- --------------------------------------------------------------------------------
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, 1997
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 33-72468
33-72468-01
THE HELICON GROUP, L.P.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
Delaware 4841 22-3248703
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
</TABLE>
HELICON CAPITAL CORP.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
Delaware 4841 22-3248702
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
</TABLE>
630 Palisade Avenue
Englewood Cliffs, New Jersey 07632
(201) 568-7720
(Address, including Zip Code and telephone number,
including area code, of registrants' principal executive offices)
Indicate by check mark whether the Registrants: (1) have 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
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
Yes X No______
The number of shares outstanding of the common stock of Helicon Capital Corp.,
as of May 13, 1997: 100.
- --------------------------------------------------------------------------------
<PAGE>
THE HELICON GROUP, L.P. AND WHOLLY OWNED
INCORPORATED ENTITIES
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
----
<S> <C>
Unaudited Condensed Consolidated Balance Sheets as at December 31, 1996 and March 31, 1997 3
Unaudited Condensed Consolidated Statements of Operations for the three-month
periods ended March 31, 1996 and 1997 4
Unaudited Condensed Consolidated Statement of Changes in Partners' Deficit for the three
month period ended March 31, 1997 5
Unaudited Condensed Consolidated Statements of Cash Flows for the three-month
periods ended March 31, 1996 and 1997 6
Notes to Unaudited Condensed Consolidated Financial Statements 7 and 8
Management's Discussion and Analysis of Financial Condition and
Results of Operations 9 - 13
PART II. OTHER INFORMATION
None
Signature Page 14
</TABLE>
2
<PAGE>
THE HELICON GROUP, L.P. AND WHOLLY OWNED
INCORPORATED ENTITIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, 1996(a) March 31, 1997
-------------------- --------------
(Unaudited)
-----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 5,751,189 $ 7,264,530
Receivables from subscribers 795,568 630,936
Prepaid expenses and other assets 959,916 1,565,973
Property, plant and equipment, net 28,887,133 29,672,727
Intangible assets and deferred costs, net 21,751,852 20,716,711
------------- -------------
Total assets $ 58,145,658 $ 59,850,877
============= =============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable $ 2,907,235 $ 2,673,899
Accrued expenses 518,625 597,428
Subscriptions received in advanced 371,464 446,164
Accrued interest 2,155,526 5,363,247
Due to principal owner 5,000,000 5,000,000
Senior secured notes 115,000,000 115,000,000
Loans payable to bank 1,497,223 1,302,640
Other notes payable 2,885,044 2,814,754
Due to affiliates 406,304 246,809
------------- -------------
Total liabilities 130,741,421 133,444,941
------------- -------------
Partners' deficit:
Accumulated partners' deficit (72,594,763) (73,593,064)
Less capital contribution receivable (1,000) (1,000)
------------- -------------
Total partners' deficit (72,595,763) (73,594,064)
------------- -------------
Total liabilities and partners' deficit $ 58,145,658 $ 59,850,877
============= =============
</TABLE>
(a) Balance Sheet at December 31, 1996 has been derived from Audited
Consolidated Financial Statements at that date.
See accompanying notes to unaudited condensed consolidated financial statements.
3
<PAGE>
THE HELICON GROUP, L.P. AND WHOLLY OWNED
INCORPORATED ENTITIES
Unaudited Condensed Consolidated Statements of Operations
Three-Month Periods Ended March 31, 1996 and 1997
1996 1997
--------------- ---------------
Revenues $ 9,319,749 $ 10,409,007
--------------- ---------------
Operating expenses:
Operating expenses 2,568,734 2,966,269
General and administrative expenses 1,443,033 1,611,749
Marketing expenses 264,628 329,605
Depreciation and amortization 2,432,902 2,545,302
Management fee charged by affiliate 465,986 520,451
Corporate and other expenses 77,796 87,438
--------------- ---------------
Total operating expenses 7,253,079 8,060,814
--------------- ---------------
Operating income 2,066,670 2,348,193
--------------- ---------------
Interest expense (3,352,777) (3,392,048)
Interest income 52,508 45,554
--------------- ---------------
Net loss $(1,233,599) $ (998,301)
=============== ===============
See accompanying notes to unaudited condensed consolidated financial statements.
4
<PAGE>
THE HELICON GROUP, L.P. AND WHOLLY OWNED
INCORPORATED ENTITIES
Unaudited Condensed Consolidated Statement of Changes in Partners' Deficit
Three-Month Period Ended March 31, 1997
<TABLE>
<CAPTION>
Partners' deficit
------------------------------
Capital
General Limited Contribution
Partners Partners receivable Total
--------- ------------ -------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $(359,419) $(72,235,344) $(1,000) $(72,595,763)
Net Loss (9,983) (988,318) -- (998,301)
---------- ------------ -------- -------------
Balance at March 31, 1997 $(369,402) $(73,223,662) $(1,000) $(73,594,064)
========== ============= ======== =============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
5
<PAGE>
THE HELICON GROUP, L.P. AND WHOLLY OWNED
INCORPORATED ENTITIES
Unaudited Condensed Consolidated Statements of Cash Flows
Three-Month Periods Ended March 31, 1996 and 1997
<TABLE>
<CAPTION>
1996 1997
--------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,233,599) $ (998,301)
--------------- ----------------
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 2,432,902 2,545,302
Gain on sale of equipment (2,160) (6,500)
Amortization of debt discount 516,351 --
Change in operating assets and liabilities:
Decrease in receivables from subscribers 71,294 164,632
Increase in prepaid expenses and other assets (177,692) (606,057)
Decrease in accounts payable and accrued expenses (427,292) (154,533)
Increase in subscriptions received in advance 81,603 74,700
Increase in accrued interest 2,629,345 3,207,721
--------------- ----------------
Total adjustments 5,124,351 5,225,265
--------------- ----------------
Net cash provided by operating activities 3,890,752 4,226,964
--------------- ----------------
Cash flows from investing activities:
Purchases of property, plant and equipment (728,864) (1,164,627)
Proceeds from sales of equipment 2,160 6,500
Cash paid for net assets of cable television systems acquired -- (1,053,457)
Cash paid for net assets of internet business acquired (40,000) --
Increase in intangible assets and defferred costs (14,551) (1,790)
--------------- ----------------
Net cash used in investing activities (781,255) (2,213,374)
--------------- ----------------
Cash flows from financing activities:
Proceeds from bank loans -- 213,750
Repayment of bank loans -- (408,333)
Repayment of other notes payable (110,224) (146,171)
Advances to affiliates (434,087) (487,970)
Repayments of advances to affiliates 296,852 328,475
--------------- ----------------
Net cash used in financing activities (247,459) (500,249)
--------------- ----------------
Net increase in cash and cash equivalents 2,862,038 1,513,341
Cash and cash equivalents at beginning of period 3,984,816 4,751,189
--------------- ----------------
Cash and cash equivalents at end of period $ 6,846,854 $ 6,264,530
=============== ================
Supplemental cash flow information:
Interest paid $207,081 $184,327
=============== ===============
Other non-cash items:
Acquisition of property, plant and equipment through issuance of
other notes payable $156,778 $75,881
=============== ===============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
6
<PAGE>
THE HELICON GROUP, L.P. AND WHOLLY OWNED
INCORPORATED ENTITIES
Notes to Unaudited Condensed Consolidated Financial Statements
March 31, 1996 and 1997
(1) Organization and Nature of Business
The Helicon Group, L.P. (the "Partnership" or the "Company") was organized
as a limited partnership on August 10, 1993 under the laws of the State of
Delaware to consolidate the ownership interests of Helicon Group Ltd.;
Terrebonne Cablevision, L.P., Roxboro Cablevision Associates, L.P., and
Vermont Cablevision Associates, L.P. (collectively, the "Predecessor
Companies") in connection with a roll-up plan completed on November 3,
1993 (the "roll-up"). As a result of the roll-up, the Partnership acquired
substantially all of the operating assets and agreements of all the cable
television systems which were previously owned by the Predecessor
Companies and the stockholders and the partners of the Predecessor
Companies became limited partners of the Partnership. The Company operates
under the name of "Helicon Cable Communications". The general partner of
the Company is Baum Investments, Inc., a Delaware Corporation, which is
100% owned by Mr. Baum. On April 8, 1996, the Company became 99% owned by
Helicon Partners I, L.P. ("HPI") and 1% owned by Baum Investments, Inc.,
the general partner. The Company is managed by Helicon Corp., an
affiliated management company.
The Partnership operates cable television systems located in Pennsylvania,
West Virginia, North Carolina, Louisiana, Vermont and New Hampshire.
(2) Basis of Presentation
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements of the Partnership and its wholly owned
incorporated entities, including Helicon Capital Corp. ("HCC"), reflect
all adjustments, consisting of normal recurring accruals, necessary to
present fairly the Partnership's Consolidated financial position as at
March 31, 1997, and their results of operations and cash flows for the
three-month periods ended March 31, 1996 and 1997. Information included in
the condensed consolidated balance sheet at December 31, 1996 has been
derived from the audited consolidated balance sheet in the Partnership's
and HCC's Annual Report on Form 10-K for the year ended December 31, 1996
(the "1996 Form 10-K") filed with the Securities and Exchange Commission.
The unaudited consolidated financial statements and these notes have been
condensed; therefore, they do not contain all of the disclosures required
by generally accepted accounting principles and should be read in
conjunction with the consolidated financial statements and the other
information in the 1996 Form 10-K.
HCC had nominal assets as of March 31, 1997 and had no operations from the
date of incorporation to March 31, 1997. All intercompany accounts have
been eliminated in consolidation. The results of operations for the
three-month periods ended March 31, 1996 and 1997 are not necessarily
indicative of the results for a full year.
7
<PAGE>
THE HELICON GROUP, L.P. AND WHOLLY OWNED
INCORPORATED ENTITIES
Notes to Unaudited Condensed Consolidated Financial Statements
March 31, 1996 and 1997
3) Acquisitions
On March 22, 1996, the Partnership acquired the net assets of a telephone
dial-up internet access provider, serving approximately 350 customers in
and around the area of Uniontown, Pennsylvania. The aggregate purchase
price was $40,000.
On January 31, 1997, the Partnership acquired a cable television system,
serving approximately 823 subscribers in the West Virginia counties of
Wirt and Wood. The aggregate purchase price was $1,053,457 and was
allocated to the net assets acquired which included property and equipment
and intangible assets.
On April 8, 1996, the Company acquired a 1% interest in HPI Acquisition
Co., LLC ("HPIAC"), a Delaware limited liability company for $1,000. The
balance of HPIAC is owned by HPI. HPIAC was formed to acquire interests in
cable television systems and related businesses. The Company's 1% interest
in HPIAC's net loss to date is not material.
8
<PAGE>
THE HELICON GROUP, L.P. AND WHOLLY OWNED
INCORPORATED ENTITIES
MARCH 31, 1996 AND 1997
Management's Discussion and Analysis of Financial Condition and Results of
Operations
General
The Helicon Group, L.P. (the "Partnership") incurred a net loss for
the three months ended March 31, 1996 and 1997, respectively. The principal
items contributing to the Partnership's net losses are the high level of
expenses relating to depreciation, amortization and interest. These expenses are
the result of capital expenditures related to continued expansion and rebuilding
of the systems, the Partnership's acquisitions and its financing activities. The
Partnership believes that recurring net losses are common for cable television
companies and expects that such net losses will continue. The Partnership
believes that available working capital, cash flows generated from operations
and the availability of the 1994 Credit Facility will be sufficient to meet its
operating needs and future commitments. See "Liquidity and Capital Resources"
below.
Recent Cable Regulatory Developments.
The Telecommunications Act of 1996, Public law 104-104, enacted on
February 8, 1996 ("1996 Act") instituted sweeping changes in the
telecommunications industries and has significantly increased the potential for
competition to cable television, especially from telephone and electric
utilities. The Act terminated the 1982 federal court consent decree (the
"Modified Final Judgment") that settled the 1974 antitrust suit against AT&T and
eliminated the 1984 Cable Act codification of the FCC telephone
cable/cross-ownership regulations. As a result, long-distance telephone
companies such as AT&T, MCI and Sprint are eligible to provide local exchange
service, and the local exchange carriers, including the seven Regional Bell
Operating Companies, GTE and the smaller independent telephone carriers, are
eligible to provide long-distance service provided certain pre-conditions are
met.
The 1996 Act also permits telephone companies to compete directly with
cable operators by repealing the telephone company-cable television
cross-ownership ban, thereby allowing direct ownership of franchised cable
systems. Further, the FCC's "video dialtone" regulations have been replaced with
a more lenient "open video system" or "OVS" concept. This will allow local
exchange carriers ("LEC's"), including the Regional Bell Operating Companies, to
compete with cable both inside and outside their telephone service areas either
as common carrier OVS provider or as a fully franchised cable operator.
The Company anticipates that, over time, it will become subject to
increasing competition from telephone companies, either directly as franchised
operators or as OVS providers. It may also face increasing competition from
electric utilities which have also been permitted to provide telecommunications
services by the 1996 Act. This may have a material, but as yet undetermined,
impact on the Company's operations.
Although the 1996 Act eliminates the telephone/cable cross-ownership
restrictions, it also contains a general prohibition on LEC acquisitions of
cable systems. Cable operators are likewise generally prohibited from acquiring
LEC systems, and joint ventures between cable operators and LEC's are also
banned. There are certain exceptions for cable systems in rural areas and
telephone exchanges and for small telephone companies.
9
<PAGE>
THE HELICON GROUP, L.P. AND WHOLLY OWNED
INCORPORATED ENTITIES
MARCH 31, 1996 AND 1997
Under the 1996 Act the Company qualifies for small cable operator status
that effectively removes it from rate regulation. The 1996 Act defines "small
cable operators", as those with fewer than approximately 600,000 subscribers and
less than $250 million gross annual revenues and defines "small cable systems"
as those with less than 50,000 subscribers in the rate regulated franchise area.
Where a system had only one tier of "basic" service as of December 31, 1994, it
is immediately rate deregulated. Where it had a "basic" tier and an upper "CPS"
tier, the CPS tier is immediately rate deregulated. The Company has a CPS tier
only on its Vermont system where the rates are governed by a Social Contract
entered into among the Company and the State of Vermont. The 1996 Act does not
disturb existing or pending rate inquiries. In April 1997 the FCC declared the
Company to be a "small cable operator" under the foregoing standards thereby
deregulating rates for all but the Vermont system's broadcast basic level of
service .
The 1996 Act amends the requirement that cable rates be uniform throughout
a franchise area to exempt situations where the cable operator faces "effective
competition," and by permitting bulk discounts to multiple dwelling units.
However, the FCC retains jurisdiction to investigate complaints of "predatory
pricing". The 1996 Act eliminates the requirement instituted in the 1992 Cable
Act that cable systems must be held for three years prior to sale. The
definition of "cable system" is amended so that competitive providers of video
services will be regulated as a definitional "cable system" only if they use
public rights-of-way. This frees many SMATV and MMDS providers of cable service
from the FCC's cable regulations and restrictions. In addition to the
elimination of the telephone/cable cross-ownership restrictions, the 1996 Act
eliminates the broadcast network/cable cross-ownership restrictions, but leaves
in place FCC regulations prohibiting cross-ownership between local television
stations and cable systems. The FCC is empowered to adopt rules to ensure
carriage, channel positioning and non-discriminatory treatment of non-affiliated
broadcast stations by cable systems affiliated with a broadcast network. The
MMDS/cable cross-ownership restrictions are eliminated for cable operators
subject to effective competition.
The 1996 Act requires cable operators, upon subscriber request, to fully
scramble or block at no charge the audio and video portion of any channel not
specifically subscribed to by a household. Further, cable operators are
obligated to fully scramble or block both the audio and video of all sexually
explicit programming. If the cable operator cannot fully scramble or block its
signal, it must restrain distribution to those "safe harbor" hours of the day
when children are unlikely to view the programming. The FCC has adopted an
interim "safe harbor" of 10:00 PM to 6:00 AM pending judicial review of that
provision of the Act. Under the "safe harbor" approach, operators may continue
carrying channels primarily dedicated to sexually explicit adult programming,
even if they were not fully scrambled, as long as the indecent, sexually
explicit programming was limited to the designated late night hours. The
Delaware Federal District Court's Temporary Restraining Order, issued
immediately following passage of the Act, was set aside by the Third Circuit
Court of Appeals, which decision was upheld by the U.S. Supreme Court. While
review of the provision will continue in the courts, operators must, in the
meantime, comply with the scrambling or "safe harbor" requirements.
The 1996 Act introduces several changes to the regulation of cable pole
attachments that could have an effect on the Company. The FCC is directed to
establish a new formula for poles used by cable operators which will result in
higher pole rental rates. Any increases pursuant to this formula may not begin
for 5 years and will be phased in over a 5 year period thereafter. This new FCC
formula does not apply in states which certify they regulate pole rents. The
1996 Act also requires pole owners to impute pole rentals to themselves if they
offer telecommunications or cable services. Additionally, cable operators need
not pay for future "makeready" on poles currently used if the makeready is
required to accommodate the attachments of another user, including the pole
owner.
10
<PAGE>
THE HELICON GROUP, L.P. AND WHOLLY OWNED
INCORPORATED ENTITIES
MARCH 31, 1996 AND 1997
Many provisions of the 1996 Act are still the subject of numerous FCC
proceedings looking toward the implementation or clarification of the statutory
dictates. The Company is unable at this time to assess the impact of those
regulations on its operations.
On March 31, 1997, the U.S. Supreme Court issued a decision upholding the
requirement that cable television systems carry all local television broadcast
stations (the "must carry" rules). Contrary to the expectations of most court
observers, the Supreme Court did not find those rules to be an infringement of
cable operators' First Amendment rights. Because those rules require that the
Company set aside as much as one-third of its channel capacity for carriage of
local television broadcast stations, they could have an impact on the Company's
ability to carry new cable programming.
In February 1997, the FCC released its Second Report and Order
implementing revisions to its "Commercial Leased Access" rules for cable
television operators. The FCC has adopted a revised rate formula and implemented
other rules that will facilitate the mandatory leasing of as much as ten to
fifteen percent of a cable operator's channels by unaffiliated commercial
entities. The Company cannot at this time determine the impact on its operations
of these rules.
Results of Operations
Three Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1996.
Revenues. Revenues increased $1,089,258 or 11.7% to $10,409,007. The
increase in revenues was primarily attributed to increase in basic service and
new program service rates, non-cable internet service revenues (acquired March
22, 1996) and strong growth in advertising revenue. The average monthly cable
revenue per basic subscriber increased from $35.44 in the 1996 period to $39.13
in the 1997 period. The $3.69 increase reflected primarily i) an increase of
$1.89 in basic revenues; ii) an increase of $.59 due to the new program
services; iii) an increase of $1.08 in advertising revenue; iv) an increase of
$.06 in premium subscription revenue; and v) an increase of $.07 in other
services.
Operating, Marketing, General and Administrative Expenses. Operating,
marketing, general and administrative expenses increased $631,228 or 14.8% to
$4,907,623. Approximately 30.0% of this increase reflected additional expenses
for new and expanded programming services, including the non-cable internet
service. The balance of the increase in expenses was consistent with the growth
in revenues, coupled with general cost increases. As a percentage of revenues,
operating, marketing, general and administrative expenses increased from 45.9%
in the 1996 period to 47.1% in the 1997 period.
Depreciation and Amortization. Depreciation and amortization expenses
increased $112,400 or 4.6% to $2,545,302, primarily as a result of $93,138
higher depreciation charges relating to capital expenditures made in 1996 and
1997 and $19,262 higher amortization expense.
Management Fee Charged by Affiliate. Management fee expenses increased
$54,465 or 11.7% to $520,451 consistent with the increase in revenues.
Corporate and Other Expenses. Corporate and other expenses increased
$9,642 or 12.4% to $87,438.
11
<PAGE>
THE HELICON GROUP, L.P. AND WHOLLY OWNED
INCORPORATED ENTITIES
MARCH 31, 1996 AND 1997
Operating Income. Operating income for the three months ended March 31,
1997 increased $281,523 or 13.6% to $2,348,193 from the $2,066,670 operating
income in the comparable 1996 period. The improvement in operating results was
due to increased profits on higher revenues.
Interest Expense. Interest expense increased $39,271 or 1.2% to $3,392,048
primarily due to higher cash interest expense on the Senior Secured Notes, which
after November 1, 1996, pay interest at the rate of 11% per annum, offset in
part by the absence of non-cash interest expense attributed to the original
issue discount on the Senior Secured Notes which became fully amortized on
November 1, 1996.
Interest Income. Interest income decreased $6,954 to $45,554.
Liquidity and Capital Resources
The cable television business requires substantial financing for
construction, expansion and maintenance of the cable plant as well as for
acquisitions. The Company has historically financed its capital needs and
acquisitions through long-term debt and, to a lesser extent, through cash
provided from operating activities. The general availability of bank financing
has been variable over recent years. In 1993, the Company refinanced its 1992
Credit Facility by issuing $115,000,000 aggregate principal amounts 11% Senior
Secured Notes due 2003. In 1994, the Company utilized its available cash and
also entered into a credit facility with another bank consisting of $2,500,000
three year term loan facility, under which $1,088,890 was outstanding at March
31, 1997 and a $2,500,000 one-year line of credit facility with a bank bearing
interest at Prime Plus 1.5%, none of which was outstanding at December 31, 1996,
secured by all the assets of the Company (the "1994 Credit Facility"). On
February 23, 1996, the 1994 Credit Facility was amended to include an additional
loan facility of $318,000 and extended to May 31, 1996. On June 28, 1996, the
term loan of the 1994 Credit Facility was extended to May 31, 1997. On February
24, 1997, the Company entered into a $285,000 loan agreement with a new bank,
under which $213,750 was outstanding at March 31, 1997. The proceeds of this new
loan were used to construct the Company's new office building in Vermont. (See
Credit Agreements of the Company, below).
The Company operates at low and sometimes negative working capital levels.
This is primarily due to account payable balances which often include
significant amounts for capital expenditures. Such payables are paid when due
from available cash balances, including cash generated from operations up to the
date of payment. When necessary, to fund significant capital items, the Company
borrowed under its 1994 Credit Facility.
Cash flows provided by operating activities amounted to $3,890,752 and
$4,226,964 for the three month periods ended March 31, 1996 and 1997,
respectively. The improvement in cash generated from operations in the 1997
period compared to the 1996 period resulted primarily from increased revenues
that were in excess of the increases in cash operating costs and higher accrued
interest.
Net cash used in investing activities amounted to $781,255 and $2,213,374
for the three months ended March 31, 1996 and 1997, respectively, and included
the following:
o In the 1996 period, the Partnership incurred $728,864 in capital
expenditures related to the expansion and rebuilding of the systems, paid
$40,000 in connection with the acquisition of equipment and intangibles of
an internet access provider and incurred $14,551 in other deferred costs.
12
<PAGE>
THE HELICON GROUP, L.P. AND WHOLLY OWNED
INCORPORATED ENTITIES
MARCH 31, 1996 AND 1997
o In the 1997 period, the Partnership incurred $1,164,627 in capital
expenditures related to the expansion and rebuilding of the systems, paid
$1,053,457 in connection with the acquisition of a cable television system
and incurred $1,790 in other deferred costs.
Net cash used in financing activities amounted to $247,459 and $500,249
for the three months ended March 31, 1996 and 1997 which included the following:
o In the 1997 period, the Partnership borrowed $213,750 from a bank and made
$408,333 in principal repayments under the 1994 Credit Facility.
o In the 1996 and 1997 period, the Partnership made repayments of notes
payable in the amounts of $110,224 and $146,171 respectively, which
represented principal repayments under the Partnership's equipment credit
facilities.
o Advances to other affiliates and repayments of such advances result from
management fees and other reimbursable expenses.
Credit Agreements of the Partnership. On March 31, 1997, the Partnership
had cash, cash equivalents and certificates of deposit of $7,264,530 and the
following credit arrangements: (i) $115,000,000 aggregate principal amount of
11% Senior Secured Notes due 2003; (ii) $1,851,604 10% Note due August 20, 2000
to Simmons Communications Partnership, L.P.; (iii) $5,000,000 principal amount
in favor of the principal owner pursuant to a Prime Plus 2% Subordinated Note
which has no due date and may only be repaid, subject to the passage of certain
limiting tests prior to repayment of the Notes; (iv) the 1994 Credit Facility
with a bank which consisted of a $2,500,000 three year term loan facility, with
a $1,088,890 balance outstanding, and a $2,500,000 one-year line of credit
facility bearing interest at Prime Plus 1.5%, none of which was outstanding,
secured by all the assets of the Company, (on February 23, 1996, this 1994
Credit Facility was amended and extended to May 31, 1996 and on June 28, 1996,
the term loan of the 1994 Credit Facility was again extended to May 31, 1997);
(v) $50,000 of Prime Subordinated Notes due July 31, 1997 in favor of a non
affiliated third party pursuant to a Non-Negotiable Subordinated Promissory
Note; (vi) $285,000 loan facility from a bank, of which $213,750 was
outstanding, bearing interest at Prime Plus 1.0% due March 1, 2012, used to
finance the Partnership's new office building in Vermont; and (vii) $913,150 of
certain other equipment credit facilities with various due dates not exceeding
four years.
The Partnership believes that available working capital, cash flows
generated from operations and the availability of the 1994 Credit Facility will
be sufficient to allow it to meet its planned capital expenditures and meet its
debt obligations and cover its other short and long-term liquidity needs. Also,
while the Partnership presently sees no reason to do so, it could adjust
scheduled capital expenditures if the Partnership's liquidity position so
warrants.
Inflation
Certain of the Partnership's expenses, such as those for wages and
benefits, for equipment repair and replacement, and for billing and marketing,
increase with general inflation. However, the Partnership does not believe that
its financial results have been, or will be, adversely affected by inflation,
provided that it is able to increase its service rates periodically.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this Report to be signed on their behalf by the
undersigned, thereunto duly authorized.
Dated: May 13, 1997 THE HELICON GROUP, L.P.
(Registrant)
By: /s/ Herbert J. Roberts
-------------------------
Name: Herbert J. Roberts
Title: Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
HELICON CAPITAL CORP.
Name: Herbert J. Roberts
Dated: May 13, 1997 By: /s/ Herbert J. Roberts
-------------------------
Name: Herbert J. Roberts
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
15
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