UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --------
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended June 30, 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 33-95298
GALAXY TELECOM, L.P.
----------------------------------------------------
Exact name of Registrant as specified in its charter)
Delaware 43-1697125
- ------------------------------- --------------------------
(States or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
1220 North Main, Sikeston, Missouri 63801
- ------------------------------- --------------------------
(Address of principal executive offices) (zip code)
Registrant telephone number, including area code: (573) 472-8200
Indicate by check mark whether the Registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
previous 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>
GALAXY TELECOM, L.P. AND SUBSIDIARY
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
INDEX
PAGE
PART I. Financial Information
Item 1. Consolidated Financial Statements
Galaxy Telecom, L.P. and Subsidiary ..................3
Notes to Consolidated Financial Statements............7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........10
PART II. Other Information....................................15
Signatures....................................................16
Exhibit Index.................................................17
2
<PAGE>
GALAXY TELECOM, L.P. AND SUDSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
ASSETS 1997 1996
--------- --------
(Unaudited)
Cash and cash equivalents $ 4,109,290 $ 2,338,345
Subscriber receivables, net of allowance
for doubtful accounts of $281,570 and
$411,950, respectively 5,451,424 5,998,127
Systems and equipment, net 141,114,351 144,822,616
Intangible assets, net 60,031,647 62,330,152
Prepaids and other 2,059,809 2,008,768
------------ ------------
Total assets $212,766,521 $217,498,008
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $ 14,795,473 $ 17,738,261
Subscriber deposits and deferred revenue 4,853,074 4,763,327
Long-term debt and other obligations 177,346,310 169,737,608
----------- -----------
Total liabilities 196,994,857 192,239,196
------------ ------------
Partners' Capital:
General partners 8,770,664 18,257,812
Limited partners 7,001,000 7,001,000
------------ ------------
Total partners' capital 15,771,664 25,258,812
------------ ------------
Total liabilities and partners' capital $212,766,521 $217,498,008
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30 June 30
--------------------- ----------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues $ 17,304,835 $ 15,544,923 $ 33,970,673 $ 30,020,321
------------ ------------ ------------ ------------
Operating expenses:
Systems operations 7,551,823 6,820,244 15,350,656 13,385,977
Selling, general and administrative 2,120,022 1,791,827 3,790,720 3,364,181
Management fee to affiliate 778,838 699,466 1,528,798 1,350,859
Depreciation and amortization 6,268,358 5,473,247 12,275,325
------------ ------------ ------------ ------------
Total operating expenses 16,719,041 14,784,784 32,945,499 27,885,687
------------ ------------ ------------ ------------
Operating income 585,794 760,139 1,025,174 2,134,634
Interest expense (5,273,521) (4,756,653) (10,349,783) (9,609,946)
Other income (expense) (168,617) (12,969) (162,539) 33,046
------------ ------------ ------------ ------------
Net loss $ (4,856,344) $ (4,009,483) $ (9,487,148) $ (7,442,266)
============ ============ ============ ============
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</FN>
</TABLE>
4
<PAGE>
GALAXY TELECOM, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
Limited Partners
General -----------------------------------------------------------------------
Partners Class B Class C Class D Class E Total Total
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Contributions $ 29,625,000 $ 1,000 $ 416,000 $ 6,384,000 -- $ 6,801,000 $ 36,426,000
Syndication and trans-
action costs (730,171) -- -- -- -- -- (730,171)
Net loss for period (175,311) -- -- -- -- -- (175,311)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31,
1994 28,719,518 1,000 416,000 6,384,000 -- 6,801,000 35,520,518
Contributions 15,000,000 -- -- -- $ 200,000 200,000 15,200,000
Net loss for period (8,549,767) -- -- -- -- -- (8,549,767)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31,
1995 35,169,751 1,000 416,000 6,384,000 200,000 7,001,000 42,170,751
Net loss for period (16,911,939) -- -- -- -- -- (16,911,939)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31,
1996 18,257,812 1,000 416,000 6,384,000 200,000 7,001,000 25,258,812
Net loss for period
(unaudited) (9,487,148) -- -- -- -- -- (9,487,148)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance at June 30, 1997
(unaudited) $ 8,770,664 $ 1,000 $ 416,000 $ 6,384,000 $ 200,000 $ 7,001,000 $ 15,771,664
============ ============ ============ ============ ============ ============ ============
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</FN>
</TABLE>
5
<PAGE>
GALAXY TELECOM, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the six months ended
------------------------
June 30, 1997 June 30, 1996
--------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (9,487,148) $ (7,442,266)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation expense 10,222,693 8,540,638
Amortization expense 2,052,632 1,244,032
Amortization included in interest expense 467,386 706,497
Financeable interest -- 269,018
Provision for doubtful accounts receivable 965,921 531,835
Loss on sale of assets 139,043 26,492
Changes in assets and liabilities:
Subscriber receivables (419,218) (3,505,047)
Prepaids and other (51,041) (61,738)
Accounts payable and accrued expenses (2,942,788) 4,680,841
Subscriber deposits and deferred revenue 89,747 2,748,490
Net cash provided by operating activities 1,037,227 7,738,792
------------ ------------
Cash flows from investing activities:
Acquisition of cable systems-net of trades -- (12,887,775)
Capital expenditures (6,988,691) (9,324,892)
Proceeds from sale of assets 394,693 56,974
Other intangible assets (235,746) (166,003)
------------ ------------
Net cash used in investing activities (6,829,744) (22,322,906)
Cash flows from financing activities:
Borrowings-Revolving Credit Facility 7,921,413 13,760,000
Payments-Revolving Credit Facility (300,000) --
Payments on other debt (42,711) (90,619)
Payments of debt issue costs (15,240) (855,527)
------------ ------------
Net cash provided by financing activities 7,563,462 13,669,381
Net increase (decrease) in cash and cash equivalents 1,770,945 (914,733)
------------ ------------
Cash and cash equivalents, beginning of period 2,338,345 3,430,835
Cash and cash equivalents, end of period $ 4,109,290 $ 2,516,102
============ ============
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</FN>
</TABLE>
6
<PAGE>
GALAXY TELECOM, L.P. AND SUBSIDIARY
- -----------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------
UNAUDITED
- ---------
1. STATEMENT OF ACCOUNTING PRESENTATIONS AND OTHER INFORMATION
The accompanying unaudited interim financial statements and related
disclosures are prepared in accordance with generally accepted accounting
principles applicable to interim financial information and with the instructions
to Form 10-Q and consequently do not include all of the footnote disclosures
required for audited financial statements by generally accepted accounting
principles. The results for June 30, 1997, and for the three months and six
months then ended are not necessarily indicative of the results to be expected
for the entire 1997 fiscal year. It is suggested that the accompanying financial
statements be read in conjunction with the Partnership's Annual Report on Form
10-K/A for the year ended December 31, 1996.
Galaxy Telecom Capital Corp. ("Capital Corp."), a Delaware
corporation, was formed July 26, 1995 and was funded August 1, 1995 as
a wholly owned subsidiary of the Partnership. Capital Corp. did not
have any significant operations for the period ended June 30, 1997.
The following notes, insofar as they are applicable to the three months
and six months ended June 30, 1997 and June 30, 1996, are not audited. In
management's opinion, all adjustments, consisting of only normal recurring
accruals considered necessary for a fair presentation of such financial
statements are included.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income," which establishes standards for
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements. SFAS No. 130 is effective for fiscal
years beginning after December 15, 1997.
Also in June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those business
enterprises report information about operating segments in interim financial
statements issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
SFAS No. 131 is effective for financial statements for years beginning after
December 15, 1997.
Management does not believe the implementation of SFAS No. 130 and No. 131
will have a material effect on its financial statements.
3. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid during the six months ended June 30, 1997 was approximately
$8.7 million. Interest paid during the six months ended June 30, 1996 was
approximately $8.9 million.
During the first six months of 1996, the Partnership traded the Shawnee
County Systems located in Shawnee and Jefferson counties in Kansas for the TCI
Systems located in various counties in northern Mississippi. There have been no
non-cash transactions in 1997.
7
<PAGE>
4. RELATED PARTY TRANSACTIONS
The Partnership incurs management fees and expenses pursuant to the terms
of a management agreement with Galaxy Systems Management, Inc., an affiliate of
a general partner, under which it manages the Partnership's business. Management
fees are calculated at 4.5% of gross revenues as defined in the management
agreement. Management fees totaled $699,466 for the three months ended June 30,
1996 and $778,838 for the three months ended June 30, 1997. Management fees
totaled $1,350,859 for the six months ended June 30, 1996 and $1,528,798 for the
six months ended June 30, 1997.
5. LONG-TERM DEBT
Long-term debt consists of the following:
June 30, December 31,
1997 1996
(Unaudited)
Revolving Credit Facility $57,497,790 $49,876,377
Senior Subordinated Notes 120,000,000 120,000,000
Unamortized discount (495,000) (525,000)
Other 343,520 386,231
------------ ------------
Total $177,346,310 $169,737,608
============ ============
Under the Revolving Credit Facility, the Partnership may make revolving
borrowings of up to $68.0 million until December 31, 1997, subject to compliance
with certain conditions, including certain financial covenants. On December 31,
1997, outstanding balances of the Revolving Credit Facility will convert to a
term loan amortizing quarterly until a final maturity on December 31, 2002.
6. SALE OF CABLE TELEVISION SYSTEMS
On April 7, 1997, the Partnership sold its cable television system located
in Five Points, South Carolina (the "Five Points Sale"), representing 311 basic
subscribers for $372,645, or approximately $1,200 per subscriber. The
Partnership used most of the proceeds from the Five Points Sale to pay down the
principal of the Revolving Note.
8
<PAGE>
7. PENDING SALES AND ACQUISITIONS
On April 7, 1997, the Partnership signed a letter of intent to purchase
certain assets comprising cable television systems owned by Venture Associates
Corp. ("Venture") for a purchase price of $675,000, which is subject to certain
adjustments. As of December 31, 1996, the Venture systems passed approximately
980 homes located in Marion County Florida, with 8.6 miles of plant, a density
of 114 homes per mile. As of December 31, 1996, the Venture systems served
approximately 954 basic subscribers, a basic penetration rate of approximately
97.3%.
On August 1, 1997, the Partnership sold its cable television system
located in Lake Murray, South Carolina (the "Lake Murray Sale"), representing
587 subscribers for approximately $587,000 or $1,000 per subscriber. The
Partnership used the proceeds from the Lake Murray Sale to pay down the
principal of the Revolving Note.
9
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
During the second quarter of 1996, Galaxy Telecom, L.P. (the
"Partnership") acquired certain cable television systems of Cablevision of Texas
III, Empire Communications, Empire Cable of Kansas, Hurst Communications,
Midcontinent Cable Systems and High Plains Cable for an aggregate consideration
of $13.4 million.
On June 14, 1996, the Partnership traded certain of its assets located in
Shawnee County and Jefferson County, Kansas for certain assets comprising
approximately six cable television systems of TCI located in northern
Mississippi.
On November 1, 1996, Galaxy acquired certain assets comprising five cable
television systems of C-S Cable for a purchase price of Approximately $2.27
million, serving approximately 3,450 subscribers in 5 franchise areas in and
around Marion and Sumter Counties in Florida.
On November 1, 1996, Galaxy traded assets comprising the Ranburn cable
system in Ranburn, Alabama serving approximately 110 subscribers for a similar
system in Mexia, Alabama serving approximately 230 subscribers. This trade
allowed Galaxy to trade a small system out of a non-targeted service area for a
similar system in proximity to our targeted service areas.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of
selected income statement items as a percent of revenues for the three
months and six months ended June 30, 1997 and June 30, 1996. Amounts
shown are in thousands.
<TABLE>
<CAPTION>
For the three months ended June 30, For the six months ended June 30,
1997 1996 1997 1996
-------------- ----------------- ------------------ -----------------
Amount %age Amount %age Amount %age Amount %age
-------- ----- -------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 17,305 100.0% $ 15,545 100.0% $ 33,971 100.0% $ 30,020 100.0%
-------- ----- -------- ----- -------- ----- -------- -----
Operating expenses:
System operations 7,552 43.6% 6,820 43.9% 15,351 45.2% 13,386 44.6%
Selling, general and administrative 2,120 12.3% 1,792 11.5% 3,791 11.2% 3,364 11.2%
Management fees 779 4.5% 700 4.5% 1,529 4.5% 1,351 4.5%
Depreciation and amortization 6,268 36.2% 5,473 35.2% 12,275 36.1% 9,784 32.6%
-------- ----- -------- ----- -------- ----- -------- -----
Total operating expenses 16,719 96.6% 14,785 95.1% 32,946 97.0% 27,885 92.9%
-------- ----- -------- ----- -------- ----- -------- -----
Operating income 586 3.4% 760 4.9% 1,025 3.0% 2,135 7.1%
Interest expense (5,273) (30.5%) (4,756) (30.6%) (10,350) (30.5%) (9,610) (32.0%)
Other income (expense) (169) (1.0%) (13) (0.1%) (162) (0.4%) 33 0.1%
-------- ----- -------- ----- -------- ----- -------- -----
Net loss $ (4,856) (28.1%) $ (4,009) (25.8%) $ (9,487) (27.9%) $ (7,442) (24.8%)
======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
10
<PAGE>
The following table sets forth demographic information as of June 30, 1997
as compared to June 30, 1996, December 31, 1996 and March 31, 1997. Information
prior to these dates are not comparable.
June 30, December 31, March 31, June 30,
1996 1996 1997 1997
-------- -------- -------- --------
Homes Passed 292,145 292,768 283,948 283,948
Basic Subscribers 175,176 182,552 178,819 177,708
Basic Penetration 59.96% 62.35% 62.97% 62.58%
Revenue per Subscriber $ 29.58 $ 28.45 $ 32.06 $ 32.82
Premium Subscribers 89,993 92,700 99,930 101,436
Premium Penetration 51.37% 50.78% 55.88% 57.08%
The Partnership generated revenues in the amount of $15,544,923 and
$30,020,321 for the three month and six month periods ended June 30, 1996,
respectively. For the three month and six month periods ended June 30, 1997 the
Partnership generated revenues in the amount of $17,304,835 and $33,970,673,
respectively. The Partnership was able to realize additional revenue by
increasing basic rates in certain systems and by increasing the premium
penetration percentage from 51.37% of basic subscribers as of June 30, 1996 to
57.08% of basic subscribers as of June 30, 1997. As a result, average revenue
per subscriber increased from $29.58 for the three months ended June 30, 1996 to
$32.82 for the three months ended June 30, 1997.
For the three months ended June 30, 1996 and June 30, 1997 system
operating expenses, consisting of subscriber costs, technician costs and system
maintenance costs were $6,820,244 and $7,551,823, respectively. As a percentage
of revenues, these expenses decreased slightly from 43.9% in 1996 to 43.6% in
1997. For the six months ended June 30, 1996 and June 30, 1997 system operating
expenses were $13,385,977 and $15,350,656, respectively, and, as a percentage of
revenues, increased slightly from 44.6% in 1996 to 45.2% in 1997. The increase
in these expenses are a result of an increase in programming fees charged to the
Partnership offset partially by a reduction in costs due to a decrease in the
number of subscribers.
11
<PAGE>
Selling, general and administrative expenses, which include office rents and
maintenance, marketing costs and corporate expenses, increased from $1,791,827
to $2,120,022 for the three months ended June 30, 1996 and June 30, 1997,
respectively, and from $3,364,181 to $3,790,720 for the six months ended June
30, 1996 and June 30, 1997, respectively. For the three month period ended June
30, these expenses increased as a percentage of revenue from 11.5% in 1996 to
12.3% in 1997. This increase is attributable to an increase in contract
marketing expense in an effort to attract and maintain basic subscribers within
existing systems. For the six month periods ended June 30, 1996 and 1997, these
expenses remained at 11.2%.
For the three months ended June 30, 1996 and June 30, 1997 depreciation
and amortization expense was $5,473,247, or 35.2% of revenues, and $6,268,358,
or 36.2% of revenues, respectively. For the six months ended June 30, 1996 and
June 30, 1997 depreciation and amortization expense was $9,784,670, or 32.6% of
revenues, and $12,275,325, or 36.1% of revenues, respectively. The increase in
depreciation and amortization expense is attributable to the increase in fixed
assets from purchases and acquisitions.
For the three months ended June 30, 1996 and June 30, 1997, interest
expense was $4,756,653 and $5,273,521, respectively. For the six months ended
June 30, 1996 and June 30, 1997, interest expense was $9,609,946 and
$10,349,783, respectively. This increase was a result of additional borrowings
under the Partnership's Revolving Credit Facility. For the three months ended
June 30, 1996 and 1997, other income (expense), which includes interest income,
loss on extraordinary items and other expenses, was a net expense of $12,969 and
$168,617, respectively. For the six months ended June 30, 1996 and 1997,
interest income and other was a net income of $33,046, and a net expense of
$162,539, respectively.
The Partnership pays no income taxes, although it is required to file
federal and state income tax returns for informational purposes only. All income
or loss "flows through" to the partners of the Partnership as specified in the
Partnership's limited partnership agreement.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Partnership had $11,620,523 in current assets,
including $4,109,290 in cash and cash equivalents, $5,451,424 in subscriber
receivables and $2,059,809 in prepaids and other. As of such date, total current
liabilities (other than notes payable) exceeded current assets by $8,028,024.
The Partnership expects to fund this deficiency through its operating cash flows
and available funds under the Revolving Credit Facility.
Due to the results of operations discussed above, the Partnership
generated operating cash flows, defined as earnings before interest,
depreciation and amortization expense, of $6,220,417, or 38.6% of operating
revenues, and $6,685,535, or 40.0% of operating revenues, for the three months
ended June 30, 1996 and 1997, respectively, and $11,952,350, or 39.8% of
operating revenues, and $13,139,960, or 38.7% of operating revenues, for the six
months ended June 30, 1997 and 1996, respectively.
On April 1, 1996, the Partnership acquired certain assets from the
Cablevision of Texas Systems for a total purchase price of $10.16 million. In
April 1996, the Partnership also completed the acquisitions of the Hurst
Systems, the High Plains Systems and the Midcontinent Systems for an aggregate
purchase price of approximately $2.75 million.
12
<PAGE>
The Partnership had aggregate indebtedness of approximately $177.3 million
as of June 30, 1997, representing $120 million of 12.375% Senior Subordinated
Notes due in 2005 (the "Notes") and $57.5 million of bank debt. The bank debt
includes a Revolving Credit Facility under which the Partnership may make
revolving borrowings of up to $68.0 million until December 31, 1997, subject to
compliance with certain conditions, including certain financial covenants. On
December 31, 1997, outstanding balances of the Revolving Credit Facility will
convert to a term loan amortizing quarterly until a final maturity on December
31, 2002. The Revolving Credit Facility requires the Partnership to maintain
compliance with certain financial ratios and other covenants. The financial
covenants in the Revolving Credit Facility may limit the Partnership's ability
to borrow under the Revolving Credit Facility. The Partnership presently intends
to utilize the Revolving Credit Facility to fund capital expenditures, repay the
term loan and acquire additional cable systems. As of June 30, 1997, the
Partnership had borrowings under the Revolving Credit Facility of $57.5 million,
which included borrowings used to fund the acquisitions of the Cablevision of
Texas, Hurst, High Plains, Midcontinent and CS Cable Systems.
As of June 30, 1997, the Partnership had $141.1 million in systems and
equipment consisting of $132.3 million of cable television systems and $8.8
million of vehicles, equipment, buildings and office equipment, all net of
accumulated depreciation. The Partnership had capital expenditures (exclusive of
system acquisitions) of $7.0 million for the six months ended June 30, 1997. For
the six months ended June 30, 1996, the Partnership had capital expenditures
(exclusive of system acquisitions) of $9.3 million. These capital expenditures
were financed mainly through the Revolving Credit Facility and cash flows from
operations. During the first six months of 1997, the Partnership's capital
expenditures were primarily used to purchase vehicles and related equipment, add
channels, expand and interconnect administrative offices, and eliminate headends
by interconnecting adjacent systems with fiber-optic cable.
The Partnership's cash flows have been sufficient to meet its debt
service, working capital and capital expenditure requirements, with the
exception of the above acquisitions of cable systems, which have been funded
principally through the proceeds of the notes and borrowings under the Revolving
Credit Facility. The Partnership expects that it will be able to meet its
short-term and long-term requirements for debt service, working capital and
capital expenditures and to fund future cable system acquisitions through its
operating cash flows and borrowings under the Revolving Credit Facility, and its
access to additional capital in the public and private debt markets.
13
<PAGE>
SAFE HARBOR UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
The statements contained in the Form 10-Q relating to the Partnership's
operating results, and plans and objectives of management for future operations,
including plans or objectives relating to the Partnership's products and
services, constitute forward looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Actual results of the
Partnership may differ materially from those in the forward looking statements
and may be affected by a number of factors including the receipt of regulatory
approvals, the success of the Partnership's implementation of digital
technology, subscriber equipment availability, tower space availability, and the
absence of interference, as well as other factors contained herein and in The
Partnership's securities filings.
The Partnership's future revenues and profitability are difficult to
predict due to a variety of risks and uncertainties, including (i) business
conditions and growth in the Partnership's existing markets, (ii) the successful
launch of systems and technologies in new and existing markets, (iii) the
Partnership's existing indebtedness and the need for additional financing to
fund subscriber growth and system and technological development, (iv) government
regulation, including FCC regulations, (v) the Partnership's dependence on
channel leases, (vi) the successful integration of future acquisitions and (vii)
numerous competitive factors, including alternative methods of distributing and
receiving video transmissions.
Because of the foregoing uncertainties affecting the Partnership's future
operating results, past performance should not be considered to be a reliable
indicator of future performance, and investors should not use historical results
or trends as determinative of the Partnership's future performance. In addition,
the Partnership's participation in a developing industry employing rapidly
changing technology may result in significant volatility in the market value of
the Notes.
In addition to the matters noted above, certain other statements made in
this Form 10-Q are forward looking. Such statements are based on an assessment
of a variety of factors, contingencies and uncertainties deemed relevant by
management, including technological changes, competitive products and services
and management issues. As a result, the actual results realized by the
Partnership could differ materially from the statements made herein. Readers of
this Form 10-Q are cautioned not to place undue reliance on the forward looking
statements made in this Form 10-Q or in the Partnership's other securities
filings.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income," which establishes standards for
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements. SFAS No. 130 is effective for fiscal
years beginning after December 15, 1997.
Also in June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those business
enterprises report information about operating segments in interim financial
statements issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
SFAS No. 131 is effective for financial statements for years beginning after
December 15, 1997.
Management does not believe the implementation of SFAS No. 130 and No. 131
will have a material effect on its financial statements.
14
<PAGE>
PART II. OTHER INFORMATION
Items 1 through 5.
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibits are included or incorporated by
-----------
reference below.
27. Financial Data Schedule
(b) Reports of Form 8-K. No reports on Form 8-K were filed during the quarter
---------------------
ended June 30, 1997.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GALAXY TELECOM, L.P.
BY: Galaxy Telecom, Inc.
as General Partner
Date: August 13, 1997 _\s\_ J. Keith Davidson______
BY: J. Keith Davidson
Vice President-Finance
(Principal Financial Officer)
16
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 4109290
<SECURITIES> 0
<RECEIVABLES> 5451424
<ALLOWANCES> 281570
<INVENTORY> 0
<CURRENT-ASSETS> 11620523
<PP&E> 176511670
<DEPRECIATION> 35397320
<TOTAL-ASSETS> 212766521
<CURRENT-LIABILITIES> 19648547
<BONDS> 177346310
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 212766521
<SALES> 0
<TOTAL-REVENUES> 17304835
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 16887658
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5273521
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4856344)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
