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 September 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)..................................... 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,
1998 1997
<S> <C> <C>
Revenue:
Service................................ $20,625,159 $20,021,657
Installation and other................. 1,710,392 1,436,465
Total revenue 22,335,551 21,458,122
Costs and Expenses:
Operating expense...................... 3,210,901 3,792,107
Programming expense.................... 4,836,733 3,978,649
Selling, general and administrative
expense.............................. 3,509,583 3,242,086
Depreciation and amortization.......... 9,288,213 9,767,522
Management fees........................ 781,745 751,033
Loss on disposal of assets............. 2,230,776 2,704,207
Total costs and expenses......... 23,857,951 24,235,604
Operating (loss)....................... (1,522,400) (2,777,482)
Interest expense....................... 5,969,632 6,123,146
Loss before income taxes............... (7,492,032) (8,900,628)
Income tax benefit..................... (1,584,925) (774,000)
Net (loss)............................. $(5,907,107) $(8,126,628)
Adjusted EBITDA........................ $10,186,588 $ 9,884,246
<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,
1998 1997
<S> <C> <C>
Revenue:
Service................................ $61,446,011 $58,347,858
Installation and other................. 5,171,316 3,778,003
Total revenue 66,637,327 62,125,861
Costs and Expenses:
Operating expense...................... 10,216,752 10,683,440
Programming expense.................... 14,086,215 12,566,663
Selling, general and administrative
expense.............................. 9,867,338 9,302,467
Depreciation and amortization.......... 27,971,592 29,136,224
Management fees........................ 2,332,307 2,174,405
Loss on disposal of assets............. 2,878,535 5,077,721
Gain on sale of Michigan assets........ (5,989,846) -
Total costs and expenses......... 61,362,893 68,940,920
Operating income (loss)................ 5,274,434 (6,815,059)
Interest expense....................... 17,687,612 17,631,516
Loss before income taxes............... (12,413,178) (24,446,575)
Income tax benefit..................... (3,484,925) (3,432,000)
Net loss............................... $(8,928,253) $21,014,575
Adjusted EBITDA........................ $30,704,712 $28,068,879
<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,
1998 1997
(Unaudited)
<S> <C> <C>
ASSETS
Cash................................... $ 2,165,338 $ 1,902,555
Customer accounts receivable,
net of allowance for doubtful
accounts of $459,414 in 1998
and $425,843 in 1997............... 1,319,006 1,371,050
Other receivables...................... 4,275,969 4,615,089
Prepaid expenses and other............. 1,730,607 1,753,257
Property, plant and equipment at cost:
Cable television transmission and
distribution systems and related
equipment.......................... 143,493,893 131,806,310
Land, building, vehicles and
furniture and fixtures............. 7,315,891 7,123,429
150,809,784 138,929,739
Less accumulated depreciation.......... (35,012,429) (26,591,458)
Net property, plant and
equipment....................... 115,797,355 112,338,281
Franchise costs and other intangible
assets, net of accumulated
amortization of $65,702,587 in 1998
and $53,449,637 in 1997.............. 157,221,873 180,059,655
Total assets................. $282,510,148 $302,039,887
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued
liabilities.......................... $ 11,974,269 $ 11,690,894
Customer deposits and prepayments.... 1,323,500 1,503,449
Interest payable....................... 3,667,672 7,384,509
Deferred taxes payable................. 8,635,000 12,138,000
Notes payable.......................... 226,075,000 229,500,000
Total liabilities............. 251,675,441 262,216,852
Commitments
Redeemable partners' interests......... 8,067,681 7,387,360
Partners' capital (deficit)
General partner...................... (2,059,802) (1,885,480)
Limited partners..................... 24,604,156 34,044,912
Preferred equity interest............ 222,673 276,243
Total partners' capital...... 30,834,706 32,435,675
Total liabilities and
partners' capital.......... $282,510,148 $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>
September 30, September 30,
1998 1997
<S> <C> <C>
ASSETS
Cash.................................... $ 2,165,338 $ 2,234,780
Customer accounts receivable,
net of allowance for doubtful
accounts of $459,414 in 1998
and $397,536 in 1997.................. 1,319,006 1,198,623
Other receivables....................... 4,275,969 3,512,758
Prepaid expenses and other.............. 1,730,607 1,675,239
Property, plant and equipment at cost:
Cable television transmission and
distribution systems and related
equipment........................... 143,493,893 129,903,938
Land, building, vehicles and
furniture and fixtures.............. 7,315,891 7,220,271
150,809,784 137,124,209
Less accumulated depreciation........... (35,012,429) (23,854,082)
Net property, plant and
equipment.................... 115,797,355 113,270,127
Franchise costs and other intangible
assets, net of accumulated
amortization of $65,702,587 in 1998
and $41,716,408 in 1997............... 157,221,873 186,065,104
Total assets................... $282,510,148 $307,956,631
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued
liabilities........................... $ 11,974,269 $ 12,717,718
Customer deposits and prepayments..... 1,323,501 1,494,015
Interest payable........................ 3,667,672 3,851,790
Deferred taxes payable.................. 8,635,000 14,041,000
Notes payable........................... 226,075,000 231,000,000
Total liabilities.............. 251,675,442 263,104,523
Commitments
Redeemable partners' interests.......... 8,067,680 6,228,800
Partners' capital (deficit)
General partner....................... (2,060,402) (1,690,370)
Limited partners...................... 24,604,755 40,007,260
Preferred equity interest............. 222,673 306,418
Total partners' capital........ 22,767,026 38,623,308
Total liabilities and partners'
capital...................... $282,510,148 $307,956,631
<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,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net loss................................. $(5,907,107) $(8,126,628)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization........ 9,288,213 9,767,522
Amortization of deferred loan cost 247,440 247,440
Loss on disposal of fixed assets..... 2,230,776 2,704,207
Deferred taxes benefit............... (1,603,000) (774,000)
Decrease (increase) in customer
accounts receivable................ (270,506) 56,345
Decrease (increase) in other
receivables........................ 264,448 (282,749)
Decrease in prepaid expenses
and other.......................... (210,947) (153,112)
Increase (decrease) in accounts
payable and accrued liabilities.... (827,925) 376,537
Increase in customer
deposits and prepayment........... 134,986 120,131
Decrease in interest payable......... (3,444,398) (3,368,170)
Net cash provided by (used in)
operating activities............ (98,020) 567,523
Cash flows from investing activities:
Additions to property, plant and
equipment.............................. (6,706,963) (6,879,091)
Additions to cable television
franchises, net of retirements
and changes in other intangible
assets................................. (117,264) (166,269)
Net proceeds from the disposal
of assets.............................. 75,627 89,890
Net cash used in
investing activities........... (6,748,600) (6,955,470)
Cash flows from financing activities
Proceeds from long-term bank debt........ 9,500,000 8,000,000
Payments of long term-bank debt.......... (1,500,000) (1,000,000)
Equity distributions to partners......... (60,076) -
Net cash provided by
financing activities............ 7,939,924 7,000,000
Net increase in cash..................... 1,093,304 612,053
Cash at beginning of period.............. 1,072,034 1,622,727
Cash at end of period.................... $ 2,165,338 $ 2,234,780
<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,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net loss................................. $(8,928,253) $(21,014,575)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization........ 27,971,592 29,136,224
Amortization of deferred loan cost 742,320 742,320
Gain on sale of Michigan assets...... (5,989,846) -
Loss on disposal of fixed assets..... 2,878,535 5,077,721
Deferred taxes benefit............... (3,503,000) (3,432,000)
Increase in customer
accounts receivable................ (1,203) (14,549)
Decrease (increase) in other
receivables........................ 336,629 (890,383)
Decrease (increase) in prepaid
expenses and other................. (9,166) 101,033
Increase in accounts payable and
accrued liabilities................ 307,296 2,780,480
Increase (decrease) in customer
deposits and prepayment........... (126,736) 221,736
Decrease in interest payable......... (3,716,837) (2,932,471)
Net cash provided by operating
activities...................... 9,961,331 9,775,536
Cash flows from investing activities:
Additions to property, plant and
equipment.............................. (22,583,508) (27,211,002)
Additions to cable television
franchises, net of retirements
and changes in other intangible
assets................................. (875,107) (14,449,055)
Net proceeds from sale of Michigan
assets................................. 17,050,564 -
Net proceeds from the disposal of assets
(other than Michigan).................. 194,579 232,069
Net cash used in investing
activities..................... (6,213,472) (41,427,988)
Cash flows from financing activities
Proceeds from long-term bank debt........ 21,500,000 37,000,000
Payments of long term-bank debt.......... (24,925,000) (4,500,000)
Equity distributions to partners......... (60,076) -
Net cash provided by (used in)
financing activities............ (3,485,076) 32,500,000
Net increase in cash..................... 262,783 847,548
Cash at beginning of period.............. 1,902,555 1,387,232
Cash at end of period.................... $ 2,165,338 $ 2,234,780
<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, 1998 and 1997
<CAPTION>
Preferred
Equity General Limited
Interest Partner Partners Total
<S> <C> <C> <C> <C>
Partners' capital (deficit)
at 6/30/98................ $258,116 $(2,056,666) $30,085,279 $28,286,729
Net income for the quarter
ended 9/30/98............. (35,443) (59,071) (5,812,593) (5,907,107)
Decretion of redeemable
partners' interest........ - 55,935 391,545 447,480
Partners' equity
distribution.............. - (600) (59,476) (60,076)
Partners' capital (deficit)
at 9/30/98................ $222,673 $(2,060,402) $24,604,755 $22,767,026
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)
Decretion 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
<FN>
See accompanying notes to financial statement.
</TABLE>
<PAGE>
<TABLE>
RIFKIN ACQUISTION PARTNERS, L.L.L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(UNAUDITED)
Nine Months Ended September 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 nine months
ended 9/30/98............. (53,570) (89,282) (8,785,401) (8,928,253)
Accretion of redeemable
partners' interest........ - (85,040) (595,280) (680,320)
Partners' equity
distribution.............. - (600) (59,476) (60,076)
Partners' capital (deficit)
at 9/30/98................ $222,673 $(2,060,402) $24,604,755 $22,767,026
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
<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 September 30, 1998, December 31, 1997
and September 30, 1997, and its consolidated results of operations and
cash flows for the three months ended September 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 $690,363 and $1,084,100, for the quarter
and nine months ended September 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 September 30, 1998 and 1997.
<PAGE>
<TABLE>
RIFKIN ACQUISITION CAPITAL CORP.
BALANCE SHEET
<CAPTION>
September 30, December 31,
1998 1997
<S> <C> <C>
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
<FN>
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 September 30, 1998 Compared to Three Months Ended
September 30, 1997
Revenue increased 4.1%, or approximately $900,000, to approximately
$22.3 million for the three months ended September 30, 1998 from
approximately $21.4 million for the three months ended September 30,
1997. This increase resulted from approximately $2.0 million in growth
in basic customers and increases in basic and tier rates, offset by
approximately $1.1 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 4.6% to
approximately 190,400 at September 30, 1998 from approximately 199,600
at September 30, 1997. This decrease was attributable to the
approximate 11,200 customers related to the Michigan Sale, offset by
continued growth in Georgia (3,100 or 5.4%). Average monthly revenue
per customer increased 8.9% from $35.90 for the three months ended
September 30, 1997 to $39.11 for 1998 primarily a result of rate
increases. Premium service units increased 3.1% to approximately
112,900 as of September 30, 1998, from approximately 109,500 as of
September 30, 1997, as a result of the Michigan Sale (6,000) offset by
increases in Georgia (5,300), Tennessee (1,800) and Illinois (2,200).
The Company's premium penetration increased to 59.3% from 54.9% between
1997 and 1998.
Operating expense, which includes costs related to technical personnel,
franchise fees and repairs and maintenance, decreased 15.3%, or
approximately $600,000 to approximately $3.2 million for the three
months ended September 30, 1998, and decreased as a percentage of
revenue to 14.4% from 17.7%. The decrease relates to the normal annual
inflationary operating expense increases, offset by an approximate
$200,000 decrease related to the Michigan Sale along with small
decreases in numerous expense categories due to tighter expense
controls.
Programming expense, which includes costs related to basic, tier and
premium services, increased 21.6%, or approximately $900,000 to
approximately $4.8 million for the three months ended September 30,
1998 from approximately $3.9 million for the three months ended
September 30, 1997, and increased as a percentage of revenue to 21.7%
from 18.5%. The increase is due to program vendor rate increases and
the addition of programming in certain systems along with lower
programmer co-op credits offset by approximately $300,000 related to
the Michigan Sale.
Selling, general and administrative expense, which includes expenses
related to on-site office and customer-service personnel, customer
billing and postage and marketing, increased 8.3%, or approximately
$300,000 to approximately $3.5 million for the three months ended
September 30, 1998 from approximately $3.2 million for the same period
in 1997. As a percentage of revenue, selling, general and
administrative expense increased to 15.7% for the three months ended
September 30, 1998 from 15.1% in 1997. Approximately $400,000 of the
increase related to the normal annual inflationary selling, general and
administrative expense increases, offset by an approximate $100,000
decrease related to the Michigan Sale.
Depreciation and amortization expense of approximately $9.3 million for
the three months ended September 30, 1998 decreased approximately
$500,000 from the three months ended September 30, 1997. The increase
in depreciation resulted primarily from increases of approximately $6.7
million in 1998 and approximately $6.9 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 41.6% in 1998 from
45.5% in 1997.
Management fees, equal to 3.5% of gross revenue, of approximately
$800,000 in 1998 remained consistent with the three months ended
September 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 $2.2 million in 1998 from approximately $2.7 million in
1997.
Interest expense during 1998 decreased approximately $200,000 from the
three months ended September 30, 1997 and decreased as a percentage of
revenue from 28.5% to 26.7%. Interest expense was based on an average
debt balance of $224.0 million with an average interest rate of 10.7%
and an average debt balance of $229.4 million with an average interest
rate of 10.7% for 1998 and 1997, respectively. The debt decrease 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 $1.6 million was recorded in 1998 compared to an income
tax benefit of approximately $800,000 million from the three months
ended September 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 $5.9 million in 1998, compared with an
approximate $8.1 million loss in 1997.
Adjusted EBITDA, defined as income (loss) before interest expense,
income taxes, depreciation and amortization, loss on disposal of assets
and the non-cash provision for the management incentive plan, increased
3.1%, or approximately $300,000 to $10.2 million in 1998 from $9.9
million for 1997. As a percent of revenue, Adjusted EBITDA decreased
to 45.6% in 1998 from 46.1% 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.
Nine months Ended September 30, 1998 Compared to Nine months Ended
September 30, 1997
Revenue increased 7.3%, or approximately $4.5 million, to $66.6 million
for the nine months ended September 30, 1998 from $62.1 million for the
nine months ended September 30, 1997. This increase resulted from
approximately $6.3 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
$3.0 million in total revenue decreases due to the Michigan Sale.
Basic customers decreased 4.6% to approximately 190,400 at September
30, 1998 from approximately 199,600 at September 30, 1997. This
decrease was attributable to the approximate 11,200 customers related
to the Michigan Sale, offset by growth in Georgia (3,100 or 5.4%).
Average monthly revenue per customer increased 5.9% from $35.87 for the
nine months ended September 30, 1997 to $37.99 for 1998 primarily a
result of acquisition timing and rate increases. Premium service units
increased 3.1% to approximately 112,900 as of September 30, 1998, from
approximately 109,500 as of September 30, 1997, as a result of the
Michigan Sale (6,000) offset by increases in Georgia (5,300), Tennessee
(1,800) and Illinois (2,200). The Company's premium penetration
increased to 59.3% from 54.9% between 1998 and 1997.
Operating expense, which includes costs related to technical personnel,
franchise fees and repairs and maintenance, decreased 4.4%, or
approximately $500,000 to approximately $10.2 million for the nine
months ended September 30, 1998, and decreased as a percentage of
revenue to 15.3% from 17.2%. Approximately $500,000 of the decrease
related to the Michigan Sale along with small decreases in numerous
expense categories due to tighter expense controls offset by an
approximate $200,000 increase related 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 12.1%, or approximately $1.5 million to
approximately $14.1 million for the nine months ended September 30,
1998 from approximately $12.6 million for the nine months ended
September 30, 1997, and increased as a percentage of revenue to 21.1%
from 20.2%. Approximately $300,000 of the increase relates to the
programming expenses of the acquired systems in the ACT V Acquisition,
along with lower programmer co-op credits offset by an approximate
$700,000 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 6.1%, or approximately
$600,000 to approximately $9.9 million for the nine months ended
September 30, 1998 from $9.3 million for the same period in 1997. As
a percentage of revenue, selling, general and administrative expense
decreased to 14.8% for the nine months ended September 30, 1998 from
15.0% 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 $400,000 decrease
related to the Michigan Sale. The remainder of the increase related
primarily to increased wages and benefits.
Depreciation and amortization expense of approximately $28.0 million
for the nine months ended September 30, 1998 decreased approximately
$1.2 million from the nine months ended September 30, 1997. The
increase in depreciation resulted primarily from increases of
approximately $22.6 million in 1998 and approximately $27.2 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 42.0% in 1998 from
46.9% in 1997.
Management fees, equal to 3.5% of gross revenue, of approximately $2.3
million in 1998 increased approximately $200,000 from the nine months
ended September 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 gain on disposal of assets, primarily the write-off of replaced
house drops and rebuilt trunk and distribution equipment more than
offset by an approximate $6.0 million gain on the Michigan sale,
increased to approximately $3.1 million in 1998 from an approximate
$5.1 million loss in 1997.
Interest expense during 1998 increased approximately $100,000 from the
nine months ended September 30, 1997 and decreased as a percentage of
revenue from 28.4% to 26.5%. Interest expense was based on an average
debt balance of $223.2 million with an average interest rate of 10.6%
and an average debt balance of $217.6 million with an average interest
rate of 10.8% 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 $3.5 million was recorded in 1998 compared to an income
tax benefit of approximately $3.4 million from the nine months ended
September 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 $8.9 million in 1998, compared with an
approximate $21.0 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 9.4%, or approximately
$2.6 million to $30.7 million in 1998 from $28.1 million for 1997. As
a percent of revenue, Adjusted EBITDA increased to 46.1% in 1998 from
45.2% 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 nine month periods ended September 30, 1998 and 1997,
net cash provided by operations (including changes in working capital)
of the Company was approximately $10.0 million and $9.8 million,
respectively.
From December 31, 1997 to September 30, 1998, the Company's available
cash and cash equivalents increased from approximately $1.9 million to
approximately $2.2 million. Accounts payable and accrued liabilities
increased approximately $300,000 to approximately $12.0 million from
December 31, 1997 to September 30, 1998 primarily a result of bill
payment timing. Customer deposits and prepayments decreased
approximately $200,000 to approximately $1.3 million from December to
September primarily a result of the timing of customer payments.
Interest payable decreased approximately $3.7 million to approximately
$3.7 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 $3.5 million to
approximately $8.6 million as a result of differences in book and tax
depreciation and amortization lives and methods. Notes payable
decreased by $3.4 million from December 31, 1997 to September 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 $226.1 million
as of September 30, 1998 from $229.5 million at December 31, 1997. The
Company has unused commitments under the Amended and Restated Credit
Agreement of $30.4 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 5.65. As of September 30, 1998, the Company's Total Funded Debt
Ratio was 5.56. 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 September 30, 1998 of $66.9 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.
Year 2000 Issue
Year 2000 issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. This
could result in a system failure or miscalculations if a computer
program recognizes a date of "00" as the year 1900 instead of 2000.
The Company is in the process of assessing the Year 2000 issue with
regard to its internal financial and operational systems as well as
third parties with which the Company has material relationships.
The Company expects to complete all significant remediation of Year
2000 issues for its internal financial and operational systems,
including both information technology ("IT")systems and non-IT systems
that include embedded technology such as microcontrollers by June 30,
1999. The total cost for this remediation effort is expected to be
less than $100,000, and will be expensed as incurred.
The Company has identified third parties with which it has material
relationships with respect to the Year 2000 issue. These parties are
primarily large financial, telecommunications and information
processing entities. All such third parties have reported to the
Company that they are on schedule with their projects to remediate Year
2000 issues, and that they anticipate being Year 2000 compliant on a
timely basis. The Company intends to continue to monitor the progress
of these third parties and will develop contingency plans during Fiscal
1999 in the event one or more of these third parties fail to remediate
their Year 2000 issues in such a way as to materially affect the
operations of the Company. At this time the Company believes the risk
of such third party failures having a material impact on the Company's
operations is remote.
<PAGE>
PART II: OTHER INFORMATION
ITEM 5. Other Information
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
REVENUE AND OPERATING CASH FLOW REPORT
(UNAUDITED)
Three Months Ended September 30, 1998 and 1997
REVENUES:
1998 1997
Georgia................................ $ 7,505,054 $ 6,546,724
Illinois............................... 2,608,924 2,528,892
Michigan(3)............................ 6,247 1,146,635
Tennessee.............................. 12,180,466 11,205,345
Other(2)............................... 34,860 30,526
Total............................... $22,335,551 $21,458,122
OPERATING CASH FLOW(1):
Georgia................................ $ 3,519,794 $ 2,987,191
Illinois............................... 1,394,827 1,253,284
Michigan(3)............................ 7,469 602,310
Tennessee.............................. 6,023,429 5,775,487
Other.................................. 22,814 17,006
Total............................... $10,968,333 $10,635,278
OPERATING CASH FLOW AS A PERCENT OF REVENUES:
Georgia................................ 46.9% 45.6%
Illinois............................... 53.5% 49.6%
Michigan(3)............................ 119.6% 52.5%
Tennessee.............................. 49.5% 51.5%
Total (excluding other)............. 49.1% 49.6%
(1) Excludes management fee expense of $781,745 and $751,033, net
losses related to the disposition of certain plant assets of
$2,230,776 and $2,704,207, and non-cash management incentive
plan expense of $189,999 and $189,999 for the quarters ended
September 30, 1998 and 1997.
(2) Principally interest income.
(3) Activity relates to the Michigan Systems which were sold
effective January 31, 1998.
<PAGE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
REVENUE AND OPERATING CASH FLOW REPORT
(UNAUDITED)
Nine Months Ended September 30, 1998 and 1997
REVENUES:
1998 1997
Georgia................................ $22,170,447 $19,095,311
Illinois............................... 7,889,450 7,553,970
Michigan(3)............................ 392,429 3,387,840
Tennessee.............................. 36,085,290 32,007,032
Other(2)............................... 99,711 81,708
Total............................... $66,637,327 $62,125,861
OPERATING CASH FLOW(1):
Georgia................................ $10,748,930 $ 8,964,379
Illinois............................... 4,136,831 3,826,968
Michigan(3)............................ 91,202 1,694,622
Tennessee.............................. 18,027,439 15,734,195
Other.................................. 32,617 23,119
Total............................... $33,037,019 $30,243,283
OPERATING CASH FLOW AS A PERCENT OF REVENUES:
Georgia................................ 48.5% 46.9%
Illinois............................... 52.4% 50.7%
Michigan(3)............................ 23.2% 50.0%
Tennessee.............................. 50.0% 49.2%
Total (excluding other)............. 49.6% 48.7%
(1) Excludes management fee expense of $2,332,307 and $2,174,405, net
losses related to the disposition of certain plant assets of
$2,878,535 and $5,077,721 for the nine months ended September 30,
1998 and 1997, respectively, the $5,989,846 gain on the sale of
Michigan assets, and non-cash management incentive plan expense
of $569,997 and $669,993 for the nine months ended September 30,
1998 and 1997, respectively.
(2) Principally interest income.
(3) Activity relates to the Michigan Systems which were sold effective
January 31, 1998.
<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 16, 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>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001011701
<NAME> RIFKIN ACQUISITION CAPITAL CORP
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,165
<SECURITIES> 0
<RECEIVABLES> 1,319
<ALLOWANCES> 459
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 150,810
<DEPRECIATION> 35,012
<TOTAL-ASSETS> 282,510
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 226,075
0
0
<COMMON> 0
<OTHER-SE> 30,835
<TOTAL-LIABILITY-AND-EQUITY> 282,510
<SALES> 0
<TOTAL-REVENUES> 66,637
<CGS> 0
<TOTAL-COSTS> 64,474
<OTHER-EXPENSES> (3,111)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,688
<INCOME-PRETAX> (12,414)
<INCOME-TAX> (3,485)
<INCOME-CONTINUING> (8,929)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,929)
<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>
