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 March 31, 2000
OR
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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 Identification Number)
incorporation or organization)
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 MARCH 31, 2000
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.................9
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)
March 31, December 31,
2000 1999
------------- -------------
ASSETS
Cash in banks $ 5,886,403 $ 386,485
Subscriber receivables, net of allowance
for doubtful accounts of $94,715 and
$86,536, respectively 3,760,763 4,431,946
Systems and equipment, net 92,317,960 94,568,015
Intangible assets, net 32,348,632 34,266,208
Prepaids and other 3,299,373 3,877,975
------------- -------------
Total assets $ 137,613,131 $ 137,530,629
============= =============
LIABILITIES AND PARTNERS' DEFICIT
Accounts payable and accrued expenses $ 20,447,653 $ 17,198,650
Subscriber deposits and deferred revenue 4,029,760 4,026,920
Long-term debt and other obligations 147,930,896 148,176,701
------------- -------------
Total current liabilities 172,408,309 169,402,271
Partners' deficit:
General partners (34,795,178) (31,871,642)
Limited partners -- --
------------- -------------
Total partners' deficit (34,795,178) (31,871,642)
------------- -------------
Total liabilities and partners' deficit $ 137,613,131 $ 137,530,629
============= =============
The accompanying notes are an integral part of the
consolidated financial statements.
3
<PAGE>
GALAXY TELECOM, L.P. AND SUDSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended March 31,
-----------------------------------
2000 1999
------------- -------------
Revenues $ 13,990,403 $ 14,569,553
------------ ------------
Operating expenses:
Systems operations 6,822,217 6,673,766
Selling, general and administrative 1,552,818 1,500,582
Management fee to affiliate 419,663 654,677
Depreciation and amortization 4,772,917 5,224,276
------------ ------------
Total operating expenses 13,567,615 14,053,301
------------ ------------
Operating income 422,788 516,252
Interest expense (5,422,503) (4,767,322)
Gain on sale of assets 2,063,407 909,179
Interest income and other, net 12,772 18,992
------------ ------------
Net loss $ (2,923,536) $ (3,322,899)
============ ============
The accompanying notes are an integral part of the
consolidated financial statements.
4
<PAGE>
GALAXY TELECOM, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended March 31,
-----------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(2,923,536) $(3,322,899)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation expense 4,169,010 4,539,932
Amortization expense 603,907 684,344
Amortization included in interest expense 1,008,208 329,999
Provision for doubtful accounts receivable 343,950 106,636
Gain on sale of assets (2,063,407) (909,179)
Changes in assets and liabilities:
Subscriber receivables 327,233 (140,334)
Prepaids and other 578,602 612,288
Accounts payable and accrued expenses 3,249,003 3,197,717
Subscriber deposits and deferred revenue 2,840 99,787
----------- -----------
Net cash provided by operating activities 5,295,810 5,198,291
----------- -----------
Cash flows from investing activities:
Acquisition of cable systems - net of trades -- --
Proceeds from sales of cable systems 3,493,429 1,102,446
Purchase of capital assets (2,981,193) (3,032,291)
Other intangible assets (19,647) (115,376)
----------- -----------
Net cash provided by (used in) investing activities 492,589 (2,045,221)
----------- -----------
Cash flows from financing activities:
Payments under term debt and revolver -- --
Payments under other debt (260,805) (153,890)
Payment of debt issue costs (27,676) (104,969)
----------- -----------
Net cash used in financing activities (288,481) (258,859)
----------- -----------
Net increase in cash and cash equivalents 5,499,918 2,894,211
Cash and cash equivalents, beginning of period 386,485 2,213,777
----------- -----------
Cash and cash equivalents, end of period $ 5,886,403 $ 5,107,988
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
5
<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 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 months ended March 31, 2000 are not necessarily indicative
of the results to be expected for the entire 2000 fiscal year. It is suggested
that the accompanying consolidated financial statements be read in conjunction
with Galaxy's Annual Report on Form 10-K for the year ended December 31, 1999.
The following notes, insofar as they are applicable to the three months
ended March 31, 2000 and March 31, 1999, 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. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid during the three months ended March 31, 2000 and 1999 was
approximately $709,000 and $395,000, respectively.
3. 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
totaled $419,663 for the three months ended March 31, 2000 and $654,677 for the
three months ended March 31, 1999.
6
<PAGE>
4. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Term loan with interest payable monthly, at an
adjusted LIBOR rate of LIBOR plus 3.25% (9.72125% at
December 31, 1999) $ 25,325,000
Amended term loan with interest payable quarterly, at an
ABR rate of PRIME plus 2% (10.75% at March 31, 2000) $ 25,325,000
12.375% senior subordinated notes, net of unamortized
discount of $330,000 and $345,000 at March 31, 2000 and
December 31, 1999, respectively, with interest payable
semiannually on April 1 and October 1 119,670,000 119,655,000
Other, including capital leases 2,935,896 3,196,701
------------ ------------
$147,930,896 $148,176,701
============ ============
</TABLE>
Galaxy's September 1995 Amended and Restated Loan Agreement has been
periodically amended and subsequently converted to a Term Loam, with the latest
amendment occurring on March 31, 2000 ("Term Loan"). Net proceeds from any
system sale must be used to reduce the outstanding balance under the Term Loan.
The Term Loan also requires Galaxy to maintain compliance with certain financial
ratios and other covenants, such as annualized cash flow to interest expense,
capital expense limits and basic subscribers to total long term debt. Galaxy is
not permitted to borrow additional funds under the Term Loan without the prior
written consent of the lenders. The Term Loan is due the earlier of December 31,
2000 or upon the occurrence of certain events set forth in the Loan Agreement.
On March 31, 2000, Galaxy entered into a new $5.0 million Term Loan
Agreement from three of the four lenders under the Term Loan ("New Loan"). The
funds available under this New Loan were not advanced to Galaxy until April 1,
2000. The New Loan also requires Galaxy to maintain compliance with certain
financial ratios and other covenants, such as annualized cash flow to interest
expense, capital expense limits and basic subscribers to total long term debt.
The New Loan bears interest at the same rate as the amended term loan agreement
and is due on December 31, 2000 or upon the occurrence of certain events set
forth in the agreement. The New Loan restricts Galaxy's ability to borrow
without the consent of the lenders. The Term Loan is due the earlier of December
31, 2000 or upon the occurrence of certain events set forth in the Loan
Agreement.
As a condition to the New Loan, Galaxy will owe an $800,000 fee to the
lenders that will be due and payable upon repayment of the New Loan. The
$800,000 fee shall be reduced by 50% to $400,000 if the New Loan is paid in full
by June 30, 2000. If the New Loan is not paid in full by June 30, 2000, but paid
in full by September 15, 2000 such fee shall be reduced by 25% to $600,000.
7
<PAGE>
Under the March 31, 2000 Term Loan and under the New Loan, it is an "Event
of Default" with respect to each if a definitive agreement for the sale of
Galaxy and an entity affiliated with Galaxy or system asset sales of
substantially all the systems owned by Galaxy and the affiliate has not been
executed and delivered by May 31, 2000 with an unaffiliated third party buyer in
a form reasonably satisfactory to the majority lenders. There can be no
assurances that a definitive purchase agreement will be delivered by this date
or, in the event of Galaxy and its affiliate's failure or inability to comply,
that such provisions will be waved by the majority lenders.
Galaxy has entered into a letter of intent with Mallard Cablevision,
L.L.C. ("Mallard") to sell its interest related to approximately all 123,000
subscribers owned by Galaxy. However, there can be no assurances that Galaxy can
enter into a definitive agreement by May 31, 2000. Therefore, Galaxy has
explored and is discussing other alternatives. These include: 1) an amendment of
the Term Loan and New Loan to extend the May 31st deadline, 2) sales of certain
subscribers and assets in Galaxy's non-core areas to other cable companies
contiguous to such properties, 3) sale of a portion of Galaxy's smaller systems
to certain DBS providers (such sales could eliminate or greatly reduce Galaxy's
bank debt) or 4) refinance the Term Loans and New Loan with a bridge facility
that would allow Galaxy additional time to recapitalize or liquidate its
interests. There can be no assurances that any of these alternatives can be
implemented by May 31, 2000.
5. DISPOSITION OF CABLE SYSTEMS
On March 31, 2000, Galaxy sold one cable television system, located in
Kansas, representing approximately 1,424 subscribers for approximately $3.5
million, or approximately $2,492 per subscriber. Galaxy will use the proceeds
from this sale to pay the principle on the Term Loan.
6. COMMITMENTS AND CONTINGENCIES
LITIGATION
Certain customers in Mississippi have filed a class action in the U.S.
District Court for the Northern District of Mississippi alleging that Galaxy
illegally charged a late fee on monthly cable bills. The Partnership has denied
any liability with respect to this claim and is defending this action. Similar
class actions against other cable companies have been filed in several states,
some of which have been successful. At this point, management is unable to
predict the likely outcome or the potential for an adverse judgment, if any. An
adverse judgment against the Partnership could have a material, adverse effect
on the Partnership's consolidated financial position, or future results of
operations or cash flows. Management has not recorded any liability in the
consolidated financial statements that may arise from the adjudication of this
lawsuit.
8
<PAGE>
Item 2. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RECENT DEVELOPMENTS
On March 31, 2000, Galaxy sold one cable television system, located in
Kansas, representing approximately 1,424 subscribers for approximately $3.5
million, or approximately $2,492 per subscriber. Galaxy will use the proceeds
from this sale to pay the principle of the Term Loan.
On March 31, 2000 Galaxy amended its Term Loan agreement to modify
financial covenants and change the maturity date of all outstanding borrowing
under the Term Loan agreement and entered into a new $5 million New Loan
Agreement from three of the four lenders under the Term Loan agreement. As
discussed in Note 2 to Galaxy's consolidated financial statements for the period
ended December 31, 1999, based on current estimates of operating cash flow,
management does not believe it will have sufficient cash to fund required debt
payments under the Term Loan and the New Loan due on December 31, 2000. It is an
event of termination under the Term Loan and New Loan if Galaxy does not have a
definitive agreement to sell its partnership interests or assets by May 31,
2000. Galaxy's partners are negotiating to sell their Galaxy partnership
interests to a third party. However, closing of such transaction is not assured.
Absent the completion of the aforementioned transaction and the partnership's
inability to meet its cash flow needs raises substantial doubt about its ability
to meet its liquidity and capital resource needs.
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 ended March
31, 2000 and March 31, 1999. Amounts shown are in thousands.
9
<PAGE>
For the three months ended March 31,
---------------------------------------
2000 1999
----------------- -----------------
Revenues $ 13,990 100.0% $ 14,570 100.0%
-------- ----- -------- -----
Operating expenses:
Systems operations 6,822 48.8% 6,674 45.8%
Selling, general and administrative 1,553 11.1% 1,501 10.3%
Management fee to affiliate 419 3.0% 655 4.5%
Depreciation and amortization 4,773 34.1% 5,224 35.9%
-------- ----- -------- -----
Total operating expenses 13,567 97.0% 14,054 96.5%
-------- ----- -------- -----
Operating income 423 3.0% 516 3.5%
Interest expense (5,423) (38.8%) (4,767) (32.7%)
Gain (loss) on sale of assets 2,063 14.7% 909 6.2%
Interest income and other, net 13 0.1% 19 0.1%
-------- ----- -------- -----
Net loss $ (2,924) (20.9%) $ (3,324) (22.9%)
======== ===== ======== =====
The following table sets forth demographic information as of June 30,
1999, September 30, 1999, December 31, 1999 and March 31, 2000.
June 30, September 30, December 31, March 31,
1999 1999 1999 2000
------- ------- ------- -------
Homes Passed 225,226 214,341 210,816 205,539
Basic Subscribers 134,233 126,861 126,357 123,941
Basic Penetration 59.60% 59.19% 59.94% 60.30%
Revenue per Subscriber $35.94 $36.93 $36.11 $37.15
Premium Subscribers 61,133 57,013 56,231 53,684
Premium Penetration 45.54% 44.94% 44.50% 43.31%
10
<PAGE>
Galaxy generated revenues in the amount of $13,990,403 and $14,569,553 for
the three-month periods ended March 31, 2000 and 1999, respectively. This
decrease in revenues was a result of the sale of systems during 1999. Galaxy was
able to increase basic rates in some systems and, as a result, average revenue
per subscriber increased from $36.52 at March 31, 1999 to $37.15 at March 31,
2000.
For the three months ended March 31, 2000 and 1999, system operating
expenses consisting of subscriber costs, technician costs and system maintenance
costs were $6,822,217, or 48.8% of revenue, and $6,673,766, or 45.8% of revenue,
respectively. These expenses increased primarily due to increased programming
and bad debt expenses.
Selling, general and administrative expenses, which includes office rents
and maintenance, marketing costs and corporate expenses, increased to $1,552,818
from $1,500,582 for the three months ended March 31, 2000 and 1999,
respectively. For the three-month period ended March 31, these expenses
increased as a percentage of revenue from 10.3% in 1999 to 11.1% in 2000. This
increase is primarily due to a decrease in co-op reimbursements during the first
quarter of 2000.
For the three months ended March 31, 2000 and 1999, depreciation and
amortization expense was $4,772,917, or 34.1% of revenues, and $5,224,276, or
35.9% of revenues, respectively. The decrease in depreciation and amortization
expense is attributable to the sale of cable television systems during 1999.
For the three months ended March 31, 2000 and 1999, interest expense was
$5,422,503 and $4,767,322, respectively. The increase in interest expense is
primarily due to an increase in interest rates charged to Galaxy, and an
increase in amortization of debt issue costs. For the three months ended March
31, 2000, gain on sale of assets was $2,063,407. For the three months ended
March 31, 1999, gain on sale of assets was $909,179. Other income (expense) went
from a net income of $18,992 for the three months ended March 31, 1999, to a net
income of $12,773 for the three months ended March 31, 2000.
Galaxy as an entity 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 Galaxy as specified in the
Partnership agreement.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership has incurred losses each year since its inception and has
a Partnership deficit of $34.8 million at March 31, 2000. During 2000, the
Partnership received net proceeds from sales of cable television systems of $3.5
million, which was used to pay down principle of the Term Loan.
11
<PAGE>
On March 31, 2000 the Partnership amended its Term Loan agreement to
modify financial covenants and change the maturity date of all outstanding
borrowings under the term loan agreement.
Additionally, as part of this amended Term Loan and New Loan agreements,
the Partnership must have a definitive sale agreement in force by May 31, 2000
to sell substantially all the interests or assets of the Partnership sufficient
for the repayment of all Partnership loans including the Senior Subordinated
Notes. This definitive agreement shall not contain any such contingencies
allowing the purchaser to terminate such an agreement arising from: (a) the
failure of such purchaser to obtain the financing necessary for purchase, (b)
the failure of such purchaser to obtain the approvals necessary for such
purchase or (c) relating to the completion of any due diligence review by such
purchaser other than completion of reasonable due diligence customarily to be
completed in such transaction after signing such agreement. Absent of such an
agreement to sell substantially all the assets of the Company triggers an event
of default under the terms of the amended Term Loan and New Loan agreements.
Galaxy has entered into a letter of intent with Mallard Cablevision,
L.L.C. ("Mallard") to sell its interest related to approximately all 123,000
subscribers owned by Galaxy. However, there can be no assurances that Galaxy can
enter into a definitive agreement by May 31, 2000. Therefore, Galaxy has
explored and is discussing other alternatives. These include: 1) an amendment of
the Term Loan and New Loan to extend the May 31st deadline, 2) sales of certain
subscribers and assets in Galaxy's non-core areas to other cable companies
contiguous to such properties, 3) sale of a portion of Galaxy's smaller systems
to certain DBS providers (such sales could eliminate or greatly reduce Galaxy's
bank debt) or 4) refinance the Term Loans and New Loan with a bridge facility
that would allow Galaxy additional time to recapitalize or liquidate its
interests. There can be no assurances that any of these alternatives can be
implemented by May 31, 2000.
In light of the Partnership's current projected earnings and cash flow,
the Partnership believes it will have the financial resources to maintain its
current level of operations until December 31, 2000, the Term Loan maturity
date. However, cash generated from operations alone will not be sufficient to
pay the Term Loan and the New Loan on December 31, 2000 without proceeds from
the sale of assets, refinancing of the Term Loans or the sale of the
Partnership's interest in Galaxy.
Absent the completion of the aforementioned transaction and the
partnership's inability to meet its cash flow needs raises substantial doubt
about its ability to meet its liquidity and capital resource needs.
As of March 31, 2000, Galaxy had $5,886,403 in cash and cash equivalents.
As of such date, total current liabilities (other than notes payable) exceeded
cash and cash equivalents by $18,591,010. Galaxy expects to fund this deficiency
through its operating cash flows, the sale of assets and new equity or debt
financing.
12
<PAGE>
Due to the results of operations discussed above, Galaxy had EBITDA,
defined as earnings before interest, depreciation and amortization expense, and
gain on sale of cable systems, of $5,195,705, or 37.1% of operating revenues,
and $5,740,528, or 39.4% of operating revenues, for the three months ended March
31, 2000 and 1999, respectively.
Galaxy had an aggregate of $147.9 million of indebtedness as of March 31,
2000, representing $119.7 million of senior subordinated notes (net of
unamortized discount of $0.3 million), $25.3 million outstanding debt under its
term loan and $2.9 million in various other obligations.
On March 31, 2000, Galaxy entered into a new $5 million Term Loan
Agreement from three of the four lenders under the Term Loan. The funds
available under this New Loan were not advanced to Galaxy until April 1, 2000.
The New Loan also requires Galaxy to maintain compliance with certain financial
ratios and other covenants, such as annualized cash flow to interest expense,
capital expense limits and basic subscribers to total long term debt. The New
Loan restricts Galaxy's ability to borrow without the consent of the lenders.
The New Loan is due the earlier of December 31, 2000 or upon the occurrence of
certain events set forth in the Loan Agreement and described above.
As of March 31, 2000, Galaxy had $92.3 million in systems and equipment
consisting of $87.2 million of cable television systems and $5.1 million of
vehicles, equipment, buildings and office equipment, all net of accumulated
depreciation. Galaxy had capital expenditures (exclusive of system acquisitions)
of $3.0 million for the three months ended March 31, 2000. For the three months
ended March 31, 1999, Galaxy had capital expenditures (exclusive of system
acquisitions) of $3.0 million. These capital expenditures were financed mainly
through the sale of non-core assets and cash flows from operations. During the
first three months of 2000, 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 provided net cash from operating activities of $5,295,810 and
$5,198,291 for the three months ended March 31, 2000 and 1999, respectively, an
increase in net cash provided by operating activities of $97,519. This increase
is mainly due to an increase in accounts payable and accrued expenses during the
periods.
Galaxy provided net cash from investing activities of $492,589 for the
three months ended March 31, 2000, and used net cash in investing activities of
$2,045,221 for the three months ended March 31, 1999, an increase in net cash
provided in investing activities of $2,537,810. This increase is mainly due to
an increase in proceeds from the sale of cable systems during 2000.
Galaxy used net cash in financing activities of $288,481 and $258,859 for
the three months ended March 31, 2000 and 1999, respectively, an increase in net
cash used in investing activities of $29,622. This increase was due to cash used
to pay down principle of other debt, offset by a decrease in cash used for
payment of debt issue costs.
13
<PAGE>
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. These factors include the receipt of regulatory approvals, the success
of Galaxy's implementation of digital technology, subscriber equipment
availability, tower space availability, 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, (vii) numerous
competitive factors, including alternative methods of distributing and receiving
video transmissions and (viii) the ability of Galaxy to successfully implement
its strategy of focusing on core service areas.
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.
14
<PAGE>
Item 3. -- QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISKS
Galaxy is not directly exposed to any foreign exchange rates or commodity
price fluctuations.
Galaxy is exposed to changes in interest rates due to its variable rate of
interest (ABR plus 2%) on its Term Loan.
Based on Galaxy's variable debt at March 31, 2000, a 1% increase in market
interest rates would increase yearly interest expense and decrease income by
approximately $279,000. This amount was calculated using the variable interest
rate in effect at March 31, 2000, assuming a constant level of variable-rate
debt. This amount does not include the effects of other events that could affect
interest rates, such as a downturn in overall economic activity, or actions
management could take to lessen risk. This also does not take into account any
changes in Galaxy's financial structure that may result from higher interest
rates.
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.
10.1 Amendment No. 7 of the Amended and Restated Loan Agreement among
Galaxy, Galaxy Telecom Capital Corp., Fleet National Bank, as agent,
and certain other lenders, dated March 31, 2000, incorporated herein
by reference to Exhibit 10.19 to Galaxy's Form 10-K for the fiscal
year ended December 31, 1999.
10.2 $5,000,000 Term Loan Agreement by and among Galaxy, Galaxy Telecom
Capital Corp., Fleet National Bank as Agent and Lender and certain
other financial institutions party thereto, dated March 31, 2000
incorporated herein by reference to Exhibit 10.20 to Galaxy's Form
10-K for the fiscal year ended December 31, 1999.
27. Financial Data Schedule
(b) Reports of Form 8-K. On January 20, 2000 Galaxy filed a report on Form 8-K
announcing a change in our certifying accountant.
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: May 15, 2000 /s/ J. Keith Davidson
BY: J. Keith Davidson
Vice President-Finance
(Principal Financial Officer)
17
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
- -------------- ----------------------------------
10.1 Amendment No. 7 of the Amended and Restated Loan Agreement among
Galaxy, Galaxy Telecom Capital Corp., Fleet National Bank, as agent,
and certain other lenders, dated March 31, 2000, incorporated herein
by reference to Exhibit 10.19 to Galaxy's Form 10-K for the fiscal
year ended December 31, 1999.
10.2 $5,000,000 Term Loan Agreement by and among Galaxy, Galaxy Telecom
Capital Corp., Fleet National Bank as Agent and Lender and certain
other financial institutions party thereto, dated March 31, 2000
incorporated herein by reference to Exhibit 10.20 to Galaxy's Form
10-K for the fiscal year ended December 31, 1999.
27 Financial Data Schedule
18
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
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