<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to ______________
Commission file number 33-72468
33-72468-01
THE HELICON GROUP, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 4841 22-3248703
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Identification No.)
Code Number)
HELICON CAPITAL CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 4841 22-3248702
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Identification No.)
Code Number)
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 AUGUST 10, 1998: 100.
<PAGE>
THE HELICON GROUP, L.P. AND WHOLLY OWNED
INCORPORATED ENTITY
INDEX
PART I. FINANCIAL INFORMATION PAGE
CONDENSED CONSOLIDATED BALANCE SHEETS AS AT DECEMBER 31, 1997 AND
JUNE 30, 1998 (UNAUDITED) 3
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 1997 AND 1998 4
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS'
DEFICIT FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1998 5
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 1997 AND 1998 6
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 7-8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 9-12
PART II. OTHER INFORMATION
-----------------
NONE
SIGNATURE PAGE 13
2
<PAGE>
THE HELICON GROUP, L.P. AND WHOLLY OWNED
INCORPORATED ENTITY
Condensed Consolidated Balance Sheet
<TABLE>
<CAPTION>
DECEMBER 31, 1997 (A) JUNE 30, 1998
--------------------- (UNAUDITED)
------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 3,693,625 $ 3,016,747
Receivables from subscribers 997,231 1,150,719
Prepaid expenses and other assets 1,409,724 1,827,698
Property, plant and equipment, net 35,080,302 35,489,826
Intangible assets and deferred costs, net 30,628,407 30,282,693
Due from affiliates 797,590 43,276
------------ ------------
Total assets $ 72,606,879 $ 71,810,959
============ ============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable $ 3,159,022 $ 3,046,241
Accrued expenses 760,609 963,614
Subscriptions received in advance 697,633 584,842
Accrued interest 2,173,590 2,167,680
Due to principal owner 5,000,000 5,000,000
Senior secured notes 115,000,000 115,000,000
Loans payable to banks 20,276,641 20,271,807
Other notes payable 3,064,854 4,733,996
Due to affiliates 427,282 451,292
------------ ------------
Total liabilities 150,559,631 152,219,472
Partners' deficit:
Accumulated partners' deficit (77,951,752) (80,407,513)
Less capital contribution receivable (1,000) (1,000)
------------ ------------
Total partners' deficit (77,952,752) (80,408,513)
------------ ------------
Total liabilities and partners' deficit $ 72,606,879 $ 71,810,959
============ ============
</TABLE>
(a) Balance Sheet at December 31, 1997 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 ENTITY
Unaudited Condensed Consolidated Statement of Operations
for the Three-Month and Six-Month Periods Ended June 30, 1997 and 1998
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1997 1998 1997 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues $ 10,287,323 $ 12,052,566 $ 20,696,330 $ 23,863,947
------------- ------------- ------------- -------------
Operating expenses:
Operating expenses 2,862,583 3,605,556 5,828,852 7,096,079
General and administrative expenses 1,575,849 1,874,650 3,187,598 3,823,301
Marketing expenses 308,266 356,085 637,871 746,062
Depreciation and amortization 2,557,504 2,900,557 5,102,806 5,730,827
Management fee charged by affiliate 514,367 602,622 1,034,818 1,193,190
Corporate and other expenses 108,124 46,500 195,562 91,501
------------- ------------- ------------- -------------
Total operating expenses 7,926,693 9,385,970 15,987,507 18,680,960
------------- ------------- ------------- -------------
Operating income 2,360,630 2,666,596 4,708,823 5,182,987
------------- ------------- ------------- -------------
Interest expense (3,382,778) (3,835,363) (6,774,826) (7,675,168)
Interest income 23,514 13,008 69,068 36,420
------------- ------------- ------------- -------------
(3,359,264) (3,822,355) (6,705,758) (7,638,748)
------------- ------------- ------------- -------------
Net loss $ (998,634) $ (1,155,759) $ (1,996,935) $ (2,455,761)
============= ============= ============= =============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
4
<PAGE>
THE HELICON GROUP, L.P. AND WHOLLY OWNED
INCORPORATED ENTITY
Unaudited Condensed Consolidated Statement of Changes in Partners' Deficit
for the Six-Month Period Ended June 30, 1998
<TABLE>
<CAPTION>
Partners' deficit
-----------------------------
Capital
General Limited Contribution
Partners Partners Receivable Total
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1997 $ (412,989) (77,538,763) (1,000) $ (77,952,752)
Net loss (24,558) (2,431,203) -- (2,455,761)
------------- ------------- ------------- -------------
Balance at June 30, 1998 $ (437,547) (79,969,966) (1,000) $ (80,408,513)
============= ============= ============= =============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
5
<PAGE>
THE HELICON GROUP, L.P. AND WHOLLY OWNED
INCORPORATED ENTITY
Unaudited Condensed Consolidated Statement of Cash Flows
for the Six-Month Periods Ended June 30, 1997 and 1998
<TABLE>
<CAPTION>
1997 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,996,935) $ (2,455,761)
------------- -------------
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 5,102,806 5,730,827
Loss (gain) on sale of equipment 2,310 (1,498)
Amortization of debt discount and deferred financing costs -- 60,000
Change in operating assets and liabilities:
Increase in receivables from subscribers (56,411) (24,812)
Increase in prepaid expenses and other assets (627,158) (333,112)
Decrease in accounts payable and accrued expenses (120,902) (287,526)
Increase (decrease) in subscriptions received in advance 28,870 (214,420)
Increase (decrease) in accrued interest 86,264 (5,910)
------------- -------------
Total adjustments 4,415,779 4,923,549
------------- -------------
Net cash provided by operating activities 2,418,844 2,467,788
------------- -------------
Cash flows from investing activities:
Purchases of property, plant and equipment (1,901,118) (2,203,681)
Proceeds from sales of equipment 19,891 91,128
Cash paid for net assets of cable television systems acquired (21,664,843) --
Increase in intangible assets and deferred costs (4,680) (15,781)
------------- -------------
Net cash used in investing activities (23,550,750) (2,128,334)
------------- -------------
Cash flows from financing activities:
Proceeds from bank loans 20,285,000 --
Repayment of bank loans (1,500,930) (4,834)
Repayment of other notes payable (518,739) (236,257)
Advances to affiliates (609,430) (2,316,708)
Repayments of advances to affiliates 474,650 1,541,467
------------- -------------
Net cash provided (used) by financing activities 18,130,551 (1,016,332)
------------- -------------
Net decrease in cash and cash equivalents (3,001,355) (676,878)
Cash and cash equivalents at beginning of period 4,751,189 3,693,625
------------- -------------
Cash and cash equivalents at end of period $ 1,749,834 $ 3,016,747
============= =============
Supplemental cash flow information:
Interest paid $ 6,688,562 $ 7,621,078
============= =============
Other non-cash items:
Acquisition of property, plant and equipment through issuance of
Other notes payable $ 436,982 $ 382,626
============= =============
Net assets of internet business transferred to (from) affiliate through
an intercompany loan $ 223,130 $ (1,553,565)
============= =============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
6
<PAGE>
THE HELICON GROUP, L.P. AND WHOLLY OWNED
INCORPORATED ENTITY
Notes to Unaudited Condensed Consolidated Financial Statements
June 30, 1997 and 1998
(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. ("Helicon"); 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. The Company also offers advanced services such as paging,
cable modems and private data network systems to its customers.
(2) BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements of the Partnership and its wholly owned
incorporated entity, Helicon Capital Corp. ("HCC"), reflect all
adjustments, consisting of normal recurring accruals, necessary to
present fairly the Partnership's Consolidated financial position as at
June 30, 1998, their results of operations for the three-month and
six-month periods ended June 30, 1997 and 1998 and cash flows for the
six-month periods ended June 30, 1997 and 1998. Information included in
the condensed consolidated balance sheet at December 31, 1997 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, 1997
(the "1997 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 1997 Form 10-K.
HCC had nominal assets as of June 30, 1998 and had no operations from the
date of incorporation to June 30, 1998. All intercompany accounts have
been eliminated in consolidation. The results of operations for the
six-month periods ended June 30, 1997 and 1998 are not necessarily
indicative of the results for a full year.
(3) ACQUISITIONS
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 June 26, 1997, the Partnership acquired the net assets of a cable
television system serving approximately 11,000 subscribers in the North
Carolina communities of Watauga County, Blowing Rock, Beech Mountain and
the town of Boone. The aggregate purchase price was $19,947,430 and was
allocated to the net assets acquired using the purchase method of
accounting and included, property, equipment and intangible assets. The
Company utilized its available cash and the proceeds from a new credit
facility it entered into with Banque Paribas consisting of $20,000,000
senior secured term loan facility to complete the acquisition.
7
<PAGE>
THE HELICON GROUP, L.P. AND WHOLLY OWNED
INCORPORATED ENTITY
Notes to Unaudited Condensed Consolidated Financial Statements
June 30, 1997 and 1998
(4) OTHER EVENTS
On April 1, 1997, the Company transferred the net assets of the
telephone dial-up internet access provider business to HPI. The transfer
was recorded at the carrying value of those assets at that date of
$223,130 and the Company made an inter-company loan due on demand to HPI
in this amount.
On June 29, 1998, Helicon OnLine, L.. P. (HOL) and HPI transferred the
assets of the telephone dial-up internet access provider business to the
Company. The transfer was recorded at the carrying value of those assets
at that date of $1,553,565 in settlement of the inter-company loans the
Company had made to HOL and HPI.
8
<PAGE>
THE HELICON GROUP, L.P. AND WHOLLY OWNED
INCORPORATED ENTITY
JUNE 30, 1997 AND 1998
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
six months ended June 30, 1997 and 1998, 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 upgrading 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 and cash flows generated from operations
will be sufficient to meet its operating needs and future commitments. See
"Liquidity and Capital Resources" below.
RECENT CABLE REGULATORY DEVELOPMENTS.
The cable television industry remains subject to extensive governmental
regulation at the federal, state, and local level. Under the Communications Act
of 1934, as amended, most recently by the Telecommunications Act of 1996, Public
Law 104-104, (the "1996 Act"), extensive federal regulation of the industry
continues, including rate regulation. Although the 1996 Act eliminates such rate
regulations as of March 31, 1999, some members of Congress, officials at the
Federal Communications Commission ("FCC"), and others have advocated the
postponement of this regulatory sunset and have also urged more rigorous rate
regulation generally. In addition, consistent with a primary underlying purpose
of the 1996 Act, the FCC remains on a regulatory approach of strongly
encouraging and supporting competition to cable television. While the Company
anticipates additional legislative and regulatory developments and changes, the
precise nature of these changes and their impact on the cable industry and the
Company cannot be accurately predicted at this time.
On December 16, 1996, Helicon Telephone Pennsylvania, LLC filed an
application with the Pennsylvania Public Utility Commission ("PPUC") for
certification as a competitive local exchange carrier in the service territory
of Bentleyville Telephone Company. As of June 30, 1998, this application was
still pending. On June 11, 1998, Helicon Telephone Pennsylvania, LLC filed an
application with the PPUC for certification as a reseller and facilities based
competitive local exchange carrier in the service territory of Bell of
Pennsylvania. On June 27, 1998, the protest period for this application expired
and, since there were no protests received within the time period, Helicon's
application was referred to the Office of Special Assistants to schedule it for
consideration at the next PPUC hearing.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997.
REVENUES. Revenues increased $3,167,617 or 15.3% to $23,863,947.
Approximately two-thirds of the increase in revenues was attributed to the June
26, 1997 acquisition of a cable television system in North Carolina. The balance
of the increase was primarily due to higher basic service and new program
service rates. Excluding the effects of the North Carolina acquisition, the
average monthly cable revenue per basic subscriber increased from $39.15 in 1997
to $41.34 in 1998. The $2.19 increase reflected primarily i) an increase of
$0.87 in basic revenues; ii) an increase of $0.91 due to the new program
services; iii) a increase of $0.05 in advertising revenue; iv) an increase of
$0.11 in premium subscription revenue; and v) an increase of $0.25 in other
services, which includes private data network systems and paging.
OPERATING, MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES. Operating,
marketing, general and administrative expenses increased $2,011,121 or 20.8% to
$11,665,442. Approximately 60% of the increase in expenses was attributed to the
North Carolina cable television system acquisition and approximately 25%
reflected additional expenses for new and expanded programming services. 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 46.6% in 1997 to
48.9% in 1998.
9
<PAGE>
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased $628,021 or 12.3% to $5,730,827, primarily as a result of $387,381
higher depreciation charges relating to the North Carolina acquisition and
ongoing capital expenditures in the other cable systems; and, $240,640 higher
amortization expense all attributed to the North Carolina acquisition.
MANAGEMENT FEE CHARGED BY AFFILIATE. Management fee expenses
increased $158,372 or 15.3% to $1,193,190 consistent with the increase in
revenues.
CORPORATE AND OTHER EXPENSES. Corporate and other expenses
decreased $104,061 or 53.2% to $91,501.
OPERATING INCOME. Operating income for the six months ended June 30,
1998 increased $474,164 or 10.1% to $5,182,987 from the $4,708,823 operating
income in the comparable 1997 period. The improvement in operating results
was due to increased profits on higher revenues.
INTEREST EXPENSE. Interest expense increased $900,342 or 13.3% to
$7,675,168 primarily due to interest expense associated with the debt for the
North Carolina acquisition.
INTEREST INCOME. Interest income decreased $32,648 or 47.3% to
$36,420 primarily due to lower average cash balances.
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997.
REVENUES. Revenues increased $1,765,243 or 17.2% to $12,052,566.
Approximately 60% of the increase in revenues was attributed to the June 26,
1997 acquisition of a cable television system in North Carolina. The balance of
the increase was primarily due to higher basic service and new program service
rates. Excluding the effects of the North Carolina acquisition, the average
monthly cable revenue per basic subscriber increased from $39.04 in 1997 to
$41.66 in 1998. The $2.62 increase reflected primarily i) an increase of $0.96
in basic revenues; ii) an increase of $0.92 due to the new program services;
iii) a increase of $0.27 in advertising revenue; iv) an increase of $0.10 in
premium subscription revenue; and v) an increase of $0.37 in other services,
which includes private data network systems and paging.
OPERATING, MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES. Operating,
marketing, general and administrative expenses increased $1,089,593 or 23.0% to
$5,836,291. Approximately 55% of the increase in expenses was attributed to the
North Carolina cable television system acquisition and approximately 20%
reflected additional expenses for new and expanded programming services. 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 46.1% in 1997 to
48.4% in 1998.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased $343,053 or 13.4% to $2,900,557, primarily as a result of $236,669
higher depreciation charges relating to the North Carolina acquisition and
ongoing capital expenditures in the other cable systems; and, $106,384 higher
amortization expense all attributed to the North Carolina acquisition.
MANAGEMENT FEE CHARGED BY AFFILIATE. Management fee expenses
increased $88,255 or 17.2% to $602,622 consistent with the increase in
revenues.
CORPORATE AND OTHER EXPENSES. Corporate and other expenses
decreased $61,624 or 57.0% to $46,500.
OPERATING INCOME. Operating income for the three months ended June
30, 1998 increased $305,966 or 13.0% to $2,666,596 from the $2,360,630
operating income in the comparable 1997 period. The improvement in operating
results was due to increased profits on higher revenues.
INTEREST EXPENSE. Interest expense increased $452,585 or 13.4%
to $3,835,363 primarily due to interest expense associated with the
debt for the North Carolina acquisition.
INTEREST INCOME. Interest income decreased $10,506 or 44.7% to
$13,008 primarily due to lower average cash balances.
10
<PAGE>
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 and a $2,500,000 one-year line of credit facility
with a bank bearing interest at Prime Plus 1.5%, 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 June 23, 1997, all balances
outstanding under the 1994 Credit Facility were repaid in full and the 1994
Credit Facility was terminated. On June 26, 1997, the Company entered into a new
credit facility (the 1997 Credit Facility) with a new bank consisting of
$20,000,000 senior secured term loan facility due November 1, 2000, bearing
interest at LIBOR plus 2.75%, under which $20,000,000 was outstanding at June
30, 1998, secured by all the assets of the Company. The proceeds of the 1997
Credit Facility was used to acquire certain cable television assets in North
Carolina. On February 24, 1997, the Company entered into a $285,000 loan
agreement with a new bank, under which $271,807 was outstanding at June 30,
1998. The proceeds of this new loan were used to construct the Company's new
office building in Vermont which secures the loan. (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 amount of capital expenditures. Such payables are paid when due from
available cash balances, including cash generated from operations up to the date
of payment.
Cash flows provided by operating activities amounted to $2,418,844 and
$2,467,788 for the six-month periods ended June 30, 1997 and 1998, respectively.
The increase in cash generated from operations in the 1998 period compared to
the 1997 period resulted primarily from increased revenues that were in excess
of the increase in cash operating costs offset in part by unfavorable changes in
working capital items.
Net cash used in investing activities amounted to $23,550,750 and
$2,128,334 for the six-month periods ended June 30, 1997 and 1998,
respectively, and included the following:
- - In the 1997 period, the Partnership incurred $1,901,118 in capital
expenditures related to the expansion and rebuilding of the systems, paid
$21,664,843 in connection with the acquisition of a cable television
system, received $19,891 in proceeds from the sales of equipment in the
ordinary course of business and incurred $4,680 in other deferred costs.
- - In the 1998 period, the Partnership incurred $2,203,681 in capital
expenditures related to the expansion and rebuilding of the systems,
received $91,128 in proceeds from sales of equipment in the ordinary course
of business and incurred $15,781 in other deferred costs.
Net cash provided by financing activities amounted to $18,130,551 in
the six months ended June 30, 1997 compared to $1,016,332 net cash used in
financing activities in the six months ended June 30, 1998 which included
the following:
- - In the 1997 period, the Partnership borrowed $20,285,000 from banks and
made $1,500,930 in principal repayments under the 1994 Credit Facility.
- - In the 1997 and 1998 period, the Partnership made repayments of notes
payable in the amounts of $518,739 and $236,257 respectively, which
represented principal repayments under the Partnership's equipment credit
facilities.
- - Advances to other affiliates and repayments of such advances result from
management fees and other reimbursable expenses.
CREDIT AGREEMENTS OF THE PARTNERSHIP. On June 30, 1998, the Partnership
had cash and cash equivalents of $3,016,747 and the following credit
arrangements: (i) $115,000,000 aggregate principal amount of 11% Senior Secured
Notes due 2003; (ii) the new 1997 Credit Facility with a bank which consisted of
a $20,000,000 senior secured term loan facility due November 1, 2000 all of
which was outstanding, bearing interest at LIBOR plus 2.75%
11
<PAGE>
secured by all the assets of the Company, (iii) $2,036,765 10% Note due
August 20, 2000 to Simmons Communications Partnership, L.P.; (iv) $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; (v)
$285,000 loan facility from a bank, of which $271,807 was outstanding,
bearing interest at Prime Plus 1.0% due March 1, 2012, used to finance the
Partnership's new office building in Vermont; (vi) $1,214,990 non-interest
bearing promissory notes issued in connection with the acquisitions of the
internet business, which were assumed by the Partnership on June 29, 1998,
and are reported net of imputed interest of $201,320; and (vii) $1,482,241 of
certain other equipment credit facilities with various due dates not
exceeding four years.
The Partnership believes that available working capital and cash flows
generated from operations 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.
ACCOUNTING PRONOUNCEMENTS
In June 1998, Statement of Financial Standards No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities" , was issued. SFAS 133
established accounting and reporting standards for derivative instruments and
for hedging activities. SFAS 133 requires that an entity recognize all
derivatives as either assets or liabilities and measure those instruments at
fair value. SFAS 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. SFAS 133 can not be applied retroactively to
financial statements of prior periods. At the current time the Company does not
utilize derivative instruments and accordingly it is anticipated that the
adoption of SFAS 133 will not have a material impact on the Company's
consolidated financial position and results of operations.
12
<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: August 12, 1998 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: August 12, 1998 By: /s/ Herbert J. Roberts
----------------------------------
Name: Herbert J. Roberts
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
13
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