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, 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 33-95298
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.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1998
INDEX
PAGE
PART I. Financial Information
Item 1. Consolidated Financial Statements
Galaxy Telecom, L.P. ........................................3
Notes to Consolidated Financial Statements....................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................10
Item 3. - Quantitative and qualitative disclosures
about market risk...........................................15
PART II. Other Information................................................16
Signatures .............................................................17
Exhibit Index .............................................................18
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. - FINANCIAL STATEMENTS
GALAXY TELECOM, L.P. AND SUDSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------- -------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 3,027,238 $ 2,403,098
Subscriber receivables, net of allowance
for doubtful accounts of $134,303 and
$154,692, respectively 5,144,473 5,424,260
Systems and equipment, net 124,339,026 138,729,592
Intangible assets, net 51,427,808 57,193,102
Prepaids and other 3,493,601 3,297,573
------------- -------------
Total assets $ 187,432,146 $ 207,047,625
============= =============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Accounts payable and accrued expenses $ 14,718,666 $ 17,152,286
Subscriber deposits and deferred revenue 5,261,910 5,434,097
Long-term debt and other obligations 172,669,299 179,250,312
------------- -------------
Total liabilities 192,649,875 201,836,695
Commitments and contingencies
Partners' Capital (Deficit):
General partners (5,217,729) --
Limited partners -- 5,210,930
------------- -------------
Total partners' capital (deficit) (5,217,729) 5,210,930
------------- -------------
Total liabilities and partners' capital (deficit) $ 187,432,146 $ 207,047,625
============= =============
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</FN>
</TABLE>
3
<PAGE>
GALAXY TELECOM, L.P. AND SUDSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30 June 30
------------------------ ------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 17,471,933 $ 17,304,835 $ 34,803,001 $ 33,970,673
------------ ------------ ------------ ------------
Operating expenses:
Systems operations 8,207,353 7,551,823 16,195,030 15,350,656
Selling, general and administrative 1,967,392 2,120,022 4,185,955 3,790,720
Management fee to affiliate 785,904 778,838 1,564,122 1,528,798
Depreciation and amortization 6,145,303 6,268,358 12,347,246 12,275,325
------------ ------------ ------------ ------------
Total operating expenses 17,105,952 16,719,041 34,292,353 32,945,499
------------ ------------ ------------ ------------
Operating income 365,981 585,794 510,648 1,025,174
Interest expense (5,343,330) (5,273,521) (10,547,793) (10,349,783)
Other income (expense) (1,593,381) (168,617) (391,514) (162,539)
------------ ------------ ------------ ------------
Net loss $ (6,570,730) $ (4,856,344) $(10,428,659) $ (9,487,148)
============ ============ ============ ============
<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 CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the six months ended June 30,
--------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss (10,428,659) $ (9,487,148)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation expense 10,396,089 10,222,693
Amortization expense 1,951,157 2,052,632
Amortization included in interest expense 467,388 467,386
Provision for doubtful accounts receivable 631,584 965,921
Loss on sale of assets 254,787 139,043
Changes in assets and liabilities:
Subscriber receivables (351,797) (419,218)
Prepaids and other (196,028) (51,041)
Accounts payable and accrued expenses (2,433,620) (2,942,788)
Subscriber deposits and deferred revenue (172,187) 89,747
------------ ------------
Net cash provided by operating activities 118,714 1,037,227
------------ ------------
Cash flows from investing activities:
Acquisition of cable systems-net of trades (133,633) --
Capital expenditures (4,801,432) (6,988,691)
Proceeds from sale of assets 12,609,509 394,693
Other intangible assets (374,172) (235,746)
------------ ------------
Net cash provided by(used in)investing activities 7,300,272 (6,829,744)
------------ ------------
Cash flows from financing activities:
Borrowings under revolver 4,425,000 7,921,413
Payments on revolver (13,650,000) (300,000)
Net borrowings (payments) on other debt 2,613,987 (42,711)
Debt issuance costs (183,833) (15,240)
------------ ------------
Net cash provided by(used in)financing activities (6,794,846) 7,563,462
------------ ------------
Net increase in cash and cash equivalents 624,140 1,770,945
------------ ------------
Cash and cash equivalents, beginning of period 2,403,098 2,338,345
------------ ------------
Cash and cash equivalents, end of period $ 3,027,238 $ 4,109,290
============ ============
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</FN>
</TABLE>
5
<PAGE>
GALAXY TELECOM, L.P. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
1. BASIS OF PRESENTATION AND OTHER INFORMATION
The attached unaudited interim consolidated financial statements of Galaxy
Telecom, L.P. and its subsidiary ("Galaxy" or the "Partnership") are presented
in accordance with the requirements of Article 10 of Regulation S-X and
consequently do not include all of the footnote disclosures required for audited
financial statements by generally accepted accounting principles. The results
for the three and six month periods ended June 30, 1998 are not necessarily
indicative of the results to be expected for the entire 1998 fiscal year. It is
suggested that the accompanying consolidated financial statements be read in
conjunction with Galaxy's Annual Report on Form 10-K/A for the year ended
December 31, 1997.
The following notes, insofar as they are applicable to the three months
and six months ended June 30, 1998 and 1997, are not audited. In management's
opinion, all adjustments, consisting of only normal recurring accruals,
considered necessary for a fair presentation of such consolidated financial
statements are included.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("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. 131 will
have a material effect on its financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 is effective for all fiscal
quarters of all fiscal years beginning after June 15, 1999 (January 1, 2000 for
the Partnership). SFAS No. 133 requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction.
6
<PAGE>
Management of the Partnership anticipates that, due to its limited use of
derivative instruments, the adoption of SFAS No. 133 will not have a significant
effect on the Partnership's results of operations or its financial position.
3. REPORTING COMPREHENSIVE INCOME
In 1998, Galaxy adopted 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.
Comprehensive loss was the same as net loss reported.
4. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
During the first six months of 1998, Galaxy traded four systems located in
and around Sheridan County, Nebraska, representing 853 subscribers for one
system located in Jefferson County, Colorado representing approximately 800
subscribers.
5. RELATED PARTY TRANSACTIONS
Galaxy 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 Galaxy's business. Management fees are
calculated at 4.5% of gross revenues as defined in the management agreement.
Management fees totaled $785,904 for the three months ended June 30, 1998 and
$778,838 for the three months ended June 30, 1997. Management fees totaled
$1,564,122 for the six months ended June 30, 1998 and $1,528,798 for the six
months ended June 30, 1997.
7
<PAGE>
6. LONG-TERM DEBT
Long-term debt consisted of the following:
June 30, December 31,
1998 1997
------------- -------------
Revolving Credit Facility $ 50,000,000 $ 59,225,000
Senior Subordinated Notes 120,000,000 120,000,000
Unamortized discount (435,000) (465,000)
Other 3,104,299 490,312
------------- -------------
Total $ 172,669,299 $ 179,250,312
============= =============
7. SALES, ACQUISITIONS AND TRADES
On January 15, 1998, Galaxy sold its cable television systems located in
Wyoming and Idaho (the "Wyoming Sale"), representing approximately 4,000
subscribers for $4.9 million, or $1,225 per subscriber, and recorded a gain on
sale of approximately $711,000. Galaxy used the proceeds from the Wyoming Sale
to pay down principal of the revolving note.
On February 1, 1998, Galaxy sold its cable television system located in
Hooper, Nebraska, representing 242 subscribers for approximately $262,000, or
approximately $1,080 per subscriber. Galaxy used the proceeds from this sale to
pay down principal of the revolving note.
On March 31, 1998, Galaxy sold two cable television systems located in
Olathe, Kansas and Independence, Missouri, representing 250 subscribers for
approximately $190,000, or approximately $760 per subscriber. Galaxy used the
proceeds from this sale to pay down principal of the revolving note.
On March 31, 1998, Galaxy sold six cable television systems located in and
around Ottawa County, Kansas, representing 752 subscribers for approximately
$623,000, or approximately $830 per subscriber. Galaxy used the proceeds from
this sale to pay down principal of the revolving note.
On March 31, 1998, Galaxy purchased five cable television systems located
in Brooks and Colquitt Counties in Georgia, representing approximately 300
subscribers for approximately $141,000, or approximately $470 per subscriber.
On March 31, 1998, Galaxy traded four systems located in and around
Sheridan County, Nebraska, representing 853 subscribers for one system located
in Jefferson County, Colorado, representing approximately 800 subscribers.
8
<PAGE>
On April 30, 1998, Galaxy sold seven cable television systems located in
and around Lincoln County, Kansas, representing approximately 500 subscribers
for approximately $395,000, or approximately $790 per subscriber. Galaxy used
the proceeds from this sale to pay down principal of the revolving note.
On June 30, 1998, Galaxy sold one cable television system located in
Goessel, Kansas, representing approximately 100 subscribers for approximately
$110,000, or approximately $1,100 per subscriber. Galaxy used the proceeds from
this sale to pay down principal of the revolving note.
On June 30, 1998, Galaxy sold all of its cable television systems located
in central Georgia, representing approximately 5,200 subscribers for
approximately $6,120,000, or approximately $1,177 per subscriber, and recorded a
gain on sale of approximately $123,000. Galaxy used the proceeds from this sale
to pay down principal of the revolving note.
8. COMMITMENTS AND CONTINGENCIES
Year 2000 Compliance
The Partnership's computer software programs utilize four digits to define
the applicable year; therefore, management of the Partnership believes it has no
internal risk concerning the Year 2000 issue. Any problems the Partnership's
suppliers and customers may have relative to this issue are not expected to
affect the Partnership. The Partnership has not incurred any costs related to
this issue and is not expecting to incur any such costs in the future.
Litigation
The Partnership is subject to various legal and administrative proceedings
in the ordinary course of business. Management believes the outcome of any such
proceedings will not have a material adverse effect on the Partnership's
consolidated financial position, results of operations or cash flows.
9
<PAGE>
Item 2. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RECENT DEVELOPMENTS
On January 15, 1998, Galaxy Telecom, L.P. and its subsidiary ("Galaxy" or
the "Partnership") sold its cable television systems located in Wyoming and
Idaho (the "Wyoming Sale"), representing approximately 4,000 subscribers for
$4.9 million, or $1,225 per subscriber. Galaxy used the proceeds from the
Wyoming Sale to pay down principal of the revolving note.
On February 1, 1998, Galaxy sold its cable television system located in
Hooper, Nebraska, representing 242 subscribers for approximately $262,000, or
approximately $1,080 per subscriber. Galaxy used the proceeds from this sale to
pay down principal of the revolving note.
On March 31, 1998, Galaxy sold two cable television systems located in
Olathe, Kansas and Independence, Missouri, representing 250 subscribers for
approximately $190,000, or approximately $760 per subscriber. Galaxy used the
proceeds from this sale to pay down principal of the revolving note.
On March 31, 1998, Galaxy sold six cable television systems located in and
around Ottawa County, Kansas representing 752 subscribers for approximately
$623,000, or approximately $830 per subscriber. Galaxy used the proceeds from
this sale to pay down principal of the revolving note.
On March 31, 1998, Galaxy purchased five cable television systems located
in Brooks and Colquitt Counties in Georgia, representing approximately 300
subscribers for approximately $141,000, or approximately $470 per subscriber.
On March 31, 1998, Galaxy traded four systems located in and around
Sheridan County, Nebraska, representing 853 subscribers for one system located
in Jefferson County, Colorado representing approximately 800 subscribers.
On April 30, 1998, Galaxy sold seven cable television systems located in
and around Lincoln County, Kansas, representing approximately 500 subscribers
for approximately $395,000, or approximately $790 per subscriber. Galaxy used
the proceeds from this sale to pay down principal of the revolving note.
On June 30, 1998, Galaxy sold one cable television system located in
Goessel, Kansas, representing approximately 100 subscribers for approximately
$110,000, or approximately $1,100 per subscriber. Galaxy used the proceeds from
this sale to pay down principal of the revolving note.
10
<PAGE>
On June 30, 1998, Galaxy sold all of its cable television systems located
in central Georgia, representing approximately 5,200 subscribers for
approximately $6,120,000, or approximately $1,177 per subscriber, and recorded a
gain on sale of approximately $123,000. Galaxy used the proceeds from this sale
to pay down principal of the revolving note.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of selected
income statement items as a percentage of revenues for the three months and six
months ended June 30, 1998 and June 30, 1997. Amounts shown are in thousands.
<TABLE>
<CAPTION>
For the three months ended June 30, For the six months ended June 30,
------------------------------------- ---------------------------------------
1998 1997 1998 1997
------------------- ------------------- ------------------- ------------------
Amount % Amount % Amount % Amount %
-------- ----- -------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 17,472 100.0% $ 17,305 100.0% $ 34,803 100.0% $ 33,971 100.0%
-------- ----- -------- ----- -------- ----- -------- -----
Operating expenses:
System operations 8,207 47.0% 7,552 43.6% 16,195 46.5% 15,351 45.2%
Selling, general and administrative 1,967 11.2% 2,120 12.3% 4,186 12.0% 3,791 11.2%
Management fees to affiliate 786 4.5% 779 4.5% 1,564 4.5% 1,529 4.5%
Depreciation and amortization 6,146 35.2% 6,268 36.2% 12,347 35.5% 12,275 36.1%
-------- ----- -------- ----- -------- ----- -------- -----
Total operating expenses 17,106 97.9% 16,719 96.6% 34,292 98.5% 32,946 97.0%
-------- ----- -------- ----- -------- ----- -------- -----
Operating income 366 2.1% 586 3.4% 511 1.5% 1,025 3.0%
Interest expense (5,343) (30.6%) (5,273) (30.5%) (10,548 (30.3%) (10,350) (30.5%)
Other income (expense) (1,593) (9.1%) (169) (1.0%) (392) (1.2%) (162) (0.4%)
-------- ----- -------- ----- -------- ----- -------- -----
Net loss $ (6,570) (37.6%) $ (4,856) (28.1%) $(10,429) (30.0%) $ (9,487) (27.9%)
======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
The following table sets forth demographic information as of September 30,
1997, December 31, 1997, March 31, 1998 and June 30, 1998.
September 30, December 31, March 31, June 30,
1997 1997 1998 1998 (1)
------- ------- ------- --------
Homes Passed 289,531 298,984 292,112 286,196
Basic Subscribers 177,057 177,296 170,967 168,386
Basic Penetration 60.81% 59.30% 58.53% 58.84%
Revenue per Subscriber $32.88 $32.85 $33.79 $34.32
Premium Subscribers 84,322 84,252 82,477 80,355
Premium Penetration 47.89% 47.52% 48.24% 47.72%
(1) Includes the demographic information of the Central Georgia systems sold
effective June 30, 1998.
11
<PAGE>
Galaxy generated revenues in the amount of $17,471,933 and $34,803,001 for
the three-month and six-month periods ended June 30, 1998, respectively. For the
three-month and six-month periods ended June 30, 1997, Galaxy generated revenues
in the amount of $17,304,835 and $33,970,673, respectively. Galaxy was able to
realize additional revenue by increasing basic rates in certain systems. As a
result, average revenues per subscriber increased from $32.82 for the three
months ended June 30, 1997 to $34.32 for the three months ended June 30, 1998.
For the three months ended June 30, 1998 and 1997, system operating
expenses, consisting of subscriber costs, technician costs and system
maintenance costs, were $8,207,353 and $7,551,823, respectively. As a percentage
of revenues, these expenses increased from 43.6% for the three months ended June
30, 1997 to 47.0% in the comparable period of 1998. For the six months ended
June 30, 1998 and 1997, system operating expenses were $16,195,030 and
$15,350,656, respectively, and, as a percentage of revenues, increased from
45.2% for the six months ended June 30, 1997 to 46.5% in the comparable period
of 1998. The increase in these expenses was a result of increased programming
costs to Galaxy.
Selling, general and administrative expenses, which include office rents
and maintenance, marketing costs and corporate expenses, decreased from
$2,120,022 to $1,967,392 for the three months ended June 30, 1998, as compared
to the three months ended June 30, 1997, and increased from $3,790,720 to
$4,185,955 for the six months ended June 30, 1998 as compared to the six months
ended June 30, 1997. For the three-month period ended June 30, these expenses
decreased as a percentage of revenue from 12.3% in 1997 to 11.2% in 1998. This
decrease was attributable to an effort to control costs associated with local
service or call centers. For the six-month period ended June 30, these expenses
increased from 11.2% in 1997 to 12.0% in 1998, due to a decrease in the amount
of reimbursements from programmers, primarily in the first quarter of 1998 as
compared to the first quarter of 1997.
For the three months ended June 30, 1998 and 1997, depreciation and
amortization expense was $6,145,303, or 35.2% of revenues, and $6,268,358, or
36.2% of revenues, respectively. For the six months ended June 30, 1998 and
1997, depreciation and amortization expense was $12,347,246, or 35.5% of
revenues, and $12,275,325, or 36.1% of revenues, respectively. The slight
increase in depreciation and amortization expense for the six months ended
June 30, 1998, was attributable to the increase in fixed assets from purchases,
offset by the sale of cable television systems.
For the three months ended June 30, 1998 and 1997, interest expense was
$5,343,330 and $5,273,521, respectively. For the six months ended June 30, 1998
and 1997, interest expense was $10,547,793 and $10,349,783, respectively. This
increase was a result of additional borrowings under the Partnership's Revolving
Credit Facility. During the first six months of 1997, Galaxy paid $13.7 million
towards the principal of the Revolving Credit Facility. For the three months
ended June 30, 1998 and 1997, other income (expense), which includes interest
income and other expenses, was a net expense of $1,593,381 and $168,617
respectively. The three months ended June 30, 1998, included a loss on sale of
systems of approximately $1,500,000.
12
<PAGE>
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, 1998, Galaxy had $3,027,238 in cash and cash equivalents.
As of such date, total liabilities less long-term debt exceeded cash and cash
equivalents by $16,953,338. Galaxy expects to fund this deficiency through its
operating cash flows and the Revolving Credit Facility.
The Partnership generated earnings before interest, depreciation and
amortization expense, of $4,917,903, or 28.1% of operating revenues, and
$6,685,535, or 38.6% of operating revenues, for the three months ended June 30,
1998 and 1997, respectively, and $12,466,380, or 35.8% of operating revenues,
and $13,137,960, or 38.7% of operating revenues, for the six months ended June
30, 1998 and 1997, respectively.
Galaxy had aggregate indebtedness of approximately $172.7 million as of
June 30, 1998, representing $120 million of 12.375% Senior Subordinated Notes
due in 2005 (the "Notes") and $52.7 million of bank debt. The Revolving Credit
Facility, which has been periodically amended, with the latest amendment
occurring in March 1998, allows the Partnership to borrow up to $63 million
until September 1998 when the outstanding balance converts to a term loan
payable in quarterly installments escalating annually from 6 percent to 30
percent of the converted balance through December 2002. The Revolving Credit
Facility requires Galaxy to maintain compliance with certain financial ratios
and other covenants. The financial covenants in the Revolving Credit Facility
may limit Galaxy's ability to borrow under the Revolving Credit Facility. Galaxy
presently intends to utilize the Revolving Credit Facility to fund capital
expenditures, repay the term loan and acquire additional cable systems.
13
<PAGE>
As of June 30, 1998, Galaxy had $124.3 million in systems and equipment
consisting of $113.9 million of cable television systems and $10.4 million of
vehicles, equipment, buildings and office equipment, all net of accumulated
depreciation. Galaxy had capital expenditures of $4.8 million for the six months
ended June 30, 1998. For the six months ended June 30, 1997, Galaxy had capital
expenditures of $7.0 million. These capital expenditures were financed mainly
through the Revolving Credit Facility and cash flows from operations. During
1998, Galaxy's capital expenditures were primarily used to add channels,
eliminate headends by interconnecting adjacent systems with fiber-optic cable,
and construct wide-area networks for distance learning and data services.
Galaxy's cash flows have been sufficient to meet its debt service, working
capital and capital expenditure requirements. Galaxy 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.
For information on the impact of recent accounting pronouncements see Note
2 to the consolidated financial statements appearing elsewhere herein.
SAFE HARBOR UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The statements contained in this Form 10-Q relating to Galaxy's operating
results, and plans and objectives of management for future operations, including
plans or objectives relating to Galaxy's products and services, constitute
forward looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Actual results of Galaxy 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 Galaxy'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 Galaxy's securities filings.
Galaxy's future revenues and profitability are difficult to predict due to
a variety of risks and uncertainties, including (i) business conditions and
growth in Galaxy's existing markets, (ii) the successful launch of systems and
technologies in new and existing markets, (iii) Galaxy's existing indebtedness
and the need for additional financing to fund subscriber growth and system and
technological development, (iv) government regulation, including Federal
Communications Commission regulations, (v) Galaxy'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.
14
<PAGE>
Galaxy expects to continue its subscriber growth within existing systems
and launch additional systems. Moderate increases in revenues and subscribers
are anticipated in 1998; however, the rate of increase cannot be estimated with
precision or certainty. Galaxy believes that general and administrative expenses
and depreciation and amortization expense will continue to increase to support
overall growth.
Because of the foregoing uncertainties affecting Galaxy'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 Galaxy's future performance. In addition, Galaxy's
participation in a developing industry employing rapidly changing technology
could result in significant volatility in the market value of the Senior
Subordinated 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 Galaxy 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 Galaxy's other securities filings.
For information on the impact of recent accounting pronouncements, see
Note 2 to the consolidated financial statements, appearing elsewhere herein.
Item 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
15
<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, 1998.
16
<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 14, 1998 /s/ J. Keith Davidson
-------------------------------------
BY: J. Keith Davidson
Vice President-Finance
(Principal Financial Officer)
17
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
-------------------- ---------------------------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
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