6%
Illinois............................... 51.9% 51.2%
Michigan(3)............................ 21.7% 48.7%
Tennessee.............................. 50.2% 47.9%
Total (excluding other)............. 49.9% 48.3%
<FN>
(1) Excludes management fee expense of $1,550,562 and $1,423,372, net
losses related to the disposition of certain plant assets of
$647,759 and $2,373,514 for the six months ended June 30, 1998 and
1997, respectively, and non-cash management incentive plan
expense of $379,998 and $479,994 for the six months ended June 30,
1998 and 1997, respectively.
(2) Principally interest income.
(3) Activity relates to the Michigan Systems which were sold effective
January 31, 1998.
</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, 1998.
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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,072
<SECURITIES> 0
<RECEIVABLES> 1,049
<ALLOWANCES> 410
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 147,214
<DEPRECIATION> 31,964
<TOTAL-ASSETS> 286,218
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 218,075
0
0
<COMMON> 0
<OTHER-SE> 36,802
<TOTAL-LIABILITY-AND-EQUITY> 286,218
<SALES> 0
<TOTAL-REVENUES> 44,302
<CGS> 0
<TOTAL-COSTS> 42,847
<OTHER-EXPENSES> (5,342)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,718
<INCOME-PRETAX> (4,921)
<INCOME-TAX> (1,900)
<INCOME-CONTINUING> (3,021)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,021)
<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>
