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 March 31, 1999 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.
RIFKIN ACQUISITION CAPITAL CORP.
INDEX
Page Number
Part I. Financial Information:
Item 1. Financial Statements:
Rifkin Acquisition Partners, L.L.L.P.
a. Consolidated Statement of Operations.................... 3
b. Consolidated Balance Sheet.............................. 4
c. Consolidated Statement of Cash Flows.................... 6
d. Consolidated Statement of Partners' Capital
(Deficit)............................................... 7
e. Notes to Consolidated Financial Statements.............. 8
Rifkin Acquisition Capital Corp.
a. Balance Sheet..................................... 10
b. Notes to Balance Sheet............................ 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 12
Part II: Other Information:
Item 1. Legal Proceedings (none)
Item 2. Changes in Securities (none)
Item 3. Defaults Upon Senior Securities (none)
Item 4. Submission of Matters to a Vote of Security
Holders (none)
Item 5. Other Information
a. Revenue and Operating Cash Flow Report............ 19
Item 6. Exhibits and Reports on Form 8-K...................... 20
Signatures..................................................... 21
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
Three Months Ended
March 31,
1999 1998
Revenue:
Service................................ $21,827,094 $20,535,417
Installation and other................. 2,190,189 1,470,093
Total revenue 24,017,283 22,005,510
Costs and Expenses:
Operating expense...................... 3,461,852 3,546,468
Programming expense.................... 5,396,599 4,941,131
Selling, general and administrative
expense.............................. 3,380,966 2,748,970
Depreciation........................... 4,010,219 3,625,474
Amortization........................... 6,383,145 5,817,358
Management fees........................ 840,605 770,193
Loss on disposal of assets............. 76,798 260,912
Total costs and expenses............ 23,550,184 21,710,506
Operating income....................... 467,099 295,004
Gain on sale of Michigan assets........ - (5,989,846)
Interest expense....................... 5,892,724 5,945,495
Income (loss) before income taxes and
cumulative effect of accounting change (5,425,625) 339,355
Income tax benefit..................... (537,000) (1,098,000)
Income (loss) before cumulative
effect of accounting change.......... (4,888,625) 1,437,355
Cumulative effect of accounting change
for organizational costs............. 111,607 -
Net income (loss)...................... $(5,000,232) $ 1,437,355
Adjusted EBITDA........................ $11,157,260 $10,188,747
See accompanying notes to financial statements.
<PAGE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
ASSETS
March 31, December 31,
1999 1998
Cash.................................... $ 4,397,931 $ 2,324,892
Subscriber accounts receivable,
net of allowance for doubtful
accounts of $286,228 in 1999
and $444,839 in 1998.................. 1,438,418 1,927,323
Other receivables....................... 3,743,948 5,637,771
Prepaid expenses and other.............. 1,479,094 2,398,528
Property, plant and equipment at cost:
Cable television transmission and
distribution systems and related
equipment........................... 154,357,916 149,376,914
Land, building, vehicles and
furniture and fixtures.............. 7,895,440 7,421,960
162,253,356 156,798,874
Less accumulated depreciation........... (39,125,222) (35,226,773)
Net property, plant and equipment..... 123,128,134 121,572,101
Franchise costs and other intangible
assets, net of accumulated
amortization of $72,059,022 in 1999
and $67,857,545 in 1998............... 176,785,191 183,438,197
Total assets................. $310,972,716 $317,303,629
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued
liabilities........................... $ 13,513,817 $ 11,684,594
Subscriber deposits and prepayments..... 645,379 1,676,900
Interest payable........................ 3,651,571 7,242,954
Deferred taxes payable.................. 7,405,000 7,942,000
Notes payable........................... 226,575,000 224,575,000
Total liabilities........... 251,790,767 253,121,448
Commitments:
Redeemable partners' interests.......... 16,732,480 10,180,400
Partners' capital (deficit)
General partner....................... (2,860,031) (1,991,018)
Limited partners...................... 44,916,743 55,570,041
Preferred equity interest............. 392,757 422,758
Total partners' capital..... 42,449,469 54,001,781
Total liabilities and partners'
capital................... $310,972,716 $317,303,629
See accompanying notes to financial statements.
<PAGE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
ASSETS
March 31, March 31,
1999 1998
Cash................................... $ 4,397,931 $ 1,191,237
Subscriber accounts receivable,
net of allowance for doubtful
accounts of $286,228 in 1999
and $429,857 in 1998............... 1,438,418 1,008,720
Other receivables...................... 3,743,948 4,018,907
Prepaid expenses and other............. 1,479,094 1,927,323
Property, plant and equipment at cost:
Cable television transmission and
distribution systems and related
equipment.......................... 154,357,916 131,851,390
Land, building, vehicles and
furniture and fixtures............. 7,895,440 6,804,551
162,253,356 138,655,941
Less accumulated depreciation.......... (39,125,222) (28,358,074)
Net property, plant and
equipment 123,128,134 110,297,867
Franchise costs and other intangible
assets, net of accumulated
amortization of $72,059,022 in 1999
and $54,854,683 in 1998............ 176,785,191 167,771,855
Total assets................. $310,972,716 $286,215,909
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued
liabilities.......................... $ 13,513,817 $ 10,766,883
Subscriber deposits and prepayments.... 645,379 1,466,183
Interest payable....................... 3,651,571 3,682,453
Deferred taxes payable................. 7,405,000 11,040,000
Notes payable.......................... 226,575,000 218,000,000
Total liabilities............... 251,790,767 244,955,519
Commitments
Redeemable partners' interests......... 16,732,480 8,514,400
Partners' capital (deficit)
General partner...................... (2,860,031) (2,011,986)
Limited partners..................... 44,916,743 34,473,109
Preferred equity interest............ 392,757 284,867
Total partners' capital...... 42,449,469 32,745,990
Total liabilities and
partners' capital.......... $310,972,716 $286,215,909
See accompanying notes to financial statements.
<PAGE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED STATEMENT OF CASH FLOW (UNAUDITED)
Three Months Ended
March 31,
1999 1998
Cash flows from operating activities:
Net income (loss)....................... $(5,000,232) $ 1,437,355
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization......... 10,393,364 9,442,832
Amortization of deferred loan cost.... 235,956 247,440
Gain on sale of Michigan assets....... - (5,989,846)
Loss on disposal of fixed assets...... 76,798 260,912
Cumulative effect of accounting change
for organizational costs............ 111,607 -
Deferred taxes benefit................ (537,000) (1,098,000)
Decrease in subscriber accounts
receivable.......................... 493,722 309,085
Decrease in other receivables......... 1,893,823 593,691
Decrease (increase) in prepaid
expenses and other.................. 919,434 (205,882)
Increase (decrease) in accounts
payable and accrued liabilities..... 1,829,223 (900,090)
Increase (decrease) in subscriber
deposits and prepayment............. (1,031,521) 15,946
Decrease in interest payable.......... (3,591,383) (3,702,056)
Net cash provided by operating
activities........................ 5,793,791 411,387
Cash flows from investing activities:
Acquisitions of cable systems, net...... (13,812) -
Additions to property, plant and
equipment............................. (5,722,161) (6,727,584)
Additions to cable television
franchises, net of retirements
and changes in other intangible
assets................................ (63,890) (38,349)
Net proceeds from sale of Michigan
assets................................ - 17,050,564
Net proceeds from the disposal of assets
(other than Michigan)................. 79,111 92,664
Net cash provided by (used in)
investing activities.............. (5,720,752) 10,377,295
Cash flows from financing activities
Proceeds from long-term bank debt....... 8,000,000 8,500,000
Payments of long term-bank debt......... (6,000,000) (20,000,000)
Net cash provided by (used in)
financing activities.............. 2,000,000 (11,500,000)
Net decrease in cash.................... 2,073,039 (711,318)
Cash at beginning of quarter............ 2,324,892 1,902,555
Cash at end of quarter.................. $ 4,397,931 $ 1,191,237
See accompanying notes to financial statements
<PAGE>
<TABLE>
RIFKIN ACQUISTION PARTNERS, L.L.L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(UNAUDITED)
Three Months Ended March 31, 1999 and 1998
<CAPTION>
Preferred
Equity General Limited
Interest Partner Partners Total
<S> <C> <C> <C> <C>
Partners' capital (deficit)
at 12/31/98............... $422,758 $(1,991,018) $55,570,041 $54,001,781
Net loss for the quarter
ended 3/31/99............. (30,001) (50,003) (4,920,228) (5,000,232)
Accretion of redeemable
partners' interest........ - (819,010) (5,733,070) (6,552,080)
Partners' capital (deficit)
at 3/31/99................ $392,757 $(2,860,031) $44,916,743 $42,449,469
Partners' capital (deficit)
at 12/31/97............... $276,243 $(1,885,480) $34,044,912 $32,435,675
Net income for the quarter
ended 3/31/98............. 8,624 14,374 1,414,357 1,437,355
Accretion of redeemable
partners' interest........ - (140,880) (986,160) (1,127,040)
Partners' capital (deficit)
at 3/31/98................ $284,867 $(2,011,986) $34,473,109 $32,745,990
<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.
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 of normal
recurring accruals necessary to present fairly the Company's consolidated
financial position at March 31, 1999, December 31, 1998 and March
31,1998, and its consolidated results of operations and cash flows for
the three months ended March 31, 1999 and 1998. 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, 1998.
2. Subsequent Event
On February 12, 1999, the Company signed a letter of intent for the
partners to sell their partnership interests to Charter Communications,
Inc. ("Charter"). On April 26, 1999, the Company signed a definitive
Purchase and Sale Agreement with Charter for the sale of the individual
partners' interest. The company and Charter are expected to complete the
sale during the third quarter of 1999.
3. Adoption of New Accounting Pronouncement
Effective January 1, 1999, the Company adopted the Accounting Standards
Executive Committee's Statement of Position (SOP)98-5 "Reporting on the
Costs of Start-Up Activities," which requires the Company to expense all
start-up costs related to organizing a new business. During the first
quarter of 1999, the Company wrote off the organization costs capitalized
in prior years along with the accumulated amortization, resulting in the
recognition of a cumulative effect of accounting change loss of $111,607.
4. Reclassification of Financial Statement Presentation
Certain reclassifications have been made to the 1998 Consolidated
Statement of Operations to conform with the Audited Consolidated
Statement of Operations for the year ended December 31, 1998.
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, were
allowed to redeem up to 25% of the principle amount of the notes issued
to institutional investors of not less than $25 million. Such redemption
did not take place. The Senior Subordinated Notes had a balance of $125
million at March 31, 1999 and 1998.
<PAGE>
RIFKIN ACQUISITION CAPITAL CORP.
BALANCE SHEET
March 31, December 31,
1999 1998
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
"Business" and "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.
Forward-looking statements include, but are not limited to, statements under
the following headings: (i) "Management's Discussion and Analysis of
Financial Conditions and Results of Operations - Liquidity and Capital
Resources" about the sufficiency of the expected cash flow of the Company; and
(ii) "Management's Discussion and Analysis of Financial Conditions and Results
of Operations - Year 2000" about the expected financial impact of the Year
2000 problem on the Company.
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:
* Competition in the television programming industry, including competition
from other companies providing programming via cable, DBS, telephone lines,
SMATV, MMDS or LMDS; the Company's substantial leverage and the risk that
the Company may be unable to service or repurchase the Partnership's and
RACC's debt. See "Management's Discussion and Analysis of Financial
Conditions and Results of Operations - Liquidity and Capital Resources";
* Certain restrictions imposed by the terms of the Company's indebtedness,
including the ability to incur additional indebtedness, incur liens, pay
distributions or make other restricted payments, consummate asset sales,
enter into certain transactions with affiliates, merge or consolidate with
other persons or sell, assign, transfer, lease, convey or dispose of all
or substantially all of the assets of the Company. see "Management's
Discussion and Analysis of Financial Conditions and Results of Operations
- Liquidity and Capital Resources;"
* Increases in the costs of cable programming the Company provides to
consumers in its Systems and the inability to have access to sufficient
cable programming;
* The ongoing need for significant capital expenditures to expand the
Company's cable systems, conduct routine replacement of cable television
plant and increase channel capacity of certain Systems. See "Management's
Discussion and Analysis of Financial Conditions and Results of Operations
- Liquidity and Capital Resources." The inability of the Company to fund
such capital expenditures could have a materially adverse impact on the
Company;
* The potential for the termination of franchises by local franchise
authorities or renewal of such franchises on less favorable terms, either
of which could have a materially adverse impact on the Company's results
of operations;
* The non-exclusivity of franchises which could permit other cable
programming providers the opportunity to compete directly with the
Company's Systems;
* Changes in or the inability to comply with government regulation in the
cable television industry;
* The Company's dependence on key personnel in executing the Company's plans,
including Monroe M. Rifkin, Chairman of Rifkin & Associates, Inc. ("R &
A"), Kevin B. Allen, Vice Chairman and Chief Executive Officer of R & A and
Jeffrey D. Bennis, President and Chief Operating Officer of R & A, the loss
of any of whom could have a materially adverse impact on the Company;
* Uncertainties regarding Year 2000 issues which could materially adversely
impact the Company, including the failure to identify and correct all
computer codes and embedded chips or otherwise obtain Year 2000 readiness
or the failure of third parties with which the company transacts business
to achieve Year 2000 readiness. See "Management's Discussion and Analysis
of Financial Conditions and Results of Operations - Year 2000";
* The dependence upon distributions to the Partnership from the Partnership's
subsidiaries. The Company derives a substantial portion of operating
income from its subsidiaries which funds are necessary for the Company to
meet its obligations; and
* Potential conflicts of interest arising out of the relationship between the
Company, RACC, and affiliates. R & A Management, LLC ("RML"), which is
controlled by Monroe M. Rifkin through Mr. Rifkin's ownership of RML's
managing member, R & A, manages all aspects of the business and operations
for the Company for a management fee. Certain decisions concerning the
management of the Company may present conflicts of interest between the
Company and RML.
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.
Three Months Ended March 31, 1999 Compared to Three Months Ended March 31,
1998
Revenue increased 9.1%, or approximately $2.0 million, to approximately $24.0
million for the three months ended March 31, 1999 from approximately $22.0
million for the three months ended March 31, 1998. This increase resulted
from approximately $2.4 million in growth in basic customers and increases in
basic and tier rates, offset by approximately $400,000 in total revenue
decreases due to the January 31, 1998 sale of systems serving Bridgeport and
Bad Axe, Michigan (the "Michigan Sale"). Basic customers increased .2% to
approximately 190,300 at March 31, 1999 from approximately 189,800 at March
31, 1998. This increase was attributable to continued growth in Georgia
(2,300 or 3.8%) offset by customer losses in Tennessee (700) and Illinois
(1,200). Average monthly revenue per customer increased 11.6% from $37.68 for
the three months ended March 31, 1998 to $42.04 for 1999 primarily a result
of rate increases. Premium service units increased 7.6% to approximately
111,400 as of March 31, 1999, from approximately 103,500 as of March 31, 1998,
as a result of increases in Georgia (3,900), Tennessee (800) and Illinois
(3,100). The Company's premium penetration increased to 58.5% from 54.5%
between 1998 and 1999.
Operating expense, which includes costs related to technical personnel,
franchise fees and repairs and maintenance, decreased 2.4%, or approximately
$100,000 to approximately $3.5 million for the three months ended March 31,
1999, and decreased as a percentage of revenue to 14.4% from 16.1%. The
decrease relates to the normal annual inflationary operating expense
increases, offset by an approximate $100,000 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 9.2%, or approximately $500,000 to approximately $5.4
million for the three months ended March 31, 1999 from approximately $4.9
million for the three months ended March 31, 1998, and remained constant as
a percentage of revenue at 22.5%. The increase is due to program vendor rate
increases and the addition of programming in certain systems offset by
approximately $100,000 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 27.1%, or approximately $700,000 to approximately
$3.5 million for the three months ended March 31, 1999 from approximately $2.7
million for the same period in 1998. As a percentage of revenue, selling,
general and administrative expense increased to 14.5% for the three months
ended March 31, 1999 from 12.5% in 1998. Approximately $400,000 of the
increase related to lower programmer cost reimbursement of marketing launch
expense and 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 $10.4 million for the
three months ended March 31, 1999 increased approximately $1.0 million from
the three months ended March 31, 1998. The increase in depreciation resulted
primarily from increases of approximately $5.7 million in 1999 and
approximately $6.7 million in 1998 in property, plant and equipment along with
$11.8 million attributable to the net fixed assets added in relation to the
Tennessee Trade. As a percentage of revenue, depreciation and amortization
expenses increased to 43.3% in 1999 from 42.9% in 1998.
Management fees, equal to 3.5% of gross revenue, of approximately $800,000 in
1999 remained consistent with the three months ended March 31, 1998.
The loss on disposal of assets, primarily the write-off of replaced house
drops and rebuilt trunk and distribution equipment totaled approximately
$100,000 for the three months ended March 31, 1999 compared to an approximate
$300,000 loss in 1998.
An approximate gain of $6.0 million was recorded in the three months ended
March 31, 1998 as a result of the Michigan Sale.
Interest expense during 1999 decreased approximately $100,000 from the three
months ended March 31, 1998 and decreased as a percentage of revenue from
27.0% to 24.5%. Interest expense was based on an average debt balance of
$226.8 million with an average interest rate of 10.4% and an average debt
balance of $225.1 million with an average interest rate of 10.6% for 1999 and
1998, respectively. The debt increase was primarily a result of increased
borrowings related to capital additions.
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
$500,000 was recorded in 1999 compared to an income tax benefit of
approximately $1.1 million for the three months ended March 31, 1998. 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."
The Company also reflected an approximate $100,000 change to income for the
write-off of organizational costs in compliance with the adoption of
accounting pronouncement SOP 98-5 "Reporting on the Costs of Start-Up
Activities," which requires the Company to expense all start-up costs.
As a result of the factors discussed above, the Company experienced a Net Loss
of approximately $5.0 million in 1999, compared with an approximate $1.4
million Net Income in 1998.
Adjusted EBITDA, defined as income (loss) before interest expense, income
taxes, depreciation and amortization, loss on disposal of assets, gain on sale
of Michigan assets, and the non-cash provision for the management incentive
plan and the cumulative effect of the accounting change for organizational
costs, increased 9.5%, or approximately $1.0 million to $11.2 million in 1999
from $10.2 million in 1998. As a percent of revenue, Adjusted EBITDA increased
to 46.5% in 1999 from 46.3% for 1998. Industry analysts generally consider
Adjusted EBITDA to be an appropriate measure of the performance of multi-
channel television operations. Adjusted EBITDA is not presented in accordance
with generally accepted accounting principles and should not be considered an
alternative to, or more meaningful than, operating income or operating cash
flow as an indication of the Company's operating performance.
Liquidity and Capital Resources
The Company has relied upon cash generated by operations, borrowing and equity
contributions to fund capital expenditures and acquisitions, service its
indebtedness and finance its working capital needs. During the comparable
three month periods ended March 31, 1999 and 1998, net cash provided by
operations (including changes in working capital) of the Company was
approximately $5.8 million and $400,000, respectively.
From December 31, 1998 to March 31, 1999, the Company's available cash and
cash equivalents increased from approximately $2.3 million to approximately
$4.4 million. Accounts payable and accrued liabilities increased approximately
$1.8 to approximately $13.5 million from December 31, 1998 to March 31, 1999
primarily a result of bill payment timing. Customer deposits and prepayments
decreased approximately $1.0 million to approximately $600,000 from December
to March primarily a result of the timing of customer payments. Interest
payable decreased approximately $3.6 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 $500,000 to approximately $7.4 million as a result of
differences in book and tax depreciation and amortization lives and methods.
Notes payable increased by $2.0 million from December 31, 1998 to March 31,
1999 due primarily to the borrowings related to capital expenditures.
The Company has increased its total consolidated debt to $226.6 million as of
March 31, 1999 from $224.6 million at December 31, 1998. The Company has
unused commitments under the Amended and Restated Credit Agreement of $25.5
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 5.50. As of
March 31, 1999, the Company's Total Funded Debt Ratio was 5.08. 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 March 31, 1999 of $62.5 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
As many computer software, hardware, and other equipment with embedded chips
or processors (collectively, the "business systems") use only two digits to
represent the year, they may be unable to process accurately certain data
before, during or after the year 2000. As a result, business and governmental
entities are at risk for possible miscalculations or systems failures causing
disruptions in their business operations. This is commonly known as the Year
2000 issue.
During 1998 and continuing into 1999, the Company began an enterprise-wide,
comprehensive effort to assess and remediate Year 2000 issues in the following
areas: (a) the Company's technology systems, including software and computer
and peripheral hardware used in the Company's operations, (b) electronic data
interchange systems, (c) non-information technology systems (embedded
technology), including PBX and voice messaging systems, heating and air
conditioning systems, alarm systems, predictive dialers, radio communication
systems and other support role systems, and (d) Year 2000 compliance of
entities or persons from which the Company retrieves or receives data or
products (including states, counties and other vendors) and third parties with
which the Company has a material relationship. The Company undertook this
action to ensure their computer systems and related software, facilities, and
equipment, process and store information in the Year 2000 and thereafter. The
Company's Year 2000 remediation efforts include an assessment of its critical
systems, including customer service and billing systems, information systems,
and product reception and distribution systems.
The Company has a Year 2000 Task Force ("Task Force") and includes
representatives from all business divisions. The Task Force is responsible
for overseeing the remediation efforts and ensures that all-necessary action
and resources are in place. The Task Force has implemented a six phase plan
to identify and repair Year 2000 affected systems: (i) inventory systems to
identify potentially date-sensitive systems, including third party-products;
(ii) assess the systems for Year 2000 compliance and evaluate the actions
necessary to bring it into compliance; (iii) remediation of the system by
modifying, upgrading or replacing the system; (iv) testing the corrected
systems; (v) deploy the corrected system; and (vi) monitor the corrected
system.
Inventory assessment of the information systems is substantially complete.
Significant progress has been made to complete the remediation, testing and
deployment, which is scheduled for completion by July 31, 1999.
Inventory and assessment of the cable system facilities, which includes the
customer service, product reception and distribution systems, are
substantially complete. Remediation, testing and deployment are well under
way and are scheduled to be completed by September 30, 1999.
The Company is continuing its survey of the significant third-party vendors
and suppliers whose systems, services or products that are important to the
Company's operations. The Company has received information that critical
systems, services and products supplied to the Company by third parties are
Year 2000 compliant or are expected to be Year 2000 compliant before the year
2000. Third-party vendors and suppliers whose systems will not be compliant
before the year 2000 have been replaced, will be scheduled to be replaced or
a contingency plan will be developed to accommodate the vendor or supplier.
Although the Company believes that its own internal systems will be Year 2000
compliant, no assurance can be given that the systems of the external sources
of the Company's data, telephone and utility providers, customers and other
third parties with which the Company has a material relationship will be Year
2000 compliant. The Company will be continuing to contact these entities
during 1999 to assess their state of Year 2000 readiness and to plan changes
that may be necessary to prevent any Year 2000 impact on the Company's
systems. Depending on the length of time the contingency plans remain in
effect, they could have an adverse effect on the Company's business,
operations and financial condition.
The Task Force will coordinate the development of contingency plans in the
event the Company's plan to identify and repair Year 2000 affected systems is
not completed by their scheduled completion dates. The Company expects to
have solidified its contingency plans by no later than July 31, 1999.
The remediation and testing of the Company's business systems will cost an
estimated $200,000. These costs are to be expensed in the period incurred and
funded through cash flows from operations. Expenses to date have approximated
$50,000. The financial impact is not expected to be material to the Company's
financial position or results of operations.
The scheduled completion dates and costs associated with the various
components of the Year 2000 compliance plan described above are estimated and
are subject to change.
The Company believes that it has and will continue to devote the resources
necessary to achieve Year 2000 readiness in a timely manner. However, there
can be no assurance that the Company's internal systems, the systems of others
on which the Company relies, or the systems of the Company's customers will
be Year 2000 ready in a timely and appropriate manner or that the Company's
contingency plans or the contingency plans of others on which the Company
relies will mitigate the effects of the Year 2000 problem. Currently, the
Company believes that the most reasonable likely worst case scenario would be
its inability to receive and/or retransmit product to their customers and the
failure of customer service and billing systems. While the Company does not
expect this scenario to occur, if it did occur, it could result in the
reduction of the Company's operations, despite the successful execution of the
Company's business continuity and contingency plans, and accordingly, have an
adverse effect on the Company's business, operations and financial condition.
The forgoing discussion under the heading "Year 2000" constitutes and is
denominated as "year 2000 readiness disclosure" within the meaning of the Year
2000 Information and Readiness Disclosure Act.
<PAGE>
PART II: OTHER INFORMATION
ITEM 5. Other Information
<PAGE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
REVENUE AND OPERATING CASH FLOW REPORT
(UNAUDITED)
Three Months Ended March 31, 1999 and 1998
REVENUES:
1999 1998
Georgia................................. $ 8,405,112 $ 7,092,344
Illinois................................ 2,707,068 2,655,844
Michigan(3)............................. - 378,046
Tennessee............................... 12,863,005 11,850,920
Other(2)................................ 42,098 28,356
Total................................ $ 24,017,283 $ 22,005,510
OPERATING CASH FLOW(1):
Georgia................................. $ 4,190,340 $ 3,496,859
Illinois................................ 1,378,148 1,390,189
Michigan................................ - 80,228
Tennessee............................... 6,406,418 5,990,925
Other................................... 22,959 739
Total................................ $ 11,997,865 $10,958,940
OPERATING CASH FLOW AS A PERCENT OF REVENUES:
Georgia................................. 49.9 % 49.3 %
Illinois................................ 50.9 % 52.3 %
Michigan................................ - 21.2 %
RAP-Tennessee........................... 49.8 % 50.6 %
Total (excluding other)............... 49.9 % 49.9 %
(1) Excludes management fee expense of $840,605 and $770,193, net losses
related to the disposition of certain plant assets of $76,798 and
$260,912 non-cash management incentive plan expense of $219,999 and
$189,999, and the non-cash cumulative effect of accounting change for
organizational costs of $111,607 and $0 for the quarters ended March 31,
1999 and 1998, respectively.
(2) Principally interest income.
(3) Activity relates to the Michigan Systems which were sold effective January
31, 1998.
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
On May 7, 1999, the Company filed a report on Form 8-K of its Purchase and
Sale Agreement dated April 26, 1999 with Charter Communications, Inc.,
and the Purchase and Sale agreement dated April 26, 1999 between
InterLink Communications Partners, LLLP and Charter Communications, Inc.
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 May 17, 1999.
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>
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<NAME> RIFKIN ACQUISITION CAPITAL CORP
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 4,398
<SECURITIES> 0
<RECEIVABLES> 1,438
<ALLOWANCES> 286
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<PP&E> 162,253
<DEPRECIATION> 39,125
<TOTAL-ASSETS> 310,973
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<BONDS> 226,575
0
0
<COMMON> 0
<OTHER-SE> 59,182
<TOTAL-LIABILITY-AND-EQUITY> 310,973
<SALES> 0
<TOTAL-REVENUES> 24,017
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<INTEREST-EXPENSE> 5,893
<INCOME-PRETAX> (5,426)
<INCOME-TAX> (537)
<INCOME-CONTINUING> (4,889)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 111
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<F1>The amount shown for current assets and current liabilities is
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